Ateneo de Manila University Graduate School of Business

18 September 2010 MBAH Batch 8

PERFORMANCE MANAGEMENT
andal aranzamendez untalan villarin

Don Rebs Andal Ricky Aranzamendez Tong Untalan Ding Villarin

OBJECTIVES
 

Identify major determinants of individual performance Discuss the three general purposes of performance management Identify the five criteria for effective performance management system Discuss the four approaches to performance management, specific techniques used in each approach, & the way these approaches compare with criteria for effective performance management system

OBJECTIVES      Choose the most effective approach to performance measurement for a given situation Discuss the advantages & disadvantages of the different sources of performance information Choose the most effective source/s for performance information for any situation Distinguish types of errors & explain how to minimize each in a performance evaluation Identify the cause of a performance problem .

What is Performance Management? Means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals. .

Performance Appraisal ( Measure ) . how well an employee is doing his job .measures aspect of performance. Job Analysis ( Define ) .Parts of Performance Management System 1.specifies which aspect of performance are relevant to the organization 2.

tying rewards to performance through compensation system .provides feedback to employee.employees effectiveness . Performance Feedback .Parts of Performance Management System 3.

g.Major Determinants of Individual Performance Organization al Strategy Long and short term goals and values Objective Results Individual Attributes (e. Skills and abilities ) Individual Behaviors Situational Constraints Organizational culture Economic conditions .

link employee activities with organization’s goals the results. behavior. and recognition . retentions. employee characteristics developing measurement and feedback mechanism 2. layoffs. promotions. Administrative Purpose .administrative decisions: salary administration.Purposes of Performance Management 1. Strategic Purpose .

Developmental Purpose .identifies deficient aspects of employees’ performance and its causes .Purposes of Performance Management 3.develop employees who are effective .

Five Criteria for Effective Performance Management 1. goals and culture .guide employees in contributing to the organization’s success 2. Validity .assesses all the relevant and only the relevant aspects of job performance .extent to which the performance management system elicits job performance that is consistent with the organization’s strategy. Strategic Congruence .

Five Criteria for Effective Performance Management “ Content Validity” Job performance measure Actual. or “true” job performance Contamination Validity Deficiency .

retest reliability: reliable over time .Five Criteria for Effective Performance Management 3.consistency of a performance measure.test . Reliability .interrater reliability . free from random error .internal consistency reliability .

3 categories of perceived fairness: > procedural > interpersonal > outcome fairness 5. Acceptability .satisfactory or adequate by those who use it .Five Criteria for Effective Performance Management 4. Specificity .detailed guidance to employees about what is expected and how they can meet these expectation .

Approaches to Measuring Performance Rebs Andal. MD 15 .

Approaches to Measuring Performance 16 .

Approaches to Measuring performance We can manage performance by focusing on:  Employee attributes  Behaviors  Results  Addition:   Overall comparisons among individuals’ performance Emphasis on Quality .

reliability. validity. acceptability and specificity .Learning Objective:  Approaches to Measuring performance    Explore various approaches to measuring and managing performance Discuss techniques associated with each approach Evaluate the approached based on criteria Strategic congruence.

COMPARATIVE Approach    Requires the rater to COMPARE an individual’s performance with that of others Uses overall assessment of an individual’s performance Develop some RANKING of the individuals within the group .1.

1. COMPARATIVE Approach     Three Techniques Ranking Forced distribution Paired comparison .

COMPARATIVE Approach RANKING   Simple ranking  Rank employees within their department from hishest to poorest performer BEST TO WORST   Alternation Ranking List of employees.1. cross the best and worst employee .

COMPARATIVE Approach RANKING    Caution! Received attention in the courts Validation of the selection system using employee rankings as the measure of performance Criteria of job performance may vary from one supervisor to another   A focused and stable body of criteria is warranted .1.

worst workers Bottom 10% No bonuses and can be terminated . COMPARATIVE Approach FORCED DISTRIBUTION   Also uses ranking format Employees ranked in groups  Employees put in predetermined categories    Best workers. in between.1.

1. COMPARATIVE Approach FORCED DISTRIBUTION  Forces manager to categorize employees  Based on distribution rules not on performance    Advantage Identifies high potential employees Identifies poorest performers Provides mechanism to help align company performance and employee performance and compensation  .

COMPARATIVE Approach FORCED DISTRIBUTION  See table 8.4 page 357 .1.

COMPARATIVE Approach FORCED DISTRIBUTION      Disadvantages This practice is arbitrary May be Illegal Cause poor morale Ex. recruiting. 20 – 70 – 10 distribution   Prone to discrimination Age.1. teamwork. and shareholder perceptions . minority. women   Subjective Potential negative side effects on morale.

COMPARATIVE Approach PAIRED COMPARISON  Compare every employee with every other employee   1 point for every higher performance Total score obtained  TIME CONSUMING .1.

1. COMPARATIVE Approach EVALUATION       Effective in differentiating employee performance Easy to develop and easy to use Common failure to be linked to the strategic goal of the organization Subjective – dependent on raters Lack specificity for feedback How can the individual improve his ranking .

leadership. and competitiveness .2. ATTRIBUTE Approach  Focuses on extent to which individuals have certain attributes  Characteristic or trait   Define a set of traits for evaluation Initiative.

ATTRIBUTE Approach Graphic Rating Scales  List of traits evaluated by a five point rating scale See table 8.2.5 p 360  .

2. ATTRIBUTE Approach Graphic Rating Scales  List of traits evaluated by a five point rating scale Legal defensibility:    Subjective Criticized appraisals – should demonstrate that rating is objectively related to actual work behavior .

ATTRIBUTE Approach Mixed Standard Scales    improved version Relevant performance dimensions Statements representing good. average and poor performance See table 8.2.6 p360  .

ATTRIBUTE Approach Mixed Standard Scales    improved version Relevant performance dimensions Statements representing good.2. average and poor performance  Originally developed as traitoriented scales  Instrument using behavioral statements as a means of reducing rating errors in performance appraisal .

ATTRIBUTE Approach EVALUATION    Most popular method in organizations Easy to develop and generalizable Across any organization and strategy    Little congruence between techniques and the company’s strategy Vague performance standards Open to different interpretation .2.

ATTRIBUTE Approach EVALUATION   Vague performance standards Different raters may provide extremely different ratings and rankings Validity and reliability are low   These technique does not provide any specific guidance on how an employee can support the company’s goal or correct performance deficiencies .2.

3. BEHAVIORAL Approach   Attempts to define the behaviors an employee must exhibit to be effective in the job Behaviors are defined and managers assess the extent to which employees exhibit them .

3. BEHAVIORAL Approach Critical Incidents     Requires managers to keep record of specific examples of effective and ineffective performance Provides specific feedback to employees .what they do well and what they do poorly Can be tied to the company’s strategy Individual approach – not being compared to others .

63 . BEHAVIORAL Approach  Behaviorally Anchored Rating Scale (BARS) Builds on the critical incidents approach  Please check figure 8.4 p.3.

BEHAVIORAL Approach  Behaviorally Anchored Rating Scale (BARS) Builds on the critical incidents approach     Identify critical incidents that represent effective and ineffective performance Experts agree on behavioral anchors that will serve as guide to raters Anchors will serve as guide to managers Rating becomes the employee’s score  Bias on information recall .3.

3. BEHAVIORAL Approach Behavioral Observation Scale (BOS)    Variation of a BARS Developed from critical incidents Uses many behaviors to necessary for effective performance Requires managers to rate the frequency with which the employee has exhibited each behavior during the rating period   Ratings are then averaged to compute an overall performance rating .

3. BEHAVIORAL Approach Behavioral Observation Scale (BOS)   Drawback May require more information that most managers can process or remember   A BOS can have 80 or more behaviors Evaluation can be annual/ bi annual .

3. BEHAVIORAL Approach Behavioral Observation Scale (BOS)  Compared to BARS and graphic rating scales   BOS is preferred for differentiating good from poor performers Maintains objectivity. suggesting training needs and being easy to use . providing feedback.

Manager informs employees of these behaviors 4.5 p 366 . Use of measurement system to assess whether these behaviors are exhibited 3. Define a set of key behaviors necessary for job performance 2. BEHAVIORAL Approach  Organizational Behavioral Modification (OBM) Entails managing the behavior of employees through a formal system of behavioral feedback and reinforcement  Components 1. Feedback and reinforcement Figure 8.3.

3. BEHAVIORAL Approach Assessment Centers  Individuals usually perform a number of simulated tasks    Leaderless group discussions In-basket management Role playing  Assessors observe the individual’s behavior and evaluate their skill or potential as managers .

Allow specific performance feedback Individualized developmental plan can be planned/designed Ex: Assessment center for certifications – middle manager certificate after OJT and developmental experiences    .3. BEHAVIORAL Approach Assessment Centers   Advantage Provide objective measure of an individual’s performance at managerial task.

3. BEHAVIORAL Approach Evaluation  Strengths       Can be very effective Can link the company’s strategy to the specific behavior necessary for implementing strategy Provides specific guidance and feedback Behaviors identified are valid Acceptability is high Techniques are reasonably reliable .

BEHAVIORAL Approach Evaluation  Weaknesses  Behaviors and measures must be constantly monitored and revised  Ensure linkage with strategic focus    Assumption of “one best way” to do the job Suited for less complex jobs Least suited for complex job  Requires multiple ways and behaviors .3.

measurable results of a job or work group Results are the closest indicator of one’s contribution to organizational effectiveness   Management by objectives Productivity Measurement and Evaluation System . RESULTS Approach   Focuses on managing the objective.4.

4. RESULTS Approach Management by Objectives   Popular in both private and public organizations Top management team first defines the company’s strategic goals    Goals are passed on to the next layer of management Goal setting process cascades down These goals are used as the standards by which an individual’s performance is evaluated .

4. RESULTS Approach Management by Objectives     Components of the Goal Specific Difficult Objective Table 8.8 p 367  .

4. RESULTS Approach Management by Objectives    Effectiveness Usually increases productivity Productivity gains tend to be highest when top management is committed   Effectively links individual’s performance with firm’s strategy Firm – Department – Individual Rewards .

RESULTS Approach   Productivity Measurement and Evaluation System (ProMES) Goal Motivate employees to higher levels of productivity Measure and feedback productivity information to personnel  .4.

4. 4. Productivity Measurement and Evaluation System (ProMES) STEPS Identify what (product) the organization expects to accomplish Staff defines indicators of the product Staff establishes the contingencies between the amount of indicators and the level of evaluation associated with that amount Feedback 2. 3. . RESULTS Approach  1.

RESULTS Approach EVALUATION Advantages  Minimizes subjectivity  Relies on Objective. quantifiable Indicators of performance  Highly acceptable  Managers and employees  Links individual’s results with the organization’s strategies and goals .4.

4. economic recession)   Deficient Not all aspects of the job are amenable to objective measurement   May focus only on aspects of their performance that are measurable Feedback lacks behavioral aspect . RESULTS Approach EVALUATION Weaknesses  Contaminated  Affected by things beyond the employee’s control (ex.

QUALITY Approach    Fundamental characteristics Customer orientation Prevention approach to errors   Goal Improving customer satisfaction .5.

5. QUALITY Approach   Expectations Emphasize an assessment of both person and system Emphasize that managers and employees work together to solve performance problems Involve both internal and external customers in setting standards and measuring performance Use multiple sources to evaluate person and system factors    .

QUALITY Approach    Techniques Process flow analysis Identify cause of delay/redundancy in the process   Cause and Effect diagram Identify cause/event that result in undesirable outcomes   Pareto Chart Highlight most important cause of a problem   Control Charts Collecting data at multiple points in time   Histogram Scattergrams .5.

5. QUALITY Approach EVALUATION   Relies primarily on combination of attributes and results approaches Adopts a system-oriented focus rather than individual employee performance Weakness  Many companies are unwilling to abandon their traditional performance management .

Performance Information .

V. Most effective source/s for performance information in any situation . Most effective approach to Performance management for a given situation VI. Advantages & Disadvantages of the different sources of performance information VII.

Managers Peers Subordinates Self Customers . 4. 3. 5. Most effective source/s for performance information in any situation      1. 2.VII.

Sources of Performance Information 1. Managers
• Most frequently used • Have the ability to rate employees • Feedback from MANAGERS is strongly related to performance

Sources of Performance Information 1. Managers
• PROBLEMS: • Some managers can’t observe employees – • “work with..” • Supervisor bias (favoritism) • should not entirely rely from MANAGERS

Sources of Performance Information 2. Peers

Co-workers
  

Expert knowledege of job requirement Observe employee daily! Bring a different perspective in the evaluation process - provide extremely valid assessment of performance

Useful esp if supervisor does not always observe employee (eg.law enforcement)

Peers    PROBLEMS: Bias due to friendship – although no empirical basis Being both a rater & a ratee is uncomfortable esp if administrative decisions are evaluated .Sources of Performance Information 2.

Subordinates   Evaluation of managers UPWARD FEEDBACK .Sources of Performance Information 3.

Subordinates   PROBLEMS: Manager evaluation give power to subordinates .Sources of Performance Information 3.

Self    Not often used Observe own behavior – employees are given responsibility to contribute to corporate decisions Useful if used as a prelude to a performance feedback session .Sources of Performance Information 4.

Self    PROBLEMS Tendency toward self inflated assessments (esp for administrative decisions – eg. Pay raises) Employees attribute poor performance to co-workers .Sources of Performance Information 4.

Customers   Often the only best person to observe employee performance BEST source of information     USEFUL  Customer evaluation sheet Random mail surveys Telephone survey  When employee gives Direct service to the customer When company needs info on what the customer wants .Sources of Performance Information 5.

Customers   PROBLEM Expense     Printing Postage Telephone labor .Sources of Performance Information 5.

Sources of Performance Information  360o Degree Appraisal Multiple rater (boss. peers. customers) . subordinates.

Rater Errors in Performance Measurement What are the types of Rating Errors? Preventive Measures? What is Appraisal Politics? 74 .

so if you are like me? You must be too” . SIMILAR to ME ! -” I am effective.What are the types of Rating Errors? 1.

CONTRAST Error when we compare individuals with one another instead of an objective standard .What are the types of Rating Errors? 2.

Distributional Errors -are the result of a rater’s tendency to use only one part of the rating scale -Leniency -Strictness -Central Tendency .What are the types of Rating Errors? 3.

4.these errors refer to a failure to distinguish among different aspects of performance . .either all positive or all negative ratings . HALO and HORNS . 4. 6.cant make the necessary distinctions between strong and weak performance 5.

frame of reference training 2. -make managers aware of rating errors and how to minimize it.PREVENTIVE MEASURES 1. Rater Error Training 1. Rater Accuracy Training. . 2. 3. -emphasizes the multidimensional nature of performance -familiarizes raters with various performance dimensions.

APPRAISAL POLITICS APPRAISAL POLITICS .refers to evaluators purposefully distorting a rating to achieve personal or company goals. .

there are competing rating goals.“distortion” is part of company folklore . .APPRAISAL POLITICS Appraisal Politics occur because. .a direct link between bet performance appraisal and desirable awards.raters are accountable to the employee being rated. .top executives tolerate “distortion” . .

Employees performances measured 3. Performance Feedback . Expected performance defined 2.PERFORMANCE FEEDBACK 1.

     .Encourage the Subordinate to Participate in the Session Recognize Effective Performance through Praise .Ask the Employee to Rate Himself First .Feedback Frequently > 1/year .Create the Right Context for Discussion .PERFORMANCE FEEDBACK  Recommendations.

Not on the Person.PERFORMANCE FEEDBACK  Recommendations     -Focus on Solving Problems. .Minimize Criticisms . .Agree to Specific Goals and Set a Date to Review Progress .Focus Feedback on Behaviour or Results.

How to Identify the cause of a Performance Problem? I N P U T Employee Knows/Understands what to do? Job Flow and Procedures Logical? Resources for activity Available? Interference from other Job Demands? .

How to Identify the cause of a Performance Problem?
E M P L O Y E E
Employee With Necessary Skills and Knowledge?

Knows why the desired level of performance is important?

Is the employee mentally, physically and emotionally able to perform at the expected level?

How to Identify the cause of a Performance Problem?
F E E D B A C K
Has the employee been informed about his performance?

Is Performance Feedback relevant, timely, accurate, specific and understandable?

How to Identify the cause of a Performance Problem?
P E R F O R M A N C E
Do Performance Standards Exists? Does the Employee know the desired level of expected Performance? Does the Employee Believe he can reach the Performance Standard?

How to Identify the cause of a Performance Problem? C O N S E Q U E N C E S Are there rewards/incentives for good performance? Are rewards/incentives valuable to the employee? Are they given in a timely Manner? Do work groups or team norms encourage employees not to meet performance standards? .

WAYS TO MANAGE EMPLOYEES PERFORMANCE Ability HIGH M O T I V A T I O N SOLID PERFORMERS -Reward good performance -Identify development opportunities' -Provide honest.Mange stress levels . team building -. direct Feedback on Performance Problems UNDERUTILIZERS -give.Demotion -.Specific.Outplacement -.Firing -. honest and direct feedback -Counselling.Goal setting --Training -.Training -.Restructured Job DEADWOOD -Withholding Pay Increases -. direct feedback MISDIRECTED EFFORT -Coaching --frequent performance feedback -.Give rewards -.

Don Rebs Andal Ricky Aranzamendez Tong Untalan Ding Villarin .

& the way these approaches compare with criteria for effective performance management system .OBJECTIVES     Identify major determinants of individual performance Discuss the three general purposes of performance management Identify the five criteria for effective performance management system Discuss the four approaches to performance management. specific techniques used in each approach.

OBJECTIVES      Choose the most effective approach to performance measurement for a given situation Discuss the advantages & disadvantages of the different sources of performance information Choose the most effective source/s for performance information for any situation Distinguish types of errors & explain how to minimize each in a performance evaluation Identify the cause of a performance problem .

Ateneo de Manila University Graduate School of Business 18 September 2010 MBAH Batch 8 PERFORMANCE MANAGEMENT andal aranzamendez untalan villarin .