Dr Sanyukta Jolly

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Performance management is an important concept to understand for academic study and began in late 1980s and it has been undertaken in several fields such as logistics management, marketing, human resources management and operations management to name a few. The idea of managing both individual and organizational performance is not new and the exact date when a formal method of reviewing performance was first introduced is not known.
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Koontz (1971) mentioned the role of imperial rater whose task was to evaluate the performance of official family of the Wei dynasty (AD 221-265) in China. The first formal system evolved before World War I (WWI) with the pioneering work of Fredrick Taylor with the ratings of officers in the U.S. armed services which took place in early 1950s. It began with personality based appraisals, shifting towards goal-setting and assessment of performance related abilities in 1960s. Beginning 1980 to 1990 the organizations underwent a rapid and successive change and performance appraisal became a central theme for managing people and business in general.

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By the end of 1990, performance management came to be seen as a core management process and a well integrated strategic tool. Broadly speaking, in the 1950-1960s the focus was on merit rating in USA and UK and known as performance appraisal. 1960s to 1970s was the period of management by objectives (MBO), critical incidents technique and use of behaviourally anchored scales (BARS), which are used extensively even now by various organizations.

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The word performance management was first used in 1970s but did not become a recognized process until the later half of 1980s.

The performance management literature can be traced in three major phasesfrom performance measurement to performance management from individual to collaborative performance measurement from lagging to leading performance management.
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Performance measurement is universal.

In the work setting especially performance measurement goes beyond annual review and can be used for many purposes:
Criterion data Employee development Motivation/satisfaction Promotion Transfer Rewards Layoffs
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Supervisors

360-Degree Appraisals
Customers

Sources for Employee Appraisals

SelfAppraisal
Peers

Subordinates
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Graphic Rating Scale

Trait Methods

Mixed Standard Scale

Forced-Choice

Essay

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Graphic Rating-Scale Method

A trait approach to performance appraisal whereby each employee is rated according to a scale of individual characteristics.

Mixed-Standard Scale Method

An approach to performance appraisal similar to other scale methods but based on comparison with (better than, equal to, or worse than) a standard.

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Graphic Rating Scale with Provision for Comments

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Example of a Mixed-Standard Scale

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Forced-Choice Method
Requires the rater to choose from statements designed to distinguish between successful and unsuccessful performance.
1. ______ a) Works hard 2. ______ a) Shows initiative 3. ______ a) Produces poor quality _____ b) Works quickly _____ b) Is responsive to customers _____ b) Lacks good work habits

Essay Method
Requires the rater to compose a statement describing employee behavior.

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Critical Incident

Behavioral Checklist

Behavioral Methods

Behaviorally Anchored Rating Scale (BARS)

Behavior Observation Scale (BOS)

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Critical Incident Method

Critical incident
An unusual event that denotes superior or inferior employee performance in some part of the job The manager keeps a log or diary for each employee throughout the appraisal period and notes specific critical incidents related to how well they perform.

Behavioral Checklist Method

The rater checks statements on a list that the rater believes are characteristic of the employees performance or behavior.
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 Consists of a series of vertical scales, one for each dimension of job performance; typically developed by a committee that includes both subordinates and managers.

Originally conceived by Smith & Kendall (1963) are graphic-performance rating scales with specific behavioral descriptions defining points against each scale (i.e. Behavioral anchors), which represents a dimension, factor or work function considered important for performance

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BARS Example

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 A performance appraisal that measures the frequency of observed behavior (critical incidents). Preferred over BARS for maintaining objectivity, distinguishing good performers from poor performers, providing feedback, and identifying training needs. Developed by Latham & Wexley (1977) are summated scales based on statements about desirable & undesirable work behavior.

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BOS Example

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Productivity Measures
Appraisals based on quantitative measures (e.g., sales volume) that directly link what employees accomplish to results beneficial to the organization.
Criterion contamination

Focus on short-term results

Management by Objectives (MBO)

A philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager.

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Tool
Graphic rating scale BARS Alternation ranking

Advantages
Simple to use; provides a quantitative rating for each employee. Provides behavioral anchors. BARS is very accurate. Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales. End up with a predetermined number or % of people in each group. Helps specify what is right and wrong about the employees performance; forces supervisor to evaluate subordinates on an ongoing basis. Tied to jointly agreed-upon performance objectives.

Disadvantages
Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems. Difficult to develop. Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent. Employees appraisal results depend on your choice of cutoff points. Difficult to rate or rank employees relative to one another.

Forced distribution method Critical incident method

MBO

Time-consuming.

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Summary of Various Appraisal Methods

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Rating Error
Contrast Effect First Impression Error Halo or Horn Effect Similar-to- me Effect Central Tendency Negative & Positive Skew Attribution Bias Recency Effect Stereotyping

What does it mean?

The tendency of the rater to evaluate people in comparison with other individuals rather than against the standards for the job The tendency of a manager to make an initial positive or negative judgment of an employee and allow that first impression to color or distort later information Inappropriate generalizations from one aspect of an individuals performance to all areas of that persons performance. The tendency of individuals to rate people who resemble themselves more highly than they rate others. The inclination to rate people in the middle of the scale even when their performance clearly warrants a substantially higher or lower ratings The opposite of central tendency: the rating of all individuals as higher or lower than their performance actually warrants. The tendency to attribute performance failings to factors under the control of the individual & performance successes to external causes The tendency to minor events that have happened recently to have more influence on the rating than major events months ago The tendency to generalize across groups and ignore individual 10/23/2013 differences.
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360 degree feedbck is also known as a multisource assessment Ward (1997) defined 360 degree feedback as the systematic collection and feedback of performance data on individul or group derived from a number of stakeholders

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Developmental purpose For appraisal For pay

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Define objectives Define recipients Decide on who will give the feedback Decide how feedback will be given Decide on areas of work and behavior on which feedback will be given Decide on the method of collecting the data Decide on data analysis and presentation Decide how the data will be used Plan the initial implementation program Analyze the outcome of the pilot scheme Plan and implement full program Monitor and evaluate

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Fit Design Skill Communication Administration

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Broader perspective Individuals know their strengths & weakneses More reliable feedback is provided New insights get highlighted Critical performance & competency requirements are clarified People given more rounded view of their performance Key development areas are identified Managers are more aware on how they impact

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People may not give frank or honest feedback People put under stress in receiving or giving feedback Lack of action following feedback Over-reliance on technology Too much bureaucracy

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When there is active support of top management When there is commitment Real determination by all to use feedback data Questionnaire items fit or reflect typical and significant aspects of behaviour Items relate to actual events Comprehensive & well delivered communication, followed by training No one is threatened by the process Questionnaire easy to complete Bureaucracy is minimized

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The problem is that not everything that counts can be counted, and not everything that can be counted counts The origin of the Balance Scorecard can be traced back to 1990, when the research arm of KPMG sponsored a study on measuring performance in organizations.

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Is a strategic approach and a performance management system that enables the organization to translate its vision and strategy into implementation. It is a conceptual framework for translating organizations vision into a set of performance indicators distributed among four perspectives

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Financial: measures reflecting financial performance, for example number of debtors, cash flow, or ROI Customer Perspective: captures the ability of the organization to provide quality goods and services, effective delivery and overall customer satisfaction for both internal & external customers. For example, time to process a phone call, results of customer survey, number of complaints or competitive rankings.
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Business Process Perspective: provides data regarding the internal business results against measures that lead to financial success and satisfied customers. To meet organizational objectives and customer expectations, organizations must identify the key business processes at which they must excel. For example, the time spent in prospecting new customers, number of units that required rework or process cost.
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Learning & Growth Perspective: captures the ability of employees, information systems and organizational alignment to manage business and adapt to change.
In order to meet changing requirements and customer expectations, employees are being asked to take on dramatically new responsibilities that may require skills, capabilities, technologies, and organizational designs that were not available before. It measures the organizations learning curve, for example, number of employee suggestions or total hours spent on staff training.

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Clarify and update strategy Communicate strategy throughout the company Align unit and individual goals with strategy Link strategic objectives to long term targets and annual budgets Identify and align strategic initiatives Conduct periodic performance reviews to learn about and improve strategy

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Translation of strategy into measurable parameters Communication of strategy to all stakeholders Alignment of individual goals with organizations strategic objectives. Feedback of implementation results to strategic planning process Preparing the organization for a change

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Lack of well defined strategy Using only lagging measures Use of generic metrics Failure at all levels Failure to follow through completion

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Informal reviews are the process by which performance is managed throughout the year. Performance is reviewed as it occurs by the individual as well as the manager, comparing what has happened and what should have happened. Formal reviews are meetings in which performance is analyzed more systematically. They include and overview and analysis of performance since the last review, comparing results with agreed expectations and plans

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Have clear aims and measurable success criteria Be designed and implemented with appropriate employee involvement Have its effective use core to all managers performance goals Allow employees a clear line of sight between performance goals and those of the organization Focus on clarity and performance improvement Be closely allied to clear and adequately resourced training and development infrastructure Make crystal clear the purpose of any direct link to reward and build in proper equity and transparency standards Be regularly and openly reviewed against its success criteria

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Why have them at all? Objectives of reviewing performance What are the organizational issues? On whom should performance review focus? On what should they focus? What criteria should be used to review process? What impact does management style make on performance reviews? What skills are required to conduct reviews and how can they be developed? How can both negative and positive elements be handled? To what extent is past performance a guide to future potential? When should reviews take place? What are the main problems in conducting reviews and how can they be overcome? How can their effectiveness be evaluated?

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How to people attend to, encode and recall behavior? How do they translate the behavior they recall into ratings of someones performance? Why do supervisors and employees complain so much about performance appraisals? Why do people say that appraisals are unfair or political? Is it possible to design a performance appraisal process that actually motivates (rather than demotivates) employees to behave in ways that benefit the organization? How can appraisals work in team-based or qualityoriented work cultures? How should appraisals be connected to training and compensation decisions?

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Appraisals and feedback should focus on performance (not merely traits). Performance dimensions and standards should be specific and communicate to employees what is expected of them. Where feasible, assessments of performance should be combined with customer data. Contextual performance should be explicitly assessed. An organization-specific competency model needs to be developed.
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Balance scorecard Focus on balanced perspective of performance Focus on medium and longer term performance Set performance objectives on operational objectives

Strategic scorecard Delivering results that make a substantial difference to performance Focus on must-win battles Getting synergies and crossorganizational efficiencies

Focus on the metrics that have to be achieved

Getting breakthrough innovations

Interdependencies Different for every organization

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The Fortune study outlines Performance & Talent management as one of the differentiating themes between the most admired organizations and the rest.

Successful performance management means investing heavily in developing people for the long term and focusing equally on the success requirements of specific roles, not just considering the development needs of the individuals within them.

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Strategy clarification and implementation Holding people accountable Achieving congruence between desired and actual working culture Developing and managing talent Balancing measurement and development with a rounded set of measures, rather than purely financial performance Integrating strategy, performance and compensation
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There is a continuing change and flux within organizations in terms of performance management practice. Organizations are working extremely hard to make a link between organizational strategy and individual accountabilities. There is an increasing trend towards measurement as well as measuring or hardening the intangibles (e.g. competencies)
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Organizations are striving where possible to standardize their approaches across different countries or business units. Real efforts are being made to hold people accountable and address poor performance. Linked to attempts to deal with poor performance, energy is being invested in revised ratings, improved, more flexible approaches to forced distribution of ratings and differentially rewarding employees based on their contribution.

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Findings from the FORTUNE magazine Research 2004 confirms that the most admired companies are already balancing the different elements of performance management by measuring more than traditional hard measures and by maintaining a link to talent management processes in such a way as to make development strongly aligned to organizational imperatives.

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