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Chapter 12:

Performance Management

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122

AFTER STUDYING THIS CHAPTER, YOU


WILL BE ABLE TO:
Describe the roles and responsibilities of a supervisor in a system
of performance management.
Summarize the management tasks required in the performance
appraisal process and describe the purposes of a formal appraisal
system.
Explain the factors, techniques, and challenges involved in
measuring and documenting performance.
Discuss the process of conducting a sound appraisal meeting.
Give examples of coaching strategies that can be used as a followup to performance appraisals.
Identify the benefits and challenges of a promotion-from-within
policy.
Discuss the supervisors role in employee compensation and
outline the goals of an effective compensation program.
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123

The Performance Management


Process
System of Performance Management
All those things a supervisor must do to enable an employee to
achieve prescribed objectives.
Setting the stage for employee success
Providing feedback and controls
Monitoring performance regularly
Providing support, guidance, and direction as needed

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124

FIGURE 12.1 Performance

management

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125

The Employee Performance Appraisal


Performance Appraisal
Is a systematic assessment of how well an employee is performing
a job and the communication of that assessment.
Includes comparing the employees performance with established
performance standards.
Regular feedback improves current performance and provides the
recognition that motivates sustained performance.
Effective supervisors provide their subordinates with day-to-day
feedback on performance.

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126

FIGURE 12.2 The

effective supervisor avoids these comments by providing


regular positive feedback on performance

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a certain product or service otherwise on a password-protected website for classroom use.

127

FIGURE 12.3 Reasons

for evaluating performance on a systematic basis

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128

The Employee Performance Appraisal


(cont.)
The Supervisors Responsibility to Do Performance Appraisals
A performance appraisal should be done by an employees
immediate supervisor because the supervisor is in the best position
to observe and judge how well the employee has performed on the
job.
Supervisors must be trained to use the appraisal instrument.
Consensus or pooled appraisals by a group of supervisors may be
required if the employee works for more than one supervisor.

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129

The Employee Performance Appraisal


(cont.)
The Supervisors Responsibility to Do Performance Appraisals (con.t)
Performance improvement professor Mary Lanigan suggests three
practices evaluators should follow in order to provide accurate
representations of their assessments in reports to management:
1. Establish and clearly understand benchmarks for what constitutes
optimal
performance for all areas being evaluatedin other words, know
what they
are measuring.
2. Support the findings of evaluations with multiple sets of data
rather than
making generalizations from one or two comments.
3. Be impeccable with words, ensuring that evaluative comments
accurately
2016
Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with
a certain product or service otherwise on a password-protected website for classroom use.

1210

The Employee Performance Appraisal


(cont.)
Peer Evaluations
Are the evaluation of an employees performance by other
employees of relatively equal rank.
Must have safeguards built in to ensure that peers are basing their
evaluations on performance factors and not on bias, prejudice, or
personality conflicts.
360-degree Evaluations
Are performance appraisals based on data collected from all
around the employeecustomers, vendors, supervisors, peers,
subordinates, and others.
Give employees a broader perspective of what they do well and
where they need to improve.

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a certain product or service otherwise on a password-protected website for classroom use.

1211

The Employee Performance Appraisal


(cont.)
Self-Evaluations
Are self-ratings from subordinates.
Are compared to the supervisors rating and any differences can be
used by the supervisor to discuss performance specifics in the
appraisal meeting.
Regardless of the approach, the ultimate responsibility for
completing the appraisal form and conducting the appraisal meeting
lies with the immediate supervisor. If peer evaluations are used, the
supervisor still must reconcile the appraisals and communicate the
information to the employee. The formal appraisal meeting usually
takes place at a set time each year and should summarize what the
supervisor has discussed with the employee throughout the year.

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1212

Managing the Appraisal Process


Timing Performance Appraisals
Should be long enough to develop a reasonably accurate record of
the employees performance and short enough to provide current,
useful information.
Shorter periods are appropriate when the employee is new to
the job.
Newly-hired employees should be evaluated at the end of their
probationary period.
If an employee has a serious performance problem, an
immediate meeting should be scheduled.
If an employee is given ongoing feedback, then the annual
appraisal should contain no surprises.

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a certain product or service otherwise on a password-protected website for classroom use.

1213

FIGURE 12.4 Regular

feedback reduces the natural apprehension


surrounding appraisals

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a certain product or service otherwise on a password-protected website for classroom use.

1214

Managing the Appraisal Process


(cont.)
Advantages of a Formal Appraisal System:
Provide systematic judgments to support salary increases,
promotions, transfers, layoffs, demotions, and terminations.
Are a means of telling subordinates how they are doing and of
suggesting needed changes in behavior, attitudes, skills, or job
knowledge. They let subordinates know where they stand with
supervisors.
Help supervisors coach and counsel employees.

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a certain product or service otherwise on a password-protected website for classroom use.

1215

Managing the Appraisal Process


(cont.)
Performance appraisals answer questions:
Who should be promoted to department supervisor when the
incumbent retires?
Who should get merit raises this year?
What should be the raise differential between employees?
Who, if anyone, needs training?
What training do employees need?
This behavior has happened before. Does the employee need
additional coaching, or is the behavior serious enough for
disciplinary action?
If an employee is appealing our termination decision, do we have
adequate documentation to support the decision?

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1216

FIGURE 12.5 Sally

and her coworkers would wholeheartedly agree:


Everyone is still doing annual performance reviews - but not
the right way

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a certain product or service otherwise on a password-protected website for classroom use.

1217

The Performance Appraisal Process


Written Appraisal Forms
Facilitate the appraisal process and make it more uniform.
Are usually prepared by the human resources department with
input from employees and supervisors.
Include descriptions of job-related factors that enable the
supervisor to make objective performance evaluations rather than
personality judgments.
Provide space for additional comments about the various aspects
of an employees performance.

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a certain product or service otherwise on a password-protected website for classroom use.

1218

The Performance Appraisal Process


(cont.)
Factors in Measuring
Performance

Job knowledge
Timeliness of output
Positive and negative effects
of effort
Suggestions and ideas
generated
Dependability (absenteeism,
tardiness, work done on time)
Safety
Amount of supervision
required (initiative)
Aptitude

Cooperation (effectiveness in
dealing with others)
Adaptability
Ability to work with others
Ability to learn
Quantity and quality of work
Effectiveness of resource use
Customer service orientation
Judgment
Appearance

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1219

FIGURE 12.6 Begin

with a blank sheet of paper and answer these questions

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a certain product or service otherwise on a password-protected website for classroom use.

1220

The Performance Appraisal Process


(cont.)
Performance Appraisal Software
Allows supervisors to move effortlessly through the performance
appraisal form.
Can import companies evaluation forms.
Can weight each factor according to its importance to the
employees job.
Provides on-screen tutorials that answer frequently answered
questions.
Can help avoid legal problems due to potentially litigious phrases
and words.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with
a certain product or service otherwise on a password-protected website for classroom use.

1221

The Performance Appraisal Process


(cont.)
Problems
with Appraisal Forms
Lack of rater agreement on appraisal terms
Rater severity error in underrating employees
Rate leniency error in overrating employees
Halo and horn effects
Performance Standards
Are the job-related requirements by which the employees
performance is evaluated.
Should be described in terms of how much, how well, when, and in
what manner.

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1222

The Appraisal Meeting


The Right Purpose
Praising good performance and supportively discussing needed
improvements in behavior and performance.
The Right Time and Place
Privacy and confidentiality of the appraisal meeting should be
ensured because this discussion could include criticisms, personal
feelings, and opinions.
Appointments for appraisal meetings should be scheduled in
advance.
The appraisal form should be reviewed again before the meeting
for objectivity and accuracy.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with
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1223

The Appraisal Meeting (cont.)


Conducting the Appraisal Meeting
State the appraisal purpose of the meeting.
Review and recognize the employees achievements before
proceeding to areas in need of improvement.
Get the employee to agree on the areas that need correction or
improvement.
Use a problem-solving approach to jointly create an action plan to
improve employee performance.
Limit criticism but clearly explain when deficiencies are serious and
improvement must be made.
Give the employee the opportunity to ask questions.
Critical incident method
Supervisors record specific examples of outstanding and belowaverage performance on the part of each employee.

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a certain product or service otherwise on a password-protected website for classroom use.

1224

The Appraisal Meeting (cont.)


Closing the Appraisal Meeting
Be certain that employees clearly understand their performance
ratings.
Get agreement on mutual goals in areas in which the employee
needs improvement.
Set a date with the employee to discuss progress toward the new
goals.
Ask employee to sign the performance appraisal formsigning
does not mean agreement.
Indicate continued support for the employee.

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a certain product or service otherwise on a password-protected website for classroom use.

1225

Managing Performance Appraisal


Results: Coaching Employees
Coaching
Gives employees information, instruction, and suggestions relating
to their job assignments and performance.
Helps prepare employees for greater depth and breadth in their
current or future jobs, reinforces employees positive behaviors,
and corrects negative behaviors positively.
Helps employees develop action plans to define the expected level
of performance, recommend specific steps for improvement, and
observe performance.

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1226

FIGURE 12.9 Questions

to determine coaching strategies

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1227

Managing Performance Appraisal


Results: Promoting Employees
Promoting from Within
Provides a steady source of trained personnel for higher positions
Provides candidates with known performance
Motivates employees when they can see a link between excellent
performance and promotion.
Modifying a Promotion-from-Within Policy
When no suitable internal candidates are available.
When extensive training is required and the position must be filled
quickly.

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a certain product or service otherwise on a password-protected website for classroom use.

1228

Managing Performance Appraisal


Results: Promoting Employees (cont.)
Criteria for Promoting from Within
Seniority: an employees length of service in a department or an
organization.
Rewards employee loyalty and commitment.
Reduces favoritism and discrimination.
Discourages young employees with less seniority.
May promote without regard to performance.
Merit: the quality of an employees job performance.
Ability: an employees potential to perform higher-level tasks.

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a certain product or service otherwise on a password-protected website for classroom use.

1229

Managing Performance Appraisal


Results: Compensating Employees
Compensation Program Objectives:
To eliminate pay inequities to minimize dissatisfaction and
complaints among employees
To establish and/or maintain sufficiently attractive pay rates so that
qualified employees are attracted to and retained by the company
To conduct periodic employee merit ratings to provide the basis for
comparative performance rewards
To control labor costs with respect to productivity gains
To reward employees for outstanding performance or the
acquisition of additional skills or knowledge

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with
a certain product or service otherwise on a password-protected website for classroom use.

1230

Managing Performance Appraisal


Results: Compensating Employees
(cont.)
The Supervisors Role in Compensation Decisions
Supervisors make higher-level managers aware of serious
compensation inequities at the departmental level.
Supervisors must know the law of the land as it relates to the
relationship between performance evaluation and salary increases.
Supervisors should recommend a wage increase only after
seriously considering whether an employee deserves a raise.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with
a certain product or service otherwise on a password-protected website for classroom use.

1231

Managing Performance Appraisal


Results: Compensating Employees
(cont.)
Pay for Performance
Compensation, other than base wages, that is given for achieving
employee or corporate goals.
Gain-sharing Plans
Group incentive plans that have employees share in the benefits
from improved performance.

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1232

Managing Performance Appraisal


Results: Compensating Employees
(cont.)
Compensation Concerns
Employees commonly compare their compensation to others.
This becomes a motivational problem when the organization has
wages or benefits that are lower than those for similar jobs at other
firms.
Two-tier wage systems and contract employees are additional
concerns for the supervisor in trying to maintain a perception of
fairness.
A temporary employee may be paid more or less than the regular
employees performing the same job.

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1233

FIGURE 12.10

Freshly Squeezed by Ed Stein

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1234

KEY TERMS
360-degree evaluation
Ability
Coaching
Critical incident method
Gain-sharing plans
Leniency error
Merit
Pay for performance
Peer evaluation
Performance appraisal
Performance standards
Rater bias
Seniority
System of performance
management

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with
a certain product or service otherwise on a password-protected website for classroom use.