Performance Management
Professor Lucia Miree
American University in Bulgaria
Performance Management
Management = getting work done
through others
Manager’s performance is only as good as
his/her employee’s performance
Manager’s job = performance
management of others
Performance Management
Organizational system
Focusing on employee performance
Consistently applied throughout organization
With a supporting structure
Names of Systems
Performance Management
Performance Appraisals
Evaluation Systems
Job Review Systems
Feedback Systems
Performance Management
Ensuring appropriate performance by all
employees through:
-Reinforcement
-Rewards
-Modeling
-Coaching
-Training
-Development
Using a consistent feedback system
Working of Performance Management
Managers Speaks with Employee re: performance
Continuously
Once per Year
Formal goals
Organizational Reporting System
Tied to Organizational Outcomes
Examples of System Output
Words and What They Mean
Exceptionally well qualified Made no major errors yet
Active socially Parties & drinks too much
Family is active socially Family drinks too much
Plans for advancement Buys drinks for all of the boys
Aggressive Obnoxious
Uses logic on difficult jobs Gets someone else to do it
Expresses himself well Speaks the local language
Has Leadership qualities Is tall or has a loud voice
Keen sense of humour Knows lots of dirty jokes
Career-minded Back-stabber
Relaxed attitude Sleeps at work
Work is first priority Too ugly to get a date
Independent worker Nobody knows what he does
Good communication skills Talks on phone lots
Loyal Can’t get another job
PERFORMANCE =
Doing present job at a
certain level (high or low) as measured by a
formal system
POTENTIAL =
Includes future service, learning
interest, motivation level
PROBLEM =
Deviation from expectations
Do something in different way
Not do something
Do something not expected/needed
Opportunity
Reinforce/Reward Behavior
Change Behavior
Model Behavior
Establish Culture
PERFORMANCE MANAGEMENT
-Based on Scientific Management concepts
-Focus on observable performance
-Goal directed
-Planning required and formalized
-Consistent, continuous collection, analysis,
and collection of data
-Value of feedback reinforced
-Facilitates benchmarking
Performance Management
Trends
Shift from viewing financial figures as
main criteria to one of multiple indicators
More weight on indicators of efficiency
and effectiveness
Change to viewing PM as on-going,
evolving process
Principles of Performance Management
Supports business-oriented strategy
Is values based
Communicates organizational mission
Fulfills responsibilities to organizational members
Enables employees to manage own performance
Manages expectations (clarifies roles and
responsibilities)
Creates partnership between management and
employee
Emphasizes importance of measurement, feedback, and
reinforcement
Empowers employees
Natural extension of management
Associated Costs
Staff Costs
Production and Processing Costs
Training Costs
Action Costs
Opportunity Costs
Key PM Questions
1. Why assess performance
2. What performance to asses
3. How to assess performance
4. Who do assess performance
5. When to assess performance
6. How to communicate performance
assessment
The WHY of Performance
Management Systems
-Administer Salary & Wages
-Correct Performance/Behavior
-Plan for Future (promotion, transfer, career dev)
-Facilitate Decision-Making (counseling, terminations)
-Facilitate Human Resource Planning
-Create Culture
-Building Good Relationships
-Increase Organizational Loyalty
-Determine Effectiveness of Selection and
Placement Methods
WHAT to Assess
Skills/Abilities/Needs/Traits of Individuals
That Interact with the Organization to Produce
Behaviors Which
Result in Outcomes
Skills/Abilities/ Behaviors Results
Needs/Traits
Job Knowledge Perform Tasks Sales
Strength Obey Instructions Production Levels
Coordination Report Problems Production Quality
Business Knowledge Maintain Equipment Scrap/Waste
Desire to Achieve Follow Rules Accidents
Dependability Submit Suggestions Equipment Repairs
Creativity Follow-up Customers Served
Leadership Write Reports Customer
Satisfaction
Honesty Completes Reviews Feedback
Measures Focus
Consistent indicators across industry or
similar organizations
Comparison of indicators over time in
organization
Comparisons with pre-determined standard
Approaches to PM
Comparative
Attribute
Behavioral
HOW to Assess Performance
Traditional
Management-by-Objective
Assessment Center
Peer Review Panel
Critical Events
Upward Feedback
360 Degree
Techniques of PM
Essay (open-ended)
Management by Objective
Ranking
Paired Comparisons
Forced Choice
Forced Distribution
Ratings:
-Checklist
-Scales
-Behaviorally Anchored Ratings (BARS)
Critical Incidents
Essay Technique
Describe in detail the quantity and quality of the
employee’s performance during the past twelve
months.
Describe the employee’s strength and weakness.
How do you describe the employee’s potential
within the company?
What leadership skills does the employee bring
to the job?
What future development activities do you
recommend for the employee?
Morgan Stanley’s Essay System
Consider objectives identified in prior year’s Summary as well
as this year’s objectives.
Evaluation:
Strengths Comments
1.
2.
3.
Development Areas Comments
1.
2.
3.
Examples of essays on PMs….
His men would follow him anywhere, but only out of curiosity.
I would not suggest breeding for this person.
When she opens her mouth, it seems that it is only to change
the foot that was previously there.
He has carried out each of his duties to his entire satisfaction.
He would be out of his depth in a car park puddle.
This person is like a gyroscope: always spinning at a fast pace,
but not really going anywhere.
This person has delusions of adequacy.
Continued examples….
Since my last report, he has reached rock bottom and is digging.
She sets low personal standards and then consistently fails to
meet them.
He has the wisdom of youth & the energy of old age.
This person should go far. And, the sooner he starts, the better.
In my opinion, this pilot should not be authorized to fly below
250 meters.
This person works well under constant supervision and when
cornered.
This man is depriving a village somewhere of its idiot.
Management-by-Objective
Examples
Employee will contribute to organizational
profit margin by lower costs in department
by 3.5percent.
To implement new recruitment system, the
employee will evaluate the effectiveness of
the advertisements placed during the year.
Ranking Example
Manager ranks all employees from best to worst:
Overall performance
On specific criteria (communication,
customer relations skills, etc.)
Paired Comparisons Example
Rank each employee grouping overall or
on a characteristic:
Employee A and Employee B
Employee B and Employee C
Employee A and Employee C
Employee C and Employee D
Employee D and Employee A
Employee D and Employee B
etc.
Forced Distribution Example
Pace each of the employees in your department
in the following categories based upon overall
or specific category performance:
Top 10 percent: 10-49 percent:
50 – 89 percent: Bottom 10 percent:
Outstanding: Average:
Good: Below Average:
Unacceptable:
General Electric’s Distribution
The Vitality Curve
Promotability
High Medium Limited
Top Performers
10%
Highly Valued
70%
Least Effective
20%
Ratings Example: Checklists
Program Auditor:
_____ 1. Unable to separate important from irrelevant data.
_____ 2. Omits important info from summaries.
_____ 3. Cross-references to improve reporting.
_____ 4. Produces summaries which lead to good reports.
_____ 5. Requires excessive instruction to produce work.
_____ 6. Unable to reduce data to manageable form.
_____ 7. Communicates well with peers on reports.
_____ 8. Fails to meet deadlines.
_____ 9. Provides detailed, professional work.
_____ 10. Protects confidentiality of information.
Ratings Example: Scales
Rate the employee’s behavior on the scale provided.
Excellent Good Fair Poor N/A
4 3 2 1 ___
Reasoning ability 4 3 2 1 ___
Decisiveness in Decision-making 4 3 2 1 ___
Imagination & originality 4 3 2 1 ___
Ability to plan and control 4 3 2 1 ___
Cooperation with peers 4 3 2 1 ___
Cooperation with management 4 3 2 1 ___
Professionalism 4 3 2 1 ___
Interpersonal skills 4 3 2 1 ___
Citibank’s Performance Scorecard
Measurements Below Par Above
Par Par
Standards Manager’s assessment
Leadership,
Ethics/Integrity
Customer Interaction
Community Involvement
Contribution to Overall Business
People Manager’s assessment
Performance
Teamwork
Training & Development
Employee Satisfaction
Control Auditors’ standards
Audit
Legal
Regulatory
Citibank’s Performance Scorecard..
Measurements Below Par Above
Par Par
Customer Satisfaction External company survey
Goal of 80%
Strategy Implementation Objective standards
Households
Cross-sell, splits, mergers
Retail asset balances
Market share
Financial Objective stadards
Revenue
Expense
Margin
Citibank’s Link to Compensation
Ratings Bonus
“Above Par” 30%
“Par” 15%
“Below Par” 0%
Microsoft’s PA System
Overall Employee Rating:
5 = Exceptional performance rarely achieved; precedent setting
results
4.5 =Consistently exceeds all requirements & expectations work
highly valued
4 =Consistently exceeds position requirements and expectations;
work often noteworthy
3.5 =Exceeds position requirements; successful in all objectives
3 =Meets position requirements and expectations; meets most
or all objectives; needs some development for quality
2.5 =Falls below performance standards and expectations; has
performance deficiencies
1.0-2.0 =Does not meet minimum requirements in critical aspects
of job
Microsoft:
Adding Distribution to Rankings
4.0 + = 35% of employees
3.5 = 40% of employees
3.0 or lower = 25% of employees
Ratings Example: BARS
Indicate the appropriate level of performance on each factor:
Quantity of work
Volume low & erratic Satisfactory steady Volume above expectations
volume
Quality of work
Results always accurate; Results accurate and Results generally inaccurate
model work thorough and not thorough
Judgment
Systematic, analytical, good Practical judgment, Does not always show good
with complex problems solves problems, judgment; problem analysis
difficulty with assessing not always adequate
relative value of factors
Microsoft Competency Toolkit
FACTOR: Individual Excellence
COMPETENCY: Intellectual Horsepower (is bright, intellectual sharp, learns quickly)
Level 1 Level 2 Level 3 Level 4
Structures basic Analyzes & organizes Analyzes, explains & Rapidly identifies the
info accurately; draws complex info from specific draws logical conclusions significance of info &
informed conclusions content area, identifying based upon complex data insightfully determines
key issues, assessing from multiple content strategic action.
impact, drawing areas
reasonable conclusions
With guidance, learns Learns new skills & ideas Rapidly learns & Rapidly learns new
quickly on the job rapidly assimilates complex info concepts & ideas;
involving unfamiliar integrates & assimilates
situations & circumstances highly complex info across
broad, multi-functional
content areas
Picks up new skills & Quickly adjusts thinking
understands ideas when for new info or ideas
structured
Learns effectively from Is able to apply & explain
experience logic related to problems
Microsoft Competency Toolkit
FACTOR: Long-term Approach
COMPETENCY: Developing people (provides job-relevant learning, developmental
exercises, and feedback to enhance individual performance)
Level 1 Level 2 Level 3 Level 4
Assigns challenging tasks Takes time to learn about Actively coaches direct Holds managers
and assignments that will and understand direct reports how to get the most accountable for developing
help people develop their reports; career goals learning from their current people in their group/
skills assignments organization
Provides direction in Provides stretch jobs and Gives direct reports Identifies key people in
correct performance of assignments for direct candid, thoughtful his/her organization to
tasks and assignments reports to help them feedback on their strengths assume high-level
develop their skills and weaknesses management
responsibilities, and is an
advocate for them when
opportunities for
advancement occur
Critical Incident Example
Employee Name:___________________________________
Date of Incident:__________________
Type of Incident:___________________________________
Individuals Involved:
Description of Incident:
Outcome of Incident:
Recommendations:
Date Discussed with Employee:____________
Supervisor Signature:______________________________
Employee Signature: ______________________________
Focus Judgmental Developmental
Time Past performance Preparation for
orientation future performance
Method Improving Improving
performance by performance by self-
changing behavior learning & personal
through rewards growth
Supervisor’s Judge who appraises Counselor who
Role listens, helps,
encourages & guides
Subordinate’s Listener, reactor to, Actively involved in
Role defender of past charting future plans
performance
Criteria for Performance
Measures
Relevant
Reliable
Discriminating
Practical
Problems with Performance
Measures
Controllability
Motivational impact
“Fallout”
Role Modeling Impact
Reliability
Relevance
Control
WHO Should Assess Performance
Superior Only
Subordinate(s)
Peers/Coworkers
Self
Customers
Others
WHEN to Assess Performance
Probation Period
Annually (anniversary date, assigned date, set
date for all)
Semi-annually
For Cause
On-going
As needed
How to Communicate PM Info
Orally
In Writing
Formally
Informally
Public
Private
Moderated
Handling Performance Issues
What to do
Where to start
How to do it
PROBLEM =
Deviation from expectations
Do something differently
Not do something
Do something not expected/needed
Performance Problems
Research shows that there is a huge performance gap
between high and low performers in any organisation –
between 30%-50% for unskilled jobs
and up to 100% for highly technical ones.
From : Why people do not get fired: the psychology of discipline avoidance
- http://www.workrelationships.com/site/articles/performance_management.htm
PROBLEM ID
PRELIMINARY SCAN
What shouldn’t be happening?
Impact of this?
Worth pursuing?
ORGANIZATIONAL SCAN
Match strategic plan?
Critical functions missing?
Culture and performance gaps?
FUNCTIONAL JOB ANALYSIS
Specific job deficiencies?
Job knowledge and training?
CAUSAL ANALYSIS
ID:
When problem began
What else has changed
PARETO’S LAW: Rule of 20/80
“80% of any problem is
caused by 20% of possible
causes.”
CAUSES OF
PERFORMANCE PROBLEMS
-Lack of ability
-Low motivation
-Poor work ethic
-Substance abuse
-Personal problems
-Lack of time
-Poor peer relationships
-Unfamiliarity with equipment or process
PERFORMANCE
OPPORTUNITIES
Excellent Perf
Poor Perf
No/Low Knowledge High Knowledge
PERFORMANCE
OPPORTUNITIES
Excellent Perf
--- OK
Poor Perf
Org
Training Development
No/Low Knowledge High Knowledge
ALTERNATIVE SOLUTIONS
1. Return to old system
2. Fire, transfer, hire new
3. Train
4. Reassign or isolate
RATE EACH BY:
-Contribution to Objectives
(high, medium, low)
-Cost to fix and to ignore
(high, medium, low)
RANK IN ORDER
Training & Development
Definition: planned, continuous effort by
management to improve employee competency
levels and org performance.
TRAINING: provide learners with knowledge & skills
for job
DEVELOPMENT: prepare organization and employees
to keep pace with industry and fields of expertise
T & D TRENDS
Skill requirements change with more work complexity
Workers more educated
Workers more diverse
Org restructuring continues
Training often outsourced
More technology use in Training
Training Departments = Brokers
J-I-T and J-W-I-N Training Grow
Increase on human performance
Factors Influencing T & D
Top management support
Commitments from Specialists and
Generalists
Technological Advances
Organizational Complexity
Behavioral Science Knowledge
Learning Principles
Performance of Other Human Resource Functions
TRAINING & DEVELOPMENT METHODS
Coaching Mentoring
Business Games Case Studies
Role Playing Videotapes
In-Basket Training Internships
Job Rotation Computer-based
Methods (continued)
Cyberlearning:
-Internet/Intranet
-Virtual Reality
-Distance Learning
-Video Conferencing
Classroom Programs
Corporate Universities
Colleges & Universities
On-the-Job Training
Apprenticeship Training
Simulators
Vestibule Training
DEVELOPMENT
1. HARDWARE
-equipment -space -money
-people -transportation
2. SOFTWARE
-policies & procedures -reward systems
-communication systems -structure
3. BEHAVIORAL
-supervision -peer relationships
-values & attitudes -personality
-individual goals & priorities
EMPLOYEES PERFORMANCE :
CATEGORIES AND STRATEGIES
DEADWOOD:
No training; demotions or removal; remedial
work; training to prevent loss; orientation to
lower job; divest
WORKHORSES:
Training stressing improvement, orientation or
maintaining skills; career counseling on limits
PROBLEM CHILDREN:
Remedial, therapeutic or corrective dev plan; divest
STARS:
Special effort, programs and funds to maximize
value; invest
IMPLEMENTATION PLAN
Priorities Options
Budget Development
Selection of Methods
Plan with Benchmarks
Pilot Program
Evaluation
Adjustments and New Plan
Full Implementation
On-Going & Periodic Evaluations
(Is it working? If no, why not?)
Why PM Is Difficult
Job/Outcomes not quantified
Personal relationships with employees
Unable to give criticism
Personality biases
Poor communication
Conflicting Goals
Playing God
Errors in Performance Measurement
Strictness or Leniency
Central Tendency
Halo Error
Recency Error
Supervisor Bias
Overall Ratings
Correcting PM Errors
Isolate Job Areas
Observe Regularly
Minimize Number of Ratings Completed
Train Raters
Define Dimensions Better
Give Feedback
Use Continual Feedback
Include Other Sources
Decrease Generalities, Include Specifics
Effective PM Systems
System acceptable to employees
Managers use system regularly & correctly
Perception of being treated fairly by system
Useful feedback provided
Focus on problem solving, not blame
Serve to increase productivity & satisfaction
System used by organization
Training for PM Interviews
Have documentation
Be objective
judge job, not individual
Use specific examples
Share control
Make it a year-round process
Training….continued
Solicit & give feedback
-Clear -Constructive
-Descriptive, not judgmental
Avoid arguments
Strive for consistency
Get it down in black and white
By-the-book
Listen
PRIOR TO PM INTERVIEW
Decide on best time
Decide on best place
Prepare facilities
Gather info and materials
Prepare employee
Plan the opening
Plan the approach
Plan the conclusion
After PM Interview
Meet deadlines
Solicit input
Reinforce, reward, punish
(follow through)
Review regularly
How to Destroy PM System
Do not follow policies
Be inconsistent in application
Treat it as unimportant
Do not follow-up
Reprimand in public; Reward in private
Conduct when angry
Be late
The WHY of Performance
Management Systems
-Administer Salary & Wages
-Correct Performance/Behavior
-Plan for Future (promotion, transfer, career dev)
-Facilitate Decision-Making (counseling, terminations)
-Facilitate Human Resource Planning
-Create Culture
-Building Good Relationships
-Increase Organizational Loyalty
-Determine Effectiveness of Selection and
Placement Methods
