Performance

Management
 Overview
 Definition of Performance Management (PM)
 The Performance Management Contribution
 Disadvantages/Dangers of Poorly
Implemented PM Systems
 Definition of Reward Systems
 Aims and Role of PM Systems
 Characteristics of an Ideal PM System
 Integration with Other Human Resources
and Development Activities
 Definition of PM

1. Continuous Process of
 Identifying
 Measuring
 Developing

The performance of individuals

and teams
Definition of PM (continued)
and
2. Aligning performance

with

Strategic Goals of the

organization
Performance Management
is NOT
performance appraisal
PM is NOT performance appraisal

 Performance Management
• Strategic business considerations
• Driven by line manager
• Ongoing feedback
 So employee can improve
performance
PM is NOT performance appraisal
 Performance Appraisal
• Driven by HR
• Assesses employee
 Strengths &
 Weaknesses

• Once a year
• Lacks ongoing feedback
Contributions of Performance Management
For Employees
 Clarify definitions of
job
success criteria
 Increase motivation to perform
 Increase self-esteem
 Enhance self-insight and development
Performance
Management

Herman Aguinis, University of Colorado at Denver

Contributions of Performance Management
For Managers
 Communicate supervisors’ views of
performance more clearly
 Managers gain insight about
subordinates
 Better and more timely differentiation
between good and poor performers
 Employees become more competent

Herman Aguinis, University of Colorado at Denver

Contributions of Performance Management
For Organization/HR Function
 Clarify organizational goals
 Facilitate organizational change
 Fairer, more appropriate
administrative actions
 Better protection from lawsuits

Herman Aguinis, University of Colorado at Denver

Disadvantages/Dangers of
Poorly-implemented
PM Systems

Herman Aguinis, University of Colorado at Denver

Disadvantages/Dangers of Poorly-implemented
PM Systems

For Employees
 Lowered self-esteem
 Employee burnout and job
dissatisfaction
 Damaged relationships
 Use of false or misleading
information

Herman Aguinis, University of Colorado at Denver

Disadvantages/Dangers of Poorly-implemented
PM Systems

For Managers
 Increased turnover
 Decreased motivation to perform
 Unjustified demands on managers’
resources
 Varying and unfair standards and
ratings

Herman Aguinis, University of Colorado at Denver

Disadvantages/Dangers of Poorly-implemented
PM Systems

For Organization
 Wasted time and money
 Unclear ratings system
 Emerging biases
 Increased risk of litigation

Herman Aguinis, University of Colorado at Denver

 Reward Systems
Definition
Set of mechanisms for distributing
 Tangible returns

and
 Intangible or relational returns

As part of an employment relationship

Herman Aguinis, University of Colorado at Denver

 Reward Systems
Tangible returns

 Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-
term)

Herman Aguinis, University of Colorado at Denver

 Reward Systems
Tangible returns (continued)
 Benefits, such as
Income Protection
Allowances
Work/life focus

Herman Aguinis, University of Colorado at Denver

 Reward Systems
Intangible returns
 Relational returns, such as
Recognition and status
Employment security
Challenging work
Learning opportunities

Herman Aguinis, University of Colorado at Denver

 Returns with Low Dependency
on the
Performance Management System
 Cost of Living Adjustment
 Income Protection

Herman Aguinis, University of Colorado at Denver

 Returns with Moderate Dependency
on the
Performance Management System

 Work/Life Focus
 Allowances
 Relational Returns
 Base Pay

Herman Aguinis, University of Colorado at Denver

 Returns with High Dependency
on the
Performance Management System

 Contingent Pay
 Short-term Incentives
 Long-term Incentives

Herman Aguinis, University of Colorado at Denver

 An Ideal PM System:
14 Characteristics
1. Congruent with organizational
strategy
2. Thorough
3. Practical
4. Meaningful
5. Specific
6. Identifies effective/ ineffective
performance
7. Reliable

Herman Aguinis, University of Colorado at Denver

 An Ideal PM System:
14 Characteristics (continued)
8. Valid
9. Acceptable and Fair
10. Inclusive
11. Open (No Secrets)
12. Correctable
13. Standardized
14. Ethical

Herman Aguinis, University of Colorado at Denver

 Congruent with organizational
strategy
 Consistent with organization’s
strategy
 Aligned with unit and
organizational goals

Herman Aguinis, University of Colorado at Denver

 Thorough
 All employees are evaluated
 All major job responsibilities are
evaluated
 Evaluations cover performance for
entire review period
 Feedback is given on both positive
and negative performance

Herman Aguinis, University of Colorado at Denver

 Practical

 Available
 Easy to use
 Acceptable to decision makers
 Benefits outweigh costs

Herman Aguinis, University of Colorado at Denver

 Meaningful
 Standards are important and relevant
 System measures ONLY what employee
can control
 Results have consequences
 Evaluations occur regularly and at
appropriate times
 System provides for continuing skill
development of evaluators

Herman Aguinis, University of Colorado at Denver

 Specific

Concrete and detailed guidance to

employees
• What’s expected

• How to meet the expectations

Herman Aguinis, University of Colorado at Denver

 Identifies
effective and ineffective
performance
 Distinguish between effective and
ineffective
• Behaviors
• Results
 Provide ability to identify
employees with various levels of
performance

Herman Aguinis, University of Colorado at Denver

 Reliable

 Consistent
 Free of error
 Inter-rater reliability

Herman Aguinis, University of Colorado at Denver

 Valid

 Relevant (measures what is

important)
 Not deficient (doesn’t measure
unimportant facets of job)
 Not contaminated (only measures
what the employee can control)

Herman Aguinis, University of Colorado at Denver

 Acceptable and Fair

 Perception of Distributive Justice

• Work performed  Evaluation received
 Reward

 Perception of Procedural Justice

• Fairness of procedures used to:
 Determine ratings
 Link ratings to rewards

Herman Aguinis, University of Colorado at Denver

 Inclusive
 Represents concerns of all
involved
• When system is created, employees
should help with deciding
 What should be measured
 How it should be measured

• Employee should provide input on

performance prior to evaluation
meeting

Herman Aguinis, University of Colorado at Denver

 Open (No Secrets)
 Frequent, ongoing evaluations and
feedback
 2-way communications in appraisal
meeting
 Clear standards, ongoing
communication
 Communications are factual, open,
honest

Herman Aguinis, University of Colorado at Denver

 Correctable

 Recognizes that human judgment

is fallible
 Appeals process provided

Herman Aguinis, University of Colorado at Denver

 Standardized

 Ongoing training of managers to

provide
 Consistent evaluations across
• People
• Time

Herman Aguinis, University of Colorado at Denver

 Ethical
 Supervisor suppresses self-
interest
 Supervisor rates only where she
has sufficient information about
the performance dimension
 Supervisor respects employee
privacy

Herman Aguinis, University of Colorado at Denver

 Integration with other
Human Resources
and Development Activities
 PM provides information for:
• Development of training to meet
organizational needs
• Workforce planning
• Recruitment and hiring decisions
• Development of compensation
systems

Herman Aguinis, University of Colorado at Denver

Aims and Roles of PMS

Herman Aguinis, University of Colorado at Denver

 Aims and Roles of PMS
1. Strategic Purpose
2. Administrative Purpose
3. Informational Purpose
4. Developmental Purpose
5. Organizational Maintenance Purpose
6. Documentational Purpose

Herman Aguinis, University of Colorado at Denver

 Strategic Purpose
To help top management achieve
strategic business objectives
By Linking the organization’s goals
with individual goals.

Herman Aguinis, University of Colorado at Denver

 Administrative Purpose
To furnish valid and useful information
for making administrative decision
about employees.
Like salary
Promotions
Transfer
Incentives
layoffs

Herman Aguinis, University of Colorado at Denver

 Informational Purpose
To inform employees about how they
are doing and about the organization's
and the supervisor's expectations.
Like a communication device

Herman Aguinis, University of Colorado at Denver

 Developmental Purpose
To allow managers to provide coaching
to their employees.
Feedback culture allow to discuss
deficiencies.
Training and Development

Herman Aguinis, University of Colorado at Denver

 Organizational Maintenance
Purpose
To Provide information to be used in
workplace planning and allocation of
Human Resource.
Forecasting and Staffing of employees.
Workforce Needs Assessment
Training Need Assessment
Placement and Recruitment of
Employees

Herman Aguinis, University of Colorado at Denver

 Documentational Purpose
To collect useful information that can
be used for various purposes. Like
testing, developing, administrative
decision making.
Data set for record of employees and
organization.

Herman Aguinis, University of Colorado at Denver