Human Resource

Management
Chapter Nine
Performance
Management

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-1

 Why Performance Management
Is Important
 How well employees perform is a function of
the effort they expend
 Manager’s goal is to motivate employees to
work hard and continually improve
 This involves evaluating performance of
employees against the standards and helping
them develop action plans to improve

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-2

 Purposes of Performance
Management
 Administrative because it directly affects a
firm’s decisions regarding its workforce
(raises, incentives, promotions, etc.)
 Developmental because it helps employees
improve performance, achieve their
potential and add value to the company

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-3

Steps in the Performance
Management Process

1. Identify performance dimensions

2. Develop performance measures
3. Evaluate employee performance
4. Providing Feedback
5. Develop Action Plans to improve performance

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 Identifying Performance
Dimensions
 Global performance measure is a single
score to reflect overall performance
 Performance dimensions are different areas
that are being evaluated—should reflect the
reasons the job exists (tasks, duties,
responsibilities)

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-5

 Developing Performance
Measures

 Should be valid, specific, and have clear

standards
 Reliable refers to how well a measure yields
consistent results over time and across raters
 Deficient measures leave out important aspects
of an individual’s performance
 Contaminated measures capture information
irrelevant to an individual’s job performance

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-6

 Performance Measurement
Standards

 Performance standards set a level of

expected performance, a benchmark
 Can be quantitative or qualitative
 Should be clear (specificity) and reflect
the entire performance spectrum

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-7

 Evaluating Employee
Performance
Individual Comparisons
 Ranking approach—comparing employees to
each other (e.g. best to worst)
 Paired comparison—each employee is compared
to every other employee and points are assigned
to the “better” individual, points are totaled and
compared
 Forced distribution—managers are forced to
distribute employees into predetermined
categories and prevented from rating everyone
as outstanding, or average
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Forced Distribution

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 Absolute Approaches
 Comparing employees against certain
“absolute” standards rather than against each
other
 Each employee’s evaluation is independent
of others and includes traits, attributes, and
behaviors

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-10

 Graphic Rating Scale

 Raters evaluate
employees based on
various traits or attributes
they possess relevant to
their performance

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-11

 Behavior-Based Approaches
Rely on variety of performance dimensions
and evaluate employees’ behavior along a
range of standards
 Critical incident approach—examples of
exceptionally good or poor performance
throughout the evaluation period (behaviors)
 Forced-choice approach—managers choose
from a set of alternative statements regarding
employee’s performance

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-12

Behaviorally Anchored Rating
Scales (BARS)

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 Results-Based Approaches

Rely on objective performance dimensions

such as production or quality measures
 Direct measures approach—evaluation on
outcomes such as sales, productivity,
absenteeism, etc.
 Management by Objectives (MBO)—based
on goals set with employees at the beginning
of the performance period

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-14

Sources of Performance Data
 Supervisors—a key source but may not have time to
monitor and observe employees every day
 Co-Workers—may be able to comment on
cooperation and support, but may intentionally skew
rating
 Self-Appraisal—can be useful starting point and
developmental tool to help employee improve
performance
 Subordinates—may be hard to separate skill from
“likeability”
 Customers—satisfaction levels may only report
extremely good or bad experiences
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-15
 360-Degree Approach
 Involves gathering performance data from as
many sources as possible—supervisors, peers,
subordinates, and customers
 Can be cumbersome and takes time to sift
through all the feedback

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 Example of the Impact of
Different Weights in Evaluations

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 Performance Measurement
Errors
 Halo/horn error—overall positive or negative
view of employee’s performance biases the
ratings given on individual criteria
 Contrast effect—manager artificially inflates
or deflates an employee’s rating after
comparing employee to another individual
 Primacy error—rater’s earlier impressions of
individual bias later evaluations of the person
 Recency error—rater focuses on employee’s
performance near the time of the evaluation
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-18
 Performance Measurement
Errors (cont’d)
 Similar-to-me error—when managers more
highly rate employees who resemble them in
some way
 Leniency error—rating employees on high end of
the scale
 Strictness error—rating employees on low end of
the scale
 Error of central tendency—rating everyone
“average”

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-19

 Reducing Rating Errors
 Make rating formats more specific, defining
precisely what is being evaluated
 Use multiple raters
 Performance Appraisal training—to
familiarize raters with errors that can occur
 Frame-of-reference training—to help raters
understand performance standards and
dimensions and develop common
evaluation standards

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-20

 Providing Feedback
 Most firms require appraisals every six
months to a year
 Feedback meeting on performance could be
separate from meeting on salary decisions
 Focus on behaviors rather than employee
 Balance approach—positive and
improvement areas
 Involve/engage employee in discussion

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 Developing Action Plans to
Improve Performance
 Seek to understand causes of poor
performance, which could stem from:
 Work environment
 Design of jobs
 Technology
 Support or performance of co-workers
 Employee’s competencies, attitudes and
behaviors

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-22

 Taking Action
 Removing barriers to employee success
 Training and development activities
 Coaching and mentoring
 Work design and technology solutions
 Addressing quality of employee’s
performance

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 Taking Action to Improve
Employee Performance
 Review performance dimensions with employees to
ensure they know what is expected of them
 Review standards of performance with employees to
ensure they know how to be successful
 Ensure performance measures are accurate
 Evaluate potential role overload or ambiguity
 Reach agreements on targets for improved
performance and timelines
 Ensure manager’s support

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 Disciplining Employees
Progressive discipline
 Verbal warning
 Written warning (copy to employee and file)
 Suspension
 Termination
Positive discipline
 Meeting to focus on constructive feedback—how to
improve the performance
 Meet to arrive at new action plan (documented)
 Final termination warning if problem not corrected
 Termination
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 Which Performance Dimensions
Are Emphasized
 Impacted by company’s strategy and how
jobs add value
 Low cost strategy will emphasize number of
transactions performed
 High customer service strategy will emphasize
quality of interactions and relationships

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 Performance Evaluation
Method Used
 Comparative approach will foster a competitive
climate and is more manageable in small
companies
 Absolute approach will enable each person to
be evaluated on attributes and behaviors—
more likely used in larger companies, but is
time-consuming and expensive

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-27

 Objectives of Performance
Management Systems
 In a competitive culture, an administrative
approach to performance management
might be used (comparative, attribute,
results)
 In cultures that focus on well-being of
employees, a developmental approach might
be used (how employees perform their jobs)

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-28

Perceptions of Procedural and
Distributive Justice
 When employees perceive performance
evaluations reflect their true performance they
are more likely to accept them (distributive
justice)
 When employees perceive evaluations
included dimensions beyond their control,
standards were too hard to achieve, or they
were not given sufficient guidance (procedural
justice) the evaluation process is less likely to
motivate
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 Other Factors Affecting
Performance Management
 Work/life balance—how much time employees need
to put into jobs to meet their standards
 Sources used by supervisors to gather performance
data about employees (especially those
telecommuting)
 Accuracy of performance evaluations—training
managers receive
 Ethnic, gender, or age biases
 Technology used to gather performance data and
provide feedback to employees about their jobs
 Globalization and international assignments
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 Globalization and
Performance Management
Evaluations of employees on international
assignments could be based on dimensions
used in home country or host country
 Performance can be affected by political
environment, social norms, cultural differences,
union relations, etc.
 Companies must clearly communicate the
standards for which employees are accountable
 Usually rely on more than one rater to provide
feedback (home and host country)

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-31

 Ethics and Performance
Management
 Employees will view a system that has
procedural and distributive fairness as more
ethical
 Employees who are allowed to participate in
the process and are allowed to voice
concerns and discuss discrepancies will
perceive fairness of system
 Surveillance and monitoring systems may
impact employee’s trust of employer
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 Other Issues Impacting
Performance Management
 Comparative evaluations may foster climate
where employees are willing to cheat
 System stressing financial performance might
encourage managers to engage in unethical
accounting practices
 System may unintentionally discriminate
 Documentation of decisions and actions
throughout the performance period will help
improve accuracy
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9-33
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States of America.

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