MGT340 - Topic 4 - Performance Management

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Learning Outcomes
Explain what performance management is and
how the establishment of goals, ongoing
performance feedback, and the evaluation process
are part of it
Describe the different sources of performance-
management information
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
Learning Outcomes
Explain the various methods used to evaluate the
performance of employees
Outline the characteristics of an effective
performance evaluation meetings and feedback
sessions and ways in which the performance of
employees can be improved
Performance Management Systems
Performance management: Process of creating a
work environment in which people can perform to
the best of the abilities
Performance evaluations: Result of an annual or
biannual process in which a manager evaluates an
employee’s performance
Uses the information to show the person where
improvements are needed and why
Developing an Effective Performance
Management System
Primary responsibility - Overseeing and coordinating
its performance management system
Employees are to accept and be satisfied with a
performance management system when they have the
chance to participate in its development
Experienced employees are asked to help identify
important job behaviors
Helps ensure that the system takes into account the
tasks that need to be done in an organization
Performance Standards
Based on job-related requirements derived from a job
analysis and reflected in an employee’s job description
and job specifications
Realistic and specific performance standards that are
measurable and written down communicate precise
information to employees
Legal Guidelines for Evaluations
Performance ratings must be job-related
Employees must be given a written copy of their job
standards in advance of evaluations
Managers who conduct the evaluation must be able
to observe the behavior they are rating
Do not allow performance problems to continue
unchecked
Supervisors must be trained to use the evaluation
form correctly
Legal Guidelines for Evaluations
Firm’s HR department should review the evaluations
to see if minority groups are being adversely impacted
Evaluations should be discussed openly with
employees and counseling offered to help poor
performers
Appeals procedure should be established to enable
employees to express disagreement with the
evaluation
Types of Performance Evaluation
Manager and/or supervisor evaluation:
Conducted by an employee’s manager and reviewed
by a manager one level higher
Self-evaluations: Conducted by the employee being
evaluated, on an evaluation form completed by the
employee prior to the evaluation meeting
Subordinate evaluations: Conducted by an
employee of a superior, which is appropriate for
developmental than for administrative purposes
Peer evaluations: Conducted by one’s fellow
employees, on forms compiled into a single profile for
use in the evaluation meeting
Team evaluations: Recognizes team
accomplishment rather than individual performance
Customer evaluations: Conducted by a firm’s
external and internal customers
360-Degree Evaluations
Conducted by different people who interact with
the employee on forms compiled into a single
profile for use in the evaluation meeting
Companies should consider the following
safeguards
Assure anonymity
Make respondents accountable
Prevent gaming of the system
Use statistical procedures
Identify and quantify biases
Training Appraisers
Improves the performance evaluation process
Establishing an evaluation plan
Provide an explanation of the performance evaluation
system’s objectives
Training Appraisers
Explain the mechanics of the rating system
 How managers should keep performance records and review
them
 How frequently the evaluations are to be conducted
 Who will conduct them
 What are the standards of performance
 How to go about preparing for evaluations
Alert raters to the weaknesses and problems of
appraisal systems so that they can be avoided
Distributional Errors
Error of central tendency: Performance rating error
in which all employees are rated about average
Leniency or strictness error: Appraiser gives
employees either unusually high or unusually low
ratings
Forced distribution: Raters are required to place a
percentage of employees into various performance
categories
Temporal Errors
Performance review is biased favorably or unfavorably
Depending on the way performance information is
selected, evaluated, and organized by the rater over
time
Recency error: Evaluation is based on the
employee’s most recent behavior rather than on
behavior throughout the evaluation period
Other Rater Errors
Contrast error: Evaluation is biased upward or
downward because of comparison with another
employee just previously evaluated
Similar-to-me error: Appraiser inflates the
evaluation of an employee because of a mutual
personal connection
Feedback Training
For raters which provides them some pointers they
can use while providing performance feedback to the
employees
Basic areas
Communicating effectively
Diagnosing the root causes of performance problems
Setting goals and objectives
Performance Evaluation Methods
Trait approaches - Based on people’s characteristics
continue to be used despite their subjectivity
Behavioral approaches - Provide more action-
oriented information to employees
Results methods - Focuses on the measurable
contributions that employees make to the
organization
Trait Methods
Graphic rating-scale method: Each employee is
rated according to a scale of characteristics
Mixed-standard scale method: Similar to other
scale methods but based on comparison with a
standard
Forced-choice method: Requires the rater to choose
from statements designed to distinguish between
successful and unsuccessful performance
Essay method: Requires the rater to compose a
statement describing employee behavior
Behavioral Methods
Critical incident: Unusual event that denotes
superior or inferior employee performance in some
part of the job
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 - Rater checks

statements on a list that the rater believes are
characteristic of the employee’s behavior
Behavioral Methods
Behaviorally anchored rating scale (BARS):
Consists of a series of vertical scales, one for each
important dimension of job performance
Behavior observation scale (BOS): Measures the
frequency of observed behavior
Preferred over BARS for:
 Maintaining objectivity
 Distinguishing good performers from poor performers
 Providing feedback
 Identifying training needs
Results Methods
Productivity measures - Directly links what
employees accomplish to results that benefit the
organization
Management by objectives (MBO): Philosophy of
management that rates employees based on the
achievement of goals set mutually by them and their
manager
Creating an Effective MBO Program
Objectives should be quantifiable and measurable
and accompanied by a description of how they will be
accomplished
Results that are expected must be under the
employee’s control
Firm’s goals and objectives must be consistent, or
aligned, with the goals of employees at all levels
Timeframes for when the goals are to be reviewed
and evaluated need to be established
Balanced Scorecard(BSC)
Evaluation takes into account
Financial measures
Customer measures
Process measures
Learning measures
Allows each individual to see how his or her
performance ties into the overall performance of the
firm
Balanced Scorecard(BSC)
Recommendations for the method’s success
Translate the firm’s strategy into a scorecard of clear
objectives
Attach measures to each objective
Provide performance feedback based on measures
Empower employees to make performance
improvements
Reassess the strategy
Meetings and Feedback Sessions
Tell and sell - Ability to persuade an employee to
change his or her behavior in a way
Tell and listen - Appraiser/supervisor communicates
the strong and weak points of an employee’s job
performance during the first part of the session
Problem solving - Seeks to obtain the employees’ buy-
in for a mutually-agreed upon way to overcome
obstacles and improve the person’s actual
performance
Conducting the Performance Evaluation
Meeting or Feedback Session
Ask for a self-evaluation
Invite participation
Express appreciation
Be supportive and demonstrate that you care
Minimize criticism
Establish goals
Follow up day to day
Tips for Using Criticism Constructively
Consider whether it is necessary
Consider the person’s ability to handle it
Be specific and do not exaggerate
Watch your timing
Make improvement on your goal
Managing Ineffective Performance
Courses of action
Provide training to increase skills and abilities
Transfer employee to another job or department
Attention of actions to motivate employee
Corrective measures needed to improve employee’s
performance
Cautions
Actions taken must be objective and fair
Do not treat underperformer differently, setting the
employee up to fail
Focus on Changing the Behavior, Not
the Person
Supervisor has to separate the employee from the
behavior
Way to communicate this to employees is to suggest
more acceptable ways of performing
When required action is taken, it should be done:
Legally
Fairly
With an understanding of the feelings of the individual
involved

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Behavioral checklist method - Rater checks

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