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Lecture # 1

Introduction to Performance Managemen

Wonders are many, and none is more wonderful than man

Performance Management in Context: Overview

Definitions related with Performance Management (PM) The PM 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

What is performance?
Performance is the sum of behavior and results, and cannot be viewed as independent of either component. It is an outcome of effective management. Bernadin et al (1995) are concerned that performance should be defined as the outcomes of work because they provide the strongest linkage to the strategic goals of the organization, customer satisfaction, and economic contributions

Brumbrach (1988):
Performance means both behaviours and results. Behaviours emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviours are also outcomes in their own right the product of mental and physical effort applied to tasks and can be judged apart from results.

Factors That Influence Performance

What is performance appraisal?

A system that involves employee evaluations once a year without an ongoing effort to provide feedback and coaching so that performance can be improved

Objectives of Performance Appraisal

Provide information to assist in the HR decisions like promotions, transfers etc. Provide clarity of the expectations and responsibilities of the functions to be performed by the employees. To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development. To reduce the grievances of the employees. Helps to strengthen the relationship and communication between superior subordinates and management employees.

Uses of Performance Appraisal

Counselling performance deficiency Identifying individual training and development options Decisions on changing rewards and/or remuneration levels Succession and career planning Work unit planning and job design/work allocation Sessions to gain commitment for new work unit or corporate objectives

Handbooks / Guidelines
Performance Appraisal Handbook. U.S. Department of the Interior m430hndbk.pdf

Rating Level Exceptional Superior Fully Successful Minimally Successful Unsatisfactory

Points Assigned 5 points 4 points 3 points 2 points 0 point

Why Appraise Performance?

Why appraise performance?
Appraisals play an integral role in the employers performance management process. Appraisals help in planning for correcting deficiencies and reinforce things done correctly. Appraisals, in identifying employee strengths and weaknesses, are useful for career planning Appraisals affect the employers salary raise decisions.

Performance Management (PM)

Performance Management (PM) as described here refers to a term coined by Dr. Aubrey C. Daniels in the late 1970s to describe a technology (i.e., science imbedded in applications methods) for managing both behavior and results, the two critical elements of what is known as performance.

Michael Armstrong (2000)

Performance management is a strategic and integrated process that delivers sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and teams.

Michael Armstrong (2000). Performance Management. London: Kogan Page Limited

Aguinis (2009) defines: PM is a continuous process of identifying, measuring and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization

So PM is Continuous Process of
Identifying performance of individuals and teams Measuring performance of individuals and teams Developing performance of individuals and teams and Aligning performance with the strategic goals of the organization

Performance Management
An iterative process of goal-setting, communication, observation and evaluation to support, retain and develop exceptional employees for organizational success.

Set Goals




The Performance Management Cycle

Focus of Performance Management

Progress and success toward goal achievement


PM is NOT performance appraisal

PM Strategic business considerations Ongoing feedback So employee can improve performance Driven by line manager Performance appraisal Assesses employee
Strengths & Weaknesses

Once a year Lacks ongoing feedback Driven by HR

Comparing Performance Appraisal and Performance Management

Performance appraisal (PA)
Evaluating an employees current and/or past performance relative to his or her performance standards.

Performance management (PM)

The process employers use to make sure employees are working toward organizational goals. PA is an important component of PM

Case Study: Merrill Lynch

Merrill Lynch started the transition from giving employees one PA per year to focusing on one of the important principles of PM. Conversation b/w managers and employees in which feedback is exchanged and coaching is given if needed In January, managers and employees set employee objectives Mid-year reviews assess progress and personal development plans End-of-the-year reviews incorporates feedback from several sources, evaluates progress and identifies areas for improvement

Case Study: Siemens

At Siemens, the PM System is based on three pillars:
Setting clear and measurable goals Implementing concrete actions Imposing rigorous consequences

History of PM
The phrase was first coined by Beer and Ruh in 1976. But it did not become recognized as a distinctive approach until the mid-1980s

Why Do Performance Management?

Communicate goals, mission, values, purpose Improve working relationships Improve management Identify and communicate strengths and areas for improvement Provide feedback Develop Monitor Support

Why Performance Management?

Increasing use by employers of performance management reflects:
The popularity of the total quality management (TQM) concepts. The belief that traditional performance appraisals are often not just useless but counterproductive. The necessity in todays globally competitive industrial environment for every employees efforts to focus on helping the company to achieve its strategic goals.

Continuous improvement
A management philosophy that requires employers to continuously set and relentlessly meet ever-higher quality, cost, delivery, and availability goals by:
Eradicating the seven wastes:
overproduction, defective products, and unnecessary downtime, transportation, processing costs, motion, and inventory.

Requiring each employee to continuously improve his or her own personal performance, from one appraisal period to the next.

PM Contribution
Motivation to performance is increased Self-esteem is increased Managers gain insight about subordinates The definitions of job and criteria are clarified Self-insight and development are enhanced Administrative actions are more fair and appropriate Organization goals are made clear Employees become more competent

There is better protection from lawsuits There is better and more timely differentiation b/w good and poor performers Supervisors views of performance are communicated more clearly Organizational change is facilitated Motivation, commitment, and intentions to stay in the organization are enhanced Management behaviours beat the political behaviours

Components of an Effective Performance Management Process

Direction sharing
Role clarification Goal alignment

Developmental goal setting

Ongoing performance monitoring Ongoing feedback Coaching and support Performance assessment (appraisal) Rewards, recognition, and compensation Workflow and process control and return

Disadvantages of poorly implemented PM System

Increased turnover Use of misleading information Lowered self-esteem Wasted time and money Damaged relationships Decreased motivation to perform Employee burnout and job dissatisfaction Increased risk of litigation

Unjustified demands on managers and employees resources Varying and unfair standards and ratings Emerging biases Unclear rating systems Political behaviours beat the management behaviours

Reward Systems

Reward Systems: Definition

A reward system is a set of mechanisms for distributing both tangible and intangible returns as part of emplacement relationship Set of mechanisms for distributing
Tangible returns Intangible or relational returns

Not all types of returns are directly related to PM system, e.g. allocations are based on seniority as opposed to performance

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

Benefits, such as
Income Protection Allowances Work/life focus

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

Returns and Their Degree of Dependency on the Performance Management System

Return Cost of Living Adjustment Income Protection Work/life Focus Allowances Relational Returns Base Pay Contingent Pay Short-term Incentives Long-term Incentives Degree of Dependency Low Low Moderate Moderate Moderate Moderate High High High

Purposes of PM Systems: Overview

Strategic Administrative Informational Developmental Organizational maintenance Documentation

Strategic Purpose
Link employee behavior with organizations goals Communicate most crucial business strategic initiatives

Administrative Purpose
Provide information for making decisions re:
Salary adjustments Promotions Retention or termination Recognition of individual performance Layoffs

Informational Purpose
Communicate to Employees: Expectations What is important How they are doing How to improve

Developmental Purpose
Performance feedback/coaching Identification of individual strengths and weaknesses Causes of performance deficiencies Tailor development of individual career path

Organizational Maintenance Purpose

Plan effective workforce Assess future training needs Evaluate performance at organizational level Evaluate effectiveness of HR interventions

Documentational Purpose
Validate selection instruments Document administrative decisions Help meet legal requirements

Characteristics of an Ideal PM System

Congruent with organizational strategy

Consistent with organizations strategy Aligned with unit and organizational goals

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

Available Easy to use Acceptable to decision makers Benefits outweigh costs

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

Concrete and detailed guidance to employees whats expected how to meet the expectations

Identifies effective and ineffective performance

Distinguish between effective and ineffective
Behaviors Results

Provide ability to identify employees with various levels of performance

Consistent Free of error Inter-rater reliability

Relevant (measures what is important) Not deficient (doesnt measure unimportant facets of job) Not contaminated (only measures what the employee can control)

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

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

Open (No Secrets)

Frequent, ongoing evaluations and feedback 2-way communications in appraisal meeting Clear standards, ongoing communication Communications are factual, open, honest

Recognizes that human judgment is fallible Appeals process provided

Ongoing training of managers to provide Consistent evaluations across
People Time

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

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

A survey conducted by the consulting firm Watson Wyatt showed that only 3 in 10 employees believe their companys performance review system actually helped them improve their performance A recent survey of almost 1000 HRM professionals in Australia revealed that 96% of companies are currently implementing PMS.

Leading Contributors
Chris Argyris:Action Science Benjamin Bloom: Educational Technology Edward Deming: TQM Peter Drucker: Management Sciences Robert Gagne: Instructional System Design Thomas Gilbert: Behavioural Engineering Joe Harless: Front-End Analysis Roger Kaufman: Strategic Planning Donald kirkpatrick: Evaluation Malcolm Knowles: Androgogy

Kurt Lewin: Force Field Analysis Robert Mager: Instructional Objectives Douglas McGregor: Theory X & Y Susan Markle: Programmed Instruction Geary Rummler: Three levels of Org. Performance Pater Senge: Learning Orgs B. F. Skinner: Behaviourism Fredrick Taylor: Scientific Management Sivasailam (Thiagi) Thiagarajan: Games and Playfulness Donald Totsi: Feedback Marvin Weisbored: Six Boxes for org diagnostic framework

Our Roadmap

Part I: Strategic and General Considerations

PM and Reward Systems in Context PM Process PM and Strategic Planning

Part II: System Implementation

Defining performance and choosing a measurement approach Measuring results and behaviours Gathering performance information Implementing a PM System

Part III: Employee Development

PM and Employee Development PM Skills

Part IV: Reward Systems, Legal Issues, and Team PM

Reward Systems and Legal Issues Managing Team Performance


Text Books
Aguinis, Herman (2009). Performance Management (2nd ed). New Delhi: Pearson. Kirkpatrick, Donald L. (2006). Improving Employee Performance through Appraisal and Coaching (2nd Edition). New York: AMACOM Adkins, Tony (2006). Case Studies in Performance Management: A Guide from the Experts. New Jersey: John Wiley & Sons, Inc. Carton, Robert B., and Hofer, Charles W. (2006). Measuring Organizational Performance: Metrics for Entrepreneurship and Strategic Management Research. Cheltenham, UK: Edward Elgar Publishing Limited.

Cokins, Gary (2004). Performance Management. New Jersey: John Wiley & Sons, Inc. Muddux, Robert. B. (2004). Performance Appraisal (4th edition). New Delhi: Viva Books Private Limited Bacal, Robert (2004). Managers Guide to Performance Reviews. New York: McGraw-Hill. Hale, Judith (2004). Performance-Based Management: What Every Manager Should Do to Get Results. USA: John Wiley & Sons. Rummler, Geary A. (2004). Serious Performance Consulting: According to Rummler. USA: International Society for Performance Improvement.

Willmore, Joe (2004). Performance Basics. USA: ASTD. Grote, Dick (2002). The Performance Appraisal Question and Answer Book: A Survival Guide for Managers. New York: AMACOM. Armstrong, Michael (2000). Performance Management Key strategies and practical guidelines (2nd edition). London: Kogan Page Limited. Clemmer, J. (1995). Pathways to Performance: A Guide to Transforming Yourself, Your Team, and Your Organization. New Delhi: Prentice Hall.

Handbook of Applied Behavior Analysis, John Austin & James E. Carr. Context Press. 2000. Handbook of Organizational Performance, Thomas C. Mawhinney, William K. Redmon & Carl Merle Johnson. Routledge. 2001.

Organizational Behavior Management Network, Dr. John Austin, Dr. Dale Brethower, Dr. Alyce Dickinson. 2009. Journal of Organizational Behavior Management, Routledge Taylor & Francis Group. Published quarterly. 2009.

Farson, R. E. (1963). Praise Reappraised. Harvard Business Review, September October, p. 61.

Meyer, H. H., Kay, E., and French, J. R. P. (1965). Split Roles in Performance Appraisal. Harvard Business Review.

Feldman, J.M. (1981). Beyond Attribution Theory: Cognitive Processes in Performance Appraisal. Journal of Applied Psychology, 66(2), 127-148.

Shrader, C.B., Taylor, L. and Dalton, D. R. (1984). Strategic Planning and Organizational Performance: A Critical Appraisal. Journal of Management, Vol. 10, No. 2, 149-171 (1984)

Pearce, J.L., and Porter, L.W. (1986). Employee Responses to Formal Performance Appraisal Feedback. Journal of Applied Psychology, 71(2), 211-218.

Cleveland, J.N., Murphy, K.R. and Williums, R. E. (1989). Multiple Uses of Performance Appraisal: Prevalence and Correlates. Journal of Applied Psychology, 74(1), 130-135.

Greenberg, J. (1991). Using explanations to manage impressions of performance appraisal fairness. Employee Responsibilities and Rights Journal, 4(1), 51-60.

Bretz, R. D., Milkovich, G .T. and Read, W. (1992). The Current State of Performance Appraisal Research and Practice: Concerns, Directions, and Implications. Journal of Management, 18(2), 321-352. Folger, R., Konovsky, M.A. and Cropanzano, R. (1992). A Due Process Metaphor for Performance Appraisal. Research in Organizational Behaviour. 14, pp. 129-177

Ilgen, D.R., Barness-Farrell, and Mckellin, D.B. (1993). Performance Appraisal Process Research in the 1980s: What has it Contributed to Appraisals in Use. Organizational Behaviour and Human Resource Processes, 54, pp. 321-368.

Rater motivation in the performance appraisal context: a theoretical framework Journal of Management, Winter, 1994 by Michael M. Harris Woehr, D. J. (1994). Rater training for performance appraisal: a quantitative review. Journal of occupational and organizational psychology, 67(3), pp. 189205

Improving Performance: How to Manage the White Space in the Organization Chart, Geary A. Rummler & Alan P. Brache. Jossey-Bass; 2nd edition. 1995. The Values-Based Safety Process: Improving Your Safety Culture with Behavior-Based Safety, Terry E. McSween. John Wiley & Sons. 1995. Clarkson, M. B. E. (1995). A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. Academy of Management Review, 20(1), 92-117.

Human Competence: Engineering Worthy Performance, Thomas F. Gilbert. Pfeiffer. 1996.

Performance-based Instruction: Linking Training to Business Results, Dale Brethower & Karolyn Smalley. Pfeiffer; Har/Dis edition. 1998.

Wiese, D, S., and Buckley, M. R. (1998). The evolution of the performance appraisal process. Journal of Management History, 4(3), 233 - 249

Mayer R. C.; Davis J. H. (1999). The effect of the performance appraisal system on trust for management : A field quasiexperiment. Journal of applied psychology. 84(1), pp. 123-136 Bringing out the Best in People, Aubrey C. Daniels. McGraw-Hill; 2nd edition. 1999.

Abraham, S.E., Karns, L.A., Shaw, K. and Mena, M . A. (2001). Managerial competencies and the managerial performance appraisal process. Journal of Management, 20(10), 842852.