fundamentals of

Human Resource Management 4th

by R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright

edition

CHAPTER 8

Managing Employees Performance

McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All Rights Reserved.

8-1

What Do I Need to Know?

1. Identify the activities involved in performance management. 2. Discuss the purposes of performance management systems. 3. Define five criteria for measuring the effectiveness of a performance management system. 4. Compare the major methods for measuring performance.
8-2

What Do I Need to Know? (continued)

5. Describe major sources of performance information in terms of their advantages and disadvantages. 6. Define types of rating errors and explain how to minimize them. 7. Explain how to provide performance feedback effectively.

8-3

What Do I Need to Know? (continued)

8. Summarize ways to produce improvement in unsatisfactory performance. 9. Discuss legal and ethical issues that affect performance management.

8-4

Introduction
Performance management: the process through which managers ensure that employees activities and outputs contribute to the organizations goals. This process requires:
Knowing what activities and outputs are desired Observing whether they occur Providing feedback to help employees meet expectations
8-5

Test Your Knowledge

If the performance management system created competition among team members, I would
A. B. C. D. Make collaboration a criterion to be evaluated. Nothing, competition is good. Increase the specificity of the feedback. Focus on personal traits rather than behaviors.

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Figure 8.1: Stages of the Performance Management Process

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Purposes of Performance Management

Strategic Purpose means effective performance management helps the organization achieve its business objectives. Administrative Purpose refers to the ways in which organizations use the system to provide information for day-to-day decisions about salary, benefits, and recognition programs. Developmental Purpose means that it serves as a basis for developing employees knowledge and skills.
8-8

Employees Want More Feedback

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Criteria for Effective Performance Management Fit with strategy

Validity Reliability

Acceptability
Specific feedback
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Figure 8.2: Contamination and Deficiency of a Job Performance Measure

8-11

Test Your Knowledge

Sarah is a computer programmer whose job mainly consists of independently coding software. Interpersonal and teamwork skills are included on performance appraisal. Measuring these skills most closely represents:
A. Criterion contamination B. Criterion deficiency C. Unreliability
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Methods for Measuring Performance

Comparative

Quality

Attribute

METHOD

Results

Behavior

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Table 8.1: Basic Approaches to Performance Measurement

8-14

Measuring Performance: Making Comparisons

Simple Ranking Requires managers to rank employees in their group from the highest performer to the poorest performer. Forced Distribution Assigns a certain percentage of employees to each category in a set of categories. Paired Comparison Compares each employee with each other employee to establish rankings.

8-15

Measuring Performance: Rating Individuals - Attributes

Graphic Rating Scale Lists traits and provides a rating scale for each trait. The employer uses the scale to indicate the extent to which an employee displays each trait. Mixed-Standard Scale Uses several statements describing each trait to produce a final score for that trait.

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Figure 8.3: Example of a Graphic Rating Scale

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Figure 8.4: Example of a Mixed-Standard Scale

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An employees performance measurement differs from job to job. For example, a car dealers performance is measured by the dollar amount of sales, the number of new customers, and customer satisfaction surveys.
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Measuring Performance: Rating Individuals - Behaviors

Critical-Incident Method Based on managers records of specific examples of the employee acting in ways that are either effective or ineffective. Employees receive feedback about what they do well and what they do poorly and how they are helping the organization achieve its goals. Behaviorally Anchored Rating Scale (BARS)

Rates behavior in terms of a scale showing specific statements of behavior that describe different levels of performance.

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Figure 8.5: Example of Task- BARS Rating Dimension for a Patrol Officer

8-21

Measuring Performance: Rating Individuals Behaviors (continued)

Behavioral Observation Scale (BOS) A variation of a BARS which uses all behaviors necessary for effective performance to rate performance at a task. A BOS also asks the manager to rate the frequency with which the employee has exhibited the behavior during the rating period. Organizational Behavior Modification (OBM) A plan for managing the behavior of employees through a formal system of feedback and reinforcement.

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Figure 8.6: Example of a Behavioral Observation Scale (BOS)

8-23

Measuring Performance: Measuring Results

Management by Objectives (MBO): people at each level of the organization set goals in a process that flows from top to bottom, so that all levels are contributing to the organizations overall goals. These goals become the standards for evaluating each employees performance.

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Table 8.2: Management by Objectives Two Objectives for a Bank

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Test Your Knowledge

The performance management system at XYZ company currently is perceived as unfair and is time-consuming for managers. Which of the following systems is the most likely and least likely used, respectively.
A. B. C. D. Paired comparisons; Results Results; Forced distribution Behavioral; Attributes Attributes; Comparative

8-26

Measuring Performance: Measuring Quality

The principles of total quality management (TQM), provide methods for performance measurement and management. With TQM, performance measurement combines measurements of attributes and results.
Subjective feedback Statistical quality control

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 Coaches provide feedback to their team just as managers provide feedback to their employees. Feedback is important so that individuals know what they are doing well and what areas they may need to work on.
8-28

Sources of Performance Information

360-Degree Performance Appraisal: performance measurement that combines information from the employees:
Managers Peers Subordinates Self Customers

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Performance management is critical for executing a talent management system and involves one-on-one contact with managers to ensure that proper training and development are taking place.
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Types of Performance Measurement Rating Errors

Contrast errors: the rater compares an individual, not against an objective standard, but against other employees. Distributional errors: the rater tends to use only one part of a rating scale.
Leniency: the reviewer rates everyone near the top Strictness: the rater favors lower rankings Central tendency: the rater puts everyone near the middle of the scale
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Types of Performance Measurement Rating Errors (continued)

Rater bias: raters often let their opinion of one quality color their opinion of others.
Halo error: when the bias is in a favorable direction. This can mistakenly tell employees they dont need to improve in any area. Horns error: when the bias involves negative ratings. This can cause employees to feel frustrated and defensive.

8-32

Test Your Knowledge

Bill rates all of his employees very low except for Jan. Jan gets above average ratings because she consistently comes to work on time. The rating errors Bill makes are _______ and _______, respectively.
A. B. C. D. Leniency; Horn Strictness; Halo Similar-to-me; Central Tendency Horn; Strictness
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Political Behavior in Performance Appraisals

Distorting a performance evaluation to advance ones personal goals A technique to minimize appraisal politics is a calibration meeting:
Meeting at which managers discuss employee performance ratings and provide evidence supporting their ratings with the goal of eliminating the influence of rating errors

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Giving Performance Feedback

Scheduling Performance Feedback
Performance feedback should be a regular, expected management activity. Annual feedback is not enough. Employees should receive feedback so often that they know what the manager will say during their annual performance review.

Preparing for a Feedback Session

Managers should be prepared for each formal feedback session.
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 When giving performance feedback, do it in an appropriate meeting place. Meet in a setting that is neutral and free of distractions. What other factors are important for a feedback session?

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Giving Performance Feedback

(continued)

Conducting the Feedback Session

During the feedback session, managers can take any of three approaches: 1. Tell-and-Sell managers tell employees their ratings and then justify those ratings. 2. Tell-and-Listen managers tell employees their ratings and then let the employees explain their side of the story. 3. Problem-Solving managers and employees work together to solve performance problems.
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Figure 8.7: Improving Performance

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Legal and Ethical Issues in Performance Management

Legal
Performance management processes are often scrutinized in cases of discrimination or dismissal.

Ethical
Employee monitoring via electronic devices and computers may raise concerns over employee privacy.

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Legal Requirements for Performance Management

Lawsuits related to performance management usually involve charges of:
Discrimination Unjust dismissal

To protect against both kinds of lawsuits, it is important to have a legally defensible performance management system.

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Legal Requirements for Performance Management (continued)

A legally defensible performance management system includes:
Based on valid job analyses, with requirements for job success clearly communicated to employees. Performance measurement should evaluate behaviors or results, rather than traits. Multiple raters (including self-appraisals) should be used. All performance ratings should be reviewed by upper-level managers. There should be an appeals mechanism for employees.
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Summary
Performance management is the process through which managers ensure that employees activities and outputs contribute to the organizations goals. Organizations establish performance management systems to meet three broad purposes:
Strategic purpose Administrative purpose Developmental purpose

Performance measures should fit with the organizations strategy by supporting its goals and culture.
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Summary (continued)
Performance information may come from an employees self-appraisal and from appraisals by the employees supervisor, employees, peers, and customers. Using only one source makes the appraisal more subjective. Organizations may combine many sources into a 360degree performance appraisal.

8-43

Summary (continued)
Organizations can minimize appraisal politics by establishing a fair appraisal system, involving managers and employees in developing the system, allowing employees to challenge evaluations, communicating expectations, and having open discussion. Performance feedback should be a regular, scheduled management activity, so that employees can correct problems as soon as they occur.

8-44

Summary (continued)
The performance feedback discussion should focus on behavior and results rather than on personalities. Managers must make sure that performance management systems and decisions treat employees equally, without regard to their race, sex, or other protected status. A system is more likely to be legally defensible if it is based on behaviors and results, rather than on traits, and if multiple raters evaluate each persons performance.

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