Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

CHAPTER 8

MANAGIN

G

EMPLOYE

ES’

PERFO

RMANCEFU

NDAMENTA

LS O

F

HUMAN RESOURCE

MANAGEMENT

5TH E

DITIO

N

BY R

.A. N

OE, J.

R. HOLL

ENBECK, B

.

GERHART, A

ND P.M. W

RIGHT

8-2

Need to Know

1. Activities involved in performance management.

2. Purposes and criteria and methods for measuring effectiveness of performance management systems.

3. Sources of performance information in terms of their advantages and disadvantages.

4. Types of rating errors and how to minimize them.

1. Activities involved in performance management.

2. Purposes and criteria and methods for measuring effectiveness of performance management systems.

3. Sources of performance information in terms of their advantages and disadvantages.

4. Types of rating errors and how to minimize them.

8-3

Need to Know

5. How to provide performance feedback effectively.6. Ways to produce improvement in unsatisfactory performance.

7. Legal and ethical issues that affect performance management.

5. How to provide performance feedback effectively.6. Ways to produce improvement in unsatisfactory performance.

7. Legal and ethical issues that affect performance management.

8-4

Introduction

Performance management: process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.

This process requires: Knowing what activities and outputs are desired Observing whether they occur Providing feedback to help employees meet expectations

Performance management: process through which managers ensure that employees’ activities and outputs contribute to the organization’s 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. Make collaboration a criterion to be evaluated.

B. Nothing, competition is good.C. Increase the specificity of the feedback.D. Focus on personal traits rather than

behaviors.

If the performance management system created competition among team members, I would

A. Make collaboration a criterion to be evaluated.

B. Nothing, competition is good.C. Increase the specificity of the feedback.D. Focus on personal traits rather than

behaviors.

8-6

Figure 8.1: Steps in the Performance Management Process

8-7

Purposes of Performance Management Strategic Purpose - effective performance

management helps the organization achieve its business objectives.

Administrative Purpose - ways in which organizations use the system to provide information for day-to-day decisions about salary, benefits, and recognition programs.

Developmental Purpose - serves as a basis for developing employees’ knowledge and skills.

Strategic Purpose - effective performance management helps the organization achieve its business objectives.

Administrative Purpose - ways in which organizations use the system to provide information for day-to-day decisions about salary, benefits, and recognition programs.

Developmental Purpose - serves as a basis for developing employees’ knowledge and skills.

8-8

Criteria for Effective Performance Management

8-9

Figure 8.2: Contamination and Deficiency of a Job Performance Measure

8-10

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 contaminationB. Criterion deficiencyC. Unreliability

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 contaminationB. Criterion deficiencyC. Unreliability

8-11

Methods for Measuring Performance

8-12

Table 8.1:Basic Approaches to Performance Measurement

8-13

Measuring Performance:Making Comparisons

8-14

Measuring Performance:Rating Individuals - Attributes

Lists traits and provides a rating scale for each trait.

Employer uses the scale to indicate extent to which an employee displays each trait.

Lists traits and provides a rating scale for each trait.

Employer uses the scale to indicate extent to which an employee displays each trait.

Uses several statements describing each trait to produce a final score for that trait.

Uses several statements describing each trait to produce a final score for that trait.

Graphic Rating Scale Mixed-Standard Scale

8-15

Figure 8.3:Example of a Graphic Rating Scale

8-16

Figure 8.4: Example of a Mixed-Standard Scale

An employee’s performance measurement differs from job to job. For example, a car dealer’s performance is measured by the dollar amount of sales, the number of new customers, and customer satisfaction surveys.

8-17

8-18

Measuring Performance:Rating Individuals - Behaviors

Based on managers’ records of specific examples of employees 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.

Based on managers’ records of specific examples of employees 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.

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

Critical-Incident MethodBehaviorally Anchored Rating Scale (BARS)

8-19

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

8-20

Measuring Performance:Rating Individuals – Behaviors

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 frequency with which the employee has exhibited the behavior during rating period.

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 frequency with which the employee has exhibited the behavior during rating period.

A plan for managing behavior of employees through a formal system of feedback and reinforcement.

A plan for managing behavior of employees through a formal system of feedback and reinforcement.

Behavioral Observation Scale (BOS)Organizational Behavior Modification (OBM)

8-21

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

8-22

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 organization’s overall goals.

These goals become the standards for evaluating each employee’s performance.

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 organization’s overall goals.

These goals become the standards for evaluating each employee’s performance.

8-23

Table 8.2: Management by Objectives: Two Objectives for a Bank

8-24

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. Paired comparisons; ResultsB. Results; Forced distributionC. Behavioral; AttributesD. Attributes; Comparative

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. Paired comparisons; ResultsB. Results; Forced distributionC. Behavioral; AttributesD. Attributes; Comparative

8-25

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

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

• 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.

• 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. 8-26

8-27

Sources of Performance Information

360-Degree Performance Appraisal: performance measurement that combines information from the employees’:

Managers Peers Subordinates Self Customers

360-Degree Performance Appraisal: performance measurement that combines information from the employees’:

Managers Peers Subordinates Self Customers

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.

8-28

8-29

Types of Performance MeasurementRating Errors

Contrast errors: rater compares an individual, not against an objective standard, but against other employees.Distributional errors: 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

Contrast errors: rater compares an individual, not against an objective standard, but against other employees.Distributional errors: 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

8-30

Types of Performance MeasurementRating Errors Rater bias: raters often let their opinion of one

quality color their opinion of others. Halo error: when bias is in a favorable direction. This can

mistakenly tell employees they don’t need to improve in any area. Horns error: when bias involves negative ratings. This can cause

employees to feel frustrated and defensive.

Rater bias: raters often let their opinion of one quality color their opinion of others.

Halo error: when bias is in a favorable direction. This can mistakenly tell employees they don’t need to improve in any area.

Horns error: when bias involves negative ratings. This can cause employees to feel frustrated and defensive.

8-31

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. Leniency; HornB. Strictness; HaloC. Similar-to-me; Central TendencyD. Horn; Strictness

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. Leniency; HornB. Strictness; HaloC. Similar-to-me; Central TendencyD. Horn; Strictness

8-32

Political Behavior in Performance Appraisals Distorting a performance evaluation to

advance one’s 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 influence of rating errors

Distorting a performance evaluation to advance one’s 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 influence of rating errors

8-33

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.

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.

8-34

When giving performance feedback, do it in an appropriate meeting place.

Meet in a setting that is neutral and free of distractions.

8-35

Giving Performance Feedback

Conducting the Feedback Session During feedback sessions, 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 employees explain view.

3.“Problem-Solving” – managers and employees work together to solve performance problems.

Conducting the Feedback Session During feedback sessions, 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 employees explain view.

3.“Problem-Solving” – managers and employees work together to solve performance problems.

8-36

6 Ways to Structure communication

8-37

Figure 8.7: Improving Performance

8-38

Legal and Ethical Issues inPerformance 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.

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.

8-39

Legal Requirements forPerformance 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.

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.

8-40

Legal Requirements forPerformance Management

A legally defensible performance management system:

Based on valid job analyses, with requirements for job success clearly communicated to employees.

Evaluates behaviors or results, rather than traits. Multiple raters (including self-appraisals) used. All performance ratings reviewed by upper-level

managers. Appeals mechanism for employees.

A legally defensible performance management system:

Based on valid job analyses, with requirements for job success clearly communicated to employees.

Evaluates behaviors or results, rather than traits. Multiple raters (including self-appraisals) used. All performance ratings reviewed by upper-level

managers. Appeals mechanism for employees.

8-41

Summary

Performance management is the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.

Organizations establish performance management systems to meet three broad purposes:

1. Strategic purpose2. Administrative purpose3. Developmental purpose

Performance measures should fit with the organization’s strategy by supporting its goals and culture.

Performance management is the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.

Organizations establish performance management systems to meet three broad purposes:

1. Strategic purpose2. Administrative purpose3. Developmental purpose

Performance measures should fit with the organization’s strategy by supporting its goals and culture.

8-42

Summary

• Performance information may come from an employee’s self-appraisal and from appraisals by the employee’s supervisor, employees, peers, and customers.

• Using only one source makes the appraisal more subjective.

• Organizations may combine many sources into a 360- degree performance appraisal.

• Performance information may come from an employee’s self-appraisal and from appraisals by the employee’s supervisor, employees, peers, and customers.

• Using only one source makes the appraisal more subjective.

• Organizations may combine many sources into a 360- degree performance appraisal.

8-43

Summary

• 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.

• 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

• Performance feedback discussions 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 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 person’s performance.

• Performance feedback discussions 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 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 person’s performance.