CHAPTER 10 - PERFORMANCE MANAGEMENT. KEY CONCEPTS AND SKILLS ➲ Performance appraisal and the appraisal process ➲ Difference between performance appraisal

CHAPTER 10 - PERFORMANCE MANAGEMENT

KEY CONCEPTS AND SKILLS

➲ Performance appraisal and the appraisal process➲ Difference between performance appraisal and

performance management➲ What are key performance indicators and the role

of Balanced Scorecard in performance management

➲ Key points for a successful performance appraisal interview

➲ Some common performance appraisal errors➲ Process of counselling employees with

performance problems

CHAPTER OUTLINE

➲ What is performance appraisal?➲ What is performance management?➲ Ensuring fairness in performance appraisals➲ Performance appraisal systems➲ Selection of factors➲ The appraisal interview➲ The appraisal programme➲ Training of appraisers ➲ Common errors in appraisals➲ Managing performance➲ When performance does not meet standards➲ Performance improvement plan➲ Correcting performance problems through

counselling

PERFORMANCE MANAGEMENT

➲ Two aspects of performance management – evaluative and developmental

➲ Performance appraisal is evaluative ➲ Performance management includes performance

appraisal but involves more comprehensive process

WHAT IS PERFORMANCE APPRAISAL?

➲ A formal system of periodic review of an employee’s job performance

➲ Process of describing an employee’s job-related strengths and weaknesses

➲ An exercise in observation and judgement, and a feedback process

PERFORMANCE APPRAISAL

➲ For performance appraisal to succeed there should be performance standards set

➲ If no standards set, then appraisal process very subjective

➲ Process also requires dependable performance measures

➲ Measures are observations or other data collection methods to measure actual performance

➲ Last aspect of performance appraisal is actual appraisal

➲ This is comparison between what has actually happened (obtained through performance measures) and what should have happened (standards)

WHAT IS PERFORMANCE MANAGEMENT?

➲ Management aimed at improving performance➲ Begins with setting of objectives or KPIs➲ Then managing performance through both rewards

and reinforcements for performance above expectations and coaching, counselling or disciplining for performance below expectations

➲ Should be face-to-face session where employee is provided with feedback and at same time given opportunity to express his feelings and how he feels he has performed.

➲ Performance management is continual and ongoing whereas performance appraisal is periodic.

16:13

Model of Performance Management

Above ExpectationsReinforce

Below Expectations Coach/ Counsel/ Discipline Plan Manage

Appraise

ENSURING FAIRNESS IN PERFORMANCE APPRAISALS

➲ System should be based on job analysis and factors appraised should be developed from analysis of job duties, providing content validation

➲ Should be clear performance standards linked to job being appraised

➲ Appraisal instrument is behaviour-oriented rather than trait-oriented

➲ Appraisers should be provided adequate training ➲ Results of performance appraisal are

communicated to employee and should be provision for appeal to higher authorities in event of disagreement

Relationship of Performance Standards to Performance Appraisal

Job Performance PerformanceAnalysis Standards Appraisal

JD Translate JD Compares and into levels actual JS of acceptable performance

levels of of individual performance with standards

PERFORMANCE APPRAISAL SYSTEMS

Rating Scales➲ A method of performance appraisal which rates

employees based on established scales for a number of defined factors.

➲ A widely used method➲ Judgements recorded on a scale usually divided

into five or seven categories➲ Selection of factors is crucial part of rating scales

method➲ Factors chosen typically of two types:

characteristics and contributions


Grading➲ A system of performance appraisal where certain

grades of performance are established in advance and carefully defined and employee performance is then compared with these grade definitions.

➲ Person allocated to grade that best describes his performance.

➲ Some organisations modify grading system into forced-distribution system, in which pre-determined percentages are established for each grade


Key Performance Indicators (KPI) or Management by Objectives (MBO)

➲ KPI is a refinement of MBO ➲ Method first mentioned by Peter Drucker in 1954

and developed further by Douglas McGregor. ➲ Heart of system is that both appraisee and

appraiser jointly establish performance goals or objectives for future

➲ Should ideally be mutually agreed upon and objectively measured

➲ Appraisee should be given periodic feedback on a regular basis so that he can make adjustments as required.



➲ Individual objectives should focus on key-result areas and measurements which have the highest priority

➲ Some criteria for objectives are:➲ SPECIFIC➲ MEASURABLE ➲ ACTIONS➲ RESOURCES REQUIRED➲ TIMED



Limitations ➲ Emphasis on individual goals sometimes are

achieved at expense of group or organisational goals

➲ Difficulty of applying to many non-managerial jobs ➲ Makes comparison of individual employees rather

difficult➲ Employees tempted to set non-challenging or

easily-attainable goals


The Balanced Scorecard➲ Concept developed by Robert Kaplan and David

Norton ➲ They believed using only financial measures of

performance was ineffective for modern organisations

➲ Felt the need for performance measures that can capture activities throughout organisation.


The Balanced Scorecard➲ Balanced Scorecard settled on four key

perspectives which could ensure organisation achieves it mission, vision and strategies.

➲ Perspectives are:➲ Customer issues (Customer)➲ Internal business processes➲ Employee activities (Learning and Growth)➲ Shareholders concerns (Financial)

The Balanced Scorecard Perspectives

CUSTOMER

VISION INTERNALFINANCIAL MISSION BUSINESS

STRATEGY PROCESSES

LEARNING AND GROWTH


Peer Review➲ Appraisal of an individual employee’s performance

by his co-workers➲ Belief is that peers often have greatest contact with

and understanding of the employee at work, and are most affected by the employee's work behaviours.

➲ Peer review useful when a supervisor is not able to properly observe or evaluate work performance of subordinates


Upward Appraisal➲ A performance appraisal process for managers

that includes subordinates’ evaluations➲ Involves subordinates providing both positive and

negative feedback to their superiors➲ Each employee asked to complete a confidential

questionnaire regarding his superior➲ Completed questionnaires then sealed and sent to

an independent third party for analysis➲ Once analysed, third party provides feedback to

the superior and at no time is feedback related to an individual employee.


360-degree appraisal➲ A performance appraisal process that includes

evaluations from a wide range of persons who interact with the manager, including self-evaluation as well as evaluations from the person’s immediate superior, subordinates, peers, and even customers.


Self appraisal➲ A system of appraisal where employees rate their

own performance and then this is compared to the ratings by the superior.

➲ Caution should be exercised in deciding to use self appraisals as problems could arise if the gap between what superior rates and employee’s self appraisal is too large

➲ Could lead to more frustrations on part of employee

SELECTION OF FACTORS

➲ Where rating scales used, then factors should be carefully selected

➲ Should be meaningful and job-related➲ Separate factors should be used for different

categories of employees.

➲ The use of ratings assumes that the human observer is reasonably objective and accurate. Because we know that this is not always the case, organisations are advised to have more objective than subjective factors to be appraised.

THE APPRAISAL INTERVIEW

➲ Essential part of performance appraisal process and one of the most important elements of MBO programme

➲ Recommended atmosphere is one characterised by empathy, mutual respect, equality, and supportive informational contributions

➲ An atmosphere that encourages discussion


Sequence of interview phases:1. Subordinate made to feel at ease.2. Subordinate asked to take lead in discussion of

accomplishments and failures. Superior participates through questions and comments. Reasons for non-accomplishment examined

3. Superior takes lead in establishing goals for next period. Subordinate proposes new set of goals

4. Both superior and subordinate equally involved in establishing performance standards

5. Last stage devoted to discussions about subordinate’s future and mutually agreeing on personal development goals


➲ Key points for a successful performance appraisal interview:

1. high level of participation by the appraisee2. helpful and constructive attitude by superior3. help from superior in solving job problems

hampering subordinate’s performance4. mutual setting of goals, with agreement of the

subordinate.


The “Sandwich” Technique➲ To sandwich unfavourable comments between

favourable comments➲ Helpful guide to entire appraisal discussion➲ Appraisers start discussion off with a compliment➲ Discussion then focuses on areas that need to be

improved➲ Finally discussion ends by finding something else

good to say about employee’s work.

CONDUCTING SUCCESSFUL APPRAISALS

➲ Key to successful appraisal is focusing on work results, not personality of employee

➲ Appraisals are achieve work objectives, not to express personal feelings or to exchange accusations

➲ A businesslike and non-threatening approach gives superior more control

➲ When focus is on specific facts rather than personality traits and actual work results rather than personal characteristics, then employee is more relaxed, receptive and encouraged to offer comments and suggestions.

THE APPRAISAL PROGRAMME

Who Is To Rate➲ In most organisations appraiser is immediate

superior ➲ Management maintains control of appraisal

process by reviewing and approving all appraisals➲ In some organisations, group ratings undertaken

for more participation and fairness➲ Raters can be superiors, peers, and subordinates ➲ Another possibility is to allow subordinates to rate

themselves

THE APPRAISAL PROGRAMME

When to Rate➲ Most organisations have annual performance

appraisal ➲ Semi-annual schedules also practised➲ Also organisations that have three separate

appraisals, for performance, salary, and potential➲ Another basis is one formal performance appraisal

for salary increments and promotions, and three quarterly reviews aimed at improving performance and remedying weaknesses.

➲ No best frequency for appraisals

TRAINING OF APPRAISERS

➲ Three major aspects of appraiser training:➲ Initial training to be familiar with philosophy and

nature of organisation’s performance appraisal system including an analysis of the factors and factor scales used

➲ Be aware of common errors in ratings➲ How to conduct appraisal interview

COMMON ERRORS IN APPRAISALS

➲ The Halo Error➲ Recent Error➲ The Error of Central Tendency➲ Constant Errors➲ Similar-To-Me Error➲ Contrast Error➲ Position Error➲ Biases of Sex, Race, Religion, and Nationality

MANAGING PERFORMANCE

➲ To ensure good performance, managers should follow these guidelines:

➲ Communicating Standards➲ Showing Appreciation for Good Work➲ Not Failing to Discipline when Necessary

REINFORCING DESIRED PERFORMANCE

➲ Desired performance must be reinforced if employees expected to continue to perform

➲ Good performance can be rewarded through rewards including promotions, merit increments, bonuses, development opportunities, and even extra fringe benefits.

➲ Besides extrinsic rewards, wide variety of ways to recognise good performance, to reinforce it, and to encourage its repetition

➲ Managers can also add value to work through other rewards like committee appointment, career counselling, showing personal concern, and providing more freedom to the employee.

WHEN PERFORMANCE DOES NOT MEET STANDARDS

➲ Need to find out why➲ If reason is lack of skills or knowledge, then

coaching or training ➲ A performance improvement plan can be carried

out.➲ Where poor performance not due to a lack of skills

or knowledge, then counselling or disciplining need to be carried out

PERFORMANCE IMPROVEMENT PLAN (PIP)

➲ A formal process resulting from the annual performance appraisal intended to improve performance and correct deficiencies detected during the appraisal interview.

➲ PIP usually for six months with some organisations granting extension up to three months if necessary

➲ Process of guiding and monitoring employee’s performance towards improving job or behavioural performance through a planned improvement plan agreed upon by the employee and immediate superior

CORRECTING PERFORMANCE PROBLEMS THROUGH

COUNSELLING

Counselling➲ A form of communication between superior and

subordinate where a problem is discussed with the general objective of helping the subordinate to cope with it so that he can become more effective as an employee.

CORRECTING PERFORMANCE PROBLEMS THROUGH

COUNSELLING

Eight steps in counselling process:1. State the problem2. Get agreement on the problem3. Listen actively4. Consider mitigating circumstances5. Be prepared to refer elsewhere6. Find a desirable solution7. Design an action plan8. Follow up

Documentation in Counselling

➲ Record-keeping plays critical role in work-life of manager

➲ Counselling sessions and verbal warnings must be recorded with details like time, date, nature of offence, and action plan agreed upon.

➲ If no improvements shown by employee, then steps taken to issue warning letters with ultimate aim of terminating employee if he does not improve

➲ Becoming more difficult to terminate services of an employee unless can be proven that sufficient attempts have been made to give employee opportunities to perform a satisfactory job

Documents

CHAPTER 10 - PERFORMANCE MANAGEMENT. KEY CONCEPTS AND SKILLS ➲ Performance appraisal and the appraisal process ➲ Difference between performance appraisal