PERFORMANCEMANAGEMENT

1. How can I best measure the performance of my employees?

2. What is the best way to give my employees developmental feedback to improve their perfrmance?

3. How can I communicate the information to employees?

4. How should I manage poorly performing employees?

QUESTIONS

9-2

Performance Managemenet is the process of :

1.Evaluating the peroformance of your employees against he standards set for

them2.Helping them develop action plans to

improve their performance

ANSWER: PERFORMANCE MANAGEMENT

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Focuses on Focuses on Results (what)

Behaviors (how)

EFFECTİVE PERFORMANCE MANAGEMENT

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Results

What the employee achieved

Job outputs #.of products sold or produced etc.

Business results (revenue, market share, etc)

Measurable accomplishments (reducing costs to desired level etc.)

Objectives achieved (finishing a cost saving project etc.)

Loyalty to schedules, budgets, deadlines (labor budget, finishing project on time etc.)

Quality, quantity, cost timeliness (no product returns etc.)

Behaviors

How the employee performed.

Obedience to organizational, values,

teamworkknowledge, attitudes,

skills

TWO COMPONENTS OF HUMAN PERFORMANCE

Results criteria are driven from

well expressed job descriptions (main job

responsibilities) And special projects

Behavior criteria are driven from

competenciesCore competencies expected from all

employeesJob competencies

TechnicalAdministrative

OperationsManagerial

SalesCustomer service....

PERFORMANCE APPRAISAL CRITERIA

Companies use performance management for both administrative and developmental purposes.

Administrative Purposes: Salary adjustment, rewards, transfers, demotions, promotions, disciplinary

purposes…etc.

Developmental Purposes: Use PM to improve employees actual performance to add more value to the

organization. Training needs are adjusted, determine steps to develop employees potential…etc.

PURPOSE

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STEPS IN PM!

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STEP 1: IDENTIFYING PERFORMANCE DIMENSIONS

Performance dimensions are specific tasks and activities for which

employees are responsible for such as: • Work output (quality and quantity)

• Personal competencies

• Goal (objective) achievement

Global performance measure is a single score to reflect overall

performance9-9

Should be valid, specific, and have clear(specific) standards.

Valid: The measure should give consistent results over time and across raters.

Standard: You should set standards for any performance to measure.

Specific: Should reflect actual needs of the position

STEP 2: DEVELOPING PERFORMANCE MEASURES

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Manager can use various ways to evaluate the performance of their

employees. They can either focus on outcomes or on

traits/behaviors(knowledge, attitudes, desire, commitment) of

their employees.

STEP 3: EVALUATING EMPLOYEE PERFORMANCE

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Trait based- assumes that certain traits drive performance, so it measures certain personal

characteristics of the position holder Behavior based – assumes that certain behaviors drive

performance, so it measures what the position holder does (for supervisors and below)

Knowledge/skill based – assumes that certain knowledge/skills drive performance, so it measures what the position holder knows, applies (production, clerical

workers, some professionals) Results based - assumes that achievement of objectives

equals performance; so it measures what the position holder achieves (professionals, managers, executives)

CHOİCE OF APPRAİSAL SYTEM

GRAPHIC RATING SCALE OF TRAITS

Raters evaluate

employees based on various traits

or attributes they possess

relevant to their performance

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BEHAVIORALLY ANCHORED RATING SCALES (BARS)

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INDIVIDUAL PERFORMANCE

Forced distribution—managers are forced to distribute employees into predetermined categories and prevented from rating everyone as outstanding,

or average

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9-16

CONTEMPORARY PERFORMANCE APPRAİSAL SYSTEMS

Management by Objectives (MBO) Competency Based Performance Evaluation

Balanced Scorecard (BS)360-Degree Approach

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MANAGEMENT BY OBJECTIVES (MBO)

A comprehensive and formal goal-setting and appraisal system requiring:

1. Setting of organization’s goals.

2. Setting of departmental goals.

3. Discussion of departmental goals.

4. Defining expected results (setting individual goals).

5. Conducting periodic performance reviews.

6. Providing performance feedback.

Goal: Raising the present competency levels of the employees to the expected levels

Performance is viewed in terms of the process employees use to achieve their job results

Result based performance appraisal focuses only on “what” they have accomplished (i.e., performance

goals), Competency based performance appraisal focuses on “how” the work was performed, using competencies

for providing feedback.

COMPETENCY BASED PERFORMANCE EVALUATİON

9-18

BALANCED SCORECARD (BS)

An approach developed by Kaplan and Norton - provides a framework of various measures to ensure the complete and

balanced view of the performance of the employees

Balancing performance on a number of metrics versus a single one like profits.

It is an integrated performance management system that directs and evalutes a company’s performance through “key performance indicators”( measure of performance) set in the

four areas:

(financial, customer related, operational, individual)

Involves gathering performance data from as many sources as possible—

supervisors, peers, subordinates, and customers

Can be cumbersome and takes time to sift through all the feedback

360-DEGREE APPROACH

9-20

Supervisors—a key source but may not have time to monitor and observe employees every day

Co-Workers—may be able to comment on cooperation and support, but may intentionally slope rating

Self-Appraisal—can be useful starting point and developmental tool to help employee improve performance

Subordinates—may be hard to separate skill from “likeability”

Customers—satisfaction levels may only report extremely good or bad experiences

SOURCES OF PERFORMANCE DATA

9-21

Most firms include training for both managers and employees on how to effectively give and receive feedback,

Most firms require appraisals every six months to a year

Focus on behaviors rather than employee

Balance approach—positive and improvement areas

Involve/engage employee in discussion

STEP 4: PROVIDING FEEDBACK

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Seek to understand causes of poor performance, which could stem from:

Work environmentDesign of jobs

TechnologySupport or performance of co-workers

Employee’s competencies, attitudes and behaviors

STEP 5: DEVELOPING ACTION PLANS TO IMPROVE

PERFORMANCE

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• Ensure they know what is expected of them

• Ensure they know how to be successful• Reach agreements on targets for improved performance and timelines

• Ensure manager’s support

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Removing barriers to employee success

Training and development activitiesCoaching and mentoring

Work design and technology solutions

TAKING ACTION

9-25

Compensation

The Importance of Compensation

• Attract and retain employees.• Ensure best levels of employee performance in

meeting the organization’s strategic objectives.

Compensation’s Components

– Direct compensation in the form of wages or salary• Base pay (hourly, weekly, and monthly)• Incentives (sales bonuses and or commissions)

– Indirect compensation in the form of benefits• Legally required benefits (e.g., Social Security)• Optional (e.g., group health benefits)

Theory Behind Compensation

• Equity Theory– Comparing inputs and outputs of a similar co-worker– Perceived inequity affects employee effort

• Expectancy Theory– People are motivated by intrinsic and extrinsic outcomes they

desire.– People will only be motivated if outcome is possible.– People will only be motivated if outcome is contingent.

“Monkeys Demand Equal Pay”

A recent study shows brown capuchin monkeys refused to play along when they saw another monkey get a better payoff for performing the same work.

The monkeys were trained to trade a stone token for a piece of cumber. When the reward was the same for both monkeys, they took the cucumber 95 percent of the time.

But it was a different story when one monkey was given something better -- namely, a grape. Then, the other monkey often pitched a fit -- either throwing the token, refusing to eat the cucumber or giving it to the other monkey.

Associated Press 2003

Types of Base Pay Systems

• Job-based– Pay the job (not the person)– Market-based (external equity focus)– Point factor-based (internal equity focus)

• Skills / knowledge-based– Pay the person (not the job)– 62% of F1000 firms used some type of skill based

pay in 1999

Job Based Pay

Attraction Depends on market pricing

Motivation No performance impact

Skill Development Learn job-related and upward mobility skills

Culture Bureaucratic, hierarchical

Structure Hierarchical, individual jobs and differentiation

Cost Good control of individual pay

Individual Skill/Knowledge Based Pay

Attraction Attracts learning-oriented individuals, high skills individuals

Motivation Little performance impact

Skill Development Motivates needed skill development

Culture Learning, self-managing

Structure Flat or team-based

Cost Higher individual pay

When to Use a Job-based Pay Policy

• A job-based pay work best in situations where:– Job duties are stable.– Skills are generic.– Employees move up through the ranks over time.– Jobs are fairly standardized within the industry.

• Drawbacks of a job-based pay system– Discounts individual ability.– Discourages lateral movement.– Tends to be bureaucratic, mechanistic, and inflexible.– Employees’ perceptions of equity are more important than market

or point data.

Individual-based Compensation

• Individual-based compensation works when:– The firm has a relatively educated workforce.– Employees often do different jobs– Technology changes frequently.– Employee participation and teamwork are encouraged.– Opportunities for upward mobility are limited.– Opportunities to learn new skills are present.– The costs of employee turnover and absenteeism in terms of lost

production are high.

Variable Pay Incentives

• Linking performance to pay– Individual – Bonuses, piece-rates, stock options– Team – Bonuses and awards– Plant / Unit / Business – Gainsharing, profit sharing– Corporation – ESOP’s

• “Line of sight” is the perceived link between individual behavior and the reward.

Individual Merit

Attraction Good for high performers

Motivation Good line of sight

Skill Development Learn skills that lead to rewarded performance

Culture Performance oriented, job focused

Structure Individual and independent jobs

Cost Depends on the size of the awards

Team Incentives

Attraction Good if team performs well

Motivation Moderate line of sight

Skill Development Encourages team skills

Culture Team focused

Structure Team-based and integrated

Cost High if significant awards given

Organizational Plans

Attraction Good if organization performs well

Motivation Weak line of sight

Skill Development Encourages broad understanding of business

Culture Business involvement

Structure Organization wide integration

Cost Possible self-funding if based on performance improvement

Pay for Performance Requires

1. Definition of performance– How are we going to measure and compare people?

2. Distribution of performance– Can we distinguish high and low performers?

3. Decide the increase for each level of performance.– How large a difference between high and low

performers?

Key Strategic Issues in Compensation

• Determining compensation relative to the market.• Striking a balance between fixed and variable

compensation.• Deciding whether or not to utilize team-based versus

individual pay.• Creating the appropriate mix of financial and non-

financial compensation.• Developing a cost-effective compensation program

that results in high performance.

New Thinking for the New Millennium

• Strategic approaches to may compensation (pay) systems more responsive:– Pay the person for individual worth (knowledge, skills and

competencies) rather than for the value of a job they perform.

– Reward excellence through a pay for performance compensation that establishes a clear relationship between a significant amount of pay and attainment of organizational objectives.

– Individualize the pay system to give employees choices in how they are rewarded and what reward they receive.

EMPLOYEE BENEFITS AND SAFETY PROGRAMS

Occupational SafetyOccupational Safety«Send everyworker home whole and healthy everyday»

Workplace Violance ProgramsWorkplace Violance ProgramsMurder…!!! Stop violance at work!!!

Ergonomic ProgramsErgonomic ProgramsTh science of undertsanding the capablities of humans in terms of their work requirements

LABOR UNIONSFinal Homework Due on

20th of August!!!This homework will consitute 50% of your final This homework will consitute 50% of your final exam!exam!

Write a brief report about the development of «labor union» in Turkey. You can check the following web pages for your summary in English!!

•http://notoku.com/turkiyede-sendikaciligin-gelisimi/

•http://grcnozdemir.brinkster.net/1946gts%C3%B6.htm

•http://bagimsizrehberler.blogcu.com/sendika-nedir-turkiye-de-ve-dunyada-sendikal-orgutlenme/12736089