PERFORMANCE

MANAGEMENT
 Case 5

• Group 7 • Group 8
• Performance management • Organization Culture in
in Amazon Amazon

Case has 2 links. One HBR Case. 2nd one is a link to new York
times article named ‘ Inside Amazon: Wrestling Big Ideas in a
Bruising Workplace’ dated Aug 15,2015 . Read both and prepare .
 Basic Concepts in Performance
Management and Appraisal

Comparing
Performance Appraisal and
Performance Management

Performance Appraisal: Performance Management:

Setting work standards, assessing An integrated approach to
performance, and providing ensuring that an employee’s
feedback to employees to performance supports and
motivate, correct, and continue contributes to the organization’s
their performance. strategic aims.
9–3
The Performance Management Process in a
Typical Organization
 Purpose of PM System
• Strategic: help top mgmt achieve strategic objective
• Administrative: furnish valid information to make admin
decisions about employees
• Developmental: allow managers to coach employees
• Informational: inform employees about their
performance and expectations from them
• Organisational maintenance: provide information to be
used in HR planning and allocation
• Documentational: collect information that can be used
for different purposes
 Review Quiz/poll
• A developmental purpose of performance evaluations is
• a. making a compensation decision.

• b. providing a paper trail for possible legal action.

• c. providing feedback about an employee's strengths and

weaknesses.

• d. providing documentation for a promotion, transfer, and layoff

decision.
 PM is goal directed

• At the heart of performance management is the idea

that employees’ effort should be goal directed, which
involves clarifying expectations and quantifying them
by setting measurable standards for each objective.
• SMART Goal Setting
 Review quiz
• A performance evaluation is
• a. a process, typically delivered by a supervisor annually or
biannually, to help employees understand their roles, objectives,
expectations, and performance success.
• b. a philosophy of management that rates the performance of
employees based on their achievement of goals set mutually by
them and their manager.
• c. the process of creating a work environment in which people
can perform to their best abilities.
• d. the process of choosing individuals who have relevant
qualifications to fill existing or projected job openings.
 WHEN?
Frequency of Appraisal

• Formal evaluation – Annual or Biannual/??

 WHAT Criteria used

Traits or
characteristics
Training
Actual
Needs Potential
performance
Behaviour
 WHO are the appraisers?
• Superior(s)
• Self
• Peers / Team members
• Subordinates
• Customers – internal and external
• Committee
 Performance Appraisal Roles

• Supervisors
• Usually do the actual appraising.
• Must be familiar with basic appraisal techniques.
• Must understand and avoid problems that can cripple appraisals.
• Must know how to conduct appraisals fairly.

9–
14
 Performance Appraisal Roles
(continued)
• The HR Department
• Serves a policy-making and advisory role.
• Provides advice and assistance regarding the appraisal tool
to use.

• Trains supervisors to improve their appraisal skills.

• Monitors the appraisal system effectiveness and
compliance with relevant laws and guidelines.
9–
15
 Performance Appraisal Roles
(continued)
• The HR Department
• Serves a policy-making and advisory role.
• Provides advice and assistance regarding the appraisal tool
to use.

• Trains supervisors to improve their appraisal skills.

• Monitors the appraisal system effectiveness and
compliance with relevant laws and guidelines.
9–
16
 Performance Appraisal Methods
Appraisal Methodologies
1 Graphic Rating Scale Method 6 Narrative Forms

Behaviorally Anchored Rating

2 Alternation Ranking Method 7
Scales (BARS)

3 Paired Comparison Method 8 Management by Objectives (MBO)

Computerized and Web-Based

4 Forced Distribution Method 9
Performance Appraisal

5 Critical Incident Method 10 Merged Methods

11 Annual Confidential Report (ACR)

9–
17
Graphic
Rating
Form
Scale for Alternate Ranking of Appraisee
Ranking Employees by the Paired Comparison Method

Note: + means “better than.” - means “worse than.” For each chart, add up the
number of +’s in each column to get the highest ranked employee.
Forced Distribution on a Bell-Shaped Curve
Examples of Critical Incidents for Assistant Plant Manager

Continuing Duties Targets Critical Incidents

Schedule production 90% utilization of Instituted new production

for plant personnel and machinery scheduling system; decreased
in plant; orders delivered late orders by 10% last month;
on time increased machine utilization in
plant by 20% last month

Supervise Minimize inventory costs Let inventory storage costs rise

procurement of raw while keeping adequate 15% last month; over-ordered
materials and on supplies on hand parts “A” and “B” by 20%;
inventory control under-ordered part “C” by 30%

Supervise machinery No shutdowns due Instituted new preventative

maintenance to faulty machinery maintenance system for plant;
prevented a machine breakdown
by discovering faulty part
 Narrative Forms
• Final appraisals
are frequently
written in a
narrative form
• Supervisor rates
employee by
describing the
behaviour related
to each factor
 Behaviorally Anchored Rating Scale (BARS)

• BARS is an appraisal tool that anchors a numerical rating scale with

specific examples of good or poor performance.
• Consists of a series of five to ten vertical scales, one for each
important dimensions of performance. The dimensions are anchored
by behaviours identified through critical incident job analysis.
• Its proponents say it provides better, more equitable appraisals than
do the other appraisal tools.
• It takes more time to develop a BARS, but the tool has several
advantages. It has high degree of content validity and said to have
more accurate ratings.
• However, the scales are specific to particular job and may not apply to
another job.
Example of
BARS for
Dimension
Salesmanship
Skills
 Behaviour Observation Scale
• A variation of behaviour scale , BOS emphasizes on
observation of behaviours by appraisers. It measures the
frequency of observed behaviours in a rating scale
ranging from never to always.
• It is preferred for being more
• Objective
• Distinguishing good from poor performers
• Providing feedback and
• identifying training needs.
 Sources of Information for
Performance Appraisal: 360-
degree feed back
 Management by Objectives

MBO refers to an organizational 6 step goal setting and

appraisal program
Set the Set the Discuss
organization’s departmental developmental
goals goals goals

Define
Performance Provide
expected
reviews feedback
results
 Review quiz/Poll
• When the management by objectives (MBO) approach is used,
• a. each trait or characteristic is represented by a scale on which
the rater indicates the degree to which an employee possesses it.
b. performance is rated on the basis of the employee's
achievement of goals mutually agreed on by the employee and
his or her supervisor.
• c. the rater is required to choose from pairs of statements that
most or least represent an employee.
• d. the rater composes statements that best describe the
employee.
 Choosing the Right Appraisal Tool

Criteria for Choosing an

Appraisal Tool

Employee
Accessibility Ease-of-use Accuracy
acceptance
 Errors in Performance Measurement
RATER ERROR PRACTICAL IMPACT

Varying standards Similar perf is rated differently

Primacy and Recency Error Timing of information affects rating

Leniency/Strictness/ Everyone is rated the same

Central Tendency
Rater prejudices affect rating
Rater bias
Generalisation is made from only one
Halo / Horns trait
Comparison is made to other people
Contrast error not standards

Similar-to-me Error Rater compares employee to self

 The Appraisal Interview
Satisfactory—Promotable

Satisfactory—Not Promotable
Types of
Appraisal
Interviews Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable
 Review Quiz

• A performance rating error in which the evaluation is

based largely on the employee's most recent behavior
rather than on behavior throughout the evaluation
period is referred to as ________.
• a. central tendency error
• b. leniency error
• c. recency error
• d. contrast error
 Assignment 20mnts

• Emailed case let . Please analyze and submit your

answer to case questions in one/two slides.
Organization Performance and Balanced Scorecard

The starting points of the balanced scorecard are the vision and the strategy
that are viewed from four perspectives: the financial perspective, the customer
perspective, the internal business processes and learning & growth.
 Financial perspective

• The financial perspective is important for all shareholders and

other financial backers of an organization.It answers the question:
“How attractive must we appear to our shareholders and financial
backers?”
• This is mainly a quantitative benchmark based on figures from the
past.In addition, it provides a reliable insight into the operational
management and the sustainability of the chosen strategy.
• The delivered added value from the other three perspectives will be
translated into a financial success. This is therefore a quantification
of the added value that is delivered in the organization.
• After all in the balanced scorecard, when there is a higher added
value, the profits will also be higher.
 Customer perspective

• Customers determine for example the quality, price,

service and the acceptable margins on these products
and/or services.
• Organizations always try to meet customer expectations
that may change at any time.
• The existence of alternatives (those of the competitor)
has a large influence on customer expectation.
• This perspective answers the question: “How attractive
should we appear to our customers?”
 Internal Business Processes

• From the perspective of internal processes the question

should be asked what internal processes have actually
added value within the organizations and what activities
need to be carried out within these processes.
• Added value is mainly expressed as the performance
geared towards the customer resulting from an optimal
alignment between processes, activities and decisions.
• This perspective answers the question: “What must we
excel at to satisfy our customers and shareholders/
financial backers?”
 Learning and growth

• An organization’s learning ability and innovation

indicate whether an organization is capable of
continuous improvement and/or growth in a
dynamic environment.
• This dynamic environment is subject to change on a
daily basis due to new legislation and regulations,
economic changes or even increasing competition.
• This perspective answers the question: “How can we
sustain our ability to achieve our chosen strategy?”.
 Implementation of Balanced
Scorecard
• The implementation of the
Balanced Scorecard can be carried
out in different manners. • Translate strategic objectives
into (personal) goals
• Broadly, this could include the
following steps: • Set up key performance
indicators to measure the
• Set up a vision, mission and objectives
strategic objectives.
• Determine the values for the
• Perform a stakeholder analysis to objectives that are to be
gauge the expectations of achieved
customers and shareholders. • Translate the objectives into
• Make an inventory of the critical operational activities.
success factors
 Amazon : A scorecard analysis

• Vision: To be Earth’s most customer centric

Organization where customers can find and discover
anything that they might want to buy online
• Mission: We strive to offer our customers the lowest
possible prices, the best available selection and the
utmost convenience
Organization Performance and Balanced Scorecard

The starting points of the balanced scorecard are the vision and the strategy
that are viewed from four perspectives: the financial perspective, the customer
perspective, the internal business processes and learning & growth.