Human Resource

Management
Performance Management in HRM
Learning Objectives

• Describe the steps in the performance management process.

• Define what is meant by a SMART goal.
• Describe the process used to diagnose performance problems
and determine their root cause using the AEO model.
• Know the pros and cons of the various options in terms of what
gets rated, who does the rating, and how the rating is done.
• Describe how the appraisal interview should be conducted.
Performance Management vs.
Performance Appraisal

• Performance management: • Performance appraisal:

• Dynamic, continuous process. • Periodic (usually annual) event.
• More informal than formal review. • Formal review.
• Improves organizational effectiveness. • End of the performance management
process.
Uses of Performance Information
• Training needs analysis.
• Linking goals.
• Compensation.
• Employee development.
• Decision making.
• Human resource planning.
• CYA.
PM Summary
Plan the
Work

Monitor the
Reward
Work /
the Worker
Worker

Evaluate
Enable the
the Work /
Worker
Worker
Performance Management Process
Step One – Planning the Work:
• Setting performance expectations/goals for groups/individuals to focus
efforts on organizational objectives.
• Involve employees in the planning process; so they know the what/why/how of it
should be done; _____________________________________________.

• Establishing standards of performance; should be measurable,

understandable, verifiable, equitable, and achievable.
• Plans should be flexible so that they can be adjusted for changing
objectives and work requirements.
SMART Goals

S Specific

M Measurable

A Actionable

R Relevant

T Time-Bound
Define Performance Expectations and
Set Goals
• Ideally, goals should also:
• Tie directly to the organization’s strategy and operational plan.

• Cascade down (or roll up), ensuring coordination across participants.

• Specify consequences for attainment

.
• Include interim milestones or checkpoints to facilitate monitoring.

• Can also set expectations without setting goals by clarifying the tasks
that should be performed (from job description) and at what level.
Performance Management Process
Step Two – Monitoring the Work:
• Consistently measure performance.

• Conduct progress reviews.

• Make changes.

• Provide immediate feedback.

Monitoring the Work and Worker
Evaluating Performance
• Comparing performance to a previously established goal.
• If there is a gap, what was the cause?

Performance
Established
at a Point in
Goals
Time

Was Performance
as Expected?
Performance Gap Analysis
• One trick is to use the 5 Why’s technique. Keep asking “why” until you
get to root cause of the problem (it may not take five times).
Performance Gap Analysis
If there is a gap between performance and expectations, why? What is
the cause?

Performance Effort Ability Opportunity

When is Effort the Problem?
Effort
• Could they perform it correctly for a million dollars?

• Are performers being punished for doing it right?

• Are performers being rewarded for doing it wrong?

• Are there no consequences to the performer for doing it right or

wrong?
When is Ability the Problem?
Ability
• Were they ever taught how to do it correctly?

• Could they do it in the past?

• Are the tasks performed often?

When is Opportunity the Problem?

Opportunity
• Can the task be simplified?

• Do they have the needed resources?

• Are there additional obstacles?

Performance Management Process
Step Three – Enabling the Worker:
• Increase capacity.

• Align incentives.

• Improving work processes.

Performance Management Process
Step Four – Rating the Worker:
• Summarize performance. Come up with an overall evaluation based on
performance of separate goals or tasks.

• Evaluate performance against standards. As established in step 1.

Traits
• Employee traits such as attitude, appearance, and initiative are basis for
some evaluations.
• Often unrelated to job performance and difficult to define.
• Caution on Traits: Wade v. Mississippi Cooperative Extension Service:
Behaviors and Tasks
• Organizations may evaluate employee’s task-related behavior.
• Rated on the tasks from the job description.
• Some repetitive jobs are best evaluated based on performance versus
expectations on important tasks.
• Highly generic behaviors like “leadership” or “team work” suffer from
same flaws as traits.
Competencies

• Broad range of knowledge, skills, traits, and behaviors.

• May be technical in nature, business oriented, or related to
interpersonal skills.
• Should be those that are closely associated with job success.
• Common to rate managers on a set of leadership competencies:
Goals
• Very common in professional level jobs.
• See SMART goals.
• Most on-line performance management systems (e.g., Success Factors) based
on goal setting approach.

• Use if organization considers _____ more important than _____.

• Should be within control of individual or team.
• Should be those goals that lead to firm’s success.
Immediate Supervisor
• Most common choice.
• Usually in excellent position to observe employee’s job performance
(and contextual performance).
• Has responsibility for managing particular unit and its employees.
• Does span of control make it reasonable?
Direct Reports
• Some cultures view evaluation by subordinates negatively.
• Some firms (e.g., Walmart) find that evaluation of managers by
subordinates is both feasible and needed.
• Issues:
Peers and Team Members
• Often work closely with evaluated employee and can have undistorted
perspective on typical performance.

• Problems include:
• Reluctance of some people who work closely together, especially on teams, to
criticize each other.
• Sometimes have very limited view of peers’ performance.
• ________________________ settings can encourage sabotage.
Self-Appraisal
•

• Employees can rate themselves too leniently and a few have major
“blind spots” of lack of self-awareness.
• Better for assessments of competencies (developmental needs) than
performance/productivity.
• Still a good idea to seek your employees’ POV on their own
performance.
Customer Appraisal

• Customer behavior determines firm’s degree of success:

• Not appropriate for many jobs or gets at only part of the job (i.e.,
customer observes only part of the employee’s job performance).
360-Degree/Multisource Feedback

• Input from multiple sources such as supervisors, subordinates, peers,

and customers.
• Shifting responsibility to multiple sources helps to reduce or eliminate
common appraisal errors.
• Different stakeholders are in different positions to view performance and
gaps can highlight problems.
Relative Rating Systems
• Evaluate an employee’s performance against that of others.
• Supervisors compare employees’ performance overall or on specific
facets (e.g., quality, timeliness).
• Variations:
• Ranking – from top to bottom (can be done in alternating fashion).
• Paired comparison – compares performance of each employee with every other
employee in group.
• Forced distribution – ______________________________________________.
Absolute Rating Systems
• Evaluate an employee’s performance against some standard (e.g.,
“meets expectations”).
• Supervisors judge employees’ performance overall or on specific facets
(e.g., timeliness) against a standard.
• Should rate observable behaviors or tasks performed, but not traits!
• Varying Content:
• Competencies.
• Graphic Rating Scales.
“Objective” Work Standards
• Compares performance to predetermined standard. Examples:

• Standards: Normal output of average worker operating at normal pace.

• Assumes a few objectively measured metrics capture the essence of
the job.
Performance Management Process
Step Five – Rewarding the Worker:
• Rewarding good performance.
• Good performance is recognized without waiting for formal award periods.
• Recognition is an ongoing, natural part of day-to-day experience.
• Rewards can take a broad range of forms.

• Consequences for poor performance.

Appraiser Discomfort
• Performance management, if done correctly, takes a lot of a manager’s
time:
• Experience can be unpleasant when employee has not performed well
and/or does not take criticism well.
• Sitting in judgment of another adult can put one in an uncomfortable
“parent-child” relationship.
• Socio-emotional costs (e.g., angry employee) all borne by the rater.
Common Rater Errors
• Halo
• Contrast Error
• Similar-to-Me
• Central Tendency
• Leniency/Severity
• Bias
• Timing Errors
• First Impression
• Recency
Contamination and Deficiency
Employee Anxiety
• Process may create anxiety

• Being replaced by some organizations.

The Review Period
• Usually annually or semiannually.

• Based on:
• employee’s date of hire.

• fiscal year.
Interview Structure
• Discuss employee’s performance.
• Discuss compensation implications.
• Assist employee in _________________ for next appraisal period.
• Suggest means for personal development, including support from
manager and firm.
Use of Praise and Criticism
• Praise is appropriate when warranted.
• Criticism, even if warranted, is especially difficult to give.
• _______________________________ is often not perceived that way.
Employee’s Role
• Should go through diary or files and make notes of all projects,
regardless of their success.
• Employees often accomplish things managers are not aware of or do so
under difficult conditions the manager does not know about.
• Information should be on appraising manager’s desk well before review.
Concluding the Interview
• Ideally, employees will leave interview with positive feelings about
management, company, job, and themselves.

• Cannot change past behavior; future performance is another matter so

focus more time there if possible.

• Interview should end with ___________________________________

for employee’s future goals and/or development.
Conduct Separate Interviews?
• Separate meetings for:

• Employee performance and development.

• Pay.

or
• Separate meetings for:

• Last year.

• Next year.
Performance Appraisal and a Country’s
Culture
• Performance management / feedback is practiced quite differently
across different country cultures.
• Eastern managers often have different idea about what performance is
than do Western managers and vice versa.
• The “Hamburger model” of feedback in the US vs:
• Germany.
• Japan.