LECTURE 5

Performance Management
Strategic Performance Management:
Organizational and Cultural
Dimensions
Dr Navreet
Professor
Chitkara Business School

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Key Result Areas: KRAs are defined objectives that are
vital to the performance of an individual employee, a
department, or an organization.

Key Performance Indicators: A KPI is a quantifiable

metric that helps assess whether an organization,
department or employee is meeting certain objectives.

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Performance Management
 Closely linked with MBO

 The performance process in this regard

is appropriately named the ‘self-
propelled performance process’ (SPPP).

 Consolidates goal-setting, employee

development, performance appraisal,
and rewarding performance into a
single common system.
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 The term is used in two contexts:
 a way of maximizing performance of an
individual, team or organization
 a process of dealing with underperforming
individuals or teams

 Its aim is to ensure that employee performance,

resources and systems support the strategic goals
of the organization

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Objectives:
Evaluation Objectives
Evaluating the readiness of the employees for taking up
higher responsibilities (Manager is a judge n makes
reward decisions)
Developmental Objectives
Identifying major skill gaps and defining training
requirements (Manager is a coach who helps in
performance improvement)
 A Gap Closing Strategy
Benefits:
 Direct Financial Gain
 Motivated Work Force
 Improved Managerial Control
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 Uses of Performance Management
System
1. Human resource planning
Provides information base for developing succession
plans, replacement charts n creating new positions in
the organization. Helps determine the potential n
promotability of all employees

2. To validate recruitment n selection decisions

(Employees who were selected must ultimately
perform better)

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3. Personnel decisions
Performance Appraisals also serve as a guide for
other personnel decisions such as promotions,
layoffs…rational decisions can be made

4. Training n development
Performance data help determine whether
performance deficiencies are due to lack of skills or
low morale

5. Feedback, motivation n personal development

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6. Career planning n development
Appraisal data helps identify employee potential and
future growth opportunities. Information about strengths
n weaknesses can help in assisting them in making realistic
career plans
7. Compensation n reward
An objective performance appraisal system helps in
making differential reward decisions. Most productive
teams or workers are rewarded accordingly thus
minimising inequity
8. Internal employee relations
Dissatisfactions over promotions or reward decisions can
be clarified using performance data resulting in a positive
organizational culture
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Performance Management
Cycle
1.
Performa
nce
Planning
And
Execution

3.
Performa 2.
nce Performa
Review, nce
Appraisal Assessme
And nt
Coaching
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 Steps in the Performance
Management Process
1. Identifying dimensions of job performance to
be appraised
2. Defining n communicating performance
standards
3. Determining who will conduct the appraisal
4. Choosing appropriate methods of
performance appraisal
5. Communicating appraisals to employees

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 Types of Performance
Evaluation Criteria (Step 1)
Criteria on which employees are evaluated

Trait-based: A subjective characteristic of the employee is evaluated

such as attitude, creativity, initiative etc. to identify employee
potential. But performance evaluations based on traits tend to be
subjective n vague n are not suitable for making performance
decisions

Behaviour-based: Include evaluating an employee’s task-related

behaviour. For a manager an appropriate behaviour to evaluate
would be ‘developing others’ n for a sales person it could be
‘customer service orientation’. Behaviour–based information helps
specify behaviours that are desirable to produce results in an
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 Trait versus Behaviour

Behaviour could be a set of traits. A

more reliable measure. Can be
observed. Generally, tells us the
underlying motive.

Trait can be labelled at a subjective

level. Different related labels. Can be
differently expressed in different
people.
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Results-based: This criterion is appropriate for jobs in
which measurement is easy n obvious n where there is
tangible output. When ends are considered more
important than the means, results-based measures are
used. The focus of the employees shifts towards
outcomes. Large tasks are divided into smaller, more
specific, n time bound projects. But overemphasizing
outcomes may result in low quality n even the use of
unethical means to achieve the goals

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 Overemphasizing behaviours may lead to good

quality products but the product delivery may

overshoot deadlines resulting in lost business for the

firm. It is important to balance both behaviour (quality

or doing the right way) n results (accomplishing goals

n meeting deadlines)

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 Performance Standards (Step
2)
After identifying job or evaluation criteria, expected level
of performance on each of these criteria is specified.
Performance standards define what constitutes
satisfactory job performance.

 Standards or performance goals should be realistic,

specific n clearly stated in quantifiable, measurable
terms. For example ‘resolving customer complaints’ is
not a clearly stated performance standard. When
stated as ‘resolving customer complaints in the first
instance 98% of the times’, it becomes precise.
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 Determining who will Conduct
Performance Evaluation (Step 3)
Customer Appraisal
appraisal by
manager or
supervisor

Team SOURCES OF
APPRAISAL Self-
appraisal
INFORMATION appraisal

Peer Subordinate
Appraisal appraisal

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 Multisource/360 Degree
Feedback
Gained popularity in the 1990s. An employee is appraised
n receives feedback from supervisors, subordinates,
peers, and/on customers. Provided anonymously to the
employee

Potential problems

 Considerable anxiety for the employee when

appraisals are negative
 Customers, subordinates n peers may be biased
 Evaluators may discuss an employee’s appraisals n
violate privacy
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 Peers may deliberately evaluate a manager
negatively to increase their own chances of
promotion
 There may not be a consensus between different
evaluators

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 Suggestions to Maximize
Benefits of 360 Degree Appraisal
 Training should be provided to the employees to enhance
self-awareness for more accurate self-ratings

 Steps must be taken to reduce organizational cynicism

towards 360 degree appraisal to make them more inclined
towards personal change

 Negative feedback must be followed by encouragement n

coaching

 It is important to train all evaluators to provide valid

evaluations
 Cultural context should be kept in mind
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 Methods of Performance
Appraisal (Step 4)

Trait-based Behaviour-based
methods methods Results-based
• Graphic rating • Critical-incident methods
scales technique • Productivity
• Forced-choice • Checklists measures
method • Behaviourally • Management by
• Essay method anchored rating objectives
• Ranking method scales
• Forced-
distribution
method

Critical Incident Technique: Situational analysis technique in

which the actions and behaviour of an employee (say, a
customer service event) is recorded and examined.
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Effectiveness and Efficiency as Dimensions of
Productivity

Effectiveness: What to do. The degree to which objectives are achieved

and the extent to which targeted problems are solved. Effectiveness is
about doing the right task, completing activities and achieving goals.

Efficiency: How to do. Efficiency is defined as the ability to produce

something with a minimum amount of effort. An example of efficiency is
a reduction in the number of workers needed to make a car. Efficiency
is about doing things in an optimal way, for example, doing it the fastest
or in the least expensive way. It could be the wrong thing, but it was
done optimally.

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Graphic Rating Scale

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???

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FORCED DISTRIBUTION METHOD
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 Communication of Appraisals
(Step 5)

1. One-way communication (Tell n Sell Approach): The

supervisor is in the dominant position n communicates the
appraisal n the action plan for subordinate’s improvement.
The latter must accept both the appraisal & the
developmental plan without expressing his feelings (lowered
motivation n defensiveness)

2. Two-way communication (Tell n Listen Approach): In this

type of appraisal interview, the subordinate can express his
feelings about the information provided…can express his
disagreement with the appraisal (lowered defensiveness)

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3. Mutual problem-solving : Serves both evaluative n
developmental purposes. Two-way communication but most
effective. The subordinate plays an active role in appraising
his own performance n developing action plans for
improvement

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Dimensions of an Effectively
Implemented Performance
Management System
 Employee Self-Appraisal

 Competency Mapping

 Well-defined Goals


Potential Appraisal (Potential for being promoted in future)

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 Focus on Positive Employee Behaviour

 Flexible System

 No Direct Linkage with Pay

 Avoidance of Micromanagement

 Line-Staff Coordination

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Competency-Based Management
Approach
 Employee centric and strategic in nature.

 Helps in setting superior performance benchmarks.

 Influences every area of human capital management

starting with hiring of an employee to the retirement.

 Aims at a horizontal fit between all HR activities.

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 Performance Appraisal v/s
Performance Management
Performance Appraisal Performance
Management
Focus is on top down Stresses on mutual objective
assessment setting through a process of
joint dialogue
Performed annually Continuous reviews are
performed
Usage of ratings is very Usage of ratings is less
common common
Focus is on traits Focus is on quantifiable
objectives, values and
behaviors
Monolithic system Flexible system 42
 The Key Elements of an
Ideal Performance
Management System

A. The Company’s Mission

Statement
Employees must see a connection between organization’s
mission and their performance appraisal for which they are
held accountable
The organizational strategy reflected in mission, vision, and
core values of the organization must form a close link with
every individual’s day-to-day performance.
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B. Carefully Designed Appraisal
Form

Focuses organizational energy on the issues of highest

priority. An ideal form has five parts:

o The first two sections identify and assess competencies

i.e. the way the person does the job

i. Universal, Organization-Wide Competencies

ii. Job-specific Competencies

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o The next two components of the form relate to
what the person actually accomplishes i.e. the
results dimension

i. Key Job Responsibilities listed in a well-

written job description

ii. Goals and Major Projects that go well beyond

the key job responsibilities

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o The final element of an ideal performance
appraisal form is the one that research suggests
is the most important:

A brief enumeration of the individual’s most

important achievements and accomplishments.

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C. Understanding of the Cultural
Contingencies

 The cultural dimensions of the

performance management systems are,
by far, the most salient in the 21st
century work environment
 For attaining sustained competitive
advantage it is imperative for
organisations to customize performance
management keeping in view workforce
diversity.
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 Experts say companies often impose an
American style of performance
management on employees based in
other countries, even when such a
system conflicts with local cultural
norms

 A better approach, they say, is to adapt

the system to fit the culture. The nature
of the employee/employer relationship
varies widely from place to place.

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As put forth by Solomon and Schell (2009)
“In some cultures you simply cannot transpose
culturally offensive management styles…..the
360-degree approach is a good example of this. It
requires a fundamentally egalitarian mind set and
value system in order to be effective.”

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“We assume in the West that
people will say things clearly……
we communicate openly and can
discuss things that are problems….
but that’s not the case in many
other cultures around the world.”
(Foster, 2009) 50
American business model is
accepted and admired, many
companies outside the United
States will simply accept the
American way of doing business
rather than adapting practices to fit
their cultures (Grote, 2005)
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Though far from perfect, and often
dreaded, the American performance
appraisal process suits the American
culture, which is regarded as highly
individualistic and egalitarian
(Hofstede, 2001).

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Research Studies on
Cultural Relativity
 Pay-for-performance system is inappropriate in
other cultures.
 The focus is on interpersonal relations and

collectivism.
Example: (Hofstede, 2005)
 In Japan, compensation is not based on
performance.
 It is rather hard to identify the individual
performance because the focus is the team.
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 The Japanese system is frequently, and even
intentionally, used as a means of discriminating
against 'undesirable' employees

 The appraisal process often involves only the

completion of the form without the discussion
between boss and subordinate of the results of
assessment (Grote, 2011)

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 The Indian Scenario

 India tends to be more collectivistic than

individualistic and embraces a high-power distance,
or inequality of power

 In India it is seen as inappropriate culturally to ask

employees to fill out a questionnaire on their boss –
a salient feature of the 360-degree feedback

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Deep Insight into Indian Organizations
Interweave Consulting Pvt. Ltd. A Diversity Consulting Firm in
Bangalore
Nirmala Menon, Founder and CEO

The nature of the performance management process gets

affected depending on type of business:

 Family-run Business
 Indian Company or a Western or American Multinational
organization

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Family-owned Organizations

 The father in the family or the elder person,

often takes the position of the boss or manager

 Organizations rely heavily on informal feedback

from the senior person

 The employee’s career growth is the boss’s

responsibility.

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 What is conveyed is accepted even if
someone is in disagreement

 Evaluations are influenced by the deference

shown to the boss and the level of loyalty;
compliance being more important than
performance

 As most Indians are socialized to be hierarchy

oriented, this often tends to spill over into the
workplace

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Modern Indian Organizations and Multinational
Corporations

 Adapt to the global value systems of their

companies
 Evaluations tend to be more structured
 Documented communication and an indirect
feedback also exists in these organizations.

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On a Concluding Note…

Before transplanting a performance

management process from one country to
another, organizations should go through a
cultural adaptability assessment. If not,
they should work with key HR staff to make
it adaptable (Solomon and Schell, 2009)

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The main objective of performance
management, according to Grote (2011), is
to make sure that employees know what the
company expects of them and how well
they are meeting expectations

This is independent of culture though

organizations may have to tailor and adapt
processes in order to make them culturally
comfortable

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 Approaches to Measuring
Managerial Performance

Person-
Job-focussed Role-focussed
focussed
approach approach
approach

Hybrid
approach
(Comprises of
the above
three)

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 Job-focussed approach:
Evaluation of the manager is on job-specific competencies (micro
competencies) i.e. the tasks managers should be competent in.
The focus is on the job description

Person-focussed approach:
Evaluation of the manager is on broader competencies (macro
competencies) i.e. the factors that enable them to complete the
above tasks effectively….Important in non-routine n complex
situations. Competencies are not seen as the functional tasks of
the job rather they refer to those actions n behaviours which help
managers carry out their jobs effectively. Personal qualities are
central to this approach. It focuses on identifying characteristics
that distinguish superior from average managerial performance
(e.g. soft skills like leadership, creativity)

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 Role-focussed approach:

Evaluation is based on the social context in which the performance

occurs. Role emerges out of the interaction between the manager
(role holder) n others in the social situation (Colleagues, boss, n
subordinates). More realistic approach since it relates to manager’s
situation rather than what he should be doing

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THANK
YOU
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