Topic 7 Managing the Employment Relationship
7. PERFORMANCE MANAGEMENT
WHAT IS PERFORMANCE MANAGEMENT?
Performance management is the process through which managers ensure that employees'
activities and outputs contribute to the organization's goals.
The organization begins by specifying which aspects of performance are relevant; the relevant
aspects of performance are measured through performance appraisal; and finally, in performance
feedback sessions, managers provide employees with information about their performance so they
can modify their behaviour to meet the organization's goals.
PURPOSES
- Strategic → meeting business objectives by helping to link employees’ behaviour with
organization’s goals.
- Administrative → providing information for day-to-day decisions about salary, benefits,
recognition, and retention or termination.
- Developmental → Using the system as a basis for developing employees' knowledge and
skills.
CRITERIA FOR EFFECTIVE PERFORMANCE MANAGEMENT
Fit with strategy
A performance management system should aim at achieving employee behaviour and attitudes
that support the organization's strategy, goals, and culture. Performance appraisals should
measure whether employees are engaging in those behaviours. Feedback should help employees
improve in those areas. When an organization's strategy changes, human resource professionals
should help managers assess how the performance management system should change to serve
the new strategy.
Validity
Whether the appraisal measures all the relevant aspects of performance and omits irrelevant
aspects of performance. Performance measures should minimize both contamination and
deficiency.
- Contamination: information gathered but irrelevant.
- Deficiency: relevant information not gathered.
Specific feedback
Performance measure should specifically tell employees what is expected of them and how they
can meet those expectations. Being specific helps performance management meet the goals of
supporting strategy and developing employees. Being specific also mean the performance measure
can be defined in quantitative terms.
Topic 7 Managing the Employment Relationship
Reliability
With regard to a performance measure, reliability describes the consistency of the results that the
performance measure will deliver.
- Interrater reliability is consistency of results when more than one person measures
performance.
- Test-retest reliability refers to consistency of results over time.
Acceptability
Whether or not a measure is valid and reliable, it must meet the practical standard of being
acceptable to the people who use it.
PROBLEMS WITH PERFORMANCE MANAGEMENT
STRUCTURAL
- Unions take defensive stance on behalf of employees → should support employee
development.
- Becomes ritualized procedure → should be continual and thoughtful.
- Become punitive in nature → more developmental.
INTERPERSONAL
- Employees get defensive → should receive with humility.
- Managers tend to avoid → should embrace as a core managerial function.
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METHODS FOR MEASURING PERFORMANCE
MAKING COMPARISONS
The performance appraisal method may require th erater to compare one individual’s
performance with that of others.
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Check process of performance management in the book.
Topic 7 Managing the Employment Relationship
Simple ranking → method of performance measurement that requires managers to rank
employees in their group from the highest to the lowest performer. In a variation on this
approach, alternation ranking, the manager works from a list of employees
Forced-distribution method → method of performance measurement that assigns a certain
percentage of employees to each category in a set of categories. It works best if the members of a
group really do vary this much in terms of their performance.
Paired-comparison model → method of performance measurement that compares each employee
with each other employee to establish rankings. When the manager has compared every pair of
employees, the manager counts the number of points for each employee.2
RATING INDIVIDUALS
Performance measurement can look at each employee’s performance relative to a uniform set of
standards. Once, the system has identified the desired attributes or behaviors, then managers rate
employees in terms of such, typically using a scale from 1 to 5.
RATING ATTRIBUTES
- Graphic rating scale → method of performance measurement that lists attributes and
provides a rating scale for each attribute; the employer uses the scale to indicate the
extent to which an employee displays each attribute.
Pros: simple to use; quatitative rating; easy to implement fo rearly stages.
Cons: unclear standards; prone to error; personal biases; low reliability.
- Mixed-standard scales → method of performance measurement that uses several
statements describing each attribute to produce a final score for that attribute.
RATING BEHAVIORS
First organization must define which behaviours are associated with success on the job.
- Critical-incident method → method of performance measurement based on managers'
records of specific examples of the employee behaving in ways that are either effective or
ineffective.
- Behaviourally anchored rating scale (BARS)3 → method of performance measurement
that rates behaviour in terms of a scale showing specific statements of behaviour that
describe different levels of performance.
Pros: more objective than graphic; job related behaviors = higher validity; reduces
bias; higgher reliability.
Cons: difficult to develop and maintain; need to tailor for each job.
- Behavioural Observation Scale (BOS) → – a variation of BARS, which uses all behaviours
necessary for effective performance to rate performance at a task. BOS uses 15 behaviour t
define levels of performance, also rates frequency with which employee has exhibited the
behaviour. These ratings are then averaged to compute an overall performance rating.
Major drawback: amount of information and time reqired.
2
See advantages and drawbacks in the book.
3
See images and examples on the book.
Topic 7 Managing the Employment Relationship
- Another approach to assessment builds directly on a branch of psychology called
behaviourism, which holds that individuals' future behaviour is determined by
their past experiences.
- Organizational Behaviour Modification (OBM) → a plan for managing the behaviour of
employees through a formal system of feedback and reinforcement. Specific OBM
techniques vary, but most have four components:
- Define a set of key behaviours necessary for job performance.
- Use a measurement system to assess whether the employee exhibits the key
behaviours.
- Inform employees of the key behaviours, perhaps in terms of goals for how often
to exhibit the behaviours.
- Provide feedback and reinforcement based on employees' behaviour.
RATING OUTPUT
Performance management can focus on managing the objective, measurable results of a job or
work group.
- Management of productivity → refers to the output of production of workers, firm
identfieis the expected outcome for e specific individual or group to accomplish.
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Management By Objectives (MBO) → a system in which people at each level of the
organization set goals in a process that flows from top to bottom, so employees at all
levels are contributing to the organization's overall goals; these goals become the
standards for evaluating each employee's performance.
An MBO system has three components:
1. Goals are specific, difficult, and objective.
2. Managers and their employees work together to set the goals.
3. The manager gives objective feedback through the rating period to monitor progress
toward the goals.
Pros: tied jointly agreed-upon performance objectives; increases autonomy.
Cons: time consuming; difficult to compare among employees.
BALANCED SCORECARD
An organizational approach to performance management that integrates strategic perspectives
including financial, customer, internal business processes, and learning and growth. Basic idea is
that managers are encouraged to go beyond meeting just traditional financial targets, and
recognize and monitos the progress of other goals such as customer and employee satisfaction.
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SOURCES OF PERFORMANCE INFORMATION
360 degree feedback → performance measurement that combines information from the
employee’s managers, peers, direct reports, self, and customers.
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Check specially bias and drawbacks of each source of information in the book.
Topic 7 Managing the Employment Relationship
- Immediate supervisor/manager → Most used source of performance information.
Managers possess the basic qualifications for this responsibility. Advantage: have an
incentive to provide accurate and helpful feedback because their own success depends so
much on employee’s performance.
- Peer appraisals → Excellent source in a job where supervisor does not often observe the
employee. So peers may have the most opportunity to observe employee’s activites.
expert knowledge of job requirements. Friendships may bias the measurement.
- Upward feedback → direct reports → the people reporting to the manager. Best chance to
see how well a manager treats employees. Power-realtionships involved, they are reluctant
to say negative things about the person to whom they report.
- Self-ratings → rarely used alone but they can contribute valuable information. Tendency
to inflate assessments of their performance. Tendency to blame outside circumstances for
failures, while taking larger part of the credit for successes.
- Customers and clients → oftne the only person who directly observes the service
performance and may be the best source of performance information. Appropriate when:
employee’s job requires direct service to customer, and when organization is interested in
determinimng what products and services the customer wants.
- Crowdsourcing through apps – variation of 360 → can apply to gathering and using data
from all of an employee’s co-workers or all of a manager’s employees to develop an
appraisal.
PERFORMANCE RATING BIAS
Humans have teremendous limitations in processing information. We often use “heuristics” or
simplifying mechanisms to make judgements.
Unconscious bias → judgement outside our consciousness that affects decisions based on
background, culture, and personal experience.
Appraisal politics: evaluators purposefully distorting a rating to achieve personal or company
goals.
Similar-to-me error: rating error of giving a higher evaluation to people who seem similar to
oneself.
Contrast error: rating error caused by comparing employee's performance to co-workers rather
than to an objective standard.
Errors in Distribution:
- Leniency error: rating error of assigning inaccurately high ratings to all employees.
- Strictness error: rating error of giving low ratings to all employees, holding them to
unreasonably high standards.
- Central tendency: incorrectly rating all employees at or near the middle of a rating scale.
Recency emphasis: rating error that occurs when an annual rating is based only on most recent
work performed.
Focus on activities: rating error when employees are assessed on how busy they appear rather
than how effective they are in achieving results.
Halo error: rating error that occurs when the rater reacts to one positive performance aspect by
rating the employee positively in all areas of performance.
Topic 7 Managing the Employment Relationship
Horns error: rating error that occurs when the rater responds to one negative aspect by rating an
employee low in other aspect
PREVENTING RATER ERRORS
- Rater error training → Develops awareness of errors and encourages strategies to
minimize them. (e.g., video-recorded vignettes of contrast error).
- Rater accuracy training → Opportunity for identification and elimination of errors and to
increase accuracy through practice
- Unconscious bias training → Reduce the potential influence of unconscious bias in
evaluations. Goal is to slow down decision making to make people aware of the reasons
and language used in performance evaluation.
- Calibration meetings → Meeting at which managers discuss employee performance
ratings and provide evidence supporting their ratings with the goal of eliminating the
influence of rating error. Goal to ensure similar standards are applied to all employees.
- Data analytics, analysts, and ratee training → Facebook uses analysts to look for bias in
performance evaluations.
FEEDBACK
Providing
Goals: Discuss performance record and explore areas of possible improvement and growth.
How to conduct the session:
- Be direct and specific
- Use goal-setting and develop an action plan
- Focus on job-related behaviors
- Avoid ego threat, particularly for less confident people
- Encourage the person to talk
PERFORMANCE IMPROVEMENT
The type of action called for depends on what is missing:
- Lack of ability → When a motivated employee lacks knowledge, skills, or abilities in some
area, the manager may offer training, and more detailed feedback. Sometimes it is
appropriate to restructure the job so the employee can meet the job demands.
- Lack of motivation → Managers with an unmotivated employee can explore ways to
demonstrate that the employee is being treated fairly and rewarded adequately. The
solution may be as simple as delivering more positive feedback. Employees may also
benefit from a referral for counselling or help with stress management.
- Lack of both → Employees whose performance is below expectations because they have
neither the motivation nor the ability to perform the job may not be a good fit for the
position. Performance may improve if the manager directs their attention to the
significance of the problem by withholding rewards or by providing specific feedback.
Performance improvement plan: summary of performance gaps and includes an action plan
mutually agreed to by the employee and supervisor with specific dates to review progress.
Topic 7 Managing the Employment Relationship
Receiving
What to do when you get a bad review:
1. Reflect before you react
- Take a few days to let the feedback sink in.
2. Look for your blind spots
- Ask yourself: what may be right about this criticism.
3. Ask questions
- Make it clear you want concrete examples of what you should do differently.
4. Make a Performance Plan
- Agree on it with your supervisor and check i within 30 or 60 days.
5. Give yourself a Second Score
- Imagine there is a 2nd assessment of how you handle the review.
6. Look at the big picture
- Are you in the position that’s right for you? Chance to make change.
