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  1. 1. Chapter 10 Establishing the Performance Management System Fundamentals of Human Resource Management Eighth Edition DeCenzo and Robbins
  2. 2. Introduction <ul><li>Employees generally see performance evaluations as having a direct effect on their work lives. </li></ul><ul><li>The performance management systems need to include: </li></ul><ul><ul><li>decisions about who should evaluate performance </li></ul></ul><ul><ul><li>what format should be used </li></ul></ul><ul><ul><li>how the results should be utilized </li></ul></ul>
  3. 3. Performance Management Systems <ul><li>Purposes of a Performance Management System </li></ul><ul><ul><li>Feedback - let employees know how well they have done and allow for employee input. </li></ul></ul><ul><ul><li>Development – identify areas in which employees have deficiencies or weaknesses. </li></ul></ul><ul><ul><li>Documentation - to meet legal requirements. </li></ul></ul>
  4. 4. Performance Management Systems <ul><li>Difficulties in Performance Management Systems </li></ul><ul><ul><li>Focus on the individual : Discussions of performance may elicit strong emotions and may generate conflicts when subordinates and supervisors do not agree. </li></ul></ul>
  5. 5. Performance Management Systems <ul><li>Difficulties in Performance Management Systems </li></ul><ul><ul><li>Focus on the process : Company policies and procedures may present barriers to a properly functioning appraisal process. </li></ul></ul><ul><ul><li>Additionally, appraisers may be poorly trained. </li></ul></ul>
  6. 6. Performance Management and EEO <ul><li>HRM practices must be bias free, objective and job-related. </li></ul><ul><li>Valid performance appraisals are conducted at established intervals and are done by trained appraisers. </li></ul>
  7. 7. The Appraisal Process
  8. 8. The Appraisal Process <ul><li>Establishment of performance standards </li></ul><ul><ul><li>Derived from company’s strategic goals. </li></ul></ul><ul><ul><li>Based on job analysis and job description. </li></ul></ul><ul><li>Communication of performance standards to employee. </li></ul>
  9. 9. The Appraisal Process <ul><li>Measurement of performance using information from: </li></ul><ul><ul><li>personal observation </li></ul></ul><ul><ul><li>statistical reports </li></ul></ul><ul><ul><li>oral reports </li></ul></ul><ul><ul><li>written reports </li></ul></ul><ul><li>Comparison of actual performance with standards. </li></ul>
  10. 10. The Appraisal Process <ul><li>Discussion of appraisal with employee. </li></ul><ul><li>Identification of corrective action where necessary. </li></ul><ul><ul><li>Immediate action deals with symptoms. </li></ul></ul><ul><ul><li>Basic corrective action deals with causes. </li></ul></ul>
  11. 11. Appraisal Methods <ul><li>Three approaches: </li></ul><ul><li>Absolute standards </li></ul><ul><li>Relative standards </li></ul><ul><li>Objectives </li></ul>
  12. 12. Appraisal Methods <ul><li>Evaluating absolute standards : </li></ul><ul><li>An employee’s performance is measured against established standards. </li></ul><ul><li>Evaluation is independent of any other employee. </li></ul>
  13. 13. Appraisal Methods <ul><li>Evaluating absolute standards : </li></ul><ul><ul><li>Essay Appraisal : Appraiser writes narrative describing employee performance & suggestions. </li></ul></ul><ul><ul><li>Critical Incident Appraisal : Based on key behavior anecdotes illustrating effective or ineffective job performance. </li></ul></ul>
  14. 14. Appraisal Methods <ul><li>Evaluating absolute standards : </li></ul><ul><ul><li>Checklist Appraisal : Appraiser checks off behaviors that apply to the employee. </li></ul></ul><ul><ul><li>Adjective Rating Scale Appraisal : Appraiser rates employee on a number of job-related factors. </li></ul></ul>
  15. 15. Appraisal Methods <ul><li>Evaluating absolute standards : </li></ul><ul><ul><li>Forced-Choice Appraisal: Appraisers choose from sets of statements which appear to be equally favorable, the statement which best describes the employee. </li></ul></ul>
  16. 16. Appraisal Methods <ul><li>Evaluating absolute standards : </li></ul><ul><li>Behaviorally Anchored Rating Scales (BARS): Appraiser rates employee on factors which are defined by behavioral descriptions illustrating various dimensions along each rating scale. </li></ul>
  17. 17. Appraisal Methods <ul><li>Relative standards: </li></ul><ul><li>Employees are evaluated by comparing their performance to the performance of other employees. </li></ul>
  18. 18. Appraisal Methods <ul><li>Relative standards: </li></ul><ul><li>Group Order Ranking : Employees are placed in a classification reflecting their relative performance, such as “top one-fifth.” </li></ul>
  19. 19. Appraisal Methods <ul><li>Relative standards: </li></ul><ul><ul><li>Individual Ranking : Employees are ranked from highest to lowest. </li></ul></ul><ul><ul><li>Paired Comparison : </li></ul></ul><ul><ul><ul><li>Each individual is compared to every other. </li></ul></ul></ul><ul><ul><ul><li>Final ranking is based on number of times the individual is preferred member in a pair. </li></ul></ul></ul>
  20. 20. Appraisal Methods <ul><li>Using Achieved Outcomes to Evaluate Employees </li></ul><ul><ul><li>Management by Objectives (MBO) </li></ul></ul><ul><ul><li>includes mutual objective setting and evaluation based on the attainment of the specific objectives </li></ul></ul>
  21. 21. Appraisal Methods <ul><li>Using Achieved Outcomes to Evaluate Employees </li></ul><ul><ul><li>Common elements in an MBO program are: </li></ul></ul><ul><ul><ul><li>goal specificity </li></ul></ul></ul><ul><ul><ul><li>participative decision making </li></ul></ul></ul><ul><ul><ul><li>an explicit time period </li></ul></ul></ul><ul><ul><ul><li>performance feedback </li></ul></ul></ul><ul><ul><li>Effectively increases employee performance and organizational productivity. </li></ul></ul>
  22. 22. Factors that can Distort Appraisals
  23. 23. Factors that can Distort Appraisals <ul><li>Leniency error </li></ul><ul><ul><li>Each evaluator has his/her own value system. </li></ul></ul><ul><ul><li>Some evaluate high (positive leniency) and others, low (negative leniency). </li></ul></ul><ul><li>Halo error : Evaluator lets an assessment of an individual on one trait influence evaluation on all traits. </li></ul>
  24. 24. Factors that can Distort Appraisals <ul><li>Similarity error : Evaluator rates others in the same way that the evaluator perceives him or herself. </li></ul><ul><li>Low appraiser motivation : Evaluators may be reluctant to be accurate if important rewards for the employee depend on the results. </li></ul>
  25. 25. Factors that can Distort Appraisals <ul><li>Central tendency : The reluctance to use the extremes of a rating scale and to adequately distinguish among employees being rated. </li></ul><ul><li>Inflationary pressures : Pressures for equality and fear of retribution for low ratings leads to less differentiation among rated employees. </li></ul><ul><li>Inappropriate substitutes for performance : Effort, enthusiasm, appearance, etc. are less relevant for some jobs than others. </li></ul>
  26. 26. Factors that can Distort Appraisals <ul><li>Attribution Theory </li></ul><ul><li>Evaluations are affected based on whether someone’s performance is due to </li></ul><ul><ul><li>internal factors they can control </li></ul></ul><ul><ul><li>external factors which they cannot </li></ul></ul><ul><li>If poor performance is attributed to internal control, the judgment is harsher than when it is attributed to external control. </li></ul>
  27. 27. Factors that can Distort Appraisals <ul><li>Impression management: </li></ul><ul><li>If employee positively influences the relationship with the supervisor, he/she is likely to receive a higher rating. </li></ul>
  28. 28. Creating More Effective Performance Management Systems <ul><li>Use Behavior-Based Measures: </li></ul><ul><li>Measures based on specific descriptions of behavior are more job-related and elicit more inter-rater agreement than traits, such as “loyalty” or “friendliness”. </li></ul>
  29. 29. Creating More Effective Performance Management Systems <ul><li>Combine Absolute and Relative Standards: </li></ul><ul><li>Absolute standards tend to be positively lenient; relative standards suffer when there is little variability. </li></ul><ul><li>Combining the standards tends to offset the weaknesses of each. </li></ul>
  30. 30. Creating More Effective Performance Management Systems <ul><li>Provide Ongoing Feedback: </li></ul><ul><li>Expectations and disappointments should be shared with employees on a frequent basis. </li></ul>
  31. 31. Creating More Effective Performance Management Systems <ul><li>Use Multiple Raters: </li></ul><ul><li>Increasing the number of raters leads to more reliable and valid ratings. </li></ul><ul><ul><li>Use peer evaluations : Coworkers offer constructive insights and more specific evaluations. </li></ul></ul><ul><ul><li>Upward appraisals allow employees to give their managers feedback. </li></ul></ul><ul><ul><li>360-Degree appraisals : Supervisors, peers, employees, team members, customers and others with relevant information evaluate the employee. </li></ul></ul>
  32. 32. Creating More Effective Performance Management Systems <ul><li>Rate Selectively </li></ul><ul><ul><li>Appraisers only evaluate in those areas about which they have sufficient knowledge. </li></ul></ul><ul><ul><li>Appraisers should be organizationally as close as possible to the individual being evaluated. </li></ul></ul><ul><ul><li>More effective raters are asked to do the appraisals. </li></ul></ul>
  33. 33. Creating More Effective Performance Management Systems <ul><li>Train Appraisers: </li></ul><ul><li>Untrained appraisers who do poor appraisals can demoralize employees and increase legal liabilities. </li></ul>
  34. 34. Creating More Effective Performance Management Systems
  35. 35. International Performance Appraisal <ul><li>Who performs the evaluation? </li></ul><ul><ul><li>Different cultural perspectives and expectations between the parent and local country may make evaluation difficult. </li></ul></ul><ul><ul><li>Evaluation forms may not be translated accurately. </li></ul></ul><ul><ul><li>Quantitative measures may be misleading. </li></ul></ul>
  36. 36. International Performance Appraisal <ul><li>Evaluation Formats </li></ul><ul><ul><li>May make sense to use different forms for parent-country nationals and host-country nationals. </li></ul></ul><ul><ul><li>Performance criteria for a particular position should be modified to fit the overseas position and site. </li></ul></ul><ul><ul><li>Include a current expatriate’s insights as part of the evaluation. </li></ul></ul>
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