1. PERFORMANCE
MANAGEMENT
Herman Aguinis
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

2. Performance Management in Context:
Overview
 Definition of Performance Management (PM)
 The Performance Management Contribution
 Disadvantages/Dangers of Poorly-implemented PM
systems
 Definition of Reward Systems
 Aims and role of PM Systems
 Characteristics of an Ideal PM system
 Integration with Other Human Resources and
Development Activities
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

3. Performance Management: Definition
Continuous Process of
Identifying performance of individuals and teams
Measuring performance of individuals and teams
Developing performance of individuals and teams
and
Aligning performance with the strategic goals of the
organization
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

4. PM is NOT performance appraisal
• PM • Performance appraisal
– Strategic business – Assesses employee
considerations • Strengths &
– Ongoing feedback • Weaknesses
– So employee can – Once a year
improve performance – Lacks ongoing feedback
– Driven by line manager – Driven by HR
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

5. Contributions of PM
For Employees
The definitions of job and success are clarified
Motivation to perform is increased
Self-esteem is increased
Self-insight and development and enhanced
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

6. Contributions of PM
For Managers
Supervisors’ views of performance are
communicated more clearly
Managers gain insight about subordinates
There is better and more timely differentiation
between good and poor performers
Employees become more competent
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

7. Contributions of PM
For Organization/HR Function
Organizational goals are made clear
Organizational change is facilitated
Administrative actions are more fair and
appropriate
There is better protection from lawsuits
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

8. Disadvantages/Dangers of
Poorly-implemented PM Systems
for Employees
• Lowered self-esteem
• Employee burnout and job dissatisfaction
• Damaged relationships
• Use of false or misleading information
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

9. Disadvantages/Dangers of
Poorly-implemented PM Systems
for Managers
• Increased turnover
• Decreased motivation to perform
• Unjustified demands on managers’ resources
• Varying and unfair standards and ratings
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

10. Disadvantages/Dangers of
Poorly-implemented PM Systems
for Organization
• Wasted time and money
• Unclear ratings system
• Emerging biases
• Increased risk of litigation
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

11. Reward Systems: Definition
Set of mechanisms for distributing
Tangible returns
and
Intangible or relational returns
As part of an employment relationship
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

12. Tangible returns
Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-term)
Benefits, such as
 Income Protection
 Allowances
 Work/life focus
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

13. Intangible returns
 Relational returns, such as
 Recognition and status
 Employment security
 Challenging work
 Learning opportunities
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

14. Returns and Their Degree of Dependency
on the Performance Management System
Return Degree of Dependency
 Cost of Living Adjustment • Low
 Income Protection • Low
 Work/life Focus • Moderate
 Allowances • Moderate
 Relational Returns • Moderate
 Base Pay • Moderate
 Contingent Pay • High
 Short-term Incentives • High
 Long-term Incentives • High
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

15. Purposes of PM Systems:
Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentation
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

16. Strategic Purpose
Link employee behavior with organization’s
goals
Communicate most crucial business strategic
initiatives
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

17. Administrative Purpose
Provide information for making decisions re:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Layoffs
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

18. Informational Purpose
Communicate to Employees:
Expectations
What is important
How they are doing
How to improve
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

19. Developmental Purpose
Performance feedback/coaching
Identification of individual strengths and
weaknesses
Causes of performance deficiencies
Tailor development of individual career path
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

20. Organizational Maintenance Purpose
Plan effective workforce
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

21. Documentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

22. Characteristics of an Ideal PM System
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

23. Congruent with organizational strategy
• Consistent with organization’s strategy
• Aligned with unit and organizational goals
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

24. Thorough
• All employees are evaluated
• All major job responsibilities are evaluated
• Evaluations cover performance for entire
review period
• Feedback is given on both positive and
negative performance
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

25. Practical
• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

26. Meaningful
• Standards are important and relevant
• System measures ONLY what employee can
control
• Results have consequences. Evaluations
occur regularly and at appropriate times
• System provides for continuing skill
development of evaluators
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

27. Specific
Concrete and detailed guidance to employees
• what’s expected
• how to meet the expectations
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

28. Identifies effective and ineffective performance
• Distinguish between effective and ineffective
– Behaviors
– Results
• Provide ability to identify employees with
various levels of performance
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

29. Reliable
• Consistent
• Free of error
• Inter-rater reliability
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

30. Valid
• Relevant (measures what is important)
• Not deficient (doesn’t measure unimportant
facets of job)
• Not contaminated (only measures what the
employee can control)
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

31. Acceptable and Fair
• Perception of Distributive Justice
– Work performed  evaluation received  reward
• Perception of Procedural Justice
– Fairness of procedures used to:
• Determine ratings
• Link ratings to rewards
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

32. Inclusive
• Represents concerns of all involved
– When system is created, employees should help
with deciding
• What should be measured
• How it should be measured
– Employee should provide input on performance
prior to evaluation meeting
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

33. Open (No Secrets)
• Frequent, ongoing evaluations and feedback
• 2-way communications in appraisal meeting
• Clear standards, ongoing communication
• Communications are factual, open, honest
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

34. Correctable
• Recognizes that human judgment is fallible
• Appeals process provided
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

35. Standardized
• Ongoing training of managers to provide
Consistent evaluations across
– People
– Time
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

36. Ethical
• Supervisor suppresses self-interest
• Supervisor rates only where he/she has
sufficient information about the performance
dimension
• Supervisor respects employee privacy
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver

37. Integration with other Human Resources
and Development activities
PM provides information for:
Development of training to meet organizational
needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver