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1. Prentice Hall, Inc. © 2006
PERFORMANCEPERFORMANCE
MANAGEMENTMANAGEMENT
Herman AguinisHerman Aguinis
Herman Aguinis, University of Colorado at Denver
PERFORMANCEPERFORMANCE
MANAGEMENTMANAGEMENT
Herman AguinisHerman Aguinis

2. Herman Aguinis, University of Colorado at Denver
Performance Management in Context:Performance Management in Context:
OverviewOverview
 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

3. Herman Aguinis, University of Colorado at Denver
Performance Management: DefinitionPerformance 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

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

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

6. Herman Aguinis, University of Colorado at Denver
Contributions of PMContributions of PM
For ManagersFor 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

7. Herman Aguinis, University of Colorado at Denver
Contributions of PMContributions of PM
For Organization/HR FunctionFor 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

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

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

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

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

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

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

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

15. Herman Aguinis, University of Colorado at Denver
Purposes of PM Systems:Purposes of PM Systems:
OverviewOverview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentation

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

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

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

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

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

21. Herman Aguinis, University of Colorado at Denver
Documentational PurposeDocumentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements

22. Herman Aguinis, University of Colorado at Denver
Characteristics of an Ideal PM SystemCharacteristics of an Ideal PM System

23. Herman Aguinis, University of Colorado at Denver
Congruent with organizational strategyCongruent with organizational strategy
• Consistent with organization’s strategy
• Aligned with unit and organizational goals

24. Herman Aguinis, University of Colorado at Denver
ThoroughThorough
• 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

25. Herman Aguinis, University of Colorado at Denver
PracticalPractical
• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs

26. Herman Aguinis, University of Colorado at Denver
MeaningfulMeaningful
• 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

27. Herman Aguinis, University of Colorado at Denver
SpecificSpecific
Concrete and detailed guidance to
employees
• what’s expected
• how to meet the expectations

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

29. Herman Aguinis, University of Colorado at Denver
ReliableReliable
• Consistent
• Free of error
• Inter-rater reliability

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

31. Herman Aguinis, University of Colorado at Denver
Acceptable and FairAcceptable 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

32. Herman Aguinis, University of Colorado at Denver
InclusiveInclusive
• 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

33. Herman Aguinis, University of Colorado at Denver
Open (Open (NoNo Secrets)Secrets)
• Frequent, ongoing evaluations and feedback
• 2-way communications in appraisal meeting
• Clear standards, ongoing communication
• Communications are factual, open, honest

34. Herman Aguinis, University of Colorado at Denver
CorrectableCorrectable
• Recognizes that human judgment is fallible
• Appeals process provided

35. Herman Aguinis, University of Colorado at Denver
StandardizedStandardized
• Ongoing training of managers to provide
• Consistent evaluations across
– People
– Time

36. Herman Aguinis, University of Colorado at Denver
EthicalEthical
• Supervisor suppresses self-interest
• Supervisor rates only where she has sufficient
information about the performance dimension
• Supervisor respects employee privacy

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