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Chapter 1
Introduction to
Performance Management
Dr. Ahmad Nizan Mat Noor
Faculty of Business & Management
UiTM Perlis
Overview
• Definition of Performance Management (PM)
• The PM Contribution
• Disadvantages/Dangers of Poorly
Implemented PM Systems
• PMS & Rewards
Chapter 1 - PM - Dr Nizan
Overview (continued)
• Purposes of PM Systems
• Characteristics of an Ideal PM System
• Integration with Other Human Resources and
Development Activities
• PM Around the World
Chapter 1 - PM - Dr Nizan
Definition of PM
1. Continuous process of …
• Identifying
• Measuring
• Developing
… the performance of individuals and
teams
2. Aligning performance with the
strategic goals of the
organization
Chapter 1 - PM - Dr Nizan
Definition of PM (continued)
Performance Management
(PM)
is NOT
Performance Appraisal
(PA)
Chapter 1 - PM - Dr Nizan
Definition of PM (continued)
PM
• Strategic business
considerations
• Driven by line
manager
• Ongoing feedback
– So employee can improve
performance
PA
• Driven by HR
• Assesses employee
– Strengths
– Weaknesses
• Once a year
• Lacks ongoing
feedback
Chapter 1 - PM - Dr Nizan
Contributions of
Performance Management
• For Employees
• For Managers
• For Organization/HR Function
Chapter 1 - PM - Dr Nizan
Contributions of Performance
Management for Employees
• Clarify definitions of
– Job
– Success criteria
• Increase motivation to perform
• Increase self-esteem
• Enhance self-insight and
development
Chapter 1 - PM - Dr Nizan
Contributions of Performance Management
for Managers
• Communicate supervisors’ views of
performance more clearly
• Managers gain insight about
subordinates
• Better and more timely
differentiation between good and
poor performers
• Employees become more
competent
Chapter 1 - PM - Dr Nizan
Contributions of Performance Management for
Organization/HR Function
• Clarify organizational goals
• Facilitate organizational change
• Fairer, more appropriate
administrative actions
• Better protection from lawsuits
Chapter 1 - PM - Dr Nizan
Disadvantages/Dangers of Poorly
Implemented PM Systems
 For Employees
 For Managers
 For Organization/HR Function
Chapter 1 - PM - Dr Nizan
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
Chapter 1 - PM - Dr Nizan
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
Chapter 1 - PM - Dr Nizan
Disadvantages/Dangers of Poorly
Implemented PM Systems for
Organization/HR Function
• Wasted time and money
• Unclear ratings system
• Emerging biases
• Increased risk of litigation
Chapter 1 - PM - Dr Nizan
Reward Systems
• Definition
• Tangible Returns
• Intangible Returns
• Returns and their Degrees of
Dependency on PM
• For Organization/HR Function
Chapter 1 - PM - Dr Nizan
Reward Systems
Definition
• Set of mechanisms for distributing…
– Tangible returns
– Intangible or relational returns
… as part of an employment relationship
Chapter 1 - PM - Dr Nizan
Reward Systems
Tangible Returns
• Cash compensation
–Base pay
–Cost-of-Living and
Contingent Pay
–Incentives (short- and long-
term)
Chapter 1 - PM - Dr Nizan
Reward Systems
Tangible Returns (continued)
• Benefits such as
–Income Protection
–Allowances
–Work/life focus
Chapter 1 - PM - Dr Nizan
Reward Systems
Intangible Returns
• Relational returns such as
– Recognition and status
– Employment security
– Challenging work
– Learning opportunities
Chapter 1 - PM - Dr Nizan
Returns and Their Degrees of Dependency on
the Performance Management System
• Low Dependency
– Cost of Living Adjustment
– Income Protection
• Moderate Dependency
– Work/Life Focus
– Allowances
– Relational Returns
– Base Pay
• High Dependency
– Contingent Pay
– Short-Term Incentives
– Long-Term Incentives
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
• Strategic
• Administrative
• Informational
• Developmental
• Organizational maintenance
• Documentation
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
Strategic Purpose
• Link individual goals with organization’s goals
• Communicate most crucial business strategic
initiatives
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
Administrative Purpose
• Provide information for making decisions regarding:
– Salary adjustments
– Promotions
– Retention or termination
– Recognition of individual performance
– Layoffs
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
Informational Purpose
• Communicate to employees:
– Expectations
– What is important
– How they are doing
– How to improve
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
Developmental Purpose
ormance feedback/coaching
• Identification of individual
strengths and weaknesses
• Identification of causes of
performance deficiencies
• Tailor development of individual
career path
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
Organizational Maintenance Purpose
• Plan effective workforce
• Assess future training needs
• Evaluate performance at
organizational level
• Evaluate effectiveness of HR
interventions
Chapter 1 - PM - Dr Nizan
Purposes of PM Systems
Documentation Purpose
• Validate selection instruments
• Document administrative decisions
• Help meet legal requirements
Chapter 1 - PM - Dr Nizan
What is
characteristics of an
ideal PM system???
Cer citer cer citer…..
Chapter 1 - PM - Dr Nizan
An Ideal PM System:
15 Characteristics
1. Strategically congruent
2. Contextually congruent
3. Thorough
4. Practical
5. Meaningful
6. Specific
7. Identifies effective and ineffective
performance
Chapter 1 - PM - Dr Nizan
An Ideal PM System:
15 Characteristics (continued)
8. Reliable
9. Valid
10. Acceptable and fair
11. Inclusive
12. Open (No Secrets)
13. Correctable
14. Standardized
15. Ethical
Chapter 1 - PM - Dr Nizan
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
1. Strategically Congruent
• Consistent with organization’s strategy
• Aligned with unit and organizational goals
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
2. Contextually Congruent
• Congruent with the
organization’s culture as well as
the broader cultural context of
the region or country
– Example: A 360-degree feedback is
not effective where
communication is not fluid and
hierarchies are rigid
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
3. 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
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
4. Practical
• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
5. 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
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
6. Specific
 Concrete and detailed
guidance to employees
•What’s expected
•How to meet the
expectations
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
7. Identifies effective and ineffective
performance
• Distinguish between effective and ineffective:
– Behaviors
– Results
• Provide ability to identify
employees with various
levels of performance.
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
8. Reliable
• Consistent
• Free of error
• Inter-rater reliability
(rating should be similar)
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
9. Valid
• Relevant (i.e., measures what is important)
• Not deficient (i.e., doesn’t measure
unimportant facets of job)
• Not contaminated (i.e., only
measures what the employee can control)
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
10. 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
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
11. 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.
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
12. Open (No Secrets)
• Frequent, ongoing evaluations and feedback
• Two-way communications in appraisal meeting
• Clear standards and ongoing communication
• Communications are factual,
open, and honest
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
13. Correctable
• Recognizes that human judgment is fallible
• Appeals process provided
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
14. Standardized
• Ongoing training of managers to provide;
• Consistent evaluations across:
– People
– Time
Chapter 1 - PM - Dr Nizan
An Ideal PM System: 15 Characteristics
15. Ethical
• Supervisor suppresses self-interest
• Supervisor rates only where (s)he has
sufficient information about the
performance dimension
• Supervisor respects
employee privacy
Chapter 1 - PM - Dr Nizan
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
Chapter 1 - PM - Dr Nizan
PM Around the World
• PM used in United States,
Mexico, Turkey, India, Australia,
China, and so on
• Common across countries: Need
to align individual and
organizational goals to enhance
the performance of individuals
and groups
Chapter 1 - PM - Dr Nizan
PM Around the World (continued)
 Yet, different countries
emphasize different
components of PM
• EX 1: PMs in Japan tend to
emphasize behaviors to the
detriment of results
• EX 2: The current challenge among
many organizations in South Korea
is how to reconcile a merit-based
approach with more traditional
cultural values Chapter 1 - PM - Dr Nizan
Chapter 1 - PM - Dr Nizan
Quick Review
• 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
• PM Around the World
Chapter 1 - PM - Dr Nizan
Self-Reading
 Chapter 2 : Performance Management Process
Chapter 1 - PM - Dr Nizan

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Chapter 1 Performance Management HRM.ppt

  • 1. Chapter 1 Introduction to Performance Management Dr. Ahmad Nizan Mat Noor Faculty of Business & Management UiTM Perlis
  • 2. Overview • Definition of Performance Management (PM) • The PM Contribution • Disadvantages/Dangers of Poorly Implemented PM Systems • PMS & Rewards Chapter 1 - PM - Dr Nizan
  • 3. Overview (continued) • Purposes of PM Systems • Characteristics of an Ideal PM System • Integration with Other Human Resources and Development Activities • PM Around the World Chapter 1 - PM - Dr Nizan
  • 4. Definition of PM 1. Continuous process of … • Identifying • Measuring • Developing … the performance of individuals and teams 2. Aligning performance with the strategic goals of the organization Chapter 1 - PM - Dr Nizan
  • 5. Definition of PM (continued) Performance Management (PM) is NOT Performance Appraisal (PA) Chapter 1 - PM - Dr Nizan
  • 6. Definition of PM (continued) PM • Strategic business considerations • Driven by line manager • Ongoing feedback – So employee can improve performance PA • Driven by HR • Assesses employee – Strengths – Weaknesses • Once a year • Lacks ongoing feedback Chapter 1 - PM - Dr Nizan
  • 7. Contributions of Performance Management • For Employees • For Managers • For Organization/HR Function Chapter 1 - PM - Dr Nizan
  • 8. Contributions of Performance Management for Employees • Clarify definitions of – Job – Success criteria • Increase motivation to perform • Increase self-esteem • Enhance self-insight and development Chapter 1 - PM - Dr Nizan
  • 9. Contributions of Performance Management for Managers • Communicate supervisors’ views of performance more clearly • Managers gain insight about subordinates • Better and more timely differentiation between good and poor performers • Employees become more competent Chapter 1 - PM - Dr Nizan
  • 10. Contributions of Performance Management for Organization/HR Function • Clarify organizational goals • Facilitate organizational change • Fairer, more appropriate administrative actions • Better protection from lawsuits Chapter 1 - PM - Dr Nizan
  • 11. Disadvantages/Dangers of Poorly Implemented PM Systems  For Employees  For Managers  For Organization/HR Function Chapter 1 - PM - Dr Nizan
  • 12. 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 Chapter 1 - PM - Dr Nizan
  • 13. 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 Chapter 1 - PM - Dr Nizan
  • 14. Disadvantages/Dangers of Poorly Implemented PM Systems for Organization/HR Function • Wasted time and money • Unclear ratings system • Emerging biases • Increased risk of litigation Chapter 1 - PM - Dr Nizan
  • 15. Reward Systems • Definition • Tangible Returns • Intangible Returns • Returns and their Degrees of Dependency on PM • For Organization/HR Function Chapter 1 - PM - Dr Nizan
  • 16. Reward Systems Definition • Set of mechanisms for distributing… – Tangible returns – Intangible or relational returns … as part of an employment relationship Chapter 1 - PM - Dr Nizan
  • 17. Reward Systems Tangible Returns • Cash compensation –Base pay –Cost-of-Living and Contingent Pay –Incentives (short- and long- term) Chapter 1 - PM - Dr Nizan
  • 18. Reward Systems Tangible Returns (continued) • Benefits such as –Income Protection –Allowances –Work/life focus Chapter 1 - PM - Dr Nizan
  • 19. Reward Systems Intangible Returns • Relational returns such as – Recognition and status – Employment security – Challenging work – Learning opportunities Chapter 1 - PM - Dr Nizan
  • 20. Returns and Their Degrees of Dependency on the Performance Management System • Low Dependency – Cost of Living Adjustment – Income Protection • Moderate Dependency – Work/Life Focus – Allowances – Relational Returns – Base Pay • High Dependency – Contingent Pay – Short-Term Incentives – Long-Term Incentives Chapter 1 - PM - Dr Nizan
  • 21. Purposes of PM Systems • Strategic • Administrative • Informational • Developmental • Organizational maintenance • Documentation Chapter 1 - PM - Dr Nizan
  • 22. Purposes of PM Systems Strategic Purpose • Link individual goals with organization’s goals • Communicate most crucial business strategic initiatives Chapter 1 - PM - Dr Nizan
  • 23. Purposes of PM Systems Administrative Purpose • Provide information for making decisions regarding: – Salary adjustments – Promotions – Retention or termination – Recognition of individual performance – Layoffs Chapter 1 - PM - Dr Nizan
  • 24. Purposes of PM Systems Informational Purpose • Communicate to employees: – Expectations – What is important – How they are doing – How to improve Chapter 1 - PM - Dr Nizan
  • 25. Purposes of PM Systems Developmental Purpose ormance feedback/coaching • Identification of individual strengths and weaknesses • Identification of causes of performance deficiencies • Tailor development of individual career path Chapter 1 - PM - Dr Nizan
  • 26. Purposes of PM Systems Organizational Maintenance Purpose • Plan effective workforce • Assess future training needs • Evaluate performance at organizational level • Evaluate effectiveness of HR interventions Chapter 1 - PM - Dr Nizan
  • 27. Purposes of PM Systems Documentation Purpose • Validate selection instruments • Document administrative decisions • Help meet legal requirements Chapter 1 - PM - Dr Nizan
  • 28. What is characteristics of an ideal PM system??? Cer citer cer citer….. Chapter 1 - PM - Dr Nizan
  • 29. An Ideal PM System: 15 Characteristics 1. Strategically congruent 2. Contextually congruent 3. Thorough 4. Practical 5. Meaningful 6. Specific 7. Identifies effective and ineffective performance Chapter 1 - PM - Dr Nizan
  • 30. An Ideal PM System: 15 Characteristics (continued) 8. Reliable 9. Valid 10. Acceptable and fair 11. Inclusive 12. Open (No Secrets) 13. Correctable 14. Standardized 15. Ethical Chapter 1 - PM - Dr Nizan
  • 31. Chapter 1 - PM - Dr Nizan
  • 32. An Ideal PM System: 15 Characteristics 1. Strategically Congruent • Consistent with organization’s strategy • Aligned with unit and organizational goals Chapter 1 - PM - Dr Nizan
  • 33. An Ideal PM System: 15 Characteristics 2. Contextually Congruent • Congruent with the organization’s culture as well as the broader cultural context of the region or country – Example: A 360-degree feedback is not effective where communication is not fluid and hierarchies are rigid Chapter 1 - PM - Dr Nizan
  • 34. An Ideal PM System: 15 Characteristics 3. 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 Chapter 1 - PM - Dr Nizan
  • 35. An Ideal PM System: 15 Characteristics 4. Practical • Available • Easy to use • Acceptable to decision makers • Benefits outweigh costs Chapter 1 - PM - Dr Nizan
  • 36. An Ideal PM System: 15 Characteristics 5. 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 Chapter 1 - PM - Dr Nizan
  • 37. An Ideal PM System: 15 Characteristics 6. Specific  Concrete and detailed guidance to employees •What’s expected •How to meet the expectations Chapter 1 - PM - Dr Nizan
  • 38. An Ideal PM System: 15 Characteristics 7. Identifies effective and ineffective performance • Distinguish between effective and ineffective: – Behaviors – Results • Provide ability to identify employees with various levels of performance. Chapter 1 - PM - Dr Nizan
  • 39. An Ideal PM System: 15 Characteristics 8. Reliable • Consistent • Free of error • Inter-rater reliability (rating should be similar) Chapter 1 - PM - Dr Nizan
  • 40. An Ideal PM System: 15 Characteristics 9. Valid • Relevant (i.e., measures what is important) • Not deficient (i.e., doesn’t measure unimportant facets of job) • Not contaminated (i.e., only measures what the employee can control) Chapter 1 - PM - Dr Nizan
  • 41. An Ideal PM System: 15 Characteristics 10. 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 Chapter 1 - PM - Dr Nizan
  • 42. An Ideal PM System: 15 Characteristics 11. 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. Chapter 1 - PM - Dr Nizan
  • 43. An Ideal PM System: 15 Characteristics 12. Open (No Secrets) • Frequent, ongoing evaluations and feedback • Two-way communications in appraisal meeting • Clear standards and ongoing communication • Communications are factual, open, and honest Chapter 1 - PM - Dr Nizan
  • 44. An Ideal PM System: 15 Characteristics 13. Correctable • Recognizes that human judgment is fallible • Appeals process provided Chapter 1 - PM - Dr Nizan
  • 45. An Ideal PM System: 15 Characteristics 14. Standardized • Ongoing training of managers to provide; • Consistent evaluations across: – People – Time Chapter 1 - PM - Dr Nizan
  • 46. An Ideal PM System: 15 Characteristics 15. Ethical • Supervisor suppresses self-interest • Supervisor rates only where (s)he has sufficient information about the performance dimension • Supervisor respects employee privacy Chapter 1 - PM - Dr Nizan
  • 47. 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 Chapter 1 - PM - Dr Nizan
  • 48. PM Around the World • PM used in United States, Mexico, Turkey, India, Australia, China, and so on • Common across countries: Need to align individual and organizational goals to enhance the performance of individuals and groups Chapter 1 - PM - Dr Nizan
  • 49. PM Around the World (continued)  Yet, different countries emphasize different components of PM • EX 1: PMs in Japan tend to emphasize behaviors to the detriment of results • EX 2: The current challenge among many organizations in South Korea is how to reconcile a merit-based approach with more traditional cultural values Chapter 1 - PM - Dr Nizan
  • 50. Chapter 1 - PM - Dr Nizan
  • 51. Quick Review • 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 • PM Around the World Chapter 1 - PM - Dr Nizan
  • 52. Self-Reading  Chapter 2 : Performance Management Process Chapter 1 - PM - Dr Nizan

Editor's Notes

  1. Base pay Hourly wages Salary Cost-of-Living & Contingent Pay Usually permanent increases in pay based on either cost of living or performance Covered in more detail in Module 11 Incentives (short- and long-term) Used to increase performance E.g., bonuses (short term) or stock options/ownership (long term) Income Protection Sometimes required under law, such as Social Security (what about unemployment insurance in the USA?) Disability pay, medical insurance, pension plans, savings plans Allowances E.g., housing transportation (e.g., company provides car)
  2. Work/life focus (to help employee balance work/home life) Such as vacation time, flextime and telecommuting, services (e.g., counseling, financial planning, fitness activities) Relational Returns Such as recognition, status, employment security, challenging work, opportunities to learn, opportunities to form personal relationships
  3. Note: the following is slide used before (some of this is not in Module 1) Links employee activities with organization’s mission and goals Identifies results and behaviors needed to carry out strategy Maximizes extent employees exhibit those behaviors and results Only 13% of organizations use PM to communicate organizational purpose and goals