PERFORMANCE MANAGEMENT

Herman Aguinis

Herman Aguinis, University of Colorado at Denver

PERFORMANCE MANAGEMENT

Herman Aguinis

Prentice Hall, Inc. © 2006

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Performance Management: Definition

Continuous Process ofIdentifying performance of individuals and teamsMeasuring performance of individuals and teamsDeveloping performance of individuals and teams

andAligning performance with the strategic goals of the

organization

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

PM is NOT performance appraisal

• 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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Contributions of PM For Employees

The definitions of job and success are clarifiedMotivation to perform is increasedSelf-esteem is increasedSelf-insight and development and enhanced

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Contributions of PMFor Managers

Supervisors’ views of performance are communicated more clearly

Managers gain insight about subordinatesThere is better and more timely differentiation

between good and poor performersEmployees become more competent

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Contributions of PM For Organization/HR Function

Organizational goals are made clearOrganizational change is facilitated Administrative actions are more fair and

appropriateThere is better protection from lawsuits

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

• Wasted time and money• Unclear ratings system• Emerging biases• Increased risk of litigation

Disadvantages/Dangers of Poorly-implemented PM Systems

for Organization

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Reward Systems: Definition

Set of mechanisms for distributingTangible returns

andIntangible or relational returns

As part of an employment relationship

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Tangible returns

Cash compensationBase payCost-of-Living & Contingent PayIncentives (short- and long-term)

Benefits, such as Income ProtectionAllowancesWork/life focus

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Intangible returns

Relational returns, such asRecognition and statusEmployment securityChallenging work Learning opportunities

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Returns and Their Degree of Dependencyon 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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Purposes of PM Systems:Overview

StrategicAdministrativeInformationalDevelopmentalOrganizational maintenanceDocumentation

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Strategic Purpose

Link employee behavior with organization’s goals

Communicate most crucial business strategic initiatives

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Administrative Purpose

Provide information for making decisions re:Salary adjustmentsPromotionsRetention or terminationRecognition of individual performanceLayoffs

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Informational Purpose

Communicate to Employees:ExpectationsWhat is importantHow they are doingHow to improve

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Developmental Purpose

Performance feedback/coachingIdentification of individual strengths and

weaknessesCauses of performance deficienciesTailor development of individual career path

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Organizational Maintenance Purpose

Plan effective workforceAssess future training needsEvaluate performance at organizational levelEvaluate effectiveness of HR interventions

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Documentational Purpose

Validate selection instrumentsDocument administrative decisionsHelp meet legal requirements

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Characteristics of an Ideal PM System

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Congruent with organizational strategy

• Consistent with organization’s strategy• Aligned with unit and organizational goals

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Practical

• Available• Easy to use• Acceptable to decision makers• Benefits outweigh costs

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Specific

Concrete and detailed guidance to employees • what’s expected • how to meet the expectations

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Identifies effective and ineffective performance

• Distinguish between effective and ineffective– Behaviors– Results

• Provide ability to identify employees with various levels of performance

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Reliable

• Consistent• Free of error• Inter-rater reliability

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Valid

• Relevant (measures what is important)• Not deficient (doesn’t measure unimportant

facets of job)• Not contaminated (only measures what the

employee can control)

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

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

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Open (No Secrets)

• Frequent, ongoing evaluations and feedback• 2-way communications in appraisal meeting• Clear standards, ongoing communication• Communications are factual, open, honest

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Correctable

• Recognizes that human judgment is fallible• Appeals process provided

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Standardized

• Ongoing training of managers to provide Consistent evaluations across– People– Time

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Ethical

• Supervisor suppresses self-interest• Supervisor rates only where he/she has

sufficient information about the performance dimension

• Supervisor respects employee privacy

Herman Aguinis, University of Colorado at DenverPrentice Hall, Inc. © 2006

Integration with other Human Resources and Development activities

PM provides information for:Development of training to meet organizational

needsWorkforce planningRecruitment and hiring decisionsDevelopment of compensation systems