Performance Management

Professor Lucia MireeAmerican University in Bulgaria

Performance ManagementManagement = getting work done

through others

Manager’s performance is only as good as his/her employee’s performance

Manager’s job = performance management of others

Performance Management

Organizational system

Focusing on employee performance

Consistently applied throughout organization

With a supporting structure

Names of Systems

Performance Management

Performance Appraisals

Evaluation Systems

Job Review Systems

Feedback Systems

Performance ManagementEnsuring appropriate performance by all

employees through:

-Reinforcement -Rewards -Modeling -Coaching -Training -Development

Using a consistent feedback system

Working of Performance Management

Managers Speaks with Employee re: performance

Continuously

Once per Year

Formal goals

Organizational Reporting System

Tied to Organizational Outcomes

Examples of System OutputWords and What They Mean

Exceptionally well qualified Made no major errors yetActive socially Parties & drinks too muchFamily is active socially Family drinks too muchPlans for advancement Buys drinks for all of the boysAggressive ObnoxiousUses logic on difficult jobs Gets someone else to do itExpresses himself well Speaks the local languageHas Leadership qualities Is tall or has a loud voiceKeen sense of humour Knows lots of dirty jokesCareer-minded Back-stabberRelaxed attitude Sleeps at workWork is first priority Too ugly to get a dateIndependent worker Nobody knows what he doesGood communication skills Talks on phone lotsLoyal Can’t get another job

PERFORMANCE =Doing present job at a

certain level (high or low) as measured by a formal system

POTENTIAL =Includes future service, learning

interest, motivation level

PROBLEM =

Deviation from expectations

Do something in different way

Not do something

Do something not expected/needed

Opportunity

Reinforce/Reward Behavior

Change Behavior

Model Behavior

Establish Culture

PERFORMANCE MANAGEMENT

-Based on Scientific Management concepts-Focus on observable performance-Goal directed-Planning required and formalized-Consistent, continuous collection, analysis, and collection of data-Value of feedback reinforced-Facilitates benchmarking

Performance ManagementTrends

Shift from viewing financial figures as main criteria to one of multiple indicators

More weight on indicators of efficiency and effectiveness

Change to viewing PM as on-going, evolving process

Principles of Performance Management

Supports business-oriented strategyIs values based

Communicates organizational missionFulfills responsibilities to organizational membersEnables employees to manage own performance

Manages expectations (clarifies roles and responsibilities)

Creates partnership between management and employee

Emphasizes importance of measurement, feedback, and reinforcement

Empowers employeesNatural extension of management

Associated Costs

Staff Costs

Production and Processing Costs

Training Costs

Action Costs

Opportunity Costs

Key PM Questions

1. Why assess performance2. What performance to asses3. How to assess performance4. Who do assess performance5. When to assess performance6. How to communicate performance

assessment

The WHY of Performance Management Systems

-Administer Salary & Wages-Correct Performance/Behavior

-Plan for Future (promotion, transfer, career dev)

-Facilitate Decision-Making (counseling, terminations)

-Facilitate Human Resource Planning-Create Culture

-Building Good Relationships-Increase Organizational Loyalty

-Determine Effectiveness of Selection andPlacement Methods

WHAT to Assess

Skills/Abilities/Needs/Traits of Individuals

That Interact with the Organization to Produce Behaviors Which

Result in Outcomes

Skills/Abilities/

Needs/Traits

Behaviors Results

Job Knowledge Perform Tasks Sales

Strength Obey Instructions Production Levels

Coordination Report Problems Production Quality

Business Knowledge Maintain Equipment Scrap/Waste

Desire to Achieve Follow Rules Accidents

Dependability Submit Suggestions Equipment Repairs

Creativity Follow-up Customers Served

Leadership Write Reports Customer Satisfaction

Honesty Completes Reviews Feedback

Measures Focus

Consistent indicators across industry or similar organizations

Comparison of indicators over time in organization

Comparisons with pre-determined standard

Approaches to PM

Comparative

Attribute

Behavioral

HOW to Assess Performance

Traditional

Management-by-Objective

Assessment Center

Peer Review Panel

Critical Events

Upward Feedback

360 Degree

Techniques of PM

Essay (open-ended)Management by Objective

RankingPaired Comparisons

Forced ChoiceForced Distribution

Ratings: -Checklist

-Scales -Behaviorally Anchored Ratings (BARS)

Critical Incidents

Essay TechniqueDescribe in detail the quantity and quality of the employee’s performance during the past twelve months.

Describe the employee’s strength and weakness.How do you describe the employee’s potential within the company?What leadership skills does the employee bring to the job?What future development activities do you recommend for the employee?

Morgan Stanley’s Essay System

Consider objectives identified in prior year’s Summary as wellas this year’s objectives.

Evaluation: Strengths Comments 1. 2. 3.

Development Areas Comments 1. 2. 3.

Examples of essays on PMs….His men would follow him anywhere, but only out of curiosity.

I would not suggest breeding for this person.

When she opens her mouth, it seems that it is only to change the foot that was previously there.

He has carried out each of his duties to his entire satisfaction.

He would be out of his depth in a car park puddle.

This person is like a gyroscope: always spinning at a fast pace, but not really going anywhere.

This person has delusions of adequacy.

Continued examples….

Since my last report, he has reached rock bottom and is digging.

She sets low personal standards and then consistently fails to meet them.

He has the wisdom of youth & the energy of old age.

This person should go far. And, the sooner he starts, the better.

In my opinion, this pilot should not be authorized to fly below 250 meters.

This person works well under constant supervision and when cornered.

This man is depriving a village somewhere of its idiot.

Management-by-ObjectiveExamples

Employee will contribute to organizational profit margin by lower costs in department by 3.5percent.

To implement new recruitment system, the employee will evaluate the effectiveness of the advertisements placed during the year.

Ranking Example

Manager ranks all employees from best to worst:

Overall performance

On specific criteria (communication, customer relations skills, etc.)

Paired Comparisons ExampleRank each employee grouping overall or on a characteristic:

Employee A and Employee BEmployee B and Employee CEmployee A and Employee CEmployee C and Employee DEmployee D and Employee AEmployee D and Employee B

etc.

Forced Distribution Example

Pace each of the employees in your department in the following categories based upon overall or specific category performance:

Top 10 percent: 10-49 percent:50 – 89 percent: Bottom 10 percent:

Outstanding: Average:Good: Below Average:

Unacceptable:

General Electric’s DistributionThe Vitality Curve

Promotability High Medium Limited

Top Performers 10%

Highly Valued 70%

Least Effective 20%

Ratings Example: Checklists

Program Auditor:_____ 1. Unable to separate important from irrelevant data._____ 2. Omits important info from summaries._____ 3. Cross-references to improve reporting._____ 4. Produces summaries which lead to good reports._____ 5. Requires excessive instruction to produce work._____ 6. Unable to reduce data to manageable form._____ 7. Communicates well with peers on reports._____ 8. Fails to meet deadlines._____ 9. Provides detailed, professional work._____ 10. Protects confidentiality of information.

Ratings Example: ScalesRate the employee’s behavior on the scale provided.

Excellent Good Fair Poor N/A4 3 2 1 ___

Reasoning ability 4 3 2 1 ___ Decisiveness in Decision-making 4 3 2 1 ___ Imagination & originality 4 3 2 1 ___Ability to plan and control 4 3 2 1 ___Cooperation with peers 4 3 2 1 ___Cooperation with management 4 3 2 1 ___Professionalism 4 3 2 1 ___Interpersonal skills 4 3 2 1 ___

Citibank’s Performance Scorecard

Measurements Below Par

Par Above Par

Standards Manager’s assessment

Leadership,

Ethics/Integrity

Customer Interaction

Community Involvement

Contribution to Overall Business

People Manager’s assessment

Performance

Teamwork

Training & Development

Employee Satisfaction

Control Auditors’ standards

Audit

Legal

Regulatory

Citibank’s Performance Scorecard..

Measurements Below

ParPar Above

Par

Customer Satisfaction External company survey

Goal of 80%

Strategy Implementation Objective standards

Households

Cross-sell, splits, mergers

Retail asset balances

Market share

Financial Objective stadards

Revenue

Expense

Margin

Citibank’s Link to Compensation

Ratings Bonus

“Above Par” 30%

“Par” 15%

“Below Par” 0%

Microsoft’s PA SystemOverall Employee Rating:

5 = Exceptional performance rarely achieved; precedent setting results

4.5 =Consistently exceeds all requirements & expectations work highly valued4 =Consistently exceeds position requirements and expectations;

work often noteworthy3.5 =Exceeds position requirements; successful in all objectives3 =Meets position requirements and expectations; meets most or all objectives; needs some development for quality2.5 =Falls below performance standards and expectations; has

performance deficiencies1.0-2.0 =Does not meet minimum requirements in critical aspects

of job

Microsoft: Adding Distribution to Rankings

4.0 + = 35% of employees3.5 = 40% of employees3.0 or lower = 25% of employees

Ratings Example: BARS

Indicate the appropriate level of performance on each factor:

Quantity of work

Quality of work

Judgment

Volume low & erratic Satisfactory steady volume

Volume above expectations

Results always accurate; model work

Results accurate and thorough

Results generally inaccurate and not thorough

Systematic, analytical, good with complex problems

Practical judgment, solves problems,

difficulty with assessing relative value of factors

Does not always show goodjudgment; problem analysis

not always adequate

Microsoft Competency Toolkit

Level 1 Level 2 Level 3 Level 4Structures basic

info accurately; draws informed conclusions

Analyzes & organizes complex info from specific content area, identifying key issues, assessing impact, drawing reasonable conclusions

Analyzes, explains & draws logical conclusions based upon complex data from multiple content areas

Rapidly identifies the significance of info & insightfully determines strategic action.

With guidance, learns quickly on the job

Learns new skills & ideas rapidly

Rapidly learns & assimilates complex info involving unfamiliar situations & circumstances

Rapidly learns new concepts & ideas; integrates & assimilates highly complex info across broad, multi-functional content areas

Picks up new skills & understands ideas when structured

Quickly adjusts thinking for new info or ideas

Learns effectively from experience

Is able to apply & explain logic related to problems

FACTOR: Individual ExcellenceCOMPETENCY: Intellectual Horsepower (is bright, intellectual sharp, learns quickly)

Microsoft Competency Toolkit

Level 1 Level 2 Level 3 Level 4Assigns challenging tasks and assignments that will help people develop their skills

Takes time to learn about and understand direct reports; career goals

Actively coaches direct reports how to get the most learning from their current assignments

Holds managers accountable for developing people in their group/

organization

Provides direction in correct performance of tasks and assignments

Provides stretch jobs and assignments for direct reports to help them develop their skills

Gives direct reports candid, thoughtful feedback on their strengths and weaknesses

Identifies key people in his/her organization to assume high-level management responsibilities, and is an advocate for them when opportunities for advancement occur

FACTOR: Long-term ApproachCOMPETENCY: Developing people (provides job-relevant learning, developmental

exercises, and feedback to enhance individual performance)

Critical Incident ExampleEmployee Name:___________________________________Date of Incident:__________________Type of Incident:___________________________________Individuals Involved:

Description of Incident:

Outcome of Incident:

Recommendations:

Date Discussed with Employee:____________Supervisor Signature:______________________________Employee Signature: ______________________________

Focus Judgmental Developmental

Time orientation

Past performance Preparation for

future performance

Method Improving performance by changing behavior through rewards

Improving performance by self- learning & personal growth

Supervisor’s Role

Judge who appraises Counselor who listens, helps, encourages & guides

Subordinate’s

Role

Listener, reactor to, defender of past performance

Actively involved in charting future plans

Criteria for Performance Measures

Relevant

Reliable

Discriminating

Practical

Problems with Performance Measures

ControllabilityMotivational impact

“Fallout”Role Modeling Impact

ReliabilityRelevance

Control

WHO Should Assess Performance

Superior Only

Subordinate(s)

Peers/Coworkers

Self

Customers

Others

Subordinates

All Stakeholders

WHEN to Assess Performance

Probation Period

Annually (anniversary date, assigned date, set date for all)

Semi-annually

For Cause

On-going

As needed

How to Communicate PM Info

Orally

In Writing Formally

Informally Public

Private

Moderated

Handling Performance Issues

What to do

Where to start

How to do it

PROBLEM =

Deviation from expectations

Do something differently

Not do something

Do something not expected/needed

Performance Problems

Research shows that there is a huge performance gap between high and low performers in any organisation –

between 30%-50% for unskilled jobs

and up to 100% for highly technical ones.

From : Why people do not get fired: the psychology of discipline avoidance - http://www.workrelationships.com/site/articles/performance_management.htm

PROBLEM ID

PRELIMINARY SCANWhat shouldn’t be happening?

Impact of this?Worth pursuing?

ORGANIZATIONAL SCANMatch strategic plan?

Critical functions missing?Culture and performance gaps?

FUNCTIONAL JOB ANALYSISSpecific job deficiencies?

Job knowledge and training?

CAUSAL ANALYSIS

ID:When problem beganWhat else has changed

PARETO’S LAW: Rule of 20/80“80% of any problem is

caused by 20% of possiblecauses.”

CAUSES OFPERFORMANCE

PROBLEMS-Lack of ability

-Low motivation-Poor work ethic

-Substance abuse-Personal problems

-Lack of time-Poor peer relationships

-Unfamiliarity with equipment or process

PERFORMANCEOPPORTUNITIES

P

oor

Perf

Excellen

t P

erf

No/Low Knowledge High Knowledge

PERFORMANCEOPPORTUNITIES

--- OK

TrainingOrg

Development

P

oor

Perf

Excellen

t P

erf

No/Low Knowledge High Knowledge

ALTERNATIVE SOLUTIONS1. Return to old system2. Fire, transfer, hire new3. Train4. Reassign or isolate

RATE EACH BY: -Contribution to Objectives (high, medium, low) -Cost to fix and to ignore (high, medium, low)RANK IN ORDER

Training & Development

Definition: planned, continuous effort by management to improve employee competency levels and org performance.

TRAINING: provide learners with knowledge & skills for job

DEVELOPMENT: prepare organization and employees to keep pace with industry and fields of expertise

T & D TRENDSSkill requirements change with more work

complexity

Workers more educated

Workers more diverse

Org restructuring continues

Training often outsourced

More technology use in Training

Training Departments = Brokers

J-I-T and J-W-I-N Training Grow

Increase on human performance

Top management support

Commitments from Specialists and Generalists

Technological Advances

Organizational Complexity

Behavioral Science Knowledge

Learning Principles

Performance of Other Human Resource Functions

Factors Influencing T & D

TRAINING & DEVELOPMENT METHODS

Coaching Mentoring

Business Games Case Studies

Role Playing Videotapes

In-Basket Training Internships Job Rotation Computer-based

Methods (continued)

Cyberlearning: -Internet/Intranet -Virtual Reality -Distance Learning -Video ConferencingClassroom ProgramsCorporate Universities Colleges & Universities On-the-Job Training Apprenticeship Training Simulators Vestibule Training

DEVELOPMENT1. HARDWARE

-equipment -space -money

-people -transportation

2. SOFTWARE-policies & procedures -reward

systems-communication systems -structure

3. BEHAVIORAL-supervision -peer relationships-values & attitudes -personality -individual goals & priorities

EMPLOYEES PERFORMANCE :CATEGORIES AND STRATEGIES

DEADWOOD: No training; demotions or removal; remedial work; training to prevent loss; orientation to

lower job; divest WORKHORSES:

Training stressing improvement, orientation or maintaining skills; career counseling on limits

PROBLEM CHILDREN: Remedial, therapeutic or corrective dev plan; divest

STARS: Special effort, programs and funds to maximize

value; invest

IMPLEMENTATION PLAN

Priorities OptionsBudget DevelopmentSelection of Methods

Plan with BenchmarksPilot Program

EvaluationAdjustments and New Plan

Full ImplementationOn-Going & Periodic Evaluations

(Is it working? If no, why not?)

Why PM Is Difficult

Job/Outcomes not quantified

Personal relationships with employees

Unable to give criticism

Personality biases

Poor communication

Conflicting Goals

Playing God

Errors in Performance Measurement

Strictness or Leniency

Central Tendency

Halo Error

Recency Error

Supervisor Bias

Overall Ratings

Correcting PM Errors

Isolate Job AreasObserve Regularly

Minimize Number of Ratings CompletedTrain Raters

Define Dimensions BetterGive Feedback

Use Continual FeedbackInclude Other Sources

Decrease Generalities, Include Specifics

Effective PM SystemsSystem acceptable to employees

Managers use system regularly & correctly

Perception of being treated fairly by system

Useful feedback provided

Focus on problem solving, not blame

Serve to increase productivity & satisfaction

System used by organization

Training for PM Interviews

Have documentation

Be objective judge job, not individual

Use specific examples

Share control

Make it a year-round process

Training….continued

Solicit & give feedback -Clear -Constructive

-Descriptive, not judgmental

Avoid arguments

Strive for consistency

Get it down in black and white

By-the-book

Listen

PRIOR TO PM INTERVIEW

Decide on best timeDecide on best place

Prepare facilitiesGather info and materials

Prepare employeePlan the opening

Plan the approachPlan the conclusion

After PM Interview

Meet deadlines

Solicit input

Reinforce, reward, punish(follow through)

Review regularly

How to Destroy PM SystemDo not follow policies

Be inconsistent in application

Treat it as unimportant

Do not follow-up

Reprimand in public; Reward in private

Conduct when angry

Be late

The WHY of Performance Management Systems

-Administer Salary & Wages-Correct Performance/Behavior

-Plan for Future (promotion, transfer, career dev)

-Facilitate Decision-Making (counseling, terminations)

-Facilitate Human Resource Planning-Create Culture

-Building Good Relationships-Increase Organizational Loyalty

-Determine Effectiveness of Selection andPlacement Methods