PERFORMANCE MANAGEMENT

Herman Aguinis

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

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

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

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

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

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

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

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

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

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

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

Returns and Their Degree of Dependency on 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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Purposes of PM Systems: Overview

Strategic Administrative Informational Developmental Organizational maintenance Documentation

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Strategic Purpose
Link employee behavior with organizations goals Communicate most crucial business strategic initiatives

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

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

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

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

Documentational Purpose
Validate selection instruments Document administrative decisions Help meet legal requirements

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Characteristics of an Ideal PM System

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Congruent with organizational strategy

Consistent with organizations strategy Aligned with unit and organizational goals

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

Specific
Concrete and detailed guidance to employees whats expected how to meet the expectations

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

Reliable
Consistent Free of error Inter-rater reliability

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Valid
Relevant (measures what is important) Not deficient (doesnt 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

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

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

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

Correctable
Recognizes that human judgment is fallible Appeals process provided

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Standardized
Ongoing training of managers to provide Consistent evaluations across
People Time

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Ethical
Supervisor suppresses self-interest Supervisor rates only where she has sufficient information about the performance dimension Supervisor respects employee privacy

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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