Performance management Lectures 24.ppt

PERFORMANCE MANAGEMENT
Lectures 11-14
Performance Appraisal Systems :
Purpose, Methods,
Appraisal instruments,
360Appraisal
HR Score Card,
Errors in appraisal,
Potential Appraisal,
Appraisal Interview.

The conventional definition of
management is getting work done
through people, but real management
is developing people through work.

What do you understand by Performance
Management System?

PERFORMANCE MANAGEMENT
• Performance management consists of defining,
assessing, and reinforcing employee work behaviors
and outcomes.
• Defining - Goal setting or specifying the kinds of
performances that are desired.
• Assessing - Performance appraisal or evaluation that
assesses the performance against goals or
• Reinforcing - Reward systems provide the reinforcements to
ensure that desired outcomes are repeated.

What factors influence performance management
system?

What are characteristics of goal setting or what
types of goals are considered good?

GOAL SETTING
CHACTERISTICS
1. Challenging goals produce better performance:
– Goals are only effective if they are difficult and
challenging.
2. Specific hard goals are better than “do your best”
Goals:
– Goal setting involves specifying and clarifying the goals.
When given specific goals, workers perform higher than
when they are simply told to "do their best“
3. People may abandon goals if too hard:
– An individual is more likely to accept or choose a goal
when there is a high expectation of reaching it. If goals
are set too high, people may lose their motivating
potential.

GOAL SETTING
CHACTERISTICS
4. Participation in setting goals increases commitment
and attainment of goals:
– Employees are more committed to self-set goals than to
goals assigned by a manager. It gives them ownership.
5. Feedback and goals improve performance.
6. Individual differences tend not to affect goal
setting:
– Goal setting programs are successful regardless of
education and position. Production workers, clerical
workers, maintenance workers, managers, all can use
goal setting successfully.

GOAL SETTING
CHACTERISTICS
7. Goal-setting in teams deserves special
consideration:
– Setting difficult individual goals for an interdependent
team task will likely result in poorer performance
8. Support of management is critical:
– Supervisors should be present to encourage the
acceptance of goals by employees, help them improve
their skills, and give timely feedback on how the goals are
being accomplished. Those who accomplish goals should
be rewarded, but the rewards need to be applied
consistently.

What are steps of goal setting exercise how
goals are to be set?

STEPS IN GOAL SETTING
1. Diagnosis: The first step is a thorough diagnosis of the job
or work group; employee needs; and the three context
factors- business strategy, workplace technology, and level
of employee involvement.
2. Preparation for goal setting: This step prepares
managers and employees to engage in goal setting,
typically by increasing interaction and communication
between managers and employees, and offering formal
training in goal- setting methods.

STEPS INGOAL SETTING
3. Setting of goals: In this step challenging goals are
established and methods for goal measurement are
clarified. Employees participate in the process to extent
that contextual factors support such involvement.
4. Review: At this final step the goal-setting process is
assessed so that modifications can be made, if necessary.
The goal attributes are evaluated to see the goals are
energizing and challenging and whether they support the
strategy and can be influenced by the employees.

How commitment for achieving goals can be
secured?

COMMITMENT TO GOALS
• Commitment to goals is obtained by following:
1. Inculcating trust in upper management
2. Support by management
3. Effective reward and incentive system
4. Competition between employees.
– Competition is useful, but managers should be careful
designing competitive situations, especially in
interdependent situations. Employees may become so
involved in competing with one another, that they lose
sight of the goals.

COMMITMENT TO GOALS
5. Providing special training for employees in new
techniques and procedures.
6. Participation in setting goals can lead employees to
accept goals.
7. Goals should be specific, measurable, and
compatible with the goals formulated at higher
levels of the organization.

What is MBO?
How goal setting is to be done while practicing MBO
system?

MANAGEMENT BY OBJECTIVES
• MBO may be defined as a system of management
set up to help in planning, organizing, problem-
solving, motivating, and other important
managerial activities.
• The superior and subordinate managers of an
organization:
– jointly identify common goals,
– define each individual’s major areas of responsibility in
terms of results expected, and
– use these measures as guides for operating the unit and
assessing the contribution of each of its members.

STEPS IN MBO PROCESS
1. Work group involvement: the members of the primary
work group define overall group and individual goals and
establish action plans for achieving them. If this step is
omitted or if organizational goals and strategies are
unclear, the effectiveness of an MBO approach may be
greatly reduced over time.
2. Joint manager-subordinate goal setting: Once the
work group's overall goals and responsibilities have been
determined, attention is given to the job duties and
responsibilities of the individual role incumbents.
3. Establishment of action plans for goals: The
subordinate develops action plans for goal accomplishment,
in a group meeting or in a meeting with the manager.

STEPS IN MBO PROCESS
4. Establishment of criteria of success: At this point, the
manager and subordinate agree on the success criteria.
Important reason for this step is to ensure that the
manager and subordinate have a common understanding
of the task and what is expected of the subordinate.
5. Review and recycle: There are three stages. First, the
review of progress and achievements and the obstacles
faced by the subordinate. Next, the manager discusses
work plans and objectives for the future. Last, after action
plans preparation, general discussion covering
subordinate's future ambitions and other factors of concern
are to be discussed.
6. Maintenance of records

What are negative aspects of MBO approach?

CRITICISM OF MBO
1. Expensive and time-consuming exercise.
2. Requires improved managerial skills and
competence.
3. May be too quantitative, and setting objectives as
explicitly as possible may not be functional in
many cases.
4. Some times communication may come from the
top instead of mutual goal setting. Thus there is a
danger that MBO will focus only on certain aspects
of the job such as sales and ignore other areas for
example, customer satisfaction.

33
GOAL SETTING
SMART Goals:
Specific
Measurable
Attainable
Relevant
Time sensitive

Define Performance Appraisal and why
it is needed?

PERFORMANCE APPRAISAL
• Performance appraisal is a method by which the job
performance of an employee is evaluated. It is part
of Performance Management System.
• Both employees and organizations need
performance appraisal.
– Employees need it for receiving feedback for career
decisions, getting a raise, and promotion.
– Organizations need it for variety of purposes such as
affirmative action, pay and promotion decisions, and
human resources planning and development.
• Performance appraisal is important instrument to
achieve organizational goals and objectives

On what factors method of performance
appraisal depends?

• The method of performance appraisal depends upon
the purposes for which it is to be used.
• Separate appraisal systems for separate purposes.
– For example appraisal methods for pay purposes are
different from systems that assess employee
development.
• Thus, at one time the appraisal process might focus
on pay decisions, another time on employee
development, and still another time on employee’s
fitness for promotion.

• The new appraisal approaches are more tailored to
balance the organizational and employee needs.
• This is accomplished by actively involving the
appraise, co-workers, and managers in assessing the
purposes of the appraisal at the time it takes place
and adjusting the process to fit that purpose.

• The new methods expand the appraiser role beyond
managers to include multiple raters, such as the
appraise, co-workers, and others having direct
exposure to the employee's performance.
• Known as 360-degree feedback, this approach is
used more for member development.
• This wider involvement provides a number of
different views of the appraises’ performance.
• The key task is to arrive at employee's performance
that incorporates all of the different appraisals.

What are objectives of performance appraisal?

OBJECTIVES OF PERFORMANCE APPRAISAL
1. To provide a basis for promotion; transfer; or
termination:
Identify those employees who deserve promotion
Or those who require lateral shift (transfer) or
termination
• Performance Appraisal (PA)is used for career
planning

2. Enhance employees’ effectiveness by helping to
identify their strengths and weaknesses and
3. Inform them about expected levels of performance
4. If employees understand their roles well, they are
likely to be more effective on the job
5. Identify training and development needs:
 Identifying training and development needs of
employees is necessary to prepare them for
meeting challenges in their current and future
employment

6. Aid in designing training and development
programs:
Identifying skills required to be developed would help in
tailor- making training and development programs.
7. Remove work alienation:
Counseling Employees corrects misconceptions which
might result in work alienation

8. Remove discontent:
– Identifying and removing factors responsible for workers’
discontent would motivate them for better work
performance .
9. Develop inter-personal relationships:
- Relations between superior - subordinate can be improved
through realization that each is dependent on the other
for better performance and success

10. Aid wage administration:
- Performance appraisal can help in development of
scientific basis for reward allocation, wage fixation,
incentives
11. Improve communication:
- Performance appraisal serves as a mechanism for
communication between superiors and subordinates

Describe process of performance appraisal?

PROCESS OF PERFORMANCE APPRAISAL
1. Establish Performance Standards:
 Performance standards serve as benchmarks against which
performance is measured
 Standards should relate to the desired results of each job.

2. Communicate the Standards
 Performance appraisal involves at least two parties, the
appraiser who does the appraisal and the appraisee
whose performance is being evaluated
 The appraiser should prepare job descriptions clearly; help
appraisee set his goals and targets; analyze results
objectively; offer coaching and guidance to appraisee
whenever required and reward good results
 The appraisee should be very clear about what he is doing
and why

3. Measure Actual Performance:
 Performance measures, must be easy to use, reliable
and must report on the critical behaviors that determine
performance.
 Performance measures can be objective or subjective:
 Objective performance measures are indications of job
performance that can be verified by others and are usually
quantitative
 Subjective performance measures are ratings that are based on
the personal standards or opinions of those doing the
evaluation and are not verifiable by others.

4. Compare actual performance with standards and
discuss the appraisal
 Actual performance may be better than expected and
sometimes it may go off the track
 Whatever be the consequences, there is a way to
communicate and discuss the final outcome
5. Taking Corrective action. Corrective action is of two
types:
 One puts out the fires immediately
 Other strikes at the root of the problem permanently

PERFORMANCE CRITERIA
• In order to be effective, the criteria for performance
appraisal should be genuinely related to success /
failure in the job and should be amenable to
objective judgment
• MBO is an example of performance-based appraisal
approach that involves setting objectives and
comparing performance against those objectives.
• Objectives give greater freedom to both
management and the employees in deciding how
performance is to be measured

What are benefits of performance appraisal?

BENEFITS OF PERFORMANCE APPRAISAL
• For the Appraisee :
 Better understanding of his role in the organization—what is
expected and what needs to be done to meet those
expectations.
 Clear understanding of his strengths and weaknesses to
develop himself into a better performer in future.
 Increased motivation, job satisfaction, and self-esteem
 Opportunity to discuss work problems and how they can be
overcome
 Opportunity to discuss aspirations and any guidance,
support or training needed to fulfill those aspirations
 Improved working relationships with supervisors

• For the Management:
1. Identification of performers and non-performers and their
development towards better performance
2. Opportunity to prepare employees for assuming higher
responsibilities
3. Opportunity to improve communication between the
employees and management
4. Identification of training and development needs
5. Generation of ideas for improvements
6. Better identification of potential and formulation of career
plans

• For the Organization:
 Improved performance throughout the organization
 Creation of a culture of continuous improvement and success
 Conveying the message that people are valued

What are different methods of performance
appraisal?

PERFORMANCE APPRAISAL - INDIVIDUAL
EVALUATION METHODS
•Confidential report
•Essay evaluation
•Critical incidents
•Checklists
•Graphic rating scale
•Behaviorally anchored
rating scale
•Forced choice method
•MBO
•Ranking
•Paired comparison
•Forced distribution
OTHER METHODS:
•Performance tests
•Field review technique

CONFIDENTIAL REPORT
• Descriptive report
– Prepared at the end of the year
– Prepared by the employee’s immediate
supervisor
– The report highlights the strengths and
weaknesses of employees
– Prepared in Government organizations
– Does not offer any feedback to the employee

ESSAY EVALUATION
• The rater is asked to express the strong as well as
weak points of employee’s behavior
• The rater considers the employee’s :
Job knowledge and potential
Understanding of company’s programs, policies,
objectives etc
Relation with co-workers and supervisors
Planning, organizing and controlling ability
Attitude and perception

ESSAY EVALUATION
• This method has the following limitations:
Highly subjective
Supervisor may write biased essay
Difficult to find effective writers
A busy appraiser may write the essay hurriedly
without assessing properly the actual performance of
the worker
If the appraiser takes a long time it becomes
uneconomical from the view point of the firm

CRITICAL INCIDENT TECHNIQUE
• Manager prepares lists of statements of very
effective and ineffective behavior of an employee
• These critical incidents represent the outstanding or
poor behavior of the employees
• The manager periodically records critical incidents
of employee’s behavior.
 July 20 - Sales clerk patiently attended to the customers
complaint. He is polite, prompt, enthusiastic in solving the
customers’ problem.
 July 20 - The sales assistant stayed 45 minutes beyond his break
during the busiest part of the day. He failed to answer store
manager’s call thrice. He is lazy, negligent, stubborn and
uninterested in work

CRITICAL INCIDENT TECHNIQUE
• Limitation of this technique are:
– Negative incidents may be more noticeable than positive
incidents.
– Supervisors have a tendency to unload a series of
complaints about incidents.
– Results in very close supervision which may not be liked
by the employee.
– The recording of incidents may be a chore for the
manager concerned who may be too busy or forget to do
it.

CHECKLIST
• A checklist is a set of objectives or descriptive
statements about the employee and his
behavior.
• Under weighted checklist, value of each question
may be weighted.
• Example:
• Is the employee really interested in the task
assigned? Yes / No
• Is he respected by his colleagues? Yes / No

GRAPHIC RATING SCALE
• A form is used to evaluate the performance of
the employees
• A variety of traits may be used in this device, the
most common being quality and quantity of
work
• Easy to understand and use.
• Permits statistical tabulation of scores of
employees

BEHAVIORALLY ANCHORED RATING SCALE
• Combination of rating scale and critical incidence
– Steps:
Collect critical incidents
Identify performance dimensions
Reclassification of incidents
Assigning scale values to incidents
Producing the final instrument

FORCED CHOICE METHOD
• This method uses several sets of paired phrases,
two of which may be positive and two negative
• The rater is asked to indicate which of the four
phrases is the most and least descriptive of a
particular worker
• Favorable qualities earn plus credit and
unfavorable ones earn the reverse

MANAGEMENT BY OBJECTIVES
• MBO emphasizes collectively set goals that are
tangible, verifiable, and measurable
• Focuses attention on goals rather than on methods
• Concentrates on Key Result Areas (KRA)
• Systematic and rational technique that allows
management to attain maximum results from
available resources by focusing on achievable goals

KEY ELEMENTS OF MBO
• Arranging organizational goals in a means-ends
chain
• Engaging in joint goal setting
• This process has the following steps:
 Identify KRAs
 Define expected results
 Assign specific responsibilities to employees
 Define authority and responsibility relationship
• Conducting periodic progress review
• Conducting annual performance review

MULTIPLE PERSON EVALUATION METHODS
• Ranking method
– The evaluator rates the employee from highest
to lowest on some overall criteria
• Paired comparison method
– Each worker is compared with all other
employees in a group
– For several traits paired comparisons are made,
tabulated and then rank is assigned to each
worker
– This method is not applicable when the group is
large

FORCED DISTRIBUTION METHODS
• The rater is asked to appraise the employee
according to predetermined distribution scale.
• Two criteria used for rating are: job performance
and promotion suitability.
• A five point performance scale is also used without
mentioning any descriptive statements.
• The worker is placed between two extremes of
“good” and “bad” performance.

GROUP APPRAISAL
• Employee is appraised by a group of appraisers.
• The group consists of :
 Immediate supervisor of the employee
 Other supervisors who have close contact with the
employee’s work.
 Manager or head of the departments.
 Consultants or Clients

FIELD REVIEW TECHNIQUE
• The appraiser goes to the field and obtains the
information about work performance of the
employee by way of questioning the said individual,
his peer group, and his superiors

360O APPRAISAL SYSTEM
• It is a systematic collection and feedback of
performance data on an individual or group,
derived from a number of stakeholders
• Data is gathered and fed back to the individual
participant in a clear way designed to promote
understanding, acceptance and ultimately behavior

What is potential appraisal?
What purposes potential appraisal serves?
What techniques are used in potential appraisal?

POTENTIAL APPRAISAL
• The potential appraisal is the appraisal for
identification of the potential of an employee for
assuming higher positions and responsibilities in
the organization.
• It attempts to bring hidden talents and skills of an
employee.
• It may be part of performance appraisal or it may
be carried out as an independent exercise.

OBJECTIVES OF POTENTIAL APPRAISAL
• Help employees to realize their career objectives.
• Help organizations to identify and develop
employees for filling up higher posts. It is part of
succession planning.
• Helps organizations to tackle attritions since
employees like to stick to an organization which
takes care of career needs.
• Helps organizations to identify training and
development needs.

TECHNIQUES OF POTENTIAL APPRAISAL
• Psychometric tests
• Leadership exercises
• Role Play
• Self – appraisals
• 360 degree appraisal
• Appraisals by superiors
• MBO etc.

What are different types of errors which
can creep in any performance appraisal
method?

ERRORS IN PERFORMANCE APPRAISAL
1.Central Tendency Error:
– Some supervisors tend to rank all employees at about
average, regardless of an employee's performance. A
supervisor who believes in never rating an employee as
excellent is demonstrating central tendency error.
2. Contrast Error
– Supervisors who rate subordinates as they compare
against each other rather than how they compare against
the performance standards commit contrast error. This
error can cause an employee who is performing average
against performance standards to rate high because his
peers are under performing.

3. False Attribution:
– False attribution is the tendency to attribute bad
performance to internal causes and good performance to
external causes. If an employee performs well, it's
because the employee had help, such as a good leader;
and if the employee performs badly, it's because the
employee did something wrong, such as procrastinate.
4. Halo Effect
– When a supervisor forms a positive impression of an
employee's skill in one area and then gives high ratings
across all rating criteria even though employee may not
deserve such higher rating, the supervisor is committing
the halo effect error.

5. Leniency Error:
– Leniency error is the tendency of a supervisor to rate an
employee higher than what his performance warrants.
Reasons that a supervisor might do this could include
avoiding confrontations, or feeling that by giving the
employee a high rating, he will work harder to live up to
the rating.

6. Perceived Meaning:
– Perceived meaning becomes an issue when appraisers do
not agree on the meaning of the rating criteria. One
supervisor may perceive an employee's constant
reporting of problems as initiative, while another
supervisor may feel this behavior demonstrates
dependence on supervisory assistance instead of
initiative.

7. Recency Error:
– Recency error happens when a supervisor uses recent
events to rate the employee. This usually occurs due to a
lack of documentation of the employee's performance
over the course of the entire performance appraisal
period. An employee who performed highly over the
course of the appraisal period may be rated low if the
most recent events where negative. Improper
preparation and poor documentation may also cause this
error

8. Severity Error:
– It is opposite of leniency error. In severity error, a
supervisor tends to rate an employee lower than what
her performance warrants. A potential cause of the error
could be the use of unrealistic standards of comparison,
such as the supervisor rating a new employee against
himself. In this scenario, the supervisor forgets that it
took time to reach the level of performance he operates
at, and a new employee would not have had enough time
to develop to that level.

9. Stereotyping:
– Stereotyping is the tendency to apply the same
generalizations to all members of specific social groups.
One of the more common types of stereotyping that
occur in the workplace is gender stereotyping.
10. Inadequately defined and/or misunderstood
standards/goals.
11. Subjectivity due to personal bias

We have done it – where is our reward?

REWARD SYSTEM
• Organizational rewards are powerful incentives for
improving employee and work group performance.
• Rewards are of two types:
Intrinsic rewards: enriched jobs and opportunities
for decision making.
Extrinsic rewards: pay; various incentives, such as
stock options, bonuses, and gain sharing;
promotions; and benefits.
• Both intrinsic and extrinsic rewards can enhance
performance and satisfaction.

REWARD SYSTEM
• Design and implementation of reward systems are
important in perform management. Rewards are an
integral part of organizations.
Rewards should be congruent with other
organizational systems and practices, such as the
organization's structure, top management's human
relations philosophy, and work designs.
Reward systems contribute to both employee
fulfillment and organizational effectiveness.

How rewards affect performance?

REWARDS AFFECT PERFORMANCE
• Rewards affect individual and group performance.
• Model describing this relationship is value
expectancy theory:
 It posits that employees will expend effort to achieve
performance goals that they believe will lead to outcomes
that they value.
 This effort will result in the desired performance goals if the
goals are realistic, if employees fully understand what is
expected of them, and if they have the necessary skills and
resources.

• Based on value expectancy theory, the ability of
rewards to motivate desired behavior depends on
these six factors:
1. Availability: For rewards to reinforce desired performance,
they must be not only desired but also available.
2. Timeliness: A reward's motivating potential is reduced to
the extent that it is separated in time from the
performance it is intended to reinforce.
3. Performance contingency: If the goal is met, the reward is
given; if the target is missed, the reward is reduced or not
given.

4. Durability: Intrinsic rewards, such as increased autonomy
and pride in workmanship, tend to last longer than
extrinsic rewards.
5. Equity: Satisfaction and motivation can be improved when
employees believe that the pay policies of the organization
are equitable or fair.
6. Visibility: Visible rewards, such as placement on a high-
status project, promotion to a new job, and increased
authority, send signals to employees that rewards are
available, timely, and performance contingent.

FOCUS OF PERFORMANCE
MANAGEMENT
Progress and
success
toward goal
achievement

Performance management Lectures 24.ppt

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Performance management Lectures 24.ppt