Chapter 7 – Managing Employees’ Performance

• Performance management is vital for talent management, benefiting both employees and organizations.
• It clarifies expectations, bolsters communication, aligns employee goals with organizational objectives, and pinpoints top performers.
• Performance management should be seen as an ongoing process, not merely a one-off event, and it needs strong support from leadership.

Six Steps in the Performance Management Process:

• Identify the organization's overarching goals.
• Establish employee goals and actions that align with company objectives.
• Provide the necessary support through training, resources, and feedback.
• Evaluate performance by comparing achieved results against set goals.
• Develop employees by addressing both strengths and areas needing improvement.
• Apply consequences like bonuses, raises, or corrective action plans based on performance.
• Effective performance management necessitates ongoing feedback, not just annual reviews.
• Systems should be strategically reviewed to ensure alignment with evolving company goals.

Purposes of Performance Management

• Strategic purpose: Aligns employee conduct with the organization’s business goals.
• Administrative purpose: Informs human resources decisions, for example, those related to pay, promotions, and retention.
• Developmental purpose: Enhances employee skills through coaching and feedback.

Criteria for Effective Performance Measures:

• Fit with Strategy: Performance measures should support the overarching goals of the company.
• Validity: Measures should encompass all relevant aspects of performance while avoiding contamination or deficiency.
• Reliability: Results should demonstrate consistency across different raters and over time.
• Acceptability: The system should be perceived as fair and manageable by its users.
• Specific Feedback: Clear communication to employees about what is expected of them and how they can improve.

Methods for Measuring Performance:

• Organizations employ diverse performance measurement methods based on attributes, behaviors, results, or direct employee comparisons.
• Methods vary in their strengths and weaknesses when assessed against criteria like fit with strategy, validity, reliability, acceptability, and feedback specificity.
• Comparative methods involve ranking employees relative to one another instead of against a fixed standard.
• Simple Ranking lists employees from best to worst.
• Alternative Ranking involves selecting highest and lowest performers alternatively.
• Forced Distribution divides employees into predetermined performance categories.
• Paired Comparison: Each employee is compared with every other employee.
• Rating Individuals evaluates employees against a set standard.
• Focuses on attributes or behaviours.
• Graphic rating scales are used.
• Assessing employee behaviour allows for more accurate and job-relevant performance reviews.
• Organizations identify key behaviours and evaluate employees based on those.
• Critical-Incident Method involves documenting specific instances of effective or ineffective behaviour.
• Behaviourally Anchored Rating Scales (BARS) use statements derived from critical incidents to represent levels of performance. Each behaviour is anchored to a rating.
• Behavioural Observation Scales (BOS) includes more behaviours and focuses on frequency.
• Organizational Behaviour Modification (OBM) is a system of feedback and reinforcement

Strengths of Behavioural Methods:

• Align with company goals and offer specific, actionable feedback.
• High validity and acceptance.
• High reliability if raters are trained.

Limitations:

• Not effective for complex jobs were behaviour-outcome links aren't clear.
• May overemphasize style over substance, especially in diverse workplaces.

Measuring Results:

• Performance can be rated by tracking objectives and measurable outcomes.
• Productivity Measurement measures output per worker or per dollar spent.
• Management by Objectives (MBO) involves employees and managers setting specific, difficult, and objective goals together.

Advantages of Results-Based Measurement:

• Less subjective.
• Clearly tied to organizational goals with high employee and manager acceptance.

Disadvantages:

• Validity issues since results can be influenced by external factors.
• May ignore important behaviours not tied directly to outcomes.
• Gaming the system can be a risk.

Tech-Enabled Evaluations:

• Organizations are turning to event capturing technologies to combat the recency effect.

Sources of Performance Information:

• Direct Reports: Useful for evaluating managers, as direct reports see management styles.
• Self-Evaluations: Employees have the most visibility into their own behaviour.
• Should be used alongside other sources to spark discussion, though individuals tend to inflate their own performance.
• Customer and Clients: Valuable in service industries; can help align HR and marketing goals.

Errors in Performance Measurement

• Rating Errors:
• Similarity Bias: Raters give higher evaluations to people who are like them.
• Contrast Errors: Ratings based on comparisons with others instead of objective standards.
• Distributional Errors:
  • Leniency: Rating everyone high.
  • Strictness: Rating everyone low.
  • Central Tendency: Rating everyone average.
• Halo Effect: One positive trait skews overall rating.
• Horns Effect: One negative trait unfairly influences the rest of the evaluation.

Reducing Rating Errors:

• Rater Training: Use videos and examples to teach recognition and avoidance of biases.
• Unconscious Bias Training: Encourages slower, more thoughtful decision-making.
• Data Analytics: Identifies trends and biases in evaluations.
• Ratee Training: Helps employees understand and accept evaluations.

Effective Performance Feedback:

• Should be frequent and ongoing.
• Use the right environment: Create a distraction-free space an approach with curiosity and openness.
• Encourage Employee Self-Evaluation: Encourages reflection and engagement.
• Ensure Collaborative Conversations: Focus on two-way communication using open-ended questions.
• Use Technology in Feedback: Tools like EY's “Feedback Zone” and social media platforms support immediate, informal feedback.
• When performance is below expectations, focus on closing the performance gap.

If the employee is motivated but lacks ability:

• Provide coaching or training, offer detailed feedback, or restructure the job.

If the employee lacks motivation:

• Emphasize their value to the team and offer positive feedback.
• A Performance Improvement Plan (PIP) may be necessary when there's lack of both ability and motivation.

For top performers:

• Provide development opportunities, recognition, and a clear path for growth.

Legal, Ethical, and Privacy Issues:

• Performance evaluations are tied to employment decisions, making them legally sensitive.
• Discrimination claims arise from biases based on age, gender, and ethnicity.
• Subjective evaluations are prone to rater errors and unconscious bias affects evaluations.
• Technology-driven monitoring using software and sensors is widespread.
• Transparency is essential; employers must explain why and how monitoring occurs.

Best practices:

• Should include using multiple raters, providing rater training, allowing appeals, and offering development opportunities.