Performance Management Overview

Performance Management

• Performance Management (PM) is about aligning employee performance with organizational goals to improve overall effectiveness.
• PM aims to develop individual and team capabilities, providing direction and motivation.
• PM acts as a bridge between organizational strategy and employee actions.
• PM bridges the gap between managing employee performance and organizational performance improvement.

Key Concepts

• Goal-Setting Theory states that setting challenging goals motivates individuals, directs attention, regulates effort, and increases persistence.
• Performance Appraisal (PA) is the process of identifying, observing, measuring, and developing employee performance.
• Performance Evaluation (PE) focuses on past performance, aligning employee goals with organizational goals.
• 360-Degree Feedback gathers feedback from multiple sources (e.g., supervisors, peers, customers) to provide a comprehensive view of performance.
• High-Performance Work System (HPWS) aligns business strategy, practices, and employee involvement to achieve high performance.

Key Elements Of PM

• Goal-setting and evaluation.
• Appraisal (bi-annual).
• Performance evaluation.
• Personal development programs.
• Self-evaluation.
• Pay for performance.
• Coaching and mentorship.
• Career management.
• Competence management.
• 180/360-degree feedback systems.

Evolution of PM

• Pre-1990 PM focused on appraisal, top-down evaluation, pay-for-performance, and HR department ownership.
• Post-1990 PM shifted towards process-oriented approaches, joint evaluations, 360-degree feedback, and employee development.

Benefits of PM

• Improve job matching.
• Communicate corporate values and objectives.
• Provide information for self-improvement, training, and career development.
• Link pay to individual and team performance.
• Validate HR practices.
• Collect information for hiring strategies.
• Provide input for legal defenses.

Goal-Setting Theory

• Challenging goals motivate employees.
• Goals direct attention, regulate effort, and increase persistence.
• Goal setting encourages planning and action plans.
• Specific and difficult goals lead to higher performance.
• Commitment to goals is crucial for effectiveness.
• Feedback on progress is essential to maintain motivation.

Performance Appraisal Considerations

• Evaluated Subjects: Attitudes, behaviors, cognitive abilities, team performance, unit outcomes.
• Evaluators: Direct supervisor, self-evaluation, peer-evaluation, customer evaluation.
• Time Frame: Annual, monthly, weekly, daily.
• Evaluation Type: Objective (hard data) or subjective (questionnaires).
• Performance Indicators: Relative (comparison) or absolute (real scores).
• Forced Contribution: Ranking employees into performance groups.
• Number of Indicators: Multiple indicators raise concerns about weighting and calculation.

Performance Management (PM)

• Performance Management translates organizational goals into employee goals.
• Managers, supervisors, and line managers are responsible for this translation.
• SMART goals are effective for motivation:
  • Specific
  • Measurable
  • Attainable
  • Results-oriented
  • Time-bound
• Expectancy Theory (Vroom):
  • Employees are motivated when they believe their efforts lead to performance, performance leads to outcomes, and these outcomes are personally valued.
  • Managers should clarify the connection between efforts, performance, outcomes, and their value.
  • Instrumentality: The link between performance and outcomes.
  • Expectancy: The perceived link between effort and performance.
  • Valence: The value employees place on outcomes.

Leadership Techniques in PM Systems

• Effective leadership techniques for goal setting in PM systems:
  • Communicating a clear vision
  • Acting as a role model
  • Expecting high performance
  • Promoting employees who embrace the vision
  • Delegating responsibilities
  • Expressing confidence in employees
  • Providing training
  • Publicly requesting commitment

360-Degree Feedback Systems

• Gather evaluations from supervisors, peers, subordinates, or a combination of these.
• Supports reliable and valid measurement.
• Selection of raters is crucial:
  • Avoid friendly raters
  • Anonymous ratings are preferred
  • Train raters on using the system
• Time-consuming and expensive due to data collection and analysis.

Procedural Justice in PM

• Focuses on fairness of procedures used in performance evaluation:
  • How evaluation systems are developed
  • Understanding feedback processes and criteria
  • Agreement with and acceptance of the PM system
  • Trained raters
  • Constructive and development-oriented environment
  • Regular feedback and opportunities for self-rating
  • Participation in the evaluation session

Distributive Justice in PM

• Concerns perception of outcomes and their allocation:
  • Pertains to rewards and punishments based on PM
  • Injustice: Unequal treatment for the same performance level.
  • Minimizing injustice:
    • Train supervisors on fair reward and punishment practices
    • Monitor and compare supervisor performance evaluations
    • Ensure consistency and transparency in the PM system

High-Performance Work Systems (HPWS)

• Strive for balance between employee and employer needs.
• PM as an HPWP can disrupt this balance:
  • Involving employees in the PM system can restore balance.

Strategic Relevance of PM

• PM can connect overall business goals with individual employee goals.

Future Trends in PM

• Shift towards performance management through culture management
• Aligning corporate and individual goals
• Using PM for talent management and leadership development
• Distinguishing high performers from low performers
• Integrating PM with 360-degree feedback and IT systems
• Utilizing PM for employee development