Chapter 7 Performance Management PDF

Performance Management Performance Management Systems Performance management systems align individual performance with organizational goals while investing in the personal development of employees. ˆ Performance management provides employees with ongoing feedback and opportunities for profes...

Performance Management Performance Management Systems Performance management systems align individual performance with organizational goals while investing in the personal development of employees. ˆ Performance management provides employees with ongoing feedback and opportunities for professional development. Performance Development aims to help people perform to the best of their abilities in alignment with the organization’s goals. It is not the sole responsibility of HR, in fact it relies on the participation of managers and leaders. ˆ Managing individual performance is an ongoing process that starts with clear job descriptions. ˆ Employees should understand company culture and their role in achieving strategic goals. ˆ Ongoing evaluation and monitoring help managers support employees, while immediate feedback allows them to adjust their behavior. Introduction to Strategic Human Resource Management 1 Effective performance management requires managers to: ˆ Clearly define and communicate performance expectations and objectives ˆ Involve employees in discussing goals and defining success for their role. ˆ Constantly monitor and evaluate employee performance. ˆ Address performance issues promptly as soon as they arise. ˆ Regularly acknowledge and recognize employee achievements. ˆ Give employees regular, timely, and constructive feedback ˆ Provide opportunities for employees to improve and grow professionally ˆ Formally appraise and record employee performance against objectives. ˆ Offer coaching, training, resources, and support to help employees succeed. Introduction to Strategic Human Resource Management 2  Setting Performance Expectations Setting performance expectations is the foundation for effective performance management, situating employees in the context of the broader organization with a clear view of how success is measured and what is expected of them. Performance expectations are clearly defined goals, responsibilities, and standards of performance for each employee within an organization. Defining Performance Expectations To effectively manage performance, set clear expectations for employees to evaluate them against. Expectations define how assigned duties should be performed, focusing on end results rather than work activities. Performance expectations are: ˆ Part of a documented performance management plan. ˆ They outline the goals, values, outcomes, and job requirements. ˆ They clarify expected results and deliverables, as well as ˆ The necessary behaviors and actions needed to achieve them. Introduction to Strategic Human Resource Management 3  Goals, Objectives and Expectations Goals are the long-term outcomes that an organization wants to achieve, while strategies are the plans or actions taken to reach those goals. Objectives are focused on end results and measurable outcomes, and they can be set for an entire department or individual. Expectations outline how assigned duties and responsibilities should be carried out, and the level of achievement expected. Expectations can be included in job descriptions and discussed during onboarding, as well as regularly throughout the performance management process. Expectations can be quantitative, qualitative or a combination of the two. ˆ Quantitative expectations specify outputs and measurable results often expressed numerically and/or a specific timeframe, for example “Increase sales by 10% over the next quarter”. ˆ Qualitative expectations focus on how goals can be achieved including desired behaviors, attitudes and values. They are more subjective and difficult to measure than quantitative expectations. Examples include collaboration, adaptability, effective communication, or team work. Expectations can combine quantitative and qualitative elements. For example a customer service representative might be expected to attend to a specific amount of customer complaints each day (quantitative) demonstrating patience, effective communication skills and empathy (qualitative). Introduction to Strategic Human Resource Management 4  Competencies Besides performance expectations, competencies can be used to define the key skills, abilities, and qualities that employees need to succeed in their job and to progress within the organization. Introduction to Strategic Human Resource Management 5  Performance Appraisal Methods Performance appraisals offer a structured approach to evaluating employee performance and facilitating employees professional growth and development. ˆ Traditional performance appraisal systems provide a structured framework for evaluation and are still widely used to assess employees progress, Appraisal Methods The evolution of performance management systems The formalization of performance management dates back to the World Wars, when the military used it to assess soldiers’ strengths and capabilities. By the mid-20th century, businesses adopted performance appraisals to grade workers and allocate rewards. In the 1960s, the focus shifted towards employee development, with appraisals becoming a platform for discussing performance and initiating training to help employees improve and advance. ˆ Despite technological advancements, most systems still focus on periodic evaluations. ˆ A shift towards ongoing feedback and guidance for goal achievement is emerging. ˆ Various methods for assessing performance exist, each with its strengths and weaknesses. ˆ The best choice depends on factors like job nature, culture, and resources. ˆ The chosen method should align with organizational goals and values. Introduction to Strategic Human Resource Management 6  Traditional Methods ˆ Category Rating Methods: The most commonly used form is a graphic scale that rates employees against specific performance factors, alternatives are checklists, or forced choices. ˆ Comparative Methods: Less popular now are methods that compare employee performance to others using rankings, paired comparisons, or forced distributions. ˆ Narrative Methods: Employees are assessed through written descriptions of their performance, either in general essays or specific critical incidents. ˆ Specialized Methods: These include behaviorally anchored rating scales(BARS) that link specific behaviors to performance ratings, and management by objectives, where employees and managers set goals together. Traditional Appraisal Process Performance appraisal forms offer a standardized method for evaluating employee performance. These forms typically include set criteria: performance factors or competencies that are used to assess employees. Using these forms helps ensure that evaluations are consistent and allows managers to systematically collect relevant performance data. Performance Objectives Performance Factors like “Teamwork”, “Knowledge” or “Initiative” are highly subjective and can be more about the rater than the employee, so it best to use quantifiable factors that can be measured. The number of factors used should match your organization’s size and culture Introduction to Strategic Human Resource Management 7 Sample Performance Factors, taken from the “Big Book of HR”: ˆ Delivers Results. Focuses on key issues, tasks, and priorities; makes timely decisions; takes action and follows through on decisions. ˆ Initiative. Works with limited direction and a sense of urgency; searches for new ideas. ˆ Knowledge. Possesses a high degree of technical knowledge and competence and applies it; stays abreast of new developments. ˆ Strategic Agility. Anticipates future consequences and trends accurately; has broad knowledge and perspective; articulates visions of possibilities and likelihoods; creates competitive and breakthrough strategies and plans. ˆ Supervisor Responsibility. Inspires confidence; directs activities; utilizes expertise; and organizes activities to meet stated goals. Introduction to Strategic Human Resource Management 8  Graphic Rating Scales HR managers often use the graphic rating scale to evaluate employee performance. It is a well-known and widely-used traditional method that rates employees on a scale against predefined performance criteria. Rating styles vary from numbered scales from one to ten, word scales like “poor, fair, good and excellent” and comment scales that use three to five phrases such as “Exceeds Expectations”, “Meets Expectation” or “Below Expectations.” The number of rating options and how they are defined (and scored) are key to how well this system performs. It is vital that the criteria should fit the organization’s culture, and that rating options should be clearly defined and detailed, if they are too general then bias is more likely and employees are not going to benefit from being appraised. Introduction to Strategic Human Resource Management 9  Errors and Bias Performance ratings are problematic because they are subjective and can be influenced by various biases (as described in Chapter 3). To recap: raters may be affected by the “contrast effect,” where they compare employees to each other rather than to objective standards. Additionally, the “halo and horns effect” can lead managers to generalize one positive or negative trait to score an employee’s whole performance. Furthermore, the “similar-to-me effect” can cause managers to favor individuals who are similar to themselves, while the “central tendency bias” results in managers avoiding extreme ratings and instead giving most employees average scores. Bottom line: The efficacy of performance ratings depends on their design and implementation. If they are not well-thought out with ratings linked to categories that are comprehensively defined and fairly applied, performance rating systems can produce unintended consequences, such as demotivated employ­ees, disengagement or even lower productivity levels. Introduction to Strategic Human Resource Management 10  New Approaches to Appraisal In the context of a changing workplace, organizations are flatter, workplaces are hybrid and work is organized more around teams and less around departments. This means top-down, hierarchical and error-prone evaluation processes are less popular and less effective. With the influx of remote workers and a younger workforce who prefer continuous feedback to annual reviews, managers have to adapt to focus on outcomes and consider more people-centered systems. In this context many organizations are looking for more inclusive, participatory and useful ways to evaluate and manage performance. New appraisal methods include ˆ Self-assessment: Individuals rate their own performance and behavior. ˆ Peer assessment: An employee’s team or co-workers rate their performance. ˆ 360-degree feedback assessment: Anonymous feedback is gathered from an employee’s managers, co-workers, and subordinates. ˆ Negotiated appraisal: A new trend utilizes a mediator and allows the subject to present first, focussing on what the employee is doing well before any criticism is offered. Introduction to Strategic Human Resource Management 11  Appraisal Objectives No matter the approach taken, performance appraisal consists of the following elements: 1 Developing objectives; 2 Assessing performance; 3 Providing feedback; 4 Collecting data; and 5 Improving future performance. Introduction to Strategic Human Resource Management 12  1 Developing Performance Objectives Before conducting a performance appraisal, managers must set clear and achievable performance expectations. This includes outlining job responsibilities, and communicating performance standards as well as defining performance goals and objectives. Ideally employees should be involved in defining performance objectives but at the very least objectives should give them a clear direction for the future and identify expected and achievable results. To be effective, performance objectives should: ˆ Use action verbs, clearly stating what should be done and expected results. ˆ Have results that are quantifiable, observable, or verifiable. ˆ Include activities and results that are within the employee’s control. ˆ Ensure that targets are realistic yet challenging. ˆ Support business goals and align with organizational strategy ˆ Contribute to job responsibilities or address a developmental need. ˆ Specify timelines or milestones to evaluate progress against. ˆ Align with team, departmental, and organizational objectives ˆ Be flexible enough to keep pace with changes in the business landscape. ˆ Get revised and reviewed regularly to keep refocus employees Introduction to Strategic Human Resource Management 13 Finally, expectations, goals and objectives should be S-M-A-R-T(S): ˆ Specific: Provide details about the desired end results. ˆ Measurable: Outline the criteria that determine when a goal is met. ˆ Achievable: Set realistic expectations that can be accomplished. ˆ Results-Oriented: Focus on the desired outcomes and results. ˆ Time-Bound: Specify deadlines and milestones for goal completion. (optional) ˆ Stretch: Include some challenging professional development goals. 2 Assessing Performance Performance assessments play the role of: ˆ Evaluating the employee against the specific requirements of the position. ˆ Determining if requirements were met using measurable, job-related criteria. ˆ Evaluating the employee’s accomplishments. ˆ Evaluating the employee against objectives and expectations Introduction to Strategic Human Resource Management 14  Rating Performance If behavioral expectations are associated with a job, those expectations should be clearly expressed, recorded and communicated for the particular role. If rating scales are used, the specific standards linked to the ratings should also be clearly defined with enough nuance to facilitate an objective evaluation, minimize any bias, and provide meaningful feedback to employees There is no need to follow traditional wording for performance rating scales, organizations can design their own rating scales and use organization- specific wording, to make them more relevant. Rating scales can be useful, when designed thoughtfully, which is why they are so widely used. Some options that are more useful (depending on the organization and employee role) include: Behaviorally Anchored Rating Scale (BARS) The value in focusing on behaviors shifts the focus from judging an employee as ‘excellent’ or ‘poor’ to using facts and behaviors as the basis for the discussion. BARS scales are typically tailored for every question and break- down the exact behaviors expected at each level for each evaluation criteria assigned. Introduction to Strategic Human Resource Management 15 Observation Frequency Scale: The observation-frequency scale is based on the day-to-day observations of the competency in question, supported by examples. Introduction to Strategic Human Resource Management 16  3 Providing Feedback and Coaching Regular feedback helps staff understand their progress in meeting expectations, provides recognition for their accomplishments and enhances staff productivity and engagement. ˆ Giving staff regular feedback on their performance is the number one driver of satisfactory performance. ˆ Coaching is one of the tools used in a leadership development process and should always be tied to the strategic objectives of the organization. Feedback Feedback is crucial for Performance Management as it helps employees understand expectations, identify areas of improvement, and reinforce positive behaviors. Feedback Methods: ˆ Informal conversations ˆ Written notes ˆ Formal performance reviews ˆ Effective feedback delivery is key to developing enhancing performance and keeps employees engaged, if it is done right. Introduction to Strategic Human Resource Management 17 Key Considerations for effective feedback: ˆ Ensure that feedback is timely, specific, and focuses on behaviors and results, not on personalities. ˆ Train managers and leaders to provide effective feedback. ˆ Incorporate peer feedback into the process. ˆ Consider upward feedback, where employees can provide their managers with constructive criticism. ˆ Use technology to gather feedback, but verify its accuracy. ˆ Ensure that feedback is a continuous, ongoing process, not just an annual event. Opportunities for Development Performance appraisals are opportunities to develop employees and learn about their aspirations or problems. For under-performers and overachievers alike, Managers should ask the same question: “What about the future? How does the organization help the employee grow in their current role or prepare for a future role?” Introduction to Strategic Human Resource Management 18  4 Data collection and Legal Considerations Reliable, consistent and good documentation keeping is necessary to support a range of future management decisions affecting employees, such as promotion or termination. For this reason: ˆ All documentation of both employee performance and conversations with the employee about their performance, whether positive or negative, should be recorded and properly maintained. ˆ To assure they are legally defensible, performance appraisals must be objective and fair, reasonable, understandable ˆ Documentation of employee performance should always focus on job- related activities and behaviors, and should not mention protected characteristics and traits such as race, sex, or age. Introduction to Strategic Human Resource Management 19  5 Performance Improvement Plans If there are gaps in performance, a performance improvement plan can address them. Performance improvement plans are positive in nature and contain between three to five tasks. Each task should include: ˆ A task definition that details what is required, ˆ An action plan specifying how the task will be completed, ˆ An indication of how results will be measured, and ˆ An expected date for completion. The plan must be discussed with the employee. Keep in mind other factors may contribute to performance gaps, such as management issues, lack of resources and training, non-performing colleagues or personal issues. Addressing Poor Performance Dealing with poor performance is a challenging yet necessary aspect of performance appraisals. Managers must address performance issues promptly and effectively to ensure employees receive the support and guidance needed for improvement. ˆ When managing poor performance, it is essential to have open and honest conversations with employees. ˆ Managers should provide constructive feedback, discuss improvement areas and provide specific examples of performance gaps. ˆ Access to training programs or mentoring can help employees overcome performance challenges. Introduction to Strategic Human Resource Management 20  ˆ If poor performance persists despite intervention, managers may need to take appropriate disciplinary actions, such as implementing performance improvement plans (PIP) or initiating a formal performance management process. ˆ These measures ensure employees understand the consequences of continued poor performance and are given opportunities to rectify their deficiencies. Fueling Future Performance Performance appraisals are also an opportunity to identify talent to nurture and develop.When it comes to employees who exceed expectations, fueling future performance is a powerful objective that all organizations should embrace. The principles are: ˆ Recognize strengths and leverage employee talent. ˆ Grow the individual along with the organization. ˆ Continuous learning and improvement ensure an organization’s success. ˆ Don’t take for granted that good performers need no encouragement ˆ Put energy into inspiring everyone. Introduction to Strategic Human Resource Management 21  Recognizing Rockstars Learn to identify rock stars who are high-performing individuals, According to Lisa Haneberg, VP and OD Practice Leader at MPI Consulting, star performers exhibit the following traits: ˆ They possess strong technical expertise ˆ They know the business operations inside out ˆ They consistently exceed performance expectations ˆ They achieve results using innovative approaches. ˆ They contribute to building and strengthening the organization ˆ They are versatile and capable of thriving in various capacities. ˆ They are receptive to feedback, responsible, and assertive. ˆ They are reliable and fulfill their commitments. ˆ They actively foster teamwork and collaboration. ˆ They earn the respect of their colleagues and subordinates Introduction to Strategic Human Resource Management 22  Annual Review Vs Real Time Feedback With a new generation of digitally-savvy employees entering the job market, many organizations are ditching the annual review and opting for real time feedback. Traditional annual performance reviews can be time-consuming, expensive, and they are not always that effective. For one they are tied to salary increases, and secondly they are not always objective, so many organizations have switched to agile performance management. ˆ Real time feedback is a constant iterative process that gives employees the chance to improve and grow as they work. ˆ Focusing on the future rather than past performance can ensure corrections when they are needed and support employees’ career growth by addressing developmental needs. ˆ Research shows that forward-looking, continuous high-quality feedback that is also technology enabled leads to improved business result Agile Performance Management Agile Performance Reviews utilize a continuous and comprehensive feedback system that assesses employee performance more frequently than traditional methods. They emphasize communication and collaboration between managers and employees in setting goals and addressing obstacles. This approach fosters a more flexible and engaging work environment, which generally works better for a younger workforce. Introduction to Strategic Human Resource Management 23  Remote workers Remote workers cannot be assessed or managed by traditional Performance Management methods. Employees working from home cannot be evaluated for values or behavior so their managers are forced to focus on outcomes. To manage the performance of remote workers: ˆ Practice real-time feedback. It’s a great addition to traditional performance reviews and gives employees a better understanding of how they are doing on a frequent basis. ˆ Keep a pulse on remote teams. Tracking collaboration, productivity, and results is great, but don’t forget to get feedback on the team’s challenges and struggles. ˆ Evaluate competencies and skills such as professional ethics, teamwork, proactiveness, self-motivation, and emotional intelligence that are necessary and essential for remote workers. Introduction to Strategic Human Resource Management 24  Coaching A coaching culture in the workplace builds trust and stronger connections with employees, empowering them to improve their performance and contribute to company success. Coaching in the workplace is a relationship focused on empowering employees to grow and achieve their goals. It involves regular meetings between the coach and the employee for open dialogue, with the coach providing feedback, direction, and support. Performance coaching aims to inspire employees to reach their full potential by honing their current abilities and learning new skills. Peer coaching occurs when two or more colleagues team up to share ideas, learn from one another, build skills, or collaborate to solve work problems. AI-based coaching uses artificial intelligence to provide coaches with insights, enhance coaching efforts, or even take over the coaching process entirely. Considerations for coaching ˆ Coaching is a partnership between a coach and an employee, with the goal of maximizing the employee’s personal and professional potential. ˆ Coaching is typically offered to high-potential employees who are receptive to coaching. ˆ Matching the coach to the employee is crucial and should involve the employee to ensure compatibility. ˆ The coaching process is a flexible and collaborative partnership focused on achieving specific goals. ˆ Coaching encourages deep learning and helps leaders address skill gaps and develop new competencies. Introduction to Strategic Human Resource Management 25 ˆ Organizations use executive coaching for various reasons, including training high-potential leaders, supporting leadership development goals, aiding in transitions, and improving communication and effectiveness. ˆ Selecting a coach involves considering factors such as experience, results, training, philosophy, and qualifications. Introduction to Strategic Human Resource Management 26 The Role of Technology in Performance Management Even in a people-centered approach to performance management, technology plays a crucial role. Technology is not just a tool for streamlining existing processes; it’s essential for adapting to the changing nature of work. ˆ Organizations should use software to manage employee performance because there are many tools available that are both efficient and effective. ˆ When used correctly, capturing performance information in real time can also provide legal support for employment decisions. HR professionals need to be well-versed in how technology can support and transform performance management. This includes understanding the range of available tools and staying updated on emerging trends. Introduction to Strategic Human Resource Management 27 Performance Management technologies provide: ˆ Real-time information: Real-time data allows managers and leaders to react quickly to employee performance, whether it’s negative feedback, onboarding new hires, or rewarding goal achievement. ˆ Trends and anomalies: Data-driven processes help HR professionals quickly identify trends and outliers in employee performance, enabling them to address complex problems more efficiently. ˆ Complete employee profiles: A systematic approach provides transparency into goal progress and feedback data, ensuring alignment and empowering employees to succeed. ˆ Accurate measurements: HR leaders can track key metrics, such as goal setting, feedback exchange, and participation in evaluation and coaching processes. This helps identify areas where processes need improvement or where training is necessary. ˆ Audit trails: Systems automatically create digital records of employee performance interactions and conversations, protecting the organization in the event of legal action. Introduction to Strategic Human Resource Management 28  Performance Management Software Performance management software provides an accurate and real-time view of the workforce that assists HR strategic planning. But when HR leaders choose performance management software, they should insist on features that suit their needs and facilitate their human-centered processes. Performance management software should ideally offer the following key features: ˆ Goal Setting and Alignment: The software should allow managers and employees to set, track, and manage goals effectively, ensuring alignment with organizational objectives. ˆ Continuous Performance Monitoring: It should facilitate ongoing performance tracking and feedback, enabling timely interventions and adjustments. ˆ Performance Appraisals: The software should support various appraisal methods, including self-assessments, peer assessments, and 360-degree feedback, and provide tools for documenting and evaluating performance. ˆ Real-Time Feedback: The software should enable frequent, real-time feedback and check-ins between managers and employees, fostering a culture of open communication and continuous improvement. ˆ Data and Analytics: It should provide robust reporting and analytics capabilities, allowing HR to track key performance metrics, identify trends, and make data-driven decisions. ˆ Integration with Other HR Systems: The software should seamlessly integrate with other HR platforms, such as learning management systems and compensation management systems, to provide a holistic view of employee performance and development. Introduction to Strategic Human Resource Management 29 ˆ Customization and Flexibility: It should be adaptable to the organization’s specific needs, allowing for customization of performance metrics, workflows, and reporting. ˆ User-Friendliness: The software should be easy to use and navigate, with an intuitive interface and clear instructions, minimizing the learning curve for both managers and employees. ˆ Mobile Accessibility: It should offer mobile access, allowing users to manage performance on the go and facilitating real-time feedback and communication. ˆ Security and Compliance: The software should adhere to data privacy and security regulations, ensuring the confidentiality and protection of sensitive employee information. Introduction to Strategic Human Resource Management 30