Performance Management & Inclusion Rotterdam School of Management, Erasmus University PDF

Performance Management & Inclusion Practices Importance, learning objectives, and takeaways RSM - a force for positive change Purpose vs. reality Purpose Reality Strategic: Drives organisational growth and productiv...

Performance Management & Inclusion Practices Importance, learning objectives, and takeaways RSM - a force for positive change Purpose vs. reality Purpose Reality Strategic: Drives organisational growth and productivity by aligning employee actions with organisational goals. Developmental: Provides employees with information on how to develop. Administrative: Provides managers with information on how to reward, promote, and retain. Source: https://hbr.org/2016/10/the-performance-management-revolution 3 Learning objectives 1. Explain the key concepts in performance management 2. Evaluate performance measurement schemes 3. Design effective strategies to address underperformance 4. Design effective feedback conversations 5. Explain key concepts and findings for inclusive workplaces 6. Identify formal and informal strategies for fostering inclusive workplaces Source: https://hbr.org/2019/10/where-companies-go-wrong-with-learning-and-development 4 Takeaways 1. The relevance of the performance management process can be understood based on goal setting theory. 2. Accuracy and meaningfulness of performance measurement can be increased by using the critical incident method, 360- degree feedback, and competency-based assessments. 3. The reasons for underperformance can be understood based on the AMO model. To address underperformance, a 5-step process can be followed. 4. Organisations are increasingly using strengths-based and continuous feedback systems. 5 Performance management Key concepts RSM - a force for positive change Basic terms Performance management: “a process for establishing shared understanding about what is to be achieved, and an approach to managing and developing people in a way which increases the probability that it will be achieved in the short and long term” (Armstrong, 2003, p. 479). Performance appraisal: “formal process, which occurs infrequently, by which employees are evaluated by some judge (typically a supervisor) who assesses the employee’s performance along a given set of dimensions, assigns a score to that assessment, and then usually informs the employee of his or her formal rating” (DeNisi & Murphy, 2017, p. 421). Source: DeNisi & Murphy (2017). Performance appraisal and performance management: 100 years of progress? Journal of Applied Psychology, 102, 421-433. 2 Traditional performance management cycle Translate organisational goals into individuals goals Determine what will be measured to determine performance Formal performance rating Provide feedback to Discuss goal attainment and employee about areas for improvement performance Discuss incremental goal attainment Redefine goals if necessary Source: Pulakos et al. (2018). The evolution of performance management: Searching for meaning. Annual Review of Organizational Psychology and 3 Organizational Behavior, 6, 249-271. Theoretical perspective: Goal-setting theory Setting goals which are specific and challenging yet attainable can result in motivation to increase performance (Locke and Latham, 1990). Goals regulate performance as they direct the direction, intensity, and duration of motivated action (Latham and Locke, 1991). Self-efficacy and feedback can strengthen the link between goal setting and performance. Source: Locke & Latham (1991). A theory of goal setting and task performance. Academy of Management Review, 16, 212-247; 4 https://www.youtube.com/watch?v=dWOt2HyjCno. Principles of goal-setting theory Source: Locke & Latham (1991). A theory of goal setting and task performance. Academy of Management Review, 16, 212-247; 5 https://www.youtube.com/watch?v=dWOt2HyjCno. Key takeaways Performance management is an umbrella term, while performance appraisal refers to the infrequent event when employee performance is measured and discussed. The traditional performance management cycle involves goal setting, feedback, and performance appraisals. Goal setting theory explains why setting specific and challenging goals motivates employee action. 6 Inclusive Workplaces Key terms and research findings RSM - a force for positive change Diversity Diversity Differences among employees in an organization or groups Integration route Underlying characteristics: Knowledge- Conflict route related differences (job, education, experience); values; beliefs Demographic differences (sex, race or ethnicity, religion, disability status, age, LGBTQ, neurodivergency) Outcome Van Knippenberg, De Dreu, & Homan (2004) Workgroup diversity and group performance: An integrative model and research agenda. Journal of 2 Applied Psychology, 89, 1008-1022.. Inclusion ALL employees both those who have historically been powerful and underrepresented in the cultural context are Treated fairly Valued for who they are Included in core decision making Belongingness Uniqueness Source: Shore, L. M., Cleveland, J.N., & Sanchez, D. (2018). Inclusive workplaces: A review and model. Human Resource Management Revi ew, 28, 176-189. 3 Image: Creator: melitas | Credit: Getty Images/iStockphoto Motivations Doing what is right and just Showing viable career paths Ensuring business success 4 Research Evidence Key variable: Climate for inclusion: Shared perception by employees of the employer’s policies, procedures, and activities focused on creating a sense of belongingness, while valuing the uniqueness of each individual employee How is it measured: “I trust the company to treat me fairly” “The company respects views of people like me” Source: [full reference if a paper, or book reference: “Textbook, p.xxx”] 5 It helps ALL employees perform! 6130 sales employees working for commission in 743 stores in the US 4544 Whites; 771 Blacks; 659 Latino; 246 Asian; 84% female Source: McKay, Avery, & Morris, 2008. Mean racial-ethnic differences in employee sales performance. Personnel Psychology 6  It matters for firm performance 26 restaurants of a US regional restaurant chain Racial diversity: 54.7% white; 33.5% Latino; 9.6% black; Rest “other” More diversity combined with inclusive climates led to better business outcomes 7 Gonzalez & Denisi 2009. Cross-level effects of demography and diversity climate on organizational attachment and firm effectiveness. Journal of Organizational Behavior.  It matters for firm performance 26 restaurants of a US regional restaurant chain Gender diversity: 56.3% Women 43.7% Men Moderate diversity combined with inclusive climates led to better business outcomes 8 Gonzalez & Denisi 2009. Cross-level effects of demography and diversity climate on organizational attachment and firm effectiveness. Journal of Organizational Behavior. Key Takeaways Inclusion helps: Your organization’s bottom line Your employees’ careers Your image as a fair employer Diversity: differences between people in a group Inclusion: appreciation and valuation of those differences 9 Inclusive Workplaces Inclusive Strategies RSM - a force for positive change From diversity to inclusion Climate of inclusion: Shared perception by employees of the employer’s policies, procedures, and activities focused on creating a sense of belongingness, while valuing the uniqueness of each individual employee Kulik & Perry (2023), p. 303 2 Inclusion ALL employees both those who have historically been powerful and underrepresented in the cultural context are Treated fairly Valued for who they are Included in core decision making Belongingness Uniqueness Source: Shore, L. M., Cleveland, J.N., & Sanchez, D. (2018). Inclusive workplaces: A review and model. Human Resource Management Revi ew, 28, 176-189. 3 Image: Creator: melitas | Credit: Getty Images/iStockphoto Formal Inclusion Policies & Practices Increasing diversity: 1. Recruitment and Selection of targeted demographic categories Selection is controversial: Potential to delegitimize the individual Recruitment is better option 2. Targeted leadership and development programs for demographic categories Risk of delegitimization What message is being sent: “Fix the minority” or focusing on structural barriers? How are candidates identified: Self-identification vs structured process? Source: Kulik & Perry (2023), pp. 303-308; Ely, R. J., Ibarra, H., & Kolb, D. M. (2011). Taking gender into account: Theory and design f rom women’s leadership 4 development programs. Academy of Management Learning and Education, 10, pp. 474-493. Formal Inclusion Policies & Practices Enhancing Inclusion: 1. Diversity and anti-bias training Context-dependent Risk of backfiring 2. Making minority employees feel like they belong: Proactive mentorship programs Actively creating connections between employees Highlight the value of each employee Source: Women in the workplace 2022. McKinsey & Company; Kulik & Perry (2023), pp. 303-308; Nishii, Khattab, Shemla,& Paluch (2018). A multi-level process 5 model for understanding diversity practice effectiveness. Academy of Management Annals, 12, 37-82. Formal Inclusion Policies & Practices Creating Accountability: 1. Measure the demographic make-up of the organization 2. Make performance evaluation contingent on inclusion statistics Source: Women in the workplace 2022. McKinsey & Company; Kulik & Perry (2023), pp. 303-308; Nishii, Khattab, Shemla,& Paluch (2018). A multi-level process 6 model for understanding diversity practice effectiveness. Academy of Management Annals, 12, 37-82. Informal Inclusion Practices: Managerial actions 1. Informal mentorship 2. Support Flexible Work Arrangements 3. Develop a team charter 4. Outwardly demonstrate support for inclusion Source: Kulik & Perry (2023), pp. 308-317 7 Key Takeaways Formal organizational policies need to be aligned with managerial actions Formal policies should focus on a) increasing diversity, b) enhancing inclusion, and c) creating accountability. Informal policies can include a) proactively building relationships, b) emphasize work outcomes rather than time, c) developing a team charter, and d) using inclusive language. 8 Performance management Performance measurement RSM - a force for positive change Performance measurement Performance measurement “refers to a formal process, which occurs infrequently, by which employees are evaluated by some judge (typically a supervisor) who assesses the employee’s performance along a given set of dimensions, assigns a score to that assessment, and then usually informs the employee of his or her formal rating.” Source: DeNisi & Murphy (2017). Performance appraisal and performance management: 100 years of progress? Journal of Applied Psychology, 102, 421-433; 2 https://www.marcusbuckingham.com/rwtb/performance-management-is-two-things/ Performance appraisal: Example “The Office” (US version) Source: https://www.youtube.com/watch?time_continue=4&v=Wx8HXtlxdEs&feature=emb_logo 3  Rater Errors Explanation Leniency / Severity Error A rater consistently rates employees at the high / low end of the scale Central Tendency Error A rater consistently rates employees at the scale midpoint A rater’s evaluation of an employee on one performance dimension creates an overall Halo Error positive or negative impression that drives ratings on other dimensions. A rater’s evaluation is heavily influenced by the employee’s first / most recent Primacy / Recency Error performance. A rater’s evaluation of an average employee is boosted after rating a poor employee, Contrast Error or lowered after rating an excellent employee. A rater’s evaluation of an employee is inflated because the rater feels a personal Similar-to-Me Error connection resulting from shared demographics, values, or experiences. Source: Kulik & Perry (2023), p. 182 4 Mount, Scullen, & Goff (2000). Understanding the latent structure of performance ratings. Journal of Applied Psychology, 85, 956-970. Reducing Error & Biases e.g., frame of reference training or calibration Training To recognize and distinguish different levels of performance e.g., let rater keep a journal Memory Aids Recording information throughout the review cycle e.g., other / more senior manager reviews evaluations or company rewards good evaluations Accountability Raters should expect to have to justify their evaluations to others. 5 Two classic approaches: Ranking and Rating Comparative Rating Methods Absolute Rating Methods “Ranking” “Rating” Example: Forced distribution Example: Behaviourally Anchored Rating Scale (BARS) Easy to use Explicit behavioral standards that anchor rater’s scores in behaviors (which employees perceive as fair) Useful for eliminating poor performance and distributing bonuses Rating level descriptions provide some feedback Unpopular with employees (seen as capricious and political) Need unique scales for each job No support for employee development Still comparatively little support for personal development (descriptions Promotes internal competition, leading to a higher likelihood of mainly focus on level of achievement, providing little input on how to aggressive culture and unethical practices improve) Source: Kulik & Perry (2023), p. 177 6 DeNisi & Murphy (2017). Performance appraisal and performance management: 100 years of progress? Journal of Applied Psychology, 102, 421-433;  Improving performance measurement (I/II) 1 Critical incident technique 2 360-degree feedback Concrete behavioural examples Multi-source review Can be time-consuming (and thus costly) for supervisors. Bureaucratic process, given the different sources used. Requires excellent observational skills. Provides relevant information for personal development. Ratings based on concrete behavioral examples. Promotes a climate of continuous improvement. Memory aid and performance measurement in one. Especially helpful when employees work with many different parties and Meaningful information for personal development. supervisors have limited insight into performance. Source: Carbery & Cross (2018), pp. 126-128 7  Improving performance measurement (II/II) 3 Sample competencies for consultants To reduce subjectivity, organisations may opt to only measure ‘results’ (e.g., % sales increase, number complaints) But: Results are not always under employee control and actions not contributing to results may be disregarded Organisations are thus advised to also measure ‘competencies’ (i.e., knowledge, skills and attitudes) Source: Carbery & Cross (2018), p. 126-128; Martone (2003). A guide to developing a competency-based performance management system. Employment 8 Relations, 30, 23-32. Key takeaways The performance measurement process needs to be standardized due to rater error and human biases that distort ratings of employee performance. Rating errors and biases can be addressed through training, memory aids, and accountability Ranking and rating are traditional approaches to performance measurement. To increase accuracy and meaningfulness, the critical incident method and 360-degree feedback can be used. Measure ‘what’ (results) employees deliver and ‘how’ they do it (competencies). 9 Performance management Trends RSM - a force for positive change 2 Source: Buckingham, M., & Goodall, A. (2016, October). The performance management revolution. Harvard Business Review. https://hbr.org/2016/10/the-performance-management-revolution Wilkie, D. (2015, August 19). Is the annual performance review dead? SHRM. https://www.shrm.org/topics- tools/news/employee-relations/annual-performance-review-dead 3  ^ Problems with performance reviews Performance reviews focus on identifying past mistakes rather than developing strengths → To: Strength-based Feedback → To: Focus on Future Behavior and Personal Development Infrequent and poor alignment with employees’ progress → To: Continuous and Personalized Feedback Source: Buckingham, M., & Goodall, A. (2016, October). The performance management revolution. Harvard Business Review. https://hbr.org/2016/10/the-performance- management-revolution Gallot Lavallée, S., Pedroni, A., Komm, A., & Noguera Lasa, A. (2024, May 15). In the spotlight: Performance management that puts people first. McKinsey. https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/in-the-spotlight-performance-management-that-puts-people-first 4 Why strengths-based feedback? “Although we label weaknesses “areas of opportunity,” brain science reveals that we do not learn and grow the most in our areas of weakness. In fact the opposite is true: we grow the most new synapses in those areas of our brain where we have the most pre-existing synapses. Our strengths, therefore, are our true areas of opportunity for growth.” Source: Buckingham, M. (2013). What if performance management focused on strengths? Harvard Business Review. https://www.youtube.com/watch?v=JAVCr6rwwv4; Aguinis et al. (2012). Delivering effective performance feedback: The strengths-based approach. Human 5 Performance, 55, 105-111. The feedforward interview protocol Step 1: Helping the employee to identify a personal success story − Focus on positive experiences only − Let employee describe nature of positive emotions in that moment Step 2: Helping the employee to discover their personal success code − Personal characteristics and actions − Supporting actions of others (e.g., supervisor, peers) − Supporting conditions created by organisation (e.g., access to information) Step 3: Helping the employee to align their future with their personal success code − Asking the feedforward question Source: Kluger, A. N., & Nir, D. (2010). The feedforward interview. Human Resource Management Review, 20, 235-246; https://www.youtube.com/watch?v=axC- 6 lXu-G-I. ADOBE disrupted performance reviews Source: https://www.youtube.com/watch?v=hr0tOih9uFw; https://www.adobe.com/check-in.html. 7 Key takeaways Employees and managers tend to dislike traditional (annual) performance reviews. Strength-based feedback views employee strengths as the true opportunities for growth. The feedforward interview is an interview protocol used for providing strength-based feedback. Continuous feedback conversations provide real-time feedback that take employees progress into account. ADOBE introduced a system called “Check-In” to provide more meaningful and timely feedback to their employees. 8