notes

# Managing Employees' Performance

Performance appraisals are crucial as they provide information to all members of an organization about what they need to succeed.

# Performance Management Process

Performance management cycle

An effective performance management process should contribute to a company's overall competitive advantage.

  • Step 1 and step 2: Convert organization goals -> successful employee behaviours
  • Step 3: Provide support that allows employee to achieve goals
  • Step 4: Performance appraisals
  • Step 5 and step 6: Ongoing feedback on improvements on employee behaviour/actions

# Reasons for Conducting Performance Appraisals

  • Strategic purpose
    • Link organization goals -> employee behaviour
    • Communicate goals to employees
    • Good employee performance drives company strategy
  • Administrative purpose
    • Provides information on decisions like pay, salary increases, recognition programs, etc.
  • Development purpose
    • Basis for developing employee knowledge and skills
    • Feedback on areas employee can improve on

# Criteria for Effective Performance Management

  • Fit with strategy — Performance management should aim at achieving employee behaviour and mindset that fits with the organization's strategy.

    • If a company emphasises customer service, then the performance management should emphasise the behaviour that contribute to excellent performance.

  • Validity — Does the performance appraisal measure all relevant aspects of performance?

    • Contamination -> irrelevant collected information
    • Deficiency -> relevant information that is not considered

  • Reliability — Describes the consistency of the results that the performance measure will deliver.

  • Acceptability — The people who use the performance measure must deem it acceptable. If management sees it as time-consuming, they will not use it. Likewise, if employees believe the measure is unfair, they will not use the feedback.

  • Specificity — A performance measure should specifically tell employees what is expected of them and how they can meet those expectations.

# Performance Appraisal Process

  1. Define performance expectations
    1. Create expectations based off job analysis and description
    2. Communicate expectations to employees
  2. Appraise performance
  3. Provide feedback

# Performance Measurement Methods

Step 2 in performance appraisal process. Performance is generally measured with regards to one of three options:

  • Traits
    • Checks degree to which employees posses specific characteristics
    • May not have correlation to productivity
  • Behaviours
    • Emphasizes how employees complete tasks
  • Results
    • Emphasizes what employees complete

Many organizations choose to determine performance through a ranking system where employees are directly compared to each other.

# Ranking

  • Simple ranking -> Managers rank each employee from highest-performer to lowest-performer.
  • Alternation ranking -> Managers alternatingly rank employees; pick highest performer, then lowest performer, then second highest, etc.
  • Forced-distribution -> Group certain proportions of employees into a pre-defined set of categories.
    • Good if employees truly have high spread in performance
    • Poor or unfair if employees are generally level
  • Paired-comparison -> Compares employees with each other to establish rankings

Ranking is generally good because:

  • Removes tendency to rank everyone in the "center" of the distribution
  • Removes biases caused by a manager being too lenient or too strict
  • Useful for making decisions on pay/layoff distribution

Notable drawbacks:

  • Difficult to link back to organization goals
  • Provides non-specific feedback to employees
  • Unfair if employees are all high performers

# Traits

  • Graphic rating scale
    • List a series of attributes with respective rating scales
    • Manager uses scale to indicate extent in which employee satisfies the attritubes
    • Low reliability -> up to manager's discretion as to what defines "outstanding expectations", "meets expectations" etc

Attribute-based performance methods are generally:

  • Easy to implement and use -> most popular used method currently
  • Can be reliable and valid if careful consideration on what attributes lead to high performance
    • Often not the case
  • Difficult to link to strategic goals
  • Poor feedback -> employees won't know where or how to improve if they only receive a number in their appraisal

# Behaviours

  • Critical incident -> performance measure based on manager's records on employee behaviour that exhibits good/bad performance
    • Specific feedback on employee improvements
    • Inefficient as a comparison metric
  • Behaviourally anchored rating scale (BARS) -> scale of behaviour "anchors" that describes what behaviours correlate to what level of performance
    • High validity -> job related behaviours
    • High feedback -> very specific on required behavioural changes
    • Time consuming
    • Requires tailoring for every job

Organizations may implement organizational behaviour modification -> plan of behaviour management through a formal system of feedback and reinforcement.

# Results

  • Productivity (output)
    • Determine desired outcome -> determine method to measure the outcome -> determine what level of outcome correlates to which level of performance
    • Set up system to track these measures while employees complete tasks
    • Time consuming but has evidently shown to increase productivity
  • Management by objectives (MBO)
    • Set goals that "trickle down" -> all employees contribute to goals
    • Goals become basis for performance management
    • Time consuming
    • Inefficent as a comparison measure -> how can an employee be better than another if they contribute to the same final objective?

# Errors in Performance Measurement

# Rating Errors

  • Similar-to-me -> tendency to give higher evaluation to individuals that are similar to oneself
  • Contrast -> comparing individuals to other employees rather than to objective standard
    • An employee might seem weaker if colleagues are outstanding, even if said employee performs job up to standard
  • Distribution errors -> tendency to group employees to a particular part of distribution
    • Leniency/strictness error -> tendency to rate individuals too high/too low
    • Central tendency -> rate all employees somewhere in the middle
  • Recency emphasis -> judge solely on most recent work
    • Recent poor performance may undermine exceptional historical performance
  • Focus-on-activities -> rate based on how busy they appear
  • Halo and horns
    • Halo -> rank positively in all aspects because employee is exceptional in one aspect
    • Horns -> opposite of halo
  • Appraisal bias -> allow external characteristics other than performance to influence rating

# Avoiding Rating Errors

  • Train raters on common rating errors
  • Frame of reference training
    • Identify and eliminate errors based on practice e.g. videos, simulations
    • Effective but costly and time consuming
  • 3rd party review on rating
    • Raters are evaluated on how well they do performance appraisal
    • Feedback is provided on how raters can minimize errors

# Performance Feedback

Ineffective appraisal can undermine employee performance and contribute to poor work motivation/productivity.

# Scheduling Feedback

  • Norm is to provide feedback annually
    • Missed improvement opportunity -> if manager notices problem in June, but feedback in November, June -> Nov missed chance to improve
    • Feedback most effective when employee not surprised; employee shouldn't wait for a year to know what their manager thinks of their work

# Preparing Feedback

  • Manager should provide neutral setting for meeting
  • Ask employee to do a self-assessment
    • Potentially provide meaningful discussion if a gap occurs between manager and employee's ratings

# Conducting Feedback

Three approaches:

  • Tell-and-sell -> management provides ratings then justify ratings
  • Tell-and-listen -> management provides ratings then allow employee to justify those ratings
  • Problem solving -> management and employee work together to come up with solutions to performance issues

General principles:

  • Feedback should paint balanced and accurate picture of employee performance
  • Should show specific areas of improvement

# Performance Improvement

Feedback should indicate what employees can do to improve their performance. The "what" is based on what attribute the employee is missing (either motivation or ability).

  • Lack of ability -> provide training or restructure job to suit their ability.
  • Lack of motivation -> ensure employee is being treated fairly and rewarded adequately.
    • Sometimes may be as simple as lack of positive reinforcement.
  • Lack of both -> employee may not be suited for position.

Generally employees with high motivation and high ability perform best.

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