Performance Management.docx

Performance Management Study Notes Chapter One Performance Management and Reward Systems in Context Definition of Performance Management: 2 parts continuous and linked to mission & goal The continuous process of: Identification Measurement Development of performance in organizations by linking individual’s performance and objectives with the organization’s overall mission and goals. Strategic Congruence Do not confuse Performance Appraisal with Performance Management—PA is one small part of PM Contributions of performance management systems • Motivation to perform is increased • Self-esteem is increased • Self-insight and development are enhanced • Employees become more competent • The definitions of job and criteria are clarified (employee gains understanding of performance required of them in their role) • Organizational goals are made clear • Supervisors’ views of performance are communicated more clearly (Mgt Std. D6: Allocate/Monitor work progress and quality) There is better and timelier differentiation between good and poor performers • Managers gain insight about subordinates (Mgt Std. D1: Dev prod relationships with colleagues) • Personnel actions are more fair and appropriate • There is better protection from lawsuits • Organizational change is facilitated Disadvantages/danger of poorly implemented performance management systems • Self-esteem may be lowered • Motivation to perform is decreased • Employees suffer from job burnout and job dissatisfaction • Employees may quit due to results • Relationships are damaged • Biases can replace standards • Mystery surrounds how ratings were derived • Standards and ratings vary and are unfair • False or misleading information may be used • Time and money are wasted • There is increased risk of litigation • Managers are required to use an unjustified amount of resources Links between the PMS and Rewards Reward system: the set of mechanisms for distributing both tangible and intangible (relational) returns as part of the employment relationship Some types of returns: Not all returns are directly linked to the PMS-see table: Reward system most frequently used to make decisions about employees’ compensation Returns and their degree of dependence on the performance management system Return Degree of dependence Class Cost of living adjustment across the board- to combat inflation Low Tangible Income protection (pensions, medical, etc) Low Tangible Allowances (housing, travel) Moderate Tangible Relational returns (recognition, security, satisfaction, challenges) Moderate Intangible Work/life focus (access to daycares, etc) Moderate Tangible Base pay (pay related to job function—not nec. Performance) Moderate Tangible Contingent pays (usually unaware of amount—addition to base pay Usually across the board-rate depends on past performance) High Tangible Short-term incentives (usually aware of amount –i.e quota bonus Temporary – not added to base pay High Tangible One time payment-therefore “variable pay” Long-term incentives (often stock options, etc.) High Tangible Aims and Roles of PMS PMS most frequently use to make decisions about salary administration, performance feedback, and identification of employee strengths and weaknesses. In general, however the uses can be classified as: Purposes served by a performance management system • Strategic: Linking ind/org goals to help top management achieve strategic business objectives • Administrative: To furnish valid and useful information for making administrative decisions about employees • Information: To inform employees about how they are doing, and about the organization’s and the supervisor’s expectations • Developmental: To allow managers to provide coaching to their employees • Organizational maintenance: (WP-HR) To provide information to be used in workplace planning and allocation of human resources • Documentation: To collect useful information that can be used for various purposes (e.g., test development, personnel decisions) “SAID OM D” Characteristics of an ideal performance management system • Strategic congruence • Identification of effective and ineffective performance Meaningfulness- Standards and evaluations for each job function must be considered important and relevant Must emphasis only those functions under the control of the employee Evaluation must take place at regular intervals and appropriate moments Should provide for continuing skill development of evaluators Results should be used for important personnel decisions Acceptability and fairness—both in terms of distributive and procedural justice. • Thoroughness—1.All people, 2.all responsibilities, 3.the entire period, 4.feedback on pos & neg performance • Inclusiveness—all stakeholders should be involved in developing and participating in PM-multiple sources of perf. info • Reliability consistent and free of error (two people evaluate employee should arrive at same score) • Specificity provides employee with detailed, concrete guidance on performance • Validity includes all relevant performance facets, and does not include irrelevant performance facets • Standardization across people and time • Practicality is not so burdensome and expensive that it won’t be implemented • Openness no secrets-freq evaluations/2 way communication - factual • Correctability if errors are identified, they can be rectified • Ethicality Integration with Other Personnel and Development Activities Performance management systems serve as important ‘feeders’ to other personnel and development activities: Workforce planning. Recruitment and hiring decisions Training Compensation plans and decisions Chapter Two The Performance Management Process All components of the PM chain are related. A weakness in any leads to overall system weakness (A PMS is a continual process involving several components….) Components Performance Prerequisites Performance Planning Performance Execution Performance Assessment Performance Review Performance Renewal and Re-contract Performance Prerequisites Two parts Part a) Knowledge of the organization’s mission –a chapter on its own--(through strategic planning process) Remember that an objective of the PM process is to ensure that individual performance is directed at achieving organizational goals; and part b) Knowledge of the job in question which is achieved through job analysis Questionnaire Observation Interviews Each has weaknesses, and used in different circumstances. Tasks of the job should be evaluated for both frequency and criticality. Ultimately, the end result is a list of the knowledge, skills, and abilities required for the position. They are usually presented in form of a job description. Knowledge-having the information to perform the task, but not necessarily the experience Skills- the ability to perform task-usually through prior performance Abilities- Physical, emotional, intellectual and psychological aptitude to perform task Occupational Informational Network (O*NET) provides access to online generic JD’s Standard JD headings: General description Tasks Knowledge Skill Abilities JD’s are fundamental in the PM process, as they lay the foundation for the “measurables” in assessing performance Criteria for assessment can be based on: Results—output—quality, quantity, cost-effectiveness, timeliness Behaviour—how the results are attempted (not necessarily achieved)—process oriented Performance Planning--- (mostly a discussion phase between supervisor and employee) Employees must have a thorough understanding of the performance management system. At the beginning of the cycle, supervisor should meet with the employee to discuss the “what’s and how’s” of performance goals. Should take into consideration results and behaviours, as well as a development plan. Results – outcomes Key Accountabilities (usually found in the JD) Broad areas of responsibilities that if done well will have a major impact Also includes performance objectives- targets for results Also includes performance standards – minimum thresholds for results—a yardstick used to evaluate how well employees have achieved each objective. Provides information on acceptable and unacceptable performance, for example regarding quality, quantity, cost and time. Prof Example Key accountabilities; Teaching and research Objectives; Student rating of 3 out of 4, and 2 articles Standards: Student rating of 2 out of four, and 1 article Behaviours Reliance in results only gives an incomplete, skewed interpretation of performance. (Later module gives indication when Traits, Results, Behaviours are indicated) Especially important when performance is outside control of employee, or customer satisfaction/relationships are strategic objective Consideration of behaviours includes measurable clusters of KSA’s -i.e. Customer service, communication, creative thinking, etc. (this is the definition of a competency) Development Plan An important step before the review cycle begins is for the supervisor and employee to agree on a development plan. At a minimum, this plan should include areas that need improving and goals to be achieved in each area. So development plans usually include both results and behaviours. Performance Execution Really where the PM system is initiated, but remember that employee participation starts earlier, with input at the JD development phase, establishing objectives, standards, etc. Employee attempts to achieve the results and exhibit the required behaviours Employee has primary responsibility for this process, but supervisor also has certain responsibility – (Management Standards Centre Standard D6: Allocate and monitor the progress and quality of work in your area of responsibility) Employee areas of responsibility Commitment to goal achievement. Ongoing performance feedback and coaching. The employee needs to take a proactive role in soliciting performance feedback and coaching from her supervisor. Communication with supervisor. Collecting and sharing performance data. The employee should provide the supervisor with regular updates on progress towards goal achievement, Preparing for performance reviews. The employee should engage in an ongoing and realistic self appraisal so that corrective action can be taken if necessary. The usefulness of the self appraisal process can be enhanced by gathering informal performance information from peers and customers (both internal and external). Supervisor areas of responsibility Observation and documentation. Supervisors must observe and document performance on a daily basis. It is important to keep track of examples of both good and poor performance. Updates on goal changes. As the organization’s goals may change, it is important to update and revise initial objectives, standards and key accountabilities (in the case of results) and competency areas (in the case of behaviours). Feedback. Feedback on progression towards goals and coaching to improve performance should be provided on a regular basis and certainly before the review cycle is over. Resources. Supervisors should provide employees with resources and opportunities to participate in developmental activities. Reinforcement. Supervisors must let employees know that their outstanding performance is noticed, by reinforcing effective behaviours and progress towards goals. Also, supervisors should provide feedback regarding negative performance and how to remedy the observed problem. Performance Assessment Both employee and supervisor are responsible for evaluating the extent to which the desired behaviours have been displayed, or results achieved. Each should fill in appraisal. Allows clearer analysis and understanding of discrepant results Self appraisals also enhance perception of system fairness (?procedural justice), reduces defensiveness , etc. Also provides valuable information to bring to the Performance Review Self appraisals also reduce employees’ defensiveness, increase employee satisfaction, and enhance perceptions of accuracy and fairness Both employee and supervisor have ownership of this process Performance Review Appraisal meeting Appraisal discussion Formal mechanism for receiving feedback Should include a review of the past, include a discussion of progress to the present, and conclude with a development plan to reach the desired future. Often fraught with tension, it has been referred to as “Achilles heal” of process Be frank, open and honest. Six steps: -Identify SPECIFIC positives and negatives -Solicit feedback; be alert for reactions -Discuss the implications of both positive and negative behaviours -Identify past positive skills to overcome current challenges -AGREE on action plan that is collaboratively developed -Set follow-up meeting to discuss measurable results and behaviours for next period Performance Renewal and Re-contracting Essentially the same as the planning phase, except it uses insights and information of previous phases Remember the objective is to meet strategic organizational objectives; these may have changed over the period. Everything is fluid and subject to change. Chapter Three Performance Management and Strategic Planning Strategic Planning defined A process that involves describing the organization’s destination, assessing barriers standing in the way of that destination, and selecting approaches for moving forward. Strategic Planning goal allocate resources in a way that provides organizations with a competitive advantage: “blueprint” Serves the following purposes: Strategic plan: Purposes • Helps define the organization’s identity • Helps organizations prepare for the future—clarifies desired destination • Enhances ability to adapt to environmental changes—through environmental analysis Allows for the consideration of new options and opportunities • Provides focus and allows for better allocation of resources • Produces an organizational culture of cooperation • Provides employees with information to direct daily activities Linking of Performance Management and Strategic Plan Simply creating a strategic plan does not ensure its success. It may be a waste of resources if it doesn’t result in concrete actions. There must be a link between the strategic plan and individual performance General hierarchy ORG Mission—emphasizes the present Vision-emphasizes the future Goals Strategies Unit/Division Mission Vision Goals Strategies Job Description Tasks Knowledge Skills Abilities Individual & Group Performance Results Behaviours Developmental plan Must have support and input of highest management for level that is being developed Does it work? Yes Example Key Bank After implementation of new Performance Management System: Employees had more decision-making power Lower-level managers had a better understanding of higher-level managers’ decisions Managers knew employees were focused on meeting important goals Communication increased improved among/between levels Take away point: Organization’s Performance Management system must rely on their strategic plans to be most effective Strategic Planning - Analysis of the organization’s competitive situation, it’s current position and destination, development of strategic goals, design of plan of action and its implementation, and the allocation of resources that will increase the likelihood of achieving the stated goals. Strategic Planning details/steps Conduct environmental analysis – SWOT—Gap analysis Define Organization’s Mission Create a Vision Setting goals Establishing strategies to meet goals Process is not linear – more like a feedback loop Environmental Analysis Identifies internal and external parameters with the purpose of understanding broad issues related to the industry where the organization operates so that decisions can be made against the backdrop of a broader context. Internal Strengths & Weaknesses Org structure Org culture Politics Processes External Opportunities & Threats Economic Political/Legal Social Technological Competitors Suppliers Monitoring of external trends is doubly important for multinationals Information gathered in the SWOT process is used to generate a gap analysis (pairing S/W to O/T) S+O=Leverage W+O=Constraint S+T=Vulnerability W+T=Problem Summary: The process of creating a strategic plan begins with an environmental analysis that considers both internal and external trends. A gap analysis consists of pairing SW/OT to determine if the situations is pos/neg, or somewhere in between. MISSION: Once the environmental and gap analyses are completed, the information can be incorporated into a mission statement. Why does org exist? What is scope of the org’s activities? Who are the customers served? What are the products/services offered? Details often include: The basic product/ service Primary markets or customer groups Unique advantages of product/services Technology used Fundamental concern for survival through growth and profitability May also include statements about org beliefs and values Managerial philosophy of the organization Public image sought by the org Self-concept of business adopted by employees and stockholders VISION After Mission statement is complete, one can move to creating a Vision statement Future aspirations>>>>perhaps 10 years out Mission and vision may be combined or separate If combined, usually includes a core ideology and envisioned future. Vision should be: Brief Focused – not a laundry list – focus on a few aspects Understandable Verifiable – reliability test – “How to prove one of the best, etc?”) Current – once achieved the vision needs to be updated Bound by timeline Inspiring A stretch GOALS To formalize statements about what the organization hopes to achieve in the medium-to-long period>>>>5 yrs or so Provide more specific information on how the mission will be implemented. Can be a source of motivation; a tangible target Good basis for making decisions Basis for performance management STRATEGIES Descriptions, “game plans” on how to achieve the stated objectives. Could address growth, survival, turnaround, etc. HR plays a critical role in implementing strategies. HR contributions: Communicate knowledge of strategic plan Provide knowledge of KSA’s need to for strategy implementation ( a repository of the necessary KSA’s) Propose reward systems STRATEGIC PLANS AT THE UNIT LEVEL Must be congruent with Organization’s mission (Microsoft & KeyBank examples) This congruence is essential irrespective of size of organization High performing organizations have a clear alignment in the emission and vision of the overall and unit-level mission and vision statements Similarly, job descriptions need to be congruent with the organization and unit mission, vision, goals and strategies. Once the strategic plan is completed, current JD’s may need to be rewritten, especially the KSA’s JD’s should include activities that, if completed properly, will help fulfill the mission and vision. A disconnect between JD’s and the M&V leads to performance evaluations based on behaviours that are not central to organizational success. INDIVIDUAL AND TEAM PERFORMANCE A well-designed Performance Management system defines a clear path from the organization Mission, to individual and team performance. The PM system needs to motivate employees to display the behaviours and produce the results required to support the organization/unit’s mission, vision and goals. In addition to serving as a guide to behaviours/results, knowledge of the M&V’s provides HR with information on how to design the performance management system. Example: In service call center, behaviours may be more important than results. Regardless of whether the focus is results or behaviours, the criteria must be: observable, and verifiable Some choices in PMS design Criteria: Behavioural vs. results Participation: Low employee vs. High employee participation Temporal: Short-term vs. Long-term criteria Level of criteria: Individual criteria vs. Group criteria System orientation: Developmental vs. Administration Rewards: Merit based vs. tenure/position focus Performance criteria must make a contribution to the strategic priorities of the organization. BUILDING SUPPORT Some senior administrators may be reluctant to commit the time/resources to implement the system. Fail to see the value that is added. “What’s in it for me?” Critical tool for allowing employees to understand the organization and where it wants to be Provides employees with the tools for achieving the org goals through their behaviours and results It is the primary tool for management to achieve their vision Support must be universal—from the top to the bottom of the organization AND it must be communicated throughout the organization—needs to communicate both the: System mechanics System consequences Involve people in the development in order to overcome possible resistance. End of chapter three Chapter Four Defining Performance and Choosing a Measurement Approach Defining Performance Usually includes both behaviours and results, although technically it should only include behaviours. Two additional characteristics of behaviours we label performance Evaluative Either neg/neutral/pos impact on achieving organizational goals Multidimensional A SET of behaviours is often used to describe how the behaviours contribute “i.e. Contribution to the effectiveness of others in achieving goals—could include shares information/develops relationships, etc. We sometimes use results as proxies of behaviours when the behaviours are not observable. Outside sales Determinants of Performance (allows some people to perform at higher levels than others) Declarative Knowledge Facts, principles, goals including what is required to get the job done. Procedural Knowledge What to do, how to do it…cognitive, physical, perceptual, Interpersonal, physical skills Motivation Choice to expend effort; how much effort to expend, and for how long to expend it (three components of motivation Performance is the multiplicative effect of all three DK*PK*M=Performance Therefore, all three must be present (have a value greater than zero) Implications for Addressing Performance problems Managers must understand what determinant is deficient. This allows for proper remedial measures, and proper utilization of resources. Factors Influencing Determinants of Performance Employee abilities HR practices Work environment When addressing performance problems, managers first need to identify which of these factors is creating them. Performance Dimensions As noted, performance is multidimensional. Two GENERAL types of performance or behaviour facets. Task performance Activities that convert raw materials into final products, or processes that contribute resources to this process Contextual Performance Sometimes referred to as Pro-social or organizational citizenship Contribute to goals by providing a good working environment---the extra mile Persistence, enthusiasm, volunteering, cooperating, following P&Ps, endorsing & supporting organizational objectives They must be considered separately, as neither, either, or both may be present Main differences between task and contextual performance Task Contextual Varies across jobs (mgr performs different task than line worker Fairly similar across jobs Likely to be role prescribed (in JD) Not likely to be role prescribed Antecedents: Abilities and skills Antecedents: Personality Contextual performance must be carefully defined, as it is likely to be more subjective and subject to bias when compared to task performance Both task and contextual performance dimensions need to be included in PMS, as: Global competition has increased the required level of effort Many orgs are reorganizing on basis of teams Increasing need to offer outstanding customer service During evaluations, it is impossible to ignore the contextual aspects of performance So contextual needs to be evaluated, even if results only are being measured Measuring Performance Performance does not occur in a vacuum. A performer>>>in a given situation>>>engages in certain behaviours>>>that produce certain results There are three approaches that can be used to measure the performance Trait – Emphasizes the individual performer and ignores the specific situation, behaviours and results—intelligence, etc. Challenges to this approach Traits are not under the control of the individual 1 Fairly stable, and therefore difficult to alter 1 Employees may feel evaluations based on traits is unfair 1 Fact that person possesses a particular trait does not guarantee performance 2 May be useful when Dramatic restructuring where certain traits will be necessary Behaviours – Emphasizes what employees do; does not consider traits or outcomes (process-oriented approach) May be useful when Employees will take a long time to achieve desired outcomes (new employees) The link between behaviours and results is not obvious (salesperson in a bad economy) Outcomes are distant (NASA) Poor results are due to causes beyond the performer’s control (day vs night shift resources) Results – Emphasizes outcomes and ignores traits and behaviours “bottom-line oriented” May be useful when Workers are skilled in the needed behaviours (basketball pro) Behaviours and results are obviously related (Newspaper delivery) Results show consistent improvement over time (indicates employee is already aware of the needed behaviours) There are many ways to do the job right Chapter Five Measuring Results and Behaviours Two most common Performance Management approaches: Results Behaviours Measuring RESULTS – Part A When developing a results based system, must ask: What are the key accountabilities? (broad area of job responsibilities) What are the expected objectives? (statements of important and measurable outcomes) What are the performance standards? (Yardstick to measure acceptable vs. unacceptable results) Performance Management systems using objectives and standards are likely to be found in organizations following MBO philosophy Determining accountabilities Job description is starting point. It can be used to illustrate “clusters” of related tasks. These clusters are key accountabilities. After they are identified, then determine their relative degree of importance. Percentage time spent performing Significance to unit objectives if performed inadequately Impact on safety, security if done erroneously Results in accountabilities such as that described below. Contains all three elements listed above Based on a JD (page 5/3), accountabilities could be: process leadership, coaching, supervision team building Process Leadership: Leads the strategy and direction of assigned processes. Coordinates related projects, and directs/manages resources. This is extremely important to the functioning of org leadership and the ability of executives to meet strategic business goals. If managed improperly. It will lead to a loss of time and money in training costs and leadership ineffectiveness. Determining Objectives: After identifying the key accountabilities, the next step in measuring results is to determine specific objectives. After achieving objectives, employees should receive feedback on their progress, and awards should be based on successful attainment. Helps employees guide their efforts: Must be: Specific and clear Challenging Agreed upon Significant Prioritized Bound by time Achievable Fully communicated Flexible Limited in number Example (for Process Leadership) Develop leadership development processes and training programmes within budget and time commitments. Also, meets budget targets and improve executive leader’s “leadership readiness” scores across the organization by 20% in the coming fiscal year Determining Performance Standards: Next step is to establish performance standards—provides raters with information on what to look for to determine the level of performance achieved. Can refer to various aspects of job including cost, quality and time. Usually describe fully satisfactory performance. But can also define satisfactory, minimum standards, and outstanding performance standards. Standards must include four elements: a verb, the desired result, a due date, and some form of quality/quantity indicator. Example (for Process Leadership) Standards should contain the following characteristics: Related to the position (not the person) Concrete, specific and measurable Practical to measure Meaningful Realistic and achievable Reviewed regularly Example (for Process Leadership) Increase the executive leader’s ‘leadership readiness’ scores across the organization by 20% by 31 December, at a cost not to exceed 70000$. MEASURING BEHAVIOURS Part B Includes the assessment of competencies (measurable clusters of KSA’s that are critical in determining how results will be achieved) Examples: written or oral communication, creative thinking, dependability Two types of competency: Differentiating (distinguishes between average and outstanding) Threshold (required to perform job to minimally acceptable standard) Competencies should be defined in behavioral terms Competencies are evaluated indirectly through Performance Indicators (an observable behaviour). We don’t measure the competency directly, but measure indicators that tell us whether the competency is present or not. A single competency may have several indicators associated with it. In describing a competency, the following components must be present: Definition Description of specific behavioural indicators that can be observed when someone demonstrates a competency effectively Description of specific behavioural indicators that can be observed when someone demonstrates a competency INeffectively List of suggestions for developing the competency in question In contrast to measuring results, measuring competencies is inherently subjective. JUDGED by raters—peers, self, supervisor Two systems used to evaluate competencies: Comparative—comparisons between employees Absolute---comparison with pre-specified standard Comparative Systems Simple rank order (1-10) Alternation rank order (best, then worst, second best, second worst, etc) Paired Comparisons Forced distribution Advantages of Comparative (Relative) systems: Easy to explain Decisions resulting from these systems are fairly easy Tend to control biases and errors better than absolute systems (leniency, severity, central tendency) Disadvantages of Comparative (Relative) systems: Employees are usually compared based on a single overall category (not compared on individual behaviours) Since there aren’t actual scores, there is no indication of distance between employees Specific to the forced distribution model: Assumption that scores are normally distributed, and this is not necessarily true May discourage contextual performance- Why help others when it may force me into a lower performance category? Rating may be lower in second review period even if performance level remains unchanged; if laggards are removed from system—middle of the pack now becomes the bottom of the pack. Forced distribution models work best in organizations with a culture of cooperation. Absolute systems Without reference to other employers Essay – unstructured, detailed, but hard to quantify Behaviour checklists – list of behaviour statements and supervisor “checking” statements that reflect employee behaviours. Because all behaviours are likely to present to some extent, the checklist usually includes a description of the bechaviour, and a response category, weighted,>> (Never 1 ----------Always 5) Selection of response category can be quite arbitrary and distance between is often assumed to be equal. Five or seven point scale: Five is usually enough Scales of frequency (Never to always) Scales of amount (None to all) When developing the anchors, should attempt to have them spaced equally on the basis of Table 5.5 Although “terrible” is available as a result category, it shouldn’t really be used. Behaviour checklists are easy to understand, but details are difficult to extract (opposite problem from essays) Critical Incidents Measurement-gathering examples of especially effective and ineffective behaviours. Allows focus on observable behaviours as opposed to vague traits Very time consuming Variation one – Creating behaviour checklists based on Critical incidents “Addresses learning needs of special needs students efficiently” Variation two – Matrix of competencies ( or core skills, values, etc) versus a response category (frequency) which includes multiple examples of behaviours for each response category Variation three – Behaviourally Anchored Rating Scale (BARS)—this is actually example of one of many types of Graphic Rating Scale (GRS). BARS is a GRS that uses Critical incidents as anchors Improves on GRS by having a group of employees identify the important dimensions of the job, then another group generates critical incidents for each dimension. Third group takes each dimension with its definition, and a randomized list of critical incidents. Must match the critical incidents with the correct dimensions. Lastly, group assigns a scale value to each incident Graphic Rating Scale – Most popular tool to measure performance. Aim is to ensure the response categories are clearly defined, interpretation of the ratings by an outside party is clear and that the supervisor and employee understand the rating. For GRS: The meaning of each response must be clear The individual interpreting the results (i.e. HR) can tell clearly what response was intended The performance dimension being rated is defined clearly for the rater Chapter Six Gathering Performance Information Remember the stages of the Performance Management Process: Performance Appraisal forms are important element of the Performance Assessment phase. Appraisal Forms: Hard copy – Traditional method Electronic forms Advantages Shared data Between managers With HR Easier analysis Stored data Appraisal Forms components Basic employee information Accountabilities, Objectives, and Standards Must include the name of the item, and a full description/definition-and the extent to which the objectives have been achieved. May also include a subsection to describe the conditions under which the objectives were met. (ie. Poor economic times) Competencies and Indicators Must also include definition, and the behavioral anchors used Major Achievements and Contributions Developmental Achievements May be dealt with separately Developmental Needs, plans and goals Stakeholder input Defined as those who have first-hand knowledge of, and are directly affected by the employee performance Employee comments Promotes buy-in, and offers some legal protection to potential future challenges Signatures Characteristics of Appraisal Forms There is no generic, perfect form “One form does NOT fit all” Note---Need to be able to evaluate appraisal form (test) for above items, and those below Certain desirable features: Simple To understand, use, and administer Adaptable Managers in different functions and departments can adapt the form to their use Relevant Addresses the true tasks/responsibilities of the job Comprehensive Includes all areas of employee performance Descriptive Outsider should be able to develop accurate picture of performance of employee after reading appraisal Clear(ly defined) All “measurable” items are well-defined so there is consistency among raters Communicated Meaning of the components of the form is communicated to all people participating in the process Time Oriented Addresses both the past and the future—clarifies expectations All good forms should incorporate above, but it is essential to remember that the form is only part of a process Determining overall rating Two primary methods Judgmental Basically an essay-a defensible summary of performance Holistic in approach to the process Difficult to compare across groups Mechanical Assignment of scores for performance dimensions Usually weighted based on importance of task being evaluated Use of weights allows for a verifiable score Probably a better approach, as judgmental may lead to inherent biases, and data is more easily comparable between raters. Appraisal Periods and the Number of Meetings What is the appropriate frequency? Annual, semi-annually, or quarterly? Most common is annual, although this is not necessarily best. Timing: IF annual, at what point? Anniversary of hire Staggered and therefore not a major undertaking Near end of fiscal year As all employees are evaluated at same time, it is easier to compare/rank employees and assign rewards Ties to the organization’s goal-(re)setting of goals Because the end of the fiscal year is a busy time, it should NOT be a once a yr event i.e. it shouldn’t be a burden to the managers How many meetings? Could include up to six System Inauguration—discussion of how the system works, requirements and responsibilities. Self Appraisal—informational—non judgmental—use same form later in the review cycle Classical Performance Review—poor PM systems often rely only on this Merit/Salary Review---should separate discussions of performance and reward Development Plan—needs and resources available Objective Setting—both results and behaviours for next period Not all meetings need to be separate, but the content for all should be covered. Who Should Provide Performance Assessment Information? Supervisor Most common, and direct link Often in best position to link performance and unit goals Supervisor may not see all aspects of performance May be intentionally/unintentionally biased Self Assists with process buy-in Covers some legal aspects May be tendency to bias upwards (My opinion is that employees usually are harder on themselves than managers) Cannot rely on this as sole indicator of performance (probably can’t rely on any ONE source) Self is the best observer of performance Can be improved by: Use of comparative, rather than absolute measures Allowing employees to practice their self-appraisal skills Assuring confidentiality Emphasizing the future Peer Two problems Evaluations may not be readily accepted if there is a belief that friendship bias prevails Peers tend to be less discriminating than supervisors when evaluating performance dimensions Subordinates Especially useful when evaluating leadership skills, and supervisor’s ability to: Remove barriers that employees face Shield employees from politics Raise employee’s competence Subordinates may be reluctant, but this can be overcome by including them in the entire Performance Management Process Customers Gathering data may be expensive and time-consuming, but is very valuable Don’t forget internal customers Customer satisfaction surveys are common tool Disagreement across Sources: Problem? Short answer: No. Shouldn’t expect ratings to be same, as; Different people see different facets of the same performance dimension Different levels of the organization view the dimensions differently What is important is that clear definitions (and indicators/anchors) exist and are communicated When disagreements do occur, you can weight the SOURCE. i.e. Customer vs. Peer A Model for Rater Evaluation P 6/21 of text Rating behaviours are influenced by: Motivation to provide accurate ratings Motivation to distort ratings Model also shows the motivational barriers that prevent raters from providing accurate performance information May be motivated to inflate in order to: Maximize merit/rewards Encourage employees Avoid creating a written record Avoid confrontation with employee Promote undesirable employees out of the unit Make manager look good to his/her superior May be motivated to deflate in order to: Shock employees Teach a rebellious employee a lesson Send a message to an employee that he should consider leaving Build a strong, written record of poor performance Process of evaluation is filled with emotional overtones and hidden agendas If raters are not motivated to provide accurate ratings, they are likely to use the PM system for political reasons What can be done to prevent CONSCIOUS distortion? Model illustrates we need to provide incentives to show raters they have more to gain from being accurate than they do from being inaccurate Summarized in “What’s in it for me”? for being accurate versus inaccurate. Can assess supervisor in their skills in implementing the PM system, and/or provide the tools for making accurate assessments. Training on how to use the system Errors can also be Unintentional. Training can affect this, as well. Preventing Rating Distortion through Rater Training Programmes Objective: To provide rater with tools to implement the PMS effectively/efficiently To help reduce rater distortions Raters make both: Intentional Unintentional errors To prevent #1, the training programmes must address the motivational issues demonstrating how the system works, and answering the “What’s in it for me?” question To prevent #2, the programme must provide information and skills on how to observe and rate performance Rater Training Programmes must include the following topics: Reasons for implementing the PMS How to identify and rank job activities How to observe, record and measure performance Information on the appraisal form and the system mechanics How to minimize rating errors How to conduct an appraisal interview How to train, counsel and coach Chapter Seven Implementing a Performance Management System There are crucial steps that must be taken before the PMS is launched: Implementing a communication plan An appeals process Training programmes for raters Pilot testing the programme Once up and running there must be: Ongoing monitoring Preparation: Communication Plan Successful implementation requires a clear understanding of how the system works and the benefits it provides Implementation requires wide organizational support and acceptance. – A good communication plan assists with buy-in Can start by communicating plan to a select few “champions” Communication plan should answer the following: What is performance management?—General overview, including definitions for terms used How does performance management fit in our strategy? – fit with strategic goals What’s in it for me? – describes the benefits for all—effective leaders, change adaptors, etc How does it work? – detailed description and timeline, with examples of appraisals, etc What are my responsibilities? – for all especially employee/supervisor responsibilities How is PM related to other initiatives? – describes link to things such as training, promotion, and succession planning (Good example in Dept. of Justice) Note: Providing a communication plan does not necessarily mean successful buy-in. Why? Because of cognitive biases affecting what information is taken in, and how it is processed. Even with good plans, the biases exist to some level (Cognitive biases are the basis for unintentional rating errors) Three cognitive bias types: Selective Exposure: The tendency to expose our minds only to ideas with which we already agree. Selective Perception: The tendency to perceive information in a way that supports our held assumptions. May be 180 degree from intended message Selective Retention: The tendency to remember information with which we already agree. They are powerful biases and can invalidate a good communication plan. Can be offset by: Employee involvement Employee needs – understand their needs, and identify ways the PMS can meet them Strike first – Create an early, positive attitude to the PMS before negative rumours take root Provide facts and consequences – explain the facts of the system so selective biases are minimized Put it in writing – Reduces inconsistencies – promotes challenges to ideas Use multiple channels of communication – same message multiple channels Use credible communicators – make sure the communicators are accepted (maybe the champions?) Say it, and then say it again – little by little, people absorb information Support for the system can be achieved through: Comprehensive appeals process Comprehensive appeals process Important for employee buy-in because it shows that disagreements can be resolved fairly, in a non-retaliatory manner Employees can challenge both: Judgmental Issues – Was the evaluation valid? Did the performance dimension reflect actual performance? Administrative Issues – Were the policies and procedures of the PMS followed? Level one appeal - usually sent to HR who evaluate and recommend. If their decision is contested, Level two appeal – Peers/managers make up arbitrator panel (Example of North Carolina University) To implement the Performance Management system, there must be: Training programmes for the Acquisition of Required skills Provides skills and tools to effectively use system Helps increase satisfaction with the system Content areas Reasons for implementing the system Information on the appraisal form and system mechanics How to identify and rank job activities How to observe, record and measure performance How to minimize rating errors How to conduct an appraisal interview How to train, counsel and coach 1-2 part of the communication plan Will focus on 3-5 6-7 for later modules Training the raters: Provides participants with the necessary tools to do a good job implementing the system Helps increase satisfaction with the system Rater Error Training (RET) Goal: To make raters aware of the rating errors they are likely to make, and to help them develop strategies to minimize those errors. To increase rating accuracy Often presented as workshop Includes: Definition of the most typical errors Description of possible causes of these errors View examples of common errors Review suggestions on how to avoid errors Watch vignettes, etc Fill out practice forms Feedback from moderators RET does not guarantee rating accuracy. Awareness does not assure accuracy, as many errors are unintentional. Some error types Unintentional: Similar to me Contrast error – even when using absolute scales – comparisons made to other employees Halo error – fail to distinguish b/w different dimensions. Good in one—good in all Primacy error – influenced by early behaviours Recency error – influenced by recent behaviours Negativity error – more weight is placed on neg. behaviours First impression error – influenced by initial favourable opinion of the employee Spillover error – from previous evaluation period Stereotype error – based on group membership Intentional: Leniency error Severity error Central Tendency error To minimize intentional errors we must address rater’s motivation. (Chap 6) “What’s in it for me?” RET exposes raters to the different errors and their causes, and MAY help reduce unintentional errors Frame of Reference Training (FOR) Goal: Improve rater accuracy by thoroughly familiarizing raters with the various performance dimensions to be assessed. To give raters skills to provide accurate ratings for each employee on each dimension by developing a common frame of reference Training includes: Discussion of the job description and the duties involved Raters are familiarized with the performance dimensions by reviewing their definitions and discussing examples of good, average, poor performance (common performance theory) View vignettes, etc of performance Practice form completion Provide justification for the rating Feedback by moderators (Formal steps described on p 7/14) FOR training takes a great deal of time and effort to administer, but results are well worth it Raters are: More likely to provide consistent and accurate ratings More likely to help employees design effective development plans b/c sharing a common view of what constitutes good performance allows supervisors to provide employees with better guidelines likely to lead raters to provide consistent and more accurate ratings as well as to help employees design effective development plans Behavioural Observation Training (BO) Focuses on HOW raters observe, store, recall and use information about performance. One type of training focuses on tools to use, such as diaries. Using these aids increases number of critical incident reporting etc. Self-leadership Training Goal: To improve a rater’s confidence in their ability to manage performance Techniques: Positive self-talk Mental imagery Promotion of positive beliefs and thought patterns Assumption: If there is increased self-direction and self-motivation and confidence, there will be increased accuracy Useful for supervisors, even if not involved in PMS Design of system Observe and record existing beliefs and assumptions Analyze the functionality and constructiveness of these beliefs Identify replacements that are more functional and constructive Substitute the beliefs Continue monitoring and maintaining beliefs Unintentional errors are largely the result of cognitive biases Intentional errors are the result of motivations issues RET is designed to reduce both types FOR/BO focus on unintentional errors Through the combined use of an effective communication plan and various training programmes, errors can be significantly reduced FOR is particularly useful when PMS is directed towards evaluating performance results BO is equally useful when the PMS is directed towards evaluating performance behaviours Pilot Testing Essential prior to “go-live” It is a roll-out of test package. Single most important thing in this phase is to have participants record any noted deficiencies Allows system users’ perspective on how well the PMS works Assists in developing an early buy-in Who should participate? Statistically significant group Managers who will commit the necessary time, and are willing to try new things—(Champions??) Ongoing monitoring and evaluation of the PMS Once the system is “live” it is essential for use clear measurements to monitor and evaluate the system. Effectiveness of the system Extent of implementation Extent to which it is producing desired results Some Indicators: Number of individuals evaluated Distribution of performance ratings – too high/low, clusters, etc Quality of information (from open ended questions) Quality of performance discussion meeting – (Confidential survey from participants on how the supervisor handles Performance review meetings) System satisfaction Unit-level and organization-level performance – perhaps from customer satisfaction surveys Chapter Eight Performance Management and Employee Development How to use PMS to help employees develop and improve their performance Personal Development Plans Allow employees to keep abreast in their profession Can be developed for all positions in the organization Information for designing development plans come from the appraisal form, specifically the performance dimensions Objectives of Development Plans Overall Encourage continuous learning, performance improvement and personal growth Specific Improve performance in current job - suggested courses of action to meet deficiencies Sustain performance in current job -suggestions on how to meet/exceed expectations Prepare employees for advancement - indicate which behaviours should be developed to help advancement Enrich the employee’s work experience - Intrinsic rewards See form used by Texas A&M page 8/4 Development Plan – Content Skills to be acquired Completion date Resources offered to assist Benchmark for determining if objective is met – score in course, diploma, etc. Characteristics of a good development plan Practical Specific Time-oriented Linked to a standard Jointly developed by employee and supervisor Important feature is that the plans should keep the needs of both the individual and the organization in mind. (Congruence of organizational and individual goals) Developmental Activities On-the-job training Courses – internal if resources exist, or external Self directed readings – time frame and benchmark for success Mentoring – should allow mentor and protégé choose each other Attending a conference-may want to ask for presentation to share the gained knowledge Getting a degree Job rotation-example of Medical residents Temporary assignments-less systematic approach to job rotation Membership or leadership role in a professional or trade organization Development plan can be part of the appraisal form or separate. Direct Supervisor’s Role Needs to explain what is required to achieve desired performance Responsible for referring the employee to the appropriate development activity Reviews and makes suggestions about development objectives Responsible for checking on employee progress in the activity Provide reinforcements so employee is motivated to complete activity Supervisors must also be motivated to participate in the development plan process. Rewards may be tied to the success of employee’s meeting development objectives Factors promoting successful implementation of personal development plans ALL employees have a plan All employees are entitled to development opportunities on an ongoing basis Mangers monitor progress, and involved in the assessment of objective accomplishment Managers are committed to employee development and career advancement Development plan is integral part of the PMS The performance of managers is evaluated (in part) by the success of employee development 360 degree feedback systems Goal is to help employees improve performance by gathering information from different groups. Superiors Peers Customers Subordinates Usually collected anonymously, so as to prevent rating inflation. Self-appraisal is also performed, and a gap analysis done to reconcile the larger discrepancies. Areas where both self and others agree on performance deficiencies are viable content items for development plan. Development plan is the objective of 360; should not be used for administrative/reward purposes. Most frequently used for supervisory positions, but the role has expanded somewhat to encompass other groups Process is amenable to technical means; especially Web-based platforms. Very sophisticated, and includes all aspects such as the data collection, reporting, feedback and general development plans. Also usually includes training for raters, etc. NOTE: NO technical product can perform all functions. The development plan MUST ultimately be jointly decided on by the supervisor and the employee. Checkpoint is good example of product: see pages 8/12-8/17 inclusive Includes: Executive overview Reference Group Comparisons Development Summary Suggestions for Improvement And more In order for 360 to work, there must be an appropriate organizational culture where: Participation in decision-making is valued Cooperation between employees is evident There is no fear of speaking up There is no obvious favoritism, etc Employees believe that others hold valuable information about their performance Decisions are based on facts and observation, not hearsay Employees are trusted to get the job done Advantages of 360 degree Feedback Systems Decreased possibility of biases – multiple sources add credence Increased awareness of expectations—become very aware of other’s expectations of your performance Increased commitment to improve- Increased self-perceptions of performance Improvement in performance-ultimate goal-information is first step Reduction of ‘undiscussables’-open, anonymous, non-threatening atmosphere Help for employees to take control of their careers RISKS of Implementing 360 degree Feedback Systems Negative feedback can be hurtful if presented in non-constructive manner Individuals MUST be comfortable with system and feel it is fair May be difficult to achieve anonymity if sample size is small People may be overloaded with forms, etc Weak link between use of 360 system and share prices – (no proof of cause and effect relationship) Characteristics of a good system Several steps can be taken to ensure process succeeds General: Organization that is open to learning, and Led by executives who are open to praise and criticism Specific: Anonymous Only those who can directly observe behaviours contribute Employees are able to provide feedback about their evaluations Option for follow-up Evaluators are not fatigued by endless requests to evaluate System focuses on behaviours rather than results Raters go beyond ratings – includes descriptive feedback Raters are trained Used for development purposes only Chapter Nine Performance Management Skills Managers need several key skills to manage the performance of their employees effectively, including skills regarding: Coaching Observing and documenting performance Giving feedback Conducting Performance Review Meetings Coaching Collaborative, ongoing process between manager and employee Directing, motivating, rewarding employee behaviour Involves: Observing Complimenting good work Helping correct performance deficiencies Concerned with Long-term performance, and making sure development plan is being achieved—link to Chapter 8 Critical Functions: Giving advice – to help performance. Describing WHAT needs to be done, and HOW things need to be done. Results & behaviour Providing guidance – on WHAT skills & knowledge are necessary, and HOW to gain them Providing support – and only being there when needed facilitate rather than continuous monitoring Imbuing confidence – giving both pos and negative feedback constructively give employees sense of responsibility Promote competence – directing toward both short and long-term skill objectives that will be useful in future positions AGS CC Requires a lot of work on the part of the manager Coaching helps turn feedback into results, BUT coaches need to display a large set of complex, key behaviours: Establish development objectives Communicate effectively Motivate employees Document performance Give feedback Diagnose performance problems Develop employees CMD FDD Mangers who display these functions and behaviours are highly effective How do we rate/measure the effectiveness of managers? Could measure the success of their employees, but this is indirect Should measure the managers’ behaviours Listens Creates supportive environment Empathizes with and encourages employees to express feelings Provides tangible support Clarifies performance expectations Encourages discussion and problem-solving Helps plan for change Explores areas for growth and development Shares authority and delegates action Understands individual needs COACHING STYLES Personality and behavioural preferences are likely to influence style Driver – tell WHAT to do; usually assertive, speaks quickly, not very expressive and expose few feelings Persuader – SELL what to do; assertive but tend to be expansive, express more feelings, and talk more about people Amiable – want everyone to be happy; hearts before their heads; feels like the right thing to do;not very assertive, speak deliberately and pause often; seldom interrupt, make conditional statement Analyzer – views performance in a logical and systematic way; follows rules and procedures before making a decision; not very assertive, but as with the “driver” is more assertive, and talks about tasks and facts rather than personal feelings Ineffective managers stick with one style. ADAPTIVE managers use all styles, as is appropriate to the situation. Sometimes employees must be told what to do; sometimes persuaded, etc. Coaching Process Five steps: Setting development goals (Chapter 8) Identify resources and strategies that will help employee achieve development goals (Chapter 8) (on job training, etc) Implementing these strategies Collect and evaluate data to assess the extent to which each of the development goals has been achieved. Provide feedback to the employee, and if necessary revise the goals Four and Five are focus of this section, as 1-3 have been covered Four. Observe and Document development behaviour Just as managers make intentional/unintentional errors in performance ratings, the same thing can happen when assessing behaviours related to development goals. It is important to observe and document behaviours specific to development activities- memos, letters, emails, etc. All discussions related to observing behaviours applies to overall performance, and vice versa. Observing progress towards objectives is not easy—some constraints: Time constraints: manager may be too busy to observe Situational constraints: may not be able to physically observe the employee engaged in the activity Activity constraints: Some activities must be complete before assessment – i.e. read a book Have to reduce the impact of the constraints? Same as suggested in Chapter 7 Communication plan for buy in Training Rater error training Frame of reference training Behavioural observation training Self-leadership training Documentation of progress towards performance/behavioural goals is essential, as it Minimizes cognitive load Creates trust Helps plan for the future Offers some legal protection What can manager do to document performance regarding development activities, and performance in general, in a useful and constructive way? Be specific Use adjectives and adverbs sparingly Balance positives and negatives Focus on job-related information Be comprehensive – all employees, and over the entire review period Standardize procedures Describe observable behaviour—use primary data Giving Feedback Key component of the coaching process “Information about past behaviour, given with the goal of improving future performance” Includes information about both positive and negative aspects of job performance Main purposes: It helps build confidence; praise promotes confidence It develops competence; information on what has been done right helps develop competence It enhances involvement: helps employee understand his role in the unit, and organization CCI Providing effective feedback does NOT ensure delivery of these purposes. There is a weak argument that feedback lowers performance (9/12) Lowered performance may be the result of feedback that does not include useful information, or is delivered in a negative way. Although some feedback systems are poor, consider the effect of NO feedback. Usually the potential negative consequences of having a feedback mechanism are outweighed by the positives. To enhance feedback: Timeliness: close to the performance event Frequency: ongoing basis Specificity: Include specific behaviours, results and the situation where these behaviours and results were observed Verifiability: should not be based on inference or rumours Consistency: Should not vary unpredictability between overwhelming praise and harsh criticism Privacy: Consequences: include contextual information that allows employee to understand consequences of behaviours Description first, evaluation second: !!!! Performance continuum; include information on good behaviours more often, and information on poor behaviours less often Pattern identification; information is more useful if it is about a pattern, rather than an isolated event Confidence in the employee; manager should state this explicitly Advice and idea generation; employee should play an important role in idea generation Praise Although important to provide, some guidelines should be followed: Should be sincere, and given only when truly deserved Should be about specific behaviours and results Should be done “comfortably”; not rushed NOT given as an absence of the negative” (i.e.; “not bad”) Negative Feedback Not to punish, embarrass, chastise To assist in improving future performance: Why are people reluctant to deliver negative feedback? Negative reactions and consequences Negative experience in the past Playing ‘God’ Need for irrefutable and conclusive evidence If managers avoid giving negative feedback, it creates a feedback gap Consequence is that in the absence of feedback, the employee feels the current level of performance is appropriate. When the behaviours finally dictate the negative feedback is required, the damage may be too great on both the organization and the employee/manager relationship. May then become punitive, and this is what we hoped to avoid in the first place. Negative feedback is most useful when early coaching identified warning signs of performance problems, and they are therefore still manageable. Also useful when it clarifies unwanted behaviours and consequences and focuses on behaviours that can be changed. Regardless of whether the performance feedback is positive, or is identifying areas in need of improvement, it should provide answers to the following questions: How is your job going? What can be done to improve your and your unit’s products/services? How can you better serve your internal/external customers? PERFORMACNE REVIEW MEETINGS Managers are often conflicted over their dual roles as judges and coaches. Therefore, it is useful to apply a structured approach to the various meetings associated with performance. Not all usually take place separately, but the possibilities include: System inauguration Self-appraisal Classical performance review Merit/salary review Development plan Objective setting Regardless of what meeting is taking place, some things must precede it: Should give at least two weeks notice so employee can prepare Block enough time for a thorough meeting to take place Make the meeting in a private place and arrange for no interruptions Many meetings are often combined into what is often referred to as the “Performance Review Meeting”. Typical sequence: Explain the purpose of the meeting Self-appraisal Share ratings and explain rationale: Start with areas of agreement, and work from highest to lowest performance areas. Work to resolve areas of discrepancies Development discussion Employee summary: allows the manager to make sure they are on the same page Rewards discussion: and explain what needs to occur for higher rewards in the next period Follow-up meeting: schedule the next meeting Approval and appeals process discussion Final recap: using the past-present-future format Performance review discussions serve multiple purposes: Allow the employee to improve performance by identifying performance problems and solutions Help build relationships between manager and employee These purposes are not always fulfilled, as employees are often defensive: Exhibit fight of flight patterns of behaviour What can managers do to prevent defensive responses? Establish and maintain rapport Private meeting place No interruptions Emphasize two-way communications Sitting close to the employee Be empathetic: be in their shoes, and don’t claim successes to be the result of outside agencies Observe both verbal and non-verbal cues Minimize threats Encourage participation Despite all of this, defensiveness may arise Best to allow the employee to vent, and if necessary re-schedule the remaining portion of the meeting; providing a cooling off period Chapter Ten Reward Systems and Legal Systems Traditional and Contingent (CP) Plans Part One: Performance Management and Reward Systems Traditional Approach to reward systems – Rewarded based on the job they fill in the organizational hierarchy-not on how well they perform. This indirectly drives benefits and incentives received. Usually a range of salaries – min, midpoint, and max. No relationship between performance management and rewards. Contingent pay (CP)=Pay for Performance – rewards based on how well job is done. Rewards can be added to base pay, or one-time bonus. (One time payments not added to base pay = Variable pay) CP plans were initially for top management, but has been extended to sales jobs, and is now widespread. With range of salaries example, 2 people can be hired at same pay rate, but one can increase beyond the other, based on performance. Could also pass lower rate in higher scale. Reasons for Introducing CP PMS are more effective when results are tied directly to the reward system b/c when the PMS has a direct relationship with the reward system, performance measurement and performance improvement is taken more seriously. CP forces organizations to define effective performance clearly and to determine those factors that are likely to lead to effective performance. Serves an important communication goal because it creates an understanding of what really matters. High performers are attracted to the organization Project a good corporate image Helps enhance employee motivation to accomplish goals that are in sync with organizational needs. (and change behaviour to improve performance) Performance is determined by the joint effects of the following: Declarative knowledge Procedural knowledge Motivation CP addresses the motivation of employees providing the following conditions (determinants) exist: Expectancy- actions lead to performance Instrumentality – link between performance level and rewards Valence – rewards have value to employee There is a multiplicative relationship of the above yielding motivation. CP cannot solve issues of performance if there are declarative or procedural deficits, or any of the three conditions are not met (Expectancy, Instrumentality, Valence) Possible Problems Associated with CP Not all CP plans work as expected because of: Poor PMS in place – biased ratings, rewarding behaviours/results that are not job related, etc Folly of rewarding A while hoping for B – rewarding behaviours that do not promote organizational goals – example of rewarding quarterly earnings when goal is long-term growth Rewards are not considered significant – usually 12-15% increase is seen as significant Managers are not accountable – managers may inflate ratings and employees set low goals – rewards become driver for performance, rather than performance being the driver for the rewards Extrinsic motivation comes at the expense of intrinsic motivation – ignoring fact that rewards are only one way to motivate. More challenging and interesting work is equally (maybe more) important (hygiene versus motivator) Selecting a CP Plan What form shall it take? Module 1 – various forms of compensation Key question to assist in deciding is current organizational culture and whether CP is to be used as driver for cultural change. Traditional culture – top down decisions, vertical communications, clearly defined jobs Possible schemes: Piece rate - manufacturing Sales commissions- direct sales Group incentives – retail Involved culture – shared decision making, lateral communication, loosely defined roles Possible schemes: Profit sharing – law firms Skill based pay – acquisition of new skills – software companies Other question to answer is the strategic direction of organization. (CP selection plan is analogous to selecting the PMS) Objective CP Plan Employee development Skill based pay Customer Service Competency based pay, gain-sharing Productivity: Individual Piece rate, sales commission Productivity: Group Gain-sharing, group incentives Teamwork Team sales commissions, gain-sharing, competency-based pay Overall profit Profit-sharing, stock options, executive pay Be aware that stock options may open doors to unwanted behaviours in the market. Putting pay into context Pay isn’t everything Manager must realize that pay is just element in a set of management practices that impact (+/-) performance If pay is the only incentive offered, the organization will pay a high price in a lack of employee loyalty commitment. Reward should be more expansively defined than just financial====anything that increases the frequency of an employee action. If pay doesn’t meet this, then it should not be viewed as a reward. Same applies to praise and recognition—not rewards if they don’t result in desired actions In order to make sure incentives are viewed as rewards: Define and measure performance first, and then allocate rewards Use on rewards that are available Make sure all employees are eligible – more employees that are eligible the more likely to strive to become top performers Make rewards visible – especially non financial (be aware that visible rewards MAY negatively impact group harmony) Make rewards contingent – on performance and NOT the job occupied/duration Make rewards timely Make rewards reversible – variable pay is good example – contingent and reversible Use non-financial rewards – praise is free! Some organizations use the phrase “Rewards and recognition” to differentiate between financial/non-financial incentives Do the non- financial incentives work? YES. But financial incentives are important in a well designed PMS/CP Pay Structures Regardless of reward system, a process is necessary for establishing base pay for new employees All begin with job evaluation: data collection to determine job worth Considers KSA’a How valuable the job is to the organization Competitor pay for similar jobs Ranking method – fast, simple – JD’s are compared with others in terms of how valuable each job is to the organization – Probs – Criteria for ranking may be unclear – distance between ranks may be unequal Classification method – Two step process that creates a set of “classes”; (grades) that are defined so that many jobs can be placed within the grades – Advantage is jobs can be quickly “slotted” – acceptable to employees. Probs include extensive time to administer, and the distance between ranks may be unequal (as in Ranking) Point Method – Time consuming but accurate – Identifying compensable factors, assigning a specific value to each point, and then evaluating each job for the factors. For each job there is a weighting factor applied to the compensable factor based on the job evaluation. Example: Compensable Factor Degree X Weight = Points Skills 1 35 35 Experience required 2 15 30 etc (Usually 1-5 based on (totals 100) etc Importance to job) In the point method, the dollar value assigned to each point is often determined through the collection of market compensation data – often through compensation surveys – which also include information about all types of compensation; not just pay. Surveys can be internally developed, but there are professional surveys that also do it. Point Method – relative difference in pay between the various positions has been established through an internally consistent method Two notable advantages: Comprehensive measurement of the worth for all jobs in the organization Once process is established, it is easy to add new jobs Although surveys show little difference in the ranking of jobs regardless of evaluation system, they also show that even small change in total job worth score had a profound effect on compensation. Point system, as the most precise and accurate is probably the best. Regardless of system used, evaluators (supervisors/analysts) must be seen as impartial Broad-banding Trend to collapse job classes into fewer categories—‘bands” – usually five or fewer Now most common pay scale structure Why implemented: Provides more flexibility in rewarding people Reflects changes in organizational structure Better base for rewarding growth in competence Places more responsibility on managers for compensation decisions Better basis for rewarding career progression Widespread use of broad-banding reflects changes in the workplace, such as: Democratization of information so that employees can easily find the compensation rates for similar jobs in other organizations A desire to reward competence easily, without re-classification or even changing job title Flatter organizations “Broad-banding is here to stay” Part Two: Performance Management and the Law Up to this point, reference has been made for the need to be fair and just when designing PMS, etc. Serves as a good base for creating a legally defensible system A decent PM system will evolve if rules and procedures are: Known to all Applied equally to all Six legal concepts to understand: Employment at will; either party can end the contract at will. Gives employer latitude when assigning rewards. Employer could end contract without documenting performance, but there are 2 exceptions to termination under such circumstances: Implied contract from conversations or items in company documents Violation of public policy Negligence: if practices in the PMS are not followed by employer, the terminated employee may have legal recourse Defamation: disclosure of untrue, unfavourable performance information that damages employee reputation. Performance evaluation can only include information related to the job Misrepresentation: Disclosure of untrue FAVOURABLE information. (i.e. recommendations) Adverse Impact: Unintentional discrimination – PMS has an unintentional impact on a protected class. Must collect ongoing data to prove all “biases” are based on KSA’s of the job. Ex: minimum strength requirements for Fire Dept. Illegal Discrimination: Disparate treatment based on non-performance related aspects; race, etc To prove, one must show They are member of protected class Suffered an adverse employment decision based on evaluation Should not have suffered the adverse impact Reward was not given to another member of the class Any system that discriminates between employees on non-performance related ratings is likely to be ILLegal Laws (UK) that protect people from discrimination Equal Pay Act 1970 – based on sex Race relations act 1976 Sex discrimination act 1975 Disability Discrimination Act 1995 Employment Equality (Sexual Orientation) Regulations 2003 Employment Equality (Religion or Belief) Regulations 2003 Laws (US) Equal Pay Act (Sex) 1963 Civil Rights Act 1964 – became Equal Employment Opportunity Act 1972 Age Discrimination in Employment Act 1967 amended in 1986 Americans with Disabilities Act 1990 Collectively, they are aimed at ensuring PMS measure performance based on job related items only Research into legal decisions shows that the most defensible PMSs are those that: Emphasized the Measurement of job related aspects of performance Provided written instructions to the raters Allowed employees to review appraisal results All can be mitigated by a good PMS Characteristics of legally sound PMS: Performance dimensions are job related, defined, communicated, and within control of the employee Procedures are uniform and universally applied PMS is explained and communicated Feedback is timely; and employees are given opportunity to correct deficiencies PMS treats employees with civility and respect; employees are given a voice in the review process There is an appeals process Multiple, diverse, unbiased raters are used Supervisors receive training on management of PMS Documentation is thorough, and based on first-hand observation There are measures to identify potentially discriminatory biases Chapter Eleven Managing Team Performance Team – Two or more people interact dynamically and interdependently and share a common and valued goal, objective, or mission Why becoming so popular? As a way to improve products and services in time of increased pressures, including globalization As a way to cope with downsizing and restructuring leading to flatter organizations As a way to deal with increasingly complex products and services As a mechanism for responding quickly to rapid environmental changes Team-based organizations do not necessarily out perform those structured around individuals PMS must focus on: Individual Individual contribution to team Overall team performance Must be aware of the dangers of poorly implemented system, and that including teams adds a layer of complexity to the PMS Types of teams, and Implications for Performance Management Teams can be classified by: Complexity – routine to non-routine Routine – well defined, few deviations, outcomes are easily assessed Membership – static to dynamic How long the team will be together Stability of membership Three main types of groups as result Work or service teams – assembly line Project teams – introducing a prototype Network teams – not constrained by time or space, very dynamic – MIR PMS must consider team type before performance measures are put in place. Should align with type of team Work/service – engaged in routine tasks - peer ratings work well Project teams – Team will disband, so to focus on results will not help. Measurements should be taken as team works, so corrective action can be undertaken Network Teams – not constrained by time and space - Emphasize the future, especially in developing individual competencies Purposes and Challenges of Team PM Goals of PMS are same regardless if focus is individual or team: Strategic Administrative Information Developmental Organizational maintenance and documentation With PMS concerned with team performance, another goal is to: Motivate the individual to have stake in the team When organizations change quickly to team focus, the PMS must be altered to reflect this Can no longer solely evaluate individuals, as this may be counterproductive to team performance Organizational challenges when there is a team component to the PMS How to assess relative individual contributions – slackers vs stars How to balance individual and team performance – motivate the individual for the good of the team How to identify individual and team measures of performance – what are appropriate individual and team measures Including team performance in the PMS Not difficult to design PMS to reflect team orientation. Use basic components of fundamental PMS as template Prerequisites – Knowledge of organization’s goals, and knowledge of the job in question. For teams, “What is the team to accomplish?” KSA’s that allow individuals to contribute to team. Not just task, but also contextual/pr-social/organizational citizenship. Examples: Communication Decision-making Collaboration Performance Planning – Consideration of results and behaviour Results expected of the team, and behaviours expected of individual members. Development plan: for both team and individual Performance Execution – autonomous teams are responsible for themselves, but if there is a supervisor, both he and the team share responsibilities Team Communicate openly with the supervisor Be prepared for review by conducting peer appraisals Supervisor Observing and documenting team performance Observing and documenting relative contribution of individuals Updating teams on changes in goals, etc Providing resources and reinforcement Performance Assessment – All team members must evaluate each other’s performance, and the overall team performance. Peer evaluations are good in this situation. Also, self-evaluations are important Three basic types of team performance to be assessed: Task – Individual skills Individual Performance – Contextual – individuals contributing to team Team performance as a whole: Effectiveness –degree results satisfy stakeholders: Quality Quantity Time Cost Efficiency – degree that team process support team goals Communication Coordination Collaboration Decision-making Learning and Growth – degree that new team skills are learned Innovation Documented learning Best practices Process improvements Team member satisfaction – Degree that individuals are satisfied with membership Perceptions of personal growth through membership Should be no more than 15 measures of team performance; otherwise there is a preoccupation with measuring, rather than performing At team performance review meetings, it is useful to have someone from outside the team Performance Review – Members meet with manager or supervisor; in case of autonomous teams, the team leader would meet with review panel Two meetings needed: Supervisor meets with team as a whole Focus on overall team performance Supervisor meets with individual members Focus on individual behaviours Both meetings focus on: Past –performance in the review period Present – rewards that are available from the performance Future – new goals and development plans Performance Renewal and re-contracting - essentially the same as planning, except to integrate lessons learned from the review period; new goals, different competencies **An important difference is that, in addition to individual performance, the system includes individual performance as it affects the functioning of the team, as well as the performance of the tram as a whole.** Rewarding Team Performance As organizations embrace teams, rewards need to be altered to reflect this Team rewards are effective if they follow the same principles as for individuals: All employees should be eligible Rewards should be visible, contingent, and reversible Rewards need to be consistent with performance objectives: Don’t reward A while hoping for B Organizations can have variable pay systems in which individuals receive a bonus based on team performance in addition to any rewards received for individual performance. Bonuses can also be partially controlled by the team. If there are savings as a result of the team performance, the SELF-FUNDED gains can be partially distributed.