Human Resource Management

Managing Performance

Aradhna Malik (PhD)

Assistant Professor
VGSoM, IIT Kharagpur

Sources
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management: Policies and practices for multinational enterprises. NY:
Routledge.
Cascio, W. F. (2003). Managing human resources: Productivity, quality of work
life, profits. New Delhi: Tata McGraw Hill.
Cleveland, J. N., Murphy, K. R. & Williams, R. E. (1989). Multiple uses of
performance appraisal: Prevalence & correlates. Journal of Applied
Psychology, 74(1), 130-135.
Dessler, G. (2005). Human resources management (10th Ed.). New Delhi:
Pearson.
Dessler, G. & Varkkey, B. (2011). Human Resource Management (10th Ed.). New
Delhi: Pearson.
Gilmore, S. & Williams, S. (Eds.) (2009). Human Resources Management (Indian
Edition). New Delhi: Oxford.
Gomez-Mejia, L. R., Balkin, D. B. & Cardy, R. L. (2012). Managing human
resources (7th Ed.). New Delhi: PHI Ltd.
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Managing
Performance

Definitions of performance management

(Hall, in Gilmore & Williams, 2009)

Managing the business (Mohrman & Mohrman, 1995, in Hall, 2009)

Effective management is managing performance and is the

responsibility of all managers.
Term first used in the 1970s by Beer and Ruh (1976, in Hall, 2009):
Emphasizes the experiential (doing and learning) aspects of
performance management, and highlights the importance of
feedback as a management activity in this process.
First formal definition by Chartered Institute of Personnel and
Development, UK, 1992: Strategy which relates to every activity of
the organization set in the context of its human resource policies,
culture, style and communication systems.. The nature of the
strategy depends on the organizational context & can vary from
organization to organization.
Armstrong & Baron (2005): Process which contributes to the
effective management of individuals and teams in order to achieve
high levels of organizational performance. As such, it establishes
shared understanding about what is to be achieved and an approach
to leading and developing people which will ensure that it is

Performance management in practice

(Hall, in Gilmore and Williams, 2009)

Performance management system: Organizational framework or

model that supports the integration and implementation of
processes to facilitate the strategic management of performance
Armstrong & Baron (2005): Characteristics of an organization that
indicate the existence of a performance management system:

It (the organization) communicates a vision of its objectives to all

employees
It sets departmental and individual performance targets that are related to
wider organizational objectives
It conducts a formal review of progress towards these targets
It uses the review process to identify training, development, and reward
outcomes
It evaluates the whole process in order to improve effectiveness
It uses formal appraisal procedures as a way of communicating
performance requirements that are set on a regular basis

Performance Appraisal

Aims of appraisal (Hall, in Gilmore & Williams, 2009)

Communication
To provide an opportunity for open two way dialogue (feedback) about all
aspects of individual performance
To discuss & clarify expectations, roles, aspirations, & any issues affecting
performance
To focus on how the individual with the support of the organization contributes to
the aims of the business
Development
To identify opportunities for professional development linked to the employees
role and career aspirations
To provide training, learning, and development opportunities to enable employees
to contribute to the performance of their organization and to enhance their career
opportunities
To develop individuals in line with organizational succession planning
Motivation
To influence motivation positively by providing feedback, recognition & praise
To identify and provide opportunities for development, including appropriate
learning & training
To empower people by encouraging them to commit & take responsibility for
tasks and objectives, and to feel that they have the personal and organizational
resources to achieve their objectives

Identifying performance dimensions

(Gomez-Mejia, Balkin & Cardy, 2012)

Employer perspective:
Despite imperfect measurement techniques, individual
differences in performance can make a difference to
company performance
Documentation of performance appraisal and feedback may
be needed for legal defense
Appraisal provides a rational basis for constructing a bonus
or merit system
Appraisal dimensions & standards can help to implement
strategic goals & clarify performance expectations
Providing individual feedback is part of the performance
management process
Despite the traditional focus on the individual, appraisal
criteria can include teamwork & the teams can be the focus
of the appraisal

Identifying performance dimensions

(Contd.) (Gomez-Mejia, Balkin & Cardy, 2012)
Employee

perspective:

Feedback

is needed & desired

Improvement in performance requires assessment
Fairness requires that differences in performance
levels across workers be measured & have an
effect on outcomes
Assessment & recognition of performance levels
can motivate workers to improve their performance

Defining employees goals & efforts

(Dessler, 2005)

Assign

specific goals
Assign measurable goals
Assign challenging but doable goals
Encourage participation

Assessment of objectives (Hall, in Gilmore & Williams, 2009)

S:

Specific, significant, stretching

M:

Measurable, meaningful, motivational

A:

Attainable, agreed upon, achievable,

acceptable, action oriented

R:

Realistic, relevant, reasonable, rewarding,

results oriented

T: Time

based, timely, tangible

Appraising performance
(Cascio, 2003, Dessler, 2005)

Steps:
Defining the job and performance and setting achievable goals
Facilitating performance
Encouraging performance
Voice of employees
Consistency of treatment of employees
Relevance of rewards
Communication about rewards process
Appraising performance
Feedback to the employee regarding appraisal and directions
for the future
Challenges:
What to measure
How to measure

Requirements of effective appraisal

systems (Cascio, 2009)

Relevance:

Clear links between the performance standards for a particular job

and an organizations goals
Clear links between the critical job elements identified through a
job analysis and the dimensions to be rated on an appraisal form

Performance standards: Translation of job requirements into

levels of acceptable or unacceptable
Sensitivity: Capability of a performance appraisal system to
distinguish effective from ineffective performers
Reliability: Consistency of judgment
Acceptability by employees
Practicality: Ease of understandability and use of appraisal
instruments

Designing and operating

performance management
systems

Performance measurement
(Hall, in Gilmore & Williams, 2009)

Results oriented: Outputs approach using metrics, e.g.

Financial Sales turnover per employee, pre-tax profit per

employee, return on investments etc.
People Value added per employee, total leavers/ total employees
(%), early leavers/ total employees (%), days lost to absenteeism
per employee, etc.
Customer Complaints per customer (%), orders not delivered on
time (%), satisfied customers (%), marketing expenditure/ turnover
(%), etc.
Innovation, learning, and development R&D expenditure/
turnover (%), training expenditure/ turnover (%), training
expenditure per employee, etc.

Grading methods or ranking methods pseudo-quantitative

used for assessing attitude and behavioral aspects of
performance, where ranking or rating methods such as
behaviorally anchored rating scales (BARS) are commonly
employed

Graphic Rating Scale Method (Dessler, 2005)

Lists

traits (such as quality & reliability) and a range

of performance values (from unsatisfactory to
outstanding) for each trait
Supervisor rates each subordinate by circling or
checking the score that best describes his or her
performance for each trait. Assigned values are
then totalled
What can be measured?
Generic dimensions such as quality & quantity
Jobs actual duties, e.g. maintenance of records
Competency based appraisals focus on the

employees ability to exhibit the competencies that the

employer values for his job

Alternation ranking method (Dessler, 2005)

Ranks

employees from best to worst on a trait

or group of traits
List all subordinates to be rated
Cross out names of any not known well enough
to rank
Indicate the employee who is highest on the
characteristic being measured and also the one
who is lowest
Choose the next highest and next lowest, and
alternate between highest and lowest until all
employees have been ranked

Other methods (Dessler, 2005)

Paired comparison method: For every trait (quality of work,

quantity of work, etc.) every employee is paired and
compared with every other
Forced distribution method: Similar to grading on a curve.
Place predetermined percentages of ratees into performance
categories e.g. 15% high performers, 20% high average
performers, 30% average performers, 20% low average
performers, 15% low performers

Problems:

Possibility of bias
High possibility of intra-office politics affecting ratings

Critical incident method: Supervisor keeps a log of positive

and negative examples (critical incidents) of a subordinates
work related behavior. Every six months or so, supervisor and
subordinate meet to discuss the latters performance, using
the incidents as examples
Narrative forms: Final written appraisal

Behaviorally Anchored Rating Scales

(BARS) (Dessler, 2005)
Generate

critical incidents
Develop performance dimensions
Reallocate incidents
Scale the incidents
Develop a final instrument
Advantages:
A more

accurate gauge
Clearer standards
Feedback
Independent dimensions
Consistency

Management by Objectives (Hall, in Gilmore & Williams, 2009)

Introduced by Peter Drucker in 1955

First systematic approach that attempted to align organizational goals with individual
performance and development, involving all levels of management.
Key principles:
The setting of objectives (goals) & targets
The participation of managers in agreeing to objectives & performance criteria
The continual review & appraisal of results
Processes:
Clarification of organizational goals & objectives
Design of organizational structures & systems to achieve goals & objectives
Participation of managers to gain acceptance & agreement on objectives,
targets, & performance criteria of employees at organizational, group, &
individual level
Agreement to performance improvement plans to enable employees to contribute
to achieving individual objectives & targets, & to improving organizational
performance
Monitoring & reviewing employee progress & performance against agreed
objectives through the use of an appraisal process
Making changes to employees objectives & targets as a consequence of review
Review of organizational performance based on outcomes of the MBO cycle of
activities

Benefits of MBO
It

(Hall, in Gilmore & Williams, 2009)

communicates organizational aims to employees

It defines work activities based on the aims of the
organization
It enables employees to contribute towards the
aims of the organization by working towards their
individual goals
It provides a process for employee and
organizational improvement
It facilitates continuous and systematic
management of performance throughout the
organization

Balanced Scorecard (Hall, in Gilmore & Williams, 2009)

Kaplan and Norton (1996): Performance measurement system to

Performance management system
Perspectives to managing performance:
Customer: Customer value proposition
Business processes (operational): The internal processes & systems
Innovation & learning (people): The human contribution through
knowledge & skills
Goals: Strategic goals at the top level of an organization and then
translated into appropriate goals at lower levels such as business units,
teams, & individuals
Process of translating and cascading strategic aims into goals at every
level throughout an organization guides and encourages people to
contribute towards the overall performance of the organization
Strategic mapping: Definition of strategic aims and relation of these aims to
organizational activities to serve as a basis for specifying goals within the
different performance perspectives

Balanced Scorecard (Hall, in Gilmore & Williams, 2009)

Financial
perspective
How we
satisfy our
shareholders
Customer
perspective

Operational
perspective
How we excel
at what we do

Vision and
strategy

People
perspective
How our
employees
contribute

How our
customers
view us

Example of a Balanced Scorecard

(Hall, in Gilmore & Williams, 2009)
Goal
(Bro
ad
obje
ctive
)

Mea
sure
or
metr
ic

Obje
ctive
/
targe
t

Deve
lopm
ent
actio
ns

Achi
eve
exc
ellen
t
cust
omer
satis
facti
on

% of
cust
omer
s
lost
over
12
mont
hs

Less
than
10%
loss
of
cust
omer
s in
6
mont
hs
time

Deve
lop
lost
cust
omer
s
repo
rt

% of

More Use

Criticisms of Balanced Scorecard

(Hall, in Gilmore & Williams, 2009)

Issues

related to its interpretation and

implementation
Issues related to time/ level of implementation
Individual
Reporting

Distraction

tool

from business activities

Lack of ownership and accountability
Difficult to establish cause & effect

European Foundation for Quality Management

(EFQM) Excellence Model (Hall, in Gilmore & Williams, 2009)

Introduced in 1992 (efqm.com)

Based on:

Enablers:

Results:

Leadership
People
Strategy & policy
Partnership & resources
Processes
People
Customers
Society
Key performance indicators

Criticisms:

Relies on self assessment

Heritage in quality management developed as auditing frameworks with
a focus on compliance with existing standards, rather than managing
performance with a view to the future

Advantages & disadvantages of appraisal tools

(Dessler, 2005, Hall, in Gilmore & Williams, 2009)

To
ol

Advantag Disadvan
es
tages

Gr
ap
hic
rati
ng
sca
le

Simple to
use,
provides
a
quantitati
ve rating
for each
employe
e

BA
RS

Provides Difficult
behavior to
al
develop
anchors
.
Accuracy

Standard
s may be
unclear,
halo
effect,
central
tendency
,
leniency,
bias can
be
problem
s

Feedback on performance
(Hall, in Gilmore & Williams, 2009)

Purpose:

To provide an opportunity for

communication between managers and
employees that specifically addresses
performance issues.
Methods:
Top

down feedback & upward feedback

unidirectional and hence flawed
360 degree is best: feedback from suppliers,
customers, peers, subordinates, supervisors
Self appraisal

Managing poor performance

(Hall, in Gilmore & Williams, 2009)
Employee fails to perform effectively

Investigation of reason for poor performance

Alternative courses of action

Address issues via
Performance review
Consider alternative
employment

Address shortcomings actions may include:

Clarify role
Set objectives
Establish monitoring meetings

Record issues discussed and action taken

If still no improvement
Procedures within disciplinary policy will apply

Effectiveness of performance appraisals

(Hall, in Gilmore & Williams, 2009)

Concerns regarding

Unintended consequences because of inappropriate (and

undesirable) employee behavior in attempting to achieve
objectives
Past reasons for current behavior
Duration between appraisals annual/ semi annual, quarterly
what is too soon?
Feedback vs. Real encouragement and support for good
performance

Potential rating scale appraisal problems (Dessler, 2005):

Unclear standards
Halo effect: Influence of the raters general impression about ratee
Central tendency: Tendency of supervisors to rate all subordinates
in the middle of the rating scale
Leniency or strictness
Bias

Appraising performance (Dessler, 2005)

Make sure you know what you mean by successful performance.

Conduct job analysis to establish the criteria and standards
Incorporate these criteria and standards into a rating instrument
(BARS, graphic rating scale, etc.
Communicate performance standards to employees and to those
rating them, in writing
When using graphic rating scales, avoid abstract trait names such
as loyalty or honesty unless you can define them in terms of
observable behaviors
Use subjective supervisory ratings (e.g. essays) as only one
component of the overall appraisal process
Train supervisors to use the rating instrument properly. Give
instructions on how to apply performance appraisal standards
when making judgments & provide written instructions for using
the rating scales.
Allow appraisers substantial daily contact with the employees they
are evaluating

Appraising performance (Contd.)

(Dessler, 2005)

Base your appraisals on separate ratings for each dimension

of the job performance instead of using a single overall rating
of job performance
Whenever possible, have more than one appraiser conduct
the appraisal, and conduct all such appraisals independently
One appraiser should never have absolute authority to
determine a personnel action
Employees should have the opportunity to review and make
comments, written or virtual about their appraisals before
they become final, and should have a formal appeals process
through which to appeal their ratings
Document all information and reasons bearing on any
personal decision
Where appropriate, provide corrective guidance to assist poor
performers in improving performance

Appraisal interviews (Dessler, 2005)

Discussion

after the appraisal between

supervisor and subordinate to review the
appraisal and make plans to remedy
deficiencies and reinforce strengths
Types of appraisal interviews:
Satisfactory

- Promotable
Satisfactory - Not promotable
Unsatisfactory but correctable
Unsatisfactory and uncorrectable

How to conduct the appraisal interview

(Dessler, 2005)

Conducting the interview

How to handle a defensive subordinate:

Talk in terms of objective work data

Dont get personal
Encourage the person to talk
Dont tiptoe around
Recognize that defensive behavior is normal
Never attack a persons defenses and try to explain someone to
themselves, e.g. statements like, You know the real reason you are using
that excuse is that you cannot bear to be blamed for anything
Postpone action
Recognize your own limitations

How to criticize a subordinate: Praise in public, punish in private

How to ensure that the interview leads to performance

Ensure that the subordinate does not feel threatened during the interview
Ensure that the subordinate has the opportunity to present his/her ideas
and feelings and has a chance to influence the course of the interview
Be helpful and supportive to the subordinate & help him/ her succeed

Effective performance feedback interviews

(Cascio, 2003)

Before

the interview:
Communicate frequently
Get training in performance appraisal
interviewing
Plan to use a problem solving approach
rather than tell and sell
Encourage subordinates to prepare for
performance feedback interviews

Effective performance feedback interviews (Contd)

(Cascio, 2003)

During the appraisal interview:

Encourage subordinates to participate
Judge performance, not personality and mannerisms
Be specific
Be an active listener:
Take the time to listen hold all phone calls and do not allow interruptions
Communicate verbally and non-verbally that you genuinely want to help
As the subordinate begins to tell his or her side of the story, do not interrupt
and do not argue
Watch for verbal as well as nonverbal cues regarding the subordinates
agreement or disagreement with your message
Summarize what was said and what was agreed to
Avoid destructive criticism because:
It produces negative feelings among recipients and can initiate or intensify
conflict
It reduces the preference of individuals for handling future disagreements
with the giver of the feedback in a conciliatory manner (e.g. collaboration and
compromise)
It has negative effects on self-set goals and on feelings of self confidence
Set mutually agreeable goals for future improvements

Effective performance feedback

interviews (Contd) (Cascio, 2003)
After

the appraisal interview

Communicate

frequently about performance and

assess progress towards goals regularly because:
It

helps keep behavior on target

It provides a better understanding of the reasons behind a
given level of performance
It enhances the subordinates commitment to perform
effectively
Make

organizational rewards contingent on

performance

Contemporary issues in managing

performance (Hall, in Gilmore & Williams, 2009)
Human

capital management: Management of

measurable contribution by the people in the
organization
Governance: Combination of conformance or
compliance and performance
Future of managing performance
Increasing

importance due to increasing competition

Effective reporting and management of performance
Need for uniformity in reporting of performance
Need for conformity of reporting of performance

Thank You