MGT 463 – Exam 1

Definition of Performance Management
1. Continuous process of …
… the performance of individuals and teams
2. Aligning performance with the strategic goals of the organization
Performance Management is NOT…
Performance Appraisal`
Differences: Performance Management
-Strategic business considerations
-Driven by line manager
-Ongoing feedback (So employee can improve performance)
Differences: Performance Appraisal
-Driven by HR
-Assesses employee: Strengths & Weaknesses
-Once a year
-Lacks ongoing feedback
Contributions of Performance Management for Employees
-Clarify definitions of: Job & Success criteria
-Increase motivation to perform
-Increase self-esteem
-Enhance self-insight and development
Contributions of Performance Management for Managers
-Communicate supervisors’ views of performance more clearly
-Managers gain insight about subordinates
-Better and more timely differentiation between good and poor performers
-Employees become more competent
Contributions of Performance Management for Organization/HR Function
-Clarify organizational goals
-Facilitate organizational change
-Fairer, more appropriate administrative actions
-Better protection from lawsuits
Disadvantages/Dangers of Poorly Implemented PM Systems for Employees
-Lowered self-esteem
-Employee burnout and job dissatisfaction
-Damaged relationships
-Use of false or misleading information
Disadvantages/Dangers of Poorly Implemented PM Systems for Managers
-Increased turnover
-Decreased motivation to perform
-Unjustified demands on managers’ resources
-Varying and unfair standards and ratings
Disadvantages/Dangers of Poorly Implemented PM Systems for Organization/HR Function
-Wasted time and money
-Unclear ratings system
-Emerging biases
-Increased risk of litigation
Reward Systems Definition
Set of mechanisms for distributing…

-Tangible returns

-Intangible or relational returns

… as part of an employment relationship

Reward Systems Tangible Returns
Cash compensation:
-Base pay
-Cost-of-Living and Contingent Pay
-Incentives (short- and long-term)

Benefits such as:
-Income Protection
-Work/life focus

Reward Systems Intangible Returns
Relational returns such as:
-Recognition and status
-Employment security
-Challenging work
-Learning opportunities
Returns and Their Degrees of Dependency on the Performance Management System
Low Dependency:
-Cost of Living Adjustment
-Income Protection

Moderate Dependency:
-Work/Life Focus
-Relational Returns
-Base Pay

High Dependency:
-Contingent Pay
-Short-Term Incentives
-Long-Term Incentives

Purposes of PM Systems Strategic Purpose
-Link individual goals with organization’s goals
-Communicate most crucial business strategic initiatives
Purposes of PM Systems Administrative Purpose
Provide information for making decisions regarding:
-Salary adjustments
-Retention or termination
-Recognition of individual performance
Purposes of PM Systems Informational Purpose
Communicate to employees:
-What is important
-How they are doing
-How to improve
Purposes of PM Systems Developmental Purpose
-Performance feedback/coaching
-Identification of individual strengths and weaknesses
-Identification of causes of performance deficiencies
-Tailor development of individual career path
Purposes of PM Systems Organizational Maintenance Purpose
-Plan effective workforce
-Assess future training needs
-Evaluate performance at organizational level
-Evaluate effectiveness of HR interventions
Purposes of PM Systems Documentation Purpose
-Validate selection instruments
-Document administrative decisions
-Help meet legal requirements
An Ideal PM System: 15 Characteristics
1. Strategically congruent
2. Contextually congruent
3. Thorough
4. Practical
5. Meaningful
6. Specific
7. Identifies effective and ineffective performance
8. Reliable
9. Valid
10. Acceptable and fair
11. Inclusive
12. Open (No Secrets)
13. Correctable
14. Standardized
15. Ethical
An Ideal PM System: 15 Characteristics Strategically Congruent
-Consistent with organization’s strategy
-Aligned with unit and organizational goals
An Ideal PM System: 15 Characteristics Contextually Congruent
Congruent with the organization’s culture as well as the broader cultural context of the region or country

Example: A 360-degree feedback is not effective where communication is not fluid and hierarchies are rigid

An Ideal PM System: 15 Characteristics Thorough
-All employees are evaluated
-All major job responsibilities are evaluated
-Evaluations cover performance for entire review period
-Feedback is given on both positive and negative performance
An Ideal PM System: 15 Characteristics Practical
-Easy to use
-Acceptable to decision makers
-Benefits outweigh costs
An Ideal PM System: 15 Characteristics Meaningful
-Standards are important and relevant
-System measures ONLY what employee can control
-Results have consequences
-Evaluations occur regularly and at appropriate times
-System provides for continuing skill development of evaluators
An Ideal PM System: 15 Characteristics Specific
Concrete and detailed guidance to employees:
-What’s expected
-How to meet the expectations
An Ideal PM System: 15 Characteristics Identifies effective and ineffective performance
-Distinguish between effective and ineffective: Behaviors & Results
-Provide ability to identify employees with various levels of performance.
An Ideal PM System: 15 Characteristics Reliable
-Free of error
-Inter-rater reliability
An Ideal PM System: 15 Characteristics Valid
-Relevant (i.e., measures what is important)
-Not deficient (i.e., doesn’t measure unimportant facets of job)
-Not contaminated (i.e., only measures what the employee can control)
An Ideal PM System: 15 Characteristics Acceptable and Fair
-Perception of Distributive Justice:
Work performed -> Evaluation received -> Reward

-Perception of Procedural Justice
*Fairness of procedures used to: Determine ratings & Link ratings to rewards

An Ideal PM System: 15 Characteristics Inclusive
-Represents concerns of all involved
-When system is created, employees should help with deciding: What should be measured & How it should be measured
-Employee should provide input on performance prior to evaluation meeting.
An Ideal PM System: 15 Characteristics Open (No Secrets)
-Frequent, ongoing evaluations and feedback
-Two-way communications in appraisal meeting
-Clear standards and ongoing communication
-Communications are factual, open, and honest
An Ideal PM System: 15 Characteristics Correctable
-Recognizes that human judgment is fallible
-Appeals process provided
An Ideal PM System: 15 Characteristics Standardized
-Ongoing training of managers to provide
-Consistent evaluations across: People &
An Ideal PM System: 15 Characteristics Ethical
-Supervisor suppresses self-interest
-Supervisor rates only where (s)he has sufficient information about the performance dimension
-Supervisor respects employee privacy
Integration with other Human Resources and Development Activities
PM provides information for:
-Development of training to meet organizational needs
-Workforce planning
-Recruitment and hiring decisions
-Development of compensation systems
PM Around the World
PM used in United States, Mexico, Turkey, India, Australia, China, and so on

Common across countries: Need to align individual and organizational goals to enhance the performance of individuals and groups

Yet, different countries emphasize different components of PM

EX 1: PMs in Japan tend to emphasize behaviors to the detriment of results

EX 2: The current challenge among many organizations in South Korea is how to reconcile a merit-based approach with more traditional cultural values

Performance Management Process
Prerequisites -> Performance Planning -> Performance Execution -> Performance Assessment -> Performance Review -> Performance Renewal and Recontracting (START OVER)
1. Knowledge of the organization’s mission and strategic goals
2. Knowledge of the job in question
Knowledge of Mission and Strategic Goals
Strategic planning
-Purpose or reason for the organization’s existence
-Where the organization is going
-Organizational goals
-Strategies for attaining goals
Mission and Goals
Cascade effect throughout organization

Organization -> Unit -> Employee

Knowledge of the Job
Job analysis of key components

KSAs required to do the job

Job Description
-Job duties
-Working conditions
Generic Job Descriptions
Occupational Informational Network (O*Net)

Job Analysis
Use a variety of tools
-Questionnaires (available on the Internet)
Job Analysis Follow-Up
All incumbents should
-Review information
-Provide feedback
-Rate tasks and KSAs in terms of: Frequency & Criticality
Rater Biases
Rating of frequency and criticality of tasks and KSAs is susceptible to:
-Self-serving bias
-Social projection bias
-False consensus bias

-These biases exaggerate the importance of certain tasks & KSAs

Rater Training: Web-based training
-Takes only about 15 minutes
-Establishes common point of reference via largely 5 steps
-In the 5 steps, participants basically practice their rating skills
-As a result, reduces exaggeration of the importance of certain task and KSAs
Web-based training: 5 steps
1. Defines the rating dimensions
2. Defines the scale anchors
3. Describes behaviors indicative of each rating dimension
4. Allows raters to practice their rating skills, and
5. Provides feedback on the practice
Performance Planning: Results
Key accountabilities

Specific objectives

Performance standards

Key Accountabilities
-Broad areas of a job for which the employee is responsible for producing results
Specific Objectives
Statements of outcomes:
Performance Standards
-“Yardstick” to evaluate how well employees have achieved each objective
-Information on acceptable and unacceptable performance, such as: Quality, Quantity, Cost, & Time
Performance Planning: Behaviors
How a job is done
Performance Planning: Competencies
-Measurable clusters of KSAs

-Critical in determining how results will be achieved

Performance Planning: Development Plan
-Areas for improvement
-Goals to be achieved in each area of improvement
Performance Execution: Employee’s Responsibilities
-Commitment to goal achievement
-Ongoing requests for feedback and coaching
-Communication with supervisor
-Collecting and sharing performance data
-Preparing for performance reviews
Performance Execution: Manager’s Responsibilities
-Observation and documentation
Performance Assessment
-Manager assessment
-Other sources (e.g., peers, customers)
Multiple Assessments Are Necessary To…
-Increase employee ownership
-Increase commitment
-Provide information
-Ensure mutual understanding
Performance Review Overview of Appraisal Meeting
-Past: Behaviors and results
-Present: Compensation to be received
-Future: New goals and development plans
Six Steps for Conducting Productive Performance Reviews
1. Identify what the employee has done well and poorly
2. Solicit feedback
3. Discuss the implications of changing behaviors
4. Explain how skills used in past achievements can help overcome any performance problems
5. Agree on an action plan
6. Set a follow-up meeting and agree on behaviors, actions, and attitudes to be evaluated
Performance Renewal and Recontracting
Identical to performance planning EXCEPT:
-Uses insights and information from previous phases
-Restarts the performance management cycle
Strategic Planning: Definition
-Describe the organization’s destination
-Assess barriers
-Select approaches for moving forward
Strategic Planning: Goal
Allocate resources to provide the organization with competitive advantage
Strategic Planning: Purposes
-Help define the organization’s identity
-Help the organization prepare for the future
-Enhance the ability to adapt to environmental change
-Provide focus and allow for better allocation of resources
-Produce an organizational culture of cooperation
-Allow for the consideration of new options and opportunities
-Provide employees with information to direct daily activities
Strategic Planning : Overview
1. Environmental Analysis
2. Mission
3. Vision
4. Goals
5. Strategies
Environmental Analysis
Identifies external and internal trends:
-To understand broad industry issues
-To make decisions using “big picture” context
External Trends
-Environmental characteristics that can help the organization succeed

-Environmental characteristics that can prevent the organization from being successful

External Trends— Factors to Consider
Internal Trends
-Internal characteristics that the organization can use for its advantage

-Internal characteristics that can hinder the success of the organization

Internal Trends— Factors to Consider
-Organizational structure
-Organizational culture
Gap Analysis

External environment
(opportunities and threats)
Internal environment
(strengths and weaknesses)

Gap Analysis Determines:
Opportunity + Strength = Leverage

Opportunity + Weakness = Constraint

Threat + Strength = Vulnerability

Threat + Weakness = Problem

Strategic Planning for the Organization
Environmental and Gap Analyses provide information for organizations to decide:
-Who they are
-What they do
A good mission statement answers:
-Why does the organization exist?
-What is the scope of the organization’s activities?
-Who are the customers served?
-What are the products or services offered?
Mission Statement contains:
Information on an organization’s:
-Basic product/service to be offered
-Primary market/customer groups
-Unique benefits and advantages of product/services
-Technology to be used
-Concern for survival through growth and profitability
Mission Statement May Contain:
Information on an organization’s values and beliefs:
-Managerial philosophy
-Public image sought by organization
-Self-concept of business adopted by
-Statement of future aspirations
-Focuses attention on what is important
-Provides context for evaluating
A Good Vision Statement: Eight Characteristics
1. Brief
2. Verifiable
3. Bound by a Timeline
4. Current
5. Focused
6. Understandable
7. Inspiring
8. A stretch
Purposes for Setting Goals
-Formalize expected achievements
-Provide motivation
-Provide tangible targets
-Provide the basis for good decisions
-Provide the basis for performance measurement
Create strategies, game plans or “How to” procedures to address issues of:
How the HR Function Contributes:
-Communicate knowledge of strategic plan
-Provide knowledge of KSAs needed for strategy implementation
-Propose reward systems
Strategic Plans at the Unit Level
Every Unit mission statement, vision statement, goals, and strategies”

Must clearly align with
and be congruent with

the Organization’s mission statement, vision statement, goals, and strategies

Strategic Consensus
Definition: The state in which various organizational units agree on a common set of strategic priorities
-Predicts firm performance
Two Ways to Achieve Strategic Consensus
Strategies -> Goals
Goals -> Strategies

Strategies -> Goals better predicts firm performance

Job Descriptions
-Tasks and KSAs are congruent with Organization and Unit strategic plans.
-Activities described support mission and vision of Organization and Unit.
Individual and Team Performance
Organization and Unit mission, vision, goals lead to:
-Performance management system, which:
-Motivates employees
-Aligns development plans with
organization priorities
Strategic Plan -> Six Choices in PM System Design
1. Criteria (Behavior vs. Results)
2. Participation (Low vs. High)
3. Temporal Dimension (Short Term vs. Long Term)
4. Level of Criteria (Individual vs. Team/Group)
5. System Orientation (Developmental vs. Administrative)
6. Rewards (Pay for Performance vs. Tenure/Position)
Building Support— Answering “What’s in It for Me?”
For top management support:
-Emphasize that PM helps carry out an organization’s vision

For support from all levels:
-Clearly communicate nature and consequences of PM
-Involve employees in the process of PM design and implementation

Defining Performance: Performance is…
-What employees do
Defining Performance: Performance is NOT…
-Results or outcomes
-What employees produce
Behaviors Labeled as Performance Are…

-Many different kinds of behaviors
-Advance or hinder organizational goals

Behaviors Are NOT Always…
Results/Consequences May Be Used…
-To infer behavior
-As proxy for behavioral measure
Determinants of Performance
Performance =
Declarative Knowledge
Procedural Knowledge
Declarative Knowledge
Information about:

Understanding of task requirements

Procedural Knowledge
-What to do
-How to do it


-Expenditure of effort
-Level of effort
-Persistence of effort

Deliberate practice leads to excellence

Deliberate Practice
-Approach performance with goal of getting better and better
-Focus on performance
-What is happening?
-Seek feedback from expert sources
-Build mental models of job, situation, and organization
-Repeat first four steps on an ongoing basis
Implications for Addressing Performance Problems
-Managers need information to accurately identify source(s) of performance problems
-Performance management systems must…
-Measure performance
-Provide information on source(s) of problems
Factors Influencing Determinants of Performance
Individual characteristics:
-Procedural knowledge
-Declarative knowledge

HR practices

Work environment

Performance Dimensions: Types of Multidimensional Behaviors
-Task performance
-Contextual performance
-Prosocial behaviors
-Organizational citizenship
Task Performance
Activities that:
-Transform raw materials
-Help with the transformation process
Contextual Performance
Behaviors that:
-Contribute to the organization’s effectiveness
-Provide a good environment in which task performance can occur
Differences Between Task and Contextual Performance
Contextual Performance:
-Fairly similar across jobs
-Not likely to be role prescribed
-Influenced by: Personality

Task Performance
-Varies across jobs
-Likely to be role prescribed
-Influenced by: Abilities & Skills

Why Include Task and Contextual Performance Dimensions in PM System?
1. Global competition
2. Customer service
4. Employee perceptions of PM
5. Supervisor views
6. Cultural differences
Voice Behavior
-Behavior that emphasizes expression of constructive challenge with the goal to improve rather than merely criticize
-Challenges the status quo in a positive way
-Makes innovative suggestions for change
-Recommends modifications to standard procedures
Approaches to Measuring Performance
-Behavior Approach: Emphasizes how employees do the job
-Results Approach: Emphasizes what employees produce
-Trait Approach: Emphasizes individual traits of employees
Behavior Approach
Appropriate if…
-Employees take a long time to achieve desired outcomes
-Link between behaviors and results is not obvious
-Outcomes occur in the distant future
-Poor results are due to causes beyond the performer’s control

Not appropriate if…
-Above conditions are not present

Results Approach
-Less time
-Lower cost
-Data appear objective

Most appropriate when:
-Workers skilled in necessary behaviors
-Behaviors and results obviously related
-Consistent improvement in results over time
-Many ways to do the job right

Trait Approach
Most appropriate when:
-Emphasis on individual: Evaluate stable traits (i.e., cognitive abilities, personality)
-Positive relationship between abilities, personality traits, and desirable work-related behaviors
-Appropriate if structural changes planned for organization

-Improvement not under individual’s control
-Trait may not lead to desired behaviors or results

Broad areas of a job for which an employee is responsible for producing results
Statements of important and measurable outcomes
Performance Standards
Yardstick used to evaluate how well employees have achieved objectives
Determining Accountabilities
Collect information about the job (Job Description)

Determine importance of task or cluster of tasks
-Percentage of employee’s time spent performing tasks
-Impact on the unit’s mission if performed inadequately
-Consequences of error

Determining Objectives
Purpose: to identify outcomes
-Limited number
-Highly important

When achieved
-Dramatic impact on overall organization success

Ten Characteristics of Good Objectives
1. Specific and Clear
2. Challenging
3. Agreed Upon
4. Significant
5. Prioritized
6. Bound by Time
7. Achievable
8. Fully Communicated
9. Flexible
10. Limited in Number
Determining Performance Standards
Standards refer to aspects of performance objectives, such as:

-Quality : How well the objective is achieved

-Quantity : How much, how many, how often, and at what cost?

-Time :Due dates, schedule, cycle times, and how quickly?

Standards Must Include
-A verb
-The desired result
-A due date
-Some type of indicator
-Quality or
Good Performance Standards: Six Characteristics
1. Related to the Position
2. Concrete, Specific, and Measurable
3. Practical to Measure
4. Meaningful
5. Realistic and Achievable
6. Reviewed Regularly
Identify Competencies
-Measurable clusters of KSAs
-That are critical in determining how results will be achieved
Types of Competencies
-Distinguish between superior and average performance

-Needed to perform to minimum standard

Identify Indicators
-Observable behaviors
-Used to measure the extent to which competencies are present or not
Necessary Components for Describing Competencies
-Description of specific behaviors
-When competency is demonstrated
-When competency is not demonstrated
-Suggestions for developing the competency
Choose a Measurement System
-Comparative system: Compares employees with one another
-Absolute system: Compares employees with prespecified performance standards
Advantages of Comparative Systems
-Easy to explain
-Identifies top as well as underperformers
-Better control for biases and errors found in absolute systems
-Central tendency
Disadvantages of Comparative Systems
-Rankings may not be specific enough for:
-Useful feedback
-Protection from legal challenge
-No information on relative distance between employees
-Specific issues with forced distribution method
Comparative Systems
-Simple rank order
-Alternation rank order
-Paired comparisons
-Relative percentile
-Forced distribution
Simple Rank Order
-Simple and easy to do
-Results are clear

-Judges performance based on one dimension only
-May be difficult to rank similar performance levels

Alternation Rank Order
-Simple and easy to do
-Results are clear
-Uses two anchors (best and worst)

-Judges performance based on one dimension only
-May be difficult to rank similar performance levels
-Does not specify threshold for acceptable performance

Paired Comparisons
-Final rankings are more accurate

-Very time consuming
-May encounter problem of comparing “apples and oranges”

Relative Percentile
-Simple and easy to use
-Evaluates specific competencies or overall performance

-May be difficult to consider all ratees at the same time
-Time consuming if using several scales for different competencies

Forced Distribution
-Categorizes employees into specific performance groups
-Facilitates reward assessment
-Competition may be good for organizational performance

-Assumes performance scores are normally distributed
-May discourage contextual performance and teamwork

Absolute Systems
-Behavior checklists
-Critical incidents
-Graphic rating scales
Advantages and Disadvantages of Absolute Systems
-Can be used in large and small organizations
-Evaluations more widely accepted by employees

-Higher risk of leniency, severity, and central tendency biases
-Generally, more time consuming than comparative systems

Behavior Checklists
-Easy to use and understand
-Provides quantitative information
-Widespread use
-More objective than other systems

-May feel impersonal and disconnected
-Scale points used are often arbitrary
-Difficult to get detailed and useful feedback

-Simplest absolute method
-Individualized for each employee
-Can be done anytime
-Potential for detailed feedback

-Unstructured and may lack detail
-Depends on supervisor’s writing skill
-Comparisons virtually impossible
-Lack of quantitative information; difficult to use in personnel decisions

Critical Incidents
-Focus on actual job behavior
-Provides specific examples
-Employees identify with rating

-Collecting critical incidents can be very time consuming
-Quantification is difficult

Graphic Rating Scales
-Meanings, interpretations, and dimensions being rated are clear
-Useful and accurate
-Most popular tool

-Time consuming and resource-laden to develop
-Lacks individualized feedback and recommendations

Graphic Rating Scales: BARS Improvement
-Behaviorally Anchored Rating Scales (BARS)
-Uses critical incidents as anchors
-Involves multiple groups of employees in development
-Identify important job elements
-Describe critical incidents at various levels of performance
-Check for inter-rater reliability
Measuring Performance
-Several types of methods
-Differ in terms of:
-Practicality (time and effort)
-Usefulness (quantifiable)
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