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Prentice Hall, Inc. © 2006
PERFORMANCE PERFORMANCE MANAGEMENTMANAGEMENT
Herman AguinisHerman Aguinis
Herman Aguinis, University of Colorado at Denver
PERFORMANCE PERFORMANCE MANAGEMENTMANAGEMENT
Herman AguinisHerman Aguinis
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Performance Management in Context: Performance Management in Context: OverviewOverview
Definition of Performance Management (PM) The Performance Management Contribution Disadvantages/Dangers of Poorly-implemented PM
systems Definition of Reward Systems Aims and role of PM Systems Characteristics of an Ideal PM system Integration with Other Human Resources and
Development Activities
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Performance Management: DefinitionPerformance Management: Definition
Continuous Process ofIdentifying performance of individuals and teamsMeasuring performance of individuals and teamsDeveloping performance of individuals and teams
andAligning performance with the strategic goals of the
organization
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
PM is NOT performance PM is NOT performance appraisalappraisal
• PM– Strategic business
considerations– Ongoing feedback– So employee can
improve performance– Driven by line manager
• Performance appraisal– Assesses employee
• Strengths & • Weaknesses
– Once a year– Lacks ongoing feedback– Driven by HR
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Contributions of PM Contributions of PM For EmployeesFor Employees
The definitions of job and success are clarifiedMotivation to perform is increasedSelf-esteem is increasedSelf-insight and development and enhanced
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Contributions of PMContributions of PMFor ManagersFor Managers
Supervisors’ views of performance are communicated more clearly
Managers gain insight about subordinatesThere is better and more timely differentiation
between good and poor performersEmployees become more competent
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Contributions of PM Contributions of PM For Organization/HR FunctionFor Organization/HR Function
Organizational goals are made clearOrganizational change is facilitated Administrative actions are more fair and
appropriateThere is better protection from lawsuits
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Disadvantages/Dangers of Disadvantages/Dangers of Poorly-implemented PM Systems Poorly-implemented PM Systems
for Employeesfor Employees
• Lowered self-esteem• Employee burnout and job dissatisfaction• Damaged relationships• Use of false or misleading information
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Disadvantages/Dangers of Disadvantages/Dangers of Poorly-implemented PM Systems Poorly-implemented PM Systems
for Managersfor Managers
• Increased turnover• Decreased motivation to perform• Unjustified demands on managers’ resources• Varying and unfair standards and ratings
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
• Wasted time and money• Unclear ratings system• Emerging biases• Increased risk of litigation
Disadvantages/Dangers of Disadvantages/Dangers of Poorly-implemented PM Systems Poorly-implemented PM Systems
for Organizationfor Organization
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Reward Systems: DefinitionReward Systems: Definition
Set of mechanisms for distributingTangible returns
andIntangible or relational returns
As part of an employment relationship
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Tangible returnsTangible returns
Cash compensationBase payCost-of-Living & Contingent PayIncentives (short- and long-term)
Benefits, such as Income ProtectionAllowancesWork/life focus
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Intangible returnsIntangible returns
Relational returns, such asRecognition and statusEmployment securityChallenging work Learning opportunities
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Returns and Their Degree of DependencyReturns and Their Degree of Dependencyon the Performance Management Systemon the Performance Management System
Return Cost of Living Adjustment Income Protection Work/life Focus Allowances Relational Returns Base Pay Contingent Pay Short-term Incentives Long-term Incentives
Degree of Dependency• Low• Low• Moderate• Moderate• Moderate• Moderate• High• High• High
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Purposes of PM Systems:Purposes of PM Systems:OverviewOverview
StrategicAdministrativeInformationalDevelopmentalOrganizational maintenanceDocumentation
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Strategic PurposeStrategic Purpose
Link employee behavior with organization’s goals
Communicate most crucial business strategic initiatives
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Administrative PurposeAdministrative Purpose
Provide information for making decisions re:Salary adjustmentsPromotionsRetention or terminationRecognition of individual performanceLayoffs
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Informational PurposeInformational Purpose
Communicate to Employees:ExpectationsWhat is importantHow they are doingHow to improve
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Developmental PurposeDevelopmental Purpose
Performance feedback/coachingIdentification of individual strengths and
weaknessesCauses of performance deficienciesTailor development of individual career path
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Organizational Maintenance PurposeOrganizational Maintenance Purpose
Plan effective workforceAssess future training needsEvaluate performance at organizational levelEvaluate effectiveness of HR interventions
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Documentational PurposeDocumentational Purpose
Validate selection instrumentsDocument administrative decisionsHelp meet legal requirements
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Characteristics of an Ideal PM SystemCharacteristics of an Ideal PM System
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Congruent with organizational strategyCongruent with organizational strategy
• Consistent with organization’s strategy• Aligned with unit and organizational goals
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
ThoroughThorough
• 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
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
PracticalPractical
• Available• Easy to use• Acceptable to decision makers• Benefits outweigh costs
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
MeaningfulMeaningful
• 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
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
SpecificSpecific
Concrete and detailed guidance to employees • what’s expected • how to meet the expectations
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Identifies effective and ineffective performanceIdentifies effective and ineffective performance
• Distinguish between effective and ineffective– Behaviors– Results
• Provide ability to identify employees with various levels of performance
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
ReliableReliable
• Consistent• Free of error• Inter-rater reliability
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
ValidValid
• Relevant (measures what is important)• Not deficient (doesn’t measure unimportant
facets of job)• Not contaminated (only measures what the
employee can control)
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Acceptable and FairAcceptable 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
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
InclusiveInclusive
• 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
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Open (Open (NoNo Secrets) Secrets)
• Frequent, ongoing evaluations and feedback• 2-way communications in appraisal meeting• Clear standards, ongoing communication• Communications are factual, open, honest
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
CorrectableCorrectable
• Recognizes that human judgment is fallible• Appeals process provided
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
StandardizedStandardized
• Ongoing training of managers to provide• Consistent evaluations across
– People– Time
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
EthicalEthical
• Supervisor suppresses self-interest• Supervisor rates only where she has sufficient
information about the performance dimension • Supervisor respects employee privacy
Prentice Hall, Inc. © 2006 Herman Aguinis, University of Colorado at Denver
Integration with other Human Resources Integration with other Human Resources and Development activitiesand Development activities
PM provides information for:Development of training to meet organizational
needsWorkforce planningRecruitment and hiring decisionsDevelopment of compensation systems