PERFORMANCE

MANAGEMENT

Herman Aguinis

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Performance Management in Context:

Overview
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: Definition

Continuous Process of
Identifying performance of individuals and teams
Measuring performance of individuals and teams
Developing performance of individuals and teams
and
Aligning performance with the strategic goals of the
organization

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

PM is NOT performance appraisal

PM
Strategic business
considerations
Ongoing feedback
So employee can
improve performance
Driven by line manager

Prentice Hall, Inc. 2006

Performance appraisal
Assesses employee
Strengths &
Weaknesses

Once a year
Lacks ongoing feedback
Driven by HR

Herman Aguinis, University of Colorado at Denver

Contributions of PM
For Employees
The definitions of job and success are clarified
Motivation to perform is increased
Self-esteem is increased
Self-insight and development and enhanced

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Contributions of PM
For Managers
Supervisors views of performance are
communicated more clearly
Managers gain insight about subordinates
There is better and more timely differentiation
between good and poor performers
Employees become more competent

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Contributions of PM
For Organization/HR Function
Organizational goals are made clear
Organizational change is facilitated
Administrative actions are more fair and
appropriate
There is better protection from lawsuits

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Disadvantages/Dangers of
Poorly-implemented PM Systems
for Organization

Wasted time and money

Unclear ratings system
Emerging biases
Increased risk of litigation

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Reward Systems: Definition

Set of mechanisms for distributing
Tangible returns
and

Intangible or relational returns

As part of an employment relationship

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Tangible returns
Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-term)

Benefits, such as
Income Protection
Allowances
Work/life focus

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Intangible returns
Relational returns, such as
Recognition and status
Employment security
Challenging work
Learning opportunities

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Returns and Their Degree of Dependency

on 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

Prentice Hall, Inc. 2006

Degree of Dependency
Low
Low
Moderate
Moderate
Moderate
Moderate
High
High
High

Herman Aguinis, University of Colorado at Denver

Purposes of PM Systems:
Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentation

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Strategic Purpose
Link employee behavior with organizations
goals
Communicate most crucial business strategic
initiatives

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Administrative Purpose
Provide information for making decisions re:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Layoffs

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Informational Purpose
Communicate to Employees:
Expectations
What is important
How they are doing
How to improve

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Developmental Purpose
Performance feedback/coaching
Identification of individual strengths and
weaknesses
Causes of performance deficiencies
Tailor development of individual career path

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Organizational Maintenance Purpose

Plan effective workforce
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Documentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Characteristics of an Ideal PM System

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Congruent with organizational strategy

Consistent with organizations strategy
Aligned with unit and organizational goals

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Practical

Available
Easy to use
Acceptable to decision makers
Benefits outweigh costs

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Specific
Concrete and detailed guidance to
employees
whats expected
how to meet the expectations

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Identifies 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

Reliable
Consistent
Free of error
Inter-rater reliability

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Valid
Relevant (measures what is important)
Not deficient (doesnt 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 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

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

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Open (No 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

Correctable
Recognizes that human judgment is fallible
Appeals process provided

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Standardized
Ongoing training of managers to provide
Consistent evaluations across
People
Time

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver

Ethical
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

and Development activities
PM provides information for:
Development of training to meet organizational
needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems

Prentice Hall, Inc. 2006

Herman Aguinis, University of Colorado at Denver