Slide 1:

Performance management is a set of processes and systems aimed at developing an employee so they
perform their job to the best of their ability.
Generally, the performance management process includes setting clear expectations for each
employee and providing frequent formal/informal feedback.
A good Performance management involves goal setting, performance appraisal, and reward systems
that align employee work behavior with;

 business strategy,
 Employee involvement, and
 workplace technology

Companies use performance management (reviews) to support employee training, career

development, compensation decisions, and promotions, among other things
Organizations having well-developed performance management process often outperform those
without this element of organization design
Ex: Adobe is probably the best-known business case related to performance management revamps.
The company estimated that managers were spending about 80,000 hours on performance reviews per
year, but their employees still felt undervalued. That led to a significant number of employees leaving.
So, decision-makers at Adobe decided to start training managers on conducting more regular check-
ins and offering actionable direction. One of the consequences was a 30% decrease in involuntary
turnover.
Slide 2:
The performance management mainly includes Goal setting, performance appraisal, reward systems.
So, let’s see the
Goal Setting:
Goal setting involves managers and subordinates in jointly establishing and clarifying employee goals
Once goals are established, the way they are measured is an important determinant of member
performance
Goal setting can clarify the duties and responsibilities associated with a particular job or work group;
When applied to jobs, goal setting can focus on individual goals and can reinforce individual
contributions and work outcomes.
When applied to work groups, it can be directed at group objectives and can reinforce members’
joint actions and overall group outcomes
A common form of goal setting used in organizations is management by objectives
 to align personal goals with business strategy by shared perceptions between the
manager and subordinates, either individually or as a group, and
 by reconciling conflict where it exists

Performance Appraisal:
  Performance appraisal is a feedback system that involves the direct evaluation of individual
or work-group performance by a supervisor, manager, or peers
 Performance appraisals are conducted for a variety of purposes, including affirmative action,
pay and promotion decisions, and human resources planning and development.
 Employees also have a variety of reasons for wanting appraisal, such as receiving feedback
for career decisions, getting a raise, and being promoted
 Rather than trying to meet these multiple purposes, the new appraisal approaches are more
tailored to balance the multiple organizational and employee needs
 Abundant evidence that organizations do a poor job appraising employees
 Many organizations have sought ways to improve performance appraisal;
 Some innovations have been made in (a) enhancing employee involvement, (b) balancing
organizational and employee needs, and (c)increasing the number of raters
 performance appraisal represents an important link between goal-setting processes and reward
systems
Reward System:
 rewards are powerful incentives for improving employee and work-group performance and
employee satisfaction
 A reward system is an important part of an organization’s design and must be aligned with the
strategy, structure, employee involvement, and work
 reward systems can be oriented to individual jobs and goals or to group functions and
objectives.
 Several innovative and effective reward systems are used in organizations today such as:

 Skill- and Knowledge-Based Pay Systems

 Performance-Based Pay Systems
 Gain-Sharing Systems and
 Promotion systems

Slide 3:
A performance management model shows how goal setting, performance appraisal, and rewards are
closely linked and difficult to separate in practice, but how each element is distinct and has its own
dynamics
Organizations having well-developed performance management process often outperform those
without this element of organization design
 As shown in Figure, performance management includes;

 practices and methods for goal setting,

 performance appraisal, and

 reward systems.

These practices jointly influence the performance of individuals and work groups
Slide 4:
What are the approaches of Goal Setting in an organization:
1. Diagnosis:
 The first step is a thorough diagnosis of the job or work group, of employee needs,
and of the three context factors, business strategy, workplace technology, and level of
employee involvement.
 The above provides information about the nature and difficulty of specific
goals, the appropriate types and levels of participation, and the necessary
support systems.
2. Preparation for Goal Setting:
 This step prepares managers and employees to engage in goal setting by increasing
interaction and communication between managers and employees, and offering
formal training in goal-setting methods.
 Specific action plans for implementing the program also are made at this
time.
3. Setting of Goals:
 challenging goals are established and methods for goal measurement are clarified.

 Employees participate in the process to the extent that they are likely to set
higher goals than those assigned by management.
4. Review:
 the goal-setting process is assessed so that modifications can be made, if necessary.

 to see whether the goals are energizing and challenging and whether they support the
business strategy
process of designing and implementing a performance appraisal system:
 OD practitioners have recommended the following six steps:

1. Select the Right People:

 Failure to recognize PA as part of a complex PMS is the important
reason for design problems.
 Members representing a variety of functions (Legal, HR, senior
managers, appraisees, etc) need to be involved in the design process.
2. Diagnose the Current Situation:
 Diagnosis the contextual factors (business strategy, workplace
technology, and employee involvement), current appraisal practices and
satisfaction with them, work design, and the current goal-setting and
reward system practices, to define the current system’s strengths and
weaknesses.
3. Establish the System’s Purposes and Objectives:
 Potential purposes can include serving as a basis for rewards, career
planning, human resources planning, and performance improvement or
simply giving performance feedback
4. Design the Performance Appraisal System:
 Given the agreed-upon purposes and the contextual factors, the
appropriate elements of an appraisal system can be established
 Criteria for designing an effective system include timeliness, accuracy,
acceptance, understanding, focus on critical control points, and economic
feasibility.
5. Experiment with Implementation:
 strongly suggest using a pilot test to spot, gauge, and correct any flaws in
the design before it is implemented system-wide
6. Evaluate and Monitor the System:
 User satisfaction from HR staff, manager, and employee viewpoints is an
essential input.
 The legal defensibility of the system should be tracked by noting the
distribution of appraisal scores against age, sex, and ethnic categories
Process of implementing the reward systems:
 OD traditionally has relied on intrinsic rewards, like enriched jobs and opportunities
for decision making. Early interventions were based mainly on the intrinsic satisfaction
derived from performing challenging, meaningful types of work.
 Recently, OD practitioners have expanded their focus to include extrinsic rewards: pay;
various incentives, such as stock options, bonuses, and gain sharing; promotions; and
benefits.
 It is discovered that both intrinsic and extrinsic rewards can enhance performance and
satisfaction
 Rewards, however, should be congruent with other organizational systems and
practices, such as the organization’s structure, top management’s human relations
philosophy, and work designs
 Many reward system features contribute to both employee fulfillment and
organizational effectiveness.