Human Resource Management:

Gaining a Competitive Advantage

Chapter 08
Performance Management

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Process of Performance Management

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5 Criteria- Performance Measures

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 Measuring Performance
 Comparative approach- compares performance with others.
 Ranking
 Simple ranking ranks employees from highest to lowest performer.
 Alternation ranking - crossing off the best and worst employees.

 Forced distribution- employees ranked in groups.

 Paired comparison- managers compare every employee with every

other employee in work group.

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 Behavioral Approach
 Critical incidents approach - requires managers to keep record of specific
examples of effective and ineffective performance.

 Behaviorally anchored rating scales (BARS)- Method of performance

measurement that rates behavior in terms of a scale showing specific statements of
behavior that describe different levels of performance.

 Behavioral observation scales (BOS)- A variation of a BARS which uses

all behaviors necessary for effective performance to rate performance at a task .

 Organizational behavior modification - formal system of behavioral

feedback and reinforcement.

 Assessment centers - multiple raters evaluate employees’ performance on a

number of exercises.

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 Results Approach

 Management by Objectives Goals

top management passes down company’s strategic
goals to managers to define goals.

 Productivity Measurement and Evaluation System

(ProMES)
goal is to motivate employees to
higher levels of productivity.
Hierarchy

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 Competency Model

Competencies are sets of skills, knowledge, abilities and personal

characteristics that enable employees to successfully perform their
jobs.

A competency model identifies competencies necessary for each

model and provides descriptions common for an entire occupation,
organization, job family or specific job.
Also useful for recruiting, selection, training and development.

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Balanced Scorecard Approach-

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5 Performance Information Sources

P Info S

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 Reducing Rater Errors and Politics

 Approaches to Reducing Rater Error:

 Rater error training
 Rater accuracy training
 Calibration Meetings- attended by managers to
discuss employee performance ratings.

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3 Ways Technology Influences PMS

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 Perceptual Errors of Raters
Halo Effect
Rater allows a single trait, outcome or consideration to influence
other measures of performance.

Stereotyping
Rater makes performance judgments based on employee’s
personal characteristics rather than the employee’s actual
performance.

Recency Error
Recent events and behaviors of the employee bias the rater’s
evaluation of the employee’s overall performance.

Copyright © 2002 South-Western. All rights reserved. 10–12

 Perceptual Errors of Raters (cont’d)
Central Tendency Error
Evaluator avoids higher and lower ends of performance assessment
rating in favor of placing all employees at or near the middle of the
scales.

Leniency or Strictness Errors

Evaluator’s tendency is to rate all employees either above
(leniency) or below (strictness) their actual performance level.

Personal Biases and Organizational Politics

Have a significant impact on the ratings employees receive from
their supervisors.

Copyright © 2002 South-Western. All rights reserved. 10–13

 Ways to Manage Performance
 Solid performers- High ability and motivation; provide
development
 Misdirected effort- Lack of ability but high motivation;
focus on training
 Under-utilizers- High ability but lack motivation; focus on
interpersonal abilities
 Deadwood- Low ability and motivation; managerial action,
outplacement, demotion, firing.

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 Withstand Legal Scrutiny
1. Conduct a valid job analysis related to performance.
2. Base system on specific behaviors or results.
3. Train raters to use system correctly.
4. Review performance ratings and allow for employee
appeal.
5. Provide guidance/support for poor performers.
6. Use multiple raters.
7. Document performance evaluations.

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 Summary
Measuring and managing performance are key to gaining competitive
edge.
 Performance management systems (PMS) serve strategic, administrative
and developmental purposes.
 PMS should be evaluated against criteria of strategic congruence,
validity, reliability, acceptability and specificity.
 Effective managers need to
 be aware of the issues involved in determining best methods.
 feed performance information back to employees
 take action based on causes for poor performance: ability, motivation or both.
 be sure that PMS can meet legal scrutiny

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