Managing Employee Performance

and Reward
Concepts, Practices, Strategies
 Shaping behaviour and competencies:
lecture overview

Behaviourally based performance management

• Behavioural observation sources
• Behavioural assessment error/unreliability
• Behavioural rating methods

Competency-based performance management

• What are ‘competencies’?
• Competency analysis
• Competency assessment/rating

• Results, behaviours or competencies?

 Three approaches to performance
measurement and management

Inputs: Activities: Outcomes:

Competencies Work behaviours Results
(individual knowledge, (individual) (individual, group and
skills and abilities) organisational)

Competency Behavioural appraisal/ Results-based

assessment assessment assessment
 Behavioural observation sources
• ‘360-degree’ (supervisor, peers, subordinates, customers)
• ‘180-degree’ (supervisor, peers, customers)

SUPERVISOR/S

PEERS CUSTOMERS
SELF
(including team (including
members) mystery
customers/
shoppers)

SUBORDINATES
 Causes of error/unreliability in behavioural
assessment

Judgement error (unintentional; perceptual-cognitive):

Halo
Horns
Recency

Classification error (intentional; political):

Leniency error
Harshness error
Central tendency error
Rating methods: graphic rating scale
 Rating methods: behavioural anchors
1. Positive anchors only
Communication
 Persuasively communicates in a way that produces positive results
 Listens well and understands the needs of the customer and others
 Conveys confidence when communicating
 Expresses ideas clearly and directly

2. Positive and negative anchors

Communication
1. Persuasively communicates in a way that produces positive results
2. Listens well and understands the needs of the customer and others
3. Conveys confidence when communicating
4. Expresses ideas clearly and directly

5. Misunderstands customer needs

6. Fails to liaise with other team members regarding customer service issues
7. Provides insufficient or inaccurate information to customers and team members
8. Customers complain about communication style
Rating methods: behaviourally anchored
rating scales
Rating methods: behavioural observation
scale
Rating methods: section of a weighted
checklist
Combating classification error: section of a forced
choice instrument
Competency-based performance management

• What are ‘competencies’?

• Competency analysis
• Competency assessment/rating
• Assessment validity
• Assessment reliability
• Results, behaviours or competencies?
 What are ‘competencies’?
Competencies are sets of skills, knowledge, abilities, behavioural characteristics, and other attributes
that, in the right combination and for the right set of circumstances, predict superior performance .
Flannery, Hofrichter & Platten, 1996
The ‘iceberg’ model
(Spencer & Spencer) Skill

Visible Knowledge

Self-concept
Hidden
Social role and values

Motives

Personality
traits
 Self-concept Self-knowledge
Self-confidence
Managing self/composure

Social Communication
Influencing/motivating others
role/values Persuasiveness
Interpersonal awareness/empathy/others
orientation (= emotional intelligence)
Political acuity
Integrity and trust
Composure/conflict management
Managerial
competencies Motives Achievement orientation
Creativity/innovation
Energy and initiative
Strategic/business focus (cf. narcissism)
Passion

Traits Conscientiousness
Assertiveness
Decisiveness
Perseverance/resilience
Adaptability
Openness to new ideas and experiences
 Matching personality
traits and roles
1. Extraversion 2. Conscientiousness 3. Agreeableness 4. Emotional 5. Openness to
stability experience

CSO/Salesperson

Accountant

Pilot

Intensive care
nurse

Research scientist
 Competency categories
‘Role’ competencies:

Threshold competencies:
• Visible
• Knowledge and skills needed for job proficiency

Differentiating competencies:
• Hidden
• Needed for high performance in specific jobs, roles or functions
• Distinguish between superior performance and standard performance in
specific jobs/roles; ‘raise the bar’ competencies
• Those competencies necessary for high performance in one role will differ
from those necessary in another
 Competency categories

‘Core’ competencies:

• Organisation-wide and common to all roles; e.g. ‘customer

focus’, ‘teamworking’, ‘quality commitment’
• Reinforce common set of values and behaviours; ‘organisational
glue’
• Used to facilitate strategic alignment and cultural integration
• Used to drive organisational/cultural change
• Emphasised mainly in recruitment and selection and, to a lesser
extent, in performance management
1 Define performance
effectiveness criteria and
indicators

2 Identify two criterion-referenced
samples for cohort comparison

3 Collect data on each sample

4 Identify specific differentiating
role competencies and competency
levels

5 Validate competency model
(using further criterion-
referenced sample cohorts)

6 Application to human resource
management practice
 Measured results
 Observed behaviour
 Information sources: supervisors, job-holders, subordinates,
customers
 Proficient performers
 Exemplary performers
 Behaviour event interviewing (BEI)
 Expert panels or focus groups
Competency
 Attributes exclusive to those people who perform at an
exemplary level
analysis
 Define competency levels
 Test the model’s power to predict performance outcomes
using a new cohort selected on basis of high profile on
differentiating competency model
 Compare outcomes for this group with those for a control
cohort lacking a high profile on the model
· Selection and succession planning
· Training and development content and program evaluation
· Performance assessment
· Performance feedback and development
· Succession planning
· Competency-related/competency-based pay
Competency-based assessment: assessment
centres
• Structured individual and group work simulation exercises
• Behavioural observation techniques
• Typically involve six to 12 people, off-site, one to three days
• Attendees rated by external experts or by managers who are
trained as assessors
• Used mainly for manager selection and succession planning
• Also used for competency-based career development
• Commonly used with psychometric assessment and
performance coaching
• Used by 5–10% of large Australian organisations
Competency-based assessment: assessment
centres
Typical exercises:
• Candidates assessed for management role competencies:
organising, planning, problem-solving, decision-making,
communication, etc.
• ‘In-basket exercise’ (for task competency and stress tolerance)
• ‘Leaderless group discussion’ (for teamworking)
• Trust-building exercises
• Strategy simulations
• Individual presentations
• Psychometric assessment
• Interviews
Competency-based assessment: assessment
centres
Drawbacks:

• High cost expertise (e.g. $2,000 to $3,000-plus per assessment)

• Labour intensive and time-consuming

 Competency-based assessment:
behaviourally anchored rating scale for
mid-level manager role
Level Your rating Your
rationale

Competency 1. Needs development 2 . Effective 3. Highly effective 1 2 3

1 1. Composure: · Gets rattled and loses · Is cool under pressure. · Can be counted on
cool under pressure and to hold things
The ability to · Does not become
stress. together during
maintain task defensive or irritated
tough times.
· Gets easily overwhelmed when times are tough.
focus, team focus
and becomes emotional, · Is a settling
and emotional · Is considered mature.
defensive or withdrawn. influence in a
control, especially · Is defensive and sensitive
· Can handle stress. crisis.
in the face of to criticism. · Is not knocked off · Models calmness
difficulties and · Is knocked off balance by
balance by the and collectedness
setbacks unexpected. to others.
surprises and gets easily
rattled. · Doesn’t show frustration · Coaches
when resisted or subordinates in
· Causes others to lose
blocked. remaining calm
composure or become
and focused.
unsettled.
· Encourages others
· Lets anger, frustration
to see setbacks as
and anxiety show.
learning
opportunities.
 Competency-based assessment:
behaviourally anchored rating scale for
mid-level manager role
Level Your rating:
Competency 1. Needs development 2. Effective 3. Highly effective 1 2 3
Problem-solving:  Accepts information  Assures critical  Models critical
Obtain sufficient at face value information was thinking skills
data to analyse a  Fails to challenge considered consistently
situation and staff’s thinking or  Assures information  Coaches or rehearses
draw conclusions processes used in the analysis staff’s presentations
from which you  Fails to require staff was valid to management in
can develop a to validate their  Assures two or more terms of their logic
plan of action or assumptions or viable alternatives and processes
provide an conclusions were considered  Asks questions in
answer.  Only considers the  Considers the ways that allow staff
immediate impact impact on other to think through
divisions issues and
implications
 Competency-based assessment:
behaviourally anchored rating scale for
employee role

Level Your rating:

Competency 1. Needs development 2. Effective 3. Highly effective 1 2 3
Problem-solving:  Misses the point  Probes for what is  Begins to grasp the
Obtain sufficient  Fails to seek relevant complexities
data to analyse a information  Obtains enough  Knows when the
situation and  Fails to confirm information to critical information is
draw conclusions accuracy of understand the point missing
from which you information  Summarises and  Points out
can develop a  States opinion interprets data discrepancies in data
plan of action or without the facts  Suggests solutions
provide an or actions based on
answer. data
 Addressing instrument (in)validity

Accuracy is the correctness of work duties performed.

1 2 3 4 5
Makes frequent Careless, makes Usually accurate; Requires little Requires absolute
errors recurrent errors makes only average supervision. Is minimum of
number of mistakes exact and precise supervision. Almost
most of the time always accurate

Alertness is the ability to grasp instructions, to meet changing conditions

and to resolve unexpected problems.
1 2 3 4 5
Slow to catch on Requires more than Grasps instructions Usually quick to Exceptionally keen
average instruction with average ability learn and and alert
and explanation understand
 Addressing instrument (un)reliability

How mentally flexible this person is in his/her thoughts and approach to any
presented task.

1 2 3 4 5
Rigid Average Flexible

Dependability is the ability to do required jobs well with a minimum of

supervision.
1 2 3 4 5
Requires close Requires prompting Usually takes care of Requires little Requires absolute
supervision. Is sometimes necessary tasks with supervision. Is reliable minimum supervision
unreliable reasonable
promptness
 Results, behaviours or competencies?

Use results where:

• Ends (results) can be more accurately specified and measured than means (e.g.
management work; project teams; targeted research work; foreign exchange
and equity trading)
• Work group performance is more important than individual performance

Use behaviours where:

• Means (behaviours) can be more easily specified than ends (results)
• Work is individualised but routine and it is thus possible to specify a single best
sequence of task behaviours plus desired organisational citizenship behaviour
(OCB; e.g. routine service work; administrative work)
• There is ongoing opportunity to observe individual’s work behaviour (e.g.
constant supervision)
 Results, behaviours or competencies?
Use competencies where:
• High performance is based on underlying abilities, values and attitudes
rather than technical knowledge and skill (e.g. high-discretion service work;
emotional labour)
• Work is non-routine and discretionary (e.g. managers, knowledge workers)
• Individual and group results difficult to quantify/attribute (e.g. knowledge
workers; exploratory research; customer service work; teachers; health care
workers)
• Traditional job assignments have been replaced by broad, fluid and largely
self-managing roles
• The organisation wishes to change its culture and employees’ values and
attitudes (and beliefs)

Balance all three where:

• Work inputs, activities and outcomes can all be specified/measured to some
degree and are all important (e.g. routine work requiring high
quality/precision; CSOs/call centres; teaching; general management roles)