Performance

Management

Chapter 8

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-1

 Learning Objectives
1. Discuss how managing employee performance relates to achieving
organizational goals.
2. Describe the various purposes of performance appraisals.
3. Describe the commonly used comparative and noncomparative
appraisal methods.
4. Discuss the advantages and disadvantages of the various raters of
performance appraisal information.
5. Describe the guidelines for effectively communicating performance
feedback to employees.
6. Outline steps to creating a performance improvement plan.
7. Explain how talent management uses information about employee
performance and potential to guide employee decisions.

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-2

 Performance Management
Performance management involves much more than
just performance appraisal
Individual employees need to meet their performance
goals
• Collectively, helps the organization to meet its goals

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 Approaches to Aligning Organizational
and Individual Performance Goals

Schwind 13th Edition, Figure 8-1

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-4
 Performance Management System
Goals
Balanced Scorecard
• Very popular approach
• Combines the performance measures of the total
organization—integrates financial goals with
customer satisfaction, internal processes,
organizational growth, learning, and innovation

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-5

 Balanced Scorecard Example

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition, Figure 8-2 Schwind 13th Edition 8-6
 Uses of Performance Appraisal

Schwind 13th Edition, Figure 8-3

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 Performance Appraisal Process

Schwind 13th Edition, Figure 8-4

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-8
 Setting Performance Objectives
Performance objectives are targets for employee
performance and they should be
• Job-related
• Practical
• Based on performance standards
Performance standards are measurable benchmarks
that may relate to:
• Quality
• Quantity
• Time

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-9

 Measuring Performance
• Rater actually sees the
Direct
employee’s performance

Indirect • Substitutes for direct (e.g.,

secondhand observations of others, complaints)

• Verifiable by others
Objective
• Usually quantitative

• Not verifiable by others

Subjective
• Based on rater’s opinions
© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-10
 Measuring Performance: Comparative
Evaluation Methods
Comparative Evaluation Methods compare one employee’s
performance with that of coworkers.

Ranking • Employees ranked from best to worst

method • Subject to halo and recency effects

• Employees sorted into categories

Forced • Usually a certain proportion must be
distributions put into each category

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-11

 Plotting Performance onto the Bell
Curve

Schwind 13th Edition, Figure 8-5

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-12
Measuring Performance: Noncomparative
Evaluation Methods
• Oldest and most widely used method
Rating scale • Subjective (i.e. based on the rater’s opinion)
• Responses may be given numerical values

• Descriptions of effective/ineffective
BARS performance—examples placed along a scale
• Job-related, practical, and standardized

Tests & • May include paper-and-pencil tests or an

Observations actual demonstration of skills

Management • Employee and supervisor jointly establish

by Objectives future performance goals

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-13

Sample BARS Approach
Team
Bank of Ontario
Management
Can be expected to praise publicly for tasks completed well, and
Outstanding
Performance
7 constructively criticizes in private those individuals who have produced less
than adequate results.
Very Good
6
Can be expected to show great confidence in subordinates, and openly
Performance displays this with the result that they develop to meet expectations.
Can be expected to ensure that employee HR records are kept right up to
Good
Performance
5 date, that reports are written on time, and that salary reviews are not
overlooked.
Acceptable
4
Can be expected to admit a personal mistake, thus showing that he or she is
Performance human too.

Marginally Can be expected to make “surprise” performance appraisals of

Acceptable 3
Performance subordinates.

Poor Performance 2
Can be expected not to support decisions made by a subordinate (makes
exceptions to rules).
Very Poor
1
Can be expected not to accept responsibility for errors and to pass blame to
Performance subordinates.

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition, Figure 8-7 Schwind 13th Edition 8-14
Sample Management-by-Objectives Approach
Objectiv Accomplish
Performance Objectives Variance
es Set ments
1.Number of sales calls 85 98 +15%
2.Number of new customers 10 8 –20%
3.Sales of Dulcha product line 2,500 3,100 +24%
4.Sales of Salmy product line 1,500 1,350 –10%

5.Customer complaints 10 22 +120%

6.Number of training courses 5 3 –40%
taken
7.Number of monthly reports on 12 11 –8%
time

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-15

Schwind 13th Edition, Figure 8-8
 Measuring Performance: Multiple Sources
for Performance Ratings

Schwind 13th Edition, Figure 8-9

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-16
 Measuring Performance:
Rater Training

Raters are trained on the purpose of the performance

appraisal process, its alignment with the organization’s
strategy, and the forms themselves (e.g., rater handbook)

Rater error training was commonly included:

• Halo effect
• Error of central tendency
• Leniency and strictness biases
• Personal prejudice
• Recency effect
• Contrast errors
© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-17
 Communicating Feedback:
Evaluation Interviews
Evaluation interviews are performance review
sessions that give employees feedback
• Tell-and-sell Approach
• Tell-and-listen Approach
• Problem-solving Approach
The interview should be a positive, performance-
improving dialogue

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-18

 Communicating Feedback: Frequency

Appraisals as basis for administrative decisions

are typically conducted annually
Appraisals for developmental purposes should
be conducted immediately after incidents of
good or bad performance, or with regular (e.g.,
quarterly) frequency

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-19

 HR Records and Decisions
HR uses performance records to guide their HR
decisions as set out in the purpose of the
performance appraisal up front

HR is responsible for maintaining records of

employee performance for legal purposes

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-20

 Establishing a Performance
Improvement Plan

Schwind 13th Edition, Figure 8-12

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-21
 Human Resource
Function Feedback
The performance management process also provides insight
into effectiveness of HRM
If poor performance is widespread, many employees are
excluded from promotions and transfers
Unacceptably high numbers of poor performance may indicate
errors in the HRM function
• e.g., selection process may be screening candidates
poorly; job analysis information may be inaccurate

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-22

 Legal Aspects of Performance
Appraisal
A performance appraisal form is a legal document
Raters must use only performance criteria that are relevant to
the job
Avoid non-relevant criteria
A reasonable time must be set for performance improvement
Well-documented performance shortcomings and use of
feedback interviews have been viewed favourably in court and
with arbitrators

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-23

 Talent Management

Schwind 13th Edition, Figure 8-13

© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-24
8 Performance Management Summary
After mastering this chapter content, you should be able to:
1. Discuss how managing employee performance relates to achieving
organizational goals.
2. Describe the various purposes of performance appraisals.
3. Describe the commonly used comparative and noncomparative appraisal
methods.
4. Discuss the advantages and disadvantages of the various raters of
performance appraisal information.
5. Describe the guidelines for effectively communicating performance
feedback to employees.
6. Outline steps to creating a performance improvement plan.
7. Explain how talent management uses information about employee
performance and potential to guide employee decisions.
© 2022 McGraw-Hill Education Ltd. Schwind 13th Edition 8-25