Transcript Designing Work Systems - Department of Management

Performance Management
Why Conduct Performance Appraisals?
Developing an Appraisal System
GOAL SETTING
 What type of work is examined?
 Who sets the goals?
 How difficult are the goals?
 Team vs. individual goals?
 What is measured?
MEANS TO EVALUATE
 What rating scale is used?
 360 degree feedback?
 Includes self-evaluation?
ADMINISTRATION
 How often?
 Flexible or standardized forms?
 Who conducts appraisals?
 How frequent is feedback?
 Is there an appeal process?
PERFORMANCE AND PAY
 Tied to rewards?
 Linked to development?
 How are the results used?
How to Evaluate?
 Compare Employees to Absolute Standards
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Performance compared to set goals
Avoids conflict among workers
May decrease differentiation
 Compare Employees Relative to Each Other
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Ranking allows for comparison of employees but does not
shed light on the distribution of employee performance.
Forces a distribution among workers
May create false distinctions and competition
What to Evaluate?
 Traits Measures
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Are an assessment of how the employee fits with the
organization’s culture, not what the employee actually does.
 Behavior-based measures
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Focus on what an employee does correctly and what the
employee should do differently.
 Results-based measures
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Focus is on accomplishments or outcomes that can be
measured objectively.
Problems occur when results measures are difficult to
obtain, outside employee control, or ignore the means by
which the results were obtained.
Trait-Based Appraisals
 Characteristics that are enduring and general
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e.g. “Leadership” “Communication” “Decisiveness”
 Competency models vs. Trait-based appraisal
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Are the characteristics really related to performance?
 Potential Problems
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Focus on person rather than performance
May be ambiguous or arbitrary
Poor feedback and goal setting
Poor reliability and validity
“An employer has no business with a man’s personality.
Employment is a specific contract calling for specific
performance and nothing else. Any attempt of an
employer to go beyond this is usurpation. It is an abuse
of power. An employee owes no “loyalty,” he owes no
“love,” and no “attitudes” – he owes performance and
nothing else.”
Peter Drucker
Management Tasks, Responsibilities, Practices (1974)
Behavior-Based Appraisal
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Focus on specific behaviors with examples
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Positives
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Simple Behavioral Scale
Behavioral Frequency / Observation Scale (BOS)
Behaviorally Anchored Rating Scales (BARS)
More valid and reliable
Acceptable to employees
Better for development and improvement
Potential Problems
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Difficult and expensive to develop
Needs to match jobs closely to be effective
Emphasizes behaviors (at the expense of others?)
Focuses on behavior rather than results
Results-Based Appraisal
 Focus on results compared to specific goals
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Should be clear and unambiguous
Requires alignment of expectations
May promote gaming of the system
Beware of results at any cost and excessive results
orientation
Time consuming and needs constant updating
 “Management by Objectives” or MBO
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Linking individual goals with business strategy
Organizational goals flow down to depts. and employees
Focus on planning, action items, and interim reviews
Objectives negotiated and agreed upon by employees
Balanced Scorecard
“What you measure is what you get”
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Financial vs. operational measures
Short term vs. long-term effectiveness
Specific goals and measures for:
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Shareholder satisfaction
Customer satisfaction
Operational Excellence
Innovation and Learning
Others?
How to Judge Appraisal Types
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Leads to desired behaviors
Minimizes negative behaviors
Reliability and validity
Perceived fairness (rater and employee)
Performance improvement and employee development
Flexibility and administrative cost
Comparison of Appraisal Forms
Ease of Use
Employee
Development
Employee
Acceptance
High
Low
Low
Behaviors
Medium
High
High
Outcomes
Low
Medium
Medium
Traits
Performance Diagnosis
Forced Ranking Systems
Forced Ranking Systems
 Gained popularity following GE
 Up to 20% of companies
 Used by:
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Conoco
Capital One
Sun Microsystems
Cisco
EDS
Hallmark Cards
 Used and abandoned by:
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Ford
Goodyear
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Microsoft
Hewlett-Packard
Intel
Texas Instruments
Enron
When managers have discretion:
1. They tend to give “Above average” ratings.
2. They prefer to give uniform ratings regardless of
performance.
3. They tend not to use the ends of the rating scale.
“A company that bets its future on its people must
remove the lower 10% and keep removing every year
– always raising the bar of performance and
increasing the quality of leadership.”
Jack Welch, former GE CEO
The “Vitality Curve”
“The bottom 10”
“The top 20”
“The Vital 70”
Jack Welch “Jack: Straight From the Gut” 2001
Why Conduct Forced Rakings?
Why NOT Conduct Forced Rankings?
Evolution of Ford’s Policy
January, 2000: Ford begins new performance evaluation policy
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Top 20,000 managers
10% of the executives will get A's, 80% will get B's, and 10% will get C's.
C’s are not eligible for bonuses. Two C's in a row are grounds for
dismissal.
Quota for C’s later reduced to 5%
July, 2001: Ford eliminates the "A," "B," and "C" ratings in favor of "top
achiever," "achiever," or "improvement required.” Quotas dropped for
employees to be ranked as "achiever" and "needs improvement."
April, 2002: Ford revises its performance review system to “focus on
creating bonds between managers and employees”, and will have no
ranking quotas.
The Appraisal Interview
Who Evaluates?
Problems with immediate supervisors conducting
performance evaluations:
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Lacking appropriate information to provide informed
feedback on employee performance.
Insufficient observation of the employee’s day-to-day work to
validly assess performance.
Lack of knowledge about the technical dimensions of a
subordinate’s work.
Lack of training or appreciation for the evaluation process.
Perceptual errors by supervisors that create bias or lack of
subjectivity in evaluations.
Perceptual Errors of Raters
 Halo Effect
 Stereotyping
 Recency Error
Perceptual Errors of Raters
 Halo Effect
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Rater allows a single trait, outcome or consideration to
influence other measures of performance.
 Stereotyping
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Rater makes performance judgments based on employee’s
personal characteristics rather than the employee’s actual
performance.
 Recency Error
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Recent events and behaviors of the employee bias the
rater’s evaluation of the employee’s overall performance.
Perceptual Errors of Raters
 Central Tendency Error
 Leniency or Strictness Errors
 Personal Biases and Organizational Politics
Perceptual Errors of Raters
 Central Tendency Error
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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
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Evaluator’s tendency is to rate all employees either above
(leniency) or below (strictness) their actual performance
level.
 Personal Biases and Organizational Politics
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Have a significant impact on the ratings employees receive
from their supervisors.
Performance Appraisal Challenges
 Gender Bias
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Managers tend to give women evaluations that are less
critical and less straightforward.
 Attribution Theory
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People tend to overestimate the influence of individual
factors (such as motivation) and underestimate the influence
of environmental factors when assessing others behavior.
 Frame of Reference
Conducting A Fair Appraisal
1. Collect appraisal data
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Objective data on job performance
Critical incidents (good and bad)
Behavioral observation
2. Evaluate performance
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Before completing form – think about intended result
Avoid biases
Consider how the message will be viewed by employee
Consider circumstances beyond employee’s control
Consider past evaluations
Conducting A Fair Appraisal
3. Write the appraisal
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Have courage to address poor performers
Be specific and use examples
Avoid nitpicking
Additional evidence needed for high/low performers
Tied to specific goals
Prioritize development needs
Providing Performance Feedback
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Choose a quiet private location.
Describe performance, not personality.
Providing specific examples and quantify whenever possible.
Be honest.
Avoid vague statements or unsubstantiated claims.
Limit plans for change, growth, and development to a few
important items that are achievable.
 Keep career discussions separate from performance
feedback.
 Create a development plan.
 Give the employee a chance to respond.
Dealing With Poor Performers
 Avoiding problems usually makes them worse.
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“Why didn’t you tell me this before?”
 Approach the employee for mutual benefit – to solve the
problem and maintain the relationship.
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Threats and punishment increase compliance but....
 Good intentions matter.
Identifying Performance Gap
1. Identify a specific gap between performance and
expectations.
Assume an employee says:
“I know you are not happy with something, but I am not sure what I am
doing wrong. What exactly is it that concerns you?”
OR
“I want to make sure that I’m doing the job the way you want it done.
What exactly should I do so that you will say I am doing a good job?”
Dealing With Poor Performers
2. Making the business case why the problem must be
solved. Be prepared to answer:
“What’s the big deal?”
“Why is this important?”
“That’s a dumb rule anyway – you know I do a good job”
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Determine consequences and actions.
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Be specific – no vague threats
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Give time for employee to change
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How critical is the problem behavior?
Dealing With Poor Performers
 Consider a range of action
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Discuss during the appraisal without making a written
reference.
Reference the issue in the appraisal narrative without lowering
ratings.
Reference the issue and lower the performance rating for that
particular area.
Reference the issue in performance summary and lower final
appraisal rating.
 Use progressively stronger sanctions