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Commerce 2BC3 Chapter 9: Performance management and Appraisal At the heart of organizational success is performance, which is driven by organizational and individual efforts leading to achieving goals and objectives. Performance management systems are a key means for HR management to contribute to organizational performance Nature of Performance Management Performance management: Composed of the processes used to identify, measure, communicate, develop, and reward employee performance - Should be propelled by business strategies Those plans have then served as the foundation for accomplishing the following functions: Clarifying the organizational performance expectations Providing information to employees about their performance Identifying the development steps that are needed to enhance employee performance Documenting performance for personnel action Providing rewards for achieving performance objectives Difference between Performance Management and Performance Appraisals Performance Appraisal: Process of evaluating how well employees perform their jobs relative to a standard and then communicating that information to the employees Referred to as employee rating, employee evaluation, performance review, and performance evaluation Performance management performance appraisals performance feedback Performance rewards and development - Performance management systems in organizations can be effective in countering the narrow and negative views of performance appraisals Includes whats expected of them, provided with the opportunity to perform, provided with help, guidance, and support as well as recognition and reward programs linked to business outcomes Performance-Focused Organizational Culture - Some are based on entitlement, meaning that adequate performance and stability dominate the organization - Employee rewards systems vary little from person to person and are not based on individual performance differences - The performance appraisals activities are seen as having little tie to performance and as being primarily a bureaucratic exercise - Some are performance-driven organizational culture focused on corporate values, results, information sharing, and performance appraisal systems that link results to employee compensation and development - Some components of a successful performance=focused culture of an organization would include the following: Clear expectations, goals, and deadlines Detailed appraisal of employee performance Clear feedback on performance Management and implementation of employee training as needed Consequences for performance - Wider cultural values need to be considered in a global workforce Executive Commitment to Performance Management - Executive involvement in continually reinforcing the performance message - If they do performance reviews on employees who report directly to them, then they are supporting the performance culture - In many organizations, performance appraisals are supposed to be done by all managers, but senior executives never do them - Another indicator of a performance-focused culture is executive compensation plans that are clearly linked to company performance measures Identifying and Measuring Employee Performance - Employee performance measures common to most jobs include the following elements: Quantity of output Quality of output Timeliness of output Presence at work Job criteria: Important element in a given job - Job criteria are then identified from well-written job descriptions that contain the most important factors of individual jobs - They define what the organization pays the employees to do, and the performance of individuals on job criteria should be measured and compared against standards, and then results be communicated to the employee - Are the rule rather than the exception in many jobs - Weights can be used to show the relative importance of several job criteria in one job Individual performance factors - 3 major factors that affect given individual performs: 1) Individual ability to do the work 2) Effort expended 3) Organizational support - The relationship of those factors is widely acknowledged in management literature as follows: Performance (P)= Ability (A) X Effort (E) X Support (S) - Individual performance is enhanced to the degree that all 3 components are present with an individual employee, and diminished if any of these factors is reduced or absent - Individual motivation is often missing Types of Performance Information - Managers can use 3 types of information about how employees are performing their jobs 1) Trait-based information - Identifies a character trait of the employee- such as attitude, initiative, or creativity, and may or may not be job related Generally too vague to use 2) Behaviour-based - Information focuses on specific behaviours that lead to job success - Clearly specifies the behaviours management wants to see Any of several behaviours can lead to successful performance in a given situation 3) Results-based - Considers employee accomplishments - For jobs in which measurement is easy and obvious The emphasis may leave out equally important but immeasurable parts of the job - Can also be viewed as objective or subjective Objective: Measures can be observed directly Subjective: Measures require judgment on the part of the evaluator and are more difficult to determine Relevance of Performance Criteria Criterion relevance: The extent to which the criterion measured represents behaviours that constitutes job performance - The most important job criteria related to specific job duties should be identified in the employees job description Criterion deficiency: Describes job performance behaviours that are not measured by the criterion Criteria contamination: The degree to which the criterion measured is influenced by measures or behaviours that are not part of the job performance - Managers need to guard against using deficient or contaminated performance measures - Overemphasis on one or two criteria can lead to problems - Ethical issues can arise Reliability - Consistency of different raters assessment of performance results of the same employee, using the same appraisal tools - Using the same tools should yield similar results when 2 or more managers rate the same employee - Should be consistency throughout the organization when managers are appraising all employees Practicality - For appraisals to be considered practical, an appraisal system and its outcome measures must be accepted by everyone involved in the appraisal - Employee has to agree for it to be useful Fairness - Quality of appraisal system when it is seen as being free from bias and is equitable - Managers must ensure that they are duly diligent about administering the program fairly among the employees Performance Standards - Define the expected levels of performance - Need to be written in a way that captures the important elements to achieve the expected goals - One approach to writing performance standards uses the SMART approach S- Specific M- Measurable A- Attainable R- Relevant T- Time-bound - Benefit both the organization and employee - Recommended that performance standards be established before the work is performed - Well-defined standards ensure that everyone involved knows the levels of accomplishment expected - Recommended that managers and supervisors discuss the standards with employees and get their input - Job analysis is the basis on which performance standards are derived to evaluate and measure objectives developed - Used in performance appraisal programs to help the manager and individual develop or identify particular standards that the performance will be evaluated against - Can be built right into the job description, and the job description can be used as a guide to generate performance standards on which behaviour is evaluated - Measuring performance in service businesses is difficult Some of the most useful sources of performance differences among managers in service businesses are these: Regional differences in labour costs Service agreement differences Equipment/infrastructure differences Work volume - Performance that is measured can be managed Legal and Effective Performance Appraisal Processes - Performance appraisals must accomplish: 1) Legal compliance and documentation 2) Administrative uses 3) Developmental uses - Achieving them is challenging - Can influence to degree to which appraisals serve those purposesLegal Concerns and Performance Appraisals - Have to be job related - Have to show that the employee was more than careless To establish cause on the basis of incompetence the employer must show: 1) The level of job performance that it required and that the level required was communicated to the employee 2) That it gave suitable instruction to the employee to enable him to meet the standard 3) The employee was incapable of meeting the standard 4) There had been a warning to the employee that failure to meet the standard would result in his dismissal - The elements of a performance appraisal system that can survive court tests can be determined from existing case law Elements of a legally defensible performance appraisal, they include the following: Objective performance appraisal criteria based on job analysis Absence of disparate impact and evidence of validity Formal evaluation criteria that limit managerial discretion A rating instrument linked to job duties and responsibilities Documentation of the appraisal activities Personal knowledge of and contact with the appraised individual Training of supervisors in conducting appraisals A review process that prevents one manager, acting alone, from controlling an employees career Counse
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