Chapter 10 - Performance Management
Performance Management The process of encompassing all activities related to
improving employee performance, productivity, and effectiveness. Includes:
pay for performance
training and development
Performance Appraisal Foundation of performance management. Purpose of
appraising and coaching employees is to instil in them the desire for continuous
5 STEPS OF PERFORMANCE MANAGEMENT (DPCDC)
1.Defining performance expectations to make sure that job duties and job standards
are clear to all.
2. Providing ongoing feedback and coaching through open two-way
3. conducting performance appraisal and evaluation discussions at specific
intervals by comparing an employees actual performance to the standards that have
been set; the employees performance and progress are discussed to reinforce the
things that the employee is doing well and to develop a plan for correction of any
4. Determining performance rewards/consequences such as promotions, salary
increases, and bonuses.
5. Conducting development and career opportunities discussions (usually
annually) to in order to review each employees career plans in light of their exhibited
strengths and weaknesses and in light of the companys strategic plans.
Step 1: Defining performance expectations
Should be linked to current strategic objectives and implementation plans.
Requires clarification of their performance expectations and how employees
contribute to the organizations overall results.
Performance appraisal criteria may need to be modified to be consistent with
cultural norms and values.
Step 2: Providing ongoing feedback
Managers and their reports should continue to discuss progress.
www.notesolution.com Important to have open two-way communication.
Both employee and manager need to check in frequently throughout the performance
Step 3: Conducting performance appraisal and evaluation discussions
Appraisal is conducted with a predetermined and formal method.
Graphic Rating Scale - a scale that lists a number of traits and a range of
performance for each. The employee is then rated by identifying the score that best
describes his or her level of performance for each trait.
Alternation Ranking Method - ranking employees from best to worst on a particular
Paired Comparison Method - ranking employees by making a chart of all possible
pairs of employees for each trait and indicting the better employee of the pair.
Forced Distribution Method - predetermined percentages of rates are placed in
Critical Incident Method - keeping a record of uncommonly good or undesirable
examples of an employees work-related behaviour and reviewing the list with the
employee at predetermined times.
Narrative Forms - Identifies a performance issue and presents a performance
improvement plan. Focuses on problem solving
Behaviourally Anchored Rating Scales (BARS) - an appraisal method that aims to
combine the benefits of narratives, critical incidents, and quantified ratings by
anchoring a quantified scale with specific narrative examples of good and poor
1. Generate critical incidents.
2. Develop performance dimensions.
3. Reallocate incidents.
4. Scale the incidents.
5. Develop the final instrument.
Management By Objectives (MBO) - requires the manager to set specific measurable
goals with each employee and then periodically discuss their progress toward these
1. Set the organizations goals.
2. Set department goals.
3. Discuss department goals.
4. Define expected results.
5. Performance reviews.
6. Provide feedback.
Computerized and Web-Based Performance Appraisal
www.notesolution.com o Electronic Performance Monitoring (EPM) - having supervisors electronically
monitor the amount of computerized data an employee is processing per day and
thereby his or her performance.
Rating Scale Problems
Unclear performance standards - an appraisal scale that is too open to
interpretation of traits and standards
Halo effect - the problem that occurs when a supervisors rating of an employee on
one trait biases the rating of that person on other traits
Central tendency - a tendency to rate all employees in the middle of the scale
Strictness/leniency - problem that occurs when a supervisor has a tendency to rate
all employees either low or high
Appraisal bias - tendency to allow individual differences such as age, race, sex, etc.
to affect the appraisal rating
Recency effect - rating error that occurs when ratings are based on most recent
Similar-to-me bias - tendency to give higher performance ratings to those who are
perceived to be similar to the rater
How to avoid Appraisal problems
3 ways to avoid appraisal problems
1. Raters must be familiar with the problems just discussed. Understanding the
problem can help avoid it.
2. Raters must choose the right appraisal tool.
3. Training supervisors to eliminate rating errors.
Who should do the Appraising
360-degree Appraisal - multiple raters including peers, employees reporting to the
appraisee, supervisors, etc.
Types of Interviews
Appraisal Interview Type Appraisal Interview
Satisfactory performance - promotable employee Make development plans
Satisfactory performance - unpromotable Maintain performance
Unsatisfactory performance - correctable Plan correction
www.notesolution.com Preparing for the Appraisal Interview
1.Assemble data. Study persons job description, compare the employees performance
to the standards.
2. Prepare the employee. Give the employee at least a weeks notice to review his
3. Find a mutually agreeable time and place and allow plenty of time for the
How to conduct the interview
Be direct and specific
Do not get personal
Encourage the person to talk
Develop an action plan
Step 4: Determine performance rewards/consequences
After the performance review has taken place, the manager should determine the
appropriate rewards or consequences.
Step 5: Career Development Discussion
Manager and employee should discuss opportunities for development to strengthen
or improve the employees KSAs.
Chapter 11 - Strategic Pay Plans
Total Rewards - an integrated package of all rewards (monetary and nonmonetary, extrinsic
and intrinsic) gained by employees arising from their employment
The 5 components of Total Rewards
1.Compensation - includes direct financial payments in the form of wages, salaries,
incentives, commissions, and bonuses.
2. Benefits - includes indirect payments in the form of financial benefits, like
employer-paid insurance and vacation.
3. Work/life programs - relates to programs that help employees do their jobs
effectively, such as flexible scheduling, telecommuting, childcare, etc.
4. Performance and recognition - includes pay-for-performance and recognition
5. Development and career opportunities - focuses on planning for the
advancement and/or change in responsibilities to best suit individual skills, talents,
and desires. Tuition assistance, professional development, sabbaticals, coaching, etc.
Four basic considerations that influence the formulation of pay plans.