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Chapter 10-16

MHR523 - Chapters 10-16

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Human Resources
MHR 523
Anne Hardacre

Chapter 10: Performance Management The Strategic Importance of Performance Management - Achieving strategic objectives requires employee productivity above all else - Create a high-performance culture by using a minimum number of employees - Better performance management represents a largely untapped opportunity to improve company profitability - Performance management: process encompassing all activities related to improving employee performance, productivity, and effectiveness - Goal setting, pay for performance, training, and development, career management, and disciplinary action - Must provide an integrated network of procedures across the organization that will direct all work behaviour - Founded by performance appraisal process - Purpose of appraising and coaching employees is to instill the desire for continuous improvement. - Concrete basis for analysis of an employees work performance The Performance Management Process 1) Defining performance expectations and goals to make sure that job duties and job standards are clear to all - Critical step in understanding how work makes a contribution to business results - Should be linked to current strategic objectives and implementation plans - Line of sight from job duties to achievement of strategic goals is blurred - Job description often is not sufficient to clarify what employees are expected to do - To clarify expectations, measurable standards related to strategic objectives should be developed for each - In global companies, performance appraisal criteria may need to be modified to be consistent with cultural norms and values 2) Providing ongoing feedback and coaching through open two-way communication - Throughout the performance management process, managers and their reports should continue to discuss progress - Important to have open two-way communication - Both employee and the manager need to check in frequently throughout the performance management process 3) Conducting performance appraisal and evaluation discussions at specific intervals by comparing an employees actual performance to the standards that have been set (usually involving some type of rating form); 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 deficiencies that the appraisal might have identified 4) Determining performance rewards/consequences such as promotions, salary increases, and bonuses 5) Conducting development and career opportunities discussions in order to review each employees career lands in light of his or her exhibited strengths and weaknesses, and in light of the companys strategic plans Formal Appraisal Methods - 1. Graphic Rating Scale - 2. Alternation Ranking Scale - 3. Paired Comparison Method - 4. Forced Distribution Method - 5. Critical Incident Method - 6. Narrative Forms - 7. Behaviourally Anchored Rating Scales - 8. Management by Objectives (MBO) - 9. Computerized and Web-Based Performance Appraisal - Graphic Rating Scale 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 trait - Paired Comparison Method Ranking employees by making a chart of all possible pairs of employees for each trait and indicating the better employee of the pair - Forced Distribution Method Predetermined percentages of rates are placed in various performance categories - 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 Performance improvement plan. Performance problem is described in specific detail; organizational impact is specified. It defines measurable improvement goals, provides directions regarding training and any other suggested activities to address the performance issue, and encourages the employee to add ideas about steps to be taken to improve performance. Outcomes and consequences are explicitly stated. - Behaviourally Anchored Rating Scales 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 performance 1) Generate critical incidents. Performs who know the job being appraised are asked to describe specific illustrations (critical incidents) of effective and ineffective performance 2) Develop performance dimensions. These people then cluster the incidents into a smaller set of performance dimensions. Each cluster is then defined. 3) Reallocate incidents. Another group of people who also know the job then reallocate the original critical incidents. They are given the clusters definitions and the critical incidents and are asked to reassign each incident to the cluster that they think it best fits. A critical incident is retained if some percentage of this second group assigns it to the same cluster as the group did in Step 2. 4) Scale the incidents. Second group is generally asked to rate the behaviour described in the incident as to how effectively or ineffectively it represents performance on the appropriate dimension 5) Develop the final instrument. A subset of the incidents is used as behavioural anchors for each dimensions Advantages and Disadvantages 1) A more accurate measure. 2) Clearer standards help clarify what is meant by good performance 3) Feedback 4) Independent dimensions 5) Consistency Problems Validity & Reliability Rater errors Lack of standards; irrelevant, subjective, unrealistic standards, poor measures of performance Poor feedback to employees e.g. arguing Failure to use evaluation results for decision-making Management by Objectives - Involves setting specific measurable goals with each employee and then periodically reviewing the progress made 1) Set the organizations goals Establish an organization-wide plan for next year and set goals 2) Set departmental goals Here department heads and their superiors jointly set goals for their departments 3) Discuss departmental goals Department heads discuss the departments goals with all employees in the department and ask them to develop their own individual goals 4) Define expected results Here, department heads and employees set short-term performance targets 5) Performance reviews: Measure the results Department heads compare the actual performance of each employee with the expected results 6) Provide feedback Department heads hold periodic performance review meetings with employees to discuss and evaluate progress in achieving expected results Computerized and Web-Based Performance Appraisal - Enables managers to keep computerized notes on employees - Improve overall performance management process - Performance management systems provide employees with a clear development path and better understanding of how goals are aligned with organization; increases support of process - Web provides advanced reporting capabilities; allows managers to track performance management initiative status Management by Objectives 1. Set the organizations goals 2. Set departmental goals 3. Discuss departmental goals 4. Define expected results (individual) 5. Performance reviews: measure the results 6. Provide feedback Problems Setting unclear, immeasurable objectives Time consuming Tug of war between manager and employee Strategic Pay Plans The Strategic Importance of Total Rewards Total Rewards: Integrated package of all rewards gained by employees arising from their employment - Considers individual reward components as part of an integrated whole to determine the best mix of rewards that are aligned with business strategy - Alignment is the extent to which rewards support outcomes that are important to achieving the organizations strategic objectives - Five Components of Total Rewards o Compensation: Direct financial payments (wages, salaries, incentives, commissions, and bonuses) o Benefits: Indirect payments in the form of financial benefits (employer-paid insurance and vacations) o Work/life Programs: Relates to programs that help employees do their jobs effectively (flexible scheduling, telecommuting, childcare) o Performance and Recognition: Pay-for-performance and recognition programs o Development and Career Opportunities: Planning for the advancement and/or change in responsibilities to best suit individual skills, talents, and desires. 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