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Administrative Studies
ADMS 2600
Paul Fairlie

HRM1283 Performance Management Donna Verity and Chris Carella LESSON 8: PERFORMANCE MANAGEMENT INTRODUCTION In order to ensure that organizational outcomes are being met, organizations must have ways of obtaining and analyzing information. This is also true of its human resources. Performance appraisal systems work best when they gather the right information for decision making and when supervisors find them easy to use and employees are confident that they are used fairly. Progressive organizations today understand that the performance appraisal system belongs to everyone in the organization and that everyone has a vested interest in ensuring that it works well. This lesson will discuss the basics of performance appraisal systems and the elements that that can lead to its success or failure. Topics will include: • the purposes of performance appraisals • performance standards • legal considerations of appraisal programs • the source of appraisal information • rater errors • the 3 classifications of performance appraisal systems • the 3 types of appraisal interviews • conducting an appraisal interview LEARNING OUTCOMES At the end of this module, you will be able to: 1 Explain the 3 purposes of performance appraisals 2 Outline how to avoid problems when developing performance standards 3 Identify how employment law influences performance appraisals 4 Describe the different sources of appraisal information and when to use each 5 Identify the various types of rater errors and why they occur 6 Explain the 3 classifications of appraisal methods and identify the major types of methods under each classification 7 Identify the types of appraisal interviews and how to use each one 8 Outline the basic elements of conducting an appraisal interview 1 HRM1283 Performance Management Donna Verity and Chris Carella TEXT READING: Appraising and Improving Performance Pages 347 - 388 LECTURE NOTES While organizations tend to think that conducting annual performance appraisals is managing performance in their organizations. However, performance management is actually a macro level activity; that is: The process of creating a work environment in which people can perform to the best of their abilities (text pg. 348) On the other hand, performance appraisals are one of the tools that are used by organizations to provided information to staff on how they are actually performing. A performance appraisal is: The process of creating a work environment in which people can perform to the best of their abilities (text pg. 348). 1. PURPOSES OF PERFORMANCE APPRAISAL Performance Appraisals actually have 3 purposes – the first two are commonly known: • Administrative Purposes: Administrative purposes include compensation (which is often tied to performance), promotions and transfers of staff, and training identification. Information from an appraisal can provide decision making points for all of these areas. • Developmental Purposes: Information from the appraisal records the performance level of staff and provides indicators where an employee may be developed for other positions in the organization. • HRM Indicators: Appraisals can also be used to verify the success of various HRM initiatives. For example, if recruitment and selection are done properly, then the performance of those hired should be at the required level, if training has been successful, then those staff should perform well, etc. 2. DEVELOPING AN EFFECTIVE APPRAISAL PROGRAM 2 HRM1283 Performance Management Donna Verity and Chris Carella Successful performance systems have be to seen by staff as fair and so it is essential that supervisors be trained well and understand the role of appraisals in the organization. While performance management systems are the joint responsibility of HR and management, systems that involve staff, both in the development and the implementation, tend to be more successful. The top ten reasons that appraisal programs fail can be found on page 351 in the text. When developing a performance management system, there are four areas that must be considered: a. Performance Standards Performance standards are basically the criteria that will be used to measure success of the performance. (When we discussed training, criteria were used to measure the success of the training – it is the same concept). It is very important that staff understand what is required of them, if they are to be able to meet the needs of the organization. Good standards are always job related so that staff can link what they are doing to what is required, and are clear enough that staff may self assess. Four basics in establishing performance standards are: • Strategic Relevance – standards are most meaningful when they relate to the strategic objectives of the organization • Criterion Deficiency - standards must capture the full range of the job -otherwise the standard is said to be deficient in measuring the most important criteria of the position • Criterion Contamination – you have heard the expression “measuring apples and oranges” which indicates that you are not using the right criteria when reaching a conclusion – contaminating criteria is essentially the same thing. For example, if an employee's performance is affected by poor equipment, their performance may be contaminated by facts over which they have no control. • Reliability – essentially a standard is reliable if it is consistent over time, that is, if 2 evaluators use the same standard to assess the same performance, then they should get a similar rating of performance. Reliability is increased when standards are clearly written, and well defined. Well defined means that you should be able to measure the quality or quantity of the performance and the appropriate level is defined, or if you are measuring behaviour, you must be able to describe the appropriate behaviour. b. Legal Considerations – Employment Law in the various provinces determines the legal use of performance appraisals, particularly when a person is released from a company. In order to protect itself from 3 HRM1283 Performance Management Donna Verity and Chris Carella wrongful dismissal suits, performance standards should meet the following guidelines: • performance ratings must be job-related (based on job analysis) • employees should have a written copy of their job standards • employee performance should be observable • supervisors should be properly trained in the appraisal process • managers should openly discuss performance with employees and offer help where needed • an appeals procedure should be developed whereby employees can voice disagreement with the appraisal that they receive c. Who Should Appraise Performance is also an important consideration. Any number of people can provide information to the appraisal, but the organization must be careful how much weight to provide to the person providing the feedback. For example, reliability is increased when a person has the opportunity to actually observe the performance, rather than drawing conclusions from interactions by phone or through email. Some sources of information include: • Manager/Supervisor – this is the most common source of information used in organizations and uses items such as daily work records and the direct observation of employees • Self-Appraisal - these are used when managers want to increase employee involvement in the appraisal process. In order to avoid problems like over assessment, this type of feedback works best with developmental methods. • Subordinate Appraisal – being appraised by your subordinates is becoming more popular since they are seen to have valid information about the leadership, communications, planning, and delegation of authority of their managers. However, if this system is to work well, there needs to be a well defined set of standards, and a culture that encourages open discussion of performance in order to encourage a change in behaviour. • Peer Appraisal – these are best used in technical/scientific jobs where knowledge is a key factor in success. Otherwise there is the danger of this being reduced to popularity contests. • Team Appraisal – these should be used to appraise the team as a whole, rather than individuals in the team to avoid the type of popularity issues found in peer appraisals. 4 HRM1283 Performance Management Donna Verity and Chris Carella • Customer Appraisal – using the feedback of clients is becoming increasingly popular, but again care must be taken to maintain reliability levels. For example, a client who is only contacted by phone does not have the luxury of observing the employee in their work environment and may not know that while the staff member is talking to them, that 6 other people may be interrupting the person. Their feedback may indicate that the staff member appears to be distracted during their dealings. Essentially, the less that an appraiser has an opportunity to see the employee actually perform, the less weight should be given to their feedback.  Vendors and Suppliers are sometimes asked to provide feedback but it is important that surveys be well developed so that the information gathered is useful • 360-Degree Appraisal – in order to be successful, all participants must be trained in giving and receiving feedback. Take a look at pages 358- 360 in your text for the pros and cons of this method and an example of how it can be made to work. d. Training Appraisers is a critical part of the appraisal process. It should focus on: • Appraisal Plan: This systematic process covers the objectives of the performance appraisal system, the method, frequency, and strengths/weaknesses of the system. • Rater Error: Eliminating rater error is essential to meeting organizational needs in terms of having reliable information on which to make decisions, but in meeting the need to have employee confidence in the system itself. Some issues include: • the use of a forced distribution method without clear behavioural anchors (descriptors) • central tendency errors occur when all employees are rated "average" – this often occurs when supervisors are not well trained and cannot explain the higher or lower performance achievements • leniency or strictness errors occur when the appraiser tends to give unusually high or low ratings – you have heard this type of error in school when you hear things like “a C in that class is like an A in another” – to deal with these types of errors, managers and supervisors must defend high or low ratings to their peers so that inappropriate standards can be eliminated • temporal errors (e.g. recency) are the result of how a person evaluates information over time. Recency errors occur when only the most recent event influences the rating – “you’re only as good as the last thing you did” 5 HRM1283 Performance Management Donna Verity and Chris Carella • contrast error occurs when an employee's evaluation is biased either favourably or unfavourably because of a previous employee's performance evaluation • s
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