Defend legal and ethical issues that affect performance management systems. Your response should be at least 75 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

No wiki, or uncited information.

248 PART 3 Assessing Performance and Developing Employees

Figure 8.7

lmproving Performance Low

L09 Discuss legal and
ethical issues that
affect periormance



SOUICE: Based on M. Lbndon, Job Feedback tMahwah, NJ: Lawrence Erlbaum Associates, 1997), pp. 96*97. Lse:

by permission.

on the grout)ds of leaving well enough alone. Rather, such employees are likelr :
appreciate opportunities for further der.elopment. Rer’vards and direct feedback h

Legal and Ethicat lssues in Performance
fu-r developing and using performance management systems, human resource prtri’i:e”

sionals ne.d to ensure that these systems meet legal requirements, such as the ar’, rj-
ance of discrimination. In addition, performance management systems should m*l
ethical sundards, such as, protection of employees’ privacy.

Legal Requirements for Performance fttanagement
Because performance measures play a central role in decisions about pay, proo)otit :–.

and discipline, employmenr-related larvsuits often challenge an organization’s per’

forroanc” murlug”*rlt system. Lawsuits related to pedormance lnanagement usu;-l:ls’
involve charges of discrimination or unjust dismissal’

Discrimination claims often allege that the performance management system j:*
criminated against employees on the basis of their race or sex. Many performi-lirts


CHAPTER 8 Managing Employees’Performance 249

i.r:-:-ii€S are subjective, and measurerrrent errors, such as those described earlier in the

: rrir. can easily occur. The Supreme Court has held that the selection guidelir”res in
:- -;-:;erai governrnenr’sllnifotmGuidelines onEmployeeSelecdonProcedttres also apply

-i::rrnance measllfement.l6 In general, these guidelines (discussed in Chapters 3
,: : r rerlllire that organizations avoid using criteria such as race and age as a basis for
::’:’.:. ,,,’n1€11[ decisions. This requires overcotning widespread rating erlofs. A substan-
–: .-. ,”1\’ of evider-rce has shor,vn rhat white and black raters tend to gir,e higher: ratings

–.:i:L.ers of tl’reir own racial group, e\ren after rater training.lT In addition, eviileuce
: ;:,::!S that this teirdency is strongest rvhen one group is only a small Percentage ,lf
.. – .:al ri’ork group, When the vast majority of the groutrr is male, females receile
, ..r:: i:rtings; .lnthat-t tl-t” minority is male, males receil’e lou’er

:,.’;:1-r regard to lawsr-rits filed on the grounds of rurjust dismissal, the usual claim is
‘:’ ,: -lre person \\/as dismissed for reasons besides the ones that the etlplttr-er states.
r .::.,s. an enployee rvho’,vorks for a defense contractor discloses rhai rl’ie colnlran)r
;f:–..rled rhe gorrernment. lf the cornpany fires the emplo)-ee, the emplo1’ee might
.,’..’ -, ,har rl’re firing was a way to pur-rish the ernpioyee for blon’ing tl-re n’l-ristle. in this

::: f situation, courts generaily focus on the emploiel’5 perf.trmance managelnellt
‘,:.:. looking to see rvhetl-ier the firing could have been L.ase.l c)n Frror l’erti)rlllallce.

– .i.i:.-nJ itself, the employer rvould need a perforuatlce lrlaltitgeffIent svsten that
.- .-ies er,idence to support its ernployrnent decisious.

– lrgrect against both kinds of iau,suits, it is irlptrn;.rlt tL) har-e a legally
.,:.::-,:lble performance n.ranagernent system.39 Sucl’r a s\stem n’rruld L’e base.l on valitl
.- ,:’.th’ses, as described in Chapter 4, t’ith the reqtrirements fLrr jtri: sr,rccess clearly

– – ::rlnicated to employees. Perforrnance rneasrlretnent shr’ttLl.l elaluate behaviors or
‘: ‘ “S’ ratl’rer tl’ran traits’ The organizaliot’t should r-rsc- tlulritr’lt- ratels (inclrrding self-
. , :-,-:als) ar-rd train raters in how to use the s),stern. The,rrgani:atirrr-r sl-rclr-rld provide
. ‘.r’ien, of ali pelforrnance ratings b}, uptr q1-lsve1 mart-t,rgers and set up a 5ttr”tlr
, –}’e€s to appeal u’hen they believe thel-ri’ere er-rrluat.-.1 ur-rfirirly. Along rvith
‘, ,.::’r;k, rl-re system should inclucle a process for ct-,2’rchino t’rr training enployees to

: -‘ .hc’m irnprove, rather thatt simplv dismissirrg !'()rrr lcdirrmtrs.

fi*ctronic Monitoring and Employee Privacy
.t.,-itter technology 11ow supports lnan\’ !.erlorrlancr tnilrtLlgclnellt systems. Orga-

: – ,r1s clften stole records of emp-t161’gss’ l.erionnance ratil1gs, tlisciplinary actions,
, . .,’,-rk-rule violations in electronic .laiirl.ases. \{ant cotlpanies r-tse computers to
. .’–:rrr l’,roductivity and other perfonlrrnce me;:lillres elecrronicaily. Meijer, a retail

,-=rierlter offering groceries and 40 otl-rer tleparrment:, is trne of several retailers
::.-.. >rrft\\rare designed to irnpror,e the etficlencl rrl cashie’rs. The store’s colllputer
– .. iron, long it takes to complete each customer trans:lction, taking into accoulrt

.’ . …::’LJs of rnerchandise being pr-rtchaseci as rreLl as rrhetl-rer cLrstornets are paytng
; ,’- :-1sll, credit, gifts carc{s, or store cretlit. Eacl-r s’eek tl-re cnshiers receive scores. If a
. . . ri ialls belon’ the baseline score too man\- tirres, l-re or sl-re rnay be carefully tnon-

::-: bv a marlager, morred to a lclu’er-pa1,ing lol:, or evell be let go. lvleijer reports
‘ , . :ire s)rstem has helped n-ranagers identifi’ ,ur.i coach siou’ cashiers, but cashiers

‘ : ..rmplai|red that it fo|ces them to hLrrr\- custolners aloug, tather than pay atten-
:’. ii rhem ar-rcl help thern through the checkr)Llt line.4r: \fi/hettrer custonters q’in

: ::rls on rvhether they prefel a speerly casl-rier c”r .r friendll’ one.
‘,–lrorrgh electlorric rnonitolirrg carr irnplott l’r,’.ltrrtivitl’, it also generzltes llri-

. rrlncerns. Critics point out thar an eurpior-t’r shotri,-l i-rot rnonitor einployees

250 PART 3 Assessing Performance and Developing Employees

rvhen ir has no reason to beiieve anything is wrong. They complain that monitoring

systems threaten to make the workplace an electronic su’eatshop in which employees

are treated as robots, robbing them of dignity. Some note that employees’performance

should be measured by accomplishments, not just time spent at a desk or rvorkbench’

Electronic systems should not be a substitute for careful management. When moni’

toring is necessary managers shouid communicate the reasons for using lt. Monitor’

ir’rg ,iay be used *or. potlriuely to gather information {or coacl-ring employees and-
heipilg rhem develop ih”it skills. Finally, organizations must protect the privacy of
p.*ur-ur’r.. measurements, as they must do with other empl6yee recorcls’



ln 2008, the business world and government leaders
were in shock. Lehman Brothers, an investment bank
with a 15O-year history folded, investment giant
Merrill Lynch seemed poised to follow, and only a
massive bailout by the U.S’ government saved ‘AlG, a

huge insurance comPany. lt appeared that the entire
financial system could collapse, effectively bringing
commerce to a halt.

As we slowly recover from the economic slump that

followed these events, many are asking what caused

the crisis, hoping to prevent such events from recur-
ring. The piciure is complicated, but observers place
soi.,e of the blame at the feet o{ management, includ-

ing human resource rnanagement
One source of trouble seems to have been per-

formance management in the mortgage lending
industry. Lending companies set goals based on what

would help them grow in the near term: make more
and more ioans to homebuyers. To back up that strat-
egy, they measured the performance of loan officers
1r,Jho apptou” loans) and mortgage brokers

(who bring

together borrowers and ienders) by counting the num-

bei of loans they made and adding up the total dollars

in those deals. The more loans these employees made,

the more money they earned. There were no rewards
for turning down risky borrowers or penalties for mak-

ing bad lians, because the lenders typically sold the

loan contracts to other financial companies’ When the
“bubble” of fast-rising housing prices burst and the
slowing economy caused many borrowers to lose jobs,

the loan deals went bad on a massive scale, fueling the

financial crisis.

SOURCE: Based on Wayne F. Cascio and Peter Cappelli,

“Lessons from the Financial Services Crisis,” HR Magazine,

January 2009, Business & Company Resource Center, http://


1. lf performance management Practices at mort-
gage companies helped the companies earn
impressive profits for a time, would you rate that

as a business success? An ethical success? Why or

why not?
2, lf those same practices made mortgage compa-

nies more vulnerable after the real estate bubble
burst and the financial crisis occurred, would you

rate that as a business {ailure? An ethical failure?
Why or why not?

3. ln general, how could performance management
at mortgage brokers be adjusted so that the com-

panies treat their employees, cusJo]nefs, investors,

and communities more ethically? Explain whether

you think your recommendations would help or
hurt the comPanies.

LOl ldentifu the activities involved in performance

Performance management is the process through

which managers ensure that employees’ activi-
ties and outputs contribute to the organization’s

goals. The organization begins by specifying which

of perfotmance ate relevant to the organi-

,”tio.r. N”*t, che organization measures the rel-
evant aspects of performance through performance

appraisal. Finaliy, in performance feedback sessions’

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