three

Define the three broad purposes for performance management, and provide an example of a situation that relates to each purpose. 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, disctionary.com or uncited information.

In this chapter we examine a variety of approaches to performance lnanage-
lneut. ‘We begin by describing the activities involved in managing performance,
then discuss ih. p.rrpor” of carrying out this process. Next, we discuss specific
approaches to performance managefrent, including the strengths and weaknesses of
.r-.h

“pprouch.
Wt aiso iook ar various sources of perfonnance informafion’ The

next section explores the kinds of errors thaf commonh’ occur during the assess’
mer-rt of performance, as well as rvays to reduce those errors. Then we describe
*’ays of giving performance feedback effectively and inten’ening when performance

must irnprove. Finally, lve summarize 1ega1 and ethicai issues affecting perfornance

management.

CHAPTER B Managing Employees’Per{ormance 725

Perlormance
Management
The process through

which managers
ensure that emPIoYees’

a ctivities and oiitputs
contribute to the
organization’s goals.

r r3ur L s! ‘

Stages of the Perfornrance Managenrent Process

i:i;!r:::r.lirtr;:’:.:rl ;1ii:

a prob-

vhether

le orga-

to rate
conse-

isals. lb
iety ser

zaricn s

‘evenue.

rg goals

s team-

: online

;o man-

fs must

uss the

:mploy-

: raises

icuss

ing

manag-

3ement.

re that
)rocess

/ occur,

oviding

;h ways

?he ffngeess *f Ferfmrf-ffieffi€€ &4Anagem*nt r#l rdentirvthe
-llrhough ma’y en’rployees have corne to clread the annual “perfortna.ce appraisal” ffH[:tt;]::t’
:::eeting, at which a boss picks apart the ernployee’s bel-raviors and apparent attitLrdes ,Jnunr*rn,.
:: 11 the Lrast year, performance management cal-) potentially deliver many benefits.
l::.ctlye pe.forrna.r.. management can tell top performers that they are valued,
:::i,-ailrage communication betu,een managers and their employees, establish uniform

-: :::j”:rJs for evaluating employees, and help the organization ider-rtify its strongest
,:.: ..r’eakest performers. Consultant Dick Grote asserts that performance a1.r;lraisals,
::,,;.rlt’done, meer an “ethical obligation of leadership” by providing information
-. r: .r11 meinbers of an organizatioll want to knorv so they carr succeed: “What is it

. ;:.!-.-.! of me? Horv arn I doing at meeling yotll’expectationsJ”‘
. ileet these objectives, performance managenent includes several activities.

:.. )iJ

When there are perfortnance probletns, the feedback
session should include efforts to identify and resolve
the underlying probleins. In addition, perfortnance
feedback can come through the organization’s tewards,
as described in Chapter 12. Using this performance
managernent process helps managers and empioyees
focus on the organization’s goals.

Conputer softrvare and h-rternet-based performance
lnanagelnent systeins ale available to help lnanagers at
various stages of the perfortnance lnanagetnent process.

Software can help nanagers cttstomize performance
measurelnent forms. The manager uses the software to
estabiish a set of perforn-iance standards for each job.
The manager rates each ernplol’ee according to the
precleterrnined star-rclarcls, and the software provides

repori thaa compares the enpltryeet perforilance to
the stantlards and identifies the empioyee’s strengths
ancl weaknesses. Otirer sofin’are offers help

:: ::, t :::tf ::r! :i::::riiiij9r!:i.,i!g: :;:r,. :,..:i:l:l::,:!:j ::i:::l: i:

t: :i. ii
lt.r i

Managers maY dread giving criti-
cism, but accarding to a survey
by Leadership lO, a research and
training company, emPloyees
want to hear more about how

:” i..; : : :,..: :’…t “:.,. .

welt they’re doing-even if itb
unpleasant.
SOURCES: Rebecca R. Hastings.
” Recession Stifl ing Managers’ Commu-
nication?” HR Magazine, February 2010,

Busrness & Company Resource Center,
http : / / gale net. gal egroup. com ; a nd
Leadership lO. ‘iManagers Are lgnoring
Their Fmployees,” news release, Decem-

ber 2, 2009, www.leadershipiq.com.

d
fi
ft
ri
o

rl
CI

ol
m
dr

I get too little positive feedback

I get too little constructive criticism

When mv boss criticizes, he/she doesn’t
giv-e enough information for me to

in”n *, ** r.:$,””T:5Jil:
is too vague to encourage rePeat

pertormance

0102a3040s0607080
Percentage of Employees Who Agree

103 Discuss
the purposes

of performance
management systems.

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In
ca
Fc
pe

al
pe

.t
I

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*.
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asks questions-for example, Does the employee work under time pressure? The
answers suggest reasons for performance problems and ways the manager can help the

employee improve.

Purposes of Performance Management
Organizations establish performance management systems to meet three broad
purposes: srrategic, administrative, and developmental. Strategrc purpose means
.ff”.ri.’. perfor*a.r.. management helps the organization achieve its bus

iness

objectives. It does this by helping to link employees’behavior q’ith the organization’s
goalr. Perfognance managemenr starts with defining what the organization expects
i.o*

“u.h
employee. It measures each employee’s performance to identifir where

those expectations are and are not being met. This enabies the organization to
take coriective action, such as training, incentives, or discipline. Performance
management can achieve its strategic purpose only when measuremerrts are truly

linkeJ to the organizarion’s goals and when the goals and feedback about performange

are communicaied to employ.er. Just Bom, the company that makes Peeps and Mike

and Ike candy, meets the strategic purpose of performance management- Its system

has empioye.s'”rrd managers meet to agree on several personal objectives-through
whlch each employee will help meet the objectives of his or her department. Together,

rhey idenrifl, .i,rr.r,., rraining the employee needs and meet regularly to discuss the
employee’s progress in meeting the objectives.i

‘fn* oa*;”irtt etiue putpose of a p.rfor*an e management syslem refers to the ways
in which organizations use the system to provide information for day’to-day decisions

abo,rt ,ulary] benefits, and recognition programs’ Per{ormance management can also

support d..irior-, making relatedto employee retention’ termination for poor behavioq

ing

,1!i,r!!litt:::r’::

The
r the

,road

reans

iness

-ion’s
pects

‘here
In to
.ance

truly
.ance
Mike
‘stem

^troh
:ther,
is the

ways
sions
r also
rvior,

auADTtrQ Q t\r—^i^^ tr*^r^.,^^., D^J^.–^– 1′]7er rht r Lrr v rvrs’ rqvnY L| rPrvrssJ

and hiring or layoffs. Because performance management supports these adninistrative
decisions, the information in a performance appraisai can have a great impact on the
future of individual employees. Managers recognize this, which is the reason they may
feel uncomfortable conducting performance appraisals when the appraisal informa-
-r– r- —^-:–^ –l -L-,-f^–

t:l–l . l–l -^ ^ l^–^tt l: –^r–:-tion is negaiive ar-rci, tneieiore, til(eiy to leaci to a la’)ioii, disappolntii-rg pay increase, or
other negative outcome.

Finally, performance management has a developmental ptnpose, meaning that it
ser\res as a basis for developing employees’ knorvledge and skills. Even empioyees
who are u\eeting expectations can become more vaiuable when they hear and discuss
performance feedback. Effective performance feedback makes employees aware of
their strengths and of the areas in which thev can improve. Discussing areas in which
employees fall shon can help the employees and their manager uncover the source
of problems and identify steps for improvement. Although discussing weaknesses
may feel uncomfortable, it is necessary when performance managenent has a
developmental purpose.

Criteria for Effeetive Performanee Management
In Chapter 6, we saw that there are many ways to predict performance of a job
candidate. Similarly, there are many ways to measure the performance of an employee.
For performance rnanagement to achieve its goals, its methods for measr,rring
performance must be good. Selecting these measures is a critical part of planning
a performance management system. Several criteria determine the effectiveness of
performance measures:

103 Define five
criteria for medsuring
the effectiveness
of a performance
management system.

Fit with suategy-A performance management system should aim at achieving
employee behavior and attitudes that support the organization’s strategy, goals, and
culture. lf a company emphasizcs customcr scrvicc, then its performancc managc-
ment system should de{ine the kinds o{behavior that contribute to good customer
service. Performance appraisals should measure whether employees are engaging in
those behaviors. Feeclbaek should help enplo*7ees improve in those areas. When
an organization’s strategy changes, human resource personnel should help manag-
ers assess how the performance rnanagement system should change to serve the
new strategy.
Validity-As we discussed in Chapter 6 , ualidity is the exrent ro which a measurelnent
tool actually measures what it is intended to measure. In the case of performance
appraisal, validity refers to whether the appraisal measures all the relevant aspects
of performance and omits irrelevant aspects of performance. Figure 8.2 shows

figure 8.2
Contamination and
Deficiency ol a Job
Performance MeasureJob

performance
meaSure

Aanlrrrl – ar tt’lrts -t’

job
performance

V’aliciity DeficiencyLOntamtnatron

n in Figure 8.1, these are defining perforrnance, measuring perfortnance,
:r-,1 :.c.lii-rg L-rack performance information. First, the organization specifies u’hich
,:-r:irS of perfotmance are relevant to the organization. These decislons are based
i-, rhe job ana\sis, described in Chapter 4. Next, the organization n-reasutes the

relevant aspects of performance by conducting performance appraisals. Finally’
through performance feedback sessions, managels give employees inforn-ration about
their performance so they can acijust their behavior to meet the organization’s goals.
When there are perfortnance probletns, the feedback
session should include efforts to identify and resolve
the underlying probleins. In addition, perfortnance
feedback can come through the organization’s tewards,
as described in Chapter 12. Using this performance
managernent process helps managers and empioyees
focus on the organization’s goals.
Conputer softrvare and h-rternet-based performance
lnanagelnent systeins ale available to help lnanagers at
various stages of the perfortnance lnanagetnent process.
Software can help nanagers cttstomize performance
measurelnent forms. The manager uses the software to
estabiish a set of perforn-iance standards for each job.
The manager rates each ernplol’ee according to the
precleterrnined star-rclarcls, and the software provides a
repori thaa compares the enpltryeet perforilance to
the stantlards and identifies the empioyee’s strengths
ancl weaknesses. Otirer sofin’are offers help $’lth diag-
nosing performance p,roblems. This rype of solnvare
:: ::, t :::tf ::r! :i::::riiiij9r!:i.,i!g: :;:r,. :,..:i:l:l::,:!:j ::i:::l: i:

t: :i. ii
lt.r i
Managers maY dread giving criti-
cism, but accarding to a survey
by Leadership lO, a research and
training company, emPloyees
want to hear more about how
:” i..; : : :,..: :’…t “:.,. .
welt they’re doing-even if itb
unpleasant.
SOURCES: Rebecca R. Hastings.
” Recession Stifl ing Managers’ Commu-
nication?” HR Magazine, February 2010,
Busrness & Company Resource Center,
http : / / gale net. gal egroup. com ; a nd
Leadership lO. ‘iManagers Are lgnoring
Their Fmployees,” news release, Decem-
ber 2, 2009, www.leadershipiq.com.
a
d
fi
ft
ri
o
s(
p(
rl
CI
ol
m
dr
I get too little positive feedback
I get too little constructive criticism
When mv boss criticizes, he/she doesn’t
giv-e enough information for me to
in”n *, ** r.:$,””T:5Jil:
is too vague to encourage rePeat
pertormance
0102a3040s0607080
Percentage of Employees Who Agree
103 Discuss
the purposes
of performance
management systems.
C
In
ca
Fc
pe
al
pe
a
.t
I
s{?#sYBtsf1’iwffi+i +t d fl rffi !F’f
9,
@
*.
,€’
lr€i*ryffi €!gery€E:{.!1ry@€f.,ltt{E’*33f{rw–eqq..s
asks questions-for example, Does the employee work under time pressure? The
answers suggest reasons for performance problems and ways the manager can help the
employee improve.
Purposes of Performance Management
Organizations establish performance management systems to meet three broad
purposes: srrategic, administrative, and developmental. Strategrc purpose means
.ff”.ri.’. perfor*a.r.. management helps the organization achieve its business
objectives. It does this by helping to link employees’behavior q’ith the organization’s
goalr. Perfognance managemenr starts with defining what the organization expects
i.o*
“u.h
employee. It measures each employee’s performance to identifir where
those expectations are and are not being met. This enabies the organization to
take coriective action, such as training, incentives, or discipline. Performance
management can achieve its strategic purpose only when measuremerrts are truly
linkeJ to the organizarion’s goals and when the goals and feedback about performange
are communicaied to employ.er. Just Bom, the company that makes Peeps and Mike
and Ike candy, meets the strategic purpose of performance management- Its system
has empioye.s'”rrd managers meet to agree on several personal objectives-through
whlch each employee will help meet the objectives of his or her department. Together,
rhey idenrifl, .i,rr.r,., rraining the employee needs and meet regularly to discuss the
employee’s progress in meeting the objectives.i
‘fn* oa*;”irtt etiue putpose of a p.rfor*an e management syslem refers to the ways
in which organizations use the system to provide information for day’to-day decisions
abo,rt ,ulary] benefits, and recognition programs’ Per{ormance management can also
support d..irior-, making relatedto employee retention’ termination for poor behavioq

ing
,1!i,r!!litt:::r’::
The
r the
,road
reans
iness
-ion’s
pects
‘here
In to
.ance
truly
.ance
Mike
‘stem
^troh
:ther,
is the
ways
sions
r also
rvior,
auADTtrQ Q t\r—^i^^ tr*^r^.,^^., D^J^.–^– 1′]7er rht r Lrr v rvrs’ rqvnY L| rPrvrssJ
and hiring or layoffs. Because performance management supports these adninistrative
decisions, the information in a performance appraisai can have a great impact on the
future of individual employees. Managers recognize this, which is the reason they may
feel uncomfortable conducting performance appraisals when the appraisal informa-
-r– r- —^-:–^ –l -L-,-f^–
t:l–l . l–l -^ ^ l^–^tt l: –^r–:-tion is negaiive ar-rci, tneieiore, til(eiy to leaci to a la’)ioii, disappolntii-rg pay increase, or
other negative outcome.
Finally, performance management has a developmental ptnpose, meaning that it
ser\res as a basis for developing employees’ knorvledge and skills. Even empioyees
who are u\eeting expectations can become more vaiuable when they hear and discuss
performance feedback. Effective performance feedback makes employees aware of
their strengths and of the areas in which thev can improve. Discussing areas in which
employees fall shon can help the employees and their manager uncover the source
of problems and identify steps for improvement. Although discussing weaknesses
may feel uncomfortable, it is necessary when performance managenent has a
developmental purpose.
Criteria for Effeetive Performanee Management
In Chapter 6, we saw that there are many ways to predict performance of a job
candidate. Similarly, there are many ways to measure the performance of an employee.
For performance rnanagement to achieve its goals, its methods for measr,rring
performance must be good. Selecting these measures is a critical part of planning
a performance management system. Several criteria determine the effectiveness of
performance measures:
103 Define five
criteria for medsuring
the effectiveness
of a performance
management system.
Fit with suategy-A performance management system should aim at achieving
employee behavior and attitudes that support the organization’s strategy, goals, and
culture. lf a company emphasizcs customcr scrvicc, then its performancc managc-
ment system should de{ine the kinds o{behavior that contribute to good customer
service. Performance appraisals should measure whether employees are engaging in
those behaviors. Feeclbaek should help enplo*7ees improve in those areas. When
an organization’s strategy changes, human resource personnel should help manag-
ers assess how the performance rnanagement system should change to serve the
new strategy.
Validity-As we discussed in Chapter 6 , ualidity is the exrent ro which a measurelnent
tool actually measures what it is intended to measure. In the case of performance
appraisal, validity refers to whether the appraisal measures all the relevant aspects
of performance and omits irrelevant aspects of performance. Figure 8.2 shows
figure 8.2
Contamination and
Deficiency ol a Job
Performance MeasureJob
performance
meaSure
Aanlrrrl – ar tt’lrts -t’
job
performance
V’aliciity DeficiencyLOntamtnatron

lth diag-
nosing performance p,roblems. This rype of solnvare

:: ::, t :::tf ::r! :i::::riiiij9r!:i.,i!g: :;:r,. :,..:i:l:l::,:!:j ::i:::l: i:

MINING FOR GOLD: RATING EMPLOYEES WITH

When performance aPpraisals
rely heavily on managers’ ratings
of their employees, concerns
arise about whether managers’
opinions are too subjective to
be valid and reliable. Some
companies have looked for more
objective kinds of data. A few have
begun applying a method called
data mining-using comPuters
to sift through massive amounts
of data generated by networked
computers, looking for patterns.

A relatively new idea is to
look for patterns in “social net-
worksj’ that is, the Patterns of
people that individuals interact
with on a regular basis. Software
collects data about emPloYees’
online interactions, such as
e-mail traffic, address books, and
buddy lists, and measures the
amount and frequency of con-
tacts among employees. lt creates
maps showing the extent to which
each employee (represented bY
a circle) interacts {lines on the

map) with each other employee.
The software also looks at out-
comes, such as the sales volume
or billable hours produced by
each employee, in order to hunt
for relationships between social
activity and business outcomes.

For example, a studY of con-
sultants at IBM found that those
who communicate extensivelY
with their manager Produce
more revenue {through billable
hours) than other consultants.
ln contrast, if consultants have
weak ties with many managers
(perhaps trying to satisfy manY
superiors), they tend to earn
less than average. Microsoft
uses a similar type of analysis
to identify which employees
are “superconnectors,” busilY
sharing ideas with others, and
which are “bottlenecks;” where
information flow stops. The
presumption is that the super-
connectors are most valuable to
the organization.

DATA MINING

eounting worker interactions
certainly is more objective than
asking a manager to rate some-
one’s communications skills. The
question, of course, is whether
this type of data mining is an
effective performance measure.
For example, is the number
of e-mails a person sends and
receives a valid measure of the
extent of that person’s communi-
cations? Will people in the organi-
zation accept it as a performance
measure? And wouid informing
employees that they are exPected
to send frequent electronic mes-
sages help them Produce more or
better-quality work?

Sources: Stephen Baker, “Putting a
Price on Social Connections,” Business-
Week, April B, 2009, www.
businessweek.com; and Stephen
Baker, “Data Mining Moves to Human
Resources,” BusinessWeek, March 1 2

2009, www.businessweek.com.

rwo sers of information. The circle on the left represents all the information in a
performance appraisal; the circle on the right represenm all relevant.measr-rres of job

performance. The overlap of the circles contains the valid information. Information

lhar is gathered but irrelevant is “contamination.” Comparing salespeople based on

hou’many calls they make to cLlstomers could be a contaminated tneasure. Making
a lot of calls does not necessarily improve sales or customer satisfaction, unless
every salesperson makes only rvell-planned calls. Information that is not gathered
but is relevant represenrs a deficiency of the performance rneasure. For example,
suplrose a company measures whether employees have good attendance records but

r-rot ,uheth.. rhey rvork efficiently. This limited performance appraisal is unlikely
to provide a fr-rll picture of employees’ contribution to the company. Perlonlance

measures shouid minimize both contamination and deficiency.
. Reliability-With regard to a performance measure, reiiability describes the

consisrency of the results that the performance lneasute will deliver. Ifiterrster
reliability is consistency of resuits when more than one person measLlres performance’

Simply asking a supervisor to fate an employee’s performance on a scale of 1 to 5
o,o,li.,l lik”ly have ltrv inrerrater reliability; the rating will differ deper-rding on who

278

{

3ns
ran
ne-
-he

ner
an

rre,
cer
rnd
the
rni-
rni-
tce
ing
ted
es-
or

CHAPTER I Managing Employees’ Ferformance 229

is scoring the ernployees. Test-retest reliability refers to consistency of results over

time. if a perfor*url.. measure lacks rest-retest reliability, determir-ring rvhether an

“mploy”el
performance has truly changed over time will be impossible.

Acieptabitity-Whether or not a measure is valid and reliable, it must meet the
p.u.ii.”l standarcl of being accepmble to the people who use it. For example, the
people who use a performance measure must’believe rhat it is not too tirne con-
suming. Likewise, if employe”r believe the tneasure is unfair, they will not use the
feedback as a basis for improving their performance.
SpeciJic feedback-Aperformance measute should specifically tell emptoyees what
is expected of thern and how they can meet those expectations. Being specific
helps performance management meet the goals of supporting strategy and devel’
oping employees. If a measufe does not specify what an employee must do to help
the organization achieve irs goals, it does not support the strategy. If the measure
fails to point out employees’ performance problems, they will not know how to
improve.

AAethods fsr Measuring Ferformance
Organizations have developed a wide variety of rnethods for measuring performance.

Some methods rank each employee to colnpare employees’ performance. Other
methods break down the evaluarion into ratings of individual attributes, behaviors,
or results. Many organizarions use a fireasurement system that includes a variety
of the preceding measllres, as in the case of applying total quality management to
perforrnance management. Table 8.1 compares these methods in terms of our criteria

for effective performance management. .

Making Comparisons
The performance appraisal method may require the rater to compare one individu-
al’s performance with that of others. This method involves some fonn of ranking, in
which some employees are best, some are average, and others are worst. The usual
techniques for making comparisons are simple ranking, forced distribution, and paired
comparison.

Simple ranking requires managers to tank ernployees in their group from the
highest performer to the poorest performer. In a variation of this approach, altemaaon
ranking, the rnanager works frorn a list of employees. First, the manager decides whlch
employee is best and crosses that person’s name off the list. From the remaining
names, the manager selects the worst employee and crosses off that name. The process

continues with the manager selecting the second best, second worst, third best, and
so on, until all the employees have been ranked. The rnajor downside of ranking
involves validiry. To state a performance measufe as broadly as “best” Or “worst”
doesn’r define rvhat exactly is good or bad about the person’s contribution to the
organization. Ranking therefore raises questions about fairness.

Another way to compare employees’performance is with the forced-distribution
method. This type of performance measurelnent assigns a certain percentage of
employees to each category in a set of categories. For example, the organization night
esrablish the following percentages and categories:

r Exceptional-5 percent
r Exceeds standards-25 percent

t$4 Compare the
m{ior methods
fof measuring
pqrformance.

SipRle Rankino
Method of
performance
measurement that
reluires managers to
rapk employees in their
grfup from the highest
performer to the
poorest performer.

Fopced-Distribution
MFthod
Mpthod of
pelrformance

measurement that
aspigns a certain
pfrcentage of
erirployees to each

ca]tegory in a set of
ca[egofles.

-..-t–..–..”

ta
ob
on
oi.I

ng
ess

:ed

‘le,
)ut
:ly
rce

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ter
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t5
ho

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