Performance Management For Dummies book cover

Performance Management For Dummies

By: Herman Aguinis Published: 05-29-2019

Implement best-in-class performance management systems 

Performance Management For Dummies is the definitive guide to infuse performance management with your organization's strategic goals and priorities. It provides the nuts and bolts of how to define and measure performance in terms of what employees do (i.e., behaviors) and the outcome of what they do (i.e., results) — both for individual employees as well as teams. 

Inside, you’ll find a new multi-step, cyclical process to help you keep track of your employees' work, identify where they need to improve and how, and ensure they're growing with the organization—and helping the organization succeed. Plus, it’ll show managers to C-Suites how to use performance management not just as an evaluation tool but, just as importantly, to help employees grow and improve on an ongoing basis so they are capable and motivated to support the organization’s strategic objectives.

  • Understand if your performance management system is working
  • Make fixes where needed
  • Get performance evaluation forms, interview protocols, and scripts for feedback meetings
  • Grasp why people make some businesses more successful than others
  • Make performance management a useful rather than painful management tool 

Get ready to define performance, measure it, help employees improve it, and align employee performance with the strategic goals and priorities of your organization.

Articles From Performance Management For Dummies

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Performance Management For Dummies Cheat Sheet

Cheat Sheet / Updated 04-05-2022

Performance management is a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the strategic goals of an organization. A performance management system is a key tool to transform people’s talent and motivation into a strategic business advantage.

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6 Legal Principles Affecting Performance Management

Article / Updated 10-26-2019

Six important principles often come into play in the case of litigation related to the implementation of a performance management system: employment at will, negligence, defamation, misrepresentation, adverse impact, and illegal discrimination. Employment at will In employment at will, the employer or employee can end the employment relationship at any time. This type of employment relationship gives employers considerable latitude in determining whether, when, and how to measure and reward performance. Thus, an employer could potentially end the employment relationship without documenting any performance problems. There are two exceptions regarding an organization’s ability to terminate an employee under these circumstances: There may be an implied contract derived from conversations with others in the organization or from information found in the company’s documentation (for example, employee handbook) indicating that employees would be terminated for just cause only. Decisions about terminating an employee should consider a potential violation of public policy. Negligence Many organizations outline a performance management system in their employee manual, employment contract, or other documents. When the system is described in such documents and not implemented as described, legal problems arise. For example, there may be a description of how frequently appraisals take place, or how frequently supervisors and employees are to meet formally to discuss performance issues. If an employee receives what she believes is an unfair performance evaluation and the system has not been implemented as was expected, she may be able to challenge the system based on negligence on the part of the organization. Defamation Defamation is the disclosure of untrue, unfavorable performance information that damages an employee’s reputation. An employee can argue that the organization defamed her if the employer states false and libelous information during the course of the performance evaluation, or negligently or intentionally communicates these statements to a third party, such as a potential future employer, thus subjecting the employee to harm or loss of reputation. The definition of defamation includes the disclosure of untrue information. Defamation can take place when an employee is evaluated based on behaviors that are irrelevant and not job-related, when an evaluator doesn’t include information that would explain or justify poor performance, or when an evaluator revises a prior evaluation in an attempt to justify subsequent adverse action taken against the employee. Defamation doesn’t exist when information regarding poor performance is clearly documented. Misrepresentation Whereas defamation is about disclosing untrue unfavorable information, misrepresentation is about disclosing untrue favorable performance, and this information causes risk or harm to others. When a past employer provides a glowing recommendation for a former employee who was actually terminated because of poor performance, that employer is guilty of misrepresentation. Adverse impact/unintentional discrimination Adverse impact, also called unintentional discrimination, occurs when the performance management system has an unintentional impact on a protected class, such as sex or race. Contrary to a common misconception that “class” refers to ethnic minorities or women only, adverse impact also happens when, for example, men receive consistently lower performance ratings than women. In other words, a protected class is a group of people with a common characteristic who are legally protected from discrimination on the basis of that characteristic. So if a group of white men consistently receives lower performance scores, then there is adverse impact because these individuals share the same characteristic (male) of a class that is protected (that is, sex). Illegal discrimination/disparate treatment Illegal discrimination, also called disparate treatment, means that raters assign scores differentially to various employees based on factors that are not performance related, such as race, nationality, color, or ethnic and national origin. As a consequence of such ratings, some employees receive more training, feedback, or rewards, than others. Illegal discrimination is usually referred to as disparate treatment because employees claim they were intentionally treated differently because of their sex, race, ethnicity, national origin, age, disability status, or other status protected under the law. The majority of legal cases involving performance management systems involve a claim of disparate treatment. What can an employee do if, for example, she feels she was given unfairly low performance scores and skipped over for promotion because she is a woman? To make such a claim, an employee can present direct evidence of discrimination, such as a supervisor making sexist comments that may have influenced the performance management process. Alternatively, she needs to provide evidence regarding the following issues: She is a member of a protected class. She suffered an adverse employment decision as a result of a performance evaluation (was skipped over for promotion). She should not have been skipped over for promotion because her performance level deserved the promotion. The promotion was not given to anyone, or it was given to an employee who is not a member of the same protected class (that is, another woman). If an employee provides this kind of evidence, the employer must articulate a legitimate and nondiscriminatory reason for not having given the promotion to this female employee. Usually, this involves a reason that is clearly performance related. This is the point at which employers benefit from having designed and implemented a system that is used consistently with all employees — the golden rule. Such a system is legally defensible, and any decisions that resulted from the system, such as promotion decisions, are also defensible. Let’s distinguish illegal discrimination from legal discrimination. A good performance management system is able to discriminate among employees based on their level of performance, and this is legal discrimination. In fact, a system that doesn’t do this is not very useful. But a good performance management system doesn’t discriminate illegally. Illegal discrimination is based on variables that should not usually be related to performance, such as sex, national origin, ethnicity, and sexual orientation.

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How to Measure Performance Management Competencies

Article / Updated 09-28-2019

To measure performance management behaviors, first cluster them into competencies. These are measurable clusters of knowledge, skills, and abilities (KSAs) that are critical in determining how results will be achieved. Examples of competencies are customer service, written or oral communication, creative thinking, and dependability. Measuring two types of competencies There are two main types of competencies. Differentiating competencies are those that allow us to distinguish between average and superior performers. Threshold competencies are those that everyone needs to display to do the job to a minimally adequate standard. For example, for the position Information Technology (IT) Project Manager, a differentiating competency is process management. Process management is defined as “managing project activities.” For the same position, a threshold competency is change management. The change management competency includes knowledge of behavioral sciences, operational and relational skills, and sensitivity to motivators. Therefore, for an IT project manager to be truly effective, she has to possess process management and change management competencies. Competencies should be defined in behavioral terms. Take the case of a professor teaching an online course. An important competency is “communication.” This competency is defined as the set of behaviors that enables a professor to convey information so that students are able to receive it and understand it. For example, one such behavior might be whether the professor is conveying information during preassigned times and dates. That is, if the professor is not present at the chat room at the prespecified dates and times, no communication is possible. To understand the extent to which an employee possesses a competency, we measure key performance indicators — indicators or KPI for short. Each indicator is an observable behavior that gives us information regarding the competency in question. In other words, we don’t measure the competency directly, but we measure indicators that tell us whether the competency is present or not. The following figure shows the relationship between a competency and its indicators. A competency can have several indicators, and the figure shows a competency with five indicators. An indicator is a behavior that, if displayed, suggests that the competency is present. In the example of the competency "communication" for a professor teaching an online course, one indicator is whether the professor shows up at the chat room at the preestablished dates and times. Another behavioral indicator of this competency could be whether the responses provided by the professor address the questions asked by the students or whether the answers are only tangential to the questions asked. As another example, consider the two competencies that define good leadership: consideration and initiation structure. Consideration is the degree to which the leader looks after the well-being of his followers. Initiating structure is the degree to which the leader lays out task responsibilities. Here are five indicators whose presence would indicate the existence of the consideration competency: Supports direct reports’ projects Asks about the well-being of employees’ lives outside of work Encourages direct reports to reach their established goals Gets to know employees personally Shows respect for employees’ work and personal lives Describing competencies To be most useful, a description of competencies must include the following components: Definition of competency Description of specific behavioral indicators that can be observed when someone demonstrates a competency effectively Description of specific behaviors that are likely to occur when someone doesn’t demonstrate a competency effectively (what a competency is not) List of suggestions for developing the competency in question Using the competency “consideration,” let’s discuss the four essential elements in describing a competency. I define consideration like this: It is the degree to which a leader shows concern and respect for followers, looks out for their welfare, and expresses appreciation and support. Next, I list five indicators or behaviors that can be observed when a leader is exhibiting consideration leadership. Leaders who don’t show consideration may speak with direct reports only regarding task assignments, repeatedly keep employees late with no consideration of social lives, take no interest in an employee’s career goals, and assign tasks based only on current expertise. Finally, how do leaders develop the consideration competency? One suggestion would be to ask employees, on a regular basis, how their lives outside of work are going. This may lead to knowledge about an employee’s family and interests outside of work. Compared to the measurement of results, the measurement of competencies is intrinsically judgmental. In other words, competencies are measured using data provided by individuals who make a judgment regarding the extent to which the competency is present. So, the behaviors displayed by the employees are observed and judged by raters such as the direct supervisor, peers, customers, the employee himself, and direct reports (for the case of managers). These possible raters constitute different performance touchpoints and are complementary sources of performance information. Two types of systems are used to evaluate competencies: comparative systems and absolute systems. Comparative systems base the measurement on comparing employees with one other. Absolute systems base the measurement on comparing employees with a prespecified performance standard. The following table lists the possible comparative and absolute systems that could be used. Comparative and Absolute Systems to Measure Performance as Behaviors Comparative Absolute Simple rank order Essays Alternation rank order Behavior checklists Paired comparisons Graphic rating scales Relative percentile Forced distribution

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How to Evaluate Your Performance Management System

Article / Updated 09-27-2019

Before a performance management system is rolled out, it is a good idea to test a version of the entire system so that adjustments and revisions can be made as needed. You don’t want to roll out a performance management system that has a major flaw, right? Also, after the system is in place, you will find it useful to collect data to see what is working and what is not. You can use this information to make fixes where needed. Pilot testing the performance management system In the pilot test of the system, you implement the system in its entirety from beginning to end, including all the steps that would be included if the system is fully implemented. In other words, meetings take place between supervisor and employee, performance data are gathered, developmental plans are designed, and feedback is provided. The most important aspect of the pilot test is that all participants maintain records, noting any difficulties they encounter, ranging from problems with the appraisal form to how performance is measured to the quality and usefulness of feedback received. The pilot test allows for the identification and early correction of any flaws before the system is implemented throughout the organization. Reasons for doing a pilot test The pilot test allows you to gain information from the perspective of the system’s users on how well the system works, to learn about any difficulties and unforeseen obstacles, to collect recommendations on how to improve all aspects of the system, and to understand personal reactions to it. Also, conducting a pilot test is yet another way to achieve early acceptance from a group of people, those involved in the pilot test, who can then act as champions for the performance management system. Participants in the pilot test can help you “sell” the performance management system to the rest of the organization. In this way, the system is not seen as owned by the HR function, but by the entire organization. A final reason for conducting a pilot test is that end users are likely to have a higher system acceptance rate, knowing that stakeholders in the company had a say in its design, rather than feeling that the system was created by the HR department alone. Don’t assume that the performance management system will necessarily be executed as planned or that it will produce the anticipated results. Select the pilot test group In larger organizations, it's important to select the right group of employees for the pilot test. In choosing this group, you need to understand that the managers who will be participating should be willing to invest the resources, including time, needed to do the pilot test. The pilot test group should be made up of managers who are flexible and willing to try new things. Also, make sure managers receive a realistic preview about what the system looks like and before they decide whether to participate in the pilot test. In selecting the group, make sure the group is sufficiently large and representative of the entire organization so that reactions from the group will be generalizable to the rest of the organization. So in selecting the group, select jobs that are similar to those throughout the company, and the group selected is not an exception in either a positive or a negative way. In other words, the group should not be regarded as particularly unique in terms of its productivity or anything else. At The Gap, Inc., they chose to pilot test their revamped performance management system in a representative store because it is a self-contained business unit. Pilot tests provide crucial information to be used in improving the system before it is actually put in place. Pilot testing the system provides huge savings and identify potential problems before they become irreversible and the credibility of the system is ruined permanently. Ongoing monitoring and evaluation of the performance management system When the testing period is over and the performance management system has been implemented organization-wide, it is important to use clear measurements to monitor and evaluate that things are working as expected. How do we evaluate the system’s effectiveness? How do you evaluate the extent to which the system is being implemented as planned, and how do you evaluate the extent to which it is producing the intended results? What to measure in your performance management system Evaluation data should include reactions to the system and assessments of the system’s operational and technical requirements. For example, you can administer a confidential survey to all employees, asking about perceptions and attitudes regarding the system. This survey can be administered during the initial stages of implementation and then at the end of the first review cycle to find out if there have been any changes. Also, regarding the system’s results, you can measure performance ratings over time to see what positive effects the implementation of the system is having. Finally, you can also interview key stakeholders, including managers and employees who have been involved in developing and implementing the performance management system. How to measure your performance management system These are good measures you can use on a regular basis to monitor and evaluate the system: Number of people evaluated: One of the most basic measures is the number of employees who are actually participating in the system. If performance evaluations have not been completed for some employees, you need to find out who they are and why a performance review has not been completed. Quality of qualitative performance data: An indicator of quality of the performance data refers to the information provided in the open-ended sections of the appraisal forms. For example, how much did the rater write? What is the relevance of the examples provided? Quality of follow-up actions: A good indicator of the quality of the system is whether it leads to important follow-up actions about development activities and improved processes. For example, to what extent follow-up actions involve exclusively the supervisor as opposed to the employee? If this is the case, then the system is not working as intended because employees are not sufficiently involved. Also, to what extent have employees learned from their successes and failures and applied those lessons to the future? Quality of performance discussion meeting: You can distribute a confidential survey to all employees on a regular basis to gather information about how the supervisor is managing the performance discussion meetings. For example, is the feedback useful? Has the supervisor made resources available so the employee can accomplish the developmental plan objectives? How relevant was the performance review discussion to one’s job? To what degree have developmental objectives and plans been discussed? To what extent does the supervisor’s way of providing feedback encourage direct reports to receive more feedback in the future? System satisfaction: You can also distribute a confidential survey to measure the perceptions of the system’s users, both raters and ratees. This survey can include questions about satisfaction with equity, usefulness, and accuracy. Overall cost/benefit ratio: A fairly simple way to address the overall impact of the system is to ask participants to rate the overall cost/benefit ratio for the performance management system. This is a type of bottom-line question that can provide convincing evidence for the overall worth of the system. The cost/benefit ratio question can be asked in reference to an individual (employee or manager), the job, and the organizational unit. Unit-level and organization-level performance: Another indicator that the system is working well is provided by the measurement of unit- and organization-level performance. Such performance indicators might be customer satisfaction with specific units and indicators of the financial performance of the various units or the organization as a whole. It may take some time for changes in individual and group performance level to be translated into unit- and organization-level results. Don’t expect results as soon as the system is implemented; however, you will start to see some tangible results at the unit level a few months after the system is in place.

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How to Become an Effective Performance Management Coach

Article / Updated 09-26-2019

Coaching is a collaborative and ongoing process in which the manager interacts with direct reports and takes an active role and interest in their performance. Good coaches do three things: they direct, they motivate, and they reward employee behavior. Coaching is a day-to-day and ongoing function that involves observing performance, complimenting good work, and helping to correct and improve any performance that doesn’t meet expectations. Coaching is also concerned with long-term performance and involves ensuring that each employee’s development plan is achieved. Effective coaches establish a helping and trusting relationship, and this is particularly important when the supervisor and direct report don’t share similar cultural backgrounds, as is often the case with expatriates or when implementing global performance management systems. Of course, coaching isn’t beneficial to large organizations only. In fact, it’s particularly important in small and medium-sized enterprises (SMEs) as well. A study conducted in the United Kingdom involving more than 1,200 SME managers over a three-year period showed that coaching training was seen as a very positive experience. Also, for some of the SME managers, coaching training was seen as a “life changing experience.” Four guiding principles of effective coaches There are four guiding principles you need to follow to become an effective coach: A good coaching relationship is essential. For coaching to work, the relationship between the coach and the employee must be trusting and collaborative. As noted by industrial and organizational psychology Professors Farr and Jacobs from Penn State University, the “collective trust” of all those involved in the process is necessary. You must listen in order to understand. In other words, the coach needs to try to walk in the employee’s shoes and view the job and organization from his or her perspective. Overall, you need to coach with empathy and compassion. Establishing a good relationship with your employees and being a compassionate coach has an important benefit for you as a coach: It’s an antidote to the chronic stress experienced by many managers. Why? The experience of compassion elicits responses within the human body that arouse the parasympathetic nervous system (PSNS), which can help mitigate stress. The employee is the source and director of change. You must understand that the employee is the source of change and self-growth. After all, the purpose of coaching is to change employee behavior and set a direction for what the employee will do better in the future. This type of change will not happen if the employee isn’t in the driver’s seat. Accordingly, you need to facilitate the employee’s setting the agenda, goals, and direction. The employee is whole and unique. You must understand that each employee is a unique individual with several job-related and job-unrelated identities such as customer service rep, father, and avid football fan and a unique personal history. The coach must try to create a whole and complete and rich picture of the employee so that employees bring their whole selves to work and are fully engaged. It will be beneficial if you have knowledge of the employee’s life and can help the employee connect his life and work experiences in meaningful ways. The coach is the facilitator of the employee’s growth. Your main role is one of facilitation. You must direct the process and help with the content of a developmental plan. You must resist the temptation to take control. Keep an attitude of exploration: help expand the employee’s awareness of strengths, resources, and challenges, and also help with goal setting. You need to understand that coaching isn’t something done to the employee, but done with the employee. Based on the four guiding principles, it’s evident that coaching requires quite a bit of effort from the managers. But when done right, you can become a true performance management leader and your organization is able to create a healthy “coaching culture.” Seven behaviors of effective coaches Given the available empirical evidence, coaching helps turn feedback into results. For this to happen, you need to engage in the following specific behaviors: Establish development objectives. You work jointly with the employees in creating the development plan and its objectives. Communicate effectively. You maintain regular and clear communication with employees about their performance, including both behaviors and results. Motivate employees. You must reward positive performance. When you do it, employees are motivated to repeat the same level of positive performance in the future. Document performance. You observe employee behaviors and results. You gather evidence about instances of good and poor performance. Give feedback. You measure employee performance and progress toward goals. You praise good performance and point out instances of substandard performance. You also help employees avoid poor performance in the future. Diagnose performance problems and performance decline. You must listen to employees and gather information to determine whether performance deficiencies and declines in performance are the result of a lack of knowledge and skills, abilities, or motivation or whether they stem from situational and contextual factors beyond the control of the employee. Diagnosing performance problems is important because such a diagnosis dictates whether the course of action should be, for example, providing the employee with resources so she can acquire more knowledge and skills, or addressing contextual issues that are beyond the control of the employee (for example, the employee is usually late in delivering the product because he receives information too late). Develop employees. You provide financial support and resources for employee development (for example, funding training, allowing time away from the job for developmental activities). By helping employees plan for the future and by giving challenging assignments, you help employees learn new things. Not all coaches follow the four guiding principles or engage in the seven behaviors I just described. But managers who do become performance management leaders. Understanding your coaching style Your personality and behavioral preferences influence your coaching style. There are four main coaching styles: driver, persuader, amiable, and analyzer. You can adopt a driving style in which you tell your employee being coached what to do. Assume that you want to provide guidance regarding how to deal with a customer. In this situation, the preference for a driver is to say to the employee, “You must talk to the customer in this way.” Such coaches are assertive, speak quickly and often firmly, usually talk about tasks and facts, are not very expressive, and expose a narrow range of personal feelings to others. Coaches can use a persuading style in which they try to sell what they want the employee to do. Someone who is a persuader would try to explain to the employee why it’s beneficial for the organization, as well as for the employee himself, to talk to a customer in a specific way. Like drivers, persuaders are assertive, but they tend to use expansive body gestures, talk more about people and relationships, and expose others to a broad range of personal feelings. Other coaches may adopt an amiable style and want everyone to be happy. Such coaches are likely to be more subjective than objective and direct employees to talk to customers in a certain way because it “feels” like the right thing to do or because the employee feels it’s the right way to do it. Such coaches tend not to be very assertive and to speak deliberately and pause often, seldom interrupt others, and make many conditional statements. Coaches may have a preference for an analyzing style in which they are logical and systematic and then follow rules and procedures when providing a recommendation. To use the same example, such analyzer coaches may tell employees to talk to a customer in a specific way “because this is what the manual says.” Analyzers are therefore not very assertive, but like drivers, are likely to talk about tasks and facts rather than personal feelings. No style is necessarily superior to the others. Performance management leadership involves sometimes providing direction, sometimes persuading employees how to do things a certain way, sometimes showing empathy and creating positive effects, and sometimes paying close attention to established rules and procedures. If you adopt only one of the coaching styles, and never the others, you will not be able to help employees develop and grow. Ineffective coaches stick to one style only and cannot adapt to using any of the other styles. On the other hand, adaptive coaches, who are able to adjust their style according to an employee’s needs, are most effective.

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How to Conduct an Environmental SWOT Analysis

Article / Updated 09-26-2019

The first step in conducting a strategic plan for your organization is to step back to take in the “big picture.” You do this what is called an environmental or SWOT analysis (strengths, weaknesses, opportunities, and threats) analysis. An environmental analysis identifies external and internal issues so that you can understand what is going on in the context and industry where your organization operates, enabling you to make decisions about what the performance management system looks like against the backdrop of this broader context. Analyze the external environment How do you conduct an analysis of the external environment? You need to understand what are the opportunities and threats. Opportunities are characteristics of the environment that can help your organization succeed. Examples of such opportunities might be markets not currently being served, untapped talent pools, and new technological advances. Threats are characteristics of the external environment that can prevent the organization from being successful. Examples of such threats range from economic recession to the launch of innovative products and services on the part of competitors. A common framework for understanding industry-based threats is the now classic work by Michael E. Porter, called “five-force analysis.” These include three forces from horizontal competition (i.e., the threat of substitute products or services, the threat of established rivals, and the threat of new entrants), and two forces from vertical competition (i.e., the bargaining power of suppliers and the bargaining power of customers). In addition to the more general five-force analysis proposed by Michael Porter, you need to think about the following more specific factors and how they affect your organization: Economic: For example, is there an economic recession on the horizon? Or is the current economic recession likely to end in the near future? How would these economic trends affect our business? Political/legal: For example, how will political changes domestically or in the international markets we are planning on entering affect our entry strategy? Social: For example, what is the impact of the entry of Millennials in the workforce (and the massive retirement of Baby Boomers)? Technological: For example, what technological changes are anticipated in our industry and how will these changes affect how we do business? Competitors: For example, how do the strategies and products of our competitors affect our own strategies and products? Can we anticipate our competitors’ next move? Customers: For example, what do our customers want now, and what will they want in the next five years or so? Can we anticipate such needs? Suppliers: For example, what is the relationship with our suppliers now and is it likely to change, and in what way, in the near future? Understanding external trends is critical for business of all sizes. But it is particularly challenging for multinational organizations because they are concerned with both domestic and international trends. Monitoring the external environment is so important in the strategic planning of multinational organizations that a survey of U.S. multinational corporations showed that 89 percent of departments responsible for the assessment of the external environment report directly to a member of the board of directors. Analyze the internal environment How do you conduct an analysis of the internal environment? You need to think about strengths and weaknesses. Strengths are internal characteristics that the organization can use to its advantage. For example, what are the organization’s assets and the staff’s key skills? Continuing with the Frontier airlines example I mentioned in a nearby sidebar, several key executives from other airlines were recruited, an important strength that was needed, given the emergence of horizontal threats. These executives created a senior management team with long-term experience in the Denver market. Weaknesses are internal characteristics that hinder the success of your organization. These could include an obsolete organizational structure that doesn’t allow for effective organization across units; the misalignment of organizational-, unit-, individual-level objectives; a talent pool with skills that have become obsolete, given changes in the industry and in technology. Here are the factors you need to think about in your internal analysis. Organizational structure: For example, is the current structure conducive to fast and effective communication? Organizational culture: Organizational culture includes the unwritten norms and values espoused by the members of the organization. For example, does the current organizational culture encourage or hinder innovation and entrepreneurial behaviors on the part of middle-level managers? Is there a culture in which new ideas and suggestions are quickly suppressed with the argument that “this has never been done before”? Politics: For example, are the various units competing for resources in such a way that any type of cross-unit collaboration is virtually impossible? Or are units open and collaborative in cross-unit projects? Processes: For example, are the supply chains working properly? Are all touchpoints with customers working properly? Can customers reach us when they need to and receive a satisfying response when they do? Size: For example, is the organization too small or too large? Is it growing too fast? Can it manage growth (or downsizing) effectively? The table below includes a summary list of external and internal trends to be considered when you conduct an environmental analysis. Think about your current employer and take a look at this table. Where does your organization stand in regard to each of these important external and internal issues? Regarding the external issues, what are some of the opportunities and threats? Regarding the internal issues, what are some of the strengths and weaknesses? Trends to Consider When Conducting an Environmental Analysis External Factors Internal Factors Driven by the line manager Driven by strategic business considerations Driven by HR Driven by operational/administrative issues Political/legal Organizational culture Social Politics Technological Processes Competitors Size Customers Suppliers How to conduct a gap analysis Now that you know the external and internal issues facing your organization, you can use information on opportunities, threats, strengths, and weaknesses to do a gap analysis. With a gap analysis, you look at the external environment in relation to the internal environment. Essentially, you pair external opportunities and threats with internal strengths and weaknesses so that you can learn whether or not you are facing a competitive situation as ranked rom most to least competitive in the following list: Opportunity + Strength = Leverage. The best combination of external and internal factors happens when there is an opportunity in the environment and a matching strength within the organization to take advantage of that opportunity. These are obvious directions that the organization should pursue. Opportunity + Weakness = Constraint. In a constraint situation, the external opportunity is present; however, the internal situation isn’t conducive to taking advantage of the external opportunity. At IBM (see the nearby sidebar), this situation could have taken place if IBM did not have the internal capabilities to develop software and other products for the network-connected devices and specialized components. The external opportunity would still be there, but, absent the internal capabilities, it would not turn into an advantageous business scenario. Threat + Strength = Vulnerability. In this situation, there is an external threat, but this threat can be contained because of the presence of internal strengths. If this had been the case at IBM, the company would not have been able to take advantage of a new situation; nevertheless, existing strengths would have allowed IBM to continue to operate in other areas. Threat + Weakness = Problem. In the worst scenario, there is an external threat and an accompanying internal weakness. For example, in the 1980s, IBM refused to adapt to the demands of the emerging microcomputer market (today’s personal systems including desktops, laptops, and notebooks). IBM did not have the internal capability to address customers’ needs for personal systems, and instead, continued to focus on its internal strength: the mainframe computer. IBM’s poor performance in the early 1990s was a direct consequence of this problem situation: the external threat (increasing demand for personal systems and dwindling demand for mainframe computers) was met with an internal weakness (lack of ability to shift internal focus from the mainframe to the personal systems and devices).

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Employee Development and Performance Management

Article / Updated 09-26-2019

Employee development is a component of an effective performance management system. For employee development to be successful, it has to be a joint activity entered into by both the employee and the manager. To do so, the first step is to create a personal development plan. Create employee development plans To be most useful, personal development needs to answer the following questions: How can I continually learn and grow in the next year? How can I do better in the future? How can I avoid performance problems I faced in the past? Where am I now and where would I like to be in terms of my career path? Information to be used in designing development plans comes from the performance evaluation form. You can design a development plan based on each of the performance dimensions evaluated. For example, if the performance dimension “communication” is rated as substandard, this area would be included in the development plan. Implement employee development plans The direct supervisor has an important role in the creation and completion of the employee’s development plan. Because of the critical role of the direct supervisor in the employee development process, it is a good idea for the supervisor to have their own development plan as well. This will help the supervisor understand the process from the employee’s perspective, anticipate potential roadblocks and pain points, and create a plan in a collaborative fashion. If you are a manager, make sure you do the following if you want your employees’ development plans to be implemented effectively: Explain what is required of the employee to reach a required performance level Refer to appropriate development activities Review and make suggestions about development objectives Check on the employee’s progress toward development objective achievement Offer the opportunity for regular check-ins and reinforcing positive behaviors To be successful in implementing each of the five success factors listed, supervisors themselves need to be motivated to support the employees’ completion of their development objectives. For this to happen, supervisors must be held accountable and rewarded for doing a good job of helping their employees develop. Define and measure performance Performance is a combination of two things: Behaviors and actions: what an employee does Results and products: the outcomes of an employee’s behavior Do you see the arrows creating a circular motion in the figure? This means that behaviors and actions affect results and products, and vice versa. For example, if an employee puts a lot of time in preparing for an important client presentation (behavior), the client will be pleased (result). In turn, if the client is satisfied (result), this will motivate the employee to allocate sufficient time to client presentations in the future (behavior). Measure performance as behaviors To measure behaviors, you first cluster them into competencies. These are clusters of knowledge, skills, and abilities (KSAs) that are critical in determining how results will be achieved. Examples of competencies are customer service, written or oral communication, creative thinking, and dependability. Competencies are not directly observable, so you must rely on key performance indicators (KPIs), which are measurable behaviors telling us the extent to which the competency is present. An indicator is a behavior that, if displayed, shows that the competency is present. Take the case of a professor teaching an online course. An important competency is “communication.” This competency is defined as “the set of behaviors that enables a professor to convey information so that students are able to receive it and understand it.” For example, one of the KPIs is whether the professor is conveying information during preassigned times and dates. That is, if the professor is not present at the chat room during the prespecified dates and times, no communication is possible. Another behavioral indicator of the competency communication is whether the responses provided by the professor address the questions asked by the students or whether the answers are only tangential to the questions asked. Measure performance as results To measure results, you first need to answer the following two questions: What are the key accountabilities — different areas in which this individual is expected to focus efforts? Within each accountability, what are the expected performance objectives — goals that should be achieved? Key accountabilities are broad areas of a job for which the employee is responsible for producing results. Objectives are statements of important and measurable outcomes for each accountability. If you manage people, you need to become a performance management leader, meaning that you guide employees so their performance is aligned with the mission, vision, objectives, and strategies of your unit and your organization. To transition from being a manager to becoming a performance management leader, you must learn a few important skills. Become an effective coach Coaching is key to staff training and development. It is a collaborative, ongoing process in which the manager interacts with direct reports and takes an active role and interest in their performance. Good coaches do three things: they direct, motivate, and reward employee behavior. Coaching happens every day. It is about helping to correct and improve any performance that doesn’t meet expectations. But it is also about long-term performance and involves ensuring that each employee’s development plan is being achieved. Being a coach is similar to serving as a consultant, and for coaching to be successful, you must establish a helping relationship. Do you want to be an effective coach? Then follow these success factors: Establish a good coaching relationship. For coaching to work, the relationship between the coach and the employee must be trusting and collaborative. You need to listen to understand. You need to try to walk in the employee’s shoes and view the job and organization from his or her perspective. You need to coach with empathy and compassion. Such compassionate coaching will help develop a good relationship with the employee. Make sure the employee is the source and director of change. You must understand that the employee is the source of change and self-growth. Accordingly, you need to facilitate the employee’s setting the agenda, goals, and direction. The purpose of coaching is to change employee behavior and set a direction for what the employee will do better in the future. This type of change will not happen if the employee isn’t in the driver’s seat. Make sure you understand that the employee is whole and unique. You must understand that each employee is a unique individual with several job-related and job-unrelated identities (for example, computer network specialist, father, skier) and a unique personal history. You must try to create a picture of your employees that is complete and rich so that they bring their whole selves to work. It will be beneficial if you have knowledge of the employee’s life and can help the employee connect his life and work experiences in meaningful ways. Facilitate employee growth. Your main role is one of facilitation. You must direct the process and help with the content of a developmental plan but not take control of these issues. You need to maintain an attitude of exploration: Help expand the employee’s awareness of strengths, resources, and challenges. And you need to facilitate goal setting. You need to understand that coaching isn’t something done to the employee, but done with the employee. Give effective feedback Giving feedback to an employee regarding their progress toward achieving their goals is a key component of the coaching process. Effective feedback is not limited to an annual employee performance review. Feedback includes information about both positive and negative aspects of job performance and lets employees know how well they are doing. Positive feedback Although most people are a lot more comfortable giving feedback on good performance than they are on poor performance, you need to follow best practices when you give praise. Here are some best practices you should implement: Positive feedback should be sincere and given only when it is deserved. If you give praise repeatedly and when it isn’t deserved, employees are not able to see when a change in direction is needed. Positive feedback should be about specific behaviors or results. You should give feedback within context so that employees know what they need to repeat in the future. In giving positive feedback, you should take your time and act pleased. Don't rush through the information. Don’t give positive feedback by referring to the absence of the negative. For example, avoid saying “not bad” or “better than last time.” Instead, praise should emphasize the positives and be phrased, for example, as “I like the way you did that” or “I admire how you did that.” Constructive feedback Constructive feedback includes information that performance has fallen short of expectations. This type of feedback is sometimes referred to as “negative feedback,” but I prefer to use "constructive feedback" because this label has a more positive and future-oriented connotation. The goal of providing constructive feedback is to help employees improve their performance in the future; it isn’t to punish, embarrass, or chastise them. It is not easy to give constructive feedback. Why? Managers fear negative reactions such as employees becoming defensive and even angry. Friendships at work can be damaged. Constructive feedback is most useful when early coaching has been instrumental in identifying warning signs and the performance problem is still manageable. Constructive feedback is most likely to be accepted when it is given by a source who uses straight talk and not subtle pressure and when it is supported by hard data. Conduct effective review meetings Discussions to review various aspects of an employee's performance evaluation serve three important purposes: These discussions allow employees to improve their performance by identifying performance problems and solutions for overcoming them. They help build a good relationship between the supervisor and the employee because the supervisor shows that they care about the employee’s ongoing growth and development and that they are willing to invest resources, including time, in helping the employee improve. Performance management leaders use review discussions as stay interviews. Stay interviews focus on finding out what makes employees stay in the organization and help managers create strategies to enhance employee engagement and retain star performers. Set up and separate review meetings Because performance management leaders play these paradoxical roles, it’s usually helpful to separate the various meetings related to performance. Separating the meetings also minimizes the possibility of negative surprises. Also, when meetings are separated, it’s easier to separate the discussion of rewards from the discussion about future career development, which allows employees to give their full attention to each issue, one at a time. Effective employee development is not reliant upon one annual performance appraisal; performance management systems can involve as many as six formal meetings. Each of these sessions should be seen as a work meeting with specific goals, including the following: System inauguration: A discussion of how the system works and the identification of the requirements and responsibilities resting on the employee and supervisor. This discussion includes the role of self-appraisal and the dates when the employee and supervisor will meet formally to discuss performance issues. This meeting is particularly important for new employees, who should be introduced to the performance management system as soon as they become members of the organization. Self-appraisal: This meeting involves the employee’s assessment of themselves. This meeting is informational in nature, and at this point, the supervisor doesn’t pass judgment on how the employee regards their own performance. This meeting provides an opportunity for the employee to describe how they see their own performance during the review period. It is helpful if they are given the same employee evaluation form to be filled out later by the supervisor so that they can provide self-ratings using the same dimensions that will be used by the supervisor. Classical performance review: During this meeting, you discuss employee performance, including both the perspective of the supervisor and the employee. Most performance management systems include only this type of meeting. No other formal meetings to discuss performance are usually scheduled. This meeting is mainly past-oriented and typically doesn’t focus on what performance should look like in the future. Merit/salary review: During this meeting, you discuss what, if any, compensation changes will result as a consequence of the period’s performance. It is useful to separate the discussion of rewards from the discussion of performance so that the employee can focus on performance first, and then, on rewards. Although these meetings are separate, supervisors should explain clearly the link between the employee’s performance, discussed in detail in a previous meeting, and the rewards given. Rewards are not likely to carry their true weight if they are not linked directly to performance. Developmental plan: In this meeting, you discuss the employee’s developmental needs and what steps will be taken so that performance will be improved during the following period. This meeting also includes information about what types of resources will be provided to the employee to facilitate the development of any required new skills. Objective setting: This meeting includes setting developmental goals for employees, both behavioral and results-oriented, regarding the following review period. At this point, the employee has received very clear feedback about their performance during the past review period, knows what rewards will be allocated (if any), understands developmental needs and goals, and knows about resources available to help in the process of acquiring any required skills. Although six types of meetings are possible, not all six take place as separate meetings. For example, the self-appraisal, classical performance review, merit/salary review, development plan, and objective setting meetings may all take place during one umbrella meeting, labeled a “performance review meeting.” Optimal sequence for review meetings Regardless of the specific type of meeting, performance management leaders should take several steps before the meeting takes place: Give at least a two-week advance notice to the employee to inform them of the purpose of the meeting and enable her to prepare for it. Block out sufficient time for the meeting and arrange to meet in a private location without interruptions. Taking these two steps sends a clear message that the meeting is important and that, consequently, performance management is important. If several meetings are merged into one labeled “performance review meeting,” the optimal sequence of events for such a meeting is the following: Explain the purpose of the meeting. Conduct self-appraisal. Share performance data and explain rationale. Discuss development. Ask employee to summarize. Discuss rewards. Hold follow-up meeting. Discuss approval and appeals process. Conduct final recap. If you are dealing with a top performer, use the final recap meeting as a stay interview by asking these types of questions: Have you ever thought about leaving our team? How can I best support you? What do you want to learn here? What can you learn here that will make you feel good when you go home every day? Although stay interviews will not ensure that a star employee will never move, they can be very useful in identifying the factors that matter most to a team’s most impactful contributors. See also How to Follow Up After a Job Performance Appraisal Session.

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Human Resources Performance Management Functions

Article / Updated 09-26-2019

Over the past two decades or so, an entire new field of research and practice has emerged, called strategic human resource management (SHRM). SHRM is about planning and implementing human resources policies with the goal of enabling an organization to achieve its objectives. Performance management is a perfect vehicle to demonstrate the strategic role and contributions of the human resources department. By being involved, and hopefully, leading the rollout of the performance management system, human resources can serve as an expert internal consultant. What is human resource management in terms of performance management? Performance management is an ongoing process. Unlike a performance appraisal, it most certainly doesn’t take place just once a year. And it is not “owned” by the human resources function. The HR function plays a critical role in terms of offering support and resources such as training opportunities and online tools that can be used to measure performance and share feedback. How to link performance management with strategic business objectives Strategic human resources planning involves describing the organization’s destination, assessing barriers that stand in the way of that destination, and selecting approaches for moving forward. Among other useful outcomes, strategic planning allows for the allocation of resources in a way that provides organizations with a competitive advantage because resources are assigned in a more effective and more targeted manner. Overall, a strategic plan serves as a blueprint that defines how the organization will allocate its resources in pursuit of its most critical and important objectives. Ensure the strategic plan does what it is supposed to do The mere presence of a strategic plan doesn’t guarantee that this information will be used effectively as part of the performance management system. In fact, countless organizations spend thousands of hours creating strategic plans that are mostly talk and lead to no tangible actions. One of the functions of human resources management is to make sure that strategy cascades down the organization and leads to concrete actions; you need to make a conscious effort to link the strategic plan with what everyone does in the organization on a daily basis. The following figure provides a useful framework for understanding the relationship between an organization’s strategic plan, a unit’s strategic plan, and job descriptions, which include information on what employees do and what should be measured in the performance management system. The organization’s strategic plan includes a mission statement and a vision statement, as well as objectives and strategies that will allow for the fulfillment of the mission and vision. Get the managers involved Another function of human resources management is to get the organizations' managers involved. The strategies are created with the participation of managers at all levels. The higher the level of involvement, the more likely it is that managers will see the resulting strategies favorably. As soon as the organizational strategies have been defined, senior management proceeds to meet with department or unit managers, who in turn, solicit input from all people within their units to create unit-level mission and vision statements, objectives, and strategies. A critical issue is to ensure that each unit or department’s mission and vision statements, objectives, and strategies are consistent with those at the organizational level. Job descriptions are then revised and updated to make sure they are consistent with unit and organizational priorities. So again, because they are driven by the job descriptions, as a result, the performance management system includes results, behaviors, and development plans for individuals that are consistent with the organizational- and department-level priorities. Does the human resource management process of aligning organizational, unit, and individual priorities actually work in practice? Is it doable? The answer to these questions is “yes,” and the benefits of doing so are widely documented. In other words, performance management systems have a critical role in translating strategy into action. In fact, a 2017 study published in Journal of Accounting and Management that included 338 organizations in 42 countries found that performance management is the third most important factor affecting the success of a strategic plan. This is particularly true for organizations that operate in rapidly changing environments, regardless of their size, industry, and age. Keep score One way to formalize the link between strategic planning and performance management is through the implementation of a balanced scorecard, which involves creating indicators of individual performance along four separate “perspectives” of an organization’s success. For the case of a bank, consider the following: Financial (cost control, sales growth rate, profit growth rate) Customer (service product quality, customer satisfaction, service timing) Internal process (information delivery, interaction between employees and clients, standard operation process) Learning and growth (corporate image, competitiveness, employee satisfaction). Ensure HR does what it is supposed to do The HR function can and should play a critical role in creating and implementing the human resource management practices and performance management strategies that will allow the organization to realize its mission and vision. Specifically, the HR function can make the following contributions: Communicate knowledge of strategic plan. The HR function is a good conduit to communicate the various components of the strategic plan (e.g., mission, vision, and objectives) to all the employees. Outline knowledge, skills, and abilities (KSAs) needed for strategy implementation. The HR function, through job analyses and the resulting job descriptions, serves as a repository of knowledge regarding what KSAs are needed for a successful implementation of the strategic plan. Thus, the HR function is in a unique situation to provide information about whether the current workforce has the KSAs needed to support the strategic plan, and if not, to offer suggestions about what types of employees should be hired and what types of plans (for example, training and development initiatives) should be put in place to develop the needed KSAs internally. Propose compensation systems. The HR function can provide useful information on what type of compensation system should be implemented to motivate employees to support the strategic plan. In addition to serving as a necessary guide for individual and team performance, knowledge of organization- and unit-level mission and vision provides the HR function with information about how to design the performance management system. Specifically, there are many choices in how the system is designed. For example, the system might place more emphasis on behaviors (processes) than on results (outcomes), or the system might emphasize more short-term criteria (quarterly objectives) than long-term criteria (triennial). Here are some of these choices: Criteria: Behavioral criteria versus results criteria Participation: Low employee participation vs. high employee participation Temporal dimension: Short-term criteria versus long-term criteria Level of criteria: Individual criteria versus team/group criteria System orientation: Developmental orientation versus administrative orientation Compensation: Pay for performance (that is, merit-based) vs. pay for tenure/position As a result of the strategic planning process, knowledge of the organization, unit vision, and mission allows the HR function to serve as an internal consultant and to make informed decisions about performance management design choices. For example, assume an organization is producing a mature product in a fairly stable industry. In this situation, an emphasis on behaviors, rather than results, is preferred because the relationship between processes and outcomes is well known, and the top priority is that employees display reliable and consistent behaviors in making the product. Regardless of the type of criteria used, be it behaviors or results, these must be observable so the person rating the criteria needs to have the ability to observe what is rated) and verifiable (that is, there needs to be evidence to confirm the criteria rated). To be most useful and impactful, an organization’s performance management system must rely on its strategic plan. Job descriptions, which serve as roadmaps for what individuals are supposed to do and what results will be produced must be aligned with the vision, mission, objectives, and strategies of the organization and unit. Organizations can expect greater returns from implementing a performance management system when such alignment is in place. Also, to the extent that the HR function is involved in the design and implementation of the performance management system, it will gain credibility and will be seen as a strategic and valued contributor to the entire organization. See also What is the Human Resource? to find out how analytics can help human resources management make decisions about the people in their organizations.

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What is Performance Management?

Article / Updated 09-26-2019

Performance management is a continuous process of identifying, measuring, and developing the performance of individuals and teams to align their performance with the strategic goals of the organization. The two main components of the definition of performance management are Continuous process. Performance management is ongoing. It involves a never-ending process of setting goals, observing performance, and giving and receiving ongoing coaching. Alignment with strategic goals. Performance management requires that managers link employees’ efforts with the organization’s goals, which helps the organization gain a competitive advantage. Performance management creates a direct link between employee and team performance and organizational goals. It also makes the employees’ contribution to the organization explicit and observable. A performance management system is a key tool to transform people’s talent and motivation into a strategic business advantage. Performance management versus performance appraisal Many organizations believe they have a “performance management” system in place, but they actually have a performance appraisal system. A system that involves employee performance reviews once a year without an ongoing effort to provide feedback and coaching so that performance can be improved is not a true performance management system. This performance appraisal system is the measurement and description of an employee’s strengths and weaknesses. Performance appraisal is an important component of performance management, but it is just part of a bigger whole. The table summarizes the main differences between performance management and performance appraisal. Think about the system at your organization. Is it truly performance management, or performance appraisal? Performance Management vs. Performance Appraisal Performance Management Performance Appraisal Driven by the line manager Driven by the HR function Strategic business purpose Mostly administrative purpose Ongoing feedback Feedback once a year Emphasis on past, present, and future Emphasis mostly on past How to design and implement a performance management system The components of a performance management system are closely related to each other and the poor implementation of any of them has a negative impact on the system as a whole. The components of a performance management process are shown in the following figure. Step 1: Establishing prerequisites Two important prerequisites must exist before the implementation of a successful performance management system. First, you need to know the organization’s mission and strategic goals. This knowledge of performance management goals, combined with knowledge regarding the mission and strategic performance management goals of their unit, allows employees to make contributions that will have a positive impact on the unit and on the organization as a whole. Second, you need to know the position in question: what tasks need to be done, how they should be done, and what knowledge, skills, and abilities (KSAs) are needed: Knowledge includes having the information needed to perform the work, but not necessarily having done it earlier. Skills refer to required attributes that are usually acquired by having done the work in the past. Abilities refers to having the physical, emotional, intellectual, and psychological aptitude to perform the work, though neither having done the job nor having been trained to do the work is required. Such knowledge is obtained through a work analysis. If you have good information regarding how a job is done, then it is easier to establish key performance indicators for job success. The tasks and KSAs needed for jobs are typically presented in the form of a job description, which summarizes the job duties, required KSAs, and working conditions for a particular position. Many work analysis questionnaires are available online. You can use them for a variety of positions. For example, the state of Delaware uses a work analysis questionnaire, which includes 18 multiple choice job content questions. Job content information is assessed through three factors: knowledge and skills, problem solving, and accountability and end results. You then use the information from a work analysis for writing a job description. Step 2: Planning performance Now that you know the organization’s strategic performance management goals and have information about the position, the supervisor and the employee formally meet to discuss, and agree upon, what needs to be done and how it should be done. This employee performance management plan discussion includes a consideration of both results and behaviors, as well as a development plan. Performance planning includes the consideration of results, behaviors, and the development plan. A discussion of results needs to include key accountabilities (that is, broad areas for which an employee is responsible), and specific objectives for each key accountability (such as goals to be reached). A discussion of behaviors needs to include competencies (clusters of knowledge, skills, and abilities). Finally, the development plan includes a description of areas that need improving and goals to be achieved in each area. Results and key accountabilities Results refer to the outcomes of what employees do — what employees produce. A consideration of results includes the key accountabilities, or broad areas of a job for which the employee is responsible for producing results. This information is typically obtained from the job description. A discussion of results also includes specific objectives that the employee will achieve as part of each accountability. Objectives are specific statements of important and measurable outcomes. Behaviors Behaviors, or how a job is done, thus constitute an important component of the planning phase. This is probably why results from a survey indicated that in addition to sales figures, salespeople would like to be appraised on such behavioral KPIs as communications skills and product knowledge. A consideration of behaviors includes discussing competencies, which are measurable clusters of KSAs that are critical in determining how results will be achieved. Examples of competencies are customer service, written or oral communication, creative thinking, and dependability. An important step before the review cycle begins is for the supervisor and employee to agree on a development plan. At a minimum, this plan should include identifying areas that need improvement and setting goals to be achieved in each area. Development plans usually include both results and behaviors. Step 3: Executing performance After the review cycle begins, the employee strives to produce the results and display the behaviors agreed upon earlier as well as to work on developmental needs. The employee has primary responsibility and ownership of this process. Employee participation doesn’t begin at the performance execution stage, however. Employees need to have active input in the development of job descriptions and the creation of the rating form. At the performance execution stage, make sure the following success factors are present: Commitment to goal achievement. The employee must be committed to the goals that were set. One way to enhance commitment is to allow the employee to be an active participant in the process of setting the goals. Check-ins and performance touchpoints. The employee has performance touchpoints with many people inside and outside of the organization on an ongoing basis. So, they should not wait until the review cycle is over to solicit performance feedback in the form of check-ins. Also, the employee should not wait until a serious problem develops to ask for coaching. The employee needs to take a proactive role in soliciting performance feedback and coaching from their supervisor. Supervisors and others with whom the employee has performance touchpoints (for example, team members) can provide performance feedback but are generally busy with multiple obligations. The burden is on the employee to communicate openly and regularly via ongoing check-ins with their performance touchpoints. Collecting and sharing performance data. The employee should provide the supervisor with regular updates on progress toward goal achievement, in terms of both behaviors and results. Preparing for performance reviews. The employee should not wait until the end of the review cycle approaches to prepare for the review. On the contrary, the employee should engage in an ongoing and realistic self-appraisal, so immediate corrective action can be taken, if necessary. The usefulness of the self-appraisal process can be enhanced by gathering informal performance information from peers and customers. Although the employee has primary responsibility for performance execution, supervisors also need to do their share of the work. Supervisors have primary responsibility over the following success factors: Observation and documentation. Supervisors observe and document performance on an ongoing basis. It is important to keep track of examples of both good and poor performance. Updates. As the organization’s goals change, update and revise initial accountabilities and objectives (in the case of results) and competencies (in the case of behaviors). Feedback. Supervisors provide feedback on progression toward goals and coaching to improve performance on a regular basis, and certainly before the review cycle is over. Resources. Supervisors provide employees with the resources and opportunities required to participate in development activities. Thus, they should encourage and sponsor participation in training, classes, and special assignments. Supervisors have a responsibility to ensure that the employee has the necessary technology and other resources to perform the job properly. Supervisors must let employees know that their outstanding performance is noticed by reinforcing effective behaviors and progress toward goals. Also, supervisors should provide feedback regarding negative performance and how to remedy the observed problem. Observation and communication are not sufficient. Performance problems must be diagnosed early, and appropriate steps must be taken as soon as the problem is discovered. The employee has primary responsibility, but both the employee and the manager are jointly involved in performance execution. Step 4: Assessing performance In the assessment phase, both the employee and the manager are responsible for evaluating the extent to which the desired behaviors have been displayed, and whether the desired results have been achieved. Employee involvement in the process increases employee ownership and commitment to the system. Also, it provides important information to be discussed during the performance review. Although many sources can be used to collect performance information such as supervisors and other team members, in most cases the direct supervisor provides the information. This also includes an evaluation of the extent to which the goals stated in the development plan have been achieved. It is important that both the employee and the manager take ownership of the assessment process. The employee evaluates their own performance, and so does the manager. The fact that both parties are involved in the assessment provides good information to be used in the review phase. When both the employee and the supervisor are active participants in the evaluation process, there is a greater likelihood that the information will be used productively in the future. Step 5: Reviewing performance The performance review stage involves the formal meeting between the employee and the manager to review their assessments. This meeting is usually called the performance review or appraisal meeting. Although good performance management systems include ongoing check-ins, the formal appraisal meeting is important because it provides a formal setting in which the employee receives feedback on his performance. In spite of its importance in performance management, the appraisal meeting is often regarded as the Achilles’ heel of the entire process. This is because many managers are uncomfortable providing performance feedback, particularly when performance is deficient. This high level of discomfort, which often translates into anxiety and trying to avoid the appraisal interview, can be mitigated through training those responsible for providing feedback. Providing effective feedback is extremely important because it leads not only to performance improvement, but also to employee satisfaction with the system. People are apprehensive about both receiving and giving performance evaluation, and this apprehension reinforces the importance of a formal performance review as part of any performance management system. In most cases, the appraisal meeting is regarded as a review of the past, that is, what was done (results) and how it was done (behaviors). The appraisal meeting should also include a discussion of the employee’s developmental progress as well as plans for the future. The conversation should include a discussion of goals and development plans that the employee will be expected to achieve over the period before the next formal review session. In addition, a good appraisal meeting includes information on what new compensation and rewards, if any, the employee could receive as a result of their performance. The appraisal discussion focuses on the past (what has been done and how), the present (what compensation is received or denied as a result), and the future (goals to be attained before the upcoming review session). The performance management process includes a cycle, which starts with establishing prerequisites and ends with conducting the formal performance review. But the cycle is not over after the formal review. In fact, the process starts all over again. Availability of performance management tools Performance management can be implemented using dynamic online systems accessed via Web and mobile apps. The use of cloud computing for performance management is much more than a mere translation of paper evaluation forms to digital format. Cloud computing technology allows supervisors and peers to provide performance evaluations on an ongoing basis and in real time while also allowing employees to receive that feedback on an ongoing basis and in real time. Using cloud computing for performance management allows organizations to update goals and communicate them in real-time to all employees, thereby allowing them to update their team and individual goals and priorities. Another advantage of using cloud computing for performance management is that it leads to a clearer understanding of the role of managers in the performance management process. For example, we can quickly learn how often they are communicating with direct reports about their performance. Also, we can quickly learn how often “check-ins” take place. The availability of Big Data is also changing performance management in important ways. For example, about 80 percent of organizations use some type of electronic performance monitoring (EPM). In its early days, EPM included surveillance camera systems and computer and phone monitoring systems. But, today EPM includes wearable technologies and smartphones, including Fitbits and mobile GPS tracking applications. Performance management as a tool In today’s globalized and hyper competitive world, it is relatively easy to gain access to the same resources as your competitors—particularly when it comes to technology and products. But a key differentiating resource is people. Organizations with engaged, motivated, and talented employees offering outstanding service to customers and coming up with creative ideas pull ahead of the competition, even if the products offered are similar to those offered by the competitors. Performance management is the ideal tool to have this type of workforce.

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10 Key Factors of an Effective Performance Management System

Article / Updated 09-26-2019

Want to make sure your performance management system works as intended and delivers excellent results? Then you need to ensure the system has these ten key factors. Congruence with strategy and context Make sure the system is congruent with the unit and organization’s strategy. In other words, align individual goals with unit and organizational goals. Also, make the system congruent with the organization’s culture as well as the broader cultural context of the region or country. If an organization has a culture in which hierarchies are rigid, an upward feedback system, in which individuals receive comments on their performance from their direct reports, will be resisted and not very effective. Regarding broader cultural issues, in countries such as Japan, there is an emphasis on the measurement of both behaviors (how people do the work) and results (the results of people’s work), whereas in the United States, results are typically preferred over behaviors. Thus, implementing a results-only system in Japan won’t be effective. Thoroughness and inclusiveness Do these four tasks to make the system thorough: Evaluate all employees (including managers). Evaluated all major job responsibilities (including behaviors and results). Evaluate performance over the entire review period, not just the few weeks or months before the formal review meeting. Give feedback on positive performance aspects as well as those that are in need of improvement. Also, in terms of inclusiveness, include input from multiple sources on an ongoing basis. The evaluation process must represent the concerns of all the people who will be affected by the outcome. Employees must participate in the process of creating the system by providing input regarding what behaviors or results will be measured and how. Meaningfulness Make the system must be meaningful in five ways: Make sure the standards and evaluations conducted for each job function are important and relevant. Assess performance only for functions that are under the control of the employee. Conduct evaluations at regular intervals and at appropriate moments. Provide continuing skill development of evaluators. Use results for important administrative decisions. Practicality Systems that are too expensive, time-consuming, and convoluted will obviously not be effective. Make sure good, easy-to-use systems (for example, performance data are entered via user-friendly Web and mobile apps) are available for managers to help them make decisions. Also, the benefits of using the system (like increased performance and job satisfaction) must be seen as outweighing the costs (such as time, effort, expense). Reliability, validity, and specificity Regarding reliability, the system should include measures of performance that are consistent and free of error. If two supervisors provide ratings of the same employee and performance dimensions, ratings should be similar. Also, the measures of performance should be valid. Validity refers to the fact that the measures include all relevant performance facets and don’t include irrelevant information. In other words, measures are relevant (include all critical performance facets), not deficient (don’t leave any important aspects out), and are not contaminated (don’t include factors outside of the control of the employee or factors unrelated to performance). Measures include what is important and don’t assess what isn’t important and outside of the control of the employee. And the system should be specific: It should provide detailed and concrete guidance to employees about what is expected of them and how they can meet these expectations. Identification of effective and ineffective performance The performance management system should provide information that allows for the identification of effective and ineffective performance. So the system should allow for distinguishing between effective and ineffective behaviors and results, thereby also allowing for the identification of employees displaying various levels of performance effectiveness. Standardization and thoroughness The system should be standardized, which means that performance is evaluated consistently across people and time. To achieve this goal, the ongoing training of the individuals in charge of appraisals, usually managers, is a must. Openness The system should have no secrets: Evaluate performance frequently and give feedback on an ongoing basis. Employees know how well they are doing at all times. Turn the review meeting into a two-way communication process during which information is exchanged, not delivered from the supervisor to the employee without his or her input. Make standards clear and communicate them on an ongoing basis. Make communications factual, open, and honest. Correctability The process of assigning ratings should minimize subjective aspects. However, it is virtually impossible to create a system that is completely objective because human judgment is an important component of the evaluation process. When employees perceive an error has been made, there should be a mechanism through which this error can be corrected. Establishing an appeals process, through which employees can challenge what may be unjust decisions, is an important aspect of a good performance management system. Acceptability, fairness, and ethicality The system should be acceptable and perceived as fair by all participants. Because perceptions of fairness are subjective and the only way to know if a system is seen as fair is to ask the participants about the system. Perceptions of fairness include four aspects: Distributive justice: Perceptions of the performance evaluation received relative to the work performed, and perceptions of the rewards received relative to the evaluation received, particularly when the system is implemented across countries. Procedural justice: Perceptions of the procedures used to determine the ratings as well as the procedures used to link ratings with rewards. Interpersonal justice: Quality of the design and implementation of the performance management system. Informational justice: Perceptions about performance expectations and goals, feedback received, and the information given to justify administrative decisions. Regarding ethicality, the system should comply with ethical standards, which means that the supervisor suppresses his or her personal self-interest in providing evaluations. In addition, the supervisor evaluates only performance dimensions for which she has sufficient information, and the privacy of the employee is respected.

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