Performance Management For Dummies book cover

Performance Management For Dummies

Author:
Herman Aguinis
Published: May 29, 2019

Overview

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.

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.

Performance Management For Dummies Cheat Sheet

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.

Articles From The Book

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Human Resources Articles

6 Legal Principles Affecting Performance Management

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.

Human Resources Articles

How to Measure Performance Management Competencies

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.

Human Resources Articles

How to Evaluate Your Performance Management System

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.