Chapter 9: Performance Evaluations

Question 1

What are the general properties of quantitive performance measures?

Answer 1

• risk profile
• distortion
• potential for manipulation
• scope
• match to job design

Question 2

What is Risk Profile? Implication? Remedy?

Answer 2

Definition:
how much performance measure is influenced by factors outside the employee’s control

Implication:
- if a measure has a high-risk profile, it leads to lower motivation and job dissatisfaction

remedy:
- Risk-sharing mechanisms

Question 3

What is Distortion? Implication?

Answer 3

Definition:
performance measure captures only desired outcomes; employees only focus on measured aspects at the expense of the unmeasured but equally important objectives

Implication:
may lead to suboptimal decisions, such as prioritizing short-term gains over long-term sustainability

Question 4

What is the Potential of Manipulation? Implication?

Answer 4

Definition:
employees can game or distort the measure without actually improving real performance

Implication:
- leads to unethical behavior, fraud, or efforts prioritizing appearances over actual performance improvements

Question 5

What is Scope? Implications?

Answer 5

Definition:
the degree to which the measure captures all aspects of an employee’s impact on organizational goals

Implications:
narrow-scope measures have less risk, high distortion, and high manipulation

broad measures have more risk, low distortion, and low manipulation

Question 6

What is Match to Job Design? Implication?

Answer 6

Definition:
refers to how well the performance measure aligns with the employee’s responsibilities and control within their role

Implication:
properly matching measures to job design enhances fairness and motivates employees to focus on controllable and impactful tasks

Question 7

What are the typical problems of Subjective Evaluation?

Answer 7

• inflation & compression ratings
• reluctance for negative feedback
• favoritism, “yes men,” pressure on evaluator
• low trust in the evaluator

Question 8

Why do we use Subjective Evaluation?

Answer 8

Metrics are imperfect so this measure:
- reduce uncontrollable risk, distortion, & manipulation
- improve incentives for risk-taking
- improve decision making
- give the incentive system flexibility
- expand communication between manager & employee
- be a form of training

Question 9

How to avoid typical problems of Subjective Evaluation?

Answer 9

• multiple evaluators may reduce bias & favoritism
• provide supervisors with performance data, training in evaluation, and structured forms to give some guidance
• provide oversight & allow employees to challenge evaluations
• the culture of constructive feedback giving & receiving
• leadership must make careful & fair evaluation a high priority

Question 10

What are the steps involved with the Performance Evaluation design?

Answer 10

1. Choosing the appropriate measure
2. Evaluate the measure
3. Adjust incentive strength based on measure flaws
4. Incorporate subjective evaluation or discretionary bonuses
5. Review and refine

Question 11

What are questions to ask when evaluating a performance measure?

Answer 11

• How much of the measure is affected by risk?
• Is risk controllable to a great extent?
• How will it distort the employee’s behavior (it will)?
• How much is the room for manipulation?