ENCOURAGING AND MANAGING PERFORMANCE Flashcards
HOW EMPLOYEE PERFORMANCE CAN BE MEASURED
PRACTICE INSIGHTS
Performance appraisals have been a longstanding practice in many organizations as a means of evaluating employee
performance and providing feedback for improvement. However, in recent years there has been some criticism of traditional
performance appraisal methods, such as annual reviews, due to their lack of effectiveness in driving performance improvements
and their potential for bias.
As a result, many organizations are moving towards more continuous performance management practices that focus on ongoing
feedback, coaching, and development. This shift in mindset has been driven by the need to adapt to changing work
environments and the desire to create a culture of continuous learning and improvement.
In the pharmaceutical industry, there may be additional factors that influence the attitudes towards performance appraisal, such
as regulatory requirements and the need to demonstrate compliance with industry standards.
INDIVIDUAL VS ORGANISATIONAL PERFORMANCE
This focuses on the challenge of demonstrating how HR practices contribute to organizational performance.
There is a relationship between individual-level variables, such as employee attitudes and behaviour, and organizational-level
variables, such as financial, productivity, and quality measures.
To demonstrate how HR practices contribute to organizational performance, it is important to predict outcomes at work through
empirical associations with factors such as pay, involvement, and HR practice “bundles.” This information can be used to inform
wider performance management systems, such as cause-effect analysis using Balanced Scorecards.
* Learning and growth in HR practices: including investing in training and providing reward and recognition programs.
* Internal perspective: These practices can contribute to improving turnaround time, supply chain relationships
* Customer perspective: such as leading on product/price or differentiating on service.
* These efforts can contribute to the financial perspective of the organization, including revenue growth and productivity
improvement.
INDIVIDUAL VS ORGANISATIONAL PERFORMANCE
This focuses on the challenge of demonstrating how HR practices contribute to organizational performance.
There is a relationship between individual-level variables, such as employee attitudes and behaviour, and organizational-level
variables, such as financial, productivity, and quality measures.
To demonstrate how HR practices contribute to organizational performance, it is important to predict outcomes at work through
empirical associations with factors such as pay, involvement, and HR practice “bundles.” This information can be used to inform
wider performance management systems, such as cause-effect analysis using Balanced Scorecards.
* Learning and growth in HR practices: including investing in training and providing reward and recognition programs.
* Internal perspective: These practices can contribute to improving turnaround time, supply chain relationships
* Customer perspective: such as leading on product/price or differentiating on service.
* These efforts can contribute to the financial perspective of the organization, including revenue growth and productivity
improvement.
PERFORMANCE MANAGEMENT (PM)
PM: the formal process by which an organization establishes:
* a shared understanding of what needs to be achieved
o This involves focusing people on doing the “right” things
o understanding what motivates people to put effort into their work.
* coordinates/directs the actions and contributions of its people to ensure that those goals are achieved.
o integrating individual efforts with strategic organizational goals
o Encouraging people to ensure the goals are achieved
The goal of PM is to attain higher levels of organisational performance
1. Holding people to account through reward, career progression and contract termination
2. Contributing to the effective management of individuals behaviours
3. Providing continuous development opportunities for individuals and teams
PM CYCLE
- The first step is to set and review objectives, which should be specific, measurable, achievable, relevant, and timebound (SMART). These objectives should be aligned with the organization’s overall goals and should provide a clear
understanding of what is expected of employees. - The next step is to assess outcomes and behaviours, which involves conducting individual-level appraisals or reviews of
how tasks were performed and the results achieved. This helps to differentiate between employees and identify those
who require additional support or training. This information can also be used to feed into reward structures and
development plans. - Feedback is a critical part of the performance management process, providing recognition for good performance and
clarity on areas for improvement. Ideally, this feedback should be a two-way conversation between the employee and
the manager, allowing for open and honest communication. - Finally, the performance management process should lead to the implementation of changes and improvements in
employee performance, which can then be looped back into the next cycle of the process. There are different types of
performance, including task performance, contextual performance, and adaptive performance, all of which should be
considered when evaluating employee performance.
HOW EMPLOYEE PERFORMANCE MEASURES ARE USED
PERFORMANCE APPRAISALS/ REVIEWS
Performance appraisals/reviews: a widely used method for documenting and evaluating an employee’s job performance.
They involve measuring an employee’s performance against predefined criteria, such as end results (outcomes) and the way
results were achieved (behaviour).
The information gathered can be used for:
* administrative purposes, such as monitoring progress towards goals, enabling appropriate rewards and remuneration,
and identifying under-performing employees
* developmental purposes, such as identifying areas for improvement, providing feedback on challenges and
opportunities, and evaluating the effectiveness of training and development programs.
There may be potential conflicts between the two. For example, identifying underperforming employees may be necessary for
administrative purposes, but it may not be the most effective way to promote developmental growth and improvement.
PERFORMANCE APPRAISALS- OPERATIONAL ASPECTS
Performance appraisals - operational aspects refer to the practical aspects of implementing a performance appraisal system in
an organization.
The key elements include:
* Measurement involves measuring an individual’s performance against agreed targets or objectives.
* Feedback provides individuals with information about their performance and progress.
* Positive reinforcement focuses on what has been done well and constructive criticism.
* Exchange of views involves discussing career aspirations and the support needed to improve performance.
* Agreement involves reaching a joint understanding of next steps to overcome issues.
Common approaches to operationalizing performance appraisal include
* “Free text” form, rating against pre-defined criteria, and dual process. The “Free text” form allows issues to emerge
through qualitative comments, but there is a risk of partiality or subjectivity.
* Rating against pre-defined criteria involves using standardized metrics and a bounded set of dimensions for appraisal,
but it might yield counterproductive employee rankings.
* Dual process involves some form of rating, with scope for a more discursive consideration of performance.
PERFORMANCE APPRAISAL TYPES
- Checklist appraisals:
a. list of desired employee knowledge, skills, and behaviours.
b. focus is on role-relevant criteria,
c. appraisee and appraiser seek agreement through formal discussion.
d. The limitation of this type of appraisal is that predefined criteria might not adapt timely to changes in business
priorities. - Goal-setting appraisals:
a. review the extent to which agreed goals have been met.
b. includes examples and evidence of what the appraise has achieved, explanations as to why objectives were
not met, aspects of the work in which improvement is required, and how this might be achieved.
c. considers the level of support and guidance required, training needs, and the appraisee’s aspirations and how
they might develop the role. - 360-degree feedback appraisals:
a. ratings and feedback received from multiple sources, including peers, subordinates, superiors, customers, and
significant others, both internal and external to the organization.
b. This type of appraisal provides a fuller and more objective picture of employee performance.
c. However, there is a risk that employees may “game” the process to hurt or help colleagues.
ATTITUDES TOWARDS APPRAISAL PRACTICES
Encouraged:
* high-quality conversations
* strength-based
* aim to understand challenges and opportunities for improvement.
* Regular performance reviews are also encouraged, as they provide ongoing feedback and help identify areas for
development.
Example: Recognition
The evidence suggests that providing recognition is an encouraged practice that can improve employee engagement and
performance. A study of 360-degree reviews found that leaders who were rated highly for providing recognition had employees
who were more engaged, had higher levels of discretionary effort, was less likely to quit, and showed better collaboration,
teamwork, and relationship-building skills. Providing recognition can also contribute to employees feeling confident that they
will be treated fairly, feeling informed, and being open to feedback from others.
Discouraged:
* forced ranking or guided distribution ratings, as they can create unnecessary competition and limit opportunities for
collaboration.
* relying solely on past performance for administrative purposes
* conducting annual appraisals can be seen as outdated and ineffective.
Example: Stack Ranking
In this practice, a fixed proportion of employees are assigned to specific performance categories, such as high, medium, or low
performers. While this approach is intended to differentiate between employees based on their performance, it can lead to
unfairness and demotivation among employees.
One example of a company that abandoned forced ranking is General Electric (GE). In the early 2000s, GE used a system called
“rank and yank,” which required managers to rank employees and fire the bottom 10% of performers each year. However, this
system was criticized for being demotivating and led to a decline in employee morale. In 2015, GE announced that it was
scrapping annual performance reviews and forced ranking in favour of more frequent feedback and coaching conversations
between managers and employees.
Overall, many experts argue that forced ranking is not an effective way to manage performance and that it can harm employee
morale and productivity.
POTENTIAL BIASES IN APPRAISALS
Cognitive biases:
* the halo effects
* attribution: someone’s behaviour is solely due to their characteristics
* primacy/recency: reliance on the most recent piece of information
* anchoring/illusion of validity: failure to adjust initial impressions
Reduce bias:
* raters be trained to compare employees with set standards
* use composite or average scores from different raters
* record performance on an ongoing basis, focus on specific job-relevant observations
* use reliable and valid measures
INDIVIDUAL ACCOUNTABILITY VS DEVELOPMENT
The traditional transactional view of performance management emphasizes holding individuals accountable for their past
behaviour through financial reward or punishment. However, this approach assumes that human capital is plentiful and readily
available, which may not be the case when talent is in short supply. Additionally, this approach places an emphasis on which
employees to let go, which may not be suitable in a situation where talent is scarce.
As a result, many companies have dropped performance appraisals altogether in favour of a more development-focused
approach. This approach emphasizes improving current performance while also developing skills for the future. Rewards include
personal growth and a sense of progress on the job.
However, there may be resistance from HR departments, which rely on performance ratings and standardized practices to
justify employment decisions and document relevant facts.
Example: Deloitte’s Approach
Deloitte’s approach to performance management involved simplifying the design to reduce idiosyncratic rater effect. The
company eliminated once-a-year reviews and 360-degree feedback and instead opted to review team members’ performance
on a continuous basis, such as weekly or after every project. The team leaders were asked about their own future actions with
respect to the ratees rather than the ratees’ skills. They were asked “What would you do” with each team member instead of
“what you think” of that individual.
