Chapter 8

Performance Management

Human Resource Management

Gaining A Competitive Advantage
THIRTEENTH EDITION
Raymond Noe, John Hollenbeck,
Barry Gerhart, Patrick Wright

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No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
 Employee Performance
Performance Management : A system through which managers ensure that
employees’ behaviors and performance are aligned with the organizational goals.
Performance Appraisal: A Tool Performance Feedback: A Session Performance Reward: A Merit

Ineffective performance evaluation system

https://www.youtube.com/watch?v=GVFB_MoHF54
 Traditional Performance Management Process or System
Step 1
Define performance objectives
for company department

Step 2
Develop standards employee’s
goals, behavior, and job tasks to
achieve goals (Job Analysis)

Step 6 Step 7
Provide consequences Analyze and find the gaps
Step 3
Communicate with employee the
standards and provide open
discussion and support on how to
achieve them

Step 5 Step 4
Evaluate employee’s Develop a performance
performance and behavior management system and
appraisal tool
Effective and structured performance evaluation system
https://www.youtube.com/watch?v=cEvOGhVStZE

• When does it occur?

• Who are involved?
• What is the focus?
• How is it conducted?
• What is the level of transparency?
 • Training
• Job Rotation
• Job Enlargement

• Mentoring
• Feedback

Why is Performance Management Important for companies?

Administrative Basis Developmental Basis
Documentation of Performance
Strategic Congruence
 Strategic Congruence: Business Balance Scorecard
Financial Perspective Customer Perspective
Goals Measures Goals Measures
Survive Cash flow As a responsive On-time delivery (defined by customer)
supplier

Succeed Quarterly sales growth and operation As a preferred - Ranking in Agoda and other hotel
income for hotel and restaurant Supplier booking apps
- Number of customer direct
bookings.
Prosper Increase market share in Cebu City
Customer Number of corporate accounts made
partnership

Internal Business Perspective Innovation and Learning Perspective

Goals Measures Goals Measures
Technology - Use online booking platforms (Agoda) Technology Time to develop next generation
capability - Use of Wing’s hotel website leadership
booking/payments/check-out
Service learning Process time to service delivery
Service Response time to bookings and hotel
excellence services Time to market New product introduction (sales, promo,
etc.) introduction vs. competition
Design Standardized workflow system
operation
 PERFORMANCE MANAGEMENT SYSTEM
Tools and Processes
VALIDITY RELIABILITY ACCEPTABILITY
Relevant to succeed in job Consistency among the Perception of fairness and
that employee performed individuals who evaluate transparency leads to
are ONLY Assessed. the employee. acceptance by both
“Content Validity” employees (ratee) and
managers (rater).

Development Procedural
Fairness
Use Feedback Fairness
Outcomes Rationale &
Expectations
Fairness
 Design and Analysis of Performance Report
Approaches and specific-techniques used in each approach
Key Result Job Periodic Actual Rating Areas for Actions
Areas Standards Assessment Performance Method Development Planning
KRAs to be How and • Daily Analyze job 1 Outstanding Knowledge, • Specific
accomplished What to be • Weekly tasks and 2 Highly Effective Skills,
3 Acceptable • Measurable
by employee measured • Monthly work flow: Abilities,
4 Unsatisfactory • Achievable
are aligned •Quality • Quarterly • Current Behaviors for
with firm’s •Costs • Yearly situation improvements • Relevant
goals •Delivery Time • Time-Bound

Conducts • Number of By end of year Quarterly Increase Participate in

walkthroughs: walkthroughs Quarterly average sales Rating Score knowledge on real estate
advise clients of • Monthly Sale Evaluation were 75%, (2022 October customer forums and
products/services • Time to December) engagement and activities – 2
including market completed Gap Analysis real estate months
conditions; less than 25% of February and
contracts 3 – Acceptable standards
supervise the sale standard March 2023
 Components of a performance management form
• Identifying information
– Employee's name
– Job title
– Review period
– Supervisor's name
– Date of review
• Instructions
– Include some brief instructions on what is to be done, why,
and how to complete the performance management form
• Evaluation Objectives
• Rating Tool or scale to be used
• Competencies to rated (knowledge, Skills, Behaviors)
• Comment Box for the Manager
• Sign-Off section – signature
– Manager
– Employee
 Ways to Evaluate Performance
• Comparative Approach
• Attribute Approach
• Behavioral Approach
• Result Approach
• Quality Approach

Some companies apply multiple approaches in their

performance management system.
Comparative Approach

Ranking Paired Comparison

1. Mike Winkle Robert Sally Fred
2. Robert King Mike   
3. Sally Morris Robert  
4. Fred Taft Sally
Fred 

Forced Distribution

Low Average High

60-70% 71-89% 90-100%

Sally Robert Fred

Mark Benjie Carol
The Attribute Approach
The Behavioral Approach

• Behaviourally Anchored Rating Scales or BARS

Anchors Performance Dimensions

Effective 5 Group member has read all agreed-upon material
4
Group member participates in discussions, though not
3
always prepared
2
Group member does little work and offers no valuable
Ineffective 1 ideas or feedback
The Behavioral Approach
Behavioral Observation Scale (BOS)
1 2 3 4 5
almost never almost always
_5__1. Sets clear priorities for multiple goals.
_3__2. Coach subordinates effectively.
_3__3. Breaks projects into doable components.
_3__4. Develops subordinates’ knowledge and skills.
_5__5. Listens to employees’ concerns.
_4__6. Seeks decision input from subordinates.

Average of Score 5+3+3+3+5+4 = 23 divide by 6 = 3.8 = Very Satisfactory

Excellent Outstanding Very Satisfactory Satisfactory Fair Poor
5.0 - 4.5 4.4 – 4.0 3.9 - 3.5 3.4 – 3.0 2.9 – 2.5 2.4 - below
 The Result Approach

Management by Objective (MBO)

Key Result Area Objective % Completed Actual Performance

Restaurant & Hotel Sales Generate income of February 28, 2023 = 21% Increase of 4.3% over
additional 10% over the target of 16.7% in two
next 12 months months (Jan – Feb 2023)
The Quality Approach
Total Quality Management (TQM)

https://www.youtube.com/watch?v=P-bDlYWuptM&t=131s
360 Degree Feedback Appraisal
appraise performance by using several sources to measure the
employee’s effectiveness.

Used primarily for strategic and developmental purposes Minimizes bias

 Use of Technology in Performance Management
Web-Based Online Performance Evaluation System Electronic Employee Tracking & Monitoring Software

Social Media Tools

 “Overwhelmingly, our people said, ‘we want
ratings. We don’t want you to eliminate ratings (in
performance assessments), we think it’s important
to know where we stand.”

Mariam M. Gradick-Weir, Former

Executive Vice President, Human
Resource, Merck (Pharmaceutical)

Video produced for the Center for Executive Succession in the Darla Moore School of Business at the University of South Carolina by Coal Powered Filmworks
Questions
 Issues resulting to inaccuracy of the ratings
RATER ERROR DESCRIPTION

Similar to me similar to rater in race, gender, background, interest, beliefs, -higher ratings

Contrast comparison between individuals instead of an objective standard -- compared

to outstanding peer

Leniency high ratings to all employees regardless of their performance.

Strictness low ratings to all employees regardless of their performance.

Central tendency middle or average ratings to all employees despite their performance.

Halo high ratings on all aspects of performance because of an overall positive

impression of the employee.

Horns low ratings on all aspects of performance because of an overall negative

impression of the employee.