Performance Management by Michael Armstrong

Performance management – is a systematic process for improving organizational performance by

developing the performance of individuals and teams. It is a means of getting better results from the
organization, teams and individuals by understanding and managing performance within an agreed
framework of planned goals, standards and competence requirements. Processes exist for establishing
shared understanding about what is to be achieved, and for managing and developing people in a way
that increases the probability that it will be achieved in the short and longer term. It is owned and driven
by line management.

‘Performance management is a strategic and integrated approach to delivering sustained success to

organizations by improving the performance of the people who work in them and by developing the
capabilities of teams and individual contributors’ (Armstrong and Baron, 4).

The overall aim of performance management- is to establish a high performance culture in which
individuals and teams take responsibility for the continuous improvement of business processes and for
their own skills and contributions within a framework provided by effective leadership. Its key purpose is
to focus people on doing the right things by achieving goal clarity.

Primary elements of performance management

a. agreement,
b. measurement,
c. feedback,
d. positive reinforcement
e. and dialogue.
Characteristics of performance Management:

a. an emphasis on front-end planning rather than back-end review;

b. a broader definition of performance that focuses on more than narrow defined job responsibilities;
concern with output

c. an emphasis on ongoing dialogue rather than forms and rating scales;

d. the recognition that there are many factors contributing to performance outcomes.

Main concerns of performance management:

a. Concern with outputs, outcomes, process and inputs.

b. Concern with planning.

c. Concern with measurement and review.

d. Concern with continuous improvement.

e. Concern with continuous development.

f. Concern for communication

g. Concern for stakeholders.

h. Concern for fairness and transparency.

Four ethical principles that should govern the operation of the performance management process have

been suggested by Winstanley and Stuart-Smith

a. respect for the individual;

b. mutual respect;

c. procedural fairness;

d. transparency of decision making.

There are five issues that need to be considered to obtain a full understanding of performance
management:

the meaning of performance;

the significance of values;

the meaning of alignment;

managing expectations;

the significance of discretionary behaviour.

Difference between Performance appraisal and performance management (Armstrong and Baron)

Psychological contract is a system of beliefs that encompasses the actions employees believe are
expected of them and what response they expect in return from their employer . As described by Guest
et al (12), ‘It is concerned with assumptions, expectations, promises and mutual obligations. They are
promissory and reciprocal, offering a commitment to some behaviour on the part of the employee, in
return for some action on the part of the employer (usually payment)’.

Performance management processes can help to clarify the psychological contract and make it more
positive by:

a. providing a basis for the joint agreement and definition of roles;

b. communicating expectations in the form of targets, standards of performance, behavioural

requirements (competencies) and upholding core values;

c. obtaining agreement on the contribution both parties (the manager and the individual) have to make
to getting the results expected;
d. defining the level of support to be exercised by managers;

e. providing rewards that reinforce the messages about expectations;

f. giving employees opportunities at performance review discussions to clarify points about their work.

The processes of performance management:

a. Planning: agreeing objectives and competence requirements and producing performance agreements
and performance improvement and personal development plans.

b. Acting: carrying out the activities required to achieve objectives and plans.

c. Monitoring: checking on progress in achieving objectives.

d. Reviewing: assessing progress and achievements so that action plans can be prepared and agreed.

Performance Management by Elaine D. Pulakos

Possible Outcomes from Effective Performance Management

a. Clarifying job responsibilities and expectations.

b. Enhancing individual and group productivity.

c. Developing employee capabilities to their fullest extent through effective feedback and coaching.

d. Driving behavior to align with the organization’s core values, goals and strategy.

e. Providing a basis for making operational human capital decisions (e.g., pay).

f. Improving communication between employees and managers

PERFORMANCE PLANNING

Performance planning includes checking on

a. Behavioral Expectations -that describe what is expected of employees in key competency areas.
During the performance planning process, managers should review and discuss these behavioral
standards with employees. It is important for managers to make sure employees understand how the
behavioral standards relate to their specific jobs.

b. Results Expectations The results or goals to be achieved by employees should be tied to the
organization’s strategy and goals. The employee’s development needs should also be taken into account
in the goal setting process.

Guidelines for Establishing Effective Performance Goals

a. Goals must clearly define the end results to be accomplished.

b. goals should have a direct and obvious link to organizational success factors or goals.

c. Goals should be difficult, but achievable, to motivate performance.

d. Goals should be set in no more than three areas—attempting to achieve too many different goals at
once will impede success.

ONGOING FEEDBACK

Guidelines for Providing Feedback Effectively

a. Provide immediate positive and developmental feedback in a private location.

b. Ask for the employee’s view about what could have been done differently.

c. Be specific about what behaviors were effective or ineffective.

d. Focus on what the person did or did not do, not personal characteristics.

e. Collaboratively plan steps to address development needs.

f. Offer help in addressing development needs and providing resources.

EMPLOYEE INPUT

Guidelines for Writing Employee Accomplishments

a. Include the situation or circumstances faced by the employee.

b. Describe what specific actions the employee took to achieve results.

c. Describe the impact of the accomplishment on the work unit or organization.

PERFORMANCE EVALUATION
Today, many organizations are using competency models as a basis for their performance management
systems.

Competency models – articulate the knowledge, skills, abilities and other characteristics that are
deemed to be most instrumental for achieving positive organizational outcomes.

Job analysis techniques-such as job observations, interviews, focus groups and surveys, are used to
identify key competencies and associated critical work behaviors.

COMPETECY MODEL (Pulakos, 2000)

PERFORMANCE AND DEVELOPMENT PLANNING

Characteristics of a traditional approach to performance and deevelopment planning

a. Role profiles are agreed which set out the KRA's (Key result areas).

KRA's- elements or core tasks of a role for which clear outputs can be defined.

b. SMART (specific, measurable, achievable, relevant, time-based) objectives are set for each KRA.

c. CSF (critical success factors) are identified.

CSF- the key aspects of performance

d. KPI (key performance indicators) are identified.

KPI- metrics or other sources of information which measures the level of performance by indicating
what results have been achieved.

e. Performance improvement plans are prepared on what employees need to do to achieve better
results.

f. Personal development plans are agreed. These are done to describe how employees can develop their
knowledge and skills to improve performance.
Development planning- is the process to identify needs to acquire knowledge and skills (learning needs)
and to overcome performance or behavioural problems (performance improvment needs). It is always
related to work and the capacity to carry it out effectively. Training courses and other learning activities
may form part of the development plan.

a. coaching'

b. adapting a role model ( mentor)

c. observing and analyzing what others do (good practice)

d. extending the role ( job enrichment)

e. project work - special assignments

f. action learning

g. e- learning

Development plans- provide an important way for employees to drive personal nad business
improvement by providing a framework that helps build new skills, refine behaviours, and acquire
different experiences. it contains 3 development areas focus on skills, behaviours and career aspirations.

Underpinning Theories

Goal Theory (Latham and Locke , 1979)- highlights 4 mechanisms that connects goals to performance
outcomes:

a. they direct attention to priorities

b. they stimulate effort

c. they challenge people to bring their knowledge and skills to increase their chances of success

d. the more challenging , the more people will draw on their full repertoire of skills

Expectancy Theory (Viktor Vroom , 1964)- states that effort (motivation) depends on the extent to
which people expect that rewards will follow effort and that the reward is worthwhile.

- it defines the relationship between effort, achievement and reward. Thus, motivates people and
provide them with sense of direction. - -

DeNisi and Pritchard (2006)- devised the expectancy-based motivational model for individual
performance improvement. People allocate their energy to actions to maximize their anticipated need
satisfaction.
Control Theory ( Kluger & DeNisi, 1996)- feedback as a means of shaping behaviour. Feedback is
recongnized as a crucial part of performance management process.

Reinforcement Theory (Hull, 1951)-states that successes in achieving goals and rewards act as positive
incentives and reinforce the successful behaviour. Constructive feedback can reinforce behaviours,
which seek alternative means of achieving goals.

Social Learning Theory (Bandura, 1977)- combination of reinforcement and expectancy theory. It
recognizes reinforcement as determinant of future behaviour and the importance of expectation.

Self-efficacy theory (Bandura, 1982)- indicates that self motivation is directly linked to self-belief of
individuals that they will accomplish certain tasks.

Performance Analysis

ANALYSING AND ASSESSING PERFORMANCE DONE

Performance Analysis -is the process of examining how well a job has been done and the factors that
have affected the results achieved.

-It generates information that can be used primarily to identify learning and development needs, but it
can also inform decisions on who should be included in a talent management pool and on performance
pay awards

-It is the basis for performance assessment.

Performance Assessment- the evaluation of how well someone is doing that may be carried out
informally as part of the normal process of management but may also be recorded following a formal
performance review.

-It is sometimes called performance appraisal.

-It is part of the review stage of the performance management cycle.

Douglas McGregor(1957) suggested that the emphasis should be shifted from appraisal to analysis as it
implies a more positive approach. Subordinates may no longer be examined and determined by his
superior about his weaknesses but rather it is the subordinate who will examine his own weaknesses as
well as his strengths and potentials. He becomes an active agent.

Douglas McGregor(1960)- emphasized that the focus should be on the future rather that the past in
order to establish realistic targets and to seek the best means of reaching them.

METHODS OF PERFORMANCE ASSESSMENT

RATING -involves an assessment by a reviewer of the level of performance of an employee expressed on

a scale.
DeNisi and Pritchard ( 2006)- states that effective performance appraisal systems are those where the
raters have the ability to measure employee performance and the motivation to assign the most
accurate ratings.

Murphy and Cleveland(1995)- states that judgement is a relatively private evaluation of a person's
performance while ratings are a public statemnet of a judgement that are recorded.

Rating Scales - summarize the level of performance achieved by an employee. This si done by selecting a
point on scale ( sometines referred to as performance anchor) that most closely corresponds with the
view ofthe assessor on how well the individual has been doing. It can be defined alphabetically ( a,b,c,d
e , etc) or numerically ( 1, 2,3,4,5, etc). These scale points may be described adjectivally like a=excellent,
b= good

Number of rating levels - can be three, four or five but the most popular is five.

How to achieve consistent ratings:

a. Frame of reference rating ( Bernading et al , 1995)- can be done by holding consistency workshops
for managers to build a level of common understanding about the rating levels. In here, they discuss
how ratings can be objectively justified and test rating decisions on simulated performance review data.

b. Managers grouped together to review the pattern of each other's ratings and challenge unusual
decisions or distributions.

Graphic rating scale- provides guidance on ratings by anchoring the rating scale which statements
describing the results of behaviour which indicate thata particular rating level is justified.

3 types of graphic rating scales:

A. Behavioural rating scales based on Critical Incident Technique

a.1 BARS (Behaviourally anchored rating scales (Smith and Kendall, 1963) -consists of specific bahvioural
descriptions defining points against each scale (behavioural anchors), which represent a dimension,
factor or work function considered important for performance.

-is a tool for evaluating employees in a defined set of performance dimensions by comparing their
behaviors with specific behavior examples that anchor each performance level, usually on a five-, seven-
or nine-point scale.

- is a measuring system which rates employees according to their performance and specific behavioral
patterns. a.2 BOS (Behavioural observation scales-developed by Latham and Wexley(1977).

-consist of summated scales based on statements about desirable or undesirable work behaviors.

B. results -based rating scales- simply gets raters to assess the extent to which performance goals have
been achieved for each key result area.
C. competency - based rating scales-are graphic rating scales, which use description of different levels of
competency as anchors for rating purposes. They work best when they are derived from a well-
researched competency framework especiLly when they include critical incident descriptions of effective
and ineffective behaviour.

Critical Incident Technique- is developed by Flanagan ( 1954)

The Critical Incident technique gives managers a starting point and a process for advancing
organizational development through learning experiences. It helps them study “what people do” in
various situations.

Critical incident method involves gathering data, or incidents, in order to learn how to improve overall
performance in various settings. For example, if a manager wanted to improve worker performance, the
manager would observe and collect incidents in order to learn how best to improve employee
performance.

When evaluating employee performance, a critical incident technique focuses on the essential behaviors
that determine whether a task is done well or poorly. Documentation in this case involves briefly
summarizing incidents that demonstrate either successful or unsuccessful behavior and outcomes.

FORCED DISTRIBUTION- means that raters have to conform to a laid down distribution at different
levels.

Forced Distribution is one method of performance measurement that requires a predetermined

percentage of employees be rated at various levels of performance.
For example:

employees are ranked with the preconceived notion that 10% are rated “most effective,” 80% are rated
“effective,” and 10% are rated “needs improvement.” This can be illustrated in a bell curve and being
utilized to eliminate the low performing employees in his organization.

Factors affecting performance

the learner- who needs the right level of competence, motivation and incentives to perform effectively

the learner's work group

the learners's manager-provides continuing support

the organization- affects performance through its structure, culture or work systems, employee relations
policy and systems, and leadership and management style

Performance can be analyzed into individual , systems and contextual factors

INDIVIDUAL FACTORS

Viktor Vroom (1964)- Suggested that performance is a function of ability and motivation

Performance= f (ability x motivation)

McCloy et al (1994)- A combination of 3 factors that enables to perform at a higher level

a. Declarative knowledge- concerning tasks requirements

b. Procedural Knowedge- knowing what and how to do

c. Motivation-level and persistence of effort

Bailey et al (2001)- participation affects performance

Boxall and Purcell (2003)- performance is a function of Ability+Motivation +Opportunity to participate

SYSTEMS FACTORS

Miller and Rice (1967)- organizations should be treated as open systems that transform input into
outputs within the internal and external environment

inputs- employee skills and knowledge

process- how employee actually perform the job

outputs- results of performance expressed in quantified terms such as sales volume, income, units of
production and outcomesthat cannot be measured by quatifiable terms.

Edward Deming (1986)- states that differences in performance were largely due to systems variations.

Organizational system includes the following

a. people who do the work

b.organization's method

c. structure

d.support

e.materials

f. equipement

g. customers

h. work culture

i.internal and external environment(markets, community, government)

CONTEXTUAL FACTORS

Nadler and Tushman (1980)- systems operate within the context of the organization. The context
includes

a. Organizational culture

b. employee relations climate

c. people

d. structure

e. technology and working practices

f. size

g. external environment