Performance

Management
Herman Aguinis
 CONTENTS
(Part 1) : Strategic and General Consideration
Chapter 1: Performance Management and Reward systems
Chapter 2: Performance Management Process
Chapter 3: Performance Management and strategic Planning
(Part 2) : System Implementation
Chapter 4: Defining performance and choosing a
management approach.
Chapter 5: Measuring results and behavior
Chapter 6: Gathering performance information.
Chapter 7: Implementing a Performance Management system
 CONTENTS
(Part 3) : Employee Development
Chapter 8: Performance Management and Employee
Development.
Chapter 9: Performance Management Skills.
(Part 4) : Reward systems, Legal Issues and team
performance Management.
Chapter 10: Reward systems and Legal Issues.
Chapter 11: Managing team performance.
Chapter one
Performance
Management
and Reward systems
  DEFINITION OF PERFORMANCE
MANAGEMENT
• Performance management is a
continuous process of identifying,
measuring, and developing the
performance of individuals and
teams and aligning performance with
the strategic goals of the
organization.
• The definition’s two main components:
• Continuous process. Performance
management is ongoing. It involves a never ending
process of setting goals and objectives, observing
performance, and giving and receiving ongoing
coaching and feedback.
• Alignment with strategic goals. Performance
management therefore creates a direct link between
employee performance and organizational goals and
makes the employees’ contribution to the organization
explicit.
Merrillis, an American investment management and
wealth management division of Bank of America, is one
of the world’s leading financial management and
advisory companies, with 25,000 professionals in 550
Merrill offices.
In sharp contrast to its old performance appraisal
system, Merrill Lynch’s goal for its newly implemented
performance management program is worded as
follows: “This is what is expected of you, this is
how we’re going to help you in your development,
and this is how you’ll be judged relative to
compensation.”3
At Germany-based company Siemens,
the performance management system is
based on three pillars: setting clear and
measurable goals, implementing
concrete actions, and imposing rigorous
consequences. The performance
management at Siemens has helped change
people’s mind-set, and the organization is
now truly performance oriented.
  Distinguish performance management
from performance appraisal.
• Although many organizations have systems labeled “performance
management,” they usually are only performance appraisal systems.
• Performance appraisal emphasizes the assessment of an
employee’s strengths and weaknesses.
• performance management helps to improve employees
performance in the future with strategic business considerations.
• Finally, performance appraisal is a once-a-year event that is often
driven by the HR department, whereas performance
management is a year-round way of managing business that is
driven by managers.
 Contributions of Performance
Management System
  Contributions of Performance
Management System
• Motivation to perform is increased.
• Self-esteem is increased.
• Managers gain insight about subordinates.
• The definitions of job and criteria are clarified.
• Self-insight and development are enhanced.
• Administrative actions are more fair and appropriate.
• Organizational goals are made clear.
• Employees become more competent.
 …..Contributions of Performance
Management System
• Employee misconduct is minimized.
• There is better protection from lawsuits.
• There is better and more timely differentiation between good
and poor performers.
• Supervisors’ views of performance are communicated more
clearly.
• Organizational change is facilitated.
• Motivation, commitment, and intentions to stay in the
organization are enhanced.
• Voice behavior is encouraged.
• Employee engagement is enhanced
• A study conducted by Development Dimensions
International (DDI), a global human resources
consulting firm specializing in leadership and
selection,
found that performance management systems are
a key tool that organizations use to translate
business strategy into business results by driving
the “cultural strategies that maximize human
assets.”.
 Dangers of poorly Implemented PM
systems
What Happens When Performance
Management Is Implemented Poorly?
  Dangers of poorly Implemented PM
systems
• Increased turnover
• Use of false or misleading information
• Lowered self-esteem
• Wasted time and money
• Damaged relationships
• Decreased motivation to perform
• Employee job burnout and job
dissatisfaction
• Increased risk of litigation
• Unjustified demands on managers’ and
employees’ resources
• Varying and unfair standards and ratings
• Emerging biases
• Unclear ratings system
 Returns and Their Degree of Dependency
on the Performance Management System
• Reward system= Tangible returns+ Intangible returns
• Tangible returns, includes cash compensation (i.e.,
base pay, cost-of-living and merit pay, short-term
incentives, and long-term incentives) and benefits
(i.e., income protection, work/life focus, tuition
reimbursement, and allowances).
• Intangible returns, also referred to as relational
returns, which include recognition and status,
employment security, challenging work, and learning
opportunities.
• All types of returns are not allocated based on
performance. For example, some allocations are based
on seniority as opposed to performance.
 Returns and Their Degree of
Dependency on the Performance
Management System
  Purposes Served by a Performance
Management System
Performance management systems serve multiple purposes.
• Strategic: : To help top management achieve strategic
business objectives
• Administrative: To furnish valid and useful information
for making administrative decisions about employees
• Informational: To inform employees about how they are
doing and about the organization’s and the supervisor’s
expectations.
……Purposes Served by a Performance
Management System
• Developmental To allow managers to provide
coaching to their employees.
• Organizational maintenance: To provide
information to be used in workplace planning and
allocation of human resources.
• Documentational: To collect useful information that
can be used for various purposes (e.g., test
development, administrative decisions).
 Characteristics of an Ideal
Performance Management
System
  Characteristics of an Ideal
Performance Management System
• Ideal performance management systems are rare. Such ideal
systems are
• Congruent with strategy (i.e., there is a clear link among
individual, unit, and organizational goals)
• Congruent with context (i.e., the system is consistent with
norms based on the culture of the organization and the
region and country in which the organization is located)
• Thorough (i.e., they include all relevant performance
dimensions)
……..Characteristics of an Ideal
Performance Management System
• Practical (i.e., they do not require excessive time and
resources)
• Meaningful (i.e., they have important consequences)
• Specific (i.e., they provide a concrete employee improvement
agenda)
• Able to identify effective and ineffective performance
(i.e., they help distinguish employees at different performance
levels)
• Reliable (i.e., the measurement of performance is consistent)
…Characteristics of an Ideal Performance
Management System
• Valid (i.e., the measures of performance are not contaminated or deficient)
• Fair (i.e., people participating in the system believe the processes and
outcomes are justified)
• Inclusive (i.e., they include input from multiple sources on an ongoing
basis)
• Open (i.e., they are transparent and there are no secrets)
• Correctable (i.e., they include mechanisms so that errors can be
corrected)
• Standardized (i.e., performance is evaluated consistently across people
and time)
• Ethical (i.e., they comply with ethical standards
 Integration of Performance
Management System with other
Reactive and Proactive activities
 Integration of Performance Management
System with other HRM and ED activities
• A performance management system is the key factor used in determining
whether an organization can manage its human resources and talent
effectively.
• Performance management provides information on who should be trained
and in what areas, which employees should be rewarded, and what type
of skills are lacking at the organization or unit level.
• Therefore, performance management also provides information on the
type of employees that should be hired.
• When implemented well, performance management systems provide
critical information that allows organizations to make sound decisions
regarding their people resources.
 Contextual and cultural
factors that affect the
implementation of
performance management
systems around the world.
• Performance management in
Mexico:
Performance management has become
increasingly popular since the 1970s. For the
most part, systems in Mexico are similar to those
implemented in the United States
• Performance management in the United
Kingdom.
Performance management in the United Kingdom has been affected by
several factors, including an emphasis on cost effectiveness and the
developmental purpose of performance management. Performance
management is gaining increased stature and significance given the more
recent emphasis on talent management and total rewards management.
As noted earlier, performance management provides critical information
regarding the identification of top performers, which helps talent
management, and critical information to be used in administrative decisions,
including the allocation of rewards. Performance management in the United
Kingdom is an established organizational practice and is clearly influenced
by broader societal issues such as socioeconomic, political, and legal trends.
Lewis Owen-Nunes (Analyst, Deloitte) says that………..
After COVID-19 and "The Great Resignation" have led to a
war for talent. To secure the best talent organisations starts
to build a workplace that prioritises Diversity, Equity, and
Inclusion to meet their employees’ core values. Recent
initiatives at organisations such as SAP, Microsoft, and JP
Morgan Chase have designed to attract and develop
neurodiverse employees saw benefits such as increased
productivity, innovative capacity, and employee
engagement. A DEI-centric PM Framework can aim to
realise these benefits.
Performance Management Framework by utilizing a
DEI (Diversity, Equity and Inclusion) centric
framework should be
• Performance management in France. Performance management
in France faces unique contextual issues such as legal requirements to
invest in employee training and development and the need to emphasize
individual accountability. Once again, performance management
systems are not implemented in a vacuum, and it is important to
consider the broader environment when designing and implementing a
system.
• Performance management in Germany. Performance
management in Germany has been affected by the established practice
of long-term employment relationships. Thus, performance management
systems emphasize long-term goals and usually do not have a short-term
focus. In spite of this unique feature, systems share some similarities
with France given their membership in the European Union, which
provides a common legal framework for many labor-related issues.
…..Contextual and cultural factors that affect the
implementation of performance management systems
around the world.
• Performance management in Turkey. personal relationships play an
important role in Turkish culture, an important challenge is the
implementation of systems that ensure valid, reliable, and fair performance
measurement.
• Performance management in India. The India economy has been on
“overdrive” since the early 1990s and there is intense international business
activity, including a significant increase in foreign direct investment going
into India as well as India firms going abroad. The intense international
business activity is leading to pose a challenge for the implementation of
performance management systems in which the supervisor serves as a coach
instead of as a “boss”.
• Performance management in China. Important issues to consider for
successful implementation of performance management systems in China
include respect for age and seniority and the emphasis on social harmony
…..Contextual and cultural factors that affect the
implementation of performance management systems
around the world.
• Performance management in South Korea. Work relationships in South
Korea are hierarchical in nature and emphasize the importance of groups over
individuals. Specifically, the financial crisis led many organizations to adopt what in
Korean is called Yunbongje (i.e., merit-based systems).
• Performance management in Japan. Although Japanese firms relied on
lifetime employment and seniority as key organizational practices, more recently
firms also consider the importance of new knowledge acquisition.
• Performance management in Australia. The Australian economy has made
an important shift from manufacturing to service, and there are important
demographic changes in the workforce including an increased presence of women
and members of ethnic minority groups.
• Strategic and General Considerations the United States and the United
Kingdom, performance management systems tend to include documentation of
performance, considerations regarding equal opportunity, and due process issues.
• Performance management in
Mexico:
Performance management has become
increasingly popular since the 1970s. For the
most part, systems in Mexico are similar to those
implemented in the United States