Mba 3 h7 performance management

1
UNIVERSITY OF KERALA REGULATIONS, SCHEME, AND SYLLABUS OF THE MBA
(Evening-Regular) PROGRAMME 2018-19 ADMISSION ONWARDS
MBA 3H7 - PERFORMANCE MANAGEMENT
UNIT I Page Number
Introduction to Performance Management - 2-7
Performance Management -Aims,Characteristics 7-16
Developments in Performance Management 16-24
Concerns of Performance Management 24-25
Understanding Performance Management 26-28
Performance Appraisal and performance Management 28-31
PM and MBO 31-36
7 rules of excellence 37-38
7 sins of HR professionals 38-40
Unit II Page Number
Process of Performance Management 40-42
Performance Management cycle 42-45
Performance Management Sequence 46-48
Working of Performance Management 48-49
Performance Management Activities 50-51
Performance Management in action 51-51
Feedback management in Performance Management 51-54
performance counseling 54-58
UNIT III Page Number
Performance Management and Development 59-60
Performance Management Measuring performance 60-62
Criteria for performance measurement 62-67
Performance Management Setting Organizational 67-69
Team & Individual Performance Standards in Performance Management 69-70
Methods for evaluating Performance in Performance Management 70-74
360 Degree appraisal in Performance Management 74-81
Competency Mapping &Competency Modelling in Performance Management 81-88
Balance Score card. Performance Management 88-97
UNIT IV Page Number
Performance Linked Rewards 97-99
Performance Linked Rewards Methods 99-108
Performance Linked Rewards Pay Structure 108-110
Performance Linked Rewards Performance Related Pay(PRP). 110-112
Performance Linked Rewards Competence related pay 112-114
Performance Linked Rewards Team pay 114-118
Performance Linked Rewards contribution related pay 118-121
Performance Linked Rewards Skill based pay 121-123
Performance Linked Rewards Shop floor incentive 123-123
Performance Linked Rewards bonus scheme 124-125
Performance Linked Rewards Sales force incentive schemes 125-126
Performance Linked Rewards Team rewards 127-129

2
UNIT I
Introduction to Performance Management
What is Performance Management?
Performance management is the process of creating a work environment or setting in which
people are enabled to perform to the best of their abilities. It is the main vehicle by which managers
communicate what is required from employees and give feedback on how well they are achieving job
goals (CIPD, 2009). It brings together many of the elements that make up the practice of people
management, including in particular learning and development.
Performance management establishes shared understanding of what is to be achieved and
provides an approach to leading and developing people that will ensure it is achieved; as such it is an
essential element of your role and will support your relationship with individuals in your team.
Why manage performance?
As a manager, you need to adopt performance management practices that will facilitate
continuous review and ongoing development of your department/ team in order to deliver
departmental/faculty and University objectives.
The underlying assumption is that by managing the performance of the individual and team,
departmental and organisational performance will follow and by raising individual and team levels of
performance, organisational performance will also improve.
Equally when performance of individuals is not managed, this can lead to frustration and
discontent amongst team members.
The department for Business Innovation and Skills recently calculated that disengaged
employees cost the UK economy between £59.4 and £64.7 billion.
Performance management is a whole work system that begins when a job is defined as needed
and starts from the assumption that most people want to perform well. Performance management is about
helping your team to perform well and removing any obstacles to this.
Key principles Performance management in its broadest sense exists when the following
activities are embedded by managers:
Performance Linked Rewards Gain sharing 129-133
Performance Linked Rewards Profit sharing. 133-135
UNIT V: Page Number
Evaluating Performance - 135-143
Performance Methods 143-153
Typical approach in evaluation of Performance 143-153
The rationale for Performance Management 153-157
Performance Agreements 157-160
Performance Reviews 160-164
Performance feedbacks 164-167
e-PM 167-170
strategic role of HR professionals 170-173

3
Performance management is a system designed to identify the ways to achieve
organizational goals through constant assessment and feedback leading to improvement of employee
performance. Performance management, unlike the performance appraisal or annual evaluation process, is
an ongoing assessment of employees in a manner geared to match their goals to the organizational goals.
It also makes strong use of goal-setting and metrics to identify progress and areas of individual strengths.
History and Evolution of Performance Management and Appraisal
Performance management systems, in various forms, have been employed for nearly two
millennia. In the third century AD, the Chinese were not only using performance appraisal systems but
were critiquing each other’s biases in their evaluations of their employees (Murphy and Cleveland, 4;
Evans, 3). During the Industrial Revolution of the 18th century, factory managers became aware of the
importance of their employees’ performance on their production outputs (Grote and Grote, 3; Murphy and
Cleveland, 4). The development of the philosophy of performance evaluation systems in America has
been attributed to such researchers and philosophers as Peter Drucker and Douglas McGregor, who
developed ideas of management by objectives (MBOs) and employee motivation (Evans, 4; Murphy and
Cleveland, 3). Spreigel reported in 1962 that by the early 1960s more than 60% of American
organizations had a performance appraisal system.The system’s popularlity stemmed from the Army’s
implementation of a performance management system for its officers (Murphy and Cleveland, 3). Since
then, researchers have continued to develop theories of how different performance evaluation methods
can contribute to the success of the organization.
Differences between Performance Management and Performance Appraisal
Employees, as well as supervisors, are often confused by the differences between
performance management systems and performance appraisals. Performance appraisals, also called
performance evaluations, are tools used to measure the effectiveness of an employee; most organizations
conduct performance appraisals once a year during an annual evaluation process. A performance
management system, however, is much more dynamic. It can use the performance evaluation tool but also
incorporates other elements into the performance management cycle.
Elements of Performance Management
Armstrong identifies the five elements of performance management as agreement (of
employee, unit, and organizational goals), measurement, feedback, positive reinforcement and dialogue
(3). These elements ensure that the performance management process is positive, successful and a spur to

4
employee improvement. Key to the performance management process are continued feedback and
assessment, depicted shown in the performance management cycle (Figure 1).
Figure 1. The performance management cycle (recreated from Armstrong)
There are four main elements of the planning portion of the performance management
cycle: role creation and development, objective planning, assessment and development planning. The first
step, role creation and development, is important because an employee must understand his or her role in
the organization before the performance of that role can be fairly assessed. By first defining the
employee’s goal, a supervisor can then align the employee’s objectives with the organizational goals.
In performance management, employers provide continuous appraisal through feedback and
re-alignment of goals based on performance. Unlike the annual evaluation process, most performance
management systems are designed to meet the changing needs of both the organization and the employee.
Armstrong identifies that performance assessment can include the following:
1. discussing what the job holder has done and achieved;
2. identifying any shortfalls in achieving objectives or meeting standards;
3. establishing the reasons for any shortfalls, including changed circumstances;
4. agreeing to any changes required to objectives and work plans in response to changed
circumstances;
5. agreeing to any actions required by the individual or the manager to improve performance (71-
72).
The organizations that have chosen to use a performance management process have often done so
because the annual evaluation process has failed to meet their appraisal needs. The constant
communication loop of performance management enables organizations to meet both the goals of their
organization and the development and feedback needs of their employees. In contrast, the annual
evaluation process, which is retrospective in nature, provides no formal opportunity for employees to
receive feedback about their performance, request development to increase their efficiency or ask for new
goals during the year.
Role Creation and Development
In order for performance management to be effective, an employee must have a clear
understanding of his or her organizational role and responsibilities. Armstrong says that the role profile
“defines the role in terms of the key results expected, what role holders are expected to know and be able
to do and how they are expected to behave in terms of behavioral competencies and upholding the
organizations’ core values” (50). Defining the core competencies for each employee is one step in
effective goal creation because it allows the supervisor to communicate personalized feedback.

5
Effective and “SMART” Goal Creation
There are many different kinds of objectives in an organization. Armstrong identifies that
effective objective-setting “results in an agreement on what the role holder (employee) has to achieve”
and “is an important part of the performance management processes of defining and managing
expectations and forms the point of reference for performance reviews” (54). He also identifies the
following types of objectives (54-56):
1. ongoing role or work objectives: based on the job description (e.g. an outreach librarian would
publish a newsletter for distribution to patrons)
2. targets: quantifiable goals that should be met (e.g. provide support for 45 reference transactions
each week)
3. tasks/projects: specified results or product (e.g. a new subject guide to be developed in 2 weeks)
4. behavioral expectations: outlines desirable and undesirable behaviors (e.g. excellent customer
service to be provided at the circulation desk at all times)
5. values: outlines the values of the organization
6. performance improvement: areas that need improvement (e.g. improvement needed in database
management)
7. developmental/learning: provide specific areas to meet improvement needs
Luecke notes that effective goals are recognized as important; clear; written in specific terms;
measurable and framed in time; aligned with organizational strategy; achievable but challenging; and
supported by appropriate rewards (7). Armstrong provides the “SMART” mnemonic: S =
specific/stretching; M = measurable; A = achievable; R = relevant; T = time framed (57). The creation of
appropriate, measurable goals is key to the performance management process; they provide a framework
for assessment and, without them, the performance management system would fail.
Assessment of Goal Achievement
After defining roles and setting goals, the manager and the employee must determine whether
the employee had been successful during the assessment period. If the goals are “SMART,” then
assessing the employee’s performance will be simple: if the employee met the specific goal within the
time frame designated, then the assessment would be a positive one. The most important aspect of the
assessment is the performance review.
There are many ways to conduct performance reviews. Some organizations conduct reviews at
certain intervals throughout the year; others create a timeline based on the goals developed (e.g. develop a
new subject guide in April; meet May 1 to discuss results). Many organizations have employees conduct a
self-evaluation prior to the evaluation meeting; Aguinis identifies that “self-appraisals can reduce
employees’ defensiveness during an appraisal meeting and increase employee satisfaction with the
performance management system, as well as enhance perceptions of accuracy and fairness and therefore
acceptance of the system” (39).
Both employees and employers have historically disliked the performance review process.
Armstrong reports that most appraisals have existed in a vacuum, with little or no relation to the
workplace: “employees have resented the superficial nature with which appraisals have been conducted
by managers who lack the skills required, tend to be biased and are simply going through the motions”
(9). In order to have a productive, positive performance review, Aguinis identifies six recommended steps
(41):
1. Identify what the employee has done well and poorly by citing specific positive and negative
behaviors.
2. Solicit feedback from your employee about these behaviors. Listen for reactions and
explanations.
3. Discuss the implications of changing, or not changing, the behaviors. Positive feedback is best,
but an employee must be made aware of what will happen if any poor performance continues.

6
4. Explain to the employee how skills used in past achievements can help him overcome any current
performance problems.
5. Agree on an action plan. Encourage the employee to invest in improving his performance by
asking questions such as “What ideas do you have for _____?” and “What suggestions do you
have for _____?”
6. Set up a meeting to follow up and agree on the behaviors, actions, and attitudes to be evaluated.
Development Planning
After creating goals and assessing progress, the employee and employer have identified
areas that can be improved; the action plan for this improvement is called development planning. This
development plan ensures that employees will continue to meet the needs of the organization through the
identification of their weaknesses and the opportunity to address them through workshops, classes, and
other educational channels.
Benefits of Performance Management
Performance management has many benefits that the traditional annual evaluation does not.
Luecke identifies three reasons “why performance management matters:”
1. Shareholders (those with a vested interest in the organization) observe better results, because the
human assets of the organization are top-notch and working in unison toward key goals.
2. Managers are more successful, because their subordinates are doing the right things correctly.
3. Employees experience greater job security, career advancement, and fatter paychecks, thanks to
outstanding performance (xiii).
Problems with Performance Management
The performance management system is designed to benefit the organization, but like any
system it may meet with resistance or be unconstructively applied. Many supervisors resist the change
from a simple annual performance evaluation process or no process at all to the performance management
system for many reasons: a dislike of criticizing employees; lack of skill in the appraisal process; dislike
of new procedures; and mistrust of the validity of the appraisal instrument (67). Other reasons the
performance management system may fail because of lack of support from the supervisors and the
employees, unclear goals or lack of support for professional development.
If performed incorrectly, an unsuccessful performance management system can have negative
consequences on the organization. Aguinis identifies the following dangers of a poorly executed system
(9):
1. Increased turnover
2. Use of misleading information (if performed improperly, an employee’s performance appraisal
can be incorrect)
3. Lowered self-esteem
4. Wasted time and money
5. Damaged relationships
6. Decreased motivation to perform
7. Employee burnout and job dissatisfaction
8. Increased risk of litigation
9. Unjustified demands on managers’ resources
10. Varying and unfair standards and ratings
11. Emerging biases
12. Unclear ratings systems
Because of these incredibly negative effects that an improperly conducted performance management
system can have on an organization, the system must be implemented thoughtfully and executed
consistently.
Performance management, unlike traditional annual evaluation, provides employees with feedback
throughout the year. The system allows constant re-evaluation of goals, progress and performance. This

7
process requires more interaction between the supervisor and supervisee and encourages the professional
development of the employee to meet the organization’s changing needs. While this more dynamic
evaluation process is time-consuming, the increased productivity levels resulting from performance
management have proven to be valuable to many organizations.
Performance Management -Aims, Characteristics
PERFORMANCE MANAGEMENT: AN OVERVIEW
DEFINED
Continuous process of improving performance by setting individual and team goals which are
aligned to the strategic goals of the organization.
It involves:
1. Performance planning to achieve goals
2. Reviewing and assessing progress
3. Developing knowledge, skills and abilities
DEFINITION OF PERFORMANCE MANAGEMENT
Consider two main components of the definition:
1. Continuous process:-
1) It is ongoing, future-oriented, and participative system-
2) Never ending process of setting goals and objectives-
3) Observing performance constantly/regularly-
4) Giving and receive ongoing coaching & feedback
5) Aimed at improving employee performance
2. Alignment with strategic goals:-
1) Ensure that employee activities & outputs are congruent with organizational
goals/objectives-
2) To help organizational gain competitive advantage-
3) Create direct link between employee performance and organisational goals-
4) and makes employee contribution to organisation explicit.
A means of getting better results from the organisation, teams and individuals by understanding
and managing performance within an agreed framework of planned goals, standards and
attribute/competence requirements. It is a process for establishing shared/common understanding about
what is to be achieved. An approach to managing and developing people in a way which increases the
probability that it will be achieved in the short and longer term.
YOU HAVE TO ASK YOURSELF NOW …
Am I really committed to better service delivery at work? What is my contribution towards the
achievement of strategic objectives?

8
SIMPLE PROPOSITION
‘When people know and understand what is expected of them, and have been able to take part in
forming those expectations, they can and will perform to meet them’. It seeks to change the attitudes,
values, and approaches of management and employees according to new strategies, processes and plans to
improve productivity and performance.
Human Resources Process
OVERALL PRINCIPLES OF PM (Strebler et al 2001)
Have clear aims and measurable success criteria .Be designed and implemented with employee
involvement .Be simple to understand and operate .Must be fundamental in achieving all management
goals .Allow employees to have clear understanding of their performance (contributions) and
organisational goals .Focus on role clarity and performance improvement. Be closely linked to well
resourced training and development infrastructure. Directly linked to reward and build in equity and
transparency safeguards .Be regularly reviewed against its success criteria
VIEWS OF PRACTITIONERS ON PRINCIPLES OF PM (Armstrong & Baron (2004)
PM is what managers do: a natural process to manage .A Management tool which helps managers
to manage. Its about how we manage people . Driven by corporate purpose and values. To obtain
solutions that work. Only interested in things you can do something about and get a visible improvement.
Focus on changing behaviour rather than paperwork. Based on acceptable principles but operates flexibly.
Focus on development not pay. Success depends on what the organisation is and needs to be in its
performance culture
ETHICAL PRINCIPLES (Winstanley & Stuart-Smith, 1996).
Respect for the individual – treat people as “ends in themselves” and not merely as “means to other
ends”. Mutual respect – parties involved respect each other. Procedural fairness – procedures operated
fairly in accordance with principles. Transparency - people affected given opportunity to scrutinize the
basis upon which decisions were made

9
THE PERFORMNACE MANAGEMENT CYCLE
SUMMARY OF PERFORMANCE MANAGEMENT ACTIVITIES OVER A YEAR
PERFORMANCE AGREEMENTS
Outcome of decisions made jointly by the manager and individual during the planning part of
performance management sequence. Provides foundation for managing performance and guide
improvement and development activities. Used as a reference point when planning and reviewing
performance and is a key of PMS. Contains agreements on expectations in the form of results,
competencies and actions required
ROLE PROFILES
Role profile is the basis of agreement, and it defines the following: Overall purpose: what the role
exist to achieve. Key result areas – elements of role for which clear outputs and standards exist
(KPA’s)Knowledge and skills requirements: what role holder should know and be able to do. Behavioural
competencies requirements: types of behaviour required for successful performance

10
AIMS OF PERFORMANCE MANAGEMENT
1) To attract & retain skilled staff
2) To integrate Corporate &individual Objectives
3) To provide a Framework for Employment equity
4) To create a performance culture
5) To provide Channels for communication
6) To provide Framework for Managing unacceptable performance
7) To develop the Climate for motivation
8) To improve Individual & team performance
9) To provide a basis For performance Related pay
10) To clarify Accountabilities And empower people
11) To develop skills, Competencies &Individual potential
12) To provide a Framework for Strategic management
THE OVERALL AIM OF PERFORMANCE MANAGEMENT:
Is to establish a culture in which individuals and groups take responsibility for the continuous
improvement of business processes and of their own skill and contributions. Thus: PMS will aim to instil
a customer-service, performance-oriented, transparency and accountability culture within an organisation
and align service processes, rules, regulations, and practices with the new culture.
KEY BENEFITS OF PMS
PM focuses on results, rather than behaviours and activities. Aligns organizational activities and
processes to the goals of the organization. Cultivates a system-wide, long-term view of the organization.
Produce meaningful measurements
WHAT CAN THE PMS DO FOR THE ORGANISATION?
Create high performance culture – high performance organization. Improve organisational
efficiency and effectiveness. Ensure quality services for greater customer satisfaction. Create costumer
service oriented culture. PMS aligned with vision and mission will provide a clear direction for
organization. Link individual activities to organisational objectives. Organisation will become a learning
organization. Organisation will achieve its strategic objectives
WHAT CAN THE PMS DO FOR EMPLOYEES?
Increase motivation and commitment of employees. Enable individuals to develop their
abilities. Ensure sustained growth and individual development. Positively influence behaviour to achieve
organisational objectives. Improve individual and team performance. Deliver increasingly efficient and

11
effective services. Responsive to the customers’ needs and ensure customer satisfaction. Motivate
employees to achieve their full potential in line with organisational strategic objectives. It supports
knowledge, skills and competency levels. Employees will understand their contribution to the vision and
mission of org. Employees will commit themselves in their jobs. Employees will adapt to new challenges
within the organization. Provide basis for rewarding people. Assists in empowering people and to retain
high quality people. Can lead to performance related salaries
MANAGING THE PMS PROCESS
Leadership, support and commitment to the implementation, enforcement, monitoring and
evaluation of the PMS will ultimately provide the impetus for its implementation. In the absence thereof
the PMS is not likely to succeed. PMS is a process owned and driven by line managers and should be
regarded as an integral part of the continuing process of management. The implementation of the PMS
should be seen as a process and not as an event. Therefore, it is a total company effort and cannot be left
to one person, one division or one Department. Leadership plays a pivotal role to steer, guide and direct
the implementation of the PMS in the organisation. Thus, performance management will become the core
function of all the supervisors, managers, executives etc.
AIMS OF PERFORMANCE MANAGEMENT
The Basic Aims :- Two simple propositions provide the foundation upon which performance
management is built :-
(1)When people (individuals & teams) know and understand what is expected of them, and have taken
part in forming these expectations, they will use their best endeavours to meet them.
(2) The capacity to meet expectations depends on the levels of capability that can be achieved by
individuals and teams, the levels of support they are given by management , and the processes, systems,
and resources made available to them by the organization.
Detailed Aims :-
In more details, the aims of performance management are two :-
(1) Help to achieve sustainable improvements in organizational performance.
(2) Act as a lever for change in developing a more performance oriented culture.
(3) Increase the motivation and commitment of employees.
(4) Enable individuals to develop their abilities, increase their job satisfaction and achieve their full
potential to their own benefit and that of the organization as a whole.
(5) Enhance the development of the team cohesion and performance.
(6) Provide opportunities for individuals to express their aspirations and expectations about their work.
Aims Suggested by other Commentators :-
The American Compensation Association (1996) states that organizations rely on performance
management to :-
(1) Document job responsibilities.
(2) Help define performance expectations.
(3) Provide a framework for supervisors and employees to communicate with each other.
(4) Provide ongoing opportunities for supervisors to coach and encourage personal development.
(5) Align individuals performance expectations with organizational goals.
The Aim of Any Good Performance Management System
There are many different approaches, tools and techniques involved in performance management.
No two performance management systems will look the same. Just like company culture, your perfor-
mance management system will be unique and specific to your values, your goals and your purpose.
However, every good performance management system seeks to work towards the improvement of the
overall organisational performance, while supporting performance, productivity and the wellbeing of its
employees.

12
Ultimately, every performance management system should ensure the achievement of overall
organisational goals and ambitions while aligning them with employee goals. In this way, performance
management and business objectives entwine with employee wellness and morale.
Performance management and its characteristics
Performance management Performance management is a continuous process by which
managers and employees work together to plan, monitor and review an employee’s work objectives and
overall contribution to the organization. or
Performance management is the continuous process of setting objectives, assessing progress
and providing on-going coaching and feedback to ensure that employees are meeting their objectives and
career goals.
1) Identifying the barriers to effective performance and resolving those barriers through constant
monitoring, coaching and development interventions.
2) Boosting the performance of the employees by motivation and implementation of an effective
reward mechanism.
3) To help the employees in identifying the knowledge and skills required for performing the job
efficiently as this would drive their focus towards performing the right task in the right way.
4) To enable the employees towards achievement of superior standards of work performance.
5) Identify poor performers
6) Determining promotions
7) Boosting the performance
8) Development
9) Motivation
10) Promoting personal growth and advancement in the career of the employees by helping them in
acquiring the desired knowledge and skills.
11) Creating a basis for several administrative decisions strategic planning, succession planning,
promotions and performance based payment.
Advantages
1) Remunerations or bonus for successful employees
2) The lazy and insincere workers are identified and removed
3) Company has documented performance history of the employees
4) Enhance the performance of both the individual and the organization
5) Helps in successful career planning
Disadvantages
1) Lengthy and complex
2) Become a hindrance in the employee’s progress
3) Employees may suffer from low self-esteem
4) Contradictory and misleading opinions in the performance management file
5) Partialities and favoritism
CHARACTERSTICS
The following is a set of characteristics that is likely to allow a performance management system to be
successful.
1. Strategic congruence
The system should be congruent with the unit’s and organization’s strategy. In other
words, individual goals must be aligned with unit and organizational goals.
2. Thoroughness
The system should be thorough regarding four dimensions. All employees should be
evaluated; all major job responsibilities should be evaluated, the entire review period, and not just
the few weeks/months before the review, on positive aspects as well as those in need of
improvement

13
3. Practicality
Systems that are too expensive, time-consuming, and will obviously not be effective. On
the other hand, good systems are available and easy to use (e.g., performance data are entered
using user-friendly software), and are acceptable to those who want to use them for decisions.
4. Meaningfulness
The system must be meaningful in several ways.
1st the standards and evaluations conducted for each job function must be considered important
and relevant.
2nd , performance assessment must emphasis only those functions under the control of the
employee.
3rd , evaluations must take place at regular intervals and at appropriate moments.
4th , the system should provide for continuing skill development of evaluators.
5th , the results should be used for important personnel decisions.
5. Identification of effective and ineffective performance
The performance management system should provide information allowing for the
identification of effective and ineffective performance. That is, the system should allow for
distinguishing between effective and ineffective behaviors and results, thereby also allowing for
the identification of employees displaying various levels of performance effectiveness.
6. Specificity
A good system should be specific, meaning that it should provide detailed and concrete
guidance to employees about what is expected of them and how they can meet these expectations.
7. Reliability
A good system should include measures of performance that are consistent and free of
error. For example, if two supervisors provided ratings of the same employee and performance
dimensions, ratings would be similar.
8. Validity
The measures of performance should also be valid. In this context, measures are
relevant (i.e., include all critical performance facets), are not deficient (i.e., do not leave any
important aspects out), and are not contaminated (i.e., do not include factors outside the control of
the employee).
9. Inclusiveness
Good systems include input from multiple sources on an ongoing basis. First, the
evaluation process must represent the concerns of all the people who will be affected by the
outcome. Consequently, employees must participate in the process of creating the system by
providing input regarding what behaviors and/or results will be measured and how. Second,
employee input about their performance should be gathered from the employees themselves
before the appraisal meeting.
10. Correct ability
The process of assigning ratings should minimize subjective aspects. However, it is
virtually impossible to create a completely objective system because human judgment is an
important component of the evaluation process.
11. Openness
Good systems have no secrets. First, performance is evaluated frequently, and
performance feedback is provided on an ongoing basis. So employees are continually informed of
their performance. Second, the appraisal meeting consists of a two-way communication process,
where information is exchanged and not just delivered from the supervisor to the employee.
Third, standards should be clear and communicated on an ongoing basis. Finally,
communications are factual, open and honest.

14
12. Standardization
Good systems are standardized. This means that performance is evaluated consistently
across people and time. To achieve this goal, the ongoing training of the individuals in charge of
appraisals, usually managers, is a must.
13. Acceptability and fairness
A good system is acceptable to and perceived as fair by all participants. Perceptions of
fairness are subjective, and the only way to know whether a system is seen as fair is to ask the
participants.
14. Ethicality
Good systems comply with ethical standards. This means that the supervisor suppresses
her personal self-interest in providing evaluations. In addition, the supervisor evaluates only
performance dimensions for which she has sufficient information, while respecting the privacy of
the employee.
Performance management is the process of identifying, measuring, managing, and
developing the performance of the human resources in an organization.
1) Future oriented for growth.
2) Ongoing or continuous review
3) Flexible process
4) Conducted by manager & supervisors.
5) Linked to business needs
Performance appraisal, on the other hand, is the ongoing process of evaluating employee
performance.
1) Retrospective for correction
2) Typically once or twice per year.
3) Rigid structure/system
4) Usually housed in HR department
5) Not linked to business needs
Characteristics of an Ideal Performance Management System
Performance management is a continuous comprehensive process of communication and
evaluation between a manager and an employee. A performance management system aims to fulfill the
strategic objectives of the organization. Performance management focuses on employee engagement,
development and performance evaluation.
Every performance management system helps to improve the effectiveness of talent
management in an organization by monitoring and improving the performance of the employees, by
engaging them with continuous feedback, appreciation and rewards program. The performance
management includes ensuring organizational buy-in of the employees, creating an open feedback culture
and providing development opportunities to the employees.
We shall discuss the various characteristics of an ideal performance management system:
1) Goal-setting and management
Goals management is an integral part of an effective performance management
system. Goals are important because they challenge the employees and motivate them to perform
better. Setting goals would mean providing direction, priority and time frame for an employee to
achieve the objectives.
Based on the business models, goals are set by the employees and approved by the
managers or set by the managers. However, the key factor is goals must be aligned with the
organization’s objectives. In general, organization set
goals that are challenging yet attainable. Clearly defined goals make employees understand what
is expected of them and proceed with clarity.

15
2) Performance Appraisals
Performance appraisals are the heart of the employee performance management
system. Feedback questionnaires are created for employees based on their goals and
competencies. Self-feedback, manager feedback and ratings are sought during the appraisal cycle.
Performance manager software automates the appraisal cycle. The automated reminders and
notifications in the software help reduce the manual follow-up efforts of HR to make the
employees and managers to complete the feedback process. It also helps to drastically reduce the
appraisal duration.
One - on- one appraisal meeting summary is captured in the system and final ratings
and recommendations are published for the employees. These ratings are then used to decide
compensation revisions. From creating appraisal feedback forms and workflows to appraisal letter
distribution the software helps to automate the entire performance appraisal process.
3) 360 Degree Reviews
An ideal performance management system does not only stimulate feedback from the
manager but considers an overarching perspective of everyone who is involved in the
business. This could be the employee, or his colleagues and external stakeholders. So how do we
bring in a system where everyone is involved in the feedback process?
One way of doing this is by creating a survey or a rating mechanism where the
employee can do a self-evaluation, the colleagues can rate him, then the managers, customers,
vendors, and HR can give their feedback. This gives an overall perspective on the employee’s
performance. You can even make this creative by adding emoticons in the rating section.
With a 360-degree review mechanism, there is an upward feature through which
employees can give anonymous feedback to their managers. The managers will then be able to
know how capable they are in terms of their leadership skills and team management. Through
this, employees can identify the perception gaps between the managers and the employees.
4) Employee engagement
Employee engagement is the hallmark of a successful performance management
system. Employee engagement is the process of creating the best work conditions for an
employee to keep him motivated. When employees are engaged, they give their best performance
every day.
In a performance management system, engaging an employee would mean, having a
system where employees are reviewed on an overall basis, they are recognized for good
performance, rewarded for their achievements and are appreciated for their talent. Something as
simple as, “You did well today” can go a long way.
One way of doing this is to have a software, that creates employee engagement
surveys. The survey can have various questions that measure employee engagement either
qualitatively or quantitatively. An example of a qualitative survey question could be, “How well
are you being able to contribute to the goals of the organization?” a quantitative question, on the
other hand, would either use a rating scale or yes or no questions.
5) Continuous Feedback Mechanism
From the beginning, we have been emphasizing one thing that is very significant for a
successful performance management system. It is a feedback mechanism that is continuous.
When you have a continuous feedback mechanism in your performance management system, all
the other processes will become easier. In one way, you could say that the continuous feedback
mechanism is a backbone to any performance management system.
When you have a continuous feedback mechanism in your performance management
system, you could have something like a wall or a portal, that could serve as a platform for
employees and managers to post their comments and feedback for employee performance. In a
way, this digital wall could become an employee performance evaluation tool.

16
In a performance management system, continuous feedback promotes healthy
collaboration between all the employees and the managers. The feedback that is provided is
accurate and timely. This process is a lot more convenient than those excel sheets that you send
every year. You can even have a facility in which you can send confidential comments to the
employees by having a mobile app.
6) Performance Analytics
In order to do effective performance management, it is important that your
performance management system has a thorough record of all the performance reports of the
employees. It is important that your PMS has proper records of all the employees' profile reports
and career history so that the managers can come up with strategies for employee’s talent
management.
For a PMS, details such as employees' skills, training programs, and attrition rate are
important because it helps managers understand the various trends in employee performance.
Performance management system is a methodological framework that fosters
collaboration among the employees and aims to improve the performance productivity of the
employees and the organization. With the help of a performance management system, we can
manage goals, conduct performance reviews, give continuous feedback and align everything with
the core values and mission of the organization. This helps in better employee engagement, which
is again the hallmark of an ideal performance system.
Developments in Performance Management
1) Change the Organizational Definition of Performance Management
Performance management must be perceived by managers and employees as an ongoing
process. HR creates this perception through its communications about performance management
and the activities that constitute the performance management process.
2) Introduce Competencies into Performance Management
By listing and defining the competencies needed to excel, managers give employees a set
of clear objectives against which to measure current behaviors. This helps to determine what
development is needed. When integrated across all talent management processes, competencies
are a powerful tool for reinforcing what a company values, as well as driving business impact.
3) Create and Support High-Quality Development Plans for All Employees
Development plans enable employees and managers to bridge employee skills or behavior
gaps that are identified through the performance appraisal process. These plans prioritize the
development needs most critical to achieving desired business results and identify specific action
steps.
4) Enable Managers to Coach
Managers need to support employee development through coaching in addition to
development plans. Managers need to understand the return on the time invested in coaching and
also have the skills to coach effectively.
5) Create Frequent Occasions for Reflecting on Performance
When employees and managers discuss performance frequently, overall performance
improves. HR has a role in making these conversations happen.
Research within the past decade suggests ways organizations can overcome problems with the
traditional performance appraisal. Five issues are addressed:
(1) legal pitfalls;
(2) the appraisal instrument;
(3) who should appraise and coach the employee;
(4) objectivity and fairness; and
(5) the coaching process itself.

17
LEGAL ISSUES
Human resource management came under legal scrutiny in 1964 with the passage of Title VII of
the Civil Rights Act in the United States (U.S.). This act makes it illegal to allow sex, age, race, religion,
or ethnicity to influence decisions regarding the recruiting, training, upgrading, compensating, demoting,
or terminating of an employee. Legal issues are increasingly problematic for organizations as people are
becoming more aware of their legal rights. In fact, there has been a 100% increase in the number of
employment discrimination cases filed since 1995, and these cases have usually involved complaints
regarding a performance appraisal. Legal confrontations regarding performance appraisals have led to the
discovery of ways to minimize them. Organizations are most likely to win court challenges when:
(1) the appraisal instrument is based on a written job analysis;
(2) it is behavioral;
(3) there is a written manual for appraising and then coaching an employee;
(4) reliability and validity of the appraisal decisions have been documented;
(5) the results of an appraisal have been reviewed with the employee; and
(6) organizations can show that appraising and coaching of employees is ‘‘fair.’’
THE APPRAISAL INSTRUMENT
The appraisal instrument is the foundation for appraising and coaching employees. It is the basis
for making administrative decisions in a uniform and consistent way. As noted earlier, a primary reason
for the frequent failure of a performance appraisal to bring about a positive change in a person’s behavior
is that many employees view the instrument as measuring the ‘‘wrong things.’’ Designing the ‘‘right’’
performance appraisal instrument improves both the accuracy of the instrument and employee perceptions
of fairness. The most frequently used instruments for assessing employees are bottom-line measures, trait-
based scales, and behavioral scales.
Bottom-line measures often take the form of management by objectives (MBO). This approach
emphasizes issues such as: Were X, Y, and Z goals attained? Were they attained on time? Was the quality
satisfactory? The relevance of such questions is difficult to attack, as they appear to be objective. The
probability that two or more appraisers will independently reach the same conclusion regarding a person’s
performance is relatively high. For example, the person either did or did not decrease costs by 14%.
Nevertheless, MBO leaves much to be desired when used as the primary basis for coaching an
employee, or for making administrative decisions. As Donald Petersen, a former CEO of Ford Motor
Company has noted, the emphasis on goal attainment is ironically a weakness of MBO. When receiving a
‘‘good’’ appraisal is contingent on goal attainment, ingenious ways are often found by employees to make
easy goals appear difficult to administrative decision makers. Moreover, a focus on bottom-line measures
is of little help in planning for and receiving training and development opportunities. They tell the
‘‘score,’’ but not what can be done to improve it. Dissatisfaction with this aspect of MBO can erode the
employees’ belief in the fairness of the appraisal process.
In short, the limitations of economic or bottom-line measures for appraisal purposes are at
least five-fold. First, cost-related measures are often affected by factors beyond a person’s control (e.g.,
lack of resources, situational constraints). Hence people can be promoted or penalized undeservedly. To
the extent that situational factors constrain performance outcomes, the focus needs to be on the person’s
behavior, or their motivation level decreases dramatically. Second, bottom-line measures often do not
take into account factors for which the person should be held accountable (e.g., team playing skills,
creating seamless boundaries within the organization). Credit needs to be given to an individual for
excelling on important non quantitative aspects of his or her job. Third, bottom-line measures can foster a
results-at all-costs mentality, which in turn can lead to unethical, if not illegal, activity. Fourth, bottom-
line measures yield little or no information on what the person must continue doing, start doing, stop
doing, or do differently to impact the bottom-line positively. Telling a middle manager, for example, that
there is a cost overrun is of little value. What the manager needs to know, and what an effective coach

18
needs to explain to the manager, are ways to work effectively within budget. Finally, comprehensive
bottom-line measures do not exist for the individual employee in most jobs.
Trait-based scales are often used to assess attitudinal and personality variables such as
commitment, creativity, loyalty, and initiative. However, unless traits are defined behaviorally, they are
too vague, subjective, and ambiguous. The appraisal reflects little more than the caprice of the appraiser.
As is the case with bottom-line measures, trait based assessments provide little insight into what the
employee should start, stop or consider doing differently. For this reason, the courts usually take a dim
view of these types of appraisal instruments. The solution is to measure and coach a person on observable
behaviors required to implement an organization’s strategy, which in turn increases the bottom-line.
Behaviorally based scales reduce ambiguity by setting common expectations that make
explicit what the person should start or stop doing. These types of measures account for more job
complexity, relate directly to what the employee does, and minimize irrelevant factors that are not under
the control of the individual. Behavioral criteria, developed from a job analysis, make clear what one
must do to be productive, and what one must do to implement the strategy. As Colin Powell has argued,
plans do not accomplish anything: strategy is only as good as its execution. All the great ideas and visions
in the world are worthless, argued Powell, if they cannot be implemented effectively and efficiently.
Behavioral measures specify ways to execute an organization’s strategic plan.
The steps to follow in developing an effective appraisal plan for coaching purposes are six-fold.
Employees must be assessed and coached on behaviors that are:
(1) observable;
(2) under their control; and
(3) critical to the implementation of the organization’s strategy. Too often, the results of months of
strategic planning are the strategic document disappearing into a desk drawer to be subsequently ignored
for the remainder of the fiscal year. Of particular importance for perceptions of fairness is that
(4) appraisal accuracy increases when both the coach and employee are informed ahead of time about
what is to be observed. This foresight focuses the attention of both parties on pertinent behaviors, and it
facilitates
recall when making administrative and developmental decisions. In developing a behaviorally based
appraisal instrument,
(5) longer, objective, descriptive behavioral statements on the appraisal instrument are more effective
than short phrases in increasing the appraiser’s accuracy. Finally,
(6) keeping a written record during appraisal periods of the specific behaviors that were observed
improves the appraiser’s recall, and hence contributes to an objective appraisal and working process.
Behavioral observation scales facilitate performance feedback, identification of training needs, and
setting Behavioral measures tied to the organization’s strategy correlate significantly with cost-related
measures such as revenue, repeat business, and customer satisfaction. Hence, they serve as a diagnostic
instrument.
Diagnostic Instrument
Whether it is in the fields of medicine or golf, coaches benefit from having a diagnostic
instrument to assist them in determining what a person is doing well, and spotting what the person can do
to enhance his or her knowledge, skills or ability. A diagnostic instrument also facilitates self-
management. In medicine, a diagnostic instrument enables people to know what to eat and what not to
eat, in order to maximize their quality of life, and minimize the probability of sundry diseases ranging
from heart disease to cancer. It sensitizes people to early warning signs as to when a medical doctor
should be consulted. In golf, a diagnostic instrument allows one to check one’s grip of the club, or
placement of one’s feet to hit the ball long and straight. It facilitates discussion with a golf coach as to
what one needs to do to improve one’s score.
In organizational settings, an effective diagnostic instrument is one that focuses on those
areas that move the strategy from rhetoric to action steps. Hence, the importance of the appraisal

19
instrument as a diagnostic tool for coaching and developing an employee, and to an employee’s own self
management. This diagnostic instrument should ensure that people are coaching themselves, and that they
are coaching others on the ‘‘right things.’’
Perceptions of Fairness
Employee acceptance is critical to the implementation and on-going use of appraisals. Trust
(perceptions of whether people adhere to the organization’s rules when making appraisals, whether the
appraisals are accurate, or whether the appraisals reflect favoritism), as well as employee perceptions of
situational constraints on their performance, predicts their motivational level.
Hostility toward performance appraisals and the coaching process often occurs when people
believe that they are being evaluated on the ‘‘wrong things,’’ or on indices over which they have little
control. This hostility is minimized to the extent that people can see that they are being assessed on the
very behaviors that enable the successful implementation of the organization’s strategic plan.
Another reason for employee hostility toward appraisals is improper weighting of the criteria.
This has led to the concept of a ‘‘balanced scorecard’’ that provides a framework for coaching employees
on the ways they can contribute meaningfully to the organization’s strategy. For example, at
PricewaterhouseCoopers (PWC), equal weight is now given to each of three criteria, namely: client,
people, and firm. This is done to shift an overemphasis by some partners on the client, at the expense of
coaching staff on ways to assist the client, as well as to ensure that what is done for the client and staff is
not done at the expense of what is in the overall interest of PWC as an organization.
The attitudes of coaches as well as the people who are being coached is positive if the appraisal
instrument facilitates assessments that are:
(1) perceived as factual, objective and unbiased;
(2) explicitly related to the organization’s strategy;
(3) developmental, in that the assessment specifies what the employee must start doing, stop doing,
continue doing, or do differently to improve performance; and
(4) conducive to setting specific high goals for doing so.
SOURCES OF APPRAISAL: WHO SHOULD COACH?
An appraisal instrument, no matter how carefully developed, is only as good as the people who
use it. Hence the question: Who is the ideal coach? Is the answer the boss? What about one’s peers or
subordinates? How about people coaching themselves?
360-Degree Feedback
Anyone who has children is aware that how they interact with their grandparents is not
necessarily how they interact with their parents, babysitters, or siblings. Moreover, how they behave on
the playground is unlikely to yield clues as to how they behave in the classroom, let alone in the home.
The answer to ‘‘Who is my child?’’ is ‘‘All of the above.’’ For similar reasoning, feedback from multiple
sources, often termed 360- degree or multisource feedback, is blossoming in the workplace.
A perception of an employee’s performance varies among subordinates, peers, and
supervisors. How an employee interacts with the boss is not necessarily an indicator of how that
employee interacts with peers or subordinates. Multisource feedback takes into account the fact that
different populations (e.g., peers, subordinates) have different opportunities to observe different aspects of
a person’s performance. It thus provides an integrated, holistic view of an employee, offsetting the biases
of an appraisal from only a single vantage point (e.g., the boss). Moreover, 360-degree feedback is
consistent with organizational values for teamwork. Upwards of 90% of Fortune 1000 firms now collect
assessments of an employee from multiple sources.
360-Degree feedback is being used in many large companies, such as DuPont, General Electric
Co. (GE), Motorola Inc., Procter & Gamble Co. and United Parcel Service of America Inc. (UPS). For
example, a 360- degree feedback program exists at AT&T Corp.’s business products division. Any
manager supervising three or more people has to go through an evaluation every year and must share the
results with his or her supervisors, as well as with the employees below the manager. Several senior

20
managers, at AT&T, Nestle’s and General Motors Corp., have openly admitted that they have been
surprised by the upward feedback within a 360-degree evaluation. The managers were unaware of the
inaccurate perceptions of some of their actions, and the uncertainty amongst employees regarding issues
the managers thought they had communicated.
However, agreement among multiple sources of an appraisal should not be expected. Each
source often observes an employee in different contexts, with supervisor–peer ratings typically exhibiting
the greatest agreement, and subordinate–self ratings showing the least agreement. Hence, multisource
appraisal instruments are often designed to assess those aspects of the job that a specific population (e.g.,
subordinates) is most likely to observe on an ongoing basis. In short, a person’s appraisal often differs
across populations (supervisor vs. subordinates) because of the actual differences in the behaviors that are
observed in different contexts.
Thus, multisource appraisals are taken into account at JP Morgan Chase when determining
developmental goals (teamwork), and/or making an administrative decision (e.g., promotion). Among the
strengths and limitations of each source of an appraisal are the following:
The Boss
The boss often has a limited opportunity to observe his or her subordinates. Thus, a boss
appraisal usually does not provide a complete picture of an employee’s performance. Consequently,
supervisory appraisals frequently fail to improve a person’s performance and may lead to employee
hostility. Such questions as: ‘‘On what basis are you able to evaluate me?’’ undermine the credibility of
the boss. The employee views the appraisal as unfair. The boss should be held accountable primarily for
collecting data for appraising an individual from multiple sources, and then making the final
administrative and developmental decisions based on these multiple sources of information.
Subordinates
Anonymous feedback from subordinates, often called upward feedback, can lead to positive
changes in the behavior of supervisors. Leaders who receive feedback from subordinates that is more
negative than their self-evaluation show the greatest level of subsequent improvement. These positive
behavior changes have been shown to be sustainable over time. This is especially true for managers who
have high self-efficacy, namely, the belief that ‘‘I can change.’’ Upward appraisals are used in such
companies as Pratt and Whitney and AT&T.
Peers
Anonymous peer ratings are among the best predictors of both training success and
performance in subsequent jobs. This is because peers often have more job-relevant information than
other sources, due to their opportunity to closely observe and compare themselves against others on task-
relevant abilities.
Peer appraisals are increasingly popular in self-managing teams. Allowing people who
comprise the teams to be responsible for appraising and coaching one another increases interpersonal
effectiveness, group cohesion, openness of communication, employee motivation, and group satisfaction.
Self-Appraisals
Self-appraisals, not surprisingly, are less accurate than appraisals from other sources. Self-
appraisals have the lowest agreement with other rating sources (peers and super visors), and the lowest
ability to predict the person’s subsequent performance. An intriguing finding is that those whose self-
appraisal is aligned with the appraisals they receive from others are usually high performers. This is
because they score high on ‘‘self-awareness’’ of their abilities. Moreover, employees whose self-
evaluations are in agreement with evaluations from their subordinates have been found to be more
promotable than those whose self-ratings are inflated.
Overall, multisource feedback provides a comprehensive way of appraising employees. It
improves the accuracy of appraisals through the multiple viewpoints that are obtained, and it increases
perceptions of fairness by ensuring that a biased source (e.g., one’s boss) is not over-represented in the
appraisal process.

21
TRAINING APPRAISERS/ COACHES
Appraisal Accuracy Appraisals are more often a reflection of the appraiser’s overall biases
than they are of the performance of an employee. Appraisers from different populations (e.g., supervisors
vs. subordinates) attach different weights to the same aspects of performance that they observe as a result
of their different perspectives in the organization. A massive study involving over 4000 managers with
appraisals from at least two supervisors, two peers, two subordinates plus self-appraisals indicated that the
idiosyncrasies of an appraiser affect the appraisals given to an employee.
The U.S. Army showed that one’s knowledge and ability explained only a very small part of an
appraisal from one’s supervisor and peers. The supervisor’s positive regard for a subordinate resulted in
both positive leniency and halo errors, and little inclination to punish poor performance. Other studies
have found that the perceived similarity of the subordinate by the supervisor inflates appraisals in the
private and public sectors. This is especially true with regard to perceived similarities regarding
extraversion, conscientiousness and emotional stability.
Interestingly, in this new millennium, people who smoke are rated lower than nonsmokers on
professional comportment, working with others, and dependability. Smokers are viewed as wasting
valuable production time as a result of leaving for designated smoking areas.
Evaluations are also adversely affected by gender. Men are typically evaluated as more
effective than women. That this finding reflects sex discrimination is suggested by the fact that even when
the males and females demonstrate the same leadership behavior, women are devalued when the
appraisers are male. A subsequent review of leadership perceptions in the military revealed preferential
ratings for men in training groups, primarily where there was a ‘‘token’’ woman; this was not found in
groups where there were several women. This suggests that token status exacerbates negative evaluations
of women, because the token female receives considerable attention, which increases the pressure on her
to perform well.
Another study also points to the importance of gender proportion as a factor affecting rating
accuracy. The respondents, only 27 of whom were female, reported that men possess the motivation and
leadership qualities necessary for effective performance, whereas women possess feminine attitudes that
impair their performance. Yet, there were no performance differences between men and women on any
objective measure. In still another study, the performance of women was rated higher than that of men
when the women constituted a higher proportion than the men. Gender proportion appears to influence the
performance evaluations of women. Increasing the representation of women in mixed groups increases
positive appraisals of them.
To minimize bias and increase the accuracy and objectivity of coaches, training programs should
allow them to evaluate actors presented on videotape, receive feedback as to rating accuracy, and to
practice, practice, practice. Such training minimizes rating errors including leniency, halo, and similar-to-
me biases. This training should teach coaches:
(1) the relevant performance criteria for evaluating people;
(2) the relevant job behaviors to observe; and
(3) and ways to effectively minimize errors in judgment when using the appraisal instrument.
Feedback and Goal-Setting
In many instances, feedback decreases rather than increases performance. Therefore, training
coaches in how to provide feedback and set goals is critical to an effective coaching process. For feedback
to bring about a positive change in behavior, a coach must:
(1) focus on the behavior rather than the person;
(2) be selective as to the ‘‘critical few’’ so as not to overwhelm the person; and
(3) focus on the desired behavior rather than the undesired, as well as ways to demonstrate it. Sensitivity
and tact in giving feedback is critical for bringing about a change in behavior. Thus,
(4) honesty should not be confused with hurtfulness. Feedback in the absence of goal setting has little or
no effect on behavior, because feedback in itself is only information; its effect on action depends on how

22
the recipient understands it, and what decisions are made with respect to it. For feedback to improve
behavior,
(5) specific high goals must be set, and the individual must be committed to meeting those goals, because
goal setting affects choice, effort and persistence.
Organizational Justice
Few things demoralize a person faster than feelings of jealousy, perceptions of favoritism, or
beliefs that someone else is getting a ‘‘better deal.’’ Not only does a coach need to be fair; the coach must
be seen as fair. At least four factors contribute to perceptions of fairness of a coach, namely, distributive
justice, procedural justice, interactional justice and the concept of voice.
The following questions are usually asked by employees regarding distributive justice: What was
distributed to whom? Who has the corner office, received the coveted assignment, or was promoted or let
go? Although the answers to these questions certainly affect perceptions of justice, often more important
to employees are answers to questions regarding procedural justice.
Perceptions of procedural justice are affected by answers to the question: Are there
procedures, processes, or systems for deciding ‘‘who gets what?’’ If the answer is no, mistrust throughout
the workforce is likely to be high. If the answer is yes, subsequent questions asked by employees include
the following: Are the procedures representative of the thinking of the unit or that of a ‘‘chosen few?’’
Are they applied consistently? Are the procedures ethical? Is there an appeal system that people can use
without fear of retribution? Do I have a champion? People become highly concerned with answers to
procedural justice questions when they receive a poor appraisal.
Interactional justice refers to the interactions between the coach and the subordinate. To the
extent that the logic of the coach is understood, and the coach is perceived as someone wanting to truly
help the person improve performance, feelings of trust and respect are usually high, even if the employee
disagrees with the coach’s appraisal.
Voice refers to the extent that people believe that their views are taken into account before an
appraisal is made. People are likely to support a decision that they did not initially advocate if they have
‘‘voice,’’ if their answer is yes to the question: ‘‘Was I heard?’’
A ‘‘due process appraisal’’ includes giving an employee adequate notice of the appraisal (e.g.,
explaining standards in advance, seeking self-appraisals, giving feedback on an ongoing basis), fair
hearing (adequate observations of the person’s performance, granting the person an opportunity to explain
self evaluations) and judgment based on evidence (e.g., consistent application of standards, an
opportunity to appeal). Employees whose voice has been heard usually feel that the appraisal system is
fair and accurate. ‘‘Due process’’ increases an employee’s motivation to improve performance, as well as
satisfaction with the appraisal system as a whole. In summary, training programs, in addition to focusing
on ways to increase appraisal accuracy, should stress the principles of organizational justice so that the
performance management process in general, and the coach in particular, are seen as fair.
Regardless of the care that is taken in developing the appraisal instrument and the training that
is given to a coach, appraisal accuracy can be affected adversely by the organization’s politics. In a study
of an Oregon newsprint facility and a Seattle bank, self-confidence in conducting accurate appraisals was
high. In the newsprint facility, however, the performance appraisal did not affect an employee’s status in
any way, regardless of whether the appraisal was positive or negative; moreover, the appraisers
anticipated neither positive nor negative outcomes for themselves for conducting accurate and timely
appraisals. Performance appraisal was viewed by everyone as a ‘‘nonevent.’’ In the bank, appraisers
feared the organizational consequences of ‘‘making waves.’’ The outcome that they expected, as a result
of recording behaviors to document an unfavorable appraisal, was a decrease in the probability of they,
themselves, being promoted. An organizational culture that fosters high self-confidence and low positive
outcome expectancies causes resentment. In these two companies, people who believed that they could
make accurate appraisals stopped doing so.

23
For performance management to be taken seriously, people must see the relationship between
the coaching provided and desirable outcomes. They must see a positive relationship between the
coaching process and other human resource systems, including staffing and training, as well the effective
implementation of the team’s, division’s or organization’s strategic plan.
When the outcome expectancies of conducting appraisals are neutral or negative, when there is
no perceived relationship between the performance appraisal one receives and subsequent positive or
negative outcomes, the entire process is seen as meaningless. Therefore, a coach should be formally
evaluated on the accuracy and comprehensiveness of appraisals of others, as well as on the extent to
which organizational justice principles are followed, and specific high goals are set.
ONGOING COACHING
In the past five years, there has been a shift in emphasis within the private and public sectors
from performance appraisal to performance management, from being a performance appraiser to
becoming a performance coach. The shift is from a discrete activity to one that is performed on an
ongoing process. The shift is from being primarily an evaluator to becoming a developer of people.
Cyclical year-round performance management (i.e., feedback, analyzing results, setting goals)
effectively increases organizational performance. Executive coaching in a public-sector municipal agency
increased employee productivity dramatically. This is because coaches can be powerful catalysts for
bringing about relatively permanent improvements in employees’ behavior when they challenge
employees on a daily basis, and when they instill in them the confidence that they can expand their
abilities to attain desired goals. The CEO of Hewlett–Packard was recently quoted as saying ‘‘along the
way, you must remind people of how far they’ve come already and how much closer they are to achieving
the goal.’’
Outcome Expectancy/Self Efficacy
A drawback to setting specific high goals is that people may obtain tangible evidence that
they did not attain them. They learn that they have failed despite their effort and persistence. Through
multiple setbacks or even one severe one, they give up. To help people overcome their sense of
helplessness, to instill optimism in the face of failure, coaches need to focus on two key concepts:
outcome expectations and self-efficacy.
A primary role of a coach is to help people see the relationship between what they do and the
outcome that they can expect. Motorola is known for having an employee development system that
combines performance appraisals, succession planning, and individual career planning into a single,
continuous system, so that employees know what they have done, where they are going, and how exactly
they need to improve. There is a sense of what one is striving for, and goals are set about how to get there.
In addition, conversations take place about how well one has accomplished one’s goals in the past, and
the progress of their current goals. Employees benefit from being able to understand their frequent
(quarterly) appraisals in terms of their own career development, as well their role in meeting
organizational performance targets.
The response ‘‘I don’t get it’’ is symptomatic of a lack of understanding of outcome
expectancies. Thus, the job of the golf pro is to help the player see the relationship between where the left
foot is placed and where the ball goes after being struck by the club. The job of the sales director is to
help the salesperson see the relationship between how the sales-call was made and the amount of revenue
that was generated. This is not a profound concept, yet it is one that many coaches in organizational
settings overlook. The use of the empathy box described earlier in Organizational Dynamics (see Latham,
2003) is a helpful tool for clarifying anticipated outcomes.
A second step to instilling a ‘‘can-do’’ mindset in an employee is for the coach to focus on the
person’s self-efficacy, namely, the conviction that ‘‘I can cause,’’ ‘‘I can bring about,’’ ‘‘I can make
happen.’’ Since self efficacy is task specific, a person may have high self-efficacy in one area—such as
bringing in new business, and low self-efficacy in another, such as managing staff. Task-specific self-
efficacy can be increased through:

24
(1) enactive mastery, that is, sequencing a task, giving assignments in such a way that all but guarantees
early successes;
(2) finding models of desired behaviors that the person being coached can identify with and learn from;
and
(3) the appropriate encouragement from others, particularly the coach. For example, at Syncrude, a large
Canadian energy company, those with high appraisals are singled out and written to personally by the
operations manager. This encouragement from the coach reinforces that performance is not only
appraised, but encouraged and valued by corporate leaders.
Peter Drucker noted that in the 20th century, great leaders gave great answers; in the 21st
century, great leaders will ask great questions. In organizational settings, as is the case for their
counterparts in professional sports, leaders may not necessarily be as adept or knowledgeable of the areas
requiring coaching, as is the person who is being coached. Thus, becoming an expert on ‘‘the answers’’ is
now, and will continue to be, all but impossible. The effective coach is one who questions and listens.
Insightful questions lead to reflection; they lead to self-discovery.
The arguable downside of becoming an effective coach is the queue; people seek out those
who listen to them. However, as Colin Powell has observed, the day people stop bringing a person their
problems is the day that person has stopped leading them. People have either lost confidence that the
person can help them, or they have concluded that the person does not care. Either case, argued Powell, is
a failure of leadership. Together, performance appraisals that lead to ongoing coaching ensure a highly
trained, highly motivated workforce. It is the essence of performance management.
Concerns of Performance Management
The following are the main concerns of performance management −
1) Concern with outputs, process and inputs
Performance management is concerned with outputs (the achievement of results) and
outcomes (the impact made on performance). But it is also concerned with the processes required
to achieve these results (competencies) and the inputs in terms of capabilities (knowledge, skill
and competence) expected from the teams and individuals involved.
Performance management is worried about yields (the accomplishment of results) and
results (the effect made on performance). In any case, it is likewise worried about the procedures
required to accomplish these outcomes (abilities) and the contributions to terms of capacities
(learning, expertise and capability) anticipated from the groups and people included.
2) Concern with planning
Performance management is concerned with planning ahead to achieve success in future.
This means defining expectations expressed as objectives and in business plans.
Performance management is worried about preparing to make progress in future. This
implies characterizing desires communicated as targets and in marketable strategies.
3) Concern with measurement and review
If you can’t measure it, you can’t manage it. Performance management is concerned
with the measurement of results and with reviewing progress towards achieving objectives as a
basis for action.
On the off chance that you can't gauge it, you can't oversee it. Performance
management is worried about the estimation of results and with auditing progress towards
accomplishing targets as a reason for activity.
4) Concern with continuous improvement
Concern with continuous improvement is based on the belief that continuously
striving to reach higher standards in every part of the organization will provide a series of
incremental gains that will build superior performance.
This means clarifying what organizational, team and individual effectiveness look like
and taking steps to ensure that those defined levels of effectiveness are achieved. Establishing a

25
culture in which managers, individuals and groups take responsibility for the continuous
improvement of business processes and of their own skills, competencies and contribution.
Worry with persistent change depends on the conviction that consistently endeavoring to
achieve higher models in all aspects of the association will give a progression of incremental
additions that will construct unrivaled performance.
This implies illuminating what authoritative, group and individual adequacy look like and
finding a way to guarantee that those characterized levels of viability are accomplished. Building
up a culture in which directors, people and gatherings assume liability for the ceaseless change of
business forms and of their own aptitudes, capabilities and commitment.
5) Concern with continuous development
Performance management is concerned with creating a culture in which
organizational and individual learning and development is a continuous process. It provides
means for the integration of learning and work so that everyone learns from the successes and
challenges inherent in their day-to-day activities.
Performance management is worried about making a culture in which hierarchical and
singular learning and improvement is a ceaseless procedure. It gives intends to the incorporation
of learning and work with the goal that everybody gains from the victories and difficulties inborn
in their everyday exercises.
6) Concern for communication
Performance management is concerned with communication. This is done by
creating a climate in which a continuing dialogue between managers and the members of their
teams takes place to define expectations and share information on the organization’s mission,
values and objectives. It establishes mutual understanding of what is to be achieved and a
framework for managing and developing people to ensure that it will be achieved.
Performance management is worried about correspondence. This is finished by
making an atmosphere in which a proceeding with discourse amongst directors and the
individuals from their groups happens to characterize desires and offer data on the association's
main goal, qualities and destinations. It sets up common comprehension of what is to be
accomplished and a structure for overseeing and creating individuals to guarantee that it will be
accomplished.
7) Concern for stakeholders
Performance management is concerned with satisfying the needs and expectations of all
the organization’s stakeholders, management, employees, customers, suppliers and the general
public. In particular, employees are treated as partners in the enterprise whose interests are
respected, whose opinions are sought and listened to, and who are encouraged to contribute to the
formulation of objectives and plans for their team and for themselves.
Performance management is worried about fulfilling the necessities and desires of all
the association's partners, management, workers, clients, providers and the overall population.
Specifically, representatives are dealt with as accomplices in the undertaking whose interests are
regarded, whose assessments are looked for and tuned in to, and who are urged to add to the
detailing of targets and plans for their group and for themselves.
8) Concern for transparency
Four ethical principles that should govern the operation of the performance management
process. These are −
1) Respect for the individual
2) Mutual respect
3) Procedural fairness
4) Transparency of decision making

26
Understanding Performance Management
Performance management often gets confused with a process known as micro-management.
Performance management is the process of analyzing an employee's performance and then offering
training and other necessary resources to improve performance. Micro-management is when a manager
scrutinizes every decision an employee makes and requires an employee to submit all work to the
manager before it is sent out to its designated recipient. With performance management, productive
employees are rewarded and non-productive employees are identified and addressed. Performance
management also helps to strengthen job descriptions and make the company's overall performance more
efficient.
Planning and Setting Expectations
When it comes to planning and setting expectations in performance management, it is critically
important to set goals that can be measured and evaluated. The manager works with the employee on
establishing performance expectations, and then there is a set of metrics created that can make it easier for
the manager to evaluate the employee's work. The manager must get the employee to understand how the
employee's job adds value to the company and why quality work is essential to the success of the
organization.
1) The Performance Management Cycle from the U.S. Office of Personnel Management
2) Performance Management Phase I: Planning from the University of California
3) Performance Planning and Appraisal Sessions - An Outline from Rutgers University
4) A Good Example of a Performance Management Plan from the Federal Highway Administration
5) Manager's Guide to Performance Management from the University of Washington
Monitoring Employee Performance
Once the employee expectations are in place, the manager must maintain a monitoring
program to help track the employee's progress. The biggest mistake some managers make is they only
monitor employee performance close to the annual evaluations. In performance management, the ongoing
monitoring of employee work habits and productivity is an essential part of the company's success. If the
manager detects any kind of unacceptable levels of performance from the employee, then those issues
need to be addressed immediately.
1) Workplace Privacy and Employee Monitoring from the Privacy Rights Clearinghouse
2) Choosing and Employee and Competence Monitoring System from Human Capital Review
3) 16 Ways to Measure Employee Performance from HR World
4) How Can I Track Ongoing Employee Performance? - from Monster.com
5) 3 Tips for Legally and Ethically Monitoring Employees Online from Entrepreneur.com
Nurturing Performance
When a manager is utilizing ongoing performance evaluations, it becomes easier to determine
what kind of resources an employee needs to succeed. The employee may require further classroom
training, or a hands-on training course may be more appropriate. The manager must use all of the
resources at their disposal to nurture the employee's performance and give that employee every possible
chance to improve productivity and offer value to the company. It could be that the employee would excel
in another position within the company. These are determinations the manager makes when nurturing
performance.
1) 10 Tips to Improve Employee Training from ThomasNet
2) ?A Comprehensive Employee Training Guide from Inc.com
3) Unusual Tips for Training Employees for Dummies
4) Ten Employee Training Tips from AllBusiness
5) ?5 Tips for Cyber-Security Training Your Employees from FCW
?Developing a Performance Rating System
It is important to be able to rate an employee's performance because that is one of the primary
ways to determine progress. Performance management is all about getting the most from employees and

27
being certain that employees have the resources they need to bring value to the company. Managers must
develop a performance rating system and then use that system to determine if an employee is developing
properly, or if there is an issue with the employee's professional progress. The manager should also share
performance ratings with the employee so that the employee can see their progress, or understand that
there are challenges to be addressed. When the final rating for the year is revealed to the employee, it
should be something that the employee understands and, in many ways, expects.
1) Evaluating Performance: Who, What, and How - from Boundless
2) Legal Guidelines for Associations for Conducting Employee Evaluations and Performance
Appraisals
3) UDSA Advice on Evaluating an Employee's Performance
4) Ten Biggest Mistakes Bosses Make in Performance Reviews from Forbes
5) 10 Ways to Ruin an Employee Evaluation from CBS News
Reward Positive Results
Rewards can be in the form of raises, promotions, or other forms of recognition. A manager
may decide to give an employee more responsibility as a reward for good work to show that the employee
is managerial material. The rewards given must be in line with the departmental policies and they must
also fit the performance. If a manager offers too much reward, then that could extinguish the motivation
for the rewarded employee, who may feel that advancement in the company is easy, and it will also work
to create disgruntled employees as well.
The Four Intrinsic Rewards That Drive Employee Engagement from the Ivey Business Journal
1) Best Ways to Reward Employees Without Promotions or Pay Raises
2) How Companies Reward Their Most Loyal Employees
3) 10 Easy Ways to Reward Employees
4) Motivating Employees from the Wall Street Journal
Implementing FCAT-M Performance Management Competencies:
Understanding Performance Management Process and Practices
In order for the performance management process to be efficient and effective, supervisors must
master the process and apply it consistently. The Federal Competency Assessment Tool - Management
(FCAT- M) assesses whether, and to what degree, supervisors have specific competencies. One of these
competencies is Understanding Performance Management Process and Practices. A supervisor equipped
with this competency will be able to better focus employee efforts on achieving organizational and
individual goals.
What is performance management? According to A Handbook for Measuring Employee
Performance, performance management is the systematic process of
1) planning work and setting expectations
2) continually monitoring performance
3) developing the capacity to perform
4) periodically rating performance in a summary fashion
5) rewarding good performance
1. Planning. The supervisor should meet with employees to create their performance plans. The
supervisor should establish measurable goals that align to the agency's strategic and operational
plans and consult with his/her employees when creating these goals. It is in this planning stage
that the supervisor has an opportunity to explain to employees how their performance directly
impacts how the agency and work unit will achieve their goals.
2. Monitoring. The supervisor should monitor employee progress, not only when there is a progress
review due, but on a continuous basis throughout the appraisal period. Monitoring gives the
supervisor an opportunity to make a course correction or adjust a timeline if it is needed so that
employees will produce the desired outcome of successfully achieving the agency's or work unit's
goals. It also provides the opportunity for the supervisor to make employees aware of their

28
progress, whether favorable or unacceptable. Should the supervisor determine the employee has
unacceptable performance on any critical element, monitoring performance enables the
supervisor to identify the problem early and get an opportunity period in place well before the
rating of record is due.
3. Developing. The supervisor should be able to determine from continuous monitoring whether
employees need additional development to achieve their assigned responsibilities. It is important
to remember that employee development includes not only remediation but enhancing good
performance as well. Types of development could include
1) formal training (classroom)
2) informal training (online)
3) coaching or mentoring
4) new work assignments (additional responsibilities)
5) details (within current agency or to an outside agency)
4. Rating. The supervisor will use the knowledge gained from monitoring the employee's
performance during the appraisal period to compare that performance against the employee's
elements and standards and assign a rating of record. The final rating should not be a surprise to
the employee, particularly when the supervisor and the employee have had numerous
performance discussions during the rating period.
5. Rewarding. The supervisor must make meaningful distinctions when granting awards. Award
amounts should be clearly distinguishable between different performance levels that are fully
successful or above. Performance management should support compensation decisions.
Every agency has policies that govern performance management that are unique to the
agency. Supervisors must, in addition to mastering and consistently applying good planning,
monitoring, developing, rating, and rewarding practices, learn and apply those policies as they
relate to the agency-specific practices of performance management. For more guidance on
agency-specific performance management systems, refer to the agency's policy and procedures
manual.
To determine whether they have implemented their agency's performance management
system successfully, supervisors need to answer the following questions:
1) Does my application of the system encourage better performance, and
2) Has performance improved during the appraisal period?
Positive answers reflect effective application of good performance management policies and practices.
Implementing FCAT-M Performance Management Competencies:
1) Performance Coaching and Feedback
2) Facilitating Performance
3) Differentiating Performance
4) Building Performance Culture
Performance Appraisal and performance Management
1) Performance Appraisal implies a rational assessment of the performance of an individual, based
on pre-determined standards. On the other hand,
The process of evaluating employee performance on a regular basis is called as
performance appraisal. Although, unlike performance management, it is restricted to evaluating
past performance and conducted once or twice a year, depending upon the organisation’s policies.
Thus essentially, performance appraisal is an integral part of a comprehensive performance
management approach.
2) performance management alludes to the management of performance of the manpower working
in an organization. While Performance Appraisal is a yearly system while if we talk about
Performance Management, it is a continuous process that does not occur eventually.

29
What kind of evaluation process is adopted by the organization is one of the biggest
questions, as the appreciation and development of employees rely on it? Some employees work silently
but does not show himself/herself, while there are also such employees who put up a show but hardly
performs. So, the performance appraisal and management play a crucial role, as the success of the
organization is combined effort of all the employees and the entrepreneur.
It is the process of managing and developing employee performance throughout the organization.
It aims at planning, tracking and assessing employee performance for a specific period. The end result of
performance management is to motivate employees and further increase their efficiency and
effectiveness.
To understand the difference between performance appraisal and performance management system.
BASIS FOR
COMPARISON
PERFORMANCE
APPRAISAL
PERFORMANCE
MANAGEMENT
Meaning Performance Appraisal,
means the analysis of an
employee's performance
and their caliber for
future growth and
development.
Performance
Management is the
management of human
resources in an
organization.
What is it? It is a system. It is a process.
Nature Rigid Supple
Type of tool Operational Tool Strategic Tool
Owned by Human Resource
Department
Managers
Conducted Annually Continuously
Approach Individualistic Holistic
Focused on Quantitative Aspects Qualitative Aspects
Corrections Retrospective Prospective
Definition of Performance Appraisal
Performance Appraisal is defined as an assessment of employees by the manager, in which
he/she evaluates the overall contribution made by the employee to the organization. It is a systematic and
logical review, conducted by the organization annually to judge his potential in performing a task. It helps
to analyze the skills and abilities of an employee for their future growth that increases the productivity of

30
employees. It helps to identify, the employee who performs their task well and those who are not, along
with the reasons for the same.
Performance Appraisal is an organized way of evaluating employee performance, for which a
comparison is made between actualperformance and the preset standards. The results of the performance
appraisal are documented. After that reviews are given to the employee about their performance during
the year, to tell them where they require improvements. Employees also wish to know their position in the
organization after a particular period of time.
Definition of Performance Management
Performance Management is a continuous process that aims at planning, monitoring and
evaluating the objectives of an employee and his total contribution to the organization. The basic purpose
of performance management is to encourage and improve employee’s efficiency and effectiveness.
In this process, both the employees and the managers participate in setting the objectives, assessing the
performance or progress, providing training and feedback to the employees at regular intervals for
improvement, implementing development programs for employees and rewarding them for their
achievements.
With the help of this process, both the employee and the employer get a chance to set the
combined goals of the employee that relates to the ultimate goal of the organization by considering the
employee’s performance. In this way, the objectives of the parties became clear that helps to achieve the
overall objectives of the organization and the growth & development of the employee as well.
Key Differences Between Performance Appraisal and Performance Management
The following are the major differences between performance appraisal and performance management:
3) An organized way of evaluating the performance and potential of employees for their future
growth and development is known as Performance Appraisal. The complete process of managing
the human resources of the organization is known as Performance Management.
4) Performance Appraisal is a system while Performance Management is a process.
5) Performance appraisal is inflexible, but performance management is flexible.
6) Performance Appraisal is an operational tool to improve the efficiency of employees. However,
performance management is a strategic tool.

Mba 3 h7 performance management

Mba 3 h7 performance management

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Similar a Mba 3 h7 performance management

Similar a Mba 3 h7 performance management (20)

Más de vibuchandran

Más de vibuchandran (14)

Último

Último (20)

Mba 3 h7 performance management