Lecture 7

Performance Management Performance Appraisal Counselling

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Performance Management
Definition M. Armstrong and H. Murlis (1994)

A process or set of processes for establishing shared understanding about what is to be achieved, and of managing and developing people in a way, which increases the probability that it will be achieved in the short and longer term.

Lockett, in R. Harrison (1997) A continuous process in which organisations clarify the level of performance required to meet their strategic objectives, convert them into unit and individual objectives and manage them continually (so) that they remain relevant and consistent with overall strategic objectives.

PM is a strategic and integrated approach to deliver sustained success to organisations by improving and developing the performance of people at work. Beven & Thompson (1992): Performance Management Systems: Communicate a vision of the organizations objectives to the employees. Provide the departmental/business unit and individual performance targets that are drawn from the wider organizational objectives. Provides a formal review process of how the objectives have been met. Establishes the basis for identifying training, development and reward decisions as outcomes from the review process. Fully integrated PM system (objective setting, review process and linked development and review system) provides the basis for evaluating the effectiveness of the whole performance process in providing enhanced organizational performance. A carefully modelled system will provide the necessary information to report on capability as well as outcomes achieved.

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Features that make up PMS can be seen as a series of steps linked to an overall business strategy: 1. 2. 3. 4. 5. 6. Objective setting Ongoing review of objectives Development of personal improvement plans linked to training and development Formal appraisal with feedback Pay review A competence-based organisational capability review.

Rewards

Selection

Performance Management

Performance

Development

Figure 5: The HR cycle (Adapted from Fombrun et al, 1984) Note: PM is a strategic management approach for monitoring how a business is performing. Describes the methodologies, metrics, processes, systems and software which are used for monitoring and managing the business performance of an enterprise. Variations of the terminologies: Business Performance Management, Strategic Performance Management, Enterprise Performance Management and Corporate Performance Management.

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PM is integrated in four senses: Vertical integration linking or aligning business, team and individual objectives; Functional integration linking functional strategies in different parts of the business; HR integration linking different aspects of HRM, especially organizational development, HR development and reward, to achieve a coherent approach to the management and development of people; and Integration of individual needs with those of the organization, as far as this is possible.

Performance means both behaviour (input) or qualitative and results (output) or quantitative. This refers to the mixed model of PM that covers: Competency levels Achievements Objective setting Review

Main benefits of PM: Helps to maximize value creation consistently. Helps to increase corporate transparency. Facilitates communication with investors, analysts and with stakeholders. Improves internal communication on strategy. Facilitates the improvement of decision-making. Helps to balance short-term, middle-term and long-term trade-offs. Improves allocation of resources, streamlines planning and budgeting. Helps to better deal with increased complexity and greater uncertainty and risk.

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Key management processes that take place within PMS are: Formulation of clear organisational objectives, cascaded down to departmental, business unit or team level; Measurement of objectives; Appraisal decisions; Performance-related pay; Coaching and counselling staff at the job level to enhance skill and learning capability; Success management or career management.

For an effective PMS, organisations will need to take note of several factors like: The history of the organisation; Its management style; Its industrial relations traditions Its size, formality and market sensitivity; The emphasis on reward and performance links; Performance versus development orientation/culture.

Step One Objective Setting Ongoing review Formal Appraisal Step Two Ongoing review

Business Strategies Personal Development Plan Step Four Career Development Plan Organization Capability Review

Training Plan Pay Review

Step Three

Performance Rating

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Performance Appraisal A performance appraisal is a process that consists out of the assessment by a qualified person of the performance and of the development and training needs of an employee.

PA gives the opportunity of the jobholder and manager to discuss the formers jobs in terms of: Past performance Strengths Weaknesses Employee concerns and agreed action plan Potentials PA is vital as: It helps to evaluate jobholders work It helps to identify strengths and weaknesses of workers It helps to develop workers potentials and helps in exploiting their potentials.

Two sides to any appraisal exercise: 1. Judgment (Historic) Actual performance is compared against performance targets and feedback (both positive and negative) is given. May or may not include the determination of a pay increase. Including pay in the appraisal has the major disadvantages that honest and open communication becomes almost impossible, and the judgment part of the appraisal becomes too dominant.

2. Development (Future-oriented) Needs of employees are evaluated in terms of the training requirement to improve skills and knowledge in line with future performance objectives and the direction the employees wants to grow. Employee objectives (SMART) are agreed.
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Any performance appraisal should be: 3. Documented 4. Delivered in a face-to-face meeting

Purpose of PA Identify strengths, weaknesses, opportunities and threats. Help improving performance by focusing on strengths and opportunities and overcoming weaknesses and threats. Identify HR with potential for wider responsibilities and agree on how to realise such potential. Review performance for training and development/ remuneration purpose.

Performance Standards Outstanding performance Superior performance Good performance Average performance Poor performance

Types of Performance Appraisal Corbridge & Pilbeam (1998) offer a useful overview of the main types of appraisal, which include: 1. Top-down schemes 2. Self-appraisal 3. Upward appraisal 4. Peer appraisal 5. Multi-directional appraisal

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1.

Top-down schemes Most traditional form of appraisal. Emphasizes both subordinate feedback and thus lead on objective setting coming from the top.

Problems cited with this form: Stresses traditional organizational hierarchies. A lack of impartiality, and favouritism. A lack of full knowledge of the employee in flatter structures, where the managers span of control may be wide.

An independent reviewer is often asked to review the outcomes of top-down appraisal to help remove potential bias.

2. Self-appraisal Rarely used as independent forms of appraisal Encourages greater ownership and participation in the appraisal scheme through self-reflection and help ensure full preparation for the appraisal discussion. In an open environment, it allows managers to shift from a directive, informative style to a counselling style, thereby assisting staff to form objectives and plans, moving from telling to selling to facilitating, which is seen as a creative and more effective level of satisfaction and ownership.

3.

Upward appraisal Increasingly used to reflect the growing trend for organizations to recognize that they have a duty to provide effective working systems for employees. Predicated on a number of things internal customer relationship, and a shift in the hierarchical shape of organizations to more collegiate arrangements.

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4.

Peer appraisal Involves members of teams evaluating each other. Is often seen as the pressure to treat internal working relationships as internal customer relationships using similar feedback systems to external customer feedback techniques. Is however complex to run in order to get the multiple channels working and assimilated. Involves sensitivities and careful development of staff is required. With the increasing uptake of team working, peer appraisal is a notional form of appraisal to use to expand non-hierarchical integrated HR system.

5.

Multi-directional appraisal (also called 360-degree appraisal/multi-source assessment or multi-rater feedback) by Ward (1995) An extended variant of peer appraisal. Key difference is that multi-directional appraisal deliberately sets out to collect data from outside the immediate team and often external customer feedback. Helps to overcome the criticisms of impracticalities and lack of knowledge of a single appraiser. Can be complex as it does expose staff to potentially hostile views which may be outside of their total control.

People participating in a 360 degree review can include: Subordinates Peers Colleagues from other departments Clients Business partners Any other business contacts of the employee Can also be combined with self-appraisal.
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The following environment/attributes are believed to be conducive for successful 360degree feedback: Organizational climate fosters individual growth. Criticisms are seen as opportunities for improvement. Proper framing of feedback method by management. Assurance that feedback will be kept confidential. Development of feedback tool based on organizational goals and values. Feedback tool includes areas for comment. Brief employees, appraisers and supervisors about purpose, uses of data and methods of survey prior to distribution of tool. Support feedback with back-up services or customized coaching.

The process of implementing a successful multiple-rater system can be broken down into four phases: 1. Phase 1 The groundwork: Clarify the companys strategies and goals; Dene the scope of the multi-rater process; Plan the process; Order; Instrument design; and Frequency

2. Phase 2 The Competency Model: This phase denes the skill set necessary for the employees to carry out the companys objectives and goals.

3. Phase 3: Implementation plans: Educating key players; and Determining your feedback strategy.

4. Phase 4: Full implementation: Hold kick off meetings; Roll out the process; Focus on development; and Evaluate the multi-rate process (Gebelein, 1996).
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Management

Employee Figure 1: Model 1 Top down management hierarchy

Model 1 consists of top-down hierarchy with control of:

Information Objectives Feedback on performance

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Employee

Management Figure 2: Model 2 Modified top-down control

Model 2 illustrates: A modified top-down control incorporating self-appraisal and upward appraisal of management practice and effective work systems. Arrows relate to the flow of communication and decision making and mark the levels if involvement in the objective setting and review process.

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Employee

Management

Figure 4: Model 3 180 degree or upward feedback

Model 3 illustrates: An inverted triangle with management in a new relationship with their employees. Employees are seen as the lead deliverers of customer service. Management role is to facilitate effective work systems in a new working relationship. In upward appraisal, in a modest way, employees are invited to provide managers with a rating on such dimensions as effective communication, involvement in decision-making, clarity of objectives and goals, and so on. More recent trends show managers conducting this process in staff focus groups as a basis for getting feedback on a range of management issues that impact upon staff.

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Trends in Performance Appraisal Fletcher (1993) identifies a number of trends in performance appraisal within the broad PMS: Reduction of paperwork quality of discussion. too much time spent in filling of forms at the expense of

Clarity of objective setting important to have precise, meaningful and auditable goals related to the business and not general or unaccountable objectives. Emphasis on the quality of the review discussion - review interview is critical in terms of manager feedback, the quality of employee commitment to preparing for and contributing to a self-evaluation and discussion of organizational factors of performance. Greater involvement of staff in the process Employment and performance being about teams not just traditional employer/employee relations.

Problems with appraisal Some of the problems frequently encountered by appraisers: Overtime to complete paperwork Vague objectives and inconsistent standards of objective setting Emphasis on getting the review over rather on the quality of the interview process Dependence culture: manager judges and informs, staff await outcome rather than be proactive in its development Narrow individual orientation that ignores wider feedback and operating context Failure to really integrate appraisal issues within the wider organisational and operational reality

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Characteristics of a good appraisal: Focus on facts Encourage self-analysis Ask open questions Start by discussing weaknesses Seek employees views on how to improve, and offer suggestions Discuss problems openly and avoid criticising Proceed with strengths: be positive and realistic Draw an action plan consisting of targets and actions for improvements Consider career development opportunities.

Successful implementation of performance management system depends on: 1. Clear description of the system and role of managers and their staffs

2. Good analysis of skills required to: i. Set and review objectives ii. Review and rate performance iii. Identify T & D needs iv. Prepare performance agreement v. Counsel and coach staff

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Counselling 3 main approaches to performance counselling: 1. Tell and sell method a. Get information from the employee on how he perceives his job and the appraiser tries to get a perception of the employee. b. The appraiser dominates the interview as he tries to accept what he thinks of the employee

2. Tell and listen method a. More justice b. Jobholder gets an opportunity to give his opinion/feedback and is used to set goals, etc. 3. Problem-solving approach a. Encourage jobholder to suggest possible solutions to particular problems b. Encourage participation

Job satisfaction, Motivation and Performance Satisfaction has an impact on performance Important to influence ability or improve competence through selection and T & D Extrinsic and intrinsic factors need to be improved in order to boost up motivation

The How of performance Need to look at: Selection process Common weaknesses Model of the future

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