Unit- 1. Performance Management and reward systems in Context
1. Herman Aguinis, University of Colorado at Denver
.
Performance Management in Context:
Overview
Prof. Preeti Bhaskar
Symbiosis Centre for Management Studies, NOIDA
2. Herman Aguinis, University of Colorado at Denver
Chapter Outline
Definition of Performance Management (PM)
The Performance Management Contribution
Disadvantages/Dangers of Poorly-implemented PM
systems
Definition of Reward Systems
Aims and role of PM Systems
Characteristics of an Ideal PM system
Integration with Other Human Resources and
Development Activities
.
3. Herman Aguinis, University of Colorado at Denver
Performance Management: Definition
Continuous Process of
Identifying performance of individuals and teams
Measuring performance of individuals and teams
Developing performance of individuals and teams
and
Aligning performance with the strategic goals of
the organization
.
5. Herman Aguinis, University of Colorado at Denver
PM is NOT performance appraisal
Performance
Management
Strategic business
considerations
Ongoing feedback So
employee can improve
performance
Driven by line manager
Performance appraisal
Assesses employee
Strengths &
Weaknesses
Once a year
Lacks ongoing
feedback
Driven by HR
.
6. Herman Aguinis, University of Colorado at Denver
.
Contributions of PM Systems
For Employees
The definitions of job and
success are clarified
Motivation to perform is
increased
Self-esteem is increased
Self-insight and development
and enhanced
For Managers
Supervisors’ views of
performance are
communicated more clearly
Managers gain insight about
subordinates
There is better and more
timely differentiation
between good and poor
performers
Employees become more
competent
For Organization
Organizational goals are
made clear
Organizational change is
facilitated
Administrative actions are
more fair and appropriate
There is better protection
from lawsuits
7. Herman Aguinis, University of Colorado at Denver
.
Disadvantages/Dangers of
Poorly-implemented PM Systems
For Employees
Lowered self-esteem
Employee burnout and
job dissatisfaction
Damaged relationships
Use of false or
misleading
information
For Managers
Increased turnover
Decreased motivation
to perform
Unjustified demands
on managers’
resources
Varying and unfair
standards and ratings
For Organization
Wasted time and
money
Unclear ratings system
Emerging biases
Increased risk of
litigation
8. Herman Aguinis, University of Colorado at Denver
Reward Systems: Definition
Set of mechanisms for distributing
Tangible returns
and
Intangible or relational returns
As part of an employment relationship
.
9. Herman Aguinis, University of Colorado at Denver
Tangible returns
Cash compensation
Base pay
Hourly wages, Salary
Cost-of-Living Adjustment (COLA)
To combat the effect of inflation in an attempt to preserve the
employee buying power
Contingent Pay/ Merit Pay
Additional pay based on employee level of performance
Incentives (short- and long-term )
bonuses (short term) or stock options/ownership (long term)
.
10. Herman Aguinis, University of Colorado at Denver
Tangible returns
Benefits, such as
Income Protection Program
Serve as a Backup to employee salaries in the event when employee is sick,
disabled, or no longer able to work .
E.g. Disability pay, medical insurance, pension plans, savings plans.
Allowances
E.g., housing, transportation, mobile , gym facility, phone bills.
Work/life focus
E.g., vacation time, counseling, financial planning, flexible work schedules (e.g.,
telecommuting, non-paid time off).
.
In fact, a recent survey including both employees in general and HR professionals in particular showed
that health care/medical insurance is the most important benefit, followed by paid time off and retirement
benefits
11. Herman Aguinis, University of Colorado at Denver
Intangible returns
Relational returns, such as
Recognition and status
Employment security
Challenging work
Learning opportunities
.
12. Herman Aguinis, University of Colorado at Denver
Returns and Their Degree of Dependency on the
Performance Management System
Return
Cost of Living Adjustment
Income Protection
Work/life Focus
Allowances
Relational Returns
Base Pay
Contingent Pay
Short-term Incentives
Long-term Incentives
Degree of Dependency
Low
Low
Moderate
Moderate
Moderate
Moderate
High
High
High
.
Degree of DependencyReturns
14. Herman Aguinis, University of Colorado at Denver
.
• To help top management achieve strategic business objectives
Strategic Purpose
• To furnish valid and useful information for making administrative decisions about
employees
Administrative Purpose
• To inform employees about how they are doing and about the organization's and the
supervisor’s expectations
Informational Purpose
• To allow managers to provide coaching to their employees
Developmental Purpose
• To provide information to be used in workplace planning and allocation of human resources
Organizational maintenance Purpose
• To collect useful information that can be used for various purposes (e.g., test development,
personnel decisions)
Documentation Purpose
15. Herman Aguinis, University of Colorado at Denver
Strategic Purpose
.
By linking the organization's goals with individual goals,
the performance management system reinforces
behaviors consistent with the attainment of
organizational goals.
Onboarding refer to the processes that help the new
employee from being Organizational outsider to
organizational insider.
16. Herman Aguinis, University of Colorado at Denver
Administrative Purpose
To furnish valid and useful information for making administrative decisions
about employees.
Such administrative decisions include-:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Identification of poor performers
Layoffs
Merit
.
17. Herman Aguinis, University of Colorado at Denver
Informational Purpose
“serve as an important communication device.”
First, they inform employees about how they are doing, and provide them with
information on specific areas that may need improvement.
Second, related to the strategic purpose, they provide information regarding the
organisation’s and the supervisor’s expectations, and what aspects of work the
supervisor believes are most important.
Third, How they can improve their performance
.
18. Herman Aguinis, University of Colorado at Denver
Developmental Purpose
Performance feedback/coaching
Identification of individual strengths and weaknesses
Causes of performance deficiencies (which could be due to individual,
group or contextual factors).
Tailor development of individual career path
.
Developmental purpose refers to both short-term and long-term
development aspects.
19. Herman Aguinis, University of Colorado at Denver
Organizational Maintenance Purpose
Workforce planning
Talent inventory, which is information on current resources (e.g., Skills, abilities,
promotional potential and assignment histories of current employees).
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions (e.g., Whether
Employees perform at higher levels after participating in a training programme).
.
20. Herman Aguinis, University of Colorado at Denver
Documentation Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements
.
21. Herman Aguinis, University of Colorado at Denver
Characteristics of an Ideal PM System
.
Strategic congruence Thoroughness Practicality Meaningfulness
Specificity
Identification of
effective and
ineffective
performance
Reliability Validity
Acceptability and
fairness
Inclusiveness Openness Correctability
Standardization Ethicality
22. Herman Aguinis, University of Colorado at Denver
Congruent with organizational strategy
Consistent with organization’s strategy
Aligned with unit and organizational goals
Thorough
• All employees are evaluated
• All major job responsibilities are evaluated
• Evaluations cover performance for entire review
period
• Feedback is given on both positive and negative
performance
23. Herman Aguinis, University of Colorado at Denver
Practical
Available
Easy to use
Acceptable to decision makers
Benefits costs
.
Meaningful
• Standards are important and relevant
• System measures ONLY what employee can control
• Results have consequences Evaluations occur regularly and
at appropriate times
• System provides for continuing skill development of
evaluators
24. Herman Aguinis, University of Colorado at Denver
Specific
Concrete and detailed guidance to employees
what’s expected
how to meet the expectations
.
Identifies effective and ineffective performance
• Distinguish between effective and ineffective
– Behaviors
– Results
• Provide ability to identify employees with
various levels of performance
25. Herman Aguinis, University of Colorado at Denver
Reliable
Consistent
Free of error
Inter-rater reliability
.
Valid
• Relevant (measures what is important)
• Not deficient (doesn’t measure
unimportant facets of job)
• Not contaminated (only measures what
the employee can control)
26. Herman Aguinis, University of Colorado at Denver
Acceptable and Fair
Perception of Distributive Justice
Work performed evaluation received
reward
Perception of Procedural Justice
Fairness of procedures used to:
Determine ratings
Link ratings to rewards
.
27. Herman Aguinis, University of Colorado at Denver
Inclusive
Represents concerns of all involved
When system is created, employees should help
with deciding
What should be measured
How it should be measured
Employee should provide input on performance
prior to evaluation meeting
.
28. Herman Aguinis, University of Colorado at Denver
Open (No Secrets)
Frequent, ongoing evaluations and feedback
2-way communications in appraisal meeting
Clear standards, ongoing communication
Communications are factual, open, honest
.
Ethical
• Supervisor suppresses self-interest
• Supervisor rates only where she has sufficient
information about the performance dimension
• Supervisor respects employee privacy
29. Herman Aguinis, University of Colorado at Denver
Integration with other Human Resources
and Development activities
PM provides information for:
Development of training to meet
organizational needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems
.