Ch 6 - Performance Management

3 reasons Companies fail to manage performance effectively

1) Performance management policies are outdated (e.g., annual performance appraisals). 2) Performance is time-consuming when done well. 3) Performance appraisals are too narrow and measure a limited number of relevant elements - Criterion deficiency occurs when performance measures omit relevant aspects of performance. - Criterion contamination occurs when performance measures are biased by containing irrelevant aspects of performance (e.g., failing to consider performance constraints that are out of an employees control such as mechanical failures).

Types of Rating Errors

1) Similar-to-me bias - Raters tend to give higher evaluations to people they think are similar to themselves. 2) Contrast error: Rater compares individual not against objective standard but against other employees. 3) Distributional error: Rater uses only part of rating scale. - Leniency: Reviewer rates everyone near top. - Strictness: Reviewer favors lower rankings. - Central tendency: Reviewer rates everyone in middle of scale (or average in performance). 4) Rater bias: Rater lets their opinion of one quality color their opinion of others. - Halo error: Bias causes favorable ratings. - Horns error: Bias causes negative ratings.

Step 1: Define Performance: Expectations and Setting Goals

Benefits of Setting goals: •Can lead to happier workers who achieve more. •Provide focus. •Enhance productivity. •Bolster self-esteem. •Increase commitment. Two major types of goals include: 1) Performance goals target a specific end result (e.g., achieving one's sales quota). 2) Learning goals involve enhancing your knowledge or skill (e.g., taking an online tutorial to enhance one's product knowledge). •Focusing on learning goals can facilitate the achievement of performance goals (i.e., development declarative knowledge about facts and information boosts procedural knowledge utilized to actually execute work-related tasks.)

Feedback Do's and Don'ts

DON'TS Don't use feedback to punish, embarrass, or put someone down. Don't provide feedback that is irrelevant to the person's work. Don't provide feedback too late to do any good. Don't provide feedback about something beyond the individual's control. Don't provide feedback that is overly complex or difficult to understand. DOS Keep feedback relevant by relating it to existing goals. Deliver feedback as close as possible to the time the behavior was performed. Provide specific and descriptive feedback. Focus the feedback on things employees can control. Be honest, developmental, and constructive.

Four-step process for establishing goals.

Four-step process for establishing goals. 1.Set goals. 2.Promote goal attainment. 3.Provide support, feedback. 4.Create action plans. Specific. Measurable. Attainable. Results oriented. Time bound

Reinforcement Consequences: The Power of Reinforcement Schedules

Intermittent reinforcement. •Involves reinforcement of some but not all instances. •Can vary the ratio and interval. •Works best with variable ratio and variable interval. Continuous reinforcement. •Every instance of a target behavior reinforced. •Great when learning a new skill. •Can quickly lose its effect.

Effective Performance Management System

Managing performance successfully is a powerful means for improving individual, group, and organizational effectiveness. Step 1) Define Performance - Set goals & communicate performance expectations Step 2) Monitor & Evaluate Performance - Measure & evaluate progress & outcomes Step 3) Review Performance - Deliver feedback and coaching Step 4) Provide Consequences - Administer valued rewards and appropriate punishments

Pay for Performance

Pay for performance is process the of monetary incentives linking at least some portion of one's pay directly to results or accomplishments. - Pay for performance plans include merit pay, bonuses, and profit sharing. - The above incentives are designed to motivate employees to work harder and/or smarter. Companies with the best pay for performance results: - Paid top performers substantially higher than the other employees. - Reduced "gaming" of the system by increasing transparency. - Utilized multiple measures of performance. - Calibrated performance measures to assure accuracy and consistency.

Performance management

Performance management is a set of processes and managerial behaviors that involve defining, monitoring, measuring, evaluating, and providing consequences for performance expectations.

Roles of Managers & Leaders in Feedback Systems

Senior managers can enhance the feedback system by: - Seeking feedback from others to create an open and honest environment. - Separating feedback from the performance review process. - Creating a mechanism to collect feedback anonymously.

Sources of Feedback

Sources of feedback include: - Others- such as supervisors, peers, lower-level employees, and third parties such as customers and suppliers. - Task- provides feedback about one is doing in completing it. - Self - though such feedback tends to be self-serving and biased. The others and self can be used as part of 360-degree feedback programs. - Such programs are based on the assumptions that (a) different sources see performance differently and (b) multiple ratings reduce rating bias. - Ratings from different sources do not correlate highly. - Managers tend to downwardly correct overestimated self ratings after receiving critical feedback from other sources.

Rewards and Consequences

Three general criteria are used for distributing rewards: 1) Results: Tangible outcomes such as quantity, quality, and individual, group, or organizational performance. These are commonly some type of accounting measure—sales, profit, or error rate. Increasingly, these may also include customer satisfaction. 2) Behavior and actions: Teamwork, cooperation, risk taking, and creativity. 3) Nonperformance considerations: Customary or contractual, where the type of job, nature of the work, equity, tenure, level in hierarchy, etc., are rewarded. Total and alternative rewards: Compensation. Benefits. Professional growth. Personal growth. Attention and recognition. Advancement.

Step 4: Rewards and Consequences

Types of Rewards Extrinsic rewards: Come from the environment (e.g., pay) Intrinsic rewards: are self-granted; psychic rewards (e.g., feeling of accomplishment). Types of Rewards - Distribution Criteria - Desired Outcomes

Step 3: Reviewing Performance and the Importance of Feedback and Coaching

Why is feedback important? - It can boost performance. - It is provided less often and less well than employees prefer. - It is underutilized due to fears of straining work relationships, time constraints, lack of confidence in providing effective feedback, a lack of consequences for not providing feedback. The two primary functions of feedback are: - Instructional-Provides information about how performance compares to the goal that has been set. - Motivational-Allows modification of behavior and efforts to enhance goal achievement. •Hard data such as units sold, days absent, dollars saved, projects completed, customers satisfied, and quality rejects are all candidates for effective feedback programs.

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Effective performance management is associated with:

•Higher profitability. •Higher productivity. •Higher employee engagement. •Higher customer service. •Lower turnover.

The three major functions of performance management are:

•Make employee-related decisions (e.g., pay, promotions, etc.). •Guide employee development (e.g., provision of feedback, performance improvement plans). •Send strong signals to employees regarding desired behaviors.

Step 2: Monitor and Evaluate Performance

•Monitoring performance is measuring, tracking, or otherwise verifying progress and ultimate performance. - How goals are measured should be consistent with the nature of the goal itself (e.g. behavioral, task oriented). - Managers need to monitor and evaluate both progress toward the final goal and the ultimate achievement of the goal. •This stage should be used to identity problems, recognizes successes, and find opportunities to enhance performance.

Impact of rater errors?

•Rater errors can lead to biases and undermine performance management systems.

Factors affecting perceptions of feedback

•Self-serving bias (see Chapter 4 Powerpoint presentation). •Fundamental attribution error (see Chapter 4 Powerpoint presentation). •Beyond attributions, the following also can influence perceptions of feedback and whether the feedback is rejected or discounted: - Accuracy: The feedback is inaccurate if the PM system measures the wrong things or measures the right things wrong. - Credibility of the source: Feedback from top performers or from trusted people will be given more weight. - Fairness of the system: Feedback will be discounted if you perceive the process or outcomes as unfair. - Performance reward-expectancies: Can be fostered through ongoing and open feedback. - Reasonableness of the standards: Feedback about unattainable goals would not be valued.

Contingent reinforcement

•The term "contingent" means there is a systematic if-then linkage between the target behavior and the consequence. •A behavior is strengthened when it increases in frequency and weakened when it decreases in frequency. 4 consequences associated with operant conditioning that can be used to control behavior. 1) Positive reinforcement: the process of strengthening a behavior by contingently presenting something pleasing. 2) Negative reinforcement: strengthens a desired behavior by contingently withdrawing something displeasing. 3) Punishment: the process of weakening behavior through either the contingent presentation of something displeasing or the contingent withdrawal of something positive. 4) Extinction: weakening a behavior by ignoring it or making sure it is not reinforced.

Reinforcement and Consequences

•Thorndike formulated his famous law of effect, which says behavior with favorable consequences tends to be repeated, while behavior with unfavorable consequences tends to disappear. •Prior to Thorndike's work, behavior was thought to be a product of inborn instincts. •The law of effect builds upon determinism, the scientific belief that outcomes derive from a discernable cause (i.e., cause-and-effect relationships between events can be established).

Reasons why Rewards May Fail

•Too much emphasis is placed on monetary rewards. •Overtime rewards are seen as entitlements. •They foster counterproductive behaviors. •A lag occurs between performance and reward. •Reward structures are not tailored to goals, tasks. •They have a short half-life. •Organizational policies and practices are misaligned