Performance Management Unit 3

min/ max settings

Min - current or minimally acceptable performance Max- should be applied from a strategic perspective Min / max setting - Budgeted Maximum incentive opportunity Improvement Statistical definitions Financial ratios and percentages Non-financial ratios Ratings Special cases

7 sins of wages (Management by Exception)

managers have no accurate means for recognizing or rewarding improvement and must therefore manage errors

7 sins of wages (Fixed-Cost Pay)

pay has come to be viewed as an entitlement by employees. employees believe they are not only entitled to their current pay, but also pay increases each year. this view makes payroll a fixed cost which grows at a compound rate due to annual pay increases.

Anchors 4-13

people like a scale that allows for exceeding the goal, so we moved the 10 point scale to the right so that the anchors are actually 4-13. it is possible to earn more than 100 points this way but it is based on the goal being at 100 points. proves to be very reinforcing

7 sins of wages (Performance Based Promotions)

prevents supervisors and managers from directly and immediately paying a subordinate for a job well done, which leads to managers having to give out promotions, creates competition within employees, does not work well because great performers like to woke independently

Performance Matrix

- a point system that enables you to measure any job. it provides a way to combine judgement measures and counts into a single index representative of the total performance that you expect of a person or a group - it evolved from J.L. Riggs objectives matrix (OMAX)

performance scorecard/ matrix feedback

- percent gain over minimum -performance index trend/ incentive payments -measure trends

advantages of the performance scorecard/matrix

- provides internal look-up scales eliminating calculations that could prove difficult for some employees - applied to any type of measure that can be expressed as an ordinal number - converts all measured data to a common conversion scale - percent gain between a min and a max is computed, rather than a simple "percent goal" - each measure is capped at both ends

components of a scorecard/ matrix

1. performance measures -number of measures -sub score cards - diagnostic measures 2. conversion scale -scale end-points -scale intervals -accelerating intervals -alternative conversion scales 3. priority weights 4. min and max -max setting 5. performance scales 6. weighted score 7. performance index

7 performance measurement categories (short term)

1. sales - any mesures designed to directly increasing revenues (short term) 2. expense control - considers all expenses except labor (short term) 3. productivity - output of employees [revenue, volume] (short term) 4. cash flow - collections, inventory, payables (short term)

6 steps of creating a blue print/ socrecard

1. strategic planning group is designated 2. group brainstorms which categories to include on the scorecard and their relative priority weightings 3. category balance is reviewed 4. group then defines specific, quantifiable performance measures for each target category 5. performance scorecard is designed for the above measures (min and max) 6. blueprint is a chart used to guide the cascading of the scorecard measure down through the rest of the organization

7 performance measurement categories (long term)

5. regulatory compliance - compliance with governing professional, industry, or government agencies (long term) 6. costumer service - external, paying customers, and can be evaluated; you can measure it by service timeliness and accuracy (long term) 7. strategic projects - projects which directly drive strategic measures, productivity-related (long term)

How does profit indexed performance pay work?

All employees participate in an incentive plan in which a portion of profits are shared with employees. employee incentive opportunity or profit share is adjusted based on the employee's scorecard performance. organizational net income x employee performance = incentive pay

components of Total Performance System (Performance management only SCORECARD)

a comprehensive performance measurement system that drives strategic objectives down to the small team and individual employee job level will likely improve performance. this is even in the absence of better management practices and incentive pay. (what gets measured is what gets done)

components of Total Performance System (Performance management only)

an organization may train its managers and supervisors in performance management techniques but without a formal measurement system, improvement initiatives may not be aligned with organizations strategy

weighted score

computed by locating the interval in which the actual data falls for each measure. The conversion score at the top of the column is then multiplied by the measure's priority weight to compute the weighted score. score of column x weight

performance scorecard/ matrix

every month, managers distribute the score cards to each of their direct reports. the scorecard enables managers to provide feedback on all of the team and individual measures assigned

7 sins of wages (Entitlement thinking)

fifty years of guaranteed pay has created an entitlement culture in which employees are owed their pay regardless of performance

How do you develop a matrix?

first define the areas of accountability and then pinpoint them as best as you can. this is usually a joint process between the supervisor and the person being measured

components of Total Performance System (Performance pay only)

have implemented various performance pay schemes without accompanying measurement system or a change in conventional management practices

accelerating intervals

last two intervals increase at twice the amount of earlier intervals, incremental improvement becomes more difficult as you approach max and therefore score gains/ incentive payouts should increase at a higher level

7 sins of wages (Management by Perception)

supports lazy management practices that undermines employee effectiveness

conversion scales with stretch intervals

the concept behind the scale is that the 100 intervals will represent plan, or max, while the intervals above 100 represent above max or stretch performance

cascading objectives

the process of communicating and setting goals downwards in the organizations (talks about the multiple levels an organization has then finds what the mission is and goes into the different levels)

weighting alignment

the scorecard measures weight allow the designer to align each scorecard's priorities with the organization's strategic objectives.

7 sins of wages (Corporate Socialism)

unfair to good performers, pays everyone a given pay grade regardless of their personal contributions, leads to mediocre performance

performance index

weighted scores are summed to compute an overall score, or, performance index. Will range from 0% to 100%, unless using a performance scale other than 0-100.

7 sins of wages (Pay for Time)

when you pay for time, you get time. when you pay for results, you get results. detrimental to employee productivity.

weight of zero on a scorecard

will display a measure in the scorecard, but the measure will not affect the overall performance index