Perfrmance Management
Perfrmance Management
Perfrmance Management
Management
Subhadeep Mukherjee
Assistant Professor
Department of Management Studies
National Institute of Management Studies
Performance Management
and Reward Systems
in Context
Overview
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
Definition of
Performance Management
(PM)
Definition of PM
1. Continuous Process of
Identifying
Measuring
Developing
with
Performance Management
• Strategic business considerations
• Driven by line manager
• Ongoing feedback
So employee can improve
performance
PM is NOT performance appraisal
Performance Appraisal
• Driven by HR
• Assesses employee
Strengths &
Weaknesses
• Once a year
• Lacks ongoing feedback
Contributions of
Performance Management
Contributions of Performance Management
For Employees
Clarify definitions of
job
success criteria
Increase motivation to perform
Increase self-esteem
Enhance self-insight and
development
Contributions of Performance Management
For Managers
Communicate supervisors’ views of
performance more clearly
Managers gain insight about
subordinates
Better and more timely
differentiation between good and
poor performers
Employees become more competent
Contributions of Performance Management
For Organization/HR Function
Clarify organizational goals
Facilitate organizational change
Fairer, more appropriate
administrative actions
Better protection from lawsuits
Disadvantages/Dangers of
Poorly-implemented
PM Systems
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
Disadvantages/Dangers of Poorly-implemented
PM Systems
For Managers
Increased turnover
Decreased motivation to perform
Unjustified demands on managers’
resources
Varying and unfair standards and
ratings
Disadvantages/Dangers of Poorly-implemented
PM Systems
For Organization
Wasted time and money
Unclear ratings system
Emerging biases
Increased risk of litigation
Reward Systems
Reward Systems
Definition
Set of mechanisms for distributing
Tangible returns
and
Intangible or relational returns
As part of an employment
relationship
Reward Systems
Tangible returns
Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and long-
term)
Reward Systems
Tangible returns (continued)
Benefits, such as
Income Protection
Allowances
Work/life focus
Reward Systems
Intangible returns
Relational returns, such as
Recognition and status
Employment security
Challenging work
Learning opportunities
Returns and
Their Degrees of Dependency
on the
Performance Management System
Returns with Low Dependency
on the
Performance Management System
Work/Life Focus
Allowances
Relational Returns
Base Pay
Returns with High Dependency
on the
Performance Management System
Contingent Pay
Short-term Incentives
Long-term Incentives
Purposes of PM Systems
Purposes of PM Systems:
Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentational
Strategic Purpose
Link individual goals with
organization’s goals
Communicate most crucial
business strategic initiatives
Administrative Purpose
Provide information for making
decisions re:
Salary adjustments
Promotions
Retention or termination
Recognition of individual
performance
Layoffs
Informational Purpose
Communicate to Employees:
Expectations
What is important
How to improve
Developmental Purpose
Performance feedback/coaching
Identification of individual
strengths and weaknesses
Causes of performance
deficiencies
Tailor development of individual
career path
Organizational Maintenance
Purpose
Plan effective workforce
Assess future training needs
Evaluate performance at
organizational level
Evaluate effectiveness of HR
interventions
Documentational Purpose
Validate selection instruments
Document administrative
decisions
Help meet legal requirements
An Ideal PM System:
14 Characteristics
1. Congruent with organizational
strategy
2. Thorough
3. Practical
4. Meaningful
5. Specific
6. Identifies effective/ ineffective
performance
7. Reliable
An Ideal PM System:
14 Characteristics (continued)
8. Valid
9. Acceptable and Fair
10. Inclusive
11. Open (No Secrets)
12. Correctable
13. Standardized
14. Ethical
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
Practical
Available
Easy to use
Acceptable to decision makers
Benefits outweigh 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
Specific
Consistent
Free of error
Inter-rater reliability
Valid