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PERFORMANCE MANAGEMENT

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PERFORMANCE
MANAGEMENT

FOU RTH EDITION

Herman Aguinis
School of Business

George Washington University

CHICAGO
BUS I NES S PRESS

CHlCAGO
I USit4tlS

© 2019 CHICAGO BUSINESS PRESS

PERFORMANCE MANAGEMENT, FOURTH EDITION

ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may
be reproduced, transmitted, sto red o r used in any form or by any means gra phic,
electronic, o r mechanical, including but not limited to pho tocopying, record ing,
scanning, digitizing, ta ping, web distribution, information networks, or infom1ation
storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976
United States Copyright Act, without the prior written permission of the publisher.

For product info rmation o r assistance, visit www.chicagobusinesspress.com

Print Ed ition ISBN-13: 978-0-9988140-8-7
eBook ISBN-13: 978-0-9988140-9-4

BRIEF CONTENTS

Part I STRATEGIC AND GENERAL CONSIDERATIONS 1
1 Performance Management in Context 3
2 Performance Management Process 41
3 Performance Management and Strategic Planning 67

Part II SYSTEM IMPLEMENTATION 97
4 Defining Performance and Choosing a Measuremen t Approach 99
5 Measuring Results and Beh aviors 123
6 Performance Analytics 153
7 Rolling Out the Performance Management System 197

Part Ill EMPLOYEE AND LEADERSH IP DEVELOPMENT 223
8 Performance Management and Employee Developmen t 225
9 Performance Management Leadership 257

Part IV REWARD SYSTEMS, LEGAL ISSUES, AND TEAM PERFORMANCE
MANAGEMENT 299
10 Performance Management, Rewards, and the Law 301
11 Team Performance Management 343

Name and Company Index 371
Subjed Index 375

v

DEDICATION

vi

To my daughters Hannah Miriam and Naomi Rebecca, and my wife Heidi, whom I love
and admire and are my superb coaches on how to become a better father and husband

CONTENTS

Part I

Preface and Introduction xiii
Acknowledgments xxiii
About the Author xxiv

STRATEGIC AND GENERAL CONSIDERATIONS 1

1 Performance Management in Context 3
1-1 Definition of Performance Management 4
1-2 Purposes of Performance Management Systems 6

1-2-1 Stra tegic P urpose 6
1-2-2 Administrative Purpose 6
1-2-3 Informationa l P urpose 7
1-2-4 Developmental Purp ose 7
1-2-5 Organizational Maintenance Purpose 8
1-2-6 Documentation Purpose 8

1-3 The Performance Management Contribution 10
1-4 When Performance Management Breaks Down: Dangers of Poorly

Implemented Systems 14
1-4-1 Perfo rmance Ratings: The Canary in the Coal Mine 16

1-5 Characteristics of an Ideal Performance Management System 18
1-6 Integration with Other H uman Resources and Development Activities 23
1-7 The Future is Now: Performance Management and the Nature of Work

and Organizations Today 24
Summary points 26
Exercise 1-1Idea/ Versus Actual Perjormn11ce Management System 29
Exercise 1-2 Distinguishing Perjorma11ce Management Systems from Performance Appraisal Systems 31
Case Study 1-1 Perjormn11ce Manngemmt at Network Solutions, Inc. 34
Case Study 1-2 Perjormn11ce Management at a CRB, Inc. 36
Endnotes 37

2 Performance Management Process 41
2-1 Prerequisites 43

2-1-1 Stra tegic P lanning 43
2-1-2 Work Oob) Analysis 43

2-2 Performance Planning 52
2-2-1 Results 52

vii

viii Contents

2-2-2 Behaviors 52
2-2-3 Development Plan 53

2-3 Performance Execution 54
2-4 Performance Assessment 56
2-5 Performance Review 57
Summary points 59
Exercise 2-1 Work (job) Analysis 61
Exercise 2-2 Peiformance Review Meeting 62
Case Study 2-1 Disrupted Links in the Performance Management Process at Omega, Inc. 63
Case Study 2-2 Performance Management at KS Cleaners 64
Endnotes 65

3 Performance Management and Strategic Planning 67
3-1 Definition and Purposes of Strategic Planning 68
3-2 Process of Linking Performance Management

to the Strategic Plan 69
3-3 Strategic Planning Process 73

3-3-1 Critical Role of the HR Function 73
3-3-2 External and Internal Environmenta l (i.e., SWOT} Analysis 75
3-3-3 Mission 78
3-3-4 Vision 81
3-3-5 Objectives 83
3-3-6 Stra tegies 84
3-3-7 Developing Strategic Plans at the Unit Level 85
3-3-8 Job Descriptions 86

3-4 Building Support and Answering the “What’s in it for me” Question 88
Summary points 90
Exercise 3-1 Linking brdividual with Unit and Organizational Priorities 92
Exercise 3-2 Building Support for a Performance Management System at the Gap, Inc. 92
Case Study 3-1 Evaluating Vision and Mission Statements at PepsiCo 94
Case Study 3-2 Linking Peiformance Management to Strategy at Procter & Gamble 95
Endnotes 96

Part II SYSTEM IMPLEMENTATION 97

4 Defining Performance and Choosing a Measurement Approach 99
4-1 Defining Performance: Behaviors and Results 100
4-2 Determinants of Performance: Abilities and Other Traits, Knowledge and Skills,

and Context 101
4 -2-1 Abilities and Other Traits, and Knowledge and Skills 103
4 -2-2 Context 104
4 -2-3 Implications for Addressing and Anticipating Performance Problems 105

4-3 Performance Dimensions 106
4-3-1 Task and Contextual Performan ce 106
4-3-2 Counterproductive Performance 109
4-3-3 Adaptive Performance 110

4-4 Approaches to Measuring Performance 112
4-4-1 Behavior Approach 112
4-4-2 Results Approach 113

Summary points 116
Exercise4-1 Do You Hnve Wlmt it Takes? Assessing your Own Extreme Ownership 117
Exercise 4-2 Role Piny: Diagnosing Causes of Poor Performance 118

Contents ix

Case Study 4-1 Differentiating Task from Contextual Performance nt Plmrma Co. Company 119
Case Study 4-2 Choosing n Performance Measurement Apprond1 nt Show Me the Money 119
Endnotes 121

5 Measuring Results and Behaviors 123
5-1 Measuring Results 124

5-1-1 Determining Accountabilities 125
5-1-2 Determining Objectives 126
5-1-3 Determining Performance Standa rds 128

5-2 Measuring Behaviors 129
5-2-1 Comparative Systems 132
5-2-2 Absolute Systems 138

5-3 The Role of Context 144
Summary points 145
Exercise 5-1 Measuring Competencies nt Midwestern United States Department of Transporta tion 147
Exercise 5-2 Creating Behnviornlly Anchored Rating Scales (BARS) for Evaluating Business Student

Performance in Team Projects 148
Case Study 5-1 Accountabilities, Objectives, nnd Standards at Disney 149
Case Study 5-2 Evaluating Objectives nnd Standards at Disney 150
Endnotes 151

6 Performance Analytics 153
6-1 Useful Components of Appraisal Forms 155
6-2 Desirable Features of Appraisal Forms 165
6-3 Determining Overall Rating 168
6-4 Appraisal Period and Number of Formal Meetings 172
6-5 Performance Touch points: Sources of Performance Data 175

6-5-1 Supervisors 175
6-5-2 Peers 176
6-5-3 Direct Reports 177
6-5-4 Self 178
6-5-5 Customers 179
6-5-6 Employee Performance Monitoring and Big Data 179
6-5-7 Disagreement Across Sources of Performance Data: Is This Really a P roblem? 182

6-6 Understanding Intentional Rating Distortion: A Model of Rater Motivation 182
Summary points 186
Exercise 6-1 Choosing a Performance Appraisal Form Vendor 189
Exercise 6-2 Employee Performance Monitoring at Trtmgo: Good or Bnd /den? 190
Case Study 6-1 Judgmental and Medmnica/ Methods of Assigning Overn/1 Performance

Score nt The Daily Planet 192
Case Study 6-2 Minimizing Distortions in Performance Datn at Expert Engineering, Inc. 193
Endnotes 194

x Con tents

7 Rolling Out the Perfo rman ce Management System 197
7-1 Communication Plan 198

7-1-1 Dea ling with Cognitive Biases and Resistance to Change 201
7-2 Appeals Process 203
7-3 Training Programs for M inimizing Unintentional Rating Errors 206

7-3-1 Rater Erro r Training 206
7-3-2 Frame of Reference Training 208
7-3-3 Behavioral Observation Training 210

7-4 Pilot Testing 211
7-5 Ongoing Monitoring and Evalu ation 212
Su mmary points 216
Exercise 7-1 Training Raters at Big Quality Care Center 218
Exercise 7-2 Proposing an Appeals Process for Nursing Homes 219
Case Study 7-1Implementing a Performance Mnnngement Communication Plan nt Accounting, Inc. 220
Case Study 7-2 Implementing an Appeals Process at Accounting, Inc. 220
Endnotes 221

Part Ill EMPLOYEE AND LEADERSHIP DEVELOPMENT 223

8 Pe rformance Management an d Employee Development 225
8-1 Personal Development Plans 226

8-1-1 Development Plan Objectives 228
8-1-2 Content o f Development Plan 229
8-1-3 Developmental Activities 231

8-2 Direct Supervisor’ s Role 234
8-3 Multisource Feedback Systems 238

8 -3-1 Benefits of Multisource Feedback Systems 244
8-3-2 Risks, Contingencies, a nd Pote ntial P itfalls in Implemen ting Multisource Feedback

Systems 245
8 -3-3 Characteristics of a Good M u ltisource Feedback System 246

Su mmary points 248
Exercise 8-1 Making the Case for n Top-Notch Multisource Feedbnck System Demo 251
Exercise 8-2 Obtnining Multisource Feedbnck on Your Own Performance 251
Case Study 8-1 Content ofn Personnl Developmental Plnn at Brainstorm, Inc. 252
Case Study 8-2Improving a Personal Development Plnn nt Brainstorm, Inc.-Pnrt ll 253
Endnotes 254

9 Pe rformance Management Leadership 257
9-1 Coaching 258
9-2 Coaching S tyles 263
9-3 Coaching Process 264

9-3-1 Observation and Documentation of Developmen tal Beh aviors and Results 266
9-3-2 Giving Feedback 269

9-4 Coaching, Development, and Performance Review Meetings 282
Summary points 287

Exercise 9-1 What Is Your Coaching Style? 291
Exercise 9-2 Dealing with Defensiveness 293
Case Study 9-1 Was Robert En ton a Good Performance Management Lender? 294

Contents xi

Case Study 9-2 Performnnce Manngement Leadership at Henry’s Commercial Sales and Leasing 295
Endnotes 296

Part IV REWARD SYSTEMS, LEGAL ISSUES, AND TEAM PERFORMANCE
MANAGEMENT 299

10 Pe rformance Management, Rewards, and the Law 301
10-1 Definition o f Reward Systems 302

10-1-1 Base Pay 302
10-1-2 Cost-of-Living Adjustmen ts a nd Contingen t Pay 303
10-1-3 Sh o rt-Term Incentives 303
10-1-4 long-Term Incen tives 303
10-1-5 Income Pro tection 304
10-1-6 Work-Life Focus 305
10-1-7 Allowances 305
10-1-8 Relationa l (Intangible) Returns 306

10-2 Traditional and Contingent Pay Plans 307
10-3 Reasons for Introducing Contingent Pay Plans 308
10-4 Possible Problems Associated with Contingent Pay Plans 310
10-5 Selecting a Contingent Pay Plan 313
10-6 Putting Pay in Context 316

10-6-1 Turning Recognition and O the r Relation al Incen tives into Rewa rds 318
10-7 Performance Management and the Law 321
10-8 Some Legal Principles Affecting Performance Management 322
10-9 Laws Aff ecting Performance Management 325
Summary points 328
Exercise 10-1 Proposing a Contingent Pay Play for SOM Architectural Firm 332
Exercise 10-2 Performance Management Mock Trial 332
Case Study 10-1 Contingency Pay Plan at Altenergy LLC 337
Case Study 10-2 Possible Illegal Discrimination at Tractors, Inc. 338
Endnotes 339

11 Team Performance Management 343
11-1 Definition and Importance of Teams 344
11-2 Types of Teams and Implications for Team Performance Management 346

11-2-1 Virtual Teams 348
11-3 Purposes and Challenges of Team Performance Management 350
11-4 Including Team Performance in the Performance Management System 351

11-4-1 Prerequisites 353
11-4-2 Perfom1an ce Planning 354
11-4-3 Performan ce Execu tion 355
11-4-4 Performan ce Assessment 357
11-4-5 Performan ce Review 358

xii Contents

11-5 Rewarding Team Performance 360
Summary points 361
Exercise 11-1 Team Performance Management at Bose 363
Exercise 11-2 Team Performance Review 364
Case Study 11-1 Tenm Performance Mnnngement at American Electric nnd Gas 366
Case Study 11-2 Tenm-Based Rewards for tire Stnte of Georgia 367
Endnotes 368

Name and Company Index 371
Subject Index 375

PREFACE AND INTRODUCTION

In today’s globalized world, it is relatively easy to gain access to the competi-
tion’s technology and products. Thanks to the Internet and the accompanying
high speed of communications, technological and product differentiation is no
longer a key competitive advantage in most ind ustries. For example, most banks
offer the same types of products (e.g., different types of savings accounts and
investment opportunities). If a particular bank decides to offer a new product
or service, such as an improved mobile phone app, it will not be long until the
competitors offer precisely the same product. As noted by James Kelley, former
performance management project leader at Idaho Power, “Technology is a facilita-
tor, but not a guarantor, of effectiveness or efficiency of a company’s workforce.” 1

So, what makes some businesses more successful than others? What is today’s
key competitive advantage? The answer is: people. Organizations with engaged
and talented employees offering outstanding service to customers pull ahead
of the competition, even if the products offered are similar to those offered by
the competitors. This is a key organizational resource that many label “human
capital” or “talent” and gives organizations an advantage over the competi-
tion? Customers want to get the right answer a t the right time and they want
to receive their products or services promptly and accurately. Having the right
human capital can make these things happen. Only human capital can produce
a sustainable competitive advantage. And performance management systems
are the key tools that can be used to transform people’s talent and motivation
into a strategic business advantage.

Unfortunately, performance management is not living up to its promise
in terms of turning human capital into a source of competitive ad vantage. For
example, consider Mercer’s 2013 Global Performance Management Survey,
which gathered data from more than 1,050 performance management leaders
representing 53 countries. These organizations varied in size from about 1,000
to more than 10,000, and represented several types of industries (e.g., for-profit,
nonprofit, government) . A very troubling result was that only 3 percent reported
that their performance management system delivers exceptional value. Also, many
aspects of organizations’ performance management approach were evaluated as
ineffective.3 So, there is big disconnect between the potential that performance

1Generating buzz: Idaho Power t akes on performance management to prepare for workforce aging. (2006,
Ju ne). Power Engineering. Retrieved January 3, 2018, f rom httpJiwww.powergenworldwide .com/index/
display/articledisplay/258477/artides/power· engineering/volume· 1 1

‘Cascio, W. F., & Aguinis, H. (2019). Applied psychology in talent management (8th ed.). Thousand Oaks, CA: Sage.
12013 Global Performance Management Survey. Mercer. Retrieved January 3, 2018, from https:/lwww.mercer
.com/contentldam/mercer/attachments/globai/Talent/Assess· BrochurePeriMgmt.pdf

xiii

xiv Preface and In troducti on

management has in terms of turning human capital into an organization’s source
of competitive advantage and the actual role of performance management in most
organizations. As noted in Mercer’s report, “Establishing an effective employee
performance management system is a major challenge for most organizations,
making performance management a perennial hot topic .. . companies around
the world are regularly in search of best practices and new solutions for this core
process.” And hence, the need for this book.

I am delighted to offer this fourth edition in partnership with Chicago Busi-
ness Press. You will find this edition m uch updated and improved in terms of
content, as well as easier to read because of its improved and more user-friend ly
layout and design. This fourth edition includes the following ten important
changes. More detailed information on each of these issues is provided in the
section titled “Improvements in this Fourth Ed ition.”

• Each of the chapters includes updated content and material, new sources,
and new sections (but the book is similarly concise as the previous
edition) .

• This edition highlights the role of context within which performance
management takes place.

• This fourth edition describes the key “strategic partner” and “internal
consultant” role played by the HR function in the design and
implementation of the performance management system.

• There is an emphasis on the changing nature of work and organizations,
including globalization, technology and Big Data, team work, and
demographics (e.g., generational differences), and how these changes affect
the design and implementation of performance management systems.

• This fourth edition emphasizes that knowledge generated regarding
performance management is essentially multidisciplinary.

• This edition emphasizes the important interplay between science and
practice.

• This edition describes the technical aspects of implementing a
performance management system in detail, and, in addition, emphasizes
the key role that interpersonal and social dynamics play in the process.

• This edition includes new “Company Spotlights” boxes in each chapter
featuring The Gap, Sears, Yahoo, Adobe, United States Department of
Defense, Discover, Google, Airbnb, Sprint, Xerox, Deloitte, GE, and many
others.

• This fourth edition includes two new hands-on “Exercises” a t the end of
each chapter- for a total of 22.

• This new edition also includes two case s tudies a t the end of each chapter,
also for a total of 22.

SOME UNIQU E FEATURES OF THIS BOOK
Performance management is a continuous process of identifying, measuring, and
developing the performance of individuals and teams and aligning their perfor-
mance with the strategic goals of the organization. Performance management is
critical to small and large, for-profit and not-for-profit, and domestic and global
organizations, and to all industries. In fact, the performance management model

Preface and Introduction xv

and processes described in this book have been used to create systems to manage
the performance of students in colleges and universities4 and employees in small
and medium enterprises (SMEs) .5 After all, the performance of an organization
depends on the performance of its people, regardless of the organization’s size,
purpose, and other characteristics. As noted by former Siemens CEO Heinrich von
Pierer, “Whether a company measures its workforce in hundreds or hundreds of
thousands, its success relies solely on individual performance.” As an example in
the not-for-profit sector, Youth Villages, a private child welfare provider operat-
ing in 12 states and the District of Columbia, has gained national recognition for
its evidence-based performance management system. By tracking performance
data on children and families, both during and after leaving care, Youth Villages
is able to better understand its program outcomes and effectiveness in delivering
social value to the community. The information collected from the performance
management system is also used to manage employee performance, assess the
achievement of strategic goals, and upper-management decision making. The
performance management system provides a detailed description of practices to
help guide implementation, the metrics used to quantify performance, and how
employees are scored on whether they adhere to those metrics.6

Unfortunately, few organizations use their existing performance management
systems in effective ways. Performance management is usually vilified as an “HR
department requirement.” In many organizations, performance management
means that managers must comply with their HR department’s request and fill
out tedious, and often useless, evaluation forms. These evaluation forms are often
completed only because it is required by the “HR cops.” Unfortunately, the only
tangible consequence of the evaluation process is that managers have to spend
time away from their “real” job duties.

In the latest wave of criticisms of performance management, performance
ratings are now the target. Also, there is quite a bit of popular media and busi-
ness press hype about the “demise” of performance evaluation, performance
measurement, and performance reviews. Currently, many companies, includ-
ing GE, Microsoft, Google, Yahoo, Adobe, and Accenture, are going through
a similar process of transitioning from a performance appraisal (i.e., dreaded
once-a-year evaluation and review) to a performance management system (i.e.,
ongoing evaluation and feedback). However, contrary to the way this trend is
usually described in business publications and the media with such headlines as
“Performance Evaluation is Dead” and “The End of Performance Reviews,” the
evaluation of performance is not going away. In fact, performance assessment
and review are becoming a normal, routine, built-in, and ever-present aspect of
work in twenty-first-century organizations. As described in this text since its first
edition published in 2008, performance management systems play a critical role
and serve important purposes.

4 Gillespie, T. l., & Parry, R. 0. (2009). Students as employees: Applying periormance management principles
in the management classroom. Journal of Management Education, 33, 553- 576.
5 Na·Nan, K., Chaiprasit, K., & Pukkeeree, P. (2017). Performance management in SME sect ors
and high-impact sectors in Thailand: Mixed method research. International Journal of Engineering Business
Management. 9, 1-8.
‘ Kamensky, J. M . (2016). Tennessee chi ld-services provider’s performance-management system offers bal anced
scorecard of metrics. Government Technology. Retrieved January 3, 20 18, f rom httpJ/www.govtech.com/

xvi Preface and Introduction

So, it is not the case that companies are abandoning ratings and performance
measurement and eval uation. They are actually implementing performance
systems more clea rly aligned with best practices, as described in this text, that
involve a constant and ongoing evaluation of performance! The companies men-
tioned above and many others in all industries, including government, such as
the United States National Security Agency (NSA), have eliminated the labels
“performance evaluation,” “performance review,” and even “performance man-
agement.” Instead, they use labels s uch as “performance achievement,” “talent
evaluation and advancement,” “check-ins,” and “employee development.” But
they still implement performance management, but use new, more fashionable,
and perhaps less threatening labels. It has been extremely gratifying to see the
transition of so many companies from performance appraisal to performance
management, as has been described since the first edition of this text more than
10 years ago. To sum this up by paraphrasing Mark Twain, we can say with cer-
tainty that the death of performance management has been vastly exaggerated .

This book is about the design and implementation of effective and successful
performance management systems. In other words, it focuses on research-based
findings and up-to-date applications that help increase an organization’s talent
pool. Performance management is ongoing and cyclical; however, for pedagogical
reasons, the book needs to follow a linear structure. Because performance obser-
vation, evaluation, and improvement are ongoing processes, some concepts and
practices may be introduced early in a cursory manner, but receive more detailed
treatment in later sections. In addition, many issues such as training of raters
and employee development will be d iscussed in multiple chapters. So, you will
see that several chapters may refer to similar issues. When this happens, content
included in more than one chapter will be cross-referenced.

Finally, this book focuses on best practices and describes the necessary s teps
to create a top-notch performance management system. As a result of practical
constraints and Jack of knowledge about system des ign and implementation,
many organizations cut corners and do not have systems that follow best practices.
Environmental and political issues (e.g., goals of raters may not be aligned with
goals of the organization) also play a role. Because the way in which systems are
implemented in practice is often not close to the ideal system, the book includes
numerous examples from actual organizations to illustrate how systems are
implemented, given actual situational constraints.

IMPROVEMENTS IN THIS FOURTH EDITION
As mentioned earlier, this edition includes ten important changes thro ughout
the book. First, this edition includes important updates and additional informa-
tion. In preparation for revising and updating this book, I gathered more than
2,000 potentially relevant articles and books. More than 250 of those sources are
now included in this edition. These sources have been published since the third
edition of the book went into production. This vast literature demonstrates an
increased interest in performance management on the part of both academics
and practitioners.

Second, there is an emphasis on the role of the context within which perfor-
mance management takes place. Performance management does not operate in
a vacuum. Rather, it takes place within a particular organizational context, and

Pr ef ace a n d Introduction xvii

organizations have a particular history, and unwritten norms about what is valued
and what is not (i.e., an organization’s culture). Also, they have unwritten norms
about communication, trust, interpersonal relations, and many other factors that
influence daily activities. Thus, for example, implementing an upward feedback
system may be effective in some organizations, b ut not in others (Chapter 8) . As
a second illustration, some organizations may have a culture that emphasizes
results more than behaviors which, in turn, would d ictate that the performance
management system also emphasize results; instead, other organizations may
place an emphasis on long-term goals, which would dictate that performance be
measured by emphasizing employee behaviors, rather than results (Chapter 4) .
Also, we need to understand the contextual reasons w hy, sometimes, performance
ratings may not be accurate-particularly if there is no accountability fo r raters to
provide valid assessments (Chapter 6). As yet another exam ple, cultural factors
affect what sources are used for performance information. In a country such as
Jordan, whose culture determines more hierarchical organizational structures,
the almost exclusive source of performance information is supervisors, whereas
employees and their peers almost have no input; this situation is different in coun-
tries with less hierarchical cultures in w hich not only performance information is
collected from peers, but also supervisors are rated by their direct reports (Chapter
6). To emphasize the role of national culture, this edition describes examples and
research conducted in o rganizations in the United States and Canada, but also
Jordan, Japan, China, Turkey, Eritrea, Germany, Spain, South Korea, Mexico,
Australia, the United Kingdom, Brazil, Ind ia, and others.

Third, this edition describes two key roles played by the HR function: stra-
tegic partner and internal consultant. Regarding the first role, the HR function
is unfortunately often vilified as being merely opera tional and not able to think
o r act strategically. Well, over the past two decades or so, an entire new field of
research has emerged called “strategic h uman resource management.” Strategic
human resource management is about planning and implementing HR policies
and activities with the goal of enabling an organization to achieve its strategic
goals.7 Performance management is an ideal vehicle to demonstrate the strategic
role of the HR ftmction because it allows for explicit and dear linkages between
an organization’s mission, vision, and objectives, and individ ual and team per-
formance. By helping implement a successful performance management system,
the HR function can get a “seat at the table” of the top management team. In fact,
the few CEOs with HR background, incl uding Samuel R. Allen at John Deere,
James C. Smith at Thomson Reuters, Steven L. Newman at Transocean, and Mary
Barra at General Motors have been able to serve as strategic partners, w hich is,
in large part, w hat propelled their trajectory from an HR role to the very top of
their organizations. Second, the HR function serves as an internal consultant
for all o rganizational members participating in the performance management
system. For example, it offers ad vice on how to measure performance, resources
in the form of training opportunities, and can also lead the strategic planning
process. So, although the HR func tion is certainly not the “owner” of the per-
formance management system, it adds value by playing a key role in its design
and implementation.

‘Wright. P.M., & Ulrich, M.D. (201 7). A road well traveled: The past, present, and future journey of stra tegic
human resource management. Annual Review of Organizational Behavior and Organiza tional Psychology.
4, 4 5-65.

xviii Pref ace an d In t roduction

Fourth, this edition highlights important changes in the nature of work and
organizations and how these changes have a direct impact on the design and
implementation of performance management systems. These changes involve
issues about globalization, technology, and demographics. Regarding globaliza-
tion, consider the example of a firm that is based in the United States, does its
software programming in Sri Lanka, its engineering in Germany, its manufac-
turing in China, and has a call center in Brazil. How do we design a successful
performance management system that takes into account the fact that employees
work together across time zones on a daily basis without having ever met in
person- although they have regular interactions using Skype? Regarding technology,
companies are now able to gather employee data that was simply unimaginable
just a few years ago-what is usually called “Big Data.” For example, the use of
GPS allows companies to track the location of its sales force real-time 24/7. Also,
Web and mobile access allows employees to provide and receive feedback on
an ongoing basis from anywhere and at any time. The availability of data offers
almost unlimited opporttmities to measure different facets of performance, but
also creates challenges and the need to understand the different between “Big
Data ” and “Smart Data.” Third, regarding team work, there is hardly any job that
is done without working with others. These changes highlight the importance
and pervasiveness of teams, and the need for a performance management system
to include a formal team management component- as well as consider different
types of teams s uch as virtual teams. Fourth, regarding demographic changes,
because baby boomers are retiring in large numbers, members of Generation
X, Generation Y or Millennials, and Generation Z or Post-Millennials are now
entering the workforce in large number. Gen X and Gen Y employees are “digital
natives” and are used to immediate feedback- just like when receiving a grade
immediately after completing a Web-based exam in high school and college. A
s uccessful performance management system must consider generational differ-
ences to be successful.

Fifth, this ed ition emphasizes that knowledge generated regarding perfor-
mance management is essentially multidisciplinary. Accordingly, the sources
used to s upport best-practice recommendations offered in this book come from
a very diverse set of fields of study, ranging from micro-level fields focusing on
the stud y of individual and teams (e.g., organizational behavior, human resource
management) to macro-level fields focusing on the study of organizations as a
whole (e.g., strategic management, accounting, information systems, engineer-
ing). This is consistent with a general movement toward multidisciplinary and
integrative research in the field of management.8 For example, best-practice rec-
ommendations regarding performance management analytics originate primarily
from industrial and organizational psychology (Chapter 5). On the other hand,
best-practice recommendations regarding the relation between performance
management and strategic planning were derived primarily from theories and
research from strategic management studies (Chapter 3). In addition, much of
the best-practice recommendations regarding team performance management
originated from the field of organizational behavior (Chapter 11).

Sixth, this edition emphasizes the important interplay between science and
practice. Unfortunately, there is a great divide in management and related fields

1Aguinis, H., Boyd, B. K., Pierce, C. A., & Short, J. C. (2011) . Walki ng new avenues in management research
methods and theories: Bridging micro and macro domai ns. Journal of Management. 37, 395-403.

P re face and Introd uction xix

between scholars and practitioners. From the perspective of scholars, much of
the work conducted by practitioners is seen as relevant, but not rigorous. Con-
versely, from the perspective of practitioners, the work done by scholars is seen
as rigorous, but mostly not relevant. This “science-practice divide” has been
documented by a content analysis of highly prestigious scholarly journals, which
regularly publish research results that do not seem directly relevant to the needs
of managers and organizations.9 This edition attempts to bridge this divide by
discussing best-practice recommendations based on sound theory and research,
and at the same time, discussing the realities of o rganizations and how some of
these practices have been implemented in actual organizations. 10

Seventh, this edition, as its predecessor, describes the technical aspects of
implementing a performance management system in detail. In addition, this edi-
tion emphasizes the key role that interpersonal dynamics play in the process. H
Traditionally, much of the performance appraisal literature has focused almost
exclusively on ratings and the measurement of performance-for example, whether
it is better to use 5-point vers us 7-point scales. However, more recent research
s uggests that issues such as trust, politics, leadership, negotiation, mentorship,
communication, and other topics related to interpersonal dynamics are just as
important in determining the s uccess of a performance management system.
Accordingly, this edition discusses the need to establish a helping and trusting
relationship between supervisors and employees (Chapter 9), the role of an orga-
nization’s top management in determining the s uccess of a system (Chapter 3),
and the motivation of s upervisors to provide accurate performance ratings
(Chapter 6), among many other related issues thro ughout the book.

Eighth, this edition includes “company spotlight” boxes in every chapter.
The addition of these application boxes is important because they serve the pur-
pose of illustrating the concepts described in each chapter using contemporary
examples. Also, these boxes will allow you to see how performance management
is done in real organizations as well as allow you to think about some thorny,
and, in some cases, unresolved issues. Some of the organizations featured in this
fourth edition include The Gap, Sears, Yahoo, Adobe, United States Department
of Defense, Discover, Google, Airbnb, Sprint, Dollar General, Xerox, Intermex,
BT Global Services, Accenture, Deloitte, GE, and many others-including several
less-known SMEs.

Ninth, this fourth edition includes new hands-on “Exercises” at the end of
each chapter. These hands-one exercises will make learning the material more
ftm, and also enhance the pedagogical experience of your course-particularly
for graduate- and executive-level courses. In total, this edition includes 22 exer-
cises (i.e., two per chapter).

Finally, this new edition includes two case studies in each chapter, also for a
total of 22. In addition, the instructor’s manual includes approximately several
more cases per chapter, for a total of about 40 additional ones. Thus, depend-
ing on an instructor’s preference, a course based on this new edition could be

‘ Cascio, W . F .• & Aguinis, H. (2008). Research i n industrial and organi zational psychology from 1963 to 2007:
Changes, choices, and t rends. Journal of Applied Psychology, 93, 1062- 1081 .
10Levy, P. E., Tseng, S. T., Rosen, C. C., & Lueke, S. B. (2017). Performance management: A marriage between
practice and science-Just sa y ” I do.” Research in Personnel and Human Resources Management 35, 155-213.
11 Aguinis, H., & Pie rce, C. A . (2008). Enhanci ng the relevance of organi zational behavior by embracing per·
forma nee management research. Journal of Organizational Behavior. 29, 139- 145.

xx Pref ace and Introducti on

taught entirely following a case forma t, experiential format, a lecture format, or
a combination of the three.

In addition to the aforementioned changes that permeate the entire book,
each chapter includes new sec tions. As illustrations, consider the following
chapter-by-chapter nonexhaustive additions:

• Chapter 1: Expanded material on the contributions of performance
management, expanded material on dangers of poorly implemented
performance management systems, discussion of the elimination of
performance ratings, impact of technological advancements, Big Data, and
demographic changes on performance management.

• Chapter 2: Expansion of job to work analysis, introduction of carelessness
bias, expanded description of O*NET, new material regarding “check-ins,”
and new discussion of steps for conducting productive performance reviews.

• Chapter 3: Why and how the HR function plays the role of strategic
partner, discussion of the balanced scorecard and the strategy map, the
critical role of the HR function in the strategic planning process, and
expanded discussion of SWOT and gap analysis.

• Chapter 4: Definition of performance as both behaviors and results,
expanded discussion of determinants of performance including abilities
and other traits (including personality), knowledge and skills, and
context (e.g., HR policies, organizational and national culture, resources
and opportunity to perform), expanded discussion of counterproductive
performance; and new material on adaptive performance.

• Chapter 5: Expanded discussion of management by objectives (MBO)
and goal setting, the transition of many companies from a performance
appraisal (i.e., dreaded once-a-year evaluation and review) to a
performance management system (i.e., ongoing evaluation and feedback},
the evolution of forced distribution systems, the apparent abandonment of
performance ratings, and new material on the nature of the performance
d istribution and star performers.

• Chapter 6: Emphasis on performance analytics, discussion of performance
management systems “without ratings,” expanded discussion on how to
make appraisal forms more useful, expanded discussion on the nature of
and number of formal review meetings, advantages and disadvantages
of collecting performance data from different performance “touchpoints”
(e.g., supervisors, peers, direct reports, customers), and new material on
employee performance monitoring and big data.

• Chapter 7: How to address cognitive biases and resistance to change when
rolling out the performance management system, and training programs
for minimizing unintentional rating errors.

• Chapter 8: The development of career competencies, expanded discussion
of developmental activities, the role of the direct supervisor in the creation
and completion of the employee’s development plan, and multisource
feedback systems.

• Chapter 9: New emphasis on performance management leadership,
evidence of the benefits of coaching, expanded discussion on how to
give praise and constructive (i.e., “negative”) feed back and using a
strengths-based approach to giving feedback, generational and individ ual
differences regarding feedback reactions and preferences, making tough

calls such as disciplinary process and organizational exit, and expanded
material on coaching, development, and performance review meetings.

• Chapter 10: Expanded material on work-life focus and relational (i.e.,
intangible, nonfinancial) returns, expanded discussion on problems
resulting from contingent pay plans, how to turn recognition and
o ther nonfinancial incentives into rewards, discussion of the latest

Preface and Introducti on xxi

legal developments regarding performance management, performance
management legal issues faced by organizations operating across national
borders, discussion of more recent cases regarding major legal principles
(e.g., negligence, defamation, illegal discrimination), and laws affecting
performance management in the United States, Canada, Australia,
Germany, and Spain.

• Chapter 11: Discussion of team-based organization design, new material
on performance management for virtual teams, characteristics of effective
team charters, skills needed for team leaders to turn teams with B-players
into winning teams, and knowledge, s kills, and abilities needed to be an
effective team member.

ORGANIZATION OF THE BOOK
Part I, which includes Chapters 1 through 3, addresses general as well as stra-
tegic considerations regarding performance management. Chapter 1 discusses
the advantages of implementing a successhtl performance management system,
as well as the negative outcomes associated with deficient systems, including
lowered employee motivation and perceptions of unfairness. This chapter also
includes the features of an ideal system. Chapter 2 describes the performance
management process, starting with what should be done before a system is
implemented and ending with the performance review stage. Chapter 3 links
performance management systems with an organization’s strategic plan. This
chapter makes it clear that a good performance management system is a critical
component of the successful implementation of an organization’s strategy.

Part II, including Chapters 4 through 7, addresses the details of system imple-
mentation. This discussion is s ufficiently general, yet detailed enough so that all
managers, not just HR managers, will benefit from this material. Chapters 4 and
5 describe some of the technical aspects associated with the assessment of perfor-
mance and how to identify and measure both behaviors and results. Chapter 6
discusses performance analytics and discusses the advantages and disadvantages
of using various sources of performance information (e.g., s upervisor, peers, and
customers). Finally, Chapter 7 describes the steps involved in rolling out the new
performance management system or changes in an existing system, including
a communication plan and pilot testing of the system before it is implemented .

Part III, including Chapters 8 and 9, addresses employee and leadership devel-
opment issues. Chapter 8 includes a description of employee development plans
and the advantages of using multisource feedback systems for developmental
purposes. Chapter 9 addresses the skills needed by supervisors to become true
“performance management leaders.”

Part IV, including Chapters 10 and 11, concerns the relationship among
performance management, rewards, the law, and teams. Chapter 10 includes
a discussion of different types of rewards (including relational or intangible

xxii Preface and Introduction

rewards), traditional and contingent pay p lans, and their links to performance
management. In addition, this chapter provides a discussion of legal issues to
consider when implementing a performance management system. Finally, Chap-
ter 11 addresses the timely topic of how to design and implement performance
management systems dealing specifically w ith team performance.

FACULTY AND STUDENT RESOURCES
Each of the chapters includes a list of its actionable learning objectives at the be-
ginning as well as summary points a t the end, two hands-on exercises, and two
case studies for d iscussion. I hope this material will allow students to have an
enjoyable and productive learning experience that will enhance your own indi-
vidual human capital. Also, there are additional resources available for instructors,
including Power Point s lides, exam questions and answers (multiple choice and
essay-type), and additional case studies that can be used for in-class discussions
or also as examination materials or take-home homework or examinations. These
materials will allow instructors to prepare for teaching this course quicker, and
a lso make teaching this course a more enjoyable and interactive experience. These
facul ty resources can be requested by visiting www.chicagobusinesspress.com.

ACKNOWLEDGMENTS

I would like to thank several individuals who were extremely instrumental in
allowing me to write the first, second, third, and current fourth edition of this
book. I am indebted to Graeme Martin for encouraging me to start this project
more than a decade ago. Nawaf Alabduljader and Ravi S. Ramani helped me
gather the numerous examples and illustrations that I have used throughout in
the fourth edition. Wendy O’Connell, Jon Dale, and Barbara Stephens helped
me update many of these examples in the previous editions. Christine Henle al-
lowed me to use her extremely usehtllecture notes in previous editions. Nawaf
Alabduljader and Ravi S. Ramani also assisted me in writing the Instructor’s
Manual for this fourth edition. Teaching and giving lectures and workshops on
performance management at the Instituto de Empresa (Madrid, Spain), Universite
Jean Moulin Lyon 3 (Lyon, France), University of Johannesburg (South Africa),
University of Salamanca (Spain), and University of Melbourne (Aus tralia) allowed
me to pilot test and improve various sections of the book. Also, I would like to
thank my publisher, Paul Ducham of Chicago Business Press, for his outstand-
ing professionalism. I am delighted to have Paul as my partner for this fourth
edition. Finally, this fourth edition benefited greatly from the feedback provided
by the following individuals who have used the third edition to teach courses a t
universities throughout the United States and Canada, and were kind enough
to offer their s uggestions for improvements and additions:

Stan Arnold, Humber College
Christine R. Day, Eastern Michigan University
Eric Ecklund, Saint Francis University
Douglas Flint, University of New Brunswick
David Garic, Tulane Universitt;
Kathleen Gosser, University of Louisville
Alan P. Huston, Portland State Universitt;
Denise Kestner, Franklin University
Kenneth S. Shultz, California State Universitt;, San Bernardino
Therese A. Sprinkle, Quinnipiac Universitt;
Thomas Timmerman, Tennessee Technological University
Bruce E. Winston, Regent University
Colette M. Young, Washtenaw Communitt; College
I thank each of you for your time and intellectual investment in this project.

Your coaching and feedback certainly helped me improve my performance!

Herman Aguinis
Washington, D.C.

xxiii

ABOUT THE AUTHOR

xxiv

D r. He rm an Ag uin is is the Avram Tucker Distinguished Scholar and Professor
of Management at George Washington University School of Business. Previously,
he was the John F. Mee Chair of Management and the Founding and Managing
Director of the Institute for Global Organizational Effectiveness in the Kelley School
of Business, Indiana University. He has been a visiting scholar at universities in
the People’s Republic of China (Beijing and Hong Kong), Malaysia, Singapore,
Argentina, France, Spain, Puerto Rico, Australia, and South Africa. His research,
teaching, and consulting activities focus on the acquisition, development, and
deployment of talent in organizations. Dr. Aguinis has written and edited five
books, including Applied PSljchology in Talent Management (with Wayne F. Cascio, 8th
ed., 2019, Sage) and Regression Analysis for Categorical Moderators (2004, Guilford) .
In addition, he has written about 150 refereed jo urnal articles in Academy of
Management Journal, Academy of Management Revie-UJ, Strategic Management Jour-
nal, Journal of Applied Psychology, and elsewhere. Dr. Aguinis has been elected to
serve as President of the Academy of Management (AOM), and is a Fellow of
AOM, the American Psychological Association, the Society for Industrial and
Organizational Psychology, and the Association for Psychological Science. He
has served as President of the lberoamerican Academy of Management, Divis ion
Chair for the Research Methods Division of the Academy of Management, and
editor-in-chief for the journal Organizational Research Methods . He has delivered
about 250 presentations and keynote addresses a t professional conferences,
delivered more than 120 invited presentations in all seven continents except for
Antarctica, raised about $5MM for his research and teaching endeavors from
private foundations and federal sources (e.g., National Science Foundation), and
consulted with numerous organizations in the United States, Europe, and Latin
America. Among the many awards he has received are the 2017 Losey Award by
the Society for Human Resource Management Foundation for lifetime achieve-
ment in human resource research, the Academy of Management Practice Theme
Committee Scholar Practice Impact Award recognizing an outstanding scholar
who has had an impact on policymaking and managerial and organizational
practices, Academy of Management Research Methods Division Distinguished
Career Award for lifetime contributions; Academy of Management Entrepreneur-
ship Division IDEA Thought Leader Award, and Best Article of Year Awards from
five refereed journals. His research has been featured by The Economist, Forbes,
Business Week, National Public Radio, USA Today, Univision, Mujer Actual (Spain), and
La Naci6n (Argentina), among many other o utlets. For m ore information, please
visit http://www.hermanaguinis.com

1

chapter

1
Performance
Management
in Context

People think they’re too busy for performance management. That’s your number one job

-Jack Welch

Learning Objectives
By t he end of this cha pter, you will be able to do t he following:

1. Compare and contrast the concepts of performance
management and performance appraisal.

2. Appraise strategic, administrative, informationa l, devel·
opmental, organizational maintenance, and documenta ·
tion purposes of performance management.

3. Create a presentation providing persuasive arguments
to argue for the business case and benefits for employ·
ees, managers, and organizations of implementing a
well·designed performance management system.

4. Assess the multiple negative consequences that can
arise from the poor design and implementation of a
performance management system.

5 . Judge the extent to which dysfunctional performance
ratings may be signs that the performance management
system is broken.

6 . Prepare a list of the key features of an ideal perter·
mance management system.

7. Propose relationships and links between performance
management and other hu man resources functions,
including recruitment and selection, training and
development, workforce plann ing , and compensation.

8 . Assess the impact of globalization and technologica l and
demographic changes on the design and implementa·
tion of performance management systems.

4 Part I Strategic and General Consideratio ns

1-1 DEFINITIO N OF PERFORMANCE MANAGEMENT
Consider the following scenario:

Sally is a sales manager a t a pharmaceutical company. The fisca l year
will end in one week. She is overwhelmed with end-of-the-year tasks,
including reviewing the budget she is likely to be allocated for the
fo llowing year, responding to customers’ phone calls, dealing with
vendors, and supervising a group of 10 salespeople. It’s a very hectic
time, probably the most hectic time of the year. She receives a phone call
from the human resources (HR) department: “Sally, we have not received
your performance reviews for your 10 direct reports; they are due by
the end of the fiscal year.” Sally thinks, “Oh, again, those performance
reviews . . . . What a waste of my time!” From Sally’s point of view, there
is no value in filling out those seemingly meaningless forms. She does
not see her direct reports in action because they are in the field, visiting
customers most of the time. All that she knows about their performance
is based on sales figures, which depend more on the products offered and
geographic territory covered than the individual effort and motivation
of each salesperson. And based on her own experience, she thinks that
little will happen in terms of compensation and rewards, regard less of
her ratings. These are Jean times in her organization, and salary adjust-
ments are based on seniority rather than on merit. She has less than three
days to turn in her forms. What will she do? In the end, she decides to
follow the path of least resistance: to please her employees and give
everyone the maximum possible rating. In this way, Sally believes the
employees will be happy with their ratings and she will not have to deal
with complaints or follow-up meetings. Sally fills out the forms in less
than 15 minutes and gets back to her “real job.”

There is something very wrong with this picture, which unfortunately hap-
pens all too frequently in many organizations and across industries. Although
Sally’s HR department calls this process “performance management,” it is not.

Performance management is a continuous process of identifying, measuring, and
developing the performance of individuals and teams and aligning perfonna nee with the
strategic goals of the organimtion. Let’s consider each of the definition’s two main
components in more detail:

1. Continuous process. Performance management is ongoing. It involves an
ongoing process of setting goals and objectives, observing performance,
talking about performance, and giving and receiving ongoing coaching
and feed back. 1

2. Alignment with strategic goals. Performance management requires that
managers ensure that employees’ activities and outputs are congruent
with the organization’s goals, and consequently, help the organization
gain a competitive advantage.2 Performance management therefore
creates a direct link between employee and team performance and
organizational goals, and makes the employees’ contribution to the
organization explicit.

Just like in the case of Sally, many organizations have what is labeled a
“performance management” system. However, we must distinguish between

Chapter 1 Performance Management in Context IS

performance management and performance appraisal. A system that involves
employee eval uations once a year without an ongoing effort to provide feedback
and coaching so that performance can be improved is not a true performance
management system. Instead, this is only a performance appraisal system.
Performance appraisal is the measurement and description of an employee’s
strengths and weaknesses. Thus, performance appraisal is an important compo-
nent of performance management, but it is just a part of a bigger whole because
performance management is much more than just performance measurement.3

As an illustration, consider how Bank of America Merrill Lynch has tran-
s itioned from a performance appraisal system to a performance management
system. Merrill Lynch was acquired by Bank of America in 2009, and then, merged
into Bank of America Corporation in October 2013, creating Bank of America
Merrill Lynch, which is one of the world’s leading financial management and
ad visory companies. Specifically, it employs more than 15,000 financial advisors
in offices in about 35 countries and manages private client assets of approximately
US$2.2 trillion. As an investment bank, it is a leading global underwriter of debt
and equity securities and strategic advisor to corporations, governments, insti-
tutions, and individuals worldwide. Bank of America Merrill Lynch started the
transition from giving employees one performance appraisal per year to focusing
on one of the important principles of performance management: the conversation
between managers and employees in which feedback is exchanged and coaching
is given, if needed . In January, employees and managers set employee objectives.
Mid-year reviews assess what progress has been made toward the goals and
how personal development plans are faring. Finally, the end-of-the-year review
incorporates feedback from several sources, evaluates progress toward objectives,
and identifies areas that need improvement. Managers also get extensive training
on how to set objectives and conduct reviews. In addition, there is a website that
managers can access with information on all aspects of the performance man-
agement system. In sharp contrast to their old performance appraisal system,
Bank of America Merrill Lynch’s goal for its newly implemented performance
management program is worded as follows: “This is what is expected of you,
this is how we’re going to help you in your development, and this is how you’ll
be judged relative to compensation.”4

As a second example, consider the performance management system for
managers at Germany-based Siemens, which used to focus on mobile phones,
comp uter networks, and wireless technology. Siemens’ current areas are electri-
fication, automation, and digitalization. It is the largest industrial manufacturing
company in Europe and employs more than 350,000 people in 190 countries.
One of the world’s largest producers of energy-efficient, resource-saving tech-
nologies, Siemens is a leading supplier of systems for power generation and
transmission as well as medical diagnosis, and in 2015, its global revenue totaled
around €75.6 billion. At Siemens, the performance management system is based
on three pillars: setting clear and measurable goals, implementing concrete ac-
tions, and imposing rigorous consequences. The performance management a t
Siemens has helped change people’s mind-set, and the organization is now truly
performance-oriented. Every manager understands that performance is a critical
aspect of working at Siemens, and this guiding philosophy is communicated in
many ways throughout the organization.5

Much like those that focus on performance appraisal only, performance
management systems that do not make explicit the employee contribution to the
organizational goals are not true performance management systems. Making an

S Part I Strategic and General Considerations

explicit link between employee and team performance objectives and the orga-
nizational goals also serves the purpose of establishing a shared understanding
about what is to be achieved and how it is to be achieved. This is painfully clear
in Sally’s case described earlier: from her point of view, the performance review
forms d id not provide any useful information regarding the contribution of each
of her d irect reports to the organization. Sally’s case is, unfortunately, more com-
mon than we would like. For example, a s urvey of 13,000 employees worldwide
conducted by the Corporate Executive Board (CEB) found that about 95% of
managers are not satisfied with their organization’s performance management
system. Moreover, 66% of employees say that the performance review process
not only does not help, but actually interferes with their productivity!6

Our discussion thus far makes it clear that performance management systems
serve multiple purposes. The information collected by a performance management
system is most frequen tly used for salary administration, performance feedback, and
the identification of employee strengths and weaknesses. In general, however,
performance management systems can serve the following six purposes: strategic,
administrative, informational, developmental, organizational maintenance, and
documentation purposes? Let’s consider each of these purposes next.

1-2 PURPOSES OF PERFORMANCE MANAGEMENT SYSTEMS
1-2·1 Strategic Purpose
The first purpose of performance management systems is to help top manage-
ment achieve strategic business objectives. By linking the organization’s goals
with individual and team goals, the performance management system reinforces
behaviors consistent with the attainment of organizational goals. Moreover, even
if, for some reason, individual goals are not achieved, linking individual and
team goals with organizational goals serves as a way to communicate the most
crucial business strategic initiatives. As an example of how this is accomplished
a t Sears, see Box 1-1.

A second strategic purpose of performance management systems is that
they play an important role in the on boarding process.8 On boarding refers to the
processes that lead new employees to transition from being organizational out-
siders to organizational insiders. Performance management serves as a catalyst
for onboarding because it allows new employees to understand the types of
behaviors and results that are valued and rewarded, which, in turn, lead to an
understanding of the organization’s culture and its values.

1·2·2 Administrative Purpose
A second function of performance management systems is to furnish valid and
useful information for making administrative decisions abo ut employees. Such
administrative decisions include salary adjustments, promotions, employee
retention or termination, recognition of superior individual performance, iden-
tification of high-potential employees, identification of poor performers, layoffs,
and merit increases. Therefore, the implementation of reward systems based
on information provided by the performance management system falls within
the administrative purpose. For example, the government in Turkey mandates

Chapter 1 Performance Management in Contex t 7

Box 1-1

Company Spotlight: How Sears Uses
Performance Management to Focus on
Strategic Business Priorities
The top management team at Sears is utilizing perfo r-
mance management practices and p ri nci ples to align
human resources with business strategy. Headquartered i n
Hoffman Estates, Illinois, Sears is the 18th largest retailing
company in the United States. And it is the f ifth largest
Ameri can department store company by sales, (behind
Walmart, Target, Best Buy, and The Home Depot), and the
third largest broadline retailer i n the United States, with
approximately US$22.14 bill ion in annual revenues and
approximately 65 1 retail stores. Sears is a home appliance
retailer and offers tools, lawn and garden products, home
electronics, and automotive repair and maintenance. Fol-
lowing the merger with Kmart Corp. and Sears, Roebuck &
Co., Aylwin B. Lewis was promoted to chief executive and
tasked w ith a strategic culture change i nit iative in hopes
of reinvigorati ng the struggling retai l company. A strategic
objective is to move from an inward focus to a customer
service approach. A second key objective is to b ring about
an entrepreneurial spirit, where store managers strive for
f i nancial literacy and are challenged to identify o pportuni-
t ies for g reater profits. Several aspects of the performance
management system are being uti lized to achieve these

strategi c objectives. For example, employee d ut ies and
objectives are being revised so that employees will spend
less t i me i n back rooms and more time interacting with
customers to faci l itate purchases and understand customer
needs. In addition, leadership communication with employees
and face-to-face interacti on are being encouraged. Lewis,
who is now CEO of Potbelly, used to spend three days per
week in stores wit h employees and f requently quizzed
managers on thei r knowledge, such as aski ng about profit
margins for a g iven department. The greatest compliment
employees receive is to be referred to as •commercial” or
someone who can identify opportunit ies for profits. All
Sears headquarters employees are also required to spend a
day worki ng in a store, which many had never done before.
Executive management has identified 500 employees who
are considered pot ential leaders who are given trai ning and
development opportunities specifically aimecd at cultural and
strategic changes. In sum, the performance management
system at Sears is used as a strategic tool to change Sears’
culture because senior management v i ews encouraging
key desired behaviors as critical to the company’s success
i n the marketplace.•

performance management systems in all public organizations in that country with
the aim to prevent favoritism, corruption, and bribery, and also, to emphasize
the importance of impartiality and merit in administrative decisionsw

1-2-3 Informational Purpose
Performance management systems 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 expectations of peers, supervi-
sors, customers, and the organization, and what aspects of work are most important.

1-2-4 Developmental Purpose
As noted earlier, feed back is an important component of a well-implemented per-
formance management system. This feed back should be used in a developmental
manner. Specifically, managers can use feedback to coach employees and improve

8 Part I Strategic and General Considerations

performance on an ongoing basis. This feedback allows for the identification of
strengths and weaknesses of employees as well as the causes for performance
deficiencies (which could be d ue to individual, team, or contextual factors). Of
course, feedback is useful only to the extent that remedial action is taken and
concrete steps are implemented to remedy any deficiencies. Feedback is useful
only when employees are willing to receive it. Organizations should strive to
create a “feedback culture” that reflects support for feedback, including feedback
that is nonthreatening and is focuse d on behaviors and coaching to help interpret
the feedback provided. 11

Another aspect of the developmental purpose is that employees receive in-
formation about themselves that can help them individualize their career paths.
For example, by learning about their strengths, they are better able to chart a
more successful path for their future. Thus, the developmental purpose refers
to both short-term and long-term aspects of development.

1·2·5 Organizational Maintenance Purpose
A fifth purpose of performance management systems is to provide information
to be used in workforce planning. Workforce planning comprises a set of systems
that allows organizations to anticipate and respond to needs emerging within and
outside the organization, to determine priorities, and to allocate human resources
where they can do the most good. 12 An important component of any workforce
planning effort is understanding the talent inventon;, which is information on
current resources (e.g., skills, abilities, promotional potential, and assignment
histories of current employees). Buying talent is extremely expensive and top
performers know their worth in the market through social media and career sites.
In the case of executives, the stock market is a good metric of perceived worth.13
For example, when Kasper Rosted left his position of CEO a t packaged-goods
company Henkel to become CEO of Adidas, Adidas gained US$1 billion. Per-
formance management systems are the primary means through which accurate
talent inventories can be assembled. Moreover, as we will describe later, talent
inventories are critical in terms of keeping track of high-potential employees.14

Other organizational maintenance purposes served by performance manage-
ment systems include assessing future training needs, evaluating performance
achievements a t the organizational level, and eval uating the effectiveness of HR
interventions. For example, accurate data on employee performance can be used
to evaluate whether employees perform at higher levels after participating in a
training program. These activities aimed a t assessing the effects of HR and other
interventions on performance cannot be cond ucted effectively in the absence of
a good performance management system.

1-2-6 Documentation Purpose
Finally, performance management systems allow organizations to collect use-
ful information that can be used for several necessary- and sometimes, legally
mandated (as described in Chapter 10)-documentation purposes. First, perfor-
mance data can be used to validate newly proposed selection instruments. For
example, a newly developed test of computer literacy can be administered to
all administrative personnel. Scores on the test can then be paired with scores
collected through the performance management system. If scores on the test and
on the performance measure are correlated, then the test can be used with future

Chapter 1 Performance Management in Con text it

applicants as predictors of performance for the administrative positions. Second,
performance management systems allow for the documentation of important
administrative decisions, such as terminations and promotions. This information
can be especially useful in the case of litigation.

Several companies implement performance management systems that allow
them to accomplish the multiple objectives described earlier. For an example of
one such company, consider the case of SELCO Credit Union in Eugene, Oregon,
a not-for -profit consumer cooperative that was established in 1936.15 SELCO
serves more than 127,000 members. In 2016, SELCO closed with a record US$1.4
billion in assets, US$1.1 billion in loans, and US$1 .3 billion in deposits. SELCO
offers many of the same services offered by other banks, including personal
checking and savings accounts, loans, and credit cards. Being members of the
credit union, however, allows individual members a say in how the credit union
is run, something a traditional bank does not permit. Recently, SELCO scrapped
an old performance appraisal system and replaced it with a new multipurpose
and more effective performance management system. First, the timing of the new
system is now aligned with the business cycle, instead of the employee’s date of
hire, to ensure that business needs are aligned with individual goals. This align-
ment serves both s trategic and informational purposes. Second, managers are
given a pool of money that they can work with to award bonuses and raises as
needed, which is more effective than the complex set of matrices that had been
in place to calculate bonuses. This improved the way in which the system is used
for allocating rewards, and therefore, serves an administrative purpose. Third,
managers are required to sit down and have regular conversations with their
employees about their performance and make note of any problems that arise. This
gives the employees a clear sense of areas in which they need improvement and
also provides documentation if disciplinary action is needed . This component
serves both informational and documentation purposes. Finally, the time that was
previously spent filling out complicated matrices and forms is now spent talking
with the employees about how they can improve their performance, allowing for
progress on an ongoing basis. This serves a developmental purpose.

Although multiple purposes are desirable, 62% of HR executives from
Fortune 500 companies say that their performance management system serves
mostly administrative (e.g., salary decisions) and developmental (e.g., to iden-
tify employees’ weaknesses and strengths) purposes.16 As will be discussed in
Chapter 9, these purposes place conflicting demands on those providing ratings
because they must be both judges (i.e., make salary decisions) and coaches (i.e.,
provide useful feed back for performance improvement) a t the same time.

Now, think about the performance management system implemented in your
organization or the last organization for which you worked. Table 1-1 summarizes
the various purposes served by a performance management system. Which of
these purposes are being served by the system you are considering? Which are
not? What are some of the barriers that prevent achieving all six purposes?

Subsequent chapters describe best practices on how to design and imple-
ment performance management systems. For now, however, Jet us say that well-
designed and implemented performance management systems achieve all six
purposes, and also, make substantial contributions to the organization. This is
why a survey of almost 1,000 HR management professionals in Australia revea led
that 96% of Australian companies currently implement some type of performance
management system1 7 Similarly, results of a survey of 278 organizations, about

10 Part I Strategic and General Considerations

TABLE 1-1
Purposes Served by a
Performance Management
System

I. Strateg1c: To help top management achieve strategic business objectJves

2. AdministratiVe: To furnish valid and useful information for making administrative decisions about
employees

3. Jnformat,ona/: To 1nform employees about how they are do•ng and about the organ•zation’s,
customers·. and supervisors’ expectations

4. Developmental: To allow managers and peers to provide coaching to their employees

5. Organ,zatJonal maintenance: To create a talent inventory and provide information to be used in
workplace planning and allocation of human resources

6. Documentation: To collect useful information that can be used for various purposes (e.g .. test
development, administrative decisions)

two-thirds of w hich are multinational corporations from 15 different countries,
indicated that about 91% of organizations implement a formal performance
management system. 18 Moreover, organizations with formal and systematic per-
formance management systems are 51% more likely to perform better than the
other organizations in the sample regarding financial outcomes, and 41% more
likely to perform better than the other organizations in the sample regarding other
outcomes, includ ing customer satisfaction, employee retention, and other import-
ant metrics. In fact, a s tudy conducted by Development Dimensions International
(DDI), a global human resources consulting firm specializing in leadership and
selection, found that performance management systems are a key tool that or-
ganizations use to translate business strategy into business results. Specificall y,
performance management systems influence “financial performance, productivity,
prod uct or service quality, customer satisfaction, and employee job satisfaction.”
In addition, 79% of the CEOs s urveyed say that the performance management
system implemented in their organizations drives the “cultural strategies that
maximize human assets.” 19 Based on these results, it is not surprising that senior
executives of companies listed in the Sunday Times list of best employers in the
United Kingdom believe that performance management is one of the top two
most important HR management priorities in their organizations.20 Let us de-
scribe these performance management contributions in detail.

1-3 THE PERFORMAN CE MANAGEMEN T CON TRIBUTION
There are many advantages associated with the implementation of a perfor-
mance management system.21 A performance management system can make the
following important contributions for employees, managers, the HR function,
and the entire organization22:

1. Self-insight an.d development are enhanced. The participants in the system
are likely to develop a better understanding of themselves and of the
kind of development activities that are of value to them as they progress
through the organization. Participants in the system also gain a better
understanding of their particular strengths and weaknesses, which can
help them better define fu ture career paths.

2. Self-esteem is increased. Receiving feed back about one’s performance fulfills
a basic human need to be recognized and valued a t work. This, in turn, is
likely to increase employees’ self-esteem.

Chapter 1 Performance Management in Contex t 11

3. Motivation to perform is increased. Receiving feedback about one’s
performance increases the motivation for future performance. Knowledge
about how one is doing and recognition about one’s past successes
provide the fuel for fu ture accomplishments.

4. Employee engagement is enhanced. A good performance management system
leads to enhanced employee engagement. Employees who are engaged feel
involved, committed, passionate, and empowered. Moreover, these attitudes
and feelings result in behaviors that are innovative, and overall, demonstrate
good organizational citizenship and active participation in support of
the organization. Employee engagement is an important predictor of
organizational performance and s uccess, and consequently, engagement is
an important contribution of good performance management systerns.23

5. Employees become more competent. An obvious contribution is that
employee performance is improved. In addition, there is a solid
foundation for helping employees become more successful by
establishing developmental plans.

6. Voice behavior is encouraged. A well-implemented performance
management system allows employees to engage in voice behavior that
can lead to improved organizational processes. Voice behavior involves
making suggestions for changes and improvements that are innovative,
challenge the status quo, are intended to be constructive, and are offered
even w hen o thers disagree.24 For example, the performance review
meeting can lead to a conversation during which the employee provides
suggestions on how to reduce cost or speed up a specific process.

7. The definitions ojjob and criteria are clarified. The job of the person
being appraised may be clarified and defined more clearly. In other
words, employees gain a better understanding of the behaviors and
results required of their specific position. Employees also gain a better
understanding of what it takes to be a s uccessful performer (i.e., w hat are
the specific criteria that define job success).

8. Employee misconduct is minimized.25 Employee misconduct is an
increasingly pervasive phenomenon that has received widespread media
coverage. Such misconduct includes accounting irregularities, churning
customer accounts, abusing overtime policies, giving inappropriate
gifts to clients and potential clients, hoping to secure their business, and
using company resources for personal use. Although some individuals
are more likely to engage in misconduct compared to others, based on
individual differences in personality and other attributes, having a good
performance management in place provides the appropriate context so
that misconduct is clearly defined and labeled as such and also identified
early on before it leads to sometimes irreversible negative consequences.

9. Declines in perfonnance can be addressed early on. Because good performance
management systems include ongoing performance measurement,
declines in performance can be noticed, which allows for immediate
feedback and continuous coaching. When such declines are observed,
remedial action can be taken immediately and before the problem
becomes so entrenched that it cannot be easily remedied.

10. Motivation, commitment, and intentions to stay in the organization are
enhanced. When employees are satisfied with their organization’s
performance management system, they are more likely to be m otivated

12 Part I Strategic and General Considerations

to perform well, be committed to their organization, and not try to
leave the organization.26 For example, satisfaction with the performance
management system is likely to make employees feel that the
organization has a great deal of personal meaning for them. In terms
of turnover intentions, satisfaction with the performance management
system leads employees to report that they will probably not look for a
new job in the next year and that they do not often think about quitting
their present job. As an illustration of this point, results of a study
including 93 professors at a university in South Africa suggested that the
implementation of a good performance management system would be
useful in preventing them from leaving their university jobs.27

11. Managers gain insight about direct reports. Direct supervisors and other
managers in charge of the appraisal gain new insights into the person
being appraised. Gaining new insights into a person’s performance and
personality will help the manager build a better relationship with that
person. Also, supervisors gain a better understanding of each individual’s
contribution to the organization. This can be useful for direct supervisors,
as well as for supervisors once removed.

12. Tlzere is better and more timely differentiation bet-«Jeen good and poor performers.
Performance management systems allow for a quicker identification of
good and poor performers. This includes identifying star performers-
those who produce at levels much higher than the rest. For example,
without a good performance management system, it is not easy to know
which particular programmers are prod ucing more and better code.28
Also, this includes identifying high-potential employees who can be
identified as htture leaders-also called “HiPos.” For example, PepsiCo’s
performance management system includes what they call Leadership
Assessment and Development (LeAD). A unique aspect of this system
is the emphasis on identifying HiPos by measuring specific job and
lead ership requirement in the future.29

13. Supervisors’ views of perfonnance are communicated more clearly. Performance
management systems allow managers to communicate to their direct reports
their assessments regarding performance. Thus, there is greater accountability
in how managers discuss performance expectations and provide feedback.
When managers possess these competencies, direct reports receive useful
information about how their performance is seen by their supervisor.

14. Administrative actions are more fair and appropriate. Performance
management systems provide valid information about performance
that can be used for administrative actions, such as merit increases,
promotions, and transfers, as well as terminations. In general, a
performance management system helps ensure that rewards are
distributed on a fair and credible basis. In turn, such d ecisions based on a
sound performance management system lead to improved interpersonal
relationships and enhanced supervisor-direct report trust.30 For example,
a good performance management system can help mitigate explicit or
implicit emphasis on age as a basis for decisions. This is particularly
important, given the aging working population in the United States,
Europe, and many other countries arotmd the world .31

15. Organizational goals are made clear. The goals of the unit and the
organization are made clear, and the employee und erstands the link

Chapter 1 Performance Management in Contex t 13

between what she does and organizational success. This is a contribution
to the communication of what the unit and the organization are all about,
and how organizational goals cascade down to the unit and the individual
employee. Performance management systems can help improve employee
acceptance of these wider goals (i.e., unit and organizational levels).

16. There is better protection from lawsuits. Data collected through performance
management systems can help document compliance with regulations
(e.g., equal treatment of all employees, regardless of sex or ethnic
background). When performance management systems are not in
place, arbitrary performance evaluations are more likely, resulting in an
increased exposure to litigation for the organization.

17. Organimtional change is facilitated. Performance management systems can
be a useful tool to drive organizational change. For example, assume an
organization decides to change its culture to give top priority to prod uct
quality and customer service. Once this new organizational direction
is established, performance management is used to align goals and
objectives of the organization with those of individ uals to make change
possible. Employees are provided training in the necessary skills and
are also rewarded for improved performance so that they have both the
knowledge and motivation to improve product quality and customer
service. This is precisely what IBM did in the 1980s, when it wanted to
switch focus to customer satisfaction: the performance evaluation of
every member in the organization was based, to some extent, on customer
satisfaction ratings, regardless of function (i.e., accounting, programming,
manufacturing, etc.).32 For IBM, as well as numerous other organizations,
performance management provides tools and motivation for individuals
to change, which, in turn, helps drive organizational change. In short,
performance management systems are likely to produce changes in the
culture of the organization, and therefore, the consequences of s uch
cultural changes should be considered carefully before implementing
the system .33 As noted by Rand y Pennington, president of Pennington
Performance Group, “The truth is that the culture change is driven by a
change in performance. An organization’s culture cannot be installed. It
can be guided and influenced by policies, practices, skills, and procedures
that are implemented and reinforced . The only way to change the culture
is to change the way individ uals perform on a daily basis.”34

Table 1-2lists the 17 contributions made by performance management sys-
tems. Recall Sally’s situation earlier in the chapter. Which of the contributions
included in Table 1-2 result from the system implemented at Sally’s organization?
For example, are Sally’s employees more motivated to perform as a consequence
of implementing their “performance management” system? Is their self-esteem
increased? What about Sally’s insight and understanding of her employees’
contributions to the organization? Is Sally’s organization now better protected
in the face of potential litigation? Unfortunately, the system implemented a t
Sally’s organization is not a true performance management system, but simply
an administrative nuisance. Consequently, many, if not most, of the potential
contributions of the performance management system are not realized . In fac t,
poorly implemented systems, as in the case of Sally’s organization, not only do
not make positive contributions, but instead can be very dangerous because of
their several negative outcomes. Let us consider those next.

14 Part I Strategic and General Considerations

TABLE 1-2
Contributions of
Performance Management
Systems

Self-insight and development are enhanced.

Self-esteem is increased.

Motivation to perform 1S increased.

Employee engagement is enhanced.

Employees become more competent

Voice behavior is encouraged.

The defiM10ns of job and cnterla are clarified.

Employee misconduct is minimized.

Declines in performance can be addressed early on.

Motivation. commitment and intentions to stay in the organization are enhanced.

Managers gain insight about direct reports.

There Is better and more timely differentiation between good and poor performers.

Supervisors’ v1ews of performance are communicated more clearly.

Administrative actions are more fair and appropriate.

Organ1zat1ona1 goals are made clear.

There Is better p rotection from lawsuits.

Organizational change is facilitated.

1-4 WHEN PERFORMANCE MANAGEMENT BREAKS DOWN:
D ANGERS OF POORLY IMPLEMENTED SYSTEMS

What happens when performance management systems d o not work as intended, as
in the case of Sally’s organization? What are some of the negative consequences associ-
ated with low-quality and poorly implemented systems? Some of these disadvantages
are simply the opposite of the contrib utions discussed in the p revious section because,
in many ways, these consequences are symptoms that the performance management
system is broken and something needs to be done about it. Consider the following list

1. Lowered self-esteem. Self-esteem may be lowered if feedback is provided in
an inappropriate and inaccurate way. This, in turn, can create employee
resentment.

2. Increased turnover. If the process is not seen as fair, employees may
become upset and leave the organization. They can leave physically
(i.e., quit) or with d raw psychologically (i.e., minimize their effort and
engage in cyberloafing until they are able to find a job elsewhere).
This is particularly a problem for star performers, who are attracted to
organizations that recognize individual cont ributions.35

3. Damaged relationships. As a consequence of a deficient system, the rel ationship
among the individuals involved may be damaged , often permanently.

4. Decreased motivation to perform. Motivation may be lowered for many reasons,
including the feeling that superior performance is not translated into meaningful
tangible (e.g., pay increase) or intangible (e.g., personal recognition) rewards.

5. Employee burnout and job dissatisfaction. When the performance assessment
instrumen t is not seen as valid and the system is not perceived as
fair, employees are likely to feel increased levels of job burnout and

Chapter 1 Performance Management in Contex t 115

job dissatisfaction. As a consequence, employees are likely to become
increasingly irritated?6

6. Use of misleading information. If a standardized system is not in place,
there are multiple opportunities for fabrica t ing information about an
employee’s performance.

7. Wasted time and mone-t;. Performance management systems cost money and
quite a bit of time. These resources are wasted when systems are poorly
designed and implemented.

8. Emerging biases. Personal values, biases, and relationships are likely to
replace organizational standards.

9. Unclear ratings SljStem. Because of poor communication, employees may not know
how their ratings are generated and how the ratings are translated into rewards.

10. Varying and unfair standards and ratings. Both standards and individual
ratings may vary across and wit hin units and a lso be unfair.

11. Unjustified demands on managers’ and emplm;ees’ resources. Poorly implemented
systems do not provide the benefits provided by well-implemented systems,
yet they take up managers’ and employees’ time. Such systems will be
resisted because of competing obligations and allocation of resources (e.g.,
time). What is sometimes worse, managers may simply choose to avoid the
system altogether, and employees may feel increased levels of overload.39

12. Increased risk of litigation. Expensive lawsuits may be filed by individuals
who feel they have been appraised unfairly. As an example, see the case of
Yahoo in Box 1-2.

Box 1-2

Company Spotlight: What Happens When
Performance Management Is Implemented Poorly?
One recent example of a performance management that may The lawsuit says managers were required to rank employees so
have been implemented poorly involves a lawsuit and the that a specific percentage would be placed in each rank even
company Yahoo. Gregory Anderson said he received a promo- if all the employees were performing well or at the same level.
tion, a pay raise, and praise for the work he had done. But Then, higher-level management who often does not interact
in November 2014, he was told he was in the bottom 5% of with the employees are allowed to modify those scores. The
Yahoo’s employees, based on quarterly performance reviews, lawsuit argues that “The performance management system was
and was fired. Anderson was Yahoo’s editorial director in charge opaque and the employees did not know who was making the
of autos, shopping, homes, travel, and small-business sites and final decisions, what numbers were being assigned by whom
had been employed for four years. In its defense, Yahoo issued along the way, or why those numbers were being changed.”
a statement saying that its performance management system Also, the lawsuit argues that changes in scores were due, in many
allows employees to “develop and do their best work” and “the cases, to gender discrimination. In a separate lawsuit Scott Ard,
performance review process was developed to allow employees a media executive who worked for Yahoo for about three and a
at all levels of the company to receive meaningful, regular, and half years until he was fired in January 2015, alleged that Yahoo’s
actionable feedback from others.” Moreover. Yahoo said that CEO Mayer, one of the highest paid and most prominent female
“Our performance review process also allows for high performers executives in the United States, •encouraged and fostered the
to engage in increasingly larger opportunit ies at our company. use of the performance management system to accommodate
as well as for low performers to be transitioned out.” Anderson’s management’s subjective biases and personal opinions, to the
case is unique because he argued that Yahoo manipulated the detriment of Yahoo’s male employees. ” 37 Anderson’s lawsuit
performance management system that led to his termination. seeks damages, pay back. and benefrts.38

16 Part I Strategic and General Considerations

TABLE 1-3
Negative Consequences
of Poorly Implemented
Pe rformance M anagement
Systems

1-4-1 Performance Rati ngs: The Canary in t he Coal Mine
Table 1-3 summarizes the list of negative consequences resulting from the care-
less design and implementation of a performance management system. As you
can see from this list, many of the negative consequences are directly related to
the issue of performance ratings. For example, ratings are biased, unjustified,
inaccurate, a waste of time and resources, and their use leads to the departure
of star performers, and even litigation.

But performance ratings are the canary in the coal mine, rather than the
problem per se. Before modern methods were available, coal miners in the early
twentieth century used to carry a caged canary with them down into the mine
tunnels. In the p resence of toxic gases s uch as carbon monoxide, the canary
would faint, o r even die, q uickly alerting the miners of imminent danger. So,
the canary was not the problem, but a sign of the presence of unobserved toxic
gases. Similarly, what are the unseen reasons why performance ratings are biased,
impractical, and cause more harm than good? What are the “toxic gases” that may
be prod ucing problems in the ratings? Consider just three of many possibilities.
First, ratings may be not be directly related to an organization’s strategic goals.
Second, they may not refer to performance dimensions under the control of the
employee. Third, it may take too long for supervisors to fill o ut complicated and
convoluted evaluation forms.

Given problems noticed with performance ratings, in the past few years,
several organizations such as Eli Lilly, Adobe, Microsoft, Accenture, Goldman
Sachs, IBM, Morgan Stanley, New York Life, Med tronic, Juniper Networks, and
Gap announced that they were going to seriously curtail or even d iscontinue
their use. In fa ct, survey results by WorldatWork and Willis Towers Watson Talent
Management indica te that between 8% and 14% of large corporations in North
America have eliminated perform ance ratings since 2014.40

But, although the elimination of ratings seems to be the latest and newest
innovation, performance management without ratings was implemented by
GE in the 1960s. In addition to no s ummary ratings, this system at GE included
frequent discussions of performance and an e m phasis on mutual goal plan-
ning and problem-solving.41 But, years later, GE not only brought ratings back,
but became famous fo r the use of former CEO Jack Welch’s “vitality curve” in
which employees were ranked in the top 20%, middle 70%, or bo ttom 10% of

Lowered self-esteem

Increased turnover

Damaged relationships

Decreased motivation to perform

Employee job burnout and job dissatisfaction

Use of false or misleading information

Wasted t1me and money

Emerging biases

Unclear ratings system

Varying and unfair standards and ratings

demands on managers’ and employees’ resources

Increased risk of litigation

Chapter 1 Performance Management in Contex t 17

the performance distribution. Going full circle, GE is now one of the companies
reevaluating their use of the annual reviews.

So, despite widespread media coverage and hype about many companies
”abandoning performance reviews and ratings,”42 many of these companies quickly
realized that even if performance ratings are abolished, supervisors evaluate
the performance of their direct reports implicitly- and so do peers-even if
evaluations forms and ratings are not used. Also, without performance ratings,
how are we going to identify, reward, and retain top performers? How will
organizations make fair compensation and promotion decisions and deal with
possible discrimination lawsuits? The answer is that performance ratings-
good-quality performance ratings- are needed .43 This is why companies s uch as
Deloitte and many others that tried to eliminate performance ratings are now
using ratings again- but they are using more than one system and emphasize
developmental feedback. 44 For example, see the case of Adobe described in
Box 1-3. Clearly, measuring performance is not easy. However, this is not a good
excuse to abandon ratings, given the large body of research that has accumulated
over decades and resulted in clear implications for practice.45 So, Part II in this
book addresses how to implement state-of-the-science performance management
systems, including how to define and measure performance using different types
of rating systems.

Now, once again, consider Sally’s organization. What are some of the
negative consequences of the system implemented by her company? Let us
consider each of the consequences listed in Table 1-3. For example, is it likely
that the performance information used is false and misleading? How about
the risk of litigation? How about the time and money invested in collecting,
compiling, and reporting the da ta? Unfortunately, an analysis of Sally’s s itu-
ation, taken with the positive and negative consequences listed in Tables 1-2
and 1-3, leads to the conclusion that this particular system is likely to do more
harm than good. Now, think about the system implemented a t your current
o rganization, or at the o rganization you have worked for most recentl y. Take a
look at Tables 1-2 and 1-3. Where does the system fit best? Is the system more
closely aligned with some of the positive consequences listed in Table 1-2 or
more closely aligned with some of the negative consequences lis ted in Table 1-3?
Returning to the canary analogy, are ratings healthy or not? If not, what are
the unseen “toxic gases” that may be the underlying reasons why ratings are
“unhealthy”?

Box 1-3

Company Spotlight: Good Performance Management
Implementation Pays Off at Adobe
In 2012, Adobe Systems, one of the largest computer software abilit ies needed to improve their performance. In the first
companies in the world, decided to scrap their obsolete year alone, Adobe estimated it saved 80,000 manager hours,
annual performance appraisa l in f avor of a continuous the equivalent of 40 full-t ime employees, which would have
performance management approach. The new approach been required by the old process. Two years later, Adobe
allowed employees to proactively, rather than retroactively, found that morale had increased, turnover decreased by
get feedback on their current roles in the company, future 30%, and involuntary departure increased by 50%.46

career goals, and inf ormation on the knowledge, skills, and

18 Part I Strategic and General Considerations

Thus far, we have defin ed performance management and its purposes,
spelled out its contributions, and discussed benefits of good systems as well as
dangers or bad ones. So, it is time to summarize what decades of research has
concluded about w hat an ideal performance management system looks like.
These characteristics can have slight variations across contexts. But overall, they
are considered fairly universal.47

1-5 CH A RACTERISTICS OF AN IDEAL P ERFORMANCE
MANAGEMENT SYSTEM

The following characteristics are likely to allow a performance management
system to be successful. Clearly, prac tical constraints may not allow for the
implementation of all these features. The reality is that performance management
systems are seldom implemented in an ideal way.48 For example, there may not
be sufficient funds to deliver training to all people involved, s upervisors m ay
have biases in how they provide performance ratings, or people may be jus t
too busy to pay attention to a performance management system that seems to
require too much time and attention. Also, there may be organizational or even
country-level constraints that prevent the implementation of a good performance
management system. For example, consider the case of Korea, which is a country
that espouses collectivist values over individual performance, and is a society
that is male-dominated and also dominated by political and administrative
leaders, and where these sociocultural norms have a clear influence on organi-
zational decision making and practices.49 These institutional constraints that are
so pervasive in Korea and many other emerging market countries must be taken
into consideration in terms of what type of performance management system
it would be possible to implement as well as the effectiveness of such a system.
However, regardless of the societal, institutional, and practical constraints, we
should strive to place a check mark next to each of these characteristics: the more
features that are checked, the more likely it will be that the system will live up
to its promise and deliver the benefits listed in Table 1-2.

• Strategic congruence. The system should be congruent with the unit and
organization’s strategy. In other words, individual goals must be aligned
with unit and organizational goals.

• Context congntence. The system should be congruent with the
o rganization’s culture as well as the broader cultural context of the
region or country. The importance of context in implementing highly
effective perfo rmance management systems is emphasized throughou t
the book. However, for now, consider the example of an organization
that has a culture in w hich communication is not flu id and hierarchies
are rigid. In such o rganizations, an upward feedback system, in which
individuals receive comments on their perfo rmance from their direct
reports, wo uld be resisted and likely not very effective. Regarding
broader cultural issues, consider that performance management research
published in scholarly journals has been conducted in about 40 countries
around the world.50 Taken together, th is body of work suggests that

Chapter 1 Performance Management in Contex t 1il

culture p lays an important role in the effectiveness of a performance
management system. For example, in countries such as Japan, there is
an emphasis on the measurement of both behaviors (i.e., how people
do the work) and results (i.e., the results of people’s work), whereas in
the United States, results are typically preferred over behaviors. Thus,
implementing a results-only system in Japan is not likely to be effective.
Specifically, although performance is measured similarly around the
world (see s tandard ization criterion below), the interpersonal aspects of
the system are adapted and customized to the local culture. For example,
performance management systems in the subsidiaries are more likely
to d iffer from those in the headquarters as power d istance differences
(i.e., degree to which a society accepts hierarchical differences) increase
between countries.

• Thoroughness. The system should be thorough regarding four dimensions.
First, all employees should be evaluated (including managers). Second ,
all major job responsibilities should be evaluated (including behaviors
and results; a detailed discussion of this topic is presented in Chapter 5) .
Third, the evaluation should include performance spanning the entire
review period, not just the few weeks or months before the review. Finally,
feedback should be given on positive performance aspects as well as those
that are in need of improvement.

• Practicality. Systems that are too expensive, time-consuming, and
convoluted will obviously not be effective. Good, easy-to-use systems
(e.g., performance data are entered via user-friendly Web and mobile
apps) are available for managers to help them make decisions. Finally,
the benefits of using the system (e.g., increased performance and job
satisfaction) must be seen as outweighing the costs (e.g., time, effort,
expense).

• Meaningfulness. The system must be meaningful in several ways. First,
the standards and evaluations conducted for each job function must be
considered important and relevant. Second, performance assessment
must emphasize only those ftmctions that are under the control of the
employee. For example, there is no point in Jetting an employee know she
needs to increase the speed of service delivery when the supplier does
not get the product to her on time. Third, evaluations must take place
a t regular intervals and at appropriate moments. Because one formal
evaluation per year is usually not sufficient, frequent informal reviews
are recommended. Fourth, the system should provid e for the continuing
skill development of evaluators. Finally, the results should be used for
important administrative decisions. People will not pay attention to a
performance system that has no consequences in terms of outcomes that
they value. For example, a study compared performance management
systems in the former East versus former West Germany. Results showed
that in former West German companies, there was a stronger link between
the performance management system and administrative decisions such
as promotions. This relationship was weaker in former East German
companies, and this difference is probably due to the socialist political
system in the former German Democratic Republic, which has had a long-
lasting effect. 51

20 Part I Strategic and General Considerations

• SpecificihJ A good system sho uld be specific: it should provide detailed
and concrete guidance to employees about w hat is expected of them and
how they can meet these expecta tions.

• Identification of effective and ineffective perfonnance. The performance
management system should provide information that allows for the
identification of effective and ineffective performance. That is, the
system should allow for distinguishing between effective and ineffective
behaviors and results, thereby also allowing for the identification of
employees displaying various levels of performance effectiveness.
In terms of administrative decisions, a system that ranks all levels of
performance, and all employees, simila rly is useless.

• ReliabilihJ A good system sho uld include measures of performance that
are consistent and free of error. For exam ple, if two s upervisors provided
ratings of the same employee and performance dimensions, ratings should
be similar.

• Validity. The measures of perform ance sho uld also be valid. In this
context, valid ity refers to the fact that the measures include all relevant
performance facets and do not include irrelevant information. In other
words, measures are relevant (i.e., include all critical per formance facets),
not deficient (i.e., do not leave any important aspects o ut), and are not
contaminated (i.e., do not include factors o utside of the control of the
employee or factors unrela ted to performance) . In short, measures include
what is important and do not assess w hat is not important and outside
of the control of the employee. For example, the gondolieri in the city of
Venice (Italy) have had a performance m anagement system for abo ut 1,000
years. Among other relevant performance dimensions, older versions of
the performance management system required gondolieri to demonstrate
their level of rowing skills and their ability to transport people and goods
safely. These are clearly relevant performance dimensions. However, the
system was contaminated because it included the fo llowing requirement
which is unrelated to performance: “Every brother [sic] shall be obliged
to confess twice a year, o r a t least once and if after a warning, he remains
impenitent, he shall be expelled . .. [from the gondolieri guild].”52

• Acceptabilitt; and fairness . A good system is acceptable and is perceived
as fair by all participants. Perceptions of fairness are subjective and the
only way to know if a system is seen as fair is to ask the participants
about the system. Such perceptions include four distinct com ponents.
First, we can ask about distributive justice, which includes perceptions
of the performance evaluation received relative to the work performed,
and perceptions of the rewards received relative to the evaluation
received, particularly when the system is implemented across countries.
For example, differences in perceptions may be found in comparing
employees from more individualistic (e.g., United States) to more
collectivistic (e.g., Korea) cultures. 53 If a discrepancy is perceived between
work and evaluation or between eval uation and rewards, then the
system is likely to be seen as unfair. 54 Second, we can ask about procedural
justice, which includes perceptions of the procedures used to determine
the ratings as well as the procedures used to link ratings with rewards.
Third, we can assess perceptions regarding interpersonal justice, which

Chapter 1 Performance Management in Contex t 21

refers to the quality of the design and implementation of the performance
management system. For example, what are employees’ perceptions
regarding how they are treated by their supervisors d uring the
performance review meeting? Do they feel that supervisors are empathic
and helpful? Finally, informational justice refers to fairness perceptions
about performance expectations and goals, feed back received, and the
information given to justify administrative decisions. For example, are
explanations perceived to be honest, sincere, and logical? Because a
good system is inherently d iscriminatory, some employees will receive
ratings that are lower than those received by other employees. However,
we should strive to d evelop systems that are regarded as fair from the
distributive, procedural, interpersonal, and informational perspectives
because each type of justice perception leads to different outcomes.55 For
example, a perception that the system is not fair from a distributive point
of view is likely to lead to a poor relationship between employee and
s upervisor and lowered satisfaction of the employee with the supervisor.
On the contrary, a perception that the system is unfair from a procedural
point of view is likely to lead to decreased employee commitment toward
the organization and increased intentions to Jeave.56 One way to improve
all four justice dimensions is to set clear rules that are applied consis tently
b y all s upervisors.

• Inclusiveness. Good systems includ e input from multiple sources
o n an ongoing basis. First, the evaluation process must represent
the concerns of all the people w ho w ill be affected by the outcome.
Consequentl y, employees must participate in the process of creating
the system b y providing input regarding what behaviors or results w ill
be measured and how. This is particularly important in today’s diverse
and global organizations, w hich include individ uals from different
c ultural backgrounds, w hich may lead to different views regarding
what is performance and how it should be measured.57 Second, input
about employee performance should be gathered from the employees
themselves before the performance review meeting.58 In short, all
participants must be given a voice in the process of designing and
implementing the system . Such inclusive systems are likely to lead to
more successful systems, including less employee resistance, improved
performance, and fewer legal challenges. 59

• Openness. Good systems have no secrets. First, performance is evaluated
frequently and performance feedback is provided on an ongoing
basis. Therefore, employees are continually informed of the quality of
their performance. Second, the review meeting consists of a two-way
communication process during which information is exchanged, not
delivered from the s upervisor to the employee without his o r her input.
Third, standards should be clear and communicated on an ongoing basis.
Finally, communications are fac tual, open, and honest.

• Correctability. The process of assigning ratings should minimize subjective
aspects; however, it is v irtually impossible to create a system that is
completely objective because human judgment is an important component
of the evaluation process. When employees perceive an error has been
made, there should be a mechanism through which this error can be

22 Part I Strategic and General Considera tions

TABLE 1-4
Characteristics o f an Id eal
Performance Management
System

corrected. Establishing an appeals process, through which employees can
challenge what may be unjust decisions, is an important aspect of a good
performance management system.

• Standardization. As noted earlier, good systems are standard ized. This
means that performance is evaluated consistently across people and time.
To achieve this goal, the ongoing training of the individuals in charge of
appraisals, usually m anagers, is a must

• Ethicality. Good systems comply with ethical standards. This means that
the supervisor suppresses h is or her personal self-interest in providing
evaluations. In add ition, the supervisor evaluates only performance
dimensions for w hich she has sufficient information, and the privacy of
the employee is respected .60

Table 1-4lists the characteristics of an ideal performance management system.
Implementing a performance management system that includes the characteristics
just described will pay off. A study conducted for Mercer, a global diversified
consulting company, revealed that the 1,200 workers surveyed s tated that they
could improve their productivity by an average of 26% if they were not held
back by a lack of “direction, support, training, and equipment” Successfully
implementing a performance management system can give workers the direction
and s upport that they need to improve their productivity.

Now, think about the perform ance management system implemented in
your organization or the last o rganization for which you worked. Which of the
features listed in Table 1-4 are included in the system you a re considering? How
far is your system from the ideal?

Strategic congruence

Context congruence

Thoroughness

Practicality

Meaningfulness

SpeCifiCity

ldenllficauon of eFFective and ineFFectJve performance

Reliability

Validity

Acceptability and Fairness

InclusiVeness

Openness

Correctabil1ty

Standardization

Ethicality

Chapter 1 Performance Management in Context 23

1-6 IN TEGRATION WITH OTHER H UMAN RESOURC ES
AN D DEVELOPMENT ACTIVITIES

Performance management systems serve as important “feeders” to other human
resources and development activities. For example, consider the relationship
between performance management and training. Performance management
provides information on developmental needs for employees. In the absence of
a good performance management system, it is not clear that organizations will
use their training resources in the most effic ient way (i.e., to train those who
most need it in the most critical areas). One organization that is able to link its
performance management system to training initiatives is General Electric (GE) .
GE’s performance management system includes over 180,000 salaried employees
spread across almost 180 countries. Recently, GE updated their performance man-
agement practices, moving from a formal “once-a-year” performance review to
an app-based system that allows managers to provide more immediate feedback
and coaching to their employees. The app accepts voice and text inputs, attached
documents, and even hand written notes. Managers can use the app’s categories
s uch as “priorities,” “touch points,” “summary,” and “insights,” to send short
messages (up to 500 characters) to individual team members or groups. For
example, a manager can use the app to provide suggestions to employees on
areas of developmental needs and where employees may benefit from additional
training. Based on this data, the manager, employee, and the human resources
department can work together to schedule training classes and off-site training
opportunities. GE is alread y seeing the benefits of this partnership between per-
formance management and training, with some divisions reporting a fivefold
increase in employee productivity.61

Unfortunately, despite the successful GE example, most organizations do
not use performance management systems to determine training content and
waste an opportunity to use the performance management system as the needs
assessment phase of their training efforts.62 Specifically, a survey including 218
HR leaders at companies with a t least 2,500 employees revealed that there is
tight integration between performance management and learning/ development
activities in only 15.3% of the organizations surveyed.63

Performance management also provides key information for workforce plan-
ning. As noted earlier, an organization’s talent inventory is based on information
collected through the performance management system. Development plans
provide information on what skills will be acquired in the near future. This in-
formation is also used in making recn1itment and hiring decisions. Knowledge
of an organization’s current and future talent is important when deciding what
types of skills need to be acquired externally and what types of skills can be
found within the organization.

Finally, there is an obvious relationship between performance management
and compensation systems. Compensation and reward decisions are likely to be
arbitrary in the absence of a good performance management system, which is
an issue described in detail in Chapter 10.

In short, performance management is a key component of talent management
in organizations. It allows for assessing the current talent and making predictions

24 Part I Strategic and General Considerations

about fu ture needs both at the individual and organizational levels. Implementing
a successful performance management system is a requirement for the successful
implementation of o ther HR functions, including training, workforce planning,
recruitment and selection, and compensation.

1-7 THE FUTURE IS NOW: PERFORMANCE MANAGEMENT
AND THE NATURE O F WORK AND ORGANIZATIONS TO DAY

We know that performance management is pervasive across industries and around
the world today. But, performance management has a long history and is actually
not something new. In fact, the Wei dynasty (mtiji}j) in China, which was a Han
dynasty that was in power between years 206 BCE and 220 CE, implemented
a performance management system for government employees. An important
component was something called the nine-rank system, by which workers were
rated based on their performance. A low ranking meant the worker would be
fired. Fast forward to nineteenth-century England. The performance of officers
in the Royal Navy was routinely rated by their peers. At approximately the same
time, Robert Owen, a Welsh industrialist, set up a large cotton mill in New Lanark
(Scotland), which can still be visited today. He mounted a block of wood on each
machine with four sides painted, based on a performance rating system: white
was best, then yellow, then blue and the worst, which was black. At the end of
each workday, the marks were recorded and each worker was evaluated by turn-
ing the block to the appropriate s ide, which would face the aisle. Owen would
walk the mill floor daily to see the block color on each machine. It is safe to say
that performance management is one of the o ldest topics in talent management
in the history of human kind .

But the nature of work and organizations today is quite different from those
in China about 2,000 years ago and England and Scotland in the nineteenth
century. Due to technological advancements, globalization, and demographic
changes, we are now witnessing nothing less than a new industrial revolution.
Technological changes have occurred on an ongoing basis in the past two cen-
turies. But, the Internet and cloud computing have fundamentally changed the
way people work.64 These advancements give everyone in the organization, a t
any level and in every functional area, amazing access to information- instan-
taneously from anywhere. Vast amount of data, what is often referred to as “Big
Data,” are collected on an ongoing basis: what employees are doing, what they
are producing, with whom they are interacting, and where they are doing what
they are doing. What does this mean for performance management? The old
days of paper-and-pencil performance evaluations are mostly gone. So are the
old days of static in-house enterprise technology platforms. Instead, performance
management can be implemented using dynamic online systems accessed via
Web and mobile apps.65

The use of cloud computing for performance management is much more than
a mere translation of paper evaluation forms to digital format. Cloud computing
technology allows supervisors and peers to provide performance eval uations
on an ongoing basis and in real time. It allows employees to receive feedback
also on an ongoing basis and in real time. Related to the strategic and informa-
tional purposes of performance management, it allows organizations to update

Chapter 1 Performance Management in Contex t 25

goals and priorities and communicate them also real-time to all organizational
members, thereby allowing them to also update their team and individual goals
and priorities. So, the cascading of goals, which we will discuss in Chapter 2,
can be implemented s uccessfully across thousands of employees in just a few
weeks. Also, cloud computing allows for a clearer understanding of the role of
managers in the performance management process. For example, how often are
they communicating with direct reports about their performance? How often
do “check-ins” take place? Companies such as Zalando, an e-retailer delivering
merchandise to about 15 European countries, are already implementing these
ad vancements. Specifically, Zalando put in place an online app that crowdsources
performance feedback from meetings, problem-solving sessions, completed projects,
launches, and campaigns.66 Zalando employees can request feedback from their
s upervisors, peers, and internal customers that Jets people provide both positive
and more critical comments about each other in a playful and engaging way. An
important innovation is that the system then weighs responses by how much
exposure the rater has to the ratee. Every time an employee requests feedback,
the online app prompts a list of questions that can be answered by moving a
s lider on the touchscreen of a smart phone or tablet. This is a good example of
“constant feedback” (Chapter 9 addresses issues about feedback in more detail) .
Clearly, this is very different from a traditional annual performance appraisal,
which is currently the target of sharp criticism.

The availability of Big Data is also changing performance management in
important ways. Specifically, about 80% of organizations use some type of electronic
performance monitoring (EPM) .67 In its early days, EPM included s urveillance
camera systems and computer and phone monitoring systems. But, today EPM
includes wearable technologies and smartphones, including Fitbits and mobile
GPS tracking applications. Indeed, in the contemporary workplace, every email,
instant message, phone call, and mouse-dick leaves a digital footprint, all of which
can be used as part of a performance management system. But we should not be
enamored by the presence of Big Data, and instead, should think about “Smart
Data.” Beginning with Chapter 4, we will discuss how to define, measure, and
gather data that are useful and accurate.

Technological advancements and the Internet have also served as catalysts
for globalization. Consider the example of a firm that is based in the United
States, does its software programming in Sri Lanka, its engineering in Germany,
its manufacturing in China, and has a call center in Brazil. All of this is possible
due to improved Web-based communications and flow of information. And
full-time, part-time, contract employees, and consultants all work together
across time zones on a daily basis without having ever met in person- although
they may have regular interactions using Skype. Performance management is
a global phenomenon and organizations all over the world are implementing
various types of performance management systems. But as discussed earlier,
context matters. The availability of online tools allows for the customization
of performance management systems such that every step of the performance
management system, as discussed in the next chapter, can be customized and
tailored to local contexts. For example, consider the case of providing feedback.
People from m ore individualistic cultures, s uch as the United States, expect to
receive feedback and many performance management systems include training
for s upervisors on how to provide one-on-one feedback in the most effective
way.68 However, in collectivistic cultures, such as China and Guatemala, open

26 Part I Strategic and General Considerations

discussions about an individual’s performance clash with cultural norms about
harmony and the d irect report may perceive negative feedback as an embarrass-
ing loss of face. This is w hy successful performance management systems need
to consider local norms-including societal and organizational cultural issues.
Chapter 7 addresses several issues about how to implement successful perform-
ance management systems.

Finally, another important change relates to demographic trends. In the United
States and many other Western countries, baby boomers (i.e., born approximately
between 1946 and 1964) are retiring in large numbers, members of Generation X
(i.e., born approximately between 1965 and 1976) and Generation Y or Millennials
(i.e., born approximately between 1977 and 1995) are now entering the workforce
in large numbers. Gen X and Gen Y employees are “digital natives.” Also, they
are used to immediate feedback- just like when receiving a grade immediately
after completing a Web-based exam in high school and college. A performance
management system must consider generational differences to be successful.
For example, it is important to include “check-in” mechanisms to give managers
and direct reports the opportunity to discuss performance issues on an ongoing
and real-time basis. These issues will be addressed in Chapter 9 and elsewhere.

In closing, to be successful and produce the benefits for employees, managers,
the HR function, and organizations listed in Table 1-2, performance management
must evolve from a dreaded and painful once-a-year “soul-crushing” exercise
to an agile and dynamic performance enabler. But as the saying goes, the devil
is in the details. The remainder of the book will delve deep into strategic and
operational steps to design and implement state-of-the science performance
management systems.

SUMMARY POINTS

• Performance management is a continuous process of identifying,
measuring, and developing the performance of individuals and teams and
aligning performance with the strategic goals of the organization.

• Although many organizations have systems labeled “performance
management,” they usually are only performance appraiSill systems.
Performance appraisal emphasizes the assessment of an employee’s
strengths and weaknesses and does not include strategic business
considerations. Also, performance appraisal systems usually do not
include extensive and ongoing feedback that an employee can use to
improve her performance in the future. Finally, performance appraisal is
usually a once-a-year event that is driven by the HR department, whereas
performance management is a year-round way of managing business that
is driven by managers.

• Performance management systems serve multip le purposes. First, they
serve a strategic purpose because they help link employee and team
activities with the organization’s mission and goals; they identify results
and behaviors needed to carry out strategy; and they maximize the extent
to which employees exhibit the desired behaviors and prod uce the desired
results. Second, they serve an administrative purpose in that they produce
information used by the reward system and other HR decision making
(e.g., promotions, termination, d isciplinary actions) . Third, they serve

Chapter 1 Perfo rmance Management in Contex t 27

an informational purpose because they enable employees to learn about
their performance in relation to the organization’s expectations. Fourth,
they serve a developmental purpose in that performance feedback allows
individuals to Jearn about their strengths and weaknesses, to identify
trairting needs, and to make better decisions regarding job assignments.
Fifth, performance management systems serve an organizational
maintenance purpose because they provide useful information for
workforce planning and for evaluating the effectiveness of other HR
systems (e.g., comparing performance before and after an expensive
trairting program to determine whether training made a difference).
Finally, performance management systems also serve a documentation
purpose; for example, they support HR decisions and help meet legal
requirements.

• Implementing a well-designed performance management system has
many advantages. From the perspective of employees, a good system
enhances self-insight and development, increases self-esteem and
motivation, helps improve performance, clarifies job tasks and duties,
and clarifies the definitions of job and criteria. From the perspective of
managers, good systems allow them to gain insight into employees’
activities and goals, allow for more fair and appropriate administrative
actions, allow them to communicate organizational goals more clearly, Jet
them differentiate good and poor performers, help drive organizational
change, encourage voice behavior, and improve employee engagement.
Finally, from the perspective of the HR function and the organization,
a good system provides protection from litigation and can also help
minimize employee misconduct, which can have so many negative
consequences for the organization.

• Poorly designed and implemented performance management systems
can have disastrous consequences for all involved. For example, star
employees may quit; those who stay may be less motivated; and
relationships (e.g., supervisor-direct report) can suffer irreparable
damage. Also, poorly designed systems can be biased, resulting in costly
lawsuits and wasted time and resources. In the end, low-quality or
poorly implemented systems can be a source of enormous frustra tion and
cynicism for all involved . Many of the negative consequences associated
with poor performance management systems are related to dyshmctional
performance ratings. But performance ratings are the canary in the coal
mine, rather than the problem per se. In other words, bad ratings serve as
signals that the performance management system is broken.

• Ideal performance management systems are rare. Such ideal systems are:
• congruent with strategy (i.e., there is a clear link among individual,

unit, and organizational goals)
• congruent with context (i.e., the system is consis tent with norms based

on the culture of the organization and the region and country in which
the organization is located)

• thorough (i.e., all employees are evaluated, they include all relevant
performance dimensions)

• practical (i.e., they do not require excessive time and resources)
• meaningful (i.e., they have important consequences)
• specific (i.e., they provide a concrete employee improvement agenda)

28 Part I Strategic and General Considerations

• able to identify effective and ineffective performance (i.e., they help
distinguish employees at different performance levels)

• reliable (i.e., the measurement of performance is consistent)
• valid (i.e., the measures of performance are not contaminated or

deficient)
• acceptable and fair (i.e., people participating in the system believe the

processes and outcomes are just)
• inclusive (i.e., they include input from multiple sources on an ongoing

basis)
• open (i.e., they are transparent and there are no secrets)
• correctable (i.e., they include mechanisms so that errors can be

corrected)
• standardized (i.e., performance is evaluated consistently across people

and time)
• ethical (i.e., they comply with ethical standards)

• Many trade-offs take place in the real-world implementation of
performance management systems. However, the closer the system is to
the ideal characteristics, the greater the return will be for the employees,
managers, the HR function, the organization as a whole.

• A performance management system is the key factor used in determining
whether an organization can manage its human resources and talent
effectively and has important linkages with other HR systems. For
example, performance management provides information on who should
be trained and in what areas, which employees should be rewarded,
and what type of skills are Jacking a t the organization or unit level.
Therefore, performance management also provides information on
the type of employees that should be hired. When implemented well,
performance management systems provide critical information that allows
organizations to make sound decisions regarding their people resources.

• Performance management is adapting to the current nature of work and
organizations involving technological and demographic changes and
g lobalization. First, the Internet and cloud computing have fundamentally
changed the way people work. Accordingly, performance management
can be implemented using dynamic online systems accessed via Web and
mobile apps that give everyone in the organization, at any level and in
every functional area, amazing access to information- instantaneously
from anywhere and at any time. Second, performance management is a
g lobal phenomenon and organizations are implementing various types
of performance management systems worldwide. Thus, the availability
of online tools allows for the custornization of performance management
systems, and every step of the performance management system , as
d iscussed in subsequent chapters, can be customized and tailored to
local and cultural contexts. Third, Millennials are now entering the
workforce in large numbers and they are “digital natives.” To maximize
its contributions, a successful performance management system must
consider generational differences.

As should be evid ent by now, implementing an id eal performance manage-
ment system requires a substantial amount of work, expertise, and effort. So, in
a way, performance management is rocket science. The process of implementing

Ch apter 1 Performance Management in Context 29

a performance management system does not start when the system is put into
place. The process starts much earlier because unless specific conditions are pres-
ent before the system is implemented, the system will not achieve its multiple
purposes. Chapter 2 provides a description of the entire performance manage-
ment process.

EXERCISE 1-1 IDEAL VERSUS ACTUAL PERFORMANCE MANAGEMENT SYSTEM

The table below summarizes the key characteristics of an ideal performance
management system, as discussed in this chapter. Think about a performance
management system you know. This could be the one implemented at your cur-
rent (or most recent) job. U you do not have information about such a system,
talk to a friend or acquaintance who is currently working and gather information
abou t the system used in his or her organization. Use theY IN column in the table
to indicate whether each of the features is present (Y: yes) or not (N: no) in the
system you are considering. In some cases, some elements may be present to a
matter o f degree and may require that you include some additional information
in the Comments column.

Next, prepare a brief report addressing the following issues:

1. How many of the 15 characteristics of an ideal system are present in the
system you are evaluating?

2. Identify two characteristics that are not present a t all, or barely present, in
your system . Discuss the implications that the Jack of these characteristics
has on the effectiveness of the system.

3. Identify one characteristic that is clearly present in your system . Discuss
the implications of the presence of this characteristic on the effectiveness
of the system .

4. Identify the characteristic in your system that is furthest from the ideal.
What can be done to produce a better alignment between your system
and the ideal? Who sho uld be responsible for d oing w hat so that your
system becomes “ideal” regarding this characteristic?

Characteristics Y/N Definition Comments

Strategic
congruence

Context
congruence

Thoroughness

IndiVIdual goals are aligned w 1th uOil and orga-
nizational goals.

The system Is congruent with norms based on
the organization’s culture.

The system Is congruent with norms based on
the culture of the region and country where
the organization is located.

All employees are evaluated.

All major job respons1biht1es are evaluated.

Evaluations include performance spanning the
enure review period.

Feedback is proVided on both posit1ve and
negat1ve performance.

(Continued)

30 Part I Strategic and General Considera tions

Practicality

Meaningful-
ness

Specificity

ofeffectlve
and ineffective
performance

Reliability

Valid1ty

Acceptability
and fairness

It is readily available for use.

It is easy to use.

It is not too expensive or time-consum1ng.

It is acceptable to those who use 1t for
decisions.

Benefits o f the system outweigh the costs.

Standards and evaluations for each job func-
tion are important and relevant.

Only the functions that are under the control
of the employee are measured.

Evaluations take place at regular inteNals and
at appropriate moments.

System provides for continuing skill develop-
ment of evaluators.

Results are used for important administrative
decisions.

Detailed gwdance Is provided to employees
about what is expected of them and how they
can meet these expectations.

The system distinguishes between effective
and ineffective behaviors and results, thereby
also identifying employees displaying various
levels of performance effectiveness.

Measures of performance are consistent.

Measures of performance are free of error.

Measures include all critical performance
facets.

Measures do not leave out any important per-
formance facets.

Measures do not include factors outside em-
ployee control or unrelated to performance.

Employees perceive the performance evalua-
tion and rewards received relative to the work
performed as fair {distributive j ustice).

Employees perceive the procedures used
to determine the ratings and subsequent re-
wards as fair (procedural just1ce).

Employees perceive the way they are treated
in the course o f designing and implementing
the system as fair (Interpersonal just1ce).

Employees perceive the information and
explanatiOns they rece1ve as part of the per-
formance management system as fair (Infor-
matiOnal justice).

Set clear rules that are applied consistently by
all supeN!sors.

Chapter 1 Performance Management In Context 31

– – —- – — — —— ————- —- – ——-

Characteristics Y/N Definition Comments

Inclusiveness

Openness

Correctabihty

Standardization

Ethicality

Employee input about performance 1S
gathered from the employees before the ap-
praisal meeung.

Employees participate in the process of creat-
ing the system by prov1ding input on what be-
haviors and results will be measured and how
performance should be measured.

MuiUple sources of informauon (e.g .. peers, su-
pervisors, direct reports) are used to evaluate
performance

Performance is evaluated frequently and feed-
back is provided on an ongoing basis.

Appraisal meeting is a two-way communication
process and not one-way communication de-
livered from the supe.visor to the employee.

Standards are clear and communicated on an
ongoing basis.

Communications are factual, open, and honest.

There Is an appeals process. through which
employees can challenge unjust or incorrect
decisions.

Performance is evaluated consistently across
people and time.

Ongoing training of the individuals in charge
of appraisals increases consistency.

Supervisors suppress their personal self-Inter-
est in prov1ding evaluauons.

Supervisors evaluate performance dimensions
only for which they have sufficient informat1on.

Employee privacy is respected.

EXERCISE 1-2 DISTINGUISHING PERFORMANCE MANAGEMENT SYSTEMS
FROM PERFORMANCE APPRAISAL SYSTEMS

What are the differences between a performance appraisal system and a perfor-
mance management system? How are the two systems related to each other?
After answering these questions, consider the following 11 criticisms. Which
of the following criticisms pertain to performance appraisal systems, but not to
performance management systems? Which criticisms pertain to both performance
appraisal and performance management systems? Use Xs on the table below to

32 Part I Strategic and General Considerations

denote answers. Then, provide an explanation for categorizing the 11 criticisms
in the way you did .

Criticism 1: ” [There can be] inconsistency between comments and scores on
an employee’s evaluation.”

Criticism 2: “The annual performance review is a bad management tool. To
start with, it is not timely. If your direct report is deficient in some ways,
you wait 11 months to say something about it. How does that help next
week’s performance?”

Criticism 3: “The evaluation is usually a hit-and-run exercise. It rarely
takes the form of a dialogue between the supervisor and direct report
and, instead it is an isolated event and not part of performance/ career
management more generally.”

Criticism 4: “A number of years ago, the U.S. Equal Employment
Opportunity Commission (EEOC) created a ‘ Like Me’ task force. Its
general conclusion- there was a human tendency to favor employees who
are like the managers making the employment assessment.”

Criticism 5: “Few managers jump with glee at appraisal time. When they
triage workplace demands, many times appraisals end up at the bottom.
As a result, late appraisals are often the norm and not the exception.”

Criticism 6: “Because performance is ultimately measured on a nonstop,
continuous basis, managers may become overwhelmed with cognitive
load, paperwork, and generally more work to do.”

Criticism 7: “What’s left is the more important strategic role of raising the
reputational and intellectual capital of the company- but HR is, it turns
out, uniquely unsuited for that. ”

Criticism 8: “Goal-setting, when done wrong, gives the employee the wrong
goals-those, for instance, which are not aligned with the organization’s
strategic orientation.”

Criticism 9: “Often, an employee with substandard performance is
evaluated as meeting expectations or even better, and the average
employee receives an above-average evaluation.”

Criticism 10: “[The process does not involve helping or making employees]
set goals for the future.”

Criticism 11: “Coaching can be tricky. When done wrong, it can be
devastating. For example, a coach’s feedback can have detrimental effects
if it focuses on the employee as a whole, as opposed to specific work
behaviors at work.”

Chapter 1 Performance Management in Context 33

Pertains to Pertains to Performance Pertains to Both .
Mana ement S stems Performance Appraosal

Appraosal Systems
1

9 y and Management
Criticisms only on y Systems

2

3

4

5

6

7

8

9

10

11

Source: Some of these criticisms were derived from the fo llowing sources: (a) Aguinis, H., joo, H., &
Gottfredson, R. K.. (2011). Why we: hate: pe:rfonnance management- And w hy we should love it. Business Hori·
zons, 54, 503-507; (b) Adler, S., Campion, M., Colquilt, A., G ru bb, A., Murph) K., O llander-Krane, R., & Pulakos,
E. (2016). Getting rid of pe:rfonnance: ratings: Genius or fo lly? A debate:. Industrial aud Organizational Psychology,
9, 219-252; (c) Ryan, L. (2009, june 30). CEOs should skip performance reviews in 2009. Bloomberg Busi11e<>”tV<‘tk.
Retrieved from hltp://wMv.businessweek.com/managing/contenl/jun2009/ca20090630_736385
.htm; (d) Segal,). A. (2011,january 14). The dirty doum performanceappraisalerrors. Bloomberg Businesstvt<‘k.
Retrieved from http://W•,.rw.businessweek.com/ managing/ content/jan2011 I ca201 10114_156455.htm; and
(e) Hammonds, K. H. (2005, Augusl 1). Why we hate HR. Fnst Compa11y. Retrieved from hltp://wMv
.fastcompany.com/magazine/97 /open_hr.html?page=Oo/o2CO

CASE STUDY 1-1

Performan ce Man agement at N etwork Solutions, Inc .

N etwork Sol utions, Inc.,
69 is a world wide

leader in hardware, software, and services
essential to computer networking. Until

recently, Network Sol utions, Inc., used more than
50 different systems to measure performance within
the company-many employees did not receive a
review; fewer than 5% of all employees received
the lowest category of rating; and there was no
recognition program in place to reward high achiev-
ers. Overall, it was recognized that performance
problems were not being addressed, and tough
pressure from competitors was increasing the costs
of managing human performance ineffectively. In
addition, quality initiatives were driving change
in several areas of the business, and Network
Solutions decided that these initiatives s hould
also apply to “people quality.” Finally, Network
Solutions wanted to improve its ability to meet its
organizational goals and realized that one way of
doing this would be to ensure that they were linked
to each employee’s goals.

Given this situation, Network Solutions’ CEO
announced that he wanted to implement a forced
distribution performance management system in
w hich a set percentage of employees were classified
in each of several categories (e.g., a rating of 1 to the
top 20% of performers; a rating of 2 to the middle
70% of performers; and a rating of 3 to the bottom
10% of performers). A global cross-divisional HR
team was put in place to des ign and implement
the new system. The firs t task for the design team
was to build a business case for the new system by
showing that if organizational strategy was carried
down to team contributions and team contributions
were translated into individual goals, then business
goals would be met. Initially, the program was rolled
out as a year-round people management system
that would raise the bar on performance manage-
ment a t Network Solutions by al igning individual
performance objectives with organizational goals
by focusing on the development of all employees.

The desired o utcomes of the new system included
raising the performance level of all employees,
identifying and retaining top talent, and identifying
low performers and improving their performance.
Network Solutions also wanted the performance
expectations for all employees to be clear.

Before implementing the program, the design
team received the support of senior leadership by
communicating that the performance management
system was the future of Network Solutions and by
encouraging all senior leaders to ensure that those
reporting directly to them tmderstood the process
and also accepted it. In addition, they encouraged
senior leaders to use the system with all of their di-
rect reports and to demand and utilize output from
the new system. Next, the design team encouraged
the senior leaders to stop the development and use
of any other performance management system, and
explained the need for standardization of perfor-
mance management across all divisions. Finally,
the team asked senior leaders to promote the new
program by involving employees in the training
of talent management and by assessing any needs
in their divisions that would not be addressed by
the new system. The Network Solutions global
performance management cycle consisted of the
following process:

1. Goal cascading and team building
2. Performance planning
3. Development planning
4. Ongoing discussions and updates between

managers and employees
5. Annual performance s ummary

Training resources were made available on Net-
work Solutions’ intranet for managers and individual
contributors, including access to all necessary forms.
In addition to the training available on the intranet,
one- to two-hour conference calls took place before
each phase of the program was begun.

Today, part of the training associated with the
performance management system revolves around
the idea that the development planning phase of
the system is the joint year-round responsibility of
managers and employees. Managers are responsible
for sched uling meetings, guiding employees on pre-
paring for meetings, and finalizing all development
p lans. Individual contributors are responsible for
documenting the developmental plans. Both man-
agers and employees are responsible for preparing
for the meeting, filling out the development plan-
ning preparation forms, and attending the meeting.

With forced distribution systems, there is a set
number of employees that have to fall into set rating
classifications. As noted, in the Network Solutions
system, employees are given a rating of 1, 2, or 3.
Individual ratings are determined by the execution
of annual objectives and job requirements as well
as by a comparison rating of others at a similar
level at Network Solutions. Employees receiving
a 3, the lowest rating, have a specified time period
to improve their performance. If their performance
does improve, then they are released from the plan,
but they are not eligible for stock options or salary
increases. If performance does not improve, they can
take a severance package and leave the company or
they can s tart on a performance improvement plan,
w hich has more rigorous expectations and time lines
than did the original action plan. If performance
does not improve after the second period, they are
terminated without a severance package. Individu-
als with a rating of 2 receive average-to-high salary
increases, stock options, and bonuses. Individ uals
receiving the highest rating of 1 receive the highest
salary increases, stock options, and bonuses. These
individuals are also treated as “high potential”
employees are given extra development opportu-
nities by their managers. The company also makes
significant efforts to retain all individuals who
receive a rating of 1.

Chapter 1 Performance Management in Context 311

Looking to the future, Network Solutions
plans to continue reinforcing the needed cultural
change to support forced distribution ratings. HR
Centers of Expertise of Network Solutions continue
to educate employees about the system to ensure
that they understand that Network Solutions still
rewards good performance; they are just measuring
it in a different way than in the past. There is also a
plan to monitor for and correct any unproductive
practices and implement correc ting policies and
practices. To do this, Network Solutions plans on
continued checks with all stakeholders to ensure that
the performance management system is serving its
intended purpose.

Consider Network Solutions’ performance man-
agement system in light of what we discussed as an
ideal system. Then, answer the following questions:

1. Overall, what is the overlap between
Network Solutions’ system and an ideal
system?

2. What are the features of the system
implemented at Network Solutions that
correspond to the features described in the
chapter as ideal characteristics? Which of
the ideal characteristics are missing? For
which of the ideal characteristics do we need
additional information to evaluate whether
they are part of the system at Network
Solutions?

3. Based on the description of the system at
Network Solutions, what do you anticipate
will be some advantages and positive
outcomes resulting from the implementation
of the system?

4. Based on the description of the system at
Network Solutions, what do you anticipate
will be some disadvantages and negative
outcomes resulting from the implementation
of the system?

CASE STUDY 1-2

Performan ce Man agem ent at CRB, In c.

Car Restoration Business (CRB, Inc.) is interviewing
you for a position as its human resources manager
on a part-time basis, working 20 hours per week,
while you complete your degree. You would be the
first HR manager they have ever been able to afford
to hire, and the husband and wife owners (Al and
Mary Brown) have been operating the small business
for 10 years. In addition to you, they recently hired
a part-time janitor. This brought the paid staff to six
full-time employees: a foreman who is responsible
for scheduling and overseeing the work, two auto
body repair workers, a person who d isassembles
and reassembles cars, a painter, and a detail person
who assis ts the painter with getting the car ready
to paint and sanding and waxing it afterward. AI
Brown handles sales and estimating prices, runs
errands and chases down parts, and envisions the
future. Mary has been doing the bookkeeping and
general paperwork. The owners and employees
are very proud of CRB’s reputation for doing high-
quality work in the restoration of old cars made as
far back as the 1930s.

CRB pays its employees based on “flagged
hours,” which are the number of paid hours that
were estimated to complete the work (e.g., the
estimate may say that it will take three hours to
straighten a fender and prepare i t for painting.
When the auto body repair worker has completed
s traightening the fender, he would “flag” comple-
tion of three hours, whether it took him two or
s ix hours to actually complete the work. It is to
his benefit to be very fast and very good a t what
he does).

CRB pays the workers 40% of what it charges
th e cus tomer for the flagged hours; the other funds
are used to pay the employer’s share of the taxes
and overhead, with a small margin for profit. The
foreman, who does some “flagged hours” auto
body repair himself, is also paid a 5% commission

on all the labor hours of the o ther employees, after
the car is accepted as complete by the customer
and the customer pays for the completed work.

Employees are given feedback by AI, the fore-
man, and by customers on an infrequent basis. Right
now, everything is going well and the employees are
working as a team. In the past, the situation was less
certain and some employees had to be fired for poor
work. When an employee filed for government-paid
unemployment compensation saying that h e was out
of work through no fault of his own, CRB challenged
the filing, and was able to prove that Al had given a
memo to the employee requesting improvements in
quality o r quantity of work. There has never been a
formal planning or appraisal process at CRB.

Mary Brown is reading about performance
management and is wondering whether CRB
should implement such a system. Please answer
Mary’s questions based on your understanding of
this small business:

1. Would a performance management system
work for our small business?

2. Discuss benefits that such a system would
provide for us as owners and for our
employees.

3. Explain any dangers our company faces if
we do not have a performance management
system. What could be a problem if we go
with a poorly implemented system?

4. What 10 characteristics, a t a minimum,
should we include in a performance
management system? Explain your answer
with one to three sentences for each
characteristic you recommend.

5. Explain how we could tie o ur current reward
system to a performance management
system.

Chapter 1 PerFormance Management in Context 37

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chapter

2
Performance
Management Process

One bad day from one member of my staff doesn’t mean they are not really good
at their jobs the rest of the time. I play a long game in terms of management.

– Helen McCabe

Learning Objectives
By the end of this chapter, you will be able to do the following:

1. Articulate that performance management is an ongoing and
circular process that includes the interrelated components of
prerequisites. performance planmng. performance execut1on.
performance assessment. and performance review.

2. Argue that the poor implementation of any of the performance
management process components has a negative impact on
the system as a whole and that a dysfunctional or disrupted
link between any two of the components also has a negative
impact on the entire system.

3. Assemble important prerequisites needed before a
performance management system is implemented. including
knowledge of the organization·s mission and strategic goals
through strategic planning and knowledge of the job in
question through work analysis.

4. Conduct work analysis to determine the tasks: knowledge.
technology and other skills. and abilities (KSAs): work

activit1es. work context and working conditions of a partiCular
job; and produce a JOb description that incorporates the KSAs
of the JOb and information on the organization and unit mission
and strategic goals.

5. Distinguish results from behaviors and understand the
need to consider both as well as development plans in the
performance planning stage of performance management.

6. Critique the employee·s role in performa nce execut1on and
distinguish areas over which the employee has primary
responsibility from areas over which the manager has primary
responsibility.

7. Recommend the employee·s and the manager·s responsibility
in the performance assessment phase.

8. Be prepared to participate in appraisal meetings that involve
the past. the present. and the future.

41

42 Part I Strateg ic and General Considerations

FIGU RE 2 -1
O veNiew of Performance
Management Process and its
Components

As described in Chapter 1, performance management is an ongoing process. It
certainly does not take place just once a year. Also, performance management is
a continuous process and includes several components. 1 Moreover, performance
management is not “owned” by the HR function. Clearly, the HR function plays
a critical role in terms of offering support and resources such as in-person and
online training opportunities and online tools that can be used to measure per-
formance and share feedback. But performance management must be owned and
managed by each unit, and supervisors play a critical role. After all, the principal
responsibility of managers is to manage, right?

The components of a performance management system are closely related
to each other and the poor implementation of any of them has a negative
impact on the performance management system as a whole. The components
in the performance management process are shown in Figure 2-1. But here is
an important clarifica tion about this chapter: It is a sort of preview because it
provides an overview and brief description of each of these components. So,
when appropriate, the various sections in this chapter refer to which subsequent
chapters include more detailed information on various topics. Let us start with
the prerequisites.

Chapter 2 Performance Management Process 43

2-1 PREREQUISITES
There are two important p rerequisites that are required before a performance
management system is implemented. Firs t, knowledge of the organization’s mis-
s ion and strategic goals. Second, knowledge of the job in question.2

2·1·1 Strategic Planning
Chapter 3 will address the stra tegic planning p rocess in d etail. For now, please
consider that knowledge of the organization’s mission and strategic goals is a
result of s trategic planning. Also, as will be discussed in detail in Chapter 3, the
s trategic planning p rocess may actu ally take place after the mission and vision
sta tements are created. In other words, there is a constant back and forth between
mission and vision and strategic planning.

Strategic planning allows an o rganization to clearly d efine its purpose and
reasons for existing, w here it wants to be in the future, the goals it wants to
achieve, and the strategies it w ill use to a ttain these goals. Once the goals fo r
the entire organization have been established, similar goals cascad e downward,
with units setting objectives to s upport the organization’s overall mission and
objectives. The cascading continues d ownward until each employee has a set o f
goals compatible with those of the entire organization. The same process applies
to large, small, and m edium-size organizations.

Unfortunately, it is often the case that m any organizational units a re not
in tune w ith the organization’s strategic d irection. However, there seems to be
a trend in the positive direction. For example, a study includ ing public sector
o rganizations in Queensland, Australia, showed a fairly high level of strategic
integration of the h uman resources (HR) function. Specifically, approximately
80% of the organizations that participated in the study were categorized as hav-
ing achieved the highest level of strategic integration. This level is characterized
b y a dynamic and multifaceted linkage based on an “integrative relationship
between people management and stra tegic managem ent process.” 3 Recall that
an important objective of any performance m anagement system is to enhance
each employee’s contribution to the goals of the organization. If there is a Jack
o f clarity regard ing w here the organization wants to go, o r if the relationship
between the organization’s mission and strategies and the unit’s mission and
strategies is not clear, there will be a Jack of clarity regarding what each e mployee
needs to do and achieve to help the o rganization get there.

2-1-2 Work (Job) Ana lysis
The second important prerequisite before a performance m anagement system is
implemented is to understand the job in question. Altho ugh, traditionally, the
literature has used the term “job,” the use of “work” is m ore appropriate today
because job seems to convey the notion that there is a s tatic, constant, and even
rigid set of tasks and responsibilities.4 In fact, g iven changes in the nature o f
work and o rganizations (as discussed in Chapter 1), jobs are anything but static.
Because people are asked to work on new projects, participate in d ifferent teams,
and use new apps and technologies on an ongoing basis, jobs also change on
an ongoing basis. So, because new tasks and responsibilities are created all the

44 Part I Strategic and General Considerations

FIGURE 2 -2

time, new “jobs” are also created all the time and old ones are redesigned on
an ongoing basis.5 From this point onward, we will still use the term “job,” but
make sure you keep in mind this dynamic point of view.

Understanding employees’ tasks and responsibilities is done through work
analysis. Work analysis is a process of determining the key components of a par-
ticular job, including activities, tasks, products, services, and processes. A work
analysis is a fundamental prerequisite of any performance management system
because without a work analysis, it is difficult to understand w hat constitutes the
required duties for a particular position. If we do not know what an employee
is s upposed to do on the job, we will not know what needs to be evaluated and
how to do so.

As a result of a work analysis, we obtain information regarding the tasks to
be carried out and the knowledge, skills, and abilities (KSAs) required of a par-
ticular job. Knowledge includes having the information needed to perform the
work, but not necessarily having done it earlier. Skills refer to required attributes
that are usually acquired by having done the work in the past. Ability refers
to having the physical, emotional, intellectual, and psychological aptitude to
perform the work, though neither having done the job nor having been trained
to do the work is required .6

The tas ks and KSAs needed for the various jobs are typically presented in the
form of a job description, which summarizes the job duties, required KSAs, and
working conditions for a particular position. As an illustration, see Figure 2-2.
This job description includes information about w hat tasks are performed (e.g.,
operation of a specific type of truck). It also includes information about the required
knowledge (e.g., manifests, bills of Jading), skills (e.g., keeping truck and trailer
under control, particularly in difficult weather conditions), and abilities (e.g.,
physical and spatial abilities needed to turn narrow corners).

Work Analysis Methods Work analysis can be conducted using observation,
off-the-shelf questionnaires, or interviews.7 Data are collected from job incumbents
(i.e., those doing the job at present) and their supervisors. Alternatively, if the job
is yet to be created, data can be gathered from the individual(s) responsible for
creating the new position and those who will supervise individ uals in the new

position. Observatio n methods include job analysts

Job Description for Trailer Truck Driver. Civilian Personnel
Management Service. U.S. Department of Defense

watching incumbents do the job, or even trying to do
the work themselves, and then, producing a description
of what they have observed. This method can be subject
to biases because job analysts may not be able to distin-
guish important from unimportant tasks. Such analysis
may not be suitable for many jobs. For example, a job
analyst could not do the work of a police officer for safety
reasons, or the work of a software programmer for Jack
of knowledge and skills to do the work. Off-the-shelf
methods involve distributing questionnaires, including
a common list of tasks or KSAs, and asking individuals
to fill them out, indicating the extent to which each task
or KSA is required for a particular job in question. These
generic off-the-shelf tools can be practical, but they might
not capture the nuances and idiosyncrasies of jobs out of

Operates gasoline- or diesel-powered truck or truck trac-
tor equipped w1th two or more drlv1ng wheels and w1th
four or more foiWard speed transmissions. which may
1nclude two or more gear ranges. These vehicles are
coupled to a trailer or sem1trailer by use of a turntable (fifth
wheel) or pintle (pivot) hook. Drives over public roads to
transport materials. merchandise. or equipment. Performs
difficult dnving tasks such as backing truck to 1oad1ng
platform. turning narrow corners. negotlaung narrow pas-
sageways, and keeping truck and trailer under control,
partiCularly on wet or icy highways. May assist in loading
and unloading truck. May also handle manifest bills of lad-
‘ng, expense accounts, and other papers pertinent to the
shipment.

the mainstream or jobs that involve novel technologies.

Ch ap t er 2 Performance Management Process 45

Interviews are a very popular work analysis method. During a work analysis
interview, the job analyst asks the interviewee to describe what he or she does
(or what indiv iduals in the position do) during a typical day a t the job from start
to finish (i.e., in chronological order). Alternatively, the job analyst can ask the
interviewee to describe the major duties involved in the job, and then, ask him
or her to break down these duties into specific tasks. Once a list of tasks has been
compiled, all incumbents should have an opportunity to review the informa-
tion and rate each task in terms of fre2uency and criticality. The frequency and
criticality scales may be the following :

1: every few months to yearly

2: every few weeks to monthly

3: every fe w days to weekly

4: every few hours to daily

5: hourly to many umes each hour

1: low level of cntlcality

2: below average level of criucahty

3: average level of criticality

4 : above average level of cntlcality

5: extremely cntical

Rating both frequency and criticality is necessary because some tasks may
be performed regularly (e.g., making coffee several times a day), but may not be
very critical. Th e job analyst can then multiply the frequ ency scores by the critical-
ity scores to obtain an overall score for each task. So, if making coffee receives a
frequency score of 4 (i.e., “every few hours to daily”) and a criticality score of 0
(i.e., “not critical”), the overall score would be 4 x 0 = 0. Considering frequency
scores alone would have given us the wrong impression that making coffee is a
task that deserved a prominent role in the job description. Overall scores for all
tasks can be ranked from highest to lowest to obtain a final list of tasks.

Numerous work analysis q u estionnaires are available online. These qu estion-
naires, which can be administered online, with a paper s urvey, or in interview
forma t, can be used for a variety of positions. For example, the state of Delaware
uses a work analysis questionnaire available at h ttp://www.delawarepersonnel
.com/class/forms/jaq/jaq.shtml. This questionnaire includes 18 multiple choice
job content questions. Job content information is assessed through three factors
(1) knowledge and skills, (2) problem solving, and (3) accountability and end
results. For example, consider the following question about problem solving:

Which one statement most accurately describes your freedom to consider alternatives
when addressing issues or problems? Select only one choice below.

• I follow detailed task lists or instructions from my s upervisor or lead
worker to get my work done. I refer problems immediately to my
s upervisor or others.

• I follow detailed stan d ard procedures or instructions from my supervisor
to get my work done. Occasionally, I change the work procedures or the
order of the tasks (for example, filing records, sorting mail, cleaning floors).

• I follow standard work routines and well-understood tasks. Problems
are alike from day-to-day. When problems arise, I can often respond b y
changing the order in w hich tasks are done (for example, typing, record

46 Part I Strategic and General Considerations

keeping, supply delivery, telephone console operation, technical assistance
on a survey crew).

• Due to changing work s ituations, I solve problems by considering
different options with the guidance of my s upervisor or within
well-defined principles and procedures. I often consider the most
appropriate procedure or example to follow (for example, deciding the
layout of bridge designs, counseling clients on social services options,
or investigating and interpreting State and Federal laws in response to a
complaint, and recommending an appropriate course of action).

• I solve problems by considering many different principles, procedures,
and standards. Because of changing priorities and work situations, I may
consider which among several procedures to follow, and in what order
to achieve the proper results (for example, administering State s upport
services, considering family counseling or foster care options for a family
in crisis, or how to organize health screening clinics).

• I solve problems by considering courses of action within the framework
of existing policies, principles, and standards. I know what needs to be
accomplished, but must decide how to accomplish it. I may consider
whether new methods need to be developed to achieve the proper results
(for example, reengineering the way work is done and organized to
improve the delivery of State services).

• I solve problems by considering courses of action within broad State or
Department policies and immediate objectives. I may determine that
new Department policies are needed. Although general goals are in
place, I must set the plan and determine the priorities and processes
to achieve State or Department objectives (for example, considering
efficient organization of the largest Divisions in the State; developing new
principles and practices affecting services to citizens).

As a second example, consider the following question about “external contacts:”

Wlzich one statement best describes the degree that your job is accountable for es-
tablishing or maintaining relationships with external contacts? (External contacts may
include the Federal Government, the legislature, the media, community service and action
groups, vendors, contractors, other government Departments, the general public, etc.).
Select only one choice below.

• Most job contacts are with other Department employees; external contacts
sometimes occur (for example, food service and laundry work, or
custodial work).

• Collecting or exchanging information, making or responding to inquiries (for
example, clerical work, laboratory work, collecting tolls or groundskeeping).

• Providing Department or State services requiring explanation of
somewhat complicated but standard procedures (for example, explaining
how to get a State permit or license.)

• Ensuring or controlling the delivery of complex and somewhat
controversial Department or State services to the public (for example,
explaining child support payment schedules to a non-custodial parent,
explairting environmental conservation Jaws).

Chapter 2 Performance Management Process 47

• Persuading or influencing others within the framework of existing
Department or State policies and practices and/ or Federal law (for
example, problem resolution in an environmental crisis or negotiating
right-of-way for the State).

• Initiating new leads and contacts, building and improving external contact
networks for the primary purpose of establishing new and substantial
long-term strategic relationships and alliances for the Department or
the State (for example, developing collaborative efforts with the Federal
Government, negotiating union contracts).

Conducting a Google search for the phrase “job analysis questionnaire tem-
plate” leads to several other instruments offered free of charge by the following
organizations, among many o thers:

• Society for Human Resources Management
• University of Houston
• University of Toledo
• WorldatWork

Be aware that some of these instruments may have been created for specific
types of positions and industries (e.g., service jobs, nonsupervisory jobs). Make
sure you check the suitability of the instrument before using it in a different or-
ganizational and industry context. Combining items and forma ts from various
instruments already available may be the most effective way to proceed.

An important component of a good work analysis is rater training. Such
training helps mitigate several biases that can affect the accuracy of the information
provided by individuals regarding KSAs needed for a job.9 Consider the following
biasing factors:

1. Self-serving bias. This bias leads people to report that their own behaviors
and personality traits are more needed for successful job performance
compared to behaviors and personality traits of others. This is because
people tend to attribute success to themselves and failure to external
causes (i.e., factors o utside of their control).

2. Social projection and false consensus bias. Social projection bias leads
people to believe that others behave similarly to themselves, and hence
to think about themselves when reporting KSAs for their job, instead
of people in general. False consensus bias is similar in that it leads
people to believe that others share the same beliefs and attitudes as
themselves.

3. Carelessness bias. Participants in job analysis differ in how carefully they
attend to the job analysis rating task.1° For example, they differ regarding
how closely they read items, how appropriately they answer a specific
question, and the extent to which they make needed distinctions between
items. This bias is related to how people process information. Specifically,
people rely on automatic (i.e., fast, effortless) and controlled (i.e., slow,
effortful) information processing modes. So, they represent a potential
trade-off between accuracy and quality (controlled processing) versus
speed and efficiency (automatic processing). Careless bias results from the
use of automatic versus controlled processes.

48 Part I Strategic and General Considerations

Taken together, self-serving, social p rojection, false consensus, a nd care-
lessness biases affect work analysis ratings because they lead people to believe
that their own KSAs are those driving success on their jobs. So, these lead to an
exaggera ted view regard ing the KSAs needed- and this exaggeration is based
on precisely the KSAs that job incumbents have.

How do we add ress these b iases? An experimental study involving two
independent samples of 96 administra tive support assistants and 95 supervisors
working for a large city government implemented a successful Web-based training
program that was able to mitigate some of these biases.n Specifically, across the
five job characteristics rated in that study, individuals who did not participate in
the Web-based training program were 62% (administrative support assistants) and
68% (supervisors) more likely to provide a higher rating than if the same individual
provided the work analysis ratings after participating in the training program. The
Web-based training program, which takes about 15 minutes to administer, provides
a common frame of reference for all raters, and includes the following five steps:

1. provides raters with a definition of each rating dimension
2. defines the scale anchors
3. describes w hat behaviors were indicative of each d imension
4. allows raters to practice their rating skills, and
5. provides feedback on the practice

Job D es criptions The information ob tained from a work a nalysis is used
for writing a job description. Writing a job description may seem like a daunt-
ing task; however, it does not have to be difficult. Generic job descrip tions can
be obtained online from the Occupational Informational Network (O*NET),
(https://www.onetonline.org) . O*NET is a comprehensive database of worker
attributes and job characteristics that provides a common language for defining
and describing occupations. The information available via O*NET can serve as
a foundation for a job description. For each job, O*NET provides inform ation on
tasks, knowled ge, technology skills, abilities, work activities, work context, job
zone, education, interests, work styles, work values, and credentials. Specifically:

• Personal requirements: the skills and knowledge required to perform the
work

• Personal characteristics: the abilities, interests, and values needed to
perform the work

• Experience requirements: the training and level of licensing and
experience needed for the work

• Job requirements: the work activities and context, including the physical,
social, and organizational factors involved in the work

• Labor market: the occupational o utlook and the pay scale for the work
O*NET descriptions can be easily adapted and changed to accommodate specific

local characteristics of a given organization. For example, see O*NET’ s description
for truck drivers in Figure 2-3. This figure includes only some of the categories,
and only the top five topics (you can see the full information online). First, the
summary description can be checked for accuracy and relevance by supervisors.
Then, the list of KSAs provided by O*NET can be readily ra ted by incumbents (and
additional KSAs may be added, if needed). Clearly, this is a more detailed and useful
job description compared to the gener ic description of truck driver in Figure 2-2.

Chapter 2 Performance Management Process 4il

FIGURE 2 -3
Summa’)’ Report for Heavy and Tractor-trailer Truck Drivers (from o-NET)•

DESCRIPTION
Drive a tractor-trailer combination or a truck with a capacity of at least 26,000 pounds
Gross Vehicle Weight (GVW). May be required to unload truck. Requires commercial drivers’
license.
TASKS
Check vehicles to ensure that mechanical, safety, and emergency equipment is in good
working order.
Follow appropriate safety procedures for transporting dangerous goods.
Inspect loads to ensure that cargo is secure.
Maintain logs of working hours or o f vehicle service or repa1r status, following applicable
State and Federal regulal!Ons.
Secure cargo for transport using ropes. blocks, chain, binders, or covers.

TECHNOLOGY SKILLS
Database user interface and que’)’ software-ddlsoftware.com dnvers daily log program
DOL; Easy Trucking Software: Fog Line Software Truckn2004; TruckersHelper
Office suite software-Microsoft Office
Operating system software-Microsoft Windows
Route navigauon software-ALK Technologies PC Miler; MarcoSoft Quo Vadis
Spreadsheet software-Microsoft Excel Hot technology.

KNOWLEDGE
Transportauon-Knowledge o f principles and methods for moving people or goods by air,
rail, sea, or road, including the relawe costs and benefits.
Public Safety and Security-Knowledge of relevant equipment, pol ides, procedures, and
strategies to promote effective local, state, or national secunty operations for the protection
o f people, data. property, and
Customer and Personal Service-Knowledge of prindples and processes for providing cus-
tomer and personal services. This includes customer needs assessment, meeting quality
standards for services, and evaluation o f customer sausfaction.
English Language-Knowledge o f the structure and content o f the English language, includ-
ing the meaning and spelling of words, rules of compOSition. and grammar.
Mechanical-Knowledge of machines and tools, including their designs, uses, repair, and
maintenance.

SKILLS
Operation and Control-Controlling operations o f equipment or systems.
Operation MoMoring-Watching gauges. d1als. or other ind1cators to make sure a machine
is working properly.
T1me Management-Managing one’s own time and the time o f others.
Criucal Thinking-Using logic and reasoning to the strengths and weaknesses o f
alternative solutions. conclusions, or approaches to problems.
Monitoring-Monitoring/Assessing performance o f yourself, other indMduals, or organiza-
uons to make improvements or take corrective acuon.

ABILITIES
Control Precision-The ab1lity to quickly and repeatedly adjust the controls of a mach1ne or
a vehicle to exact pos1tions.
Far V1sion-The ab1lity to see details at a distance.
Multilimb Coordination-The ability to coordinate two or more limbs (for example. two arms,
two legs. or one leg and one arm) while sitting, standing. or Jy1ng down. It does not involve
performing the actJIIties while the whole body is in mot1on.
Near V1sion-The ability to see details at close range (Within a few feet o f the observer).
Reaction Time-The ab1lity to quickly respond (W1th the hand. finger. or foot) to a signal
(sound, light, picture) when 1t appears.

(Conti nued)

SO Part I Strategic and General Considerations

FIGURE 2-3
Summa.y Report for Heavy and Tractor-trailer Truck Drivers (from O”NET)• (Continued)

WORK ACTIVITIES
Operating Vehicles. Mechanized Devices, or Equipment-Running, maneuvering. navigat-
ing, or drlv1ng vehicles or mechanized equipment such as forklifts, passenger vehicles,
aircraft, or water craft.
Inspecting Equipment, Structures. or Material-lnspecung equipment, structures. or materi-
als to identify the cause of errors or other problems or defects.
Getting Information-Observing. receiving, and otherwise obtaining information from all rel-
evant sources.
Identifying Obj ects. ACUons. and Events-ldenUfying information by categorizing, estimating,
recognizing differences or similarities. and detecung changes in circumstances or events.
Controlling Machines and Processes-Using either control mechanisms or direct physical
activ1ty to operate machines or processes {not including computers or vehicles).

DETAILED WORK ACTIVITIES
Inspect motor vehicles.
Follow safety procedures for vehicle operation.
Inspect cargo to ensure 1t is properly loaded or secured.
Record operational or produCUon data.
Record service or repair aCUV1ties.

WORK CONTEXT
In an Enclosed Vehicle or Equipment-88% responded “Eve.y day.”
Duration of Typical Work Week-84% responded “More than 40 hours.”
Outdoors. Exposed to Weather-76% responded “Eve.y day.”
T1me Pressure-69% responded “Eve.y day.”
Very Hot or Cold Temperatures-SO% responded “Every day.•

EDUCATION
High school diploma or equivalent (56% of respondents)
Less than high school diploma (19% of respondents)
Post-seconda.y certificate (15% of respondents)

WORK STYLES
Dependability-Job requires being reliable, responsible. and dependable, and fulfilling
obligations.
Self-control- Job requires maintaining composure. keeping emotions in check. controlling
anger, and avoiding aggressive behaVior. even in ve.y difficult Situations.
Attention to Deta1I-Job reqUires being careful about detail and thorough in completing
work tasks.
lntegnty-Job requires being honest and ethical.
Stress Tolerance-Job requires accepting cnticism and dealing calmly and effectively with
high-stress situations.

WORK VALUES
Support-Occupations that satisfy this work value offer supportive management that stands
behind employees. Corresponding needs are Company Policies. SupeNision: Human Rela-
tions. and Supervision: Technical.
Independence-Occupations that satisfy this work value allow employees to work on
their own and make decisions. Corresponding needs are CreaUvity, Responsibility, and
Autonomy.
Working Conditions-Occupations that satisfy this work value offer job secunty and good
working conditions. Corresponding needs are ActiVIty, Compensation. Independence,
Security, Variety and W011<ing Conditions.

description includes the top five in each category only.

Chapter 2 PerFormance Management Process 51

O*NET is a particularly useful resource for small businesses because for most
of them, conducting a work analysis may not be feasible simply because there are
not sufficient numbers of people in any particular position from whom to collect
data. In addition, O*NET can be used when organizations expand and new posi-
tions are created. Again, one thing needs to be clear, however: jobs change. Thus,
job descriptions must be checked for accuracy and updated on an ongoing basis.

Job descriptions are a key prerequisite for any performance management
system because they provide the criteria (i.e., yardsticks) that will be used in mea-
s uring performance. Such criteria may concern behaviors (i.e., how to perform)
or results (i.e., what outcomes s hould result from performance) . In our truck
driver example, a behavioral criterion could involve the skill “equipment main-
tenance.” For example, a s upervisor may rate the extent to which the employee
“performs routine maintenance on equipment and determines when and what
kind of maintenance is needed.” Regarding res ults, these criteria usually fall into
one of the following categories (1) quality, (2) quantity, (3) cost-effectiveness, and
(4) timeliness. 12 In the truck driver example, results-oriented criteria can include
number of accidents (i.e., quality) and amount of load transported over a specific
period of time (i.e., quantity).

Some organizations are becoming aware of the importance of considering
prerequisites before implementing a performance management system. Take the
case of Alliance Health Deaconess Hospital in Oklahoma City, Oklahoma, which
includes a workforce of more than 500 healthcare professionals, who maintain a
291-bed facility offering cancer care, cardiac care, orthopedic care, and wound care
and rehabilitation. Alliance Health Deaconess Hospital has been able to effectively
integrate employees’ job d escriptions within their performance management
system. The need for this integration was reinforced by results from an employee
survey revealing that employees did not know what they were being evaluated on.
Therefore, with the input of employees, the hospital updated each of the 260 job
descriptions. At present, each employee’s job description is part of the performance
review form. The new forms incorporate task performance standards as well as
behaviors specific to individual jobs. For example, a nurse may be evaluated on
“how well he or she safely, timely, and respectfully administers patient medication
and on his or her p lanning and organization skills.” In addition, Deaconess Hospi-
tal has been able to link each employee’s performance to the strategic goals of the
organization. Specifically, all employees are rated on the following core behaviors
considered to be of top strategic importance: (1) a d aptability, (2) building customer
loyalty, (3) building trust, and (4) contributing to team success. 13

In summary, there are two important prerequisites that must exist before the
implementation of a successful performance management system. First, there
is a need to have good knowledge of the organization’s mission and strategic
goals. This knowledge, combined with knowledge regarding the mission and
s trategic goals of their unit, allows employees to make contributions that will
have a positive impact on the unit and on the organization as a whole. Second ,
there is a need to have good knowledge of the position in question: what tasks
need to be d one, how they sho uld be done, and what KSAs are needed . Such
knowledge is obtained through a work analysis. If we have good information
regarding a job, then it is easier to establish criteria for job s uccess.

152 Part I Strategic and General Considerations

2-2 PERFORMANCE PLAN NING
Armed with knowledge of the organization’s strategic goals and information
about the position, the supervisor and the employee formally meet to discuss,
and agree upon, what needs to be done and how it should be done. This perfor-
mance planning disc ussion includes a consideration of both results and behaviors
(described in greater detail in Chapter 4}, as well as a development plan (described
in greater detail in Chapter 8).

2-2-1 Results
Results refer to what needs to be done or the outcomes an employee must
produce. A consideration of results needs to include the key accountabilities,
or broad areas of a job for which the employee is responsible for prod uc-
ing results. This information is typically obtained from the job description.
A discussion of results also includes specific objectives that the employee will
achieve as part of each accountability. Objectives are s tatements of important
and measurable outcomes. Finally, d iscussing results also means discussing
performance standards. A performance standard is a yardstick used to evaluate
how well employees have achieved each objective. Performance standards
provide information about acceptable and unacceptable performance (e.g.,
quality, quantity, cost, and time).

Consider the job of a university professor. Two key accountabilities are
(1) teaching (preparation and delivery of instructional materials to students),
and (2} research (creation and dissemination of new knowledge). An objective for
teaching could be “to obtain a student eval uation of teaching performance of 3
on a 4-point scale.” An objective for research could be “to publish two articles in
scholarly refereed journals per year.” Performance standards could be “to obtain
a student evaluation of teaching performance of at least 2 on a 4-point scale” and
“to publish at least one article in scholarly referred journals per year.” Thus, the
objective is the desired level of performance, whereas the standard is usually a
minimum acceptable level of performance.

2-2-2 Behaviors
Although it is important to measure results, an exclusive emphasis on results can
give a skewed or incomplete picture of employee performance. For example, for
some jobs, it may be difficult to establish precise objectives and standards. For
other jobs, employees may have control over how they do their jobs, but not over
the results of their behaviors. For example, the sales figures of a salesperson could
be affected more by the assigned sales territory than by the salesperson’s ability
and performance. Behaviors, or how a job is done, thus constitute an important
component of the planning phase. This is probably why results from a survey
ind icated that in addition to sales figures, salespeople would like to be appraised
on such behavioral criteria as communications skills and prod uct knowledge.14

A consideration of behaviors includes discussing competencies, which are
measurable clusters of KSAs that are critical in determining how results will be
achieved. Examples of competencies are customer service, written or oral com-
munication, creative thinking, and dependability. Returning to the example of the

Chapter 2 Performance Management Process 153

professor, assume that teaching is done online and numerous technology-related
problems exis t, so that the resulting teaching evaluations are deficient (i.e., lower
than the standard of2). This is an example of a situation in which behaviors should
be given more importance than results. In this situation, the evaluation could
include competencies such as online communication skills (e.g., in the chat room).

2-2-3 D evelopment Plan
An important step before the review cycle begins is for the s upervisor and em-
ployee to agree on a development plan. At a minimum, this plan should include
identifying areas that need improvement and setting goals to be achieved in each
area. Development plans usually include both results and behaviors.

In summary, performance planning includes the consideration of results and
behaviors and the development plan. A discussion of results needs to include key
accountabilities (i.e., broad areas for which an employee is responsible), specific
objectives for each key accountability (i.e., goals to be reached), and performance
s tandards (i.e., w hat constitutes acceptable and tmacceptable levels of perfor-
mance). A discussion of behaviors needs to include competencies (i.e., clusters
of KSAs). Finally, the development plan includes a description of areas that need
improving and goals to be achieved in each area. Box 2-1 includes a description
of how performance planning is implemented at Discover.

Once the prerequisites are met and the planning phase has been completed,
we are ready to begin the actual implementation of the performance management
system. This includes performance execution, assessment, and review.

Box 2-1

Company Spotlight: Performance Planning
at Discover
The Discover credit card was launched in 1986 and offered
an important innovati on that no other credit card company
was doing at that t ime: cash back. But today, Discover offers
d irect bank and electronic payment services. Their direct
bank issues the company’s flagship credit card business and
offers numerous banki ng products such as private student
loans, personal loans, home equi ty loans, checking and
savings accounts, certificates of deposit, and money market
accounts. Also, Discover operates PULSE, one of the nati on’s
leading ATM/debit networks; Discover Network, with mil-
lions of merchant and cash access locations; and Diners Club
International, a g lo bal payments network with acceptance
in more than 185 countries and territories. Discover is tak-
ing several steps to ensure that performance planning and
employee development support the organizati on’s business
goals. Discover has init iated an approach that addresses the

development needs of specific busi ness units by assigning HR
professionals to attend business meetings regularly to gain
an understand ing of what knowledge, skills, and abilities
are required . The company asks managers to go through
the same curriculum w ith classroom and online learning
o pportunit ies. These managers form d iscussi on groups to
talk about what they have learned and how it applies to
the challenges of their specific role. In addit ion, part of the
strategy includes meeting with empl oyees to agree upon
metri cs in the performance p lann ing stage, creating an
acti on plan, and following up with evaluations and ratings
to determine to what degree the learning experi ence was
successful. In summary, Di scover utilizes the various stages
of the performance management process to ensure that
employee development is a focus that matches the mission
of providing a workplace that supports high performance.”

154 Part I Strategic and General Considerations

2-3 P ERFORMANCE EXECUTION
Once the review cycle begins, the employee strives to produce the results and
d isplay the behaviors agreed upon earlier as well as to work on developmental
needs. The employee has primary responsibility and ownership of this process.
Employee participation does not begin at the performance execution s tage,
however. As noted earlier, employees need to have active input in the creation
of job descriptions, performance standards, and the rating form. In add ition, a t
later stages, employees are active participants in the evaluation process in that
they provide a self-assessment, and the performance review interview is a two-
way communication process. At the performance execution stage, the following
factors must be present16:

1. Commitment to goal achievement. The employee must be committed to
the goals that were set. One way to enhance commitment is to allow the
employee to be an active participant in the process of setting the goals.

2. Check-ins and performance touchpoints. The employee has performance
“touchpoints” with many people inside and outside of the organization
on an ongoing basis. So, he should not wait until the review cycle is
over to solicit performance feedback in the form of “check-ins.” Also,
the employee should not wait tmtil a serious problem develops to ask
for coaching. The employee needs to take a proactive role in soliciting
performance feedback and coaching from her supervisor. 17 Supervisors
and others with whom the employee has performance touch points
(e.g., team members) can provide performance feedback, but are
generally busy with multiple obligations. The burden is on the employee
to communicate openly and regularly via ongoing check-ins with her
performance touchpoints.

3. Collecting and sharing performance data. The employee should provide the
supervisor with regular updates on progress toward goal achievement, in
terms of both behaviors and results.

4. Preparing for performance reviews. The employee should not wait until
the end of the review cycle approaches to prepare for the review. On
the contrary, the employee should engage in an ongoing and realistic
self-appraisal, so immediate corrective action can be taken, if necessary.
The usefulness of the self-appraisal process can be enhanced by gathering
informal performance information from peers and customers (both
internal and external).

Although the employee has primary responsibilities for performance execu-
tion, the supervisor also needs to do her share of the work. Supervisors have
primary responsibility over the following issues18:

1. Observation and documentation. Supervisors must observe and document
performance on a daily basis. It is important to keep track of examples of
both good and poor performance.

2. Updates. As the organization’s goals may change, it is important to update
and revise initial objectives, standards, and key accountabilities (in the
case of results) and competency areas (in the case of behaviors).

Chapt er 2 Performance Management Process ISIS

3. Feedback. Feedback on progression toward goals and coach ing to improve
performance should be provided on a regular basis, and certainly before
the review cycle is over.

4. Resources. Supervisors should provide employees with resources and
opportunities to participate in development activities. Thus, they should
encourage (and sponsor) participation in training, classes, and special
assignments. Overall, supervisors have a responsibility to ensure that
the employee has the necessary supplies and fund ing to perform the job
properly.

5. Rd.nforcement. Supervisors must let employees know that their
outstanding performance is noticed by reinforcing effective behaviors
and progress toward goals. Also, supervisors should provide feedback
regarding negative performance and how to remedy the observed
problem. Observation and communication are not sufficient. Performance
problems must be diagnosed early, and appropriate steps must be taken
as soon as the problem is discovered .
The summary list included in Tab le 2-1 makes it clear that both the

employee and the manager are responsible for performance execution . As
an example of this shared responsibility, conside r the case of International
Business Machines (IBM). IBM is one the world’s largest multinational
technology com panies, with more than 400,000 employees in 170 countries.
IBM recently transitioned from the previous once-a-year “stack ranking” re-
view that compared employees to a more frequen t and personalized review
focus ing on the employee’s own goals. Before decid ing on a new performance
management system, IBM’s HR department asked for employees’ input
through its internal social media s ite. Employees reported they wanted more
frequen t feedback and the ability to change their goals as the year progressed .
IBM recognized that the fast-paced business environment meant that new
things come along, lead ing to employees experimenting and iterating. This
meant that employees a re often not working on what they originally pro-
posed at the beginning of the year. Accordingly, a new system was designed
that allows employees to set annual goals and short-term milestones. Based
on continuous fee d back from managers, employees a re able to update their
goals and milestones th roughout the year. By allowing employees to change
and develop their own goals throughout the year, IBM’s managers can now
avoid irrelevant year-end discussions, and have richer dialogue through
frequent check-ins with employees.19

Employees Managers

Comm1tment to goal achievement

Check-ins and performance touchpoints

Collecting and shanng performance data

Preparing for perfonmance reviews

Observation and documentatiOn

Updates

Feedback

Resources

Reinforcement

TABLE 2 ·1
Performance Execution
Stage: Areas for Which
Employees and Ma nagers
H ave Primary Responsibility

1515 Part I Strategic and General Considerations

2-4 P ERFORMANCE ASSESSM ENT

Box 2-2

In the assessment phase, both the employee and the manager are responsible for
evaluating the extent to which the desired behaviors have been displayed, and
whether the desired results have been achieved. Although many sources can be used
to collect performance information (e.g., supervisors, other team members), in most
cases, the direct supervisor provides the information. This also includes an evaluation
of the extent to which the goals stated in the development plan have been achieved.

It is important that both the employee and the manager take ownership of
the assessment process. The employee evaluates his own performance, and so
does the manager. The fact that both parties are involved in the assessment pro-
vides good information to be used in the review phase. When both the employee
and the s upervisor are active participants in the evaluation process, there is a
greater likelihood that the information will be used prod uctively in the htture.
Specifically, the inclusion of self-ratings helps emphasize possible discrepancies
between self-views and the views that important others (i.e., s upervisors, other
team members, customers) have of what we are doing, how we are doing it, and
what results we are producing. It is the discrepancy between these views that
is most likely to trigger development efforts, particularly when feedback from
the supervisor and others is more negative than are employee self-eval uations.20

The inclusion of self-appraisals is also beneficial regarding important additional
factors. Self-appraisals can reduce an employee’s defensiveness during an appraisal
meeting and increase the employee’s satisfaction with the performance management
system, as well as enhance perceptions of accuracy and fairness, and therefore, accep-
tance of the system.21 Box 2-2 describes how this process is implemented at Google.

In s um, both the employee and the supervisor must evaluate employee per-
formance. As will be described in detail in Chapter 6, employee involvement in
the process increases employee ownership and commitment to the system. In
addition, it provides important information to be discussed d uring the perfor-
mance review, which is discussed next.

Company Spotlight: Performance
Assessment at Coogle
Google is consistently ranked at the t op of Fortune’s 100
Best Companies t o Work For. Google uses a 360-degree
review process, cond ucted semi-annually. Managers take
two things into account when evaluating employees: results
(what the employee accomplished), and behaviors (how
t he employee attained these results). The self-assessment,
peer reviews, and manager reviews are based on a five-
point scale (1 = needs improvement; 5 = superb) and use
t he following six criteria (1) “Googleyness”- adherence
to Google va lues, (2) Problem solving- ana lytica l skills
applied to work, (3) Execut ion-delivering great work

w ith great autonomy, (4) Thought leadership-how much
an employee is seen as a reference for a specif ic area of
expertise, (5) Leadership-displaying leadership sk ills such
as being proactive and t aking the lead on projects, and (6)
Presence-the ability to make yourself known in a large
o rganizat ion. To reduce bias, managers meet and review
all employee’s ratings together. In summary, Google utilizes
their performance assessment process to provide a clear link
between each individual and team activ ity and the strateg ic
o bjectives of the organization.22

Chapter 2 Performance Management Process 57

2-5 PERFORMAN CE REVIEW
The performance review stage involves the formal meeting between the employee
and the manager to review their assessments. This meeting is usually called
the appraisal meeting or discussion. Although good performance management
systems include ongoing check-ins, the formal appraisal meeting is important
because it provides a forma l setting in which the employee receives feed back
on her performance.

In spite of its importance in performance management, the appraisal meeting
is often regarded as the “Achilles’ heel of the entire process.”23 This is because
many managers are uncomfortable providing performance fee d back, particularly
when performance is deficient.24 This high level of discomfort, which often trans-
lates into anxiety and the avoidance of the appraisal interview, can be mitigated
through training those responsible for providing feedback. As will be discussed in
detail in Chapters 6 and 9, providing feedback in an effective manner is extremely
important because it leads not only to performance improvement, but also to
employee satisfaction with the system. For example, a study involving more than
200 teachers in Malaysia, including individuals with distinct Chinese, Malay, and
Ind ian cultural backgrounds, found that when they received effective feed back,
they reported greater satisfaction with the system even when they received low
performance ratings.25 At this point, however, let us emphasize that people are
apprehensive about both receiving and giving performance information, and this
apprehension reinforces the importance of a formal performance review as part
of any performance management system.26

Remember Jack Welch, the famed former chairman and CEO of General
Electric (GE)? Although his leadership s tyle was unique, colorful, and often
controversial, during his 20-year tenure at GE (1981- 2000), the company’s value
rose about 4,000%. He has addressed the issue of giving honest feed back in
many of his public appearances since he retired.27 At an appearance in front of
an audience of about 2,000 managers, he asked them if their organizations had
integrity. As was expected, a vast majority of managers, about 95%, raised their
hands. Then, he asked the same audience if their organization’s leaders provide
d irect reports w ith honest and straightforward performance feedback. Only
about 5% of the people raised their hands. Avoiding giving negative feed back
is very dangerous because it conveys the message that mediocrity is acceptable
and damages the morale of the top Rerformers, who can be about four times as
productive as the poor performers.

In most cases, the appraisal meeting is regarded as a review of the past,
that is, what was done (i.e., results) and how it was done (i.e., behaviors). For
example, a survey includ ing more than 150 organizations in Scotland showed
that performance management systems in more than 80% of organizations em-
phasize the past.29 But the appraisal meeting should also include a discussion
of the employee’s developmental progress as well as plans for the future. The
conversation should include a discussion of goals and development plans that
the employee will be expected to achieve over the period before the next formal
review session. In addition, a good appraisal meeting includes information on what
new compensation and rewards, if any, the employee could receive as a result of
her performance. In short, the appraisal discussion focuses on the past (what has
been done and how), the present (what compensation is received or denied as a
result), and the future (goals to be attained before the upcoming review session) .

158 Part I Strategic and General Considerations

As noted earlier, the discussion about past performance can be challenging,
particularly when performance levels have no t reached acceptable levels.
is a script reflecting what the first few seconds of the appraisal meeting can be like.

Good afternoon, Lucy, please have a seat. As you know, we take perfor-
mance very seriously and we scheduled our meeting today to talk abo ut
the work you have done over the past year. Because we believe in the
importance of talking about performance issues, I blocked an hour of
my time d uring which I won’t take any phone calls and I also won’t be
texting o r emailing with anyone. I want to be able to focus 100% on our
conversation because talking about performance will be helpful to both of
us. There sho uld be no surprises, given that we have been communicat-
ing abo ut your performance on an ongoing basis. You have also received
feedback not only from me, but also fro m your peers. Let’s go through
this process step by s tep. First, I would like you to tell me about your own
views about your performance during the past year. Specificall y, please
share with me what are the things you believe you d id particularly well
and areas in which you think you may have been able to do better. As a
second step, I will tell you abo ut the performance evaluation I prepared .
As a third step, we will talk abo ut the issues on which you and I agree.
As a fourth step, we can talk about issues for which we may have d if-
ferent perspectives. I will explain the reasoning behind my views and I
want to hear the reasoning behind yours. In terms of my evaluation of
your work, I want to first make sure we agree on w hat are the specific
goals and objectives of your job. Then, we will talk about the results
you achieved this year and the section on the evaluation form about job
skills and competencies. After we talk abo ut that, I will tell you what my
overall rating is and why I believe this is an appropriate score. Ok, let’s
go ahead and sta rt. Please tell me about how things went this past year.

We will discuss performance reviews in more detail in Chapter 9. For now,
however, consider the following six recommended steps for cond ucting produc-
tive performance reviews31:

1. Identify what the employee has done well and poorly by citing specific
positive and negative behaviors.

2. Solicit feed back from your employee about these behaviors. Listen for
reactions and explanations.

3. Discuss the implications of changing, or not changing, the behaviors.
Positive feedback is best, but an employee m ust be made aware of what
will happen if any poor performance continues.

4. Explain to the employee how skills used in past achievements can help
him overcome any current performance problems.

5. Agree on an action plan. Encourage the employee to invest in improving
his performance by asking questions such as “What ideas do you have for
___ ?” and “What suggestions do you have for ___ ?”

6. Set up a meeting to follow up and agree on the behaviors, actions, and
attitudes to be evaluated.

In closing, the performance management process includes a cycle, which starts
with prerequisites and ends with the forma l performance review. However, the

Chapt er 2 Pe rformance Management Process !Sit

cycle is not over after th e formal review. In fact, the process starts all over again:
th ere needs to be a discussion of p rerequisites, including the updated organiza-
tion’s mission and strategic goals and th e updated job’s KSAs. Because mar kets
ch ange, customers’ preferences and needs change, and prod ucts change, there is
a need to continuously monitor the prerequisites so that perform ance p lanning,
and all the subsequent stages, are consis tent w ith the organization’s strategic
objectives. Recall that, in the end, one of the main goals of any performance
management system is to promote the achievement of organization-wide goals.
Obviously, if managers and employees are not aware of what these strategic goals
are, it is unlikely that the perform ance management system will be instrumental
in accomplishing th e strategic goals.

SUMMARY POINTS

• Perfor mance management is an ongoing and circular process. It
never ends. Once established in an organization, it becomes part of an
o rganization’s culture. The performance management process includes
fi ve closely related components (1) p rerequisites, (2) performance
planning, (3) performance execution, (4) performance assessment, and
(5) perform ance review.

• Each of the five components of the performance management process
plays an important role. If any of th ese components is implem ented
poorly, then the entire perfor mance management system suffers.
For example, Jack of knowledge of the organization’s mission and
strategic goals and the job in question (i.e., prerequisites) will not allow
perfor mance p lanning (i.e., performance road map) to be aligned with
o rganizational goals, which in turn, will lead to poor performance
execu tion. In short, a perform ance management system is only as good as
its weakest component.

• The links between th e various components m ust be clearly established.
For example, performance planning need s to be closely related to
perfor mance execu tion. Perform ance planning is a futile exercise if
execu tion does not follow from it. The sam e applies to all the arrows
linking the various components, as shown in Figure 2-1.

• The first component of the performance management process involves
two prerequisites. First, there is a need to have good knowledge o f the
o rganization’s mission and strategic goals. This knowledge, combined
with knowledge regarding the mission and strategic goals of one’s unit,
allows employees to make contributions that will have a positive impact
on their units and on th e organization as a whole. Second, th ere is a need
to have good knowledge of the job in question. A work analysis allows for
th e d etermination of the key components of a particular job: w hat tasks
need to be done, how th ey should be done, and what KSAs are needed.
If we have good information regarding a job, th en it is easier to establish
criteria for job success.

• Work analysis is a technique used to understand employees’ tasks and
responsibilities and can be implemented using interviews, observation, or
off-the-shelf questionnaires. It is important to train individuals to fill out

60 Part I Strategic and General Considerations

work analysis instruments so as to minimize biases (i.e., self-serving bias,
social projection, false consensus, carelessness responding) in the resulting
ratings. Once a list of tasks has been compiled, all incumbents should have
an opportunity to review the information and rate each task in terms of its
frequency and criticality.

• The second com ponent of the performance management process
involves performance planning. Performance planning incl udes the
consideration of results and behaviors, as well as a development plan.
A d iscussion of results needs to include key acco untabilities (i.e., broad
areas fo r which an employee is responsible), specific objectives fo r
each key accountability (i.e., goals to be reached ), and performance
s tandards (i.e., w ha t a re acceptable and unacceptable levels of
performance). A d iscussion of behaviors needs to include competencies
(i.e., clusters of KSAs) . Finally, the development plan includes a
description of areas that need improvement and goals to be achieved in
each area.

• The third component involves performance execution. Both the employee
and the manager are responsible for performance execution. For example,
the employee needs to be committed to goal achievement and should
take a proactive role in seeking feedback from his or her supervisor and
o ther performance touchpoints (e.g., o ther team members, customers).
The burden is on the employee to communicate openly and regula rly
with the supervisor. Also, the e mployee has a responsibility to be
prepared for the performance review by cond ucting regular and
realistic self-appraisals. In addition, the supervisor also has important
responsibilities. These include observing and documenting performance,
up dating the employee of any changes in the goals of the organization,
and providing resources and reinforcement so the em ployee can succeed
and continue to be motivated.

• The fourth component involves performance assessment. Both the
employee and the supervisor must evaluate employee performance.
Involvement of the employee in the process increases his or her ownership
and commitment to the system. In addition, it provides important
information to be d iscussed during the performance review. In the absence
of self-appraisals, it is often not clear to supervisors if employees have a
real understanding of what is expected of them.

• The fifth component involves performance review when the employee
and manager meet to d iscuss employee performance. This formal
meeting is usually called the appraisal meeting. This meeting typically
emphasizes the past: what the employee has done and how it was done.
But a more effective appraisal meeting also focuses on the present and the
future. The present involves the changes in compensation that may result
from the results obtained. The future involves a discussion of goals and
development plans that the employee will be expected to achieve during
the period before the next review session.

Chapter 2 PerFormance Management Process 151

— — — — – — – – – ——- —-

EXERCISE 2-1 WORK (JOB) ANALYSIS

Conduct a work analysis for the position “wait staff” at a local restaurant. This
work analysis may benefit from interviewing incumbents (i.e., wait staff) as well as
s upervisors (i.e., restaurant’s general manager). In addition, of course, you can rely
on your own knowledge of this job. By the end of your work analysis, follow the
O*NET format and create a summary description for the position as well as a list
of tasks, technology skills, abilities, work activities, work context, education, work
styles, and work values needed for successful performance. Use Figure 2-3 “Summary
Report for Heavy and Tractor-Trailer Truck Drivers (from O*NET)” as a template.

At a minimum, your job description should include four lists-one for tasks,
one for knowledge, one for skills, and one for abilities. For each of the four lists,
rate the corresponding elements in terms of frequency and criticality. Use the
scales provided below to rate each element. Then, multiply the frequency and
criticality scores for each of the elements in each list to obtain its overall score.
Then, arrange the list of elements in order of importance from high to low.

Frequency and Criticality Scales

————————————————————-Frequency Criticality
0 : not performed

1: every Few months to yearly

2: every Few weeks to monthly

3: every Few days to weekly

4: every Few hours to daily

5: hourly to many times each hour

0 : not crrtical

1: low level or criticality

2: below average level or crit1cahty

3: average level or cnticahty

4: above average level or cnucality

5: extremely critical

Have one or more people do the same rating task with the same job descrip-
tion. Then, answer the following questions.

1. Are there any disagreements between or among the resulting orderings?
If so, why do you think that is the case?

2. What can be done to mitigate any observed disagreement between or
among the resulting orderings? After discussing some possible techniques
to reduce d isagreement, if there were indeed any disagreements, apply
some of those techniques until 100% agreement is reached.

3. Recall that tasks listed in a job description can largely be divided into
behaviors (i.e., how to perform) and results (i.e., what outcomes should
result from performance). In the job description you created, which of
the tasks are behaviors and which tasks are outcomes? Are there more
behaviors or more outcomes? Or, is there a strong balance between the
two types of tasks? Whether there is such an imbalance or balance, do you
think the observed (im)balance is justified? Explain.

62 Part I Strategic and General Considerations

EXERCISE 2-2 PERFORMANCE REVIEW MEETING

As part of this exercise, you are asked to conduct a performance review meeting
in front of the class. Specifically, you will prepare a performance assessment o f
student participation in the classroom for a particular student, and then, meet
with that student to deliver the perfor mance review face- to-face and real-time in
front of the class. You will either play the role of the supervising manager giving
the performance review, or the direct report receiving the performance review.

Steps:

1. Conduct a self-appraisal o f your own class participation performance
a. Rate your participation from 0 (lowest level contribution) to 15 (highest

possible contrib ution) on each of th e items listed below and note th e
reasons for the score you assign yourself.

b. In rating participation, use the following specific eight items:
i. Being an active participant, but not a d ominating participant.

ii. Being a good listener and demonstrating respect for o th ers’
opinions.

iii. Making thoughtfu l, insightful comments, and not speaking just to
be heard .

iv. Building on others’ comments.
v. Asking q uestions, not just giving answers.

vi. Id entifying key assumptions underlying discussion points and
arguments.

vii. Judiciously playing th e role of the “d evil’s advocate” .
viii. Being constructive and positive in one’s comments.

2. Choose any five students from th e class and prepare an assessm ent of
th eir participation performance.
a. Rate their participation from 0 (lowest level contribution) to 15 (high est

possible contrib ution) using th e same eigh t items listed ab ove.
3. Prepare to provide a perform ance review to each of th ese five classmates,

including ratings and the reasons for th e scores you assigned them. (Hint:
Consider the steps of the performance management cycle in Figure 2-1
when writing your assessm ent) .
a. The performance review m eeting sho uld not be longer than 10 minutes

(Hint: Th e perform ance review s ubsection of the chapter lists the issues
typically d iscussed in a perfor mance review, and provid es an example
of how to begin a review) .

b. Make sure to include both positive and negative feedback that allows
your classmates to improve th eir performance.

4. Th e other students in th e classroom will then evaluate the perform ance
review meeting and p rovide feedb ack on how performance review
m eetings can be improved in the future.

CASE STUDY 2 -1

Disrupted Links in the Performance Management Process
at Omega, Inc.32

O mega, Inc., is a small manufacturing company whose sales success or failure rests in the hands of sales representatives employed by
franchised dealers operating independently. Omega
faces a challenging situation because it does not h ave
control over the people working for the independent
dealerships. In fact, it is the performance of these
individuals that dictates Omega’s sales s uccess. To
make things even more complicated, until recently,
there was no clear understanding of the role of the
sales representatives and there were no formal sales
processes in place. Sales representatives varied grea tly
in terms of their level of skill and knowled ge; most
put in little effort beyond taking orders, and they
did not fee l motivated to make additional sales.
Finally, franchises varied greatly regarding their
management strategies and follow-up with Omega.

Recently, understanding the need to improve
the performance of sales representatives, Omega
agreed to partially fund and support a training
program for them. The network of franchise own-
ers, in turn, agreed to work together to implement a
performance management system. As a first step in
creating the performance management system, the
franchise owners conducted a work anal ysis of the
role of the sale representatives, wrote a job d escrip-
tion, and distributed it to all sales representatives.
The franchise owners a lso a d opted a franchise-wide
mission statement based primaril y on the need to
provide high-quality customer service. This mission
s tatement was posted in all franchise offices, and
each franchise owner spoke w ith his employees
about the contribution made by individ ual sales
on achieving their mission. As a second step, the
managers set performance goals (i.e., sales quotas)
for each employee. Then, all sales representatives
attended extensive training sessions. The employees
received feedback based on their performance in
the training course, and then, were reminded once
again of their sales quotas.

Back on the job, managers gave feedback to their
employees regarding their standing in relation to
their sales q uotas. Since the employees had no way of
monitoring their own progress toward their quotas,
the performance feedback consisted of little more than
a reiteration of monthly sales goals. There was no per-
formance appraisal form in place, so discussions were
not documented. This lack of feedback continued, and
although sales qu otas were being met for the first few
months, franchise owners received complaints from
customers about the low quality of customer service
they were receiving. Subsequently, sales began to d e-
cline. Furthermore, many orders were often incorrect,
forcing customers to return items to Omega.

While the new performance management process
was an improvement over no performance manage-
ment (at least initially), the franchise owners were
s till far from having a system that included a smooth
transition between each of the components of the
performance management process. Based on Omega’s
situation, please answer the following questions.

1. Consider each of the links of the perfor mance
management process as shown in Figure 2-1:

a. prerequisites performance planning
b. performance p lanning performance

execution
c. performance performance

assessment
d. performance assessment performance

review
e. performance review prerequisites

Discuss whether each of the links is present,
and in what form, in the performance
management system described .

2. Given your answers to question 1, what can
be done to fix each of the disrupted links in
the process?

CASE STUDY 2-2

Performan ce Man agement at KS Cleaners

KS Cleaners (KSC) is a small company that provides several services to its customers: dry cleaning of clothes, laundry, ironing,
and some clothing repair work. KSC specializes in
low<ost volume, promising that dry cleaning will be
returned to its customers the day after it is turned in.
The charge is $2.25 for each item dry-cleaned; there
is an extra charge for ironing, although ironing is
usually not necessary because the items are placed on
clothes hangers immediately after they are removed
from the dryers. Laundry is $1.50 per item, with an
extra charge for iron ing, if desired. Clothing repair,
s uch as hemming, replacement of buttons and zip-
pers, and so on, is charged by the hour.

In addition to Kevin, the owner and manager,
there a re eigh t emp loyees: two dry cleaners, a seam-
s tress, and five general duty employees, who rota te
where they a re needed among front counter customer
service and sorting clothes, loading the machines,
removing clothes from machines, folding or hang-
ing up the items, and preparing them for pickup.
Kevin has found that he can hire teenagers for the
general duty positions, because these duties do
not require much training. The company needs
employees who are focused on customer satisfaction
and quick turnaround; when there are slow times,
however, these high school students often work on
homework, socialize, or spend time on their smart
phones, which is acceptable behavior as long as the
work gets done and the customers are happy.

Pay ranges from minimum wage for the general
duty employees to $20 per hour for the dry cleaners.
The seamstress is paid on a negotiated piecework
basis, depending on the complexity of the task.

This shop has been doing so well that Kevin is
thinking abou t opening another one. He has done
some research and realizes that he will need to
fo rmalize procedures that, heretofore, he has run
almost by ins tinct. A new manager will need to
opera te the new shop in a fashion that is identical
to the s uccessful way he has rw1 his current shop.
Although he d reads the process, he recognizes that it
is time to document procedures and to formalize job

descriptions. He has hired you to help him develop
a performance management process.

1. In the context of KSC, critically evaluate
the availability of any prerequisites to
implementing a performance management
process.

2. Discuss your plans for developing formal job
descriptions for the employees at the second
shop.

3. Explain key features of developing
performance plans fo r the emp loyees. Provide
examples of facto rs you would consider in
developing s uch plans fo r the dry cleaner.

4. In the context of KSC, crea te two results-
oriented performance standards for the
general d uty employees.

5. The following information was obtained
fromO•NET.

41-2021.00- Counter and Re ntal C lerks

Knowledge: Customer and Personal
Service-Knowledge of principles and
processes for providing customer and
personal services. This includes customer
needs assessment, meeting quality
standards for services, and evaluation of
customer satisfaction.

Technology Skills: Database user interface
and query software-Database software.

Abilities: Oral Expression-The ability to
communicate information and ideas in
speaking so others will understand.

Work Activities-Performing for or Working
Directly with the Public-Performing
for people or dealing directly with the
p ublic. This includes serving customers
in restauran ts and s tores, and receiving
clients or guests.

Discuss the factors that s hould be
considered in establishing behavior-oriented

performance s tandards for the general
d uty em ployees. Give an example of such a
standard.

6. Provide a detailed discussion of both the
responsibilities of the manager and
the responsibilities of the general d uty

ENDNOTES

Chapter 2 Performance Management Process 6B

employees during the performance execution
phase.

7. Explain the p rocess that Kevin sho uld use
to get info rmation w hen he is developing
the performance assessments for the general
duty employees.

1. Th e general fr am ework an d labels for these com ponen ts a re based on Grote, D. (1996).
The complete guide to perfomrance appraisal (Chap. 2). New York: Am erican Managem ent
Association.

2. Agu inis, H. {2009). An expanded view of performance m an agement. In j . W. Sm ither & M.
London (Eds.), Performance management: Putting researc/r into practice (pp. 1-43). San Fran cisco,
CA: Wiley.

3. Teo, S. (2000). Eviden ce of strategic HRM linkages in eleven Australian corporatized p u blic
sector organizations. Public Personnel Management, 29,557-574.

4. Sanchez, j ., & Levine, E. L. (2012). The rise an d fall of job analysis an d the future o f work
analysis. Annual Revii!W of Psychology, 63,397-425.

5. Parker, S. K., Margeson, F. P., & johns, G. (2017). One hun dred years of work design research:
Looking back and looking forward . joumal of Applied Psychology, 102,403-420.

6. Van lddekinge, C. H., Raymark, P. H., & Eidson, j . E. (2011 ). An examination of the valid ity
and incrementa l value of needed-a t-entry ra tings for a cu stome r serv ice job. Applied
Psychology: An International Review, 60, 24-45.

7. Margeson, F. P. (2017). job an alysis. In S. G . Rogel berg (Ed.), The SAGE encyclopedia of
industrial/organiZlltional psychology (2nd ed., Vol. 2, pp. 765-768). Thousand Oaks, CA: Sage.

8. Rodriguez, D., Patel, R., Bright, A., Gregory, D., & Gowing, M. K. (2002). Developing
compete ncy models to pro mo te integrated human-resource practices. Human Resource
Management, 41,309-324.

9. OuVem et, A.M., Wilson, M.A., & Dierdorff, E. C. (2015). Exploring fac tors tha t in fluence
work analysis data: A me ta-analysis of design ch o ices, purposes, an d organizatio na l context.
joumal of Applied Psyclrology, 100, 1603-1633.

10. Margeson, F. P., Spitzmuller, M., Garza, A. S., & Cam p ion, M.A. (2016). Pay attention! The
lia bilities of respondent experien ce an d carelessn ess when making job an alysis judgm en ts.
joumal of Management, 42,1904-1933.

11. Agu inis, H., Mazurkiewicz, M. 0., & Heggestad, E. 0 . (2009). Using web-based
fra me-of-reference training to decrease biases in personality-based job an a lysis: An
experimental fie ld study. Personnel Psychology, 62, 405-438.

12. Banner, 0. K., & Graber, j . M. (1985). C ritical issues in performance appraisal. jormral of
Management Development, 4, 27-35.

13. Erickson, P. B. (2002, March 24). Perform an ce feedback boosts employee morale, experts in
Oklahoma City Say. The Daily Oklahoman, OK-Worker-Reviews section.

14. Pettijohn, L. S., Parker, R. 5., Pettijohn, C. E., & Kent, j . L. (2001). Performan ce a ppra isals:
Usage, crite ria and observations. joumal of Management Development, 20, 754-781.

15. Whitney, K. {2005, Au gust). Discover: It pays to develo p leaders. Chief Learning Officer, 48.
16. G rote, The complete guide to performance appraisal, pp. 22-24.
17. VandeWalle, 0 ., Ganesan, S., Ch allagalla, G. N., & Brown, S. P. (2000). An integrated

m odel of feedback-seeking behavior : Disposition, context, and cognition. joumal of Applied
Psychology, 85, 996-1003.

18. Grote, The complete guide to performance appraisal, pp. 27-32 .
19. Zillman, C. (2016, February 1). IBM is blowing up its annual performan ce review.

Fortune. Retrieved january 3, 2018, fro m http://fortune.com /2016/02/01/
ibm-e m ployee-performance-reviews

20. Brown, A., Lin, Y., & Jnceoglu, 1. (2017). Prevent ing ra te r biases in 360-degree feed back by
forcing choice. OrganiZlltional Research Methods, 20, 121-148.

66 Part I Strategic and General Considerations

21. Ohiman, A., & Mahesh wari, S. K. (2013). Per fo rmance appraisal politics fro m appraisee
perspective: A stud y of antecedents in the Ind ian context. lntemationalfoumal of Human
Resource Management, 24,1202-1235.

22. Homen d e Mello, F. S. (2015). Coogle’s perfonnmrce management pmctices. Retrieved january 3, 2018,
from http:// www.qulture.rocks/blog/ googles-per formance-management-practices-part-1

23. Kikoski, J. F. (1999). Effective comm unication in the per fo rmance appraisal interview:
Face-to- face communication for p u blic m anagers in the culturally d iverse wor kplace. Public
Personnel Management, 28,301-322.

24. Cianci, A.M., Klein, H.)., & Seijts, G. H. (2010). The effect of negative feedbac k on tensio n
and subsequent perform an ce: The main and inter active effects of goal content and
conscientiousness.Joumal of Applied Psychology, 95, 618-630.

25. Rahm an, S. A. (2006). A ttitudes of Malaysian teachers toward a per fo rmance-appraisal
system . Joumal of Applied Social PsyciJOiogy, 36, 3031-3042.

26. Lo ndon, M. (2003).Job feedback: Giving, seeking, and usingfeedbockfor performance improvement
(2nd ed.). Mahwah, NJ: Lawrence Erlbaum.

27. Rogers, B. (2006). High per fo rmance is more than a d ream-It’s a culture. T&D, 60(1), 12.
28. Aguinis, H., & Bradley, K. J. (2015). The secret sauce for organizational success: Managin g

and p roducing sta r per fo rmers. Organizational Dynamics, 44,161-168.
29. Soltani, E. (2003). Towards a TQM-d r i•en H R per fo rmance evaluation: An empirical s tudy.

Employee Relations, 25, 347-370.
30. Th is material is based on Gro te, D. (1998). Painless per fo rmance appraisals focus on results,

behaviors. HR Magazine, 43(11), 52-56.
31. G rossman, J. H., & Parkinson, J. R. (2002). Becoming a successful manager: How to make a smooth

transition from managing yourself to managing others (pp. 142-145). Chicago, IL: McGraw-Hill
Professional.

32. This case s tudy is loosely based o n Swinney, J ., & Couch, B. (2003). Sales performance
impravement getting results tlrrouglr a franc/rise sales organization. International Society fo r
Per fo rmance Im provem ent Case Studies.

chapter

3
Performance
Management and
Strategic Planning

Strategy is a style of thinking, a conscious and deliberate process,
an intensive implementation system, the science of insuring future success.

– Pete johnson

Learning Objectives
By t he end of this cha pte r, you will be able to do t he following:

1. Critique the definiti on and purposes of strategic
planning.

2. Create alignment between performance management
and an organization’s strategic priorities and direction.

3. Assess the critical role of the HR function in the strategic
planning process.

4 . Devise an environmental (i.e., SWOT) analysis that includes
a consideration of both internal (strengths and weak·
nesses) and external (opportunities and threats) trends.

5. Prepare a gap analysis resulting from a consideration
of external and internal trends that identify leverage,

constraints, vulnerabilities, and problems that dictate an
organization’s mission.

6 . Produce state·of·the·science mission and vision statements,
objectives, and strategies for the organization and its units.

7. Devise j ob descript ions that take into account a unit’s
and the organization’s vision, mission, obj ectives, and
strategies.

8. Build up support for the performance management
system by using it as a tool to help achieve the organiza·
lion’s strategic priorities.

67

68 Part I Strategic and General Considerations

In Chapters 1 and 2, we d iscussed the fact that good performance management
systems encourage employees to make tangible and important contrib utions
toward the organization’s s trategic objectives. When these contributions to the
top organizational and unit p riorities are mad e clear, perform ance management
systems are likely to receive crucial top m anagement support. Without this
s u pport, it is unlikely that a performance managem ent system w ill even get
off the g round. How, then, are these s trategic o rganizational objectives identi-
fi ed? How does an organization know w ha t the “target” sho uld be, what it is
trying to accomplish, and how to do it?

The HR function plays a key role as strategic partner in helping to answer
these q uestions. Unforttmately, the HR function is often vilified as being merely
opera tional and not able to think or act strategically. Well, over the past two
decades or so, an entire new field of research and p ractice has emerged, called
strategic human resource management (SHRM). SHRM is about p lanning and
implem enting HR policies and activities with the goal of enabling an organiza-
tion to achieve its objectives.• Performance m anagement is an ideal vehicle to
dem onstrate the strategic role and contributions of the HR function beca use it
allows for explicit and clear links between what HR is doing and the organiza-
tion’s mission, vision, and objectives. By being involved, and hopefully, leading
the rollo ut of the strategic planning process and linking a firm ‘s objectives with
the performance m anagement system, the HR function can serve as an expert
internal consultant w ho has got a “seat at the table” of the top management team.
In fact, the few CEOs w ith a HR background, includ ing Samuel R. Allen a t John
Deere, James C. Smith at Thomson Reuters, Steven L. Newman a t Transocean,
and Mary Barra at General Motors, have been able to serve as strategic partners
while heading their respective HR units, which is, in large part, what p ropelled
their trajectory into the very top of their organizations. First, Jet us d efine strategic
planning and describe its p urposes.

3-1 DEFINITION AN D PURPOSES OF STRATEGIC PLANNING
Strategic planning is a process that involves d escribing the organization’s d estina-
tion, assessing barriers that stand in the way of that d estination, and selecting
approaches for moving forward? Among o ther useful outcomes, strategic plan-
ning allows for the allocation of resources in a way that p rovides organizations
with a competitive advantage because they are assigned in a more effective and
more targeted manner? Overall, a strategic plan serves as a blueprint that d efines
how the organization will allocate its resou rces in pursuit of its most critical and
important objectives.

Strategic p lanning serves the following seven specific p u rposes. Fi rst and
fo remost, s trategic planning allows o rganizations to define their identity. In
o ther word s, it provides o rganizations w ith a clearer sense of who they are and
what their p u rpose is . Second, strategic planning helps organizations prepare
fo r the fu ture because i t clarifies their d esired destination. Knowing w here
the organization wants to go is a key first s tep in p lanning how to get there,
and then, doing so. Third, strategic p lanning a llows organizations to analyze
their external and internal environment, and d oing so enhances their ability to
a d apt to environmental changes and even anticipate future changes. Although
knowledge of the environment does not guarantee that an organization will

Ch apter 3 Performance Management and Strategic Planning 6il

be more likely to change and adapt, this knowl- ………………………………………………….. ..
edge is the first and critical step toward possible St rategic Plan: Purp o ses
adaptation. Fourth, s trategic planning provides
organizations with focus and allows them to Helps define the organization’s Identity
allocate resources to what matters most. In turn, Helps organizations prepare For the Future
the improved allocation of resources is likely to
s timulate growth and improve organizational per-
formance and profitability. Fifth, strategic planning
helps produce a common perspective and culture
of cooperation within the organization, given that
a common set of objectives is created. Such a com-
mon agenda and culture of cooperation can gain

Enhances ability to adapt to enVironmental changes

Provides Focus and allows For better allocation or resources

Produces an organizational culture or cooperat1on

Allows For the consideration of new options and opportunities

Prov1des employees w1th inFormat1on to direct daily actlllt1es

organizations a key competitive advantage. Sixth, strategic p lanning can be a
good corporate eye-opener because it generates new options and opportuni-
ties to be considered. For example, new opportunities can include expanding
to new markets or offering new products. Finally, s trategic p lanning can be
a powerful tool to guide employees’ daily activities because it identifies the
behaviors and results that are directly linked to the organization’s objective
and really matter. Thus, a strategic plan provides critical information to be
used in the performance management system. To s ummarize, Table 3-1 1ists
key purposes of a strategic p lan.

3-2 PROCESS OF LINKING PERFORMAN CE MAN AGEMENT
TO THE STRATEGIC PLAN

The mere presence of a strategic plan does not guarantee that this information
will be used effectively as part of the performance management system. In fac t,
countless organizations spend thousands of hours creating strategic plans that
are mos tly talk but do not lead to tangible actions. The process then ends up
being a huge waste of time and a source of frustration and long-lasting cyni-
cism, particularly in situations when there is frequent leadership turnover and
a strategic planning process is put into motion over and over again, leading to
nothing more than reports and updated website content. In those situations, it
is typical to hear people say: “Oh no, again! Another CEO and another strategic
plan!” For example, a worldwide survey of senior executives from 197 companies
with combined sales exceeding US$500 million showed that less than 15% spent
any time evaluating how the previous year’s strategic plan affected current per-
formance. The study also found that corporate strategies routinely only deliver
between 50% and 63% of their potential financial performance.4 Thus, to ensure
that strategy cascades down the organization and leads to concrete actions, a
conscious effort mus t be made to link the strategic plan with w hat everyone does
in the organization on a daily basis.

Figure 3-1 provides a useful framework for understanding the relationship
between an organization’s strategic plan, a unit’s strategic plan, and job descrip-
tions (which are the d rivers of ind ividual and team tasks and required KSAs- as
described in Chapter 2). The organization’s strategic p lan includes a mission
s tatement and a vision statement, as well as objectives and strategies that will
allow for the fulfillment of the mission and vision. The strategies are created with

70 Part I Strategic and General Considerations

FIGURE 3-1
Link Among Organization and Unit Strategic Plans, and Job Descriptions

• Mission
• Vision
• Objectives
• Strategies

Organization’ s
Strategic

Plan

• Mission
• Vision
• Objectives
• Strategies

• Tasks
• Knowledge
• Skills
• A bilities

the participation of m anagers at all levels. The higher the level of involvement,
the more likely it is that managers will see the resulting stra tegies favorably.5 As
soon as the organizational strategies have been defined, senior management pro-
ceeds to meet with department or unit managers, who in turn, solicit inp ut from
all people within their units to create unit-level mission and vision s ta tements,
objectives, and stra tegies. A critical issue is to ensure that each unit’s or depart-
ment’s mission and vision statements, objectives, and strategies are consistent with
those a t the organizational level. Job descriptions are then revised and updated
to make sure they are consistent with unit and organizational priorities. Driven
by the job descriptions, results and behaviors as well as development plans are
then consistent with the o rganizational- and department-level p riorities.

Does the process of aligning organizational, unit, and individ ual priorities
actually work in practice? Is this doable? The answer to these questions is “yes,”
and the benefits of doing so are widely documented. Specifically, performance
management sys tems have a critical role in translating strategy into action.6 In
fact, a stud y including 338 organizations in 42 countries found that performance
management is the third most important factor affecting the success of a strategic
plan. This is particularly true for organizations tha t operate in rapidly changing
environments, regardless of their s ize, ind ustry, and age.7

One way to form alize the link between strategic planning and performance
management is through the implementation of a Balanced Scorecard. Although
this approach has been revised since it was originally proposed by Kaplan and
Norton in 1992,8 the basic components are largely unchanged. In a nutshell, a
balanced scorecard involves creating indicators of individual performance along

Chapter 3 PerFormance Management and Strategic Planning 71

four separate “perspectives” of an organization’s success. For the case of a bank,
consider the following: (a) financial (e.g., cost control, sales growth rate, profit
growth rate}, (b) customer (e.g., service product quality, customer satisfaction,
service timing), (c) internal process (e.g., information delivery, interaction between
employees and clients, standard operation process}, and (d) learning and growth
(e.g., corporate image, competitiveness, employee satisfaction) .

In addition to including individ ual performance measures that go beyond
pure financial goals, an important feature of balanced scorecards is that each of
the indicators should be directly related to a firm’s mission and vision. This is
usually shown graphically with a stralegJJ map, which is a flowchart type diagram
with circles and arrows that links objectives developed for each of the four per-
spectives in a causal chain that eventually leads to a d irect impact on the firm’s
objectives. For example, regarding the illustrative financial indicators mentioned
earlier, a strategy map could show the following sequence: employee satisfaction
(learning and growth) interaction between employees and clients (internal
processes) satisfaction (customer) growth rate (financial},
which leads to achieving the bank’s objective of increasing the number of corpo-
rate accounts and the total value of commercial loans by the end of the quarter.
As a more general example of linking strategy and performance management
that does not include the specific balanced scorecard approach, consider the case
of Key Bank, a financial services company with assets of US$134.5 billion, which
provides investment management, retail and commercial banking, consumer
finance, and investment banking prod ucts and services. Key Bank has more than
1,200 branches, 1,500 ATMs, and 18,000 employees. In 2015, KeyBank was ranked
540th on the Fortune 500 list. In the state of Utah, Key Bank successfully developed
a performance management system that is aligned with the strategic plan of the
organization.9 To do this, the bank firs t involved managers at all hierarchical levels
to develop an organization mission statement. Next, they developed objectives
and strategies that would help achieve Key Bank’s mission. The mission statement,
objectives, and strategies a t the organizational level served as the foundation
for developing the strategies for individual branches. To develop these, senior
managers met with branch managers to discuss the organization’s objectives
and strategies and to explain the importance of adopting similar ones in each
branch. Subsequently, each of the branch managers met with their employees
to develop branch mission statements and objectives. One important premise in
this exercise was that each branch’s mission statement and objectives had to be
aligned with the corporate mission statement, objectives, and strategies. After
organizational and branch objectives and strategies were aligned, managers and
employees reviewed individual job descriptions. That is, each job description
was tailored so that individual tasks, duties, and responsibilities were clear and
contributed to meeting the department’s and the organization’s objectives. Involv-
ing employees in this process helped them to gain a clear understanding of how
their performance affected the branch, and in turn, the organization. A revised
version of the process implemented a t Key Bank of Utah is shown in Figure 3-2.

Consider Key Bank’s overall and branch mission statements in Figure 3-2 and
the brief job description for bank teller. Now, re-read the more detailed job descrip-
tion from O*NET for a truck driver in Figure 2-3. What are the critical technology
skills and abilities that could be included in the bank teller job description to make
it more specific and useful and congruent with organization- and branch-level
objectives? What are some key results and behaviors that should be included

72 Part I Stra tegic and General Considerations

FIGURE 3 -2
Summary of Alignment of Performance Management and Strategic Plan at KeyBank of Utah

• Mission (Branch Level):
Increase the knowledge,
skills, and decision-making
abilities of all of our
branch employees so
that we will minimize
losses and other
operating expenses
while maximizing the
profitability of our
branching systems as well
as attraction and retention
of customers.

Organizati on’ s
Strategic

Plan

Job
Descripti ons

• Mission statement The mission of the
corporation is to operate as a
performing financial institution providing
a wide range of profitable, competitive,
and superior financial services in our
market.

• Goals: to attract and retain customers
and an outstanding staff who are highly
motivated and productive and who
vigorously pursue revenue-generating
and cost·reduction strategies.

• Strategy: … aitically review our existing
branches and departments to ensure
that all branches are consistent in their
goals, strategies and profit objectives.

• Brief description for bank teDer.
Receives and pays out money, and
keeps records of money and negotiable
instruments involved in various
transactions with customers.

in the performance management system to make sure there is good alignment
between the objectives of the organization and the branch, and individual key
accountabilities, performance objectives, and performance standards? (Hint: feel
free to look up the job description for bank teller on O*NET.)

What happened after Key Bank of Utah implemented their performance man-
agement system? In general terms, KeyBank was able to enjoy several positive
consequences of aligning corporate, branch, and individual objectives. After the
implementation of its new performance management system, KeyBank found
several meaningful benefits, including the following:

• Managers knew that employees were focused on meeting important
objectives.

• Employees had more decision-making power.
• Lower-level managers had a better understanding of higher-level

managers’ decisions.
• Communication increased and improved among managers and between

managers and employees_

To sum up, to be most useful and impactful, an organization’s performance
management system must rely on its strategic plan. The job descriptions, which
serve as roadmaps for what individuals are s upposed to do, how, and what
results will be produced must be aligned with the vision, mission, objectives, and
s trategies of the organization and unit. Organizations can expect greater returns
from implementing a performance management system when such alignment

Chapter 3 Performance Management and Strategic Planning 73

is in place. Also, to the extent that the HR function is involved in the design and
implementation of the performance management system, it will gain credibility
and will be seen as a strategic and valued contributor to the entire organization.

3-3 STRATEGIC PLANNING PROCESS
Chapter 2 included a brief overview of the strategic planning process. But the
development of an organization’s strategic plan requires a careful analysis of
the organization’s competitive s ituation, the organization’s current position
and destination, the development of the organization’s strategic objectives, the
design of a plan of action and implementation, and the allocation of resources
(human, organizational, physical) that will increase the likelihood of achieving
the stated objectives. 10 And the HR function can, and should, play an important
role in this process.

3-3-1 Critical Role of the HR F unction
As mentioned in the opening section of this chapter, the HR function can play
a critical role in creating and implementing the strategies that will allow the
organization to realize its mission and vision. Specifically, the HR function can
make the following contributions:

• Communicate knowledge about the strategic plan. The HR function can be a
good conduit to communicate the various components of the strategic
plan (e.g., mission, vision, and objectives) to all the employees.

• Outline knowledge, skills, and abilities (KSAs) needed for strategy
implementation. The HR function, through work analyses and the resulting
job descriptions, serves as a repository of knowledge regarding what KSAs
are needed for a successful implementation of the strategic plan. Thus, the
HR function is in a unique situation to provide information about whether
the current workforce has the KSAs needed to s upport the strategic plan,
and if not, to offer suggestions about what types of employees should be
hired and what types of plans (e.g., training and development initiatives)
should be put in place to develop the needed KSAs internally.

• Propose compensation systems. The HR function can provide useful
information on what type of compensation system should be
implemented to motivate employees to support
the strategic plan. TABLE 3-2

In addition to serving as a necessary guide for
individual and team performance, knowledge of
organization- and unit-level mission and vision pro-
vides the HR function with information about how
to design the performance management system. Spe-
cificall y, there are many choices in how the system is
designed. For example, the system might place more
emphasis on behaviors (i.e., processes) than on results
(i.e., outcomes), or the system might emphasize more
short-term criteria (i.e., quarterly objectives) than
long-term criteria (triennial). Some of these choices
are presented in Table 3-2.

Some Choices in Performance Management System Design
to be Guided by an Organization’s Strategic Plan

Cater/a: Behavioral cnterla vs. results cnteria

Portlclpation: Low employee participation vs. high employee
participation

Temporal dlmens1on: Short-term cnteria vs. long-term criteria

Level of criteria: Individual cnterla vs. team/group criteria

System ooentatJon. Developmental orientation vs. adminis-
trative orientation

Compensation: Pay for performance (1.e., merit-based) vs.
pay for tenure/position

74 Part I Strategic and General Considerations

As a result of the strategic planning process, knowledge of the organization and
unit vision and mission allows the HR function to serve as an internal consultant and
to make informed decisions about performance management design choices. More
detailed information on each of the factors guiding each of these design choices is
provided in subsequent chapters. For now, as one illustration, assume an organiza-
tion is producing a mature product in a fairly stable industry. In this situation, an
emphasis on behaviors, rather than results, may be preferred because the relationship
between processes and o utcomes is well known, and the top priority is that employ-
ees display reliable and consistent behaviors in making the product. Regardless of
the type of criteria used, be it behaviors or results, these m ust be observable (i.e.,
the person rating the criteria needs to have the ability to observe what is rated) and
verifiable (i.e., there needs to be evidence to confirm the criteria rated).

As a second example, consider the actual case of Dell computers. Dell is one
of the top players in the personal computer industry through its m ode of online
direct selling. Dell’s main strategic b usiness strategy is to be a low-cost leader
in an industry that deals with a prod uct that has now become a commodity.
However, in addition to a low-cost strategy, Dell has a customer relationship
business strategy of maintaining customer service a t a high level, while reducing
costs. Dell’s performance management system provides a strong link between
individual objectives and o rganizational performance by including a results
component (i.e., cost) and a behavioral component (i.e., customer service).11 At
Dell, both low cost and high levels of customer service (for both internal and
external customers) are important dimensions of the performance management
system. Also, the system is strongly linked not only to the strategic objectives
(i.e., low cost and high levels of customer service), but also to the organization’s
“winning culture” (i.e., achievement of personal and business objectives through
its focus on interaction between managers and team members).

Next, Jet us discus the several steps involved in the creation of a strategic plan.
These include (1) the conduct of an environmental or SWOT analysis (i.e., the
identification of the external and internal strengths, weaknesses, opportunities,
and threats of the external and internal environment in which the o rganization
operates); (2) the creation of an organizational mission (i.e., statement of what
the organization is all about); (3) the creation of an o rganizational vision (i.e.,
statement of where the organization intends to be in the long term, say, about
5-10 years); (4) setting objectives (i.e., what the organization intends to do in the
short term, say, one to three years); and (5) the creation of strategies that will allow
the organization to fulfill its mission and vision and achieve its objectives (i.e.,
descriptions of game plans or how-to procedures to reach the sta ted objectives) .

Although we will describe these steps sequentially, the strategic planning
process is not linear. For example, there may firs t be a rough draft of the organi-
zation’s mission and vision, and then, the conduct of an environmental or SWOT
(strengths, weaknesses, opportunities, and threats) analysis may follow to help
define the mission and vision more clearly. In other words, the mission and
vision m ay be drafted first and the environmental analysis may follow second .
The important point is that there is a constant back and forth among these issues:
the vision and mission affect the type of environmental analysis to be conducted,
and the results of an environmental analysis are used to revise the mission and
vision. By necessity, we need to d iscuss them one by one; however, keep in mind
that they affect and inform each other on an ongoing basis. Let us begin with a
d iscussion of environmental or SWOT analysis.

Chapter 3 PerFormance Managemen t and Strategic Planning 715

3-3-2 External and Internal Environmental (i.e., SWOT) Analysis
In conducting a strategic plan, we need to step back to take in the “big picture.” This
is accomplished through what is called an environmental or SWOT (i.e., strengths,
weaknesses, opportunities, and threats) anal ysis. 12 An environmental analysis
identifies external and internal parameters with the purpose of understanding
broad issues related to the context and industry where the organization operates
so that decisions can be made against the backdrop of this broader context.13

External Environment An examination of the external environment includes a
consideration of opportunities and threats. Opportunities are characteristics of
the environment that can help the organization succeed. Examples of such op-
portunities might be markets not currently being served, untapped talent pools,
and new technological advances. Threats are characteristics of the external envi-
ronment that can prevent the organization from being successhtl. Examples of
such threats range from economic recession to the launch of innovative products
and services on the part of competitors. A common framework for understand-
ing ind ustry-based threats is the now classic work by Michael E. Porter, called
“five-force analysis.” 14 These includ e three forces from horizontal competition
(i.e., the threat of substitute products or services, the threat of established rivals,
and the threat of new entrants), and two forces from vertical competition (i.e.,
the bargaining power of suppliers and the bargaining power of customers).

For example, consider the case of Frontier airlines, which is an affordable-fare
airline headquartered a t Denver International Airport, and serving more than
55 cities in the United States, Mexico, the Dominican Republic, and Cuba with
approximately 275 daily flights. 15 Frontier commenced operations in July 1994,
given two key opportunities in the external environment. First, two major com-
peting airlines (Continental and United, which have actually merged in the year
2012) engaged in a dramatic downsizing of their Denver operations, leading to
service gaps in various major markets that Frontier filled. Second, the city of
Denver replaced the heavily congested Stapleton Airport with the much larger
Denver International Airport. In February 2004, United Airlines, the largest carrier
operating out of Denver International Airport, made changes in the environment
that resulted in a direct horizontal threat to Frontier: United Airlines launched
its own low-fare affiliate. The new affiliate, Ted, was going head-to-head with
Frontier. Peter McDonald, then vice president for operations for United Airlines,
reported that Ted ‘s cost per available seat mile was in the ballpark of Frontier’s
8.3 cents. 16 So, what had been an opportunity for Frontier no longer remained one,
given the launching of Ted. To make things even worse for Frontier, Southwest
Airlines, another low-cost competitor, also entered the Denver market a few years
later- and now, Frontier is only the third largest carrier in Denver after United
and Southwest. To complement the more general five-force analysis proposed
by Michael Porter, the following is a nonexhaustive list of external factors that
should be considered in any environmental analysis:

• Economic. For example, is there an economic recession on the horizon? Or,
is the current economic recession likely to end in the near future? How
would these economic trends affect our business?

• Political/legnl. For example, how will political changes d omestically or in
the international markets we are planning on entering affect our entry
strategy?

76 Part I Strategic and General Considerations

• Social. For example, what is the impact of the entry of Millennials in the
workforce (and the massive retirement of Baby Boomers)?

• Technological. For example, what technological changes are anticipated in
our industry and how will these changes affect how we do business?

• Competitors. For example, how do the strategies and products of our
competitors affect our own strategies and products? Can we anticipate our
competitors’ next move?

• Customers. For example, what do our customers want now, and what will
they want in the next five years or so? Can we anticipate s uch needs?

• Suppliers. For example, what is the relationship with our suppliers now
and is it likely to change, and in what way, in the near fu ture?

An examination of external trends is critical for businesses of all sizes. But
it is particularly challenging for multinational organizations because they are
concerned with both domestic and international trends. In fact, monitoring the
external environment is so important in the strategic planning of multinational
organizations that a survey of U.S. multinational corporations showed that 89%
of departments responsible for the assessment of the external environment report
directly to a member of the board of directors.17

Internal Environment An examination of the internal environment includes a
consideration of strengths and weaknesses. Strengths are internal characteristics
that the organization can use to its ad vantage. For example, what are the organi-
zation’s assets and the staff’s key skills? At Frontier, several key executives from
other airlines were recruited, an important strength that was needed, given the
emergence of horizontal threats. These executives created a senior management
team with long-term experience in the Denver market.

Weaknesses are internal characteristics that are likely to hinder the success
of the organization. These could include an obsolete organizational structure
that does not allow for effective organization across units; the misalignment of
organizational-, unit-, individual-level objectives; a talent pool with skills that
have become obsolete given changes in the industry and in technology.

The following is a nonexhaustive list of internal issues that should be con-
sidered in any environmental analysis:

• Organizational stn1cture. For example, is the current structure conducive to
fast and effective communication?

• Organizational culture. Organizational culture includes the unwritten
norms and values espoused by the members of the organization. For
example, is the current organizational culture likely to encourage
or hinder innovation and entrepreneurial behaviors on the part of
middle-level managers? Is there a culture in w hich new ideas and
s uggestions are quickly s uppressed with the argument that “this has never
been done before”?

• Politics. For example, are the various units competing for resources in such
a way that any type of cross-unit collaboration is virtually impossible? Or,
are tmits likely to be open and collaborative in cross-unit projects?

• Processes. For example, are the s upply chains working properly? Are all
touch points with customers working properly? Can customers reach

Chapter 3 Performance Management and Strategic Planning 77

TABLE 3-3 us when they need to and do they receive a satisfying
response when they do?

• Size. For example, is the organization too small or too
large? Are we growing too fast? Will we be able to manage
growth (or downsizing) effectively?

Trends to Consider in Conducting an External and
Internal Environmental (I.e., SWOT) Analysis

Table 3-3 includes a summary list of external and internal
trends to be considered in conducting an environmental analysis.
Think about your current employer (or last employer). Take a
look at Table 3-3. Where does your organization stand in regard
to each of these important external and internal issues? Regard-
ing the external issues, what are some of the opportunities and
threats? Regarding the internal issues, what are some of the
strengths and weaknesses?

Gap Analysis After external and internal issues have been con-

Polttical/legal

Social

Technological

Compet1tors

Customers

Suppliers

s idered, information is collected regarding opportunities, threats, strengths, and
weaknesses. This information is used to conduct a gap analysis, which analyzes
the external environment in relation to the internal environment. The pairing of
external opportunities and threats with internal s trengths and weaknesses leads
to the following situations (ranked from most to least competitive):

1. Opportunil:tj +Strength = Leverage. The best combination of external and
internal factors occurs when there is an opportunity in the environment
and a matching strength within the organization to take advantage of
that opportunity. These are obvious directions that the organization
should pursue. Consider the case of IBM, the world’s largest information
technology company, as well as the world’s largest business and
technology services provider with a revenue from continuing operations
of US$21.8 billion. IBM has concluded that the personal computer-driven
model no longer applies and that network-based computing is taking
over. As noted by IBM’s CEO Virginia (Ginni) Rometty, “Digital is the
wires, but digital intelligence, or artificial intelligence as some people
call it, is about much more than that. This next decade is about how you
combine those and become a cognitive business. It’s the dawn of a new
era.” This realization shifted the focus to servers, databases, and software
for transaction and data management. Furthermore, IBM recognized
the upsurge of network-connected devices, including s martphones and
tablets. To take ad van tage of this external opportunity, IBM now focuses
its resources on s upporting network systems, developing software
for the network-connected devices, and manufacturing specialized
components. Consider the categories of products that IBM offers today
(a) Cloud, (b) Cognitive, (c) Data and Analytics, (d) Internet of Things,
(e) IT Infrastructure, (f) Mobile, and (g) Security. 18 This is a long way
from IBM’s first products involving clocks and cash registers! IBM built
up its software capabilities through internal development and outside
acquisitions. In short, IBM developed a leverage factor by identifying
internal strengths that matched external opportunities, which in turn,
leads to a successful business model.

Organizational culture

PoliUCS

Processes

Size

78 Part I Strategic and General Considerations

2. Opportunity+ Weakness = Constraint. In a constraint situation, the external
opportunity is present; however, the internal situation is not conducive
to taking ad vantage of the external opportunity. At IBM, this situation
could have taken place if IBM did not have the internal capabilities to
develop software and other prod ucts for the network-connected devices
and specialized components. The external opportunity would still be
there, but, absent the internal capabilities, it would not turn into an
advantageous business scenario.

3. Tineal+ Strength = Vulnerability. In this situation, there is an external
threat, but this threat can be contained because of the presence of
internal s trengths. If this had been the case at IBM, the company would
not have been able to take advantage of a new situation; nevertheless,
exis ting strengths would have allowed IBM to continue to operate in
other areas.

4. Threat+ Weakness = Problem. In the worst scenario, there is an external
threat and an accompanying internal weakness. For example, in the 1980s,
IBM refused to adapt to the demands of the emerging microcomputer
market (i.e., today’s personal systems including desktops, laptops,
and notebooks). IBM did not have the internal capability to address
customers’ needs for personal systems, and instead, continued to focus on
its internal strength: the mainframe computer. IBM’s poor performance
in the early 1990s was a direct consequence of this problem situation: the
external threat (increasing demand for personal systems and dwindling
demand for mainframe computers) was met with an internal weakness
(Jack of ability to shift internal focus from the mainframe to the personal
systems and devices).

Consider the organization you are currently working for, or the organization
for which you have worked m ost recently. Try to identify one leverage and one
problem, based on an analysis of opportunities, threats, strengths, and weak-
nesses. What was the situation like? What were the outcomes?

In sum, the process of creating a strategic plan begins with an environ-
mental analysis, also called SWOT analysis, which considers internal as
well as external trends. Internal trends can be classified as either strengths
or weaknesses, and external trends can be classified as either opportunities
or threats. A gap analysis consists of pairing strengths and weaknesses with
o pportunities and threa ts, and de te rmining whether the situation is advan-
tageous (i.e., leverage), disad vantageous (i.e., problem), or somewhere in
between (i.e., constraint and vulnerability). A SWOT analysis offers critical
information for all organizations- as illustrated with the case of Airbnb in
Box 3-1.

3-3-3 M ission
After the environmental analysis has been completed and the gap analysis
reveals an organization’s leverage, constraints, v ulnerabilities, and problems,
the members of the organization must determine who they are and what they
do. This information will then be incorporated into the organization’s mission
sta tement. The mission statement summarizes the organization’s most important
reason for its existence. Mission sta tements provide information on the purpose

Chapter 3 Performance Management and Strategic Planning 7SI

Box 3 -1

Company Spotlight: SWOT and Gap Analysis
atAirbnba
A i rbnb i s an online hospitality service broker that allows
customers to rent short-term lodgi ng from local residents.
Launched i n 2008, it has more than 3 m il lion listi ngs in
65,000 cit ies and 191 countries, 150 million users, and was
recently val ued at over US$30 bi llion.•

Strengths

• First to market
• Host incentive {hosts can

make money)
• Ease of use (search by

price. location, dates)
• Website design
• Profiles (browse hosts

and review them)
• No daily updates required

for listings

Weaknesses

• Lack of brand awareness
in new markets

• Company quality
dependent on hosts and
customers

• Ease of competitor entry
• Legal costs to deal

with zoning laws (e.g.,
prohibiting people from
running a business)

• Insurance costs to protect
hosts and customers

Opportunities

• Lower prices than hotels
• More connected to city

and its culture
• Easy to become a host

and connect w1th local
residents

• Large market for
temporary housing

• Growing use or online
booking

Gap A nalysis (Leverage):

Threats

• Established lodging
providers (e.g .. hotels)

• Online rooms (e.g.,
Craigsllst couchsurfing
.com)

• Competitors copying
business model

• Bad press surrounding
poor room. poor
customers, or poor hosts

• Provi de alternative to hotels by provi di ng temporary
housi ng that allows hosts to make money and users
to save money and experi ence local culture.

• Provi de easy-to-use web platform that allow hosts to
easi ly list temporary housing by posting thei r l i sti ng
once, and users to easi ly search and f i lter.

• This analysis is based loosely on the pitch deck of Airbnb: Dishman, L. (2015, September). Lessons from the early pitch decks of A irbnb, Buzzfeed,
and Youtube. Retrieved from https:llwww.fastcompa ny.com/3050985/lessons·from· the-early·pitch·de<ks·of·a irbnb· buzzfeed·a nd·youtubeo
b Fast Company. (2017). Most innovative companies: A irbnb. Available online at: https://www.fastcompany.com/company/airbn b

of the organization and its scope. State-of-the-science mission s tatements provide
answers to the following questions:

• Why does the organization exist?
• What is the scope of the organization’s activities?
• Who are the customers served?
• What are the products or services offered?

As an example, consider the mission s tatement for the Coca-Cola Company:

• To refresh the world mind, body, and spirit.
• To inspire moments of optimism and happiness through our brands and

actions.
• To create value and make a difference. 19

Presumably, this mission statement was preceded by an environmental analy-
s is examining external and internal trends. We do not have information on this.
But what we do know is that this mission s tatement provides some information
regarding the four questions noted earlier. Based on this mission statement, we
have information about w hy the company exists (i.e., “to refresh the world”) and

80 Part I Strategic and General Considerations

the scope of the organization’s activities (i.e., “to inspire moments of optimism
and happiness, create value, and make a difference” ). The mission s tatement
does not, however, include information about who are the customers served .
Also, there is no information about specific products (e.g., Fanta, Sprite, Minute
Maid, Powerade, Dasani, Fresca).

More specific and detailed information would be needed if Coca-Cola’ s
mission statement is to be used by its various units to create their own miss ion
statements. More detailed information is also needed if both the organization and
unit miss ion statements are to be used as inp ut for individual job descriptions,
which will, in turn, be used for managing individual and team performance.
State-of-the-science mission statements include the following components:

• Basic prod uct or service to be offered (does what?)
• Primary markets or customer groups to be served (to whom?)
• Unique benefits and ad vantages of prod ucts or services (with what

benefits?)
• Technology to be used in production or delivery
• Fundamental concern for s urvival through growth and profitability

Miss ion statements can also include information about the organization’s values
and beliefs, but these are sometimes lis ted separately, including the following:

• Managerial philosophy of the organization
• Public image sought by the organization
• Self-concept of bus iness adopted by employees, s hareholders, and other

s takeholders

In short, a mission s tatement defines why the organization exists, the scope
of its activities, the customers served, and the products and serv ices offered.
Mission s tatements also include specific information, s uch as the technology
used in production or delivery, and the unique benefits or advantages of the
organization’s prod ucts and services. Finally, a mission statement can incl ude a
s tatement of values and beliefs, such as the organization’s managerial philosophy,
or these can be presented separately. Table 3-4 lists the characteristics of good
mission statements.

TABLE 3-4
Characteristics o f Good Mission Sta tements

Characteristics

Basic producVseiVIce to b e o ffered (does what)

Primary markets or customer groups to be seNed (to whom)

Unique benefits. features. and ad vantages of products/services (with what bene fits)

Technology to be used in production or delivery

Fundamental concern for suNival through growth and profitability

Managerial philosophy o f the organization

Public image sought by organiza t1on

Self-concept o f business adopted by employees, shareholders, and other stakeholders

Chap t er 3 PerFormance Management and Strategic Planning 81

3-3-4 V ision
An organization’s vision is a statement of future aspirations. In other words, the
vision statement includes a description of what the organization would like to
become in the future-abou t 5-10 years out. Vision statements are typically written
after the mission statement is completed because the organization needs to know
who they are and what their purpose is before they can figure out who they want
to be in the fu ture. Note, however, that mission and vision statements are often
combined, and therefore, in many cases, it is difficult to differentiate one from the
other. In such cases, the vision statement usually includes two components: a core
ideology, which is referred to as the mission, and an envisioned future, which is what
is referred to as the vision per se. The core ideology contains the core purpose
and core values of an organization, and the envisioned fitture specifies long-term
objectives and a picture of what the organization aspires to in the long term.

Spectrum Brands provides an example of combining mission and vis ion into
one sta tement. Spectrum Brands is a global consumer products company and a
leading supplier of batteries, kitchen appliances, shaving and grooming products,
personal care prod ucts, pet supplies, and home and garden products. Originally
founded in 1906 as the French Battery Company in Madison, Wisconsin, and
renamed Rayovac Company during the 1930s, the company changed its name
to Spectrum Brands to reflect its diverse portfolio and position as a publicly
held company. Some of its more recognizable brands include Rayovac, VARTA,
Remington, George Foreman, Black+ Decker, Nature’s Miracle, Littermaid, and
Liquid Fence. Based in Middleton, Wisconsin, Spectrum Brands’ products are
sold by the world’s top 25 retailers and are available in more than one million
s tores in approximately 160 countries. Spectrum Brands’ combined mission and
vision statement is the following:

Spectrum Brands is a rapidly growing, global, diversified, market-driven
consumer products company.

We will continue to grow our company through a combination of strategic
acquisitions and organic growth.

We will strengthen our brands and generate growth through emphasis on
brand strategy/marketing and innovative product technology, design and
packaging.

We w ill leverage IT infrastructure, distribution channels, purchasing power
and operational structure globally to continue to drive efficiencies and
reduce costs.

We w ill profitably expand distribution in all served markets.20

This sta tement includes components of a mission statement (i.e., “a rapid ly
growing, global, diversified, market-driven consumer products company”) as
well as components of a vision statement (e.g ., “will strengthen our brands
and generate growth through emphasis on brand strategy I marketing and
innovative product technology, design and packaging”). Thus, this statement
combines the present (i.e., who the company is, what it does) w ith the future
(i.e., aspirations).

Other organizations make a more explicit differentiation between the mission
and vision sta tements. Consider the vision s tatement for Greif, a global company
headquartered in Delaware, Ohio, with approximately 13,000 employees and

82 Part I Strateg ic and General Considerations

more than 200 operating locations in more than 50 countries. Greif offers rigid
industrial packaging and services (e.g., steel, rigid intermediate bulk containers;
b lending, filling and o ther packaging services), flexible products and services
(e.g., flexib le intermediate bulk containers, shipping sacks; reconditioning flexible
intermediate bulk containers), paper packaging (e.g., containerboard, corrugated
sheets and other corrugated products; packaging services), and land management
(e.g., timber, timberland and special use properties). Greif’s vision statement is
the following21:

Vision
In ind ustrial packaging, be the best performing customer service company in

the world.
Our Core Values. Our people are our past, present and future. We will honor

The Greif Way, building upon our rich history as a special p lace to work.
We will operate within a culture of integrity, character and respect. We
will maintain a safe working environment. We will attract and cultivate
a responsible, competent, efficient and empowered workforce. We will
provide opportunities to excel. We will communicate. We will listen.

Our customers are our reason for being. We will keep our promises to our
customers. We will be synonymous with quality and service. We will solve
their packaging challenges. We will prove the val ue of our relationship by
being the best at what we do.

Our products are our livelihood. We will be a low-cost manufacturer and the
high-value supplier in our business segments. We will innovate, using
our ingenuity and creativity to provide better solutions. We will maintain
our focus on where we can be the best and apply our expertise to do it
better.

Our shareholders are our support. We will conduct our business e thically
and with transparency. We w ill establish rigorous financia l goals that
will drive our business decisions and measure our progress. We will
s trive to attain a superior rate of return and maintain trust with our
investors.

Our stage is the world. Our communities and the environment are our backdrop.
We will be a conscientious global citizen, a responsive community
neighbor and a responsible steward of the earth’s natural resources.

Greif’s vision statement is dearly future-oriented. It provides direction and
focus. In addition, it includes several features that are required of useful vision
statements. First, it focuses attention on what is most important, and thus, elimi-
nates unproductive activities. Second, it provid es a context from which to evalu-
a te new external opportunities and threats. For example, the vision statement
indicates that new opportunities for profitable growth in the industrial packag-
ing and services business should be pursued. In addition, state-of-the-science
vision statements have the following characteristics, not all of which are present
in Greif’s vision statement:

• Brief A v ision statement should be brief so that employees can remember it.
• Verifiable. A good v ision statement should be able to stand the reality

test. For example, how can we verify if Greif indeed becomes “one of
the most desirable companies to work for in our industries, focusing on
establishing a work atmosphere in which our employees can excel”?

Ch ap t er 3 Performance Management and Strategic Planning 83

• Bound tn; a timeline. A good vision statement specifies a timeline for the
fulfillment of various aspirations.

• Current. Outdated vision statements are not useful. Vision statements
should be updated on an ongoing basis, ideally as soon as the old vision is
fulfilled.

• Focused. A good v ision statement is not a laundry list of aspirations, but
rather, focuses on just a few (perhaps not more than three or four) aspects
of an organization’s performance that are important to future success.

• Understandable. Vision statements need to be written in a clear and
s traightforward manner so that they are tmderstood b y all employees.

• Inspiring. Good vision statements make employees feel good about their
organization’s direction and motivate them to help achieve the vision.

• A stretch. Consider Microsoft’s vision statement in the 1980s of “putting
a computer on every desk and in every home,” which was the v ision
when CEO Bill Gates started the MS-DOS operating system. This v is ion
s tatement was such a stretch that it was considered ludicrous at a time
when the mairtframe computer still reigned supreme and the fi rst personal
computers were being made and sold. But that vision became a reality.
Two decades later, Microsoft revised their vision as follows: “p utting a
comp uter in every car and every pocket.” Once again, this v ision has now
become a reality- in the form of car dashboards and smartphones.

In sum, a vision statement includes a descriptio n of future aspirations.
Whereas the mission statement emphasizes the present, the vision s tatement
emphasizes the future. Table 3-5 includes a s ummary list of the features that
should be present in a good v ision sta tement. Think about your current or last
employer. Take a look at Table 3-5. How many of these features are reflected
in your organization’s v is ion statement? What should be added to the vision
s tatements to make it more congruent with an ideal one?

3-3-5 Objectives
After an organization has anal yzed its external opportunities and threats as well
as internal strengths and weaknesses and has defined its mission and v ision, it
can realistically establish objectives that w ill further its mission. The purpose of
setting s uch objectives is to formalize s tatements about what the organization
hopes to achieve in the medium- to long-range period (i.e., within the next three
to five years). Objectives provide more specific information regarding how the
mission will be implemented. Objectives a lso provide a good basis for making
decisions by keeping the desired outcomes in mind. Objectives provide the ba-
s is for performance measurement because they allow for a comparison of what
needs to be achieved versus what each unit, group, and individual is achieving.
Moreover, objectives can also be a source of motivation and provide employees
with a more tangible target for w hich to strive.

Consider the case of Harley-Davidson, Inc., the motorcycle manufacturer.
Matthew S. Levatich, president and CEO since May 2015, said that a major ob-
jective is to

… deliver those customer-growth objectives, not chassis-growth objectives.
It sotmds kind of trite: We’re not really in the business of manufacturing
motorcycles. We’re in the business of building customers. When I joined

TABLE 3 -5
Characteristics o f Good
Vision Statements

Bnef

Verifiable

Bound by a umehne

Current

Focused

Understandable

lnsplfing

A stretch

84 Part I Strategic and General Considerations

[in 1994], we had made86,000 motorcycles the prior year. Compare that to
the peak in 2006 at about 350,000. It’s less today, but we’re working hard
to get that volume back up. But the emphasis has shifted from making
motorcycles to what I would say is identifying and finding customers-
with product, with distribution, with everything we do at the company.22

Operationally speaking, this means that Harley Davidson is trying to achieve
the followin?:

• Lead in every market: Harley-Davidson plans to achieve the leadership
position in the 601cc motorcycle segment. As the company’s CEO Matt
Levatich p ut it, “This is not just about competing, b ut winning.”

• Grow sales at a faster rate: Harley-Davidson plans to grow its retail sales
in the United States as well as internationally at a faster pace. In the next
five years, the company plans to add 150-200 dealers globally to achieve
this objective.

• Grow earnings faster than revenues: Harley-Davidson has stated an
objective of growing its revenues over the next five years. It is also aiming
a t growing its earnings faster than its revenues through 2020.

These objectives provide a clear direction for Harley-Davidson. In fac t, they
provide useful information to guide unit-level objectives as well as individual
and team performance. The entire organization has a clear sense of focus because
all members know that there are clear objectives in terms of market presence,
growth, sales, earnings, and financial performance.

3 -3-6 Strategies
At this point, we know what the organization is all about (mission), what it wants
to be in the future (vision), and what it needs to do to get there (objectives). What
remains is a discussion of how to fulfill the mission and vision and how to achieve
the stated objectives. This is done by creating strategies, which are descriptions
of game plans or how-to procedures to reach the stated objectives. The strategies
could address issues of growth, survival, turnaround, stability, innovation, talent
acquisition, and leadership, among others.

There is an entire field of study called “strategic management studies” devoted
to the development and implementation of strategies. In fact, Deloitte, Boston
Consulting Group, Bain & Company, KPMG, and Accenture offer consulting
services in the dom ain of business strategy. Also, there are hundreds of books
written on this topic. To give you a brief overview of some possibilities, consider
the following strategies, out of many, that could be implemented24:

• Operations: Addressing issues abo ut the global economic environment in
terms of market, capital, interest rates, labor costs, taxes, regulations, and
available infrastructure.

• Competitiveness: Operating a t optimum levels of productivity and
efficiency: Continuous benchmarking, use of statistical tools for
process optimization, total quality model, gathering data on customer
expectations and experiences.

• Optimal use of resources: Optimization of global collaboration with
suppliers, parts standard ization and reduction, and flexible manufacturing
and services.

Chapter 3 Performance Managemen t and Strategic Planning 815

• Global corporate culture: Respecting cultural values of different regions,
constant training at all levels, policies of respect and recognition to
individuals, and selecting highly qualified employees.

• Research and development: Ongoing initiatives aimed at innovation and
creativity.

3-3-7 Developing Strat egic Plans at t he U nit Level
As shown in Figure 3-1, the organization’s strategic plan has a direct impact
on the units’ strategic plans. The case of KeyBank of Utah described earlier il-
lustrates how the branches had a mission statement that was aligned with the
overall organizational mission statement. Similarly, the vision statement, objec-
tives, and strategies of the various units need to be congruent with the overall
organizational vision, objectives, and strategies. Consider the case of Microsoft
Corporation’s mission statement25:

Our Mission: Our mission is to empower every person and every
organization on the planet to achieve more.

What We Value
• Innovation: Learn about innovations from our computer science research

o rganization. With more than 1,000 researchers in our Jabs, it’s one of
the largest in the world.

• Diversity and Inclusion: Explore how we maximize every person’s
contribution- from our employees to our customers-so that the way
we innovate naturally includes diverse thought.

• Corporate Social Responsibilitt;: See how we work to be a responsible
partner to those who place their trus t in us, conducting business in a
way that is inclusive, transparent, and respectful of human rights.

• Philanthropies: Find out how we empower people by investing
technology, m oney, employee talent, and the company’s voice in
programs that promote digital inclusion.

• Environment: Discover how we lead the way in sustainability and
use our technologies to minimize the impact of our operations and
prod ucts.

• Trustworthy Computing: Check out how we deliver secure, private, and
reliable computing experiences based on sound business practices.

Now, consider the mission statement of one of Microsoft’s units, Training
and Education:

With the charter to enable Microsoft engineering workgroups to realize
their full potential for innovation and performance through world-class
learning strategies, Microsoft Training and Education (MSTE) provides
performance support strategies to support the overall corporation’s soft-
ware engineering efforts. Our efforts include the design, development,
and delivery of learning programs, on-line information, and resources
for Microsoft employees. MSTE’s integrated s uite of technical offerings
supports our objective of having a significant impact on Microsoft’s busi-
ness. We promote best practices, cross-group communication, Microsoft
expertise and Industry expertise.

815 Part I Strategic and General Considerations

As you can see, the mission of the training and education unit regarding the
realization of people’s full potential for innovation and performance is consistent
with the overall mission to empower every person, which plays a central role.
Of course, MSTE’s mission is more focused on issues specifically relevant to the
training and ed ucation function. Nevertheless, the link between the two mission
statements is clearly apparent.

The congruence between the mission of the organization and its various units is
important, regardless of the type of ind ustry and the size of the organization. High-
performing organizations have a clear alignment in the mission and vision of the
overall and unit-level mission and vision statements. Consider the case of Norfolk
State University (NSU), located in Norfolk, Virginia. NSU, the seventh largest histori-
cally African American university in the United States, serves many s tudents who
are the first in their families to attend college. It offers about 50 academic programs,
including 16 Master’s and 2 Doctoral degree programs. NSU has seven main schools
offering courses to their approximately 6,200 and 800 undergraduate and graduate
students, respectively: School of Business, School of Education, School of Liberal
Arts, College of Engineering, Science & Technology, School of Social Work, and
School of Extended Learning. The university’s mission statement is the following:

Through exemplary teaching, scholarship, and outreach, Norfolk State
University transforms lives and communities by empowering individu-
als to maximize their potential, creating life-long learners equipped to
be engaged leaders and productive global citizens.26

The mission statement of the School of Business ind icates that its objective is to:

.. . be your path to an amazing fu ture. At Norfolk State’s School of
Business, high character combines with high expectations, excellence
in instruction and a global perspective to prepare students to succeed
personally and professionally. Our graduates will be known for mastery
of their academic specialties and the ability to apply their knowledge in
the workplace and in service to others. It is precisely this type of prepara-
tion that has allowed our to assume leadership roles in great
organizations worldwide. 7

Note that both mission statements are aligned and refer to similar issues.
Specifically, they include the (1) delivery of a high-quality ed ucation and aca-
demic achievement, and (2) ed ucating productive citizens who will contribute
to a (3) global society.

In sum, the organization’s strategic plan, including the mission, vision, ob-
jectives, and strategies, cascades down to all organizational levels. Thus, each
d ivision, branch, department, or unit also creates its own strategic plan, which
should be consistent with the organization’s overall plan.

3-3-8 Job Descriptions
Continuing with the sequence of components shown in Figure 3-1, job descrip-
tions also need to be congruent with the organization and unit mission, vis ion,
objectives, and strategies. We d iscussed the work analysis process lead ing to
the creation of job descriptions in Chapter 2. Recall that job descriptions are
important because they serve as a roadmap for w hat individuals are supposed
to do, how, and what results will be prod uced. Moreover, job descriptions are

Chapter 3 Performance Management and Strategic Planning 87

O perates gasol!ne- or d iesel-powered truck or truck tractor equipped with two or more driVing
wheels and with four or more forward speed transmissions. which may include two or more gear
ranges. These vehicles are coupled to a trailer or semi-trailer by use of a turntable (fifth wheel) or pin-
tle (pivot) hook. Drives over public roads to transport materlals, merchandtse. or equipment. Performs
difficult driVing tasks such as backing truck to loading platform, turning narrow corners. negoUa!Jng
narrow passageways, and keeping truck and trailer under control, particularly on wet or icy high-
ways. May assist in loadtng and unloading truck. May also handle manifest. bills of lading. expense
accounts. and other papers pertinent to the shipment.

important for new employees because they set clear expecta tions from day one.
So, if job descriptions are consistent with the organization and unit miss ion,
vision, objectives, and strategies, it is more likely tha t resul ts produced by
individuals and teams will contrib ute to the s uccess of their units and organi-
zation as a whole. Chapter 4 w ill add ress how to define behaviors and results
and Chapters 5 and 6 w ill add ress how to measure them in great detail. For
now, Jet us continue to add ress the links between strategic b usiness priorities
and job descriptions.

After the strategic plan is completed, some rewriting of the existing job descrip-
tions may be in order. Recall the job description for trailer truck driver as used by
the Civilian Personnel Management Service (U.S. Department of Defense) (see
Figure 3-3) .

This description provides inform ation about the various tasks performed,
together with a description of some of the KSAs required for the position. But
what is the link with the organization and unit strategic plans? How d o the
s pecific tasks make a contribution to the strategic priorities of the transportation
d ivis ion and the organization as a whole? This description includes only cursory
and indirect information regarding these issues. For example, one can assume
that the proficient handling of bills of Jading, expense accounts, and other papers
pertinent to the shipment contributes toward a smooth shipping operation, and
therefore, makes a contribution to the transportation divis ion. However, this link
is not sufficiently clear.

However, consider a job announcement describing the position of Perfor-
mance Solutions Gro up Manager in Microsoft’s training and education unit (see
Fig ure 3-4). This job description makes the link between the individ ual position
and MSTE quite clear. First, the description includes MSTE’s mission statement
so that individuals become aware of how their specific role fits within the over-
all mission of the department. Second, the job description includes language to
the effect that the work must lead to an “industry leading” prod uct, which is
consistent not only with MSTE’s mission, but also with Microsoft’s overall mis-
s ion. Third, in the needed qualifications section, there is a clear overlap between
those needed for this specific position and those mentioned in MSTE’s as well
as in Microsoft’s overall mission. In short, the person working as performance
solutions group manager has a clear sense not only of her position, but also of
how behaviors and expected results are consistent with expectations about MSTE
and Microsoft in general.

In sum, the tasks and KSAs included in individ ual job descriptions must be
congruent with the organization’s and unit’s strategic plans. In other words, job
descriptions should include activities that, if executed well, will help execute the

FIGURE 3 -3
Job Description for Trailer
Truck Driver: Civilian Person-
nel Management Service.
u.s. Department of Defense

88 Part I Strategic and General Considerations

FIGU RE 3 -4
Job Description for
Performance Solutions Group
Manager at Microsoft

As the Performance Solutions Group Manager, you will be accountable for developing and deliv-
ering on a portal strategy that touches over 20,000 employees wMdwlde and involves a com-
plex d ata delivery system. Addttionally, the person is responsible for defining the cutting-edge
tool suite used by the team to develop and maintain the portal, the content housed by the group,
and all e-learning solutions. Key inttiauves include redesigning the Engineering Excellence Guide
within the next 6 months and evolVing tt over the next 18 months to 3 years to become the in-
dustry-leading performance support site. Key challenges include maintaining and managing the
cutting-edge tool swte used by the team and driving a clear vtsion for an indusuy-leading portal
and content delivery plan.
Qualifications for this position are a min imum of five years of senior management experience.
preferably in knowledge management, e-learning, o r Web-based product development roles:
ability to think strategically and exercise sound business judgment on behalf of Microsoft; excel-
lent leadership, communication, interpersonal, and organizational skills: firsthand experience
delivering/shipping Web-based learning and content management solutions; proven record of
successful team management and ability to work well independently and under pressure. while
being ftexible and adaptable to rapid change. Know1edge o f performance support and training
procedures, standards. and processes is preferred.
Wtth the charter to enable M icrosoft engineering workgroups to realize their full potential for
innovation and performance through world-class learning strategies, Microsoft Training and Edu-
cation (MSTE) provides performance support strategies to support the overall corporation’s soft-
ware engineering efforts. Our efforts include the design. development, and delivery of learning
programs, online in formation. and resources for Microsoft employees. MSTE’s integrated suite
of technical offerings supports our objective of having a significant impact on M tcrosoft’s busi-
ness. We p romote best practices. cross-group communication. M icrosoft expertise and Industry
expertise.

mission and vision. Job descriptions that are detached from strategic priorities
will lead to performance evaluations focused on behaviors and results that are
not central to an organization’s success, and the performance management system
will be seen as irrelevant and a big waste of time by managers and employee alike.

3-4 BUILDING SUPPORT AND AN SWERING THE ” WHAT’S IN IT
FOR ME” QUESTION

Given the many competing projects and the usual scarcity of slack resources,
some organizations may be reluctant to implement a performance management
system. Primarily, the reasons include a Jack of any perceived val ue added, an
initiative that requires many resources (particularly, time from supervisors), and
something that, simply put, is perceived to produce little tangible payoffs and even
causes more harm than good. The need to align organization and unit priorities
with the performance management system is one of the key factors contributing
to obtaining the much-needed top management s upport for the system.

A good q uestion that top management is likely to, and frankly, should ask is:
“Why is performance management important and even necessary?” One answer
to this question is that performance management is the primary tool that will
allow top management to carry o ut their vision. The performance management
system, when aligned with organization and unit priorities, is a critical tool to (1)
allow all employees to understand where the organization stands and where it
wants to go, and (2) provide tools to employees (e.g., motivation, developmental
resources) so that their behaviors and results will help the organization achieve

Chapter 3 PerFormance Managemen t and Strategic Planning 8il

its targets. Fundamentally, the implementation of any performance management
system requires that the “What’s in it for me?” question be answered convinc-
ingly. In the case of top management, the answer to the “What’s in it for me?”
q uestion is that performance management can serve as a primary tool to realize
their vision and achieve strategic objectives.

Building s upport for the system does not stop with top management, how-
ever. All participants in the system need to understand the role they play and
also receive a clear answer to the “What’s in it for me?” question. Accord ingly,
communication about the system is key. This includes a clear description of the
system’s mechanics (e.g., when the performance planning meetings will take
place, how to handle disagreements between su pervisor and employees) and the
system’s consequences (e.g., relationship between performance evaluation and
compensation). As discussed in Chapter 1, not involving people in the process
of system design and implementation can create resis tance, and the performance
management system may result in more harm than good .

Consider the role that good comm unication p layed in the launching of a
revamped p erformance management system a t Bankers Life and Casualty, an
insurance com pany specializing in ins urance for seniors and headquartered
in Chicago. When Edward M. Berube was appoin ted as its president and
CEO, he understood that Bankers Life and Casualty was facing important
cha llenges, including new customer demands, the impact of the Internet,
outsourcing, and increased com petition. So, Bankers Life and Casualty en-
gaged in a very aggressive marketing campaign, which incl uded re taining
ac tor Dick Van Dyke as its company spokesperson. In spite of these efforts,
however, internal focus groups revealed that while employees understood
the organization’s strategic plan, they d id not unde rstand what role each
person was s upposed to p lay in helping the o rganization execute its strategy.
In o ther words, employees d id not have a clear understanding of how each
person could help ach ieve the organization’s strategic objectives, including
focusing on the following three key areas (1) d istribution scope, scale, and
productivity; (2) home office p roductivity and unit costs; and (3) prod uct
revenue and profitability.

Bankers Life a nd Casualty realized that a bette r link between strategy and
job descriptions could be established by improving its performance manage-
ment process. The HR function, therefore, proceeded to overhaul the perfor-
mance management system so that the three areas of strategic importance
just outlined would be part of everyone’s job descriptions. The design and
implementation of the new system was a joint venture between the HR and
the communications departments. First, the HR and communications teams
spoke candid ly with the CEO about his expectations. The CEO responded
with overwhelming s upport, stating that the performance management
syste m would be implemented fo r every e m ployee on p re-established dates,
and that he would hold his team accountable for making this happen. Then,
to implement the performance management system, each unit met with its
VP. During these meetings, each VP discussed how his o r her unit’s objec-
tives were linked to the corporate objectives. Next, HR and communications
Jed discussions surrounding objective setting, giving feedback, and writing
development p lans. Managers were then given the opportunity to share any
feedback, concerns, or questions that they had about the p rogram . During
this forum, managers exchanged success stories and offered advice to one

90 Part I Strategic and General Considerations

another. These success stories were then shared with the CEO. The CEO then
shared these stories with those who reported directl y to him to strengthen
the visibility of his support for the program.

In short, the performance management system a t Bankers Life and Casu-
al ty helped all employees understand their contributions to the organization’s
strategic plan. This was a key issue that motivated the CEO to lend unqualified
s upport to the system. This support gave a clear message to the rest of the orga-
nization that the performance management system was an important initiative
that added value to the entire organization. The support of the CEO and other
top executives, combined with a high degree of participation from all employees
and their ability to voice concerns and provide feedback regarding the system,
was a critical factor in the s uccess of the performance management system a t
Bankers Life and Casualty.

SUMMARY POINTS

• Strategic planning involves defining the organization’s present and future
identity. Overall, the strategic plan serves as a blueprint that allows
organizations to a llocate resources in a way that provides the organization
with a competitive advantage.

• The HR function can play a critical role as a strategic partner and expert
internal consultant in creating the strategic plan. Also, performance
management is an ideal vehicle to demonstrate the strategic role of
the HR function because it allows for explicit and clear links with the
organization’s mission, vision, and objectives. By helping implement
the strategic planning process and linking a firm’s objectives with the
performance management system, the HR function can get a “seat at the
table” of the top management team.

• Strategic planning serves several specific purposes, including d efining
an organization’s identity, preparing for the h1ture, analyzing the
environment, providing focus, creating a culture of cooperation,
generating new options, and serving as a guide for the daily activities of
all organizational members.

• Performance management systems mus t rely on the strategic plan to
add value and be useful. The job descriptions o f all employees mus t
be aligned with the vision, mission, objectives, and strategies of the
organization and unit. It is critical to align organizational, unit, and
individual priorities, and one formal approach to do this is the balanced
scorecard approach.

• The process o f creating a strategic plan begins with an environmental
(SWOT) analysis, which considers internal (e.g., organizational structure,
processes) as well as external (e.g., economic, technological) trends.
Internal trends can be classified as either strengths or weaknesses, and
external trends can be classified as either opportunities or threats. A gap
analysis consists of pairing strengths and weaknesses with opportunities
and threats and determining whether the s ituation is advantageous (i.e.,

Chapter 3 PerFormance Management and Strategic Planning tH

leverage), disadvantageous (i.e., problem), or somewhere in-between (i.e.,
constraint and vulnerability).

• The second component in creating a strategic plan is to write a mission
s tatement based on the results of the gap analysis. A state-of-the-science
mission statement defines why the organization exists, the scope of its
activities, the customers served, and the products and services offered.
Mission statements also include information abo ut what technology is
used in production or delivery, and the unique benefits or advantages
of the organization’s products and services. Finally, a mission sta tement
can include a statement of values and beliefs, such as the organization’s
managerial philosophy, although some organizations choose to create
separate value statements.

• The third component of a strategic plan is the vision statement, which
includes a description of fu ture aspirations. Whereas the mission
s tatement emphasizes the present, the vision statemen t emphasizes the
future. In many cases, however, the mission and vision statements are
combined into one statement. State-of-the-science vision statements are
brief, verifiable, bound by a timeline, current, focused, understandable,
inspiring, and a s tretch.

• After the mission and v is ion statements are created, the fourth step in the
s trategic planning process is to generate objectives that will help fulfill
the mission and vision. Objectives provide more specific information
regarding how the mission and vision will be implemented. Typically,
objectives span a three- to five-year period.

• The fifth and final step in the strategic p lanning process is to identify
s trategies that will help achieve the stated objectives. These strategies are
game plans and usually address issues s urrounding growth, survival,
turnaround, stability, innovation, and leadership.

• The organization’s strategic plan, including the mission, v ision, objectives,
and strategies, cascades down to all organizational levels. Thus, each
division, d epartment, or unit a lso creates its own strategic plan, which
should be consistent with the organization’s overall plan. The most
effective sequence for doing so is for the units to first agree on common
s trategies, and then, specify unit-level objectives.

• The tasks and KSAs included in individual job descriptions must be
congruent with the organization’s and unit’s strategic p lans. In o ther
words, job descriptions should include activities that, if executed well,
will help realize the mission and vision. Job descriptions that are detached
from strategic priorities will lead to performance evaluations focused on
behaviors and results that are not central to an organization’s success.

• To build support for the performance management system , top
management mus t be aware that it is a primary tool and ideal conduit
to execute an organization’s strategic plan. This awareness will lead to
top management’s support for the system. In addition, all organizational
members need to be able to answer the “What’s in it for me?” question
regarding the system . Implementing the performance management system
will require considerable effort on the part of all those involved. Those
doing the evaluation and those being evaluated should know how the
system will benefit them directly.

•:z Pa rt I Strategic and General Considerations

EXERCISE 3-1 LINKING INDIVIDUAL WITH UNIT AND ORGANIZATIONAL
PRIORITIES

Obtain a copy of the job description for your current or most recent job. If this
is not feasible, obtain a copy of a job description of someone you know. Then,
obtain a copy of the mission statements for the organization and unit in question.

Revise the job description so that it is aligned with the unit and organizational
strategic priorities. Revisions may include adding tasks and KSAs important in
the mission statement that are not already included in the job description.

EXERCISE 3-2 BUILDING SUPPORT FOR A PERFORMANCE MANAGEMENT
SYSTEM AT THE GAP, INC.

You have just been appointed the Chief Human Resource Office (CHRO) for The
Gap, Inc., a large retail clothing company with more than US$1 billion in sales,
3,000 retail stores in the United States, and over 130,000 employees. The mission
of the company is “to create emotional connections with customers through our
brands, unique designs, and enjoyable store experiences.”

The current performance management system is not delivering results in
terms of business performance, with the company posting a 10% decline in sales
during the previous month, the 12th monthly decrease in a row. The Chief Execu-
tive Officer (CEO) believes that this is because of a Jack of strategic alignment
between the company’s overall mission and its retail stores.

Imagine the class instructor is the CEO of the company, and the other students
are members of the top management team. Your task is to devise a new strategic
p lan that achieves the CEO’s goal of greater alignment between organizational-
and store-level strategies. Based on the mission statement of the company and
other information provided:

1. Develop a mission and vision statement that translates the organization’s
mission statement for the retail stores using the guidelines below. (Hint:
Sections 3-3-3 “Mission” and 3-3-4 “Vision” provide detailed guidance
and examples of mission and vision statements.)
• Mission statements should include: The product offered (clothing);

the target customer group (young adults and casual wear for
professionals); benefits of the product (cost, quality, style); technology
used (if applicable); and a focus on sales growth and profitability
(increasing revenue).

• Vision statements should be: brief, verifiable, bound by a timeline,
current, focused, understandable, inspiring, and a stretch.

2. Develop 2- 3 retail store objectives and the strategies to achieve those
objectives. These should be closely linked to the new mission and vision
statement. (Hint: Sections 3-3-5 “Objectives,” 3-3-6 “Strategies,” and 3-3-7

Chapter 3 Performance Management and Strategic Planni ng •3

“Developing Strategic Plans at the Unit Level” provide detailed guidance
and examples of setting objectives and strategies.)
• Objectives should address the next three to five years, and provide a

clear performance target to aim for. They might address issues such as
sales revenue, payroll, or advertising.

• Strategies should add ress how the objectives will be achieved . They
might address issues such as operations, customer surveys and
benchmarking, or inventory management.

3. Prepare a brief (5-10 minute) presentation that:
• Presents the new strategic plan (mission, vision, objectives, and

strategies) to the CEO and the top management team.
• Convinces the CEO and the top management team to support the new

plan
• Your presentation should clearly answer the question “What’s in it for

me?” for both the CEO and the rest of the top management team.
• Articulate how the new plan aligns with the organization’s overall

mission and how it will lead to greater sales.
• Consider how you can make the CEO and the rest of the top

management team feel a sense of involvement and ownership
(e.g., allow top management team members to provide suggestions
about the verbiage of the mission or vision; allow them to take
responsibility for some part of the process).

• This exercise is loosely based on Gap Inc. encouraging employees to grow. perform and succeed- Without
ratings. Retrieved January 3, 2018, from https:/fwww.e·reward.co.ukluploadsleditor/files/Gapln<:_Case_Study.pdf

CASE STUDY 3-1

Evaluating Vision and Mission Statements at PepsiCo

Consider the mission and vision statements for PepsiCo, and then, answer the questions included below: PepsiCo’s Vision Statement At PepsiCo, we aim to deliver top-tier financial performance over the long term
by integrating sustainability into our busi-
ness strategy, leaving a positive imprint on
society and the environment. We call this
Performance with Purpose. It starts with
what we make-a wide range of foods and
beverages from the indulgent to the more
nutritious; extends to how we make our prod-
ucts-conserving precious natural resources
and fostering environmental responsibility
in and beyond our operations; and considers
those who make them-striving to support
communities where we work and the careers
of generations of talented PepsiCo employees.

PepsiCo’s Mission Statement8

As one of the largest food and beverage
companies in the world, our mission is
to provide consumers around the world
with delicious, affordable, convenient and
complementary foods and beverages from
wholesome breakfasts to healthy and fun
daytime snacks and beverages to evening
treats. We are committed to investing in our
people, our company, and the communi-
ties where we operate to help position the
company for long-term, sustainable growth.

M1ssion Statement-Who
we are and what we do

Vision Statement-future
aspirat1ons

Characteri sti cs Y /N

Basic producVservice to be offered (does what)

Primary markets or customer groups to be served (to Whom)

Unique benefits, features, and advantages of products/services (w1th what benefits)

Technology to be used in production or delivery

Fundamental concern for surv1va1 through growth and profttability

Managerial philosophy of the organization

Public image sought by

Self-concept of business adopted by employees. shareholders. and other stakeholders

Bnef-so that employees can remember it

Verifiable-able to stand the reality test

Bound by a timeline-specifies a t1meline for fulfillment of the various aspirations

Current-updated on an ongoing basis

Focused-lists a few (3-4) aspects of organization’s performance that are important for future
success
Understandable-written in a clear and straightforward manner so that they are understood
by all employees

lnsplfing-makes employees feel good about thelf organization’s dlfecVon and moDvates
them to help achieve the VISion

Stretch-objective not easily attained

” PepsiCo. (2017). What we believe. Retrieved January 3, 2018, from httpJiwww.pepsico.com/purpose. Used with permission from Pepsi Co, Inc.

Chapter 3 Performance Management and Strategic Planning •s
1. The table below summarizes the key

characteristics of ideal mission and vision
statements as discussed in Chapter 3. Use the
Y /N columns in the table to indicate whether
each of the fea tures is present or not in the
mission and vision statements of PepsiCo.

2. How do the mission and vision statements
relate to the eight characteristics of an
ideal mission statement and the eight
characteristics of an ideal vision sta tement?
What are the gaps?

CASE STUDY 3-2

3. How useful are the mission and vision
statements of PepsiCo in terms of linking
organizational priorities with individual
and team performance? In creating such a
link, which ideal mission/vision statement
characteristics (shown in the table earlier)
seem to be more important than others?
What other places might the HR department
at PepsiCo look for information regarding
how to more effectively cascade firm-level
strategy to each individual’s objectives?

Linking Performance Management to Strategy
at Procter & Gamble

Consider the following descript ion of a firm-w ide s trategy pursued by Procter & Gamble•:
Procter & Gamble (P&G), the world’s largest

consumer products company, follows a fairly unique
strategy: P&G appeals to the heart and cares about
human needs. In other words, P&G attempts to touch
and improve the lives of its consumers all over the
world. As an example, take the razor-and-blade
innovation pioneered by Gillette’s Himalaya team,
which focuses on India but is a global group based
partly in Boston, USA. The team received informa-
tion abo ut how men in India shave: about half of
them use barbershops and barbers usually break
double-sided blades in two and used them repeat-
edly, which crates unsanitary conditions. With the
strategic objective of improving the lives of its custom-
ers, the team created a razor-and-blade innovation
that simplified the essential features of the shaving
done in barbershops. The products were a success in
terms of improving both the human condition and
profitability. As a second example, consider a situ-
a tion in P&G Brazil, where P&G feared a shutdown
d ue to decreased business volume. Low-income
consumers were the fastest growing segment of the
population, but P&G’s global premium products
were too expensive for this market segment. Local
P&G teams decided to live with families, scrutinized

every P&G process in an attempt to reduce costs, and
ended up creating an innovative prod uct line they
dubbed “basico” (for “essential” in Portuguese). The
team members felt that they were doing good for
the world, not just making money for the corpora-
tion. Demand immediately outpaced supply when
the first “basico” products were launched, which
included women’s hygiene, diapers, and greener
laundry detergent. The company quickly captured
market share through small neighborhood shops
and premium products were no longer offered. The
business in Brazil became a profitable global growth
model, and not just for emerging countries. As a
consequence, “Tide Basic” was recently introduced
in the United States.

In sum, P&G’s strategy inspires employees
to add their hearts to their heads and aims at
finding creative solutions when purpose-inspired
opportunities and commercial considerations
seem to collide.

Imagine you are an HR executive a t P&G.
Given the company’s strategic orientation toward
purpose and values, what would you do to help
align a new performance management system with
the strategic plan? How would you explain this
relationship? What would you say and do to gar-
ner company-wide support for your performance
management system?

• The description is adapted from the following source: Kanter, R. M. (2009, September 14). Inside Procter & Gamble’s new values· based strategy.
Harvard Business Review. Retrieved January 3, 2018, f rom

H Part I Strategic and General Considerations

ENDNOTES

1. Wright, P.M., & Ulrich, M. 0 . (2017). A road well traveled: The past, present, and fu ture
journey of strategic human resource m anagement. Annual Review of Organizational Behavior
and Organizational Psychology, 4, 45-65.

2. Wolf, C., & Floyd, S. W. (2017). Stra tegic planning research: Toward a theory-driven agenda.
jouma/ of Managemmt, 43, 1754-1788.

3. Mankins, M., & Steele, R. (2005). Turning great strategy into great performance.
Harvard Business Review. Retrieved Jan uary 2, 2018, fro m https://hbr.org/2005/07 I
turning -great-strategy-into-g reat-per fo rmance

4. Rao, A. S. (2007). Effectiveness of per fo rmance managem ent systems: An e mpirical stud y in
Indian companies. lntemationa/ journal of Human Resource Management, 18, 1812-1840.

5. McCauley, M.A. (2017). How to weave strategic planning into your day-t<rday work.
Communication World, 1-4.

6. Nistor, C. S., Stefanescu, C. A., & Sintejudeanu, M. A. (2017). Performance management an d
balan ced scorecard-A link for p u blic sector. jouma/ of Accounting and Management, 6(3), 5-25.

7. Pierce, J. R., & Aguinis, H. (2013). The to<rm uch-of-a-good-thing effect in m anagement.
jouma/ of Managemmt, 39, 313-338.

8. Kaplan, R. S., & Norton, P. (1992). The balanced scorecard: Measures that d rive pe rform ance.
Harvard Business Review, 70(1),

9. This example is loosely adapted from Addam s, H. L., & Embley, K. (1988). Per formance
m anagement systems: From strategic planning to e mp loyee p roductivity. Personnel, 65,55-60.

10. Adapted from Fisher, C. 0., Schoenfeldt, L. F., & Shaw, J. B. (2003). Human resource
management (5th ed.). Boston, MA: Houghton Mifflin.

11. Performance management at Dell. Retrieved January 2, 2018, from https://prezi.com /
d 3d_hvlvs8te/perform an ce-management-a t -dell/

12. Kolbina, 0. (2015). SWOT an alysis as a stra tegic planning tool for companies in the food
industry. Problems of Economic Transition, 57, 74-83.

13. Th e discussion regard ing e nvi ronm ental analysis is ad apted from Dro han, W. (1997).
Principles o f strategic planning. Association Management, 49,85-87.

14. Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(2),
137-156.

15. About us: Low fares done right. Retrie•ed January 2, 2018, from https://www.flyfrontier
.com/ about-us

16. Low-cost Ted may help U nited fly out of bankruptcy. (2004, February 13). USA Today.
Re trieved January 2, 2018, from h ttp://www.usatod ay.com / travel/ news/ 2004-02-13-ted-
w rap_x.htrn

17. Prudential: Planning s tra tegic directio n fo r g lobal oper a tions. (2016). Profiles in Diversity
jouma/, 153.

18. IBM Produ cts. Retrieved january 2, 2018, from https://www.ibm.com/products
19. About us: Mission, vision and ‘alues. Retrieved January 2, 2018, from http://www.coca-

cola.eo.uk/about-us/ mission-visio n-and -values
20. Our m issio n. Retrieved January 2, 2018, from http://www.spectrumbrand s.com / AboutUs/

Mission.aspx
21. About G reif. Retrieved January 2, 2018, from http://www.greif.com / com pan y
22. Cycle World Inter view: Matt Levat ich, Harley-Davidson President & CEO.

Re trieved January 2, 2018, from h ttp://www.cycleworld.com/ 2015/04/30/
cycle-world-inter v iew-ma tt-le•atich-harley-davidson-president-and -ceo

23. An Investor’s Guide to Harley-Davidson’s 3Q15 Eamings. Re trieved January 2, 2018, from
http://m a rketrealist.com / 2015/10/harley-davidsons-5-objectives-investor-takeaways/

24. Vargas-Herruin dez, ). G. (2017). Stra tegies fo r organizational intervention to develop a world-
class company. Sc/zoledge lntemationa/ jouma/ of Business Policy & Ccvemance, 4(1), 1-6.

25. About Microsoft. Retrieved Jan uary 2, 2018, fro m https://www.microsoft.com /en-us/about/
default.aspx

26. Mission statement of NSU. Re trieved January 2, 2018, from h ttps://www.nsu .edu /
p resident/mission-statement

27. The School o f Business mission sta tem ent. Re trieved January 2, 2018, from h ttps://www
.nsu.edu/business/ about-us

chapter

4
Defining Performance
and Choosing
a Measurement
Approach

You have to measure to understand

– Ginni Rometty

Learning Objectives
By the end of this chapter, you will be able to do the following:

1. Argue that perfo rmance invo lves both behavio rs
and results and that perfo rmance i s evaluative and
multidimensional in nature.

2. Prepare a list of the fact ors that determine performance,
including abilities and other t raits. knowledge and skills
(including declarative knowledge and procedural knowl·
edge). and context.

3. Propose a list of contextual f actors (e.g .. HR pol icies.
organizational and national culture) that have a d irect
impact on performance.

4. Plan int erventions involving deliberat e practice
and extreme ownership with the goal of improving
performance.

5. Propose how to address and anticipate performance
problems.

6. Create a performance management system that
includes key performance indicators (KPis) of each of
the four types or dimensions of performance: (a) t ask.
(b) cont extual. (c) counterproductive, and (d) adaptive.

7. Set up a behavior approach to measuring performance
(e.g .• competency modeling). which basically f ocuses
on how the job is done. as opposed to the results
produced.

8. Set up a results approach to measuring performance,
which basically focuses on the outcomes of work, as
opposed to the manner in which the work is done.

99

100 Part II System Implementation

This chapter marks the beginning of Part II of this text, which describes how to imple-
ment a performance management system. Whereas Part I addressed strategic and
organizational and other macro-level issues, Part II addresses operational concerns. In
this chapter, we begin w ith an issue that, at first glance, may seem simple, but it is not:
What exactly is performance and how can we measure it? Answering this question is
absolu tely key if we want to implement a successful performance management system,
because if we do not have a good artSwer, we will not be able to craft actual measures-
a topic that will be addressed in Chapter 5. Let us begin by defining performance.

4-1 D EFINING PERFORMANCE: BEHAVIORS AN D RESU LTS

FIGURE 4 -1

As shown in Figure 4-1, performance includes (a) behaviors and actions (what
an employee d oes) and (b) results and products (the outcomes of an employee’s
behavior).1 Both of these components are important and they influence each other.
For example, if a student allocates a sufficient amount of efficient time to preparing
for an exam (behavior), it is likely that he will receive a good grade (resul t). In turn,
receiving a good grade (result) will serve as a motivating factor for continuing to
allocate sufficient time to studying in the fu ture (behavior). So behaviors and results
create a virtuous and self-reinforcing cycle that together constitute performance.

There are two characteristics of the behaviors and results we label ” perfor-
mance.”2 First, they are evaluative. This means that they can be judged as nega-
tive, neutral, or positive for individual and organizational effectiveness. In other
words, the va lue of these behaviors and results can vary depending on the extent
to which they make a contribution toward the accomplishment of individual,
unit, and organizational goals. Second, performance is multidimensionnf.l This
means that there are many different types of behaviors and results that have the
capacity to advance (or hinder) organizational goals.

As an example, consider a set of behaviors that can be grouped under the
general label “contribution to effectiveness of others in the work unit.” This set
of behaviors can be defined as follows:

Works with others within and outside the unit in a manner that improves
their effectiveness; shares information and resources; develops effective
working relationsh ips; builds consensus; constructively manages conflict.

Contribution to the effectiveness of others in the work unit could be assessed by
using a scale that inclu des anchors demonstrating various levels of competence. For
example, anchors could be words and phrases such as “ou tstanding,” “significantly

exceeds standards,” “fully meets stand ards,”” does

Performance: Combination of Behaviors and Actions. and Results
and Products

n ot fully meet standards,” and “unacceptable.” This
illustrates the evaluative nature of performance
because this set of behaviors is judged as positive,
neutral, or negative. In addition, this example illus-
trates the multidimensional nature of performance
because there are several behaviors that, combined,
affect the overall perceived contribution that an
employee makes to the effectiveness of others in the
work unit. In other words, we would be missing
important information if we only considered, for
example, ”shares information and resources” and did
not consid er the additional behaviors listed earlier.

Behaviors &
Actions

Performance Results & Products

Chapter 4 Defining Performance and Choosing a Measurement Approach 101

Performance management systems also include measures of results or prod-
ucts that we infer are the direct result of employees’ behaviors. Take the case of
a salesperson whose job consists of visiting clients to offer them new products
or services. The salesperson’s supervisor is back in the home office and does not
have an opportunity to observe the salesperson’s behaviors firsthand. In this
case, sales volume may be used as a performance measure. In other words, the
s upervisor makes the assumption that if the salesperson is able to produce high
sales figures, then she is probably engaging in the right behaviors.

4-2 DETERMINANTS OF PERFORMANCE: A BILITIES AND
OTHER TRAITS, KNOWLEDGE AND SKILLS, AND CONTEXT

Why do certain individuals perform better than o thers? What factors cause an
employee to perform at a certain level? A combination of three fac tors allows
some people to perform at higher levels than others: (1) abilities and other traits,
(2) knowledge and skills, and (3) context.4

Abilities and other traits include such things as cognitive abilities (i.e.,
intelligence), personality, stable motivational dispositions, and physical characteristics
and abilities. Also, knowledge and s kills include job-related knowledge and
s kills, attitudes, and malleable motivational states. Knowledge and skills can be
divided into declarative J,:nowledge, which is information about fac ts and things,
including information regarding a given task’s requirements, labels, principles,
and goals; and procedural knowledge, which is a combination of knowing what
to do and how to do it and includes cognitive, physical, perceptual, motor, and
interpersonal skills. Finally, contextual issues include HR policies and procedures
(e.g., compensation system), managerial and peer leadership, organizational and
national culture, issues about time and timing of performance, and resources and
opportunities given to employees to perform.

As shown in Figure 4-2, performance results from a combination of all three
factors. Also, the three factors have an additive relationship. This means that two
employees can achieve the same level of performance by having different combina-
tions of factors. For example, one employee can be more motivated and spend more
hours at work, whereas another can work fewer hours, but have higher levels of skill. 5

In addition, however, if any of the determinants has a value of 0, then over-
all performance is unlikely to be satisfactory. For example, consider the case of
Jane, a sales associate who works in a national clothing retail chain. Jane has
excellent declarative knowledge regarding the merchandise. In particular, she
knows the names of all of the brands; the prices for all products; sizing charts for
clothes for women, men, and children; and sales promotions. So her declarative
knowledge is very high. Jane is also intelligent and physically able to conduct all
of the necessary tasks- both considered important traits for the job. However, her
interactions with customers are not so good (i.e., procedural knowledge regard-
ing interpersonal skills). She does not pay much attention to them because she
is busy restocking clothes on shelves and hangers. She does not greet customers
and is also not good a t providing answers to their questions. Her overall perfor-
mance, therefore, is likely to be poor because although she has the declarative
knowledge necessary to do the job, as well as cognitive and physical traits, she
Jacks procedural knowledge. In short, it is necessary to have a t least some level
of each of the determinants of performance.

102 Part II System Implementation

FIGURE 4 -2
Determinants of Performance: Abilities and Other Tr8lls, Know1edge and Skills. and Context

–…….
KNOWLEDGE AND

SKILLS:
Dedaraliw

(lr1om’lalion about facts and
lhir’w;)S, inctuding lnfonnation

regarding a fjlten taSk’s
labels. pti…:ipleS,

and goats). procedl.l’al
knOWledge (know;ng

what to do and
MwtoCIOn).

Chapter 4 Defining Performance and Choosing a Measurement Approach 103

4·2·1 Abilities and Other Traits, and Knowledge and Skills
An important d ifference between abilities and other t raits and knowledge and
s kills is t hat knowledge and skills are more malleable-meaning that they are
easier to change. For example, cognitive abilities and personality traits are fa irll
s table.6 For example, the following personality traits are called the “Big Five” :

1. Extroversion: being sociable, gregarious, assertive, talkative, and active
(the opposite end of extroversion is labeled introversion)

2. Neuroticism: being anxious, d epressed, angry, embarrassed, emotional,
worried, and insecure (the opposite pole of neuroticism is labeled
emotional stability)

3. Agreeableness: being curious, flexible, trusting, good-nat ured, cooperative,
forgiving, and tolerant

4. Conscientiousness: being d ependable (i.e., being careful, thorough,
responsible, and organized), as well as hardworking, achievement-
oriented, and persevering

5. Openness to experience: being imaginative, cultured, curious, original,
broad-mind ed , intelligent, and artistically sensitive

In general, individual differences that are less malleable are called “traits.”
Those that are easier to change, for example, through a training program or other
organizational interventions, are called “states.” For example, consider the fact
that employees vary in terms of their motivation: how much energy and effort
they allocate. Specifically, consider the following three choices:

1. Choice to expend effort (e.g., “I will go to work today”)
2. Choice of level of effort (e.g., ” I will put in my best effort at work” vers us

“I will not try very hard”)
3. Choice to persist in the expendit ure of that level of effort (e.g., ” I will give

up after a little while” versu s ” I will persist no matter what”)

The first two are more malleable and therefore considered s tate motivation.
For example, we could influence an employee’s choice regarding w hether she
shows up a t work- and on time-using HR policies regarding absenteeism and
tardiness. We could influence the second choice by setting clear goals. But the
third is less malleable and more likely to be a stable individual t rait (rather than
a s tate). This type of trait motivation is consid ered a fairl y stable personality trait,
called “achievemen t motivation,” and is a facet of conscientiousness.

What can we do to improve our own knowledge and skills and therefore improve
our performance? Let us think about those individuals who have achieved the top level
of performance in their fields. Think about Leo Messi and Cristiano Ronal d o as soccer
(“football” outside of North America) players, Beyonce as a singer and songwriter,
Bill Gates as Microsoft’s founder, Magnus Carlsen as a chess player, Thomas Edison
as an inventor, Marie Curie as a physicist and chemist, and Socrates as a philosopher.
How did they achieve such excellence? What made these individ uals’ performance
so extraordinary? How were they able to improve their performance constantly even
when others would believe they had reached a plateau and could not possibly improve
their performance? What these individuals have in common is that they devoted
a large number of hours to deliberate practice.8 Deliberate practice is different from
regular practice and from simply working many hours a week Professor K. Anders
Ericsson of Florida State University gives the following example: “Simply hitting a

104 Part II System Implementat ion

bucket of balls is not deliberate practice, which is why most golfers d on’t get better.
Hitting an eight-iron 300 times with a goal of leaving the ball within 20 feet of the pin
80% of the time, continually observing results and making appropriate adjustments,
and doing that for hours every day- that’s deliberate practice.” Top performers in
all fields engage in deliberate practice consistently, daily, including weekends. The
famous pianist Vladimir Horowitz was quoted as saying: “If I don’t practice for a
day, I know it; jf I don’t practice for two days, my wile knows it; jf I don’t practice for
three days, the world knows it.” Deliberate practice involves the following five s teps:

1. Approach performance with the goal of getting better and better.
2. As you are performing, focus on what is happening and why you are

doing things the way you do.
3. Once your task is finished, seek performance feedback from expert

sources, and the more sources, the better.
4. Build mental models of your job, your situation, and your organization.
5. Repeat steps 1-4 continually and on an ongoing basis.

Think about a particular task at which you would like to do better. This could be
job-related, school-rel ated, or a hobby (e.g., music, sports, cooking, playing poker).
Now, create a deliberate practice program for yourself. Who are the experts from
whom you could solicit feedback? How often would you practice? For how long?
What would be some of your specific goals you would like to achieve, and by when?

4-2-2 Context
The third determinant of performance is context because performance is also
determined by what is happening around the employee. For example, HR policies
and practices can have an important impact on employee performance. Take the
case of IBM. In December 2016, Ginni Rometty, IBM’s CEO, said that over the
next four years, the company will invest US$1 billion in training and develop-
ment in t he United Sta tes.9 In contrast to IBM, working for a company with an
HR function that does not offer much in terms of training means that, sooner or
later, performance will s uffer as s kills become obsolete.

As a second example, an organizational culture that does not promote
excellence will also have negative consequences on performance. Take the case
of a compensation system that includes paying everyone the same, regardless
of employee performance-this is unlikely to motivate employees to do better.

As a third example, time and the timing of performance is another contextual
factor that also p lays a role. Specifically, typical performance refers to the average
level of an employee’s performance, whereas maximum performance refers to the
peak level of performance an employee can achieve. Employees are more likely
to perform at maximum levels when they understand they are being eval uated,
when they accept inst ructions to maximize performance on the task, and when
the task is of short durationw A key issue is t hat the relationship between typical
(i.e., what employees will do) and maximum (i.e., what employees could do)
performance is very weak. What this means is that measuring performance during
short time intervals may be assessing maximum, and not typical, performance.
Most organizations are more interested in what employees will do on a regular
basis, rather than what they could do during the short period of time when
they are observed and evaluated. In short, the time and timing of performance
observation and measurement also affect the observed levels of performance.

Chapter 4 Defining Performance and Choosing a Measurement A pproach 105

Fourth, resources and opportunities to perform are important contextual
issues as well. There is a harsh reality in organizations that involves some
employees receiving less resources and opportunities than others. 11 For example,
within the same firm, some consultants may have more opportunities to work
with important clients than o thers. This issue is quite obvious in sports: there is
a limited amount of p laying time during each game. So some athletes have more
playing time than others. In both of these cases, al though employees may have
the same levels of abilities and other traits as well as knowled ge and skills, dif-
ferential levels of opportunities will have a direct impact on their performance.

Finally, consider the issues of organizational and national culture. Take the
case of World Com, a company that was the second largest long-distance phone
company in the United States before it collapsed in 2002. One of the reasons for its
collapse was its” cult-like corporate culture” around a charismatic leader, former
basketball coach Bernie Ebbersn Ebbers exercised unquestioned authority and
demanded unquestioned loyalty from employees. Within this context, it was dif-
ficult, if not impossib le, for employees to do anything different from what they
were told-even if this meant doing things that were clearly unethical. This was
an important contextual factor that affected the performance of all employees a t
World Com, regardless of their levels of abilities and traits as well as knowledge
and skills. National culture can a lso affect performance in meaningful ways.
For example, cultures that are more hierarchical and power centered are less
likely to lead to outstanding performance regarding s uch issues as creativity and
innovation. On the other hand, these types of cultures can result in outstanding
performance regarding standardization, speed, and efficiencyn

4-2-3 Implications for Addressing and Anticipating Performance
Problems

The fact that performance is affected by the combined effect of three different
factors has implications for addressing as well as anticipating performance
problems. To do so properly, managers must find information that w ill allow
them to understand whether the source of the problem is abilities and other
traits; knowledge and skills; context ual issues; or some combination of these three
factors. If an employee lacks procedural knowledge but the manager believes
the source of the problem is declarative knowledge, the manager may give the
employee a manual with facts and figures about products so he can acquire
the knowledge that is presumably lacking. In the example of Jane discussed
earlier, this would obviously be a waste of time and resources for the indiv idual,
manager, and organization because it is lack of procedural knowledge, and not
lack of declarative knowledge, that is causing her poor performance. This is why
performance management systems should not only measure performance, but
also be a tool to tmderstand the source of any performance deficiencies.

Anoth er issue regarding the id entification of performance problems relates to
w hat is called ownership, or what Jocko Willink, retired United States Navy SEAL
and former commander in the Battle of Ramadi in Iraq, calls extreme ownership.14
Willink served in SEAL Task Unit Bruiser, the most highly decorated Special
Operations unit from the war in Iraq. They faced tremendous difficulties along
the way, including being involved in a “blue-on-blue”: friendly fire-the worst
thing that could happen. One o f the American soldiers was wounded, an Iraqi
soldier was dead, and oth ers were seriously wounded. This incident led to asking

106 Part II System Implementat ion

very difficult questions, and the most critical one was: “Who was responsible for
this debacle?” Willink notes that the very first step is to take ownership of poor
performance, no matter how painful this process may be. What he learned in war
can be extrapolated to other contexts: Acknowledging that we have performed
under par is never easy. It hurts our egos. It hurts our self-esteem. But these are
short-term effects only. Unless we engage in this process, it will be very difficult
to address any type of performance problem. Willink said that he “had to take
complete ownership of what went wrong. That is what a leader if it
means getting fired .” We will continue to add ress this important issue of extreme
ownership in o ther chapters, including the discussion of coaching in Chapter 9.

In short, when addressing and anticipating performance problems, managers
first need to identify whether abilities and other traits, knowledge and skills (i.e.,
declarative and procedural knowledge), or context are hampering performance,
and then, help the employee improve his performance. Thirtk about the last time
when you or a coworker showed a level of performance that was not considered
adequate. What were the causes of this substandard level of performance-Lack
of abilities and traits, knowledge and skills, or contextual issues? Which were
the two most important factors?

4-3 PERFORMANCE DIMENSIONS
As noted earlier, performance is multidimensional, meaning that we need to
consider many different types of behaviors and results to understand performance.
We can classify performance into four types or dimensions (a) task performance,
(b) contextual performance (also called prosocial or organizational citizenship
performance), (c) counterproductive performance, and (d) adaptive performance.
A good performance management system should include Key Performance
Ind icators (KPis), or observable measures, for each of these types.

4-3-1 Task and Contextual Performance
Contextual and task performance must be considered separately because they
do not necessarily occur in tandem. An emp loyee can be highly proficient a t
her task, but be an underperformer regarding contextual performance.15 Task
performance is defined as:

• Activities that transform raw materials into the goods and services that are
prod uced by the organization

• Activities that help with the transformation process by replenishing the
supply of raw materials; distributing its finished products; or providing
important planning, coordination, supervising, or staff ftmctions that
enable the organization to function effectively and efficiently.

Contextual performance is defined as those behaviors that contribute to the
organization’ s effectiveness by providing a good environment in which task
performance can occur. Contextual performance includes behaviors such as the
following:

• Persisting with enthusiasm and exerting extra effort as necessary to
complete one’s own task activities successfully (e.g., being punctual and
rarely absent, expending extra effort on the job)

Chapter 4 Defining Performance and Choosing a Measurement Approach 107

• Volunteering to carry out task activities that are not formally part of the
job (e.g., s uggesting organizational improvements, making constructive
s uggestions)

• Helping and cooperating with others (e.g., assisting and helping
coworkers and customers)

• Following o rganizational rules and procedures (e.g., following orders and
regulations, showing respect for authority, complying with organizational
values and policies)

• Endorsing, supporting, and defending organizational objectives (e.g.,
o rganizational loyalty, representing the o rganization favorably to
o utsiders).

Both task and contextual performance are important dimensions to take into
account in performance management systems. Imagine what would happen to
an organization in w hich all employees are outstanding regarding task perfor-
mance, but do not perform well regarding contextual performance. What if a
colleague whose cubicle is next to yours needs to take a restroom break and asks
you to answer the phone if it rings, because an important client will call at any
moment? What if we said, “That is not MY job?” See Box 4-1, which describes a
system including both tas k and contextual performance at Sprint.

Many organizations now realize that there is a need to focus on both task and
contextual performance because organizations cannot function properly without
a minimum dose of positive contextual behaviors on the part of all employees.
Consider the case of ZFTRW Automotive Holdings Corp., w hich designs, manu-
factures, and sells automotive systems, modules, and components to automotive

Box 4 -1

Company Spotlight: Task and Contextual
Performance at Sprint
Sprint is a communications services company serving
59.7 million connections. Sprint is widely recognized for
developing, engineering, and deploying innovative tech-
nologies, including the f irst wireless 4G service f rom a
national carrier in the United States, leading no-contract
brands, including Virgin Mobile USA, Boost Mobile, and
Assurance Wireless, instant national and international
push-to-talk capabilities, and a global Ti er 1 Internet back-
bone. The company is headquartered in Reston, Virg inia.
At Sprint, all employees are evaluated and development
plans are created through the use of f ive core dimensions:
acting w ith integrity, focusing on the customer, deliver-
ing results, building relationships, and demonstrating
leadership. The d imensions are used not only for business
strategy and objectives, but also as a template for what
successful performance looks like at the company. These
dimensions include the consideration of both task and

contextual performance, and employees in the evaluation
and develo pment process are asked to write behavioral
examples of how they have performed on each dimension.
For example, the delivering results dimensi on clearly links
to performing specific tasks of one’s job. Each empl oyee
has certain tasks to complete on a regula r basis to keep
the business moving. On the other hand, the company is
concerned about how the work gets done and contribut –
ing t o a good work environment that allows for greater
effectiveness. This i s apparent through the dimensions
that l ook at how employees develop rel ationships with
others and act w ith integrity in their day-to-day function-
ing. In summary, Sprint has recogn ized the importance
of considering both task and contextual components of
a job in its performance management system. Employees
are evaluated not only on results, but also on how they
are achieved through worki ng with others. 16

108 Part II System Implementation

TA BLE 4 -1
M ain Differe nces Between
Task and Cont extual
Pe rformance

original equipment manufacturers. The company was founded in 1904, is based
in Livonia, Michigan, and has approximately 67,000 employees. With increasing
market pressures and sluggish growth, the company wanted to become more
performance driven, experiment in new markets, and offer greater value to its
shareholders. To do so, the senior management team developed what they labeled
the “key behaviors.” These behaviors are communicated throughout the company
and have a prominent role in the performance management process. The majority
of these key behaviors actually focus on contextual performance. Specifically, the
ZF TRW behaviors emphasize many of the elements of contextual performance,
including teamwork and trust.

Table 4-1 summarizes the main differences between task and contextual
performance. First, task performance varies across jobs. For example, the tasks
performed by an HR manager are different from those performed by a line
manager. The tasks performed by a senior HR manager a re more strategic in
nature compared to those performed by an entry-level HR analyst, which are
more operational in nature. On the other hand, contextual performance is fairly
similar across functional and hierarchical levels. All employees, regard less of job
title, hmction, and responsibilities, are equally responsible for, for example, vol-
unteering to carry out task activities that are not formally part of the job. Second,
task performance is likely to be role prescribed, meaning that task performance
is usually included in one’s job description. In contrast, contextual performance
behaviors are usually not role prescribed, but are typically expected without mak-
ing them explicit. Finally, task performance is infl uenced mainly by abilities and
skills (e.g., cognitive, physical), whereas contextual performance is influenced
mainly by personality (e.g., conscientiousness, agreeableness) .17

There are numerous pressing reasons why both task and contextual perfor-
mance dimensions should be included in a performance management system.
First, global com petition is raising the levels of effort required of employees.
Thus, whereas it may have sufficed in the past to have a workfo rce that was
competent in task perfo rmance, today’s globalized world and accom panying
competitive forces make it imperative that the workforce also engage in positive
contextual performance. It is d ifficult to compete if an organization em ploys a
workforce that does not engage in contextual behaviors. Second, related to the
issue of global competition is the need to offer outstanding customer service.
Contextual performance behaviors can m ake a profound impact on customer
satisfaction. Imagine what a big difference it makes, from a customer perspec-
tive, w hen an employee p uts in extra effort to satisfy a customer ‘s needs. Third,
many organizations are forming employees into teams. Although some teams
may not be permanent because they are created to complete specific short-term
tasks, the reality of today’s world of work is that teams are here to stay. Interper-
sonal cooperation is a key determinant of team effectiveness. Thus, contextual

Task Performance _(also called Prosocial or
Orgamzatoonal Cotozenshop Performance)

Varies across jobs Fairly similar across jobs

likely to be role prescribed Not likely to be role prescribed

Antecedents: abilities and skills Antecedent. personality

Chapter 4 Defining Performance and Choosing a Measurement A pproach 109

performance becomes particularly relevant for teamwork. Fourth, including
both task and contextual performance in the performance management system
provides an additional benefit: Employees being rated are more satisfied with
the system and also believe the system is more fair if contextual performance is
measured in addition to task performance.18 It seems that employees are aware
that contextual performance is important in affecting organizational effective-
ness, and therefore, believe that these types of behaviors should be included
in a performance management system in addition to the more traditional task
performance. Finally, when supervisors evaluate performance, it is difficult for
them to ignore the contextual performance dimension, even though the evalua-
tion form they are using may not include any specific questions about contextual
performance.19 Consequently, because contextual performance has an impact on
ratings of overall performance even when only task performance is measured, it
makes sense to include contextual performance more explicitly.

Finally, there is an additional type of behavior that is another facet of con-
textual performance but is different from traditional ways of thinking about it:
voice behavior.20 Voice behavior is a type of behavior that emphasizes expression
of constructive challenge with the goal to improve, rather than merely criticize;
it challenges the s tatus quo in a positive way and is about making innovative
suggestions for change and recommending modifications to standard procedures
even when others, including an employee’s supervisor, disagree.

Consider an employee who has just been hired into your organization. This
new colleague was recruited from a competitor, which is known to implement
top-notch performance management practices. This employee, having the ben-
efit of an outsider perspective, can point to processes that could be improved .
For example, the new colleague may suggest that more feedback be given to the
members of the team regarding their performance. This employee may even
send an e-mail message to all members of her team and to her supervisor, includ-
ing suggestions for improvement based on proven practices directly observed
elsewhere. Some of these suggestions may not be applicable in the new organi-
zational environment owing to different equipment, processes, products, and
clients. However, others, if implemented, may produce immediate and highly
beneficial results. Although such type of behavior can be included as part of the
broader category of contextual behavior, it is different in that it is not conformist
in nature. In fact, voice behavior can be seen as a threat by the new employee’s
supervisor, who is used to” doing thirlgs the same way we’ve done them before.”
Such supervisors may perceive the suggestions for changes and improvements
as a threat to the status q uo. Moreover, more senior organizational members may
also feel personally threatened by the knowledge, energy, and innovative ideas
of the new employee. These reactions to voice behavior can be a sign that the
wrong people are occupying leadership positions in the organization, and also,
a sign of imminent organizational decline.21 In contrast, healthier organizational
environments that are more adaptive and promote innovation and improvements
are more receptive to voice behavior and even reward it.22

4·3-2 Counterproductive Performance
The third type or dimension of performance is labeled counterproductive
performance.23 Counterproductive performance is behaviors and results that
are voluntary and that violate organizational norrns, and consequently, threaten

110 Part II System Implementation

the well-being of the organization, its members, or both. It may seem that counter-
prod uctive performance is simply the opposite of contextual performance, but
it is not. Specifically, the same employee can engage in both contextual and
counterproductive performance. Some KPis of counterproductive performance
include the following24:

• Exaggerating hours worked
• Falsifying a receipt to get reimbursed for more money than was spent on

business expenses
• Starting negative rumors about the company
• Gossiping about coworkers and one’s s upervisor
• Covering up one’s mistakes
• Competing with coworkers in an unproductive way
• Staying out of sight to avoid work
• Blaming one’s coworkers for one’s mistakes
• Intentionally working slowly or carelessly
• Being intoxicated during working hours
• Seeking revenge on coworkers
• Cyberloafing
• Presenting colleagues’ ideas as if they were one’s own

Consider the corporate scandal of Enron, which led to the bankruptcy of the
Enron Corporation. This was a large American energy company based in Houston,
Texas, and the “Enron scandal” was the largest bankruptcy reorganization in
American history, as well as the biggest audit failure. A book by McLean and
Elkind, based on hund reds of interviews and details from personal calendars,
performance reviews, e-mails, and other documents, showed that one of the
primary reasons for the company’s collapse was widespread counterproductive
performance.25 In fact, Enron executives were described as “supersmart.” For
example, its former CEO, Jeffrey Keith “Jeff” Skilling, and many other top execu-
tives, had earned their MBAs from top-ranked business schools s uch as Harvard
Business School and The University of Texas. A performance management system
that included not only task performance but also counterproductive performance
could have detected unethical behaviors and accounting practices before they
became widespread and led to the collapse of the entire company- including a
loss of 99.5 percent of its market value in a year. Not surprisingly, when he became
dean of the Harvard Business School a few years after Enron’s collapse, Professor
Nitin Nohria posed the core question for the school: “Are we educating
who have the competence and character to exercise leadership in business?” 6

4-3-3 Ad apt ive Performance
Adaptive performance is the fourth type and is related to an individ ual’s adapt-
ability to changes-be it in the organization and its goals, in the requirements
of the job, or the overall work context.27 Given the rapid pace of technology and
other factors that are constantly changing the nature of work and organizations,
adaptive performance is becoming an increasingly important performance dimen-
sion. For example, an organization may change its strategic priorities, merge or
be acquired, and have more or less resources. The way employees react to and
anticipate these changes is, therefore, an important performance component.

Chapter 4 Defini ng Performance and Choosing a Measurement Approach 111

There are several KPis of adaptive performance. Consider the following eighf8:

1. Handling emergencies or crisis situations. To what extent can employees react
with appropriate and proper urgency in dangerous or emergency situations;
quickly analyze options for dealing with danger or crises; maintain
emotional control and objectivity while staying focused on the situation at
hand; and step up to take action and handle danger or emergencies?

2. Handling work stress. To what extent can employees remain composed
and cool when faced with difficult circumstances or a highly demanding
workload or schedule; not overreact to unexpected news or situations;
and manage frustration well by directing effort to constructive solutions
rather than blaming others?

3. Solving problems creatively. To what extent can employees use unique
types of analyses to generate new, innovative ideas in complex areas;
turn problems upside down and inside out to find fresh, new approaches;
integrate seemingly unrelated information to develop creative solutions;
and entertain wide-ranging possibilities others may miss?

4. Dealing with uncertain and unpredictable work situations. To what extent can
employees take effective action without knowing all the facts at hand; change
gears in response to unpredictable or unexpected events; adjust plans, goals,
actions, or priorities to deal with changing situations; not need things to be
black and white; and refuse to be paralyzed by uncertainty or ambiguity?

5. Learning work tasks, technologies, and procedures. To what extent can
employees demonstrate enthusiasm for learning new approaches and
technologies; do what is necessary to keep knowledge and skills current;
Jearn new methods; adjust to new work processes and procedures, and
anticipate changes in the work demands; and search for and participate in
assignments or training that will prepare them for these changes?

6. Demonstrating interpersonal adaptability. To what extent can employees
be flexible and open-minded when dealing with others; listen to and
consider others’ viewpoints and opinions and alter their own opinion
when it is appropriate to do so; be open and accepting of negative or
developmental feedback regarding work; and work well and develop
effective relationships with people with diverse personalities?

7. Demonstrating cultural adaptabilitt;. To what extent can employees take
action to Jearn about and understand the climate, orientation, needs, and
values of other groups, organizations, or cultures; integrate well into and be
comfortable with different values, customs, and cultures; and understand
the implications of one’s actions and adjust their approach to maintain
positive relationships with other groups, organizations, and cultures?

8. Demonstrating physically oriented adaptability. To what extent can
employees adjust to challenging environmental states such as extreme
heat, humidity, cold, or dirt; accommodate frequent physical pressure to
complete strenuous or demanding tasks and adjust weight and muscular
strength; and become proficient in performing physical tasks as necessary
for the job?

In summary, performance includes four types or dimensions: task, context-
ual, counterproductive, and adaptive. All four should be considered because they
have separate and important effects on organizational success. In the case of all

112 Part II System Implementation

dimensions, each behavior and result should be defined clearly so that employees
understand what is expected of them. Organizations that include all four dimensions
are likely to be more s uccessful, as in the case of Three Ireland, Ireland’s second
largest mobile phone operator. Headquartered in Dublin, it operates 67 retail
stores and currently has over 1,400 employees throughout Ireland. A few years
ago, Three Ireland implemented a performance management system in its 320 seat
customer care center in Limerick. Three Ireland ‘s performance management sys-
tem includes several performance dimensions- for example, task-related facets
centered in hard metrics regarding productivity. Also, contextual-related facets
include involvement in staff socialization and contribution to team development.
The targets set for each employee are also aligned with company objectives. Three
Ireland believes that this focus on both task and contexhtal performance has led
to higher levels of customer service and employee satisfaction.

4-4 A PPROACHES TO MEASURING PERFORMANCE
We must once again remember that performance involves both results and be-
haviors (see Figure 4-1). So good systems include measures of both behaviors
and actions as well as results and products, as described next.

4 -4-1 Behavior A pproach
The behavior approach emphasizes what employees do on the job and does not
consider the outcomes or products resulting from their behaviors. This is basi-
cally a process-oriented approach that emphasizes how an employee does the
job, and not what is produced.

The behavior approach is most appropriate under the following circumstances:

• The link between behaviors and results is not obvious. Sometimes, the relation
between behaviors and the desired outcomes is not clear. In some cases,
the desired result may not be achieved in spite of the fact that the right
behaviors are in place. For example, a salesperson may not be able to close
a deal because of a downhtrn in the economy. In other cases, results may
be achieved in spite of the absence of the correct behaviors. For example,
a pilot may not check all the items in the preflight checklist, but the flight
may nevertheless be successful (i.e., take off and land safely and on time).
When the link between behaviors and results is not always obvious, it is
beneficial to focus on behaviors, as opposed to o utcomes.

• Outcomes occur in the distant future. When the desired results will not be
seen for months, or even years, the measurement of behaviors is beneficial.
Take the case of NASA’s Mars Exploration Rover Mission program.
NASA launched the exploration rover Spirit on June 10, 2003, w hich
landed on Mars on January 3, 2004, after traveling 487 million kilometers
(302.6 million miles). Its twin, the exploration rover, Opportunity, was
launched on July 7, 2003, and landed on the opposite side of Mars on
January 24, 2004. From launch to landing, this mission took about six
months to complete. In this circumstance, it is certainly appropriate
to assess the performance of the engineers involved in the mission by
measuring their behaviors in short intervals during this six-month period,
rather than waiting until the final result (i.e., successful or unsuccessful
landing) is observed. Now, NASA has the goal of sending humans to the

Chapter 4 Defining Performance and Choosing a Measurement Approach 113

Red Planet in the 2030s. That journey is already well under way. But we will
have to wait more than 10 years until we are able to evaluate performance
based on results. So a behavior approach is appropriate in this case.

• Poor results are due to causes beyond the perfonner’s control. When the results
of an employee’s performance are beyond the employee’s control, it makes
sense to emphasize the measurement of behaviors. For example, consider
a situation involving two assembly line workers, one of them working
the day shift, and the other, the night shift. When the assembly line gets
stuck because of technical problems, the employee working during the
day receives immediate technical assistance, so the assembly line is back
in motion in less than five minutes. By contrast, the employee working
the night shift has very little technical support, and, therefore, when
the assembly line breaks down, it takes about 45 minutes for it to be up
and running again. U we measured results, we would conclude that the
performance of the day-shift employee is far s uperior to that of the night-
shift employee, but this would be an incorrect conclusion. Both employees
may be equally competent and do the job equally well. The results prod uced
by these employees are uneven because they depend on the amount and
quality of technical assistance they receive when the assembly line is stuck.

A popular type of behavior approach used mostly for managerial positions is
called competenet; modeling.29 In a nutshell, competencies are clusters of knowledge,
s kills, abilities, and other characteristics (KSAOs) that, together, determine how
results are achieved. As s uch, competencies are not directly observable, but we
can measure them by assessing behavioral indicators. For example, to measure
the competency “leadership,” we can measure the behaviors that a manager uses
in mentoring and developing her direct reports. For an example of competency
modeling at Dollar General, see Box 4-2. We discuss the specific steps involved in
developing measures of behaviors, including competencies, in Chapter 5. Next,
let us discuss the results approach to measuring performance.

4-4-2 Result s Approach
The results approach emphasizes the outcomes produced by the employees.
It does not consider how employees do the job. This is basically a bottom-line
approach that is not concerned about employee behaviors and processes but in-
stead focuses on w hat is produced (e.g., sales, number of accounts acquired, time
spent with clients on the telephone, number of errors). Defining and measuring
results us ually takes less time than defining and measuring behaviors needed to
achieve these results. In fact, given the ongoing collection of employee data in the
form of employee monitoring (what we described in Chapter 1 as “Big Data”),
the results approach is us ually seen as more cost-effective because results can
be less expensive to track than behaviors. Overall, data resulting from a results
approach seem to be objective and are intuitively very appealing.

The results approach is most appropriate under the following circumstances:
• Workers are skilled in the needed behaviors. An emphasis on results is

appropriate when workers have the necessary abilities, knowledge, and
s kills to do the work. In such situations, workers know what specific
behaviors are needed to achieve the desired results, and they are also
sufficiently s killed to know what to do to correct any process-related
problems when the desired results are not obtained . Consider the example

114 Part II System Implementation

Box 4 -2

Company Spotlight: Competency-Based Behavior
Approach at Dollar General
Doll ar General uses a behavior approach to measure among empl oyees. In order to encourage employees to
performance. Tennessee-based Dollar General operat es arrive at work on t ime, a system was develo ped to group
about 13,000 stores in 43 states in the United St ates. The employees into t eams who earn points. A wall chart was
company sells consumabl e basics, such as paper products, created displaying a racetrack, and each team was g iven
cleaning supplies, health and beauty products, foods and a car that would be moved forward by the number of
snacks, housewares, toys, and basic apparel. As part of points earned each day. After a certain number of l aps
the performance management system, Doll ar General around the track, employees on the teams with the most
h as identif ied behaviors that serve as in dicators of po ints woul d be given a choice about how to celebrate.
underlying competencies. These behavi ors are reviewed The program was successfu l within t he f irst two weeks
and ut ilized to encourage certain outcomes and provi de and increased attendance significantly. In summary, Dollar
feedback and rewards to staff members. For example, the General’s performance management system includes the
company management soug ht t o improve attendance use of a behavi or approach to measuring performance.’•

of a professional basketball player. A free throw is an unhindered shot
made from the foul line and is given to one team to penalize the other
team for committing a foul. Free throw shooting can make the difference
between winning and losing in a close basketball game. Professional
players know that there is really no secret to becoming a great free
throw shooter: just hours and hours of dedicated practice besides actual
basketball play, per o ur earlier discussion about deliberate practice. In
assessing the performance of professional basketball players, the free
throw shooting percentage is a key results-oriented performance indicator
because most players have the skills to do it. It is just a matter of assessing
whether they do it well or not.

• Behaviors and results are obviously related. In some situations, certain results
can be obtained only if a worker engages in certain specific behaviors. This
is the case of jobs involving repetitive tasks such as assembly line work
or newspaper delivery. Take the case of a person delivering newspapers.
Performance can be measured adopting a results approach: whether the
newspaper is delivered to every customer within a particular time frame.
For the employee to obtain this result, she needs to pick up the papers a t a
specific time and use the most effective delivery route. If these behaviors
are not present, the paper will not be delivered on time.

• Results show consistent improvement over time. When results improve
consis tently over time, it is an indication that workers are aware of the
behaviors needed to complete the job successfully. In these situations, it is
appropriate to adopt a results approach to assessing performance.

• There are many ways to do the job right. When there are different ways in w hich
one can do the tasks required for a job, a results approach is appropriate. An
emphasis on results can be beneficial because it could encourage employees
to achieve the desired outcomes in creative and innovative ways.

Chapt er 4 Defining Performance and Choosing a Measurement Approach 1115

Table 4-2 summarizes the conditions under which a TABLE 4 _2
behavior or a results wapproach may be best suited for Behavior Approach Versus Results Approach to Measuring
assessing performance. Let us emphasize again that these Performance
approaches are not mutually exclusive. Measuring both
behavior and results is the approach adopted by many
organizations. Consider the case of L Brands Inc., a retailer
that owns the brands Victoria’s Secret, Bath & Body Works,

Adoptmg a behovtor approach to measurmg performance
IS most appropnate when

• The link between behaviors and results is not obVious

PINK, La Senza, and Henri BendeL L Brands operates more • Outcomes occur in the distant future
than3,000 company-owned specialty stores in the United
States, Canada, the United Kingdom, and Greater China;
its brands are sold in more than 700 franchised locations
worldwide; and it employs more than 88,000 associates,
who produced combined sales ofUS$12.6 billion. L Brands
aims to foster an entrepreneurial culture for its managers;
therefore, managers who thrive in the company have a hist-
ory of delivering impressive business results. They decided

• Poor results are due to causes beyond the performer’s
control

Adoptmg a results approach to meosunng performance rs
most oppropnote when

• Workers are skilled in the needed behavrors

• BehaViors and results are obviously related

• Results show consistent improvement over time
to design a new performance management system that • There are many ways to do the Job right
is now used uniformly by all L Brands companies. With
the involvement of outside consultants and employees,
L Brands developed a performance management system
wherein managers are measured on business resul ts, including total sales, market
share, and expense/ sale growth ratio, as well as leadership competencies that are
tailored to L Brands. A few of these competencies includ e d eveloping a fashion sense,
financial acumen, and entrepreneurial drive. Overall, L Brands has been pleased
with the new system because it helps align individual goals with business strategy
and results. Raters like the new system because behavioral anchors help define the
competencies, which make ratings more straightforward. Finally, employees com-
ment that they appreciate the new focus on how results are achieved as opposed to
the earlier focus on only what is achieved (i.e., sales).

The results approach is used not only in large companies but, in fact, in
many small as well as start-up organizations as well, where results are key. For
example, Box 4-3 includes an illust ration of the use of a results approach in a
very different type of organization: Basecamp.

Box 4 -3

Company Spotlight: Results Approach to Measuring
Performance at Basecamp
Basecamp, a web and mobile project management company,
generates more than USS25 mill ion in revenue with only
52 employees. It was recogn ized in Forbes’ 2017 Small
Gi ant List as being among the top 25 small businesses in
the United States. Since it was founded in 1999, they have
lost only f our employees. The company d ivides its work
into six-week work cycles containing one or two “big batch
projects,” and four to eight “small batch projects” that
take anywhere from a day to two weeks to complete. As

founder and CEO Jason Fried explains: “We don’t measure
efficiency, compare actuals vs. estimates. We have six weeks
to get something done. However, a team decides to get it
done during that time is up to them.” In summary, Base-
camp utilizes a performance management system focusing
on outcomes or results in order to motivate employees and
bring about business results. The company looks at what
is produced in the work, rather than at behaviors or how
the job gets done.31

1115 Part II System Implementation

SUMMARY POINTS

• Performance is about behavior or what employees do and what employees
prod uce or the o utcomes of their work. Thus, performance management
systems typically include the measurement of both behaviors (how the
work is done) and the results (the outcomes of one’s work). Performance is
evaluative (i.e., we judge it on the basis of whether it advances or hinders
organizational goals) and multidimensional (i.e., there are different types
or dimensions of performance).

• Performance is determined by a combination of (1) abilities and other
traits (i.e., fairly stable individ ual differences), (2) knowled ge and skills
(i.e., more malleable information and know-how), and (3) context (i.e.,
situational factors). Lack of ideal values for any of these factors can be
compensated by higher levels of the other factors. However, if any of the
three determinants of performance has a very small value (e.g., very little
knowledge of how to treat customers right), then overall performance
will also be at a low level. All three determinants of performance must be
present for performance to reach satisfactory (and better) levels.

• The role of context is particularly noteworthy because it includes
organizational and national culture, HR policies, time and the timing
of performance (i.e., maximum versus typical performance), resources
and opportunities to perform, and other situational factors that are often
outside of the employee’s control. Thus, it is important to be able to know
whether a performance problem is due to Jack of abilities and traits,
knowledge and skills, or contextual issues.

• Two ways to improve our own performance is to engage in deliberate
practice and assume extreme ownership. Deliberate practice involves
approaching performance with the goal of getting better and better;
focusing on what is happening and why you are doing things the way
you do; seeking performance feedback from expert so urces; and building
mental models of your job, your situation, and your organization. Extreme
ownership involves taking responsibility for poor performance, no matter
how painful this process may be. Acknowledging that we have performed
under par is never easy; it hurts our egos and our self-esteem. But these
are short-term effects only. Unless we engage in this process, it will be
very d ifficult to address any type of performance problem.

• There are four important facets of performance: task, contextual,
counterproductive, and adaptive. Unless we understand the reasons
for poor performance, we will not be able to address or anticipate
performance problems. All four types or dimensions of performance have
an important impact on organizational s uccess and sho uld be included in
a performance management system:

• Task performance refers to the specific activities required by one’s
job. It varies across jobs, is likely to be role prescribed, and its main
antecedents are abilities, knowledge, and skills.

• Contextual performance refers to the activities required to be a
good “organizational citizen,” and examples are helping coworkers,
s upporting company initiatives, and expressing voice behavior (i.e.,

Chapt er 4 Defining PerFormance and Choosing a Measurement Approach 117

issuing constructive challenge with the goal to improve, rather than
merely criticize even when others, including an employee’s s upervisor,
d isagree) .

• Counterproductive performance is behaviors and results that are
voluntary and violate organizational norms, and consequently, threaten
the well-being of the organization, its members, or both. Examples
include starting negative rumors about the company, gossiping about
coworkers, cyberloafing, covering up one’s mistakes, and intentionally
working slowly or carelessly.

• Adaptive performance is related to an individual’s adaptability to
changes-be it in the organization and its goals, in the requirements
of the job, and in the overall work context. Examples include handling
emergencies or crisis situations, handling work stress, solving problems
creativel y, and dealing with uncertain and unpredictable work situations.

• An emphasis on behaviors leads to a behavior-based approach to
assessing performance (including competency modeling). An emphasis on
results leads to a results-based approach to assessing performance.

• A behavior approach emphasizes what employees do (i.e., how work
is done). This approach is m ost appropriate when (1) the link between
behaviors and results is not obvious, (2) outcomes occur in the distant
future, and (3) poor results are due to causes beyond the employee’s
control. A behavior approach may not be the best choice if most of these
conditions are not present. In most situations, however, the inclusion of
a t least some behavior-based measures is beneficial. A common behavior
approach is called competency modeling, which involves creating bundles
of knowledge, skills, and abilities, and then measuring them by creating
observable behavioral indicato rs.

• A results approach emphasizes the o utcomes and results prod uced by
employees. This is a bo ttom-line approach that is not concerned with
how the work is done as long as certain specific results are obtained. This
approach is most appropriate when (1) workers are skilled in the needed
behaviors, (2) behaviors and results are obviously related, (3) results
show consistent improvement over time, and (4) there are many ways
to do the job right. An emphasis on results can be beneficial because it
could encourage employees to achieve the desired outcomes in creative
and innovative ways. However, measuring only results is typically not
welcomed by employees even in types of jobs for which the expected
result is very dear (e.g., sales jobs).

EXERCISE 4-1 DO YOU HAVE WHAT IT TAKES? ASSESSING YOUR OWN
, EXTREME OWNERSHIP

Watch the 13-minute Ted Talk on Extreme Ownership by Jocko Willink delivered at
the University of Nevada. It is ava ilable on You Tube at https:// www.youtube.com/
watch?v= ljqra3BcqWM. Then, think about a recent situation in which your own
performance was not satisfactory. This could involve a situation involving task,
contextual, counterproductive, o r adaptive performance. Also, it may involve
performance defined as behaviors, results, or both.

118 Part II System Implementation

Applying the concept of extreme ownership, what went wrong? What was
your own responsibility in this situation? What did you do or not do that should
be improved in the future? What will you do in the future to try to avoid making
these same mistakes?

EXERCISE 4-2 ROLE PLAY: DIAGNOSING CAUSES OF POOR PERFORMANCE

Heather works in the training department of a large information technology
organization. She is in charge of designing and delivering interpersonal skills
training, including communication skills, networking, and new manager training
classes. Heather has excellent knowledge of how to design a training class. She
incorporates deliberate practice into all of her classes. She has also cond ucted
research on what good communication consists of, how to network, and what
new managers need to know to be successful. However, individuals who attend
Heather’s training classes often give her low ratings, stating that she has a hard
time answering specific questions in classes and that she does not seem approach-
able after the classes when individuals want to ask questions.

You are Heather’s manager. You are meeting with Heather to discuss her
poor performance and will try to determine what is going on.

1. In your opinion, what is causing Heather’s poor performance? Is it due to
a deficiency in abilities and traits, knowledge, and skills (declarative and
procedural), or contextual issues?

2. What can be done to remed y the performance problem?

CASE STUDY 4-1

Differentiating Task from Contextual Performan ce at
Pharm a Co. Company

Consider the following adaptation of a job description for the position of a district busi-ness manager for a sales organization in a
pharmaceutical company (Pharma Co.). Pharma
Co. prod uces pharmaceuticals, infant formulas and
nutritional products, ostomy and advanced wound
care products, cardiovascular imaging supplies,
and over-the-counter prod ucts. Their stated mission
is to “extend and enhance human life by providing
the highest-quality pharmaceutical and related
health care products.” In addition, all employees
live by the Pharma Co. pledge: “We pledge-to
our patients and customers, to our employees and
partners, to our shareholders and neighbors, and
to the world we serve-to act on our belief that the
priceless ingredient of every product is the honor
and integrity of its maker.”

Job Responsibilities of the District
Business Manager
The following are the core performance objectives
for the district business manager (DBM) position:
Create the environment to build an innovative

CASE STUDY 4-2

culture, create and articulate a vision, drive innov-
ation by embracing diversity and change, set the
example, and thereby shape the culture. Develop
and communicate the business plan, understand
and explain Pharma Co. strategies, translate national
plan to business plans for districts and territories, set
goals and expectations of performance, set priorities,
and allocate resources. Execute and implement the
business plan, maximize rank order lists of med-
ical education professional relationships, achieve
optimum coverage frequency of highest potential
physicians, take accountability, and achieve results.
Build relationships focused on customer retention,
develop relationships (i.e., networks), influence
others (i.e., internal and external), and develop self
and o thers. Strong skills are acquired in the following
areas: written and oral communication, negotiation,
strategic analysis, leadership, team building, and
coaching. (Source: Pharma Co.)

1. Based on the DBM job description, extract
a list of KPis in each of the following four
dimensions (a) task, (b) contextual, (c)
counterproductive, and (d) adaptive.

Choosing a Performan ce Measurement Approach at Show
Me the Money

The following job description is for an account executive at Show Me the Money, a payroll and HR solution providers similar to ADP,
AmCheck, BenefitMall, Big Fish Payroll Services,
Fuse Workforce Management, GetPayroll, Gusto, and
o thers. Show Me the Money offers payroll, human
resources, and benefits outsourcing solutions for
small- to medium-sized businesses. Because account

executives often make sales calls individually, their
managers do not always directly observe their be-
havior. Furthermore, managers are also responsible
for sales in their markets and for staying up-to-date
on payroll Jaws. However, account executives are
responsible for training new account executives
and networking in the industries in which they
sell products. For example, if an account manager

120 Part II System lm plementation

is responsible for retail companies, then that account executive is expected to
attend retail trade shows and professional meetings to identify potential clients
and to stay current with the issues facing the retail industry.

Account Executive Job Responsibilities
• Performing client needs analysis to ensure that the major market services

product can meet a client’s requirements and expectations
• Establishing clients on the host processing system
• Acting as primary contact for the client during the conversion process
• Supporting clients during the first few payrolls
• Completing the required documentation to turn the client over to

customer service for ongoing support
• Scheduling and making client calls, and when necessary, supporting sales

representatives in presales efforts
• Keeping abreast of the major market services system and software

changes, major changes and trends in the PC industry, and changes in
wage and tax Jaw.
1. Based on the above description, assess whether Show Me the Money

should use a behavior approach, a results approach, or a combination
of both to measure performance.

2. Using the accompanying tables as a guide, place check marks next to
the descriptions that apply to the job of account executive. Explain why
you chose the approach yo u did .

Behavior approach to measuring performance is most appropriate when

the l1nk between behaviors and results is not obvious

outcomes occur in the distant fu ture

poor results are due to causes beyond the performer’s control

Results approach to measuring performance is most appropriate when

workers are sk1lled 1n the necessary behaviors

behaViors and results are obviously related

results show consistent improvement over t1me

there are many ways to do the job right

Chapter 4 Defining Performance and Choosing a Measurement Approach 121

– ———

ENDNOTES

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3. Borman, W. C., Brantley, L. B., & Hanson, M.A. (2014). Progress toward understanding the
structure and determinants of job performance: A focus on task and citizenship performance.
ltzternatiotzal journal of Selectiotz & Assessment, 22, 422-431.

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5. Van lddekinge, C. H., Aguinis, H., Mackey, J. D., & DeOrt entiis, P. S. (2017). A meta-analysis
of the interactive, additive, and relative effects of cognitive ability and motivation o n
performance. journal of Matzagemetzt, 44(1), 249-279. doi:10.1l77 /0149206317702220

6. Berghuis, J ., Denissen, J. A., Oberski, D., Sijtsma, K., Meeus, W. J ., Branje, S., & . . . Bleidom, W.
(2017). Big five personality stability, change, and codevelopment across adolescence and early
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personality scales bet ween the five-factor m odel and the circumplex model. journal of Applied
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8. Eskreis-Winkler, L., Shulman, E. P., Young, V., Tsukayama, E., Brunwasser, S. M., &
Duckworth, A. L. (2016). Using w ise interventions to motivate deliberate practice. Journal of
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10. Beus, J. M., & Whitman, D. S. (2012). The rela tio nship between typical and maximum
performance: A me ta-analyt ic examination. Humatz Performance, 25, 355-376.

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differentiation and stra tegic human resource management. journal of Matzagement, 37,421-428.

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January 2, 2018, from https://www.bloomberg.com / news/artides/2005-03-15/
five-lessons-of-the-worldcom-debade

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national culture on new produc t performance. journal of Product Jnuovntiou Management, 33,
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NY: St. Martin’s Press.

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conscientiousness on evaluations of task and contextual performance of o lder and younger
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41(12), 2(}-25.

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Management and 5, 75-88.

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A multilevel mediation model of a uthentic leadership development. European Journal of Work
& Organizational Psychology, 26, 434-443.

21. Bedeian, A. G., & Armenakis, A. A. (1998). The cesspool syndro me: How dreck floats to the
top o f declining organizations. Academy of Ma11agement Executive, 12,

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(2016). Using organizational science research to address U.S. Federal Agencies’ managemen t
and labor needs. Behavioral Science & Policy, 2, 67-76.

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23. Marcus, B., Taylor, 0 . A., Hastings, S. E., Sturm , A., & Weigelt, 0. {2016). The structure of
counterproductive work behavior. joumal of Mnrragement, 42, 203-233.

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eyes of the beholder: A non-self-report measure of wor kplace devian ce. joumal of Applied
Psyclrology, 94, 207-215.

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fall of En ron. New York, NY: Penguin.

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and Quants. Retrieved January 2, 2018, fro m http:// fort une.com / 2011 /02/09/
from-ha rvard-success-story-to-accused -insider-trader I

27. Jun d t, D. K., Shoss, M. K., & Huan g, J. L. (2015). Individ ual adaptive per fo rmance in
organizations: A review. joumal of Organizational Behavior, 36, S53-S71.

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the workplace: Developm ent of a taxonomy of adaptive perform ance. journal of Applied
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chapter

5
Measuring Results
and Behaviors

The reason most people never reach their goals is that they don’t define them, or ever seriously
consider them as believable or achievable. Winners can tell you where they are going, what they

plan to do along the way, and who will be sharing the adventure with them.

– Denis Waitley

Learning Objectives
By t he end of this cha pter, you will be able to do t he following:

1. Devise a results approach to measuring performance.
including the development of key accountabilities,
objectives, and standards.

2. Formulate key accountabilities and their relative
importance.

3. Produce performance objectives that are specific and
clear. challenging, agreed upon, significant. prioritized,
bound by time, achievable, fully communicated, flexible,
and limited in number.

4. Develop performance standards that are related to
the position, concrete, specific , measurable, practical
to measure, meaningful, realistic and achievable, and
reviewed regularly.

5. Devise a behavior approach to measuring performance.
including the identification and assessment of
competencies.

6. Create competencies that are defi ned clearly, propose
specific behavioral indicators that can be observed
when someone demonstrates a competency effectively,

propose specific behaviors that are likely to occur when
someone doesn’t demonstrate a competency effectively
(what a competency is not), and include suggestions for
developing them further.

7. Design comparative performance measurement systems
such as simple rank order, alternation rank order, paired
comparisons, relative percentile, and forced distribution
being aware of the relative advantages and disadvan·
tages of each and critique the assumption that perform·
ance is normally distributed and recommend how to
produce star performers. Design absolute performance
measurement systems such as essays, behavior check·
lists, critical incidents, and graphic rati ng scales being
aware of the relative advantages and disadvantages of
each.

8. Appraise how choices in performance measurement
approaches are affected by an organization’s culture,
indust ry, and strategic direction established by its
leadership.

123

124 Part II System lm plementation

Chapter 4 provided a definition of performance and described the results and
behavior approaches to measuring performance. In this chapter, we provide a
more detailed description of how to measure performance, adopting the results
and behavior approaches. Recall that most systems include a combination of
both results and behaviors. Also, regardless of whether performance is assessed
using results or behaviors, all systems rely on observable measures, which are
us ually referred to as key performance indicators (KP!s).

5-1 MEASURING RESULTS
Chapter 2 included a brief preview of how to assess performance when using a
results approach. Specifically, we need to answer the following key questions:

• What are the different areas in which this individual is expected to focus
efforts (key accountabilities)?

• Within each area, what are the expected performance objectives?
• How do we know how well the results have been achieved (performance

standards)?1

As a reminder, key accountabilities are broad areas of a job for which the
employee is responsible for producing results. A discussion of results also
includes specific objectives that the employee w ill achieve as part of each
accountability. Objectives are statements of important and measurable out-
comes. Finally, discussing results also means discussing performance standards.
A performance standard is a yardstick used to evaluate how well employees
have achieved each objective. Performance standards provide information on
acceptable and unacceptable performance-for example, regarding quality,
quantity, cost, and time.

Organizations that implement a management by objectives (MBO) philosophy
are likely to implement results-based performance management systems that
include objectives and standards. For example, as part of Kraft Heinz’s MBO
system, employees’ personal goals are publically displayed on their desks,
while top executives’ goals (including those of the CEO) are posted o n the
wall. The goals are data-driven, measurable, and linked to other employees’
goals, to teamwork as well as the company’s val ues of ownership
and transparency. Several other companies have also made MBOs an integral
part of their performance management systems. For example, Bill Packard, one
of the founders of the computer company Hewlett-Packard (HP), has said that
no operating policy contrib uted more to HP’s success than MBOs.3 Google uses
MBOs to set “stretch” goals, and asks that employees achieve 65% of these seem-
ingly unachievable goals. Business networking site Linkedln uses MBOs to set
3-5 objectives for the quarter that are difficult to achieve, and then, uses weekly
meetings to monitor progress made toward achieving the objectives. Zynga,
maker of the popular comp uter game Farm Ville, uses MBOs to encourage focus
and urgency by asking employees to set three objectives each week and attempt
to achieve at least two out of the three, and then, track how they performed.4
Overall, an emphasis on objectives and standards is likely to allow employees
to transla te organizational goals into individual goals, w hich is a key purpose
of MBO philosophies.5

Chapter 5 Measuring Resul ts and Behaviors 125

5-1-1 Determ ining Accountabilities
The first step in determining accountabilities is to collect information about the
job. The primary source is, of course, the job description that has resulted from
the work analysis and a consideration of unit- and organization-level strategic
priorities. The job description provides information on the tasks performed. Tasks
included in the job description can be grouped into clusters, based on their degree
of relatedness. Each of these task clusters or accountabilities is a broad area of
the job for which the employee is responsible for prod ucing results.

After the accountabilities have been identified, we need to determine their
relative degree of importance. To understand this issue, we need to answer the
following key questions:

• What percentage of the employee’s time is spent performing each
accountability?

• If the accountability were performed inadequately, would there be a
significant impact on the work unit’s mission?

• Is there a significant consequence of error? For example, could inadequate
performance of the accountability contribute to the injury or death of the
employee or others, serious property damage, or loss of time and money?

Although determining accountabilities may, at first, seem like a daunting
task, it is not that difficult. Let us discuss an example based on a real job in a real
organization to illustrate how it is done. Consider the position of Training Specialist/
Consultant- Leadership & Team Development for Target Corporation. Target focuses
exclusively on general merchandise retailing and is the second largest discount
store retailer in the United States, behind Walmart. Target employs a workforce of
341,000 employees in its more than 1,800 stores and generates US$69.495 billion in
revenue. A brief summary of the job description is provided below:

Identifies the training and development needs of Target Corporation’s
work force (in collaboration with partners), with primary emphasis on
exempt team members. Designs and delivers training and development
workshops and programs and maintains an ongoing evaluation of the
effectiveness of those programs. Assumes leadership and strategic
responsibility for assigned processes. May supervise the non-exempt staff.

Based on the job description, and additional information found on Target’s
web page regarding the company’s strategic priorities, a list of the accountabili-
ties, consequences of performing them inadequately, consequences of making
errors, and percentage of time spent in each follows:

• Process leadership. Leads the strategy and direction of assigned processes.
Coordinates related projects and directs or manages resources. This is
extremely important to the functioning of Target leadership and the ability
of executives to meet strategic business goals. If this position is managed
improperly, then it will lead to a loss of time and money in training costs
and leadership ineffectiveness. (40% of time)

• Supervision of nonexempt staff Supervises nonexempt staff working in
the unit. This is relatively important to the functioning of the work
unit. If nonexempt s taff members are supervised improperly, then the
development of the employees and the ability to meet business targets will
be compromised. (10% of time)

1215 Part II System Implementation

• Coaching. Conducts one-on-one executive coaching with managers and
executives. This is extremely important to the development of internal
leaders. If managers and executives are not coached to improve their
performance, there is a loss of time and money associated with their poor
performance as well as the cost of replacing them, if necessary. (20% of time)

• Team-building consultation. Assists company leaders in designing and
delivering their own team-building sessions and other interventions. This
is relatively important to the success of teams at Target. Mismanagement
of this function will result in teams not meeting their full potential and
wasting time and resources on conducting team sessions. (10% of time)

• Assessment instrument feedback. Delivers feedback based on scores obtained
on assessment instmments of skills, ability, personality, and other individual
characteristics. This is relatively important to the development of leaders. If
assessment is incorrect, it could derail leader development. (10% of time)

• Product improvement. Continuously seeks and implements opportunities
to use technology to increase the effectiveness of leadership and team
development programs. This is important to the effectiveness of training
delivery and could result in significant gains in efficiencies of the systems
if carried out effectively. (10% of time)

5·1·2 Determining Objectives
After the accountabilities have been identified, the next step is to determine
specific objectives. Objectives are statements of an important and measurable
o utcome that, when accomplished, will help ensure s uccess fo r the account-
ability. The purpose of establishing objectives is to identify a limited number of
highly important results that, w hen achieved, will have a dramatic impact on the
overall success of the organization. After objectives are set, employees should
receive feed back on their progress toward attaining the objective. Also, rewards
should be allocated to those employees w ho have reached their objectives.

Objectives are clearly important because they help employees guide their
efforts toward a specific target. To serve a useful function, objectives must have
the following characteristics6:

1. Specific and clear. Objectives must be easy to understand. In addition, they
must be verifiable and measurable-for example: “Cut travel cost by 20%.”

2. Challenging. Objectives need to be challenging but not impossible to
achieve. They must be a stretch, but employees should feel that the
objective is reachable.

3. Agreed upon. To be most effective, objectives need to result from an agreement
between the manager and the employee. Employees need an opportunity
to participate in setting objectives. Participation in the process increases
objective aspirations and acceptance, and decreases objective resistance.

4. Significant. Objectives must be important to the organization. Employees
must believe that if the objective is achieved, it will have a critical impact
on the overall s uccess of the organization. In addition, achieving the
objective should give the employee a feeling of congruence between the
employee’s performance and the goals of the organization. This, in turn,
is likely to enhance feelings of value to the o rganization.

5. Prioritized. Not all objectives are created equal; therefore, objectives
should be prioritized and tackled one by one.

Chapter 5 Measuring Resul ts and Behaviors 127

6. Bound by time. Good objectives have deadlines and mileposts. Objectives
Jacking a time dimension are likely to be neglected.

7. Achievable. Good objectives are doable; that is, employees should have
sufficient skills and training to achieve them. If they do not, then the
organization should make resources available so that the necessary skills
are learned and technology is made available to achieve the goals.

8. Fully communicated. In addition to the manager and employee in question,
the other organizational members who may be affected by the objectives
need to be aware of them.

9. Flexible. Good objectives are not immutable. They can, and likely will,
change based on changes in the work or business environments.

10. Limited in number. Too many objectives may become impossible to achieve,
but too few may not make a sufficient contribution to the organization.
Objectives must be limited in number. Between 5 and 10 objectives per
review period is a manageable number, but this can change, based on the
position and organization in question.

Several organizations set goals following these guidelines. For example,
Microsoft Corporation has a long history of using individ ual goals in its perfor-
mance management system. The goals at Microsoft are described by the acronym
SMART: specific, measurable, achievable, results-based, and time-specific. Research
based on more than 1,000 empirical studies has demonstrated that setting goals
that are specific and challenging leads to higher performance than setting an
easy or vague goal, s uch as “I will do my best.”7

Why does setting goals work? There are four main reasons why goal setting leads
to better performance. First, setting a goal establishes a clear priority and clear focus
over other less important tasks. Second, a specific and difficult goal increases effort
over and above an easy, vague, or nonexistent goal. Third, setting goals improves
persistence because there is a clear target in sight. Finally, and perhaps the most
critical reason, a specific and difficult goal forces people to create and implement
specific strategies, such as how to allocate time and resources, to reach the goal.

Table 5-1 summarizes the characteristics of good objectives. Using this list
as our guide, let us return to the position Training Specialist/Cons ultant-
Leadership & Team Development at Target Corporation.

Examples of objectives (one or two per accountability) are the following:

• Process leadership. Establish leadership development processes and
training programs within budget and time commitments. Meet budget
targets and improve executive leaders’ ‘1eadership readiness” scores
across organization by 20% in the coming fiscal year.

• Supervision of nonexempt staff Receive acceptable managerial effectiveness
rating scores from your nonexempt staff in the coming fiscal year.

• Coaching. Improve the managerial effectiveness scores of executive
coaching clients in the coming fisca l year.

• Team-building consultation. Deliver necessary team-training sessions
throughout the year within budget and with an acceptable
satisfaction rating (as measured by the follow-up survey that is sent
to every team) for team-training sessions in the coming fiscal year.

• Assessment instrument feedback. Deliver assessment feed back with an
acceptable approval rating from your coaching clients in the coming
fiscal year.

TABLE 5-1
Char acteristics of Good Objectives

Spec1f1c and clear

Challenging

Agreed upon

Significant

Prionuzed

Bound by time

Achievable

Fully communicated

Flexible

Um1ted in number

128 Part II System Impl ementation

• Product improvement. Improve satisfaction with training delivery in the
corning fiscal year by receiving acceptable scores while staying on budget.

Now, comp are th e objectives listed above w ith the criteria listed in Table S-1.
Do these objectives comply with each of the 10 character istics of good objectives?
Which objectives could be imp roved ? How, specifically?

5·1·3 Determ ining Performance Standards
After accountab ilities and objectives have been determined , the next step is to define
performance stand ards. These are yards ticks designed to h elp p eople und erstand
to what extent th e objective has been achieved. The standards provide raters with
information about what to look for to d etermine the level of perfor mance that
has b een achieved. Stand ards can refer to various asp ects of a specific objective,
including quality, quantity, and time. Each of these aspects can be consid ered a
criterion to be u sed in judging th e extent to which an objective has been achieved .

• Qua/itt;: how well the objective has been achieved . This can include
usefulness, responsiveness, effect ob tained (e.g., p roblem resolution),
acceptance rate, error ra te, and feedb ack from users o r customers
(e.g., “‘customer complaints, returns), and cost of spoiled or rejected wor k.

• Quantity: how m uch has been p roduced, how many units, how often, and
a t w h at cost. For exam ple, commission earnings, dollar volume of sales,
and number of new patents or creative/innovative inventions and projects.

• Time: due d ates, adherence to sch ed ule, cycle times, and d eadlines (how
q uickly) (e.g., timetables, p rogress rep orts).

Standards must include an action, the d esired result, a due date, and some type of
quality or quantity indicator. For example, a standard might be the following: “Reduce
overtime from 150 h ours/ month to 50 hours/month, 6 months from now at a cost not
to exceed US$16,000.” The action is reduce, the d u e d ate is 6 months from now and the
indicators are the reductian in hours from 150 to 50 and at a cost not to exceed US$16,000.

Standards usually d escribe fully satisfactory performance. As soon as a stan-
dard has been created, one can create stand ards th at describe minimum perfonnance
and outstanding perfonnance. For exam ple, the minimum standard could be the
following: “Reduce overtime from 150 hours/month t o 75 h ours/month by
6 month s from now at a cost not to exceed US$16,000.” Th e stand ard suggest ing
outstanding per formance co uld be th e following: Reduce overtime from 150 hours/
month to 40 hours/month by 4months from now at a cost not to exceed US$16,000.

In writing stand ard s, consider the following characteristics that often d eter-
mine t heir usefulness:

1. Related to the position. Good standards a re based on the job ‘s key elem ents
and tasks, not on indiv id ual traits or p erson-to-p erson comparisons.

2. Concrete, specific, and measurable. Good standards are ob servable and
verifiable. They allow us to d ist inguish between different perfor mance
levels. A good standard allows raters to measure th e employee’s actual
per formance to determine if it is below expectations, fully satisfactory,
or above expectations. Standards are sp ecific and concrete so that there
sho uld be no dispute over w h ether and how well they were met.

3 . Practical to mea.sure. Good standards provide necessary information about
performance in the most efficient way possible. Good stand ards are created

Chapter 5 Measuring Results and Behaviors 129

by taking into accoun t th e cost, accuracy, and availability of the
need ed data.

4. Meaningful. Good standards are about what is important
and relevant to the p urpose of the job, to th e achievement of
the organization’s mission and objectives, and to th e user or
recipient of the product or service.

5. Realistic and achievable. Standards are possible to accomplish,
but th ey require a stretch . There should be no apparent
barriers to achieving the standard . Employees sho uld be able
to reach the standards within the specified time frame.

6. Reviewed regularly. Inform ation sh ould be available on a
regular b asis to d etermine w h eth er th e em p loyee h as reach ed the
standard, and if not, remedial action should be taken.8

TABLE 5 -2
Characteristics o f Good Performance
Standard s

Related to the posiUon

Concrete. spec1fic, and measurable

Practical to measure

Meaningful

RealisUc and achievable

ReViewed

Table 5-2 lists th e aforementioned characteristics that a re typical of good
s tandard s. Using this list as a g uide, let us once again return to the position of
Training Specialist/Consultant-Leadership & Team Development at Target
Corporation. Examples of standards (one per objective for each accountability)
are the following:

• Process leadership. Increase the executive leaders’ “leadership readiness”
scores across the organization by 20% by 5 months from now at a cost not
to exceed US$70,000.

• Supervision of nonexempt staff Receive managerial effectiveness rating
scores o f 80% approval from the nonexempt staff 5 months from now.

• Coaching. Improve the managerial effectiveness scores of executive
coaching clients by 5%, 5 m onths from now.

• Team-building consultation. Design and deliver 95% of scheduled
team-building sessions with a cost not to exceed US$30,000 for an 85%
satisfaction rating with team -training sessions by 5 months from now.

• Assessment instrument feedback. Deliver assessment feed back with an 85%
approval rating from the coaching clients by 5 m onths from now.

• Product improvement. Improve satisfaction scores w ith training d elivery by
5% by 5 months from now at a cost not to exceed US$30,000.

Now, compare the standards listed ab ove with th e characteristics of good
performance stand ards in Table 5-2. Do they meet each of th e six characteristics of
good stan dards? Which of the six stan dards could be improved? How, specifically?

5-2 MEASURIN G BEHAVIORS
Chapter 2 provid ed a brief introduction to the topic of m easuring behaviors.
Also, as m entioned in Chapter 4, a behavior approach to measuring performance
usually includes the assessment of competencies. Competencies are measurable
clusters of knowled ge, skills, and abili ties (KSAs) that are critical in determining
how results will be achieved.9 Examples of competencies are customer serv ice,
written o r oral communication, creative th inking, and dependability.

We can consider two types of competencies. First, differentiating competencies
are those that allow us to d istinguish between average and superior perform ers.

130 Part II System Implementation

BOX 5-1

Second, threshold competencies are those that everyone needs to display to do the
job to a minimally adequate s tandard . For example, for the position Informa-
tion Technology (IT) Project Manager, a differentiating competency is process
management. Process management is defined as “managing project activities.”
For the same position, a threshold competency is change management. 10 The
change management competency includes knowledge of behavioral science,
operational and relational skills, and sensitivity to motivators. Therefore, for an
IT project manager to be truly effective, she has to possess process management
and change management competencies.

As noted earlier, competencies should be defined in behavioral terms. Take
the case of a professor teaching an online course. An important competency is
“communication.” This competency is defined as the set of behaviors that enables a
professor to convey information so that s tudents are able to receive it and understand
it. For example, one such behavior might be whether the professor is conveying
information during preassigned times and dates. That is, if the professor is not
present a t the chat room at the prespecified dates and times, no communication
is possible. Box 5-1 includes an example of how the assessment of competencies
is a critical component in the leadership development program at xes.

To understand the extent to which an employee possesses a competency,
we measure indicators. Each indicator is an observable behavior that gives us
information regarding the competency in question. In other words, we do not
measure the competency directly, but we meas ure indicators that tell us whether
the competency is present or not.

Figure 5-1 shows the relationship between a competency and its indicators.
A competency can have several indicators. Figure 5-1 shows a competency with
five ind icators. An indicator is a behavior that, if d isplayed, suggests that the
competency is present. In the example of the competency communication for a
professor teaching an online course, one indicator is whether the professor shows
up at the chat room at the preestablished dates and times. Another behavioral
indicator of the competency communication could be whether the responses
provided by the professor address the questions asked by the students or whether
the answers are only tangential to the questions asked.

Company Spotlight: Leadership Competencies at
Xerox Capital Services
At Xerox Capital Services (XCS), identifying leadership
competencies was the first step in a successful leadership
development program. xes is jo intly owned by the Xerox
Corporation and General Electric. The company offers
financing, risk analysis, credit approval, order processing,
billing, and collection services. It employs 1,800 people in the
United States and generates an estimated US$ 146.5 milli on
in annual revenue. A leadership development program at
xes was focused on high-potential future leaders that were
currently in pre-management roles. An important step in

developing tra ining sessi ons was to identify the key compe-
tencies of l eaders in the organizati on. This process involved
senior managers g iving their opinions about what was most
crit ical for leadership success in the company. After a clearly
defined list of 12 competencies was identifi ed, a curriculum
was developed that included readings and a specif ic course
each week on each topic. In summary, xes provides an ex-
ample of the importance of identifying competencies and
how the competencies can be used within the context of a
performance management system. 11

Chap ter 5 Measuring Results and Behaviors 131

FIGURE 5 -1
Competency and BehaVioral Indicators

As another example, consider the two competencies that define good leadership:
consideration and initiation structure.12 Consideration is the degree to which the
leader looks after the well-being of his followers. Initiating structure is the degree
to which the leader lays out task responsibilities. Five indicators whose presence
would indicate the existence of the consideration competency are the following:

• Supports direct reports’ projects
• Asks about the well-being of employees’ lives outside of work
• Encourages direct reports to reach their established goals
• Gets to know employees personally
• Shows respect for employees’ work and personal lives

In describing a competency, the following components must be present:

L Definition of competency
2. Description of specific behavioral indicators that can be observed when

someone demonstrates a competency effectively
3. Description of specific behaviors that are likely to occur when someone

does not demonstrate a competency effectively (what a competency is not)
4. List of suggestions for developing the competency in question 13

Using “consideration,” Jet us discuss the four essential elements in describing
a competency. We defined consideration: it is the degree to which a leader shows
concern and respect for followers, looks out for their welfare, and expresses apprecia-
tion and support. Next, we listed five indicators or behaviors that can be observed
w hen a leader is exhibiting consideration leadership. Leaders who do not show
consideration may speak with direct reports only regarding task assignments, repeat-
edly keep employees late with no consideration of social lives, take no interest in an
employee’s career goals, and assign tasks based only on current expertise. Finally,
how do leaders develop the consideration competency? One suggestion would be
to ask employees, on a regular basis, how their lives outside of work are going. This
may lead to knowledge about an employee’s family and interests outside of work.

In contrast to the measurement of results, the measurement of competencies
is intrinsically judgmental. In other words, competencies are measured using data
provided by individuals who make a judgment regarding the extent to which
the competency is present. That is, the behaviors d isplayed by the employees are
observed and judged by raters such as the direct supervisor, peers, customers,
the employee himself, and direct reports (for the case of managers). As will be

132 Part II System Implementa tion

TABLE
5

_; · · · · · · · · · · · · · · · · · · · · · · described in detail in Chapter 6, each of these possible
Comparative and Absolu te Behavioral Measurement Systems raters constitute different “performance touchpoints” and

are complementary sources of performance information.

S1mple rank order

Alternation rank order

comparison s

Relative p ercenUie

Forced distnbuuon

Essays

Behavior checklists

Cnucal incidents

Graphic rating scales

Two types of systems are used to evaluate com-
petencies: comparative systems and absolute systems.
Comparative systems base the measurement on com-
paring employees with one other. Absolute systems
base the measurement on comparing employees with
a prespecified performance s tandard .

Table 5-3 lists the various types of comparative and
absolute systems that could be used. Let us discuss

how to implement each of these systems and point out some advantages and
disadvantages of each. 14

5-2-1 Comparative Systems
Comparative systems of measuring behaviors imply that employees are evaluated rela-
tive to one other. If a simple rank order system is used, employees are simply ranked from
best performer to worst performer. Alternatively, in an alternation rank order proced ure,
the result is a list of all employees. Then, raters selects the best performer (#1), then
the worst performer (#n), the second best (#2), the second worst (#n-1), and so forth,
alternating from the top to the bottom of the list until all employees have been ranked.

Paired comparisons is another comparative system. In contrast to the simple and
alternation rank order procedures, explicit comparisons are made between all pairs
of employees to be evaluated. 15 In other words, raters systematically compare the
performance of each employee against the performance of all other employees. The
number of pairs of employees to be compared is computed by the following equation:
where n is the number of employees to be eval uated . If a rater needs to evaluate
the performance of8 employees, she would have to make [8(8-1))/2 = 28 com-
parisons. Th e rater ‘s job is to ch oose the better of each pair, and each individu al’s
rank is determined by counting the number of times he was rated as better.

Another type of comparison method is the relative percentile method. 16 This
type of measurement system asks raters to consider all employees at the same
time and to estimate the relative performance of each by using a 100-point scale.
The 50-point mark on this scale (i.e., 50th percentile) suggests the location of an

n(n. – 1)
2

average employee-about 50% of employees are better performers and about 50%
of employees are worse performers than this individ ual. Relative percentile methods
may inclu de one scale for each competency and also include one scale on which raters
evaluate the overall performance of all employees. Figure 5-2 includes an example
of a relative percentile method scale to measure the competency “communication.”

FIGURE 5-2
Example o f Relative Percentile Method Scale

Don Desiree Heather

II I I
0 50 100

Chapter 5 Measuring Results and Behaviors 133

In this illustration, the rater has p laced Heather at roughly the 95th percentile,
meaning that Heather’s performance regarding communication is higher than
95% of other employees. On the other hand, Don has been p laced around the 48th
percentile, meaning that about 52% of employees are performing better than him.

A fifth comparison method is called forced distribution. In this type of system,
employees are apportioned according to an approximately normal distribution- a
curve that looks like a bell and has approximately the same number of performers to
the right and the left of the mean score (i.e., the center of the distribution). For example,
20% of employees must be classified as exceeding expectations, 70% must be classi-
fied as meeting expectations, and 10% must be classified as not meeting expectations.

General Electric (GE) is one organization that adopted a forced distribution
system under the leadership of former CEO Jack Welch. This forced distribution
system was called t he “vitality curve.” In Welch’s view, forced ranking enables
managers to “take care of your very best, make sure the valued middle is cared
for, and weed out the weakest.” GE’s success in implementing a forced ranking
system is cited as the model by many of the 20% of U.S. companies that have
adopted it in the past three decades. At GE, each year 10% of managers were
assigned the “C” grade, and if they did not improve, they were asked to leave
the company. 17 Box 5-2 describes the evolution of this type of forced distribution
system at GE and Box 5-3 describes Deloitte’s journey.

BOX 5-2

Company Spotlight: The Evolution of the Forced
Distribution System at General Electric (GE)
General Electric (GE) is one of the most frequently cited
companies to have utilized a comparative rating system
with a forced distribution. GE, based in Fairfield, Con-
necticut, provides a wide array of products and services
g l obally to customers in the areas of financial services,
media entertainment, health care, and energy technol-
ogies, and products such as appliances and plastics. In
recent years, the rig i d system of requiring managers to
place employees into three groups (top 20%, middle 70%,
and bottom 1 0%) has been revised to allow managers
more flexibility. While the normal distribution curve i s still
referenced as a guideline, the reference to the 20fl0/10
split has been removed, and work groups are now able
to have more” A players” or “no bottom 10’s.” The com-
pany d id not v i ew the forced distribution system of the
past as a match for fostering a more innovative culture
in which taking risks and fai lure are part of the business
climate. As a result, the company has begun evaluating
employees relative to certain t raits, including one’s ability
to act in an innovative manner or have an external busi-
ness focus. In summary, GE’s performance management
system and revisions to the system provide an example of
how decisions about how to measure performance need

to consider the ram ifications and resulting behaviors
that are encouraged or discouraged. The consideration
of culture and overall business strategy is also crucial in
determining how to measure performance.•• More recently,
GE has revised its measurement system again. Specifically,
GE has moved from a formal “once-a-year” performance
review to an app-based system. Using thi s system allows
managers to provide feed back and coaching on a more
frequent basis to their employees. Performance manage-
ment tasks such as recognizing employee contributions,
identifying areas of concern, and offering developmental
opportunities can now be offered in near real-time, rather
than waiting until the annual performance appraisal.19 1n
add ition, performance appraisal meetings are themselves
more prod uctive as there are few surprises. Rather than
an exclusive backward-looking system, the new system is
forward-looking and emphasi zes development by focusing
on guiding, coaching, and providing feedback to employees
that helps them on their path to achi eving their goals.20

These changes at GE reflect a shift f rom a performance
apprai sal system f ocused on ratings to a performance
management system involving a constant and ongoing
evaluation and improvement of performance.

134 Part II System Implementation

BOX 5-3

Company Spotlight: The Evolution of the Forced
Distribution System at Deloitte
Deloitte Touche Tohmatsu Limited (Deloitte), headquartered
in New York City, is one of the world’s largest professional
services firms, provid ing a host of services in areas such as
audit, tax, f inancial advisory, consulting, and enterprise risk
management. It employs over 200,000 professionals and
has consistently been ranked as one of the best companies
to work for by Fortune magazine. Previously, the perform-
ance management system at Deloitte had utilized a forced
distribution system for assessing and reviewing employee
performance. In this system, all departments were required
to compare employees to one another using a •forced curve•
methodol ogy and classify them as “underperformers,”
• average performers,” and “high performers,” based on a
predetermined percent age that must fall in each cat egory,
with the goal being to •weed • out the bottom performers. 21

In 2015, however, Deloitte announced a new performance
management system with only four metrics for managers
to fill out at the end of every project or on a quarterly
basis. The three objectives of this new system are to (1)
” Recognize” performance through variable compensati on,

(2) “See” performance by reshaping the manner in which
supervisors evaluate performance, and (3) “Fuel” perform-
ance by improving the ongoing performance management
conversation between supervisor and employee. Leaders now
provide feedback on measures such as “I would always want
him or her on my team” and “I would award this person
the highest possible compensation increase and money” at
the end of each proj ect or quarter, which helps them “see•
performance in terms of their future interactions w ith the
employee. To “fuel” performance, managers are expected
to check in with each team member at least once a week,
and to document their conversati on. Data on these ratings
and check-ins is provided back to the l eaders at the end of
the year, enabling them to give deliver better performance
revi ews.22 In summary, although Deloitte has moved away
f rom forced d istribution, it does not mean that performance
evaluation has been eliminated. Instead, the company has
moved to a more robust performance management system
that includes ongoing evaluati on and feedback with the
goal of improving employee performance.

You will see that these companies, and many others, are going through
a similar process of transitioning from a performance appraisal (i.e., dreaded
once-a-year evaluation and review) to a performance management system (i.e.,
ongoing evaluation and feedback). Also, you may have noticed quite a bit of
popular business press hype about the “demise of performance evaluation and
measurement.” However, contrary to the way this trend is usually described
with such headlines as “Performance Evaluation is Dead” and “The End of
Performance Reviews,” the evaluation of performance is not going away. In
fact, it is becoming a normal, routine, built-in, and ever-present aspect of work
in twenty-first-century organizations. Clearly, as described in Chapter 1, perfor-
mance management systems play a critical role and serve important purposes.
So, to paraphrase Mark Twain, the death of performance management has been
vastly exaggerated.

What are some of the advantages of using comparative measurement methods?
First, these types of measurement procedures are usually easy to explain. Second,
decisions resulting from these types of systems are fairly straightforward: it is
easy to see w hich employees are w here in the distributions. Third, they tend to

Chapter 5 Measuring Results and Behaviors 1315

control several biases and errors made by those rating performance better than
do those in absolute systems. Such errors include leniency (i.e., giving high scores
to most employees), severity (i.e., giving low scores to most employees), and
central tendency (i.e., not giving any above-expectations or below-expectations
ratings). Fourth, they are particularly beneficial for jobs that are very autonomous
(i.e., employees perform their duties without much interdependence).23 Finally, a
recent s tudy found that individ uals high in cognitive abilities are more attracted
to organizations that have forced distribution systems.24 Clearly, those individuals
are attracted to it because they expect to perform well and benefit directly from
this type of system. Also, to them, it is an important signal that the organization
values high achievement.

On the other hand, there are also disadvantages associated with the use of
comparative systems, which may explain why only about 17% of HR executives
(e.g., vice presidents of HR, vice presidents for global talent development, HR dir-
ectors, and HR managers) report that their companies use these types of systems
(but 32% use a combination of comparative and absolute systems, as described in
Section 5-2-2 Absolute Systems).25 First, employees usually are compared only in
terms of a single overall category. Employees are not compared based on individual
behaviors, or even individual competencies, but instead, are compared based on
an overall assessment of performance. As a consequence, the resulting rankings
are not sufficiently specific so that employees can receive useful feedback, and
also, these rankings may be subject to legal challenge. Second, because the result-
ing data are based on rankings and not on actual scores, there is no information
about the relative distance between employees. All we know is that employee A
received a higher score than employee B, but we do not know if this difference
is, for example, similar to the difference between employee B and employee C.

Some of these disadvantages were experienced by Microsoft and were
noticed by Lisa E. Brummel, former vice president for HR.26 She noted that by
using a forced distribution system, “people were beginning to feel like their
p lacement in one of the buckets was a larger part of the evaluation than the
work the person actually did.” Similarly, a posting on an anonymous Microsoft
employee’s blog called MiniMicrosoft read as follows: “I LOVE this company,
but I hate the Curve.”

If these criticisms of forced distribution systems ring a bell, they should . The
reason is that they should remind you of our discussion of performance ratings
serving the role of” canary in the coal mine” in Chapter 1. Many of the criticisms
against forced distribution systems, and comparative systems in general, are
similar to those raised against the use of performance ratings. After all, ratings
are often the building blocks for making employee comparisons. And although
many of the criticisms may seem d irected at comparative rating systems, they
are actually about how the system is designed and used. For example, much like
our discussion regarding performance ratings in Chapter 1, criticisms involve
saying that forced distributions are biased, unjustified, inaccurate, and may even
lead to litigation. But much like performance ratings, the problem is often not
the forced distribution per se, but what is measured, how, the extent to which
employees participate in the process, and consequences associated with the result-
ing ratings. Forced distribution systems that are perceived as being unfair and
even cruel are indicators (i.e., the canary in the coal mine) that the performance

136 Part II System Implementation

management system is broken. For example, it is likely that there is no clear
explanation of how ratings were produced. Also, it is likely that employees not
rated a t the top of the distribution feel that their contributions are not val ued
by their organizations.

Many organizations that initially ditched forced distributions and even ratings
altogether are using them again- although they use different labels and terms to
refer to them.27 For example, Cargill introduced its “Everyday Performance Man-
agement” system, designed to incorporate daily encouragement and feedback into
on-the-job conversations. Managers offer performance evaluations and feedback
on an ongoing basis. As another example, consider Adobe, which is probably one
of the most frequen tly discussed cases regarding their performance management
system because it is argued that they were able to reduce voluntary employee
turnover by about 30% after introducing a frequent” check-in program.” Again,
performance is evaluated on an ongoing basis. As noted by Adobe’s Senior Vice
President for People and Places, Donna Morris, the new system “requires execu-
tives and managers to have regular tough discussions with employees who are
struggling with performance issues- rather than putting them off until the next
performance review cycle comes around.” And consider the case of Google, where
employee set goals called OKRs: objectives and key results. So, as mentioned
earlier, contrary to what one may conclude based on reading the popular business
press, it is not the case that companies are abandoning distributions and ratings.28
They are actually implementing performance systems more clearly aligned with
best practices, as described in this text, that involve a constant and ongoing evalu-
ation of performance! These and many other companies may have eliminated the
label “performance evaluation,” “performance review,” and even “performance
management.” Instead, they use labels such as “performance achievement,”
“check-ins,” and “employee development.” But a t the end of the day, they are
implementing performance management using new labels.

5-2-1-1 The Nature of the Performance D istribution
The use of a forced distribution system implies that performance scores are forced
to fit under a particular d istribution shape. As mentioned earlier, companies such
as GE, Yahoo, and many others have used the normal d is tribution for decades.
And today, it is used in many colleges and universities as part of the student
grading system.

Let us think about the following: If the distribution of performance is truly
bell-shaped, this means that the majority of employees are grouped toward the
center (i.e., are average), and there is a very small minority of individuals who
are very poor and very good performers, as shown in Figure 5-3. Also, if we use
a normal curve to assign ratings, we ration the number of top performers. For
example, if we use a five-point scale, many companies would tell managers that
“no more than 10% of the d irect reports gets the highest rating of 5.” But what
if this is an outstanding unit that had an excellent applicant pool, recruited the
best among the best, and then, offered training and development opportunities
resulting in even better performance? Why should we limit the highest ratings
to just the top 10% if we have, say, 40% of s tar performers?

Research conducted over the pas t few years has challenged the common
practice of using the norm al curve. In fac t, several studies based on more

Chapter 5 Measuring Results and Behaviors 137

than 600,000 workers, includ ing the num ber of publications auth ored by
more than 25,000 researchers across more than 50 scien ti fic field s, as well
as p roductivity metrics collected from movie d irectors, writers, m usicians,
athletes, bank te lle rs, call cente r employees, grocery checkers, electrical fix-
ture assemblers, and w ire rs have revealed that performance is d istributed
fo llowing a heavy-tail .29

Figure 5-3 shows a critical difference between these two types of distributions.
Specifically, under a heavy-tailed distribution, we expect to see many “star per-
formers” (i.e., those very far to the right of the mean). However, under a normal
d istribution, the presence of such extreme scores is considered an anomaly. Also,
Figure 5-3 shows that performance (i.e., area under the curves) is such that under
a heavy-tailed distribution, differences between the top and average performers
are much greater under a heavy-tailed compared to normal d istribution.

The existence of norm al performance distributions is expected in certain
s ituations, however. For example, workers in a manufacturing p lant cannot
work fas ter than the speed of the assembly line. So, this type of situational
constraint will impede the emergence of star performers, and the performance
d istribution is likely to be normal or close to it. But in the twenty-first-century
economy dominated by the services ind ustry, ceilings on performance are the
exception, ra ther than the rule.30 Constraints such as geographic distances, lack
of good communications, inability to access information and knowledge, and
s low technological dispersion are now disappearing, given the pervasiveness
of the Internet and the virtually unimpeded flow of information. Consequently,
normal distributions are the exception, ra ther than the rule.

FIGURE 5-3
Normal versus Heavy-ta1led Performance Distribution

.,
l
.2
Q,

E w
0 z
E
:> z

H igh

Performance Scores
High

138 Part II System Impl ementation

An important consequence of “debunking the myth of the normal curve”
is that we are now more aware of the existence of star performers- those indi-
viduals whose contributions are much larger than the rest.3 1 Star performers not
only do well in terms of their individual performance, but more importantly,
they have a large positive influence on numerous key outcomes, such as firm
survival, retention of clients, new product development, and many other indica-
tors of organizational performance.32 How can an organization produce more
star performers? Consider the following recommendations33:

• Identify, and if possible, eliminate situational constraints (i.e., ceiling
constraints) faced by workers to allow for the emergence of star performers.
For example, what are the resources needed to facilitate the emergence of stars?

• Allow star performers to rotate across teams because this widens their
network and takes full advantage of knowledge transfer to rising stars.

• Make sure sufficient resources are invested in star performers who are
making clear contributions to an organization’s core strategic objectives.

• Take care of star retention by paying attention to their developmental
network (e.g., employment opportunities for significant others and
long-term contracting with a s tar’s direct reports).

• In times of financial challenges and budget cuts, pay special attention to
star performers because once they leave, an organization’s recovery will
be very difficult. In fact, star departure can create a downward spiral of
performance when average and even mediocre performers deliberately
replace stars with inferior workers.

• Star performers should be given preferential treatment, but these perks
should be clearly articulated to all workers and applied fairly. In other words,
anyone can receive those perks if they achieve high levels of performance.
Consider the following analogy. If a large proportion of your company sales
come from just 30% of your customers, you would be thinking about making
sure these customers are happy and how to treat them better. Also, you
would probably call them to thank them and even offer to treat them to a very
nice lunch or dinner. Similarly, if a minority of employees are responsible for
a disproportionately large amotmt of results, we should talk to them and find
ways to treat them better so they stay within the organization.34

• The easiest way to not produce star performers is to use non-performance-
based incentives, encourage limited pay dispersion, and implement
longevity-based promotion decisions because they emphasize
homogeneity of employee performance.

5·2·2 Absolute Systems
In absolute systems, raters provide evaluations of an employee’s performance
without making d irect reference to other employees. In the simplest absolute
system, a rater writes an essay describing each employee’s strengths and weak-
nesses and makes suggestions for improvement. One advantage of the essay
system is that raters have the potential to provide detailed feedback to employ-
ees regarding their performance. But, essays are almost to tally unstructured
and some raters may choose to be more detailed than others. Moreover, some
raters may be better at writing essays than others. Given this variability, com-
parisons across individuals, groups, or tmits are virtually impossible because

Chapter 5 Measuring Results and Behaviors 139

essays written by different raters, and even by the same rater regarding differ-
ent employees, may address different aspects of an employee’s performance.
Finally, essays do not provide any quantitative information, making it difficult
to use them in some personnel decisions (e.g., allocation of rewards).

A second type of absolute system involves a behavior checklist, which consists
of a form listing behavioral s tatements that are indicators of the various compe-
tencies to be measured. The rater’s task is to indicate (“check”) sta tements that
describe the employee being rated. When this type of measurement system is
in place, raters are not so much evaluators as they are “reporters” of employee
behavior. Because it is likely that all behaviors rated are present to some extent,
behavior checklists us ually include a description of the behavior in question (e.g.,
“the employee arrives at work on time”), followed by several response categories,
s uch as “always,” “very often,” “fairly often,” “occasionally,” and “never.” The
rater s imply checks the response category she feels best describes the employee.
Each response category is weighted- for example, from 1 (“never”) to 5 (“always”)
if the statement describes desirable behavior s uch as arriving at work on time.
Then, an overall score for each employee is computed by adding the weights of
the responses that were checked for each item. Figure 5-4 includes an example
of an item from a form using a behavior checklist measurement approach.

How do we select response categories for behavior checklist scales? Often,
this decision is fairly arbitrary and equal intervals between scale points are simply
assumed . For example, in Figure 5-4, we would assume that the distance between
“never” and “sometimes” is the same as the distance between “fairly often” and
“always” (i.e., 1 point in each case). However, great care must be taken in how
the anchors are selected . Table 5-4 includes anchors that can be used for scales
involving frequency and amount.35

FIGURE 5-4
Example of Behavior Checklist Item.

1 2 3 4 5

Never Sometimes Often Fairly often Always

TABLE 5-4
Anchors f or Checklists o f Frequency and Amount

Anchors for Checklists of Frequency Anchors for Checklists of Amount

Seven-point scale Five-point scal e Seven-point scale Five-point scale

Always Always All All

Constantly Very often An extraordinary amount of An extreme amount of

Often Fairly often A great amount of 0Utte a bit of

Fairly o ften Occasionally Quite a bit o f Some

Someumes Never A moderate amount of None

Once in a while Somewhat

Never None

140 Part II System Implementation

TA BLE 5 -5
Anchors for Checklists of Evaluation and Agreement

Anchors for Checklists of Evaluation Anchors for Checklists of Agreement

Anchor Rating Anchor Rating

Ternble 1.6 Slightly 2.5

Bad 3 .3 A little 2.7

Inferior 3.6 Mildly 4.1

Poor 3.8 Somewhat 4_4

UnsatiSfactory 3.9 In part 4.7

Mediocre 5 .3 Halfway 4 .8

Passable 5.5 Tend to 5 .3

Decent 6.0 Inclined to 5 .4

Fatr 6.1 Moderately 5 .4

Average 6.4 Generally 6 .8

Sausfactory 6.9 Pretty much 7.0

Good 7.5 On the whole 7.4

Excellent 9.6 Very much 9.1

Table 5-4 includes anchors to be used in both seven-point and five-poin t
scales. For mos t systems, a five-point scale should be sufficient to capture an
employee’s performance on the behavior being rated. One advantage of using
five-point scales is that they are less complex than seven-point scales. Also, five-
point scales are s uperior to three-point scales because they are more likely to
motivate performance improvement because employees believe it is more doable
to move up one level on a five-point scale than it is on a three-point scale.36

Table 5-5 includes anchors that can be used in scales involving agreement
and evaluation.37 This table includes 13 anchors that can be chosen if one uses
a scale of evaluation and 13 anchors that can be used if a scale of agreement
is used .

Table 5-5 also includes ratings that can be used to choose anchors for a scale
of evaluation or agreement. In creating scales, we must choose anchors that are
approximately equally spaced based on the ratings included in Table 5-5. So, if
we were to create a five-point scale of evaluation using the information provided
in this table, one possible set of anchors might be the following:

L Terrible
2. Unsatisfactory
3. Decent
4. Good
5. Excellent

In this set of anchors, the distance between all pairs of adjacent anchors
ranges from L5 to 2.3 points. Note, however, that the use of the anchor “terrible”

Chapter 5 Measuring Results and Behaviors 141

has a very negative connotation, so we may want to use a less negative anchor,
such as “bad” or “inferior.” In this case, we would be choosing an anchor that is
closer to the next one (“unsatisfactory”) than we may wish, but using the new
anchor may lead to less defensive and overall negative reactions on the part of
employees who receive this rating.

In summary, behavior checklists are easy to use and to understand. But,
detailed and useful feedback is difficult to extract from the numerical rating
provided. Overall, however, the practical advantages of checklists probably ac-
count for their current use.

Every job includes some critical behaviors that make a crucial difference
between doing a job effectively and doing it ineffectively. The critical incidents
measurement approach involves gathering reports of s ituations in which employees
exhibited behaviors that were especially effective or ineffective in accomplishing
their jobs. 38 The recorded critical incidents provide a starting point for assessing
performance. For example, consider the following incident as recorded by a
high school principal regard ing the performance of Tom Jones, the head of the
disability services office:

A sophomore with learning disabilities was experiencing difficulty in
writing. Her parents wanted an iPad for her. Tom Jones ordered an iPad
and it was delivered to the student’s teacher. No training was provided
to the child, her teacher, or her parents. The iPad was never used.

This recorded incident is actually the synthesis of a series of incidents:

1. A problem was detected (a student with a special need was identified).
2. Corrective action was taken (the iPad was ordered).
3. Corrective action was initially positive (the iPad was delivered).
4. Corrective action was subsequently deficient (the iPad was not used

because of the Jack of training) .

When critical incidents are collected, this measurement method allows rat-
ers to focus on actual job behavior, rather than on vaguely defined traits. But,
collecting critical incidents is very time-consuming. Also, as is the case with es-
says, it is d ifficult to attach a score quantifying the impact of the incident (either
positive or negative) . So, a revised version of the critical incidents technique
involves summarizing critical incidents and giving them to raters in the form of
scales (e.g., behavior checklist). One example following up on the critical incident
involving Tom Jones might be the following:

Addresses learning needs of special-needs students efficiently

Strongly Agree Agree Undecided Disagree Strongly Disagree

A second variation of the critical incidents technique is the approach adopted
in the performance management system implemented by the city of Irving,
Texas.39 First, the city identified core competencies and classified them as core
values, skill group competencies, or performance essentials. Then, the team in
charge of implementing the system wrote dozens of examples of different levels

142 Part II System Implementation

of performance on each competency- from ineffective to highly effective. In
o ther words, this team was in charge of compiling critical incidents illustrating
various performance levels for each competency. Then, managers used this lis t
by simply circling the behavior that best described each of the employees in
the work unit.

As an example, consider the competency Adaptability /Flexibility. For this
competency, critical incidents were used to illustrate various performance levels:

Effective Exce tional
Ineffective Ineffective Effect1ve p

Able to focus on Easily distracted Handles a Handles a va- Easily Juggles a
only one task at from work variety of work nety of work large number of
attme assignments/ assignments/ assignments/ assignments and

actllllt1es acttvtttes wtth rew acttVtties acttVtties
diffiCulties concurrently

Avoids or Complains Accepts reasons Understands and Encourages and
attempts to about necessal)’ for change responds to rea- instructs others
undermine changes sons for change about the ben-
changes efits of change

Refuses to adopt Makes only those Adapts to chang- Adapts to Welcomes
changed policies changes w1th tng circumstances changes and change and looks

which they agree and attitudes of develops job aids for new opportu-
others to assist others n1t1es 1t provtdes

Considers only Occasionally Listens to others Ensures that Actively seeks
own opinion listens to others and seeks solu- evel)’one·s input in addition
when seeking but supports own tions acceptable thoughts and to recognized
solution solutions to all opinions are con- sources and facil·

sidered in reach- itates implemen-
ing a solution tation of solution

A third variation of the critical incidents technique is the use of behaviorally
anchored rating scales (BARS), which are described next, as one of several types
of graphic rating scales.

The graphic rating scale is a popular tool used to measure performance. The
aim of graphic rating scales is to ensure that the response categories (ratings of
behavior) are clearly defined, that interpretation of the rating by an outside party
is clear, and that the rater and the employee understand the rating. An example
of a graphic rating scale used to rate the performance of a project manager is
the following:

Project management awareness is the knowledge of project management
planning, updating status, working within budget, and delivering project
on time and within budget. Rate ‘s project management
awareness using the following scale:

2 3 4

Unaware or Needs additional Aware of Excellent knowl-
not interested training responsibilities edge and perfor-

mance of skills

5

Superior performance
of skill: abil1ty to train
others

Chapter 5 Measuring Results and Behaviors 143

BARS use graphic rating scales that use critical incidents as anchors.40 BARS
improve on the graphic rating scales by first having a group of employees identify
all of the important dimensions of a job. Then, another group of employees gen-
erates critical incidents ill ustrating low, average, and high skills of performance
for each dimension. A third group of employees and supervisors takes each
dimension and the accompanying definitions and a randomized list of critical
incidents. They must match the critical incidents with the correct dimensions.
Finally, a group of judges assigns a scale va lue to each incident. Consider the
following BARS for measuring job knowledge:

Job Knowled ge: The amount of job-related knowledge and skills that
an employee possesses.

Consider the following BARS which assess one of 10 performance dimen-
s ions identified as important for auditors41 :

5 Exceptional: Employee consistently displays high level of JOb knowledge in all areas of
h1s or her job. Other employees go to this person for training.

4 Advanced: Shows high levels of job knowledge in most areas of his or her job. Cons is·
tently completes all normal tasks. Employee continues searching for more job knowl·
edge, and may seek guidance in some areas.

3 Competent. Employee shows an average level of job knowledge in all areas of the job.
May need assistance compleung d1fficult tasks.

2 Improvement Needed: Does not consistently meet deadlines or complete tasks re-
quired for this job. Does not attempt to acquire new skills or knowledge to improve
performance.

MaJOr Improvement Needed: Typically performs tasks incorrectly or not at all. Employee
has no appreciation for improving his or her performance.

Knowled ge of Accounting and Auditing Standards/Theory: Technical fotm-
dation, application of knowledge on the job, ability to identify problem areas
and weigh theory vs. practice.

3 Hlgh·Po1nt Performance: D1sp1ays very strong technical foundation, able to profiCiently ap-
ply knoWledge on the job, Willingly researches areas. able to identify problems, can weigh
theory vs. pract1ce considera!IOns.

2 Mld·Point Performance: Can resolve normal accounting issues, has adequate technical
foundation and skills, application requires some refinement, has some problems in weigh·
ing theory vs. practice, can ldenufy major problem areas.

Low·Po1nt Performance: Displays weak account1ng knowledge and/or technical ab1lity to
apply knowledge to Situations/issues on an engagement, has diffiCulty in idenllfying prob-
lems and/or weighing factors of theory vs. pract1ce.

For graphic rating scales to be most useful and accurate, they must include
the following features:

• The meaning of each response category is clear.
• The individual who is interpreting the ratings (e.g., a human resources

manager) can tell clearly what response was intended.
• The performance dimension being rated is defined clearly for the rater.

144 Part II System Implementation

Compare the two examples of BARS shown earlier. Which is better regard-
ing each of these three features? How can these BARS be revised and improved?

In summary, several types of methods are available for assessing performance.
These methods differ in terms of practicality (i.e., some take more time and effort
to be developed than others), usefulness for administrative purposes (i.e., some
are less useful than others because they do not provide a clear quantification of
performance), and usefulness for users (i.e., some are less useful than others in
terms of the feedback they produce that allows employees to improve performance
in the future). Practicality and usefulness are key considerations in choosing one
type of measurement procedure over another. But there are additional, contex-
tual, issues that also determine choices regarding the performance measurement
approach. We describe these next.

5-3 THE ROLE OF CONTEXT
Chapter 4 described how context plays an important role in determining perfor-
mance. Similarly, context plays an important role in determining how performance
is measured- including the relative emphasis on results and behaviors, the use
of comparative or absolute systems, and the many other choices and options that
we discussed in this chapter, such as types and the nature of accountabilities,
objectives, and standards.

For example, consider the role of organizational culture. In some organiza-
tions, the culture is highly competitive and there is a win-lose mentality such that
employees know that to succeed and receive the rewards they want, they need
to be concerned about themselves first and others last. In those organizations,
it is unlikely that the performance management system will include measures
of contextual performance such as competencies regarding cooperation and
working with others.

As a second example, the culture in some firms is such that employees know,
although this will not be found in the “employee manual,” that they are not
rewarded for establishing long-term relationships with customers. Rather, the
name of the game is to “squeeze as much out the customer as possible-here
and now.” In fact, many financial advisors working for investment banks are
fully aware that pushing the products of their own banks (e.g., mutual funds)
to clients is seen favorab ly because this helps their organization’s bottom line.
So, a performance management system in an organization s uch as this one is
likely to include measures of results in the form of sales volume. Because of
this, many of the largest brokerage firms in the United Sta tes are now trying to
shrug off “their lingering boiler room images and sales-driven cultures, which
have contributed to their loss of market share to independent peers the past
several years. ” 42 For example, in the recent Wells Fargo scandal, employees
created as many as 2.1 million phony deposit and credit cards accounts, and
branch managers were told that they “would end up working for McDonald’s”
if they missed sales quotas.43

Another contextual factor that affects choices in terms of performance mea-
surement is the issue of industry trends. To continue with the financial brokerage
industry, an important change is that consumers are s tarting to recognize that

Chapter 5 Measuring Results and Behaviors 145

investment “advisers” actually have a conflic t of interest when they recom-
mend their bank’s own products. Accordingly, many firms are changing their
performance management systems, and specifically, the way in which they
measure performance. For example, early in 2017, Merril Lynch, w hich has US$2
trillion in client assets, abandoned the traditional model in w hich employees’
performance is measured based on the amount of charges to customers on each
transaction in a retirement account. Performance is no longer measured based
on revenue generated from the number of transactions and, instead, customers
are charged a flat fee based on a percentage of a portfolio’s asset. This change in
how performance is now measured was a direct result of changes in the industry.

Leadership also p lays an important role in how performance is measured .
To continue with the Merril Lynch example, Andy Sieg, Head of Merrill Lynch
Wealth Management, sees this change in the way performance is measured
as a critical strategic move. In fac t, he hopes that this change in how the per-
formance of financial advisers is measured “will help raise the level of trust
in our industry because clients are going to be assured that when it comes to
their retirement savings, there’s no one’s interest that is being put in front of
the interest of a client.”

In closing, we earlier discussed reasons for measuring performance as results
or behaviors and these focused on the nature of the job and the nature of work.
However, there are also contextual factors that play an important role in how
performance is measured and these are related to the culture of the organiza-
tion, characteristics of the industry, and the strategic direction chosen by the
organization’s leadership. Next, in Chapter 6, we will consider the important
topic of performance analytics- the process of collecting and compiling per-
formance data.

———————————————————————— —-

SUMMARY POINTS

• A results approach to measuring performance involves an assessment
of w hat employees produce and not how they do so. The first step in
measuring performance by adopting a results approach is to identify key
accountabilities. Accountabilities are broad areas of a job for which the
employee is responsible for producing results.

• After all key accountabilities have been identified, the second step in
the results approach is to set objectives for each. Objectives should be
(1) specific and clear, (2) challenging, (3) agreed upon, (4) significant,
(5) prioritized, (6) botmd by time, (7) achievable, (8) fully communicated,
(9) flexible, and (10) limited in number. Goal-setting leads to superior
performance compared to vague o r “do your best” goals because it helps
establish a clear priority and focus, increases effort over and above an easy
and vague goal, improves persistence because there is a clear target in
s ight, and forces people to create and implement specific strategies, s uch
as how to allocate time and resources to reach the goal.

• The third and fina l step in the results approach involves determining
performance s tandards. These yardsticks are designed to help people
understand to what extent the objective has been achieved. In creating
s tandards, we must consider the dimensions of quality, quantity, and

1445 Part II System Implementation

time. Good standards are (1) related to the position; (2) concrete, specific,
and measurable; (3) practical to measure; (4) meaningful; (5) realistic and
achievable; and (6) reviewed regula rly.

• A behavior approach to measuring performance involves assessing how
the employee does the job and not the outcomes produced . Adopting a
behavior approach involves identifying competencies. Competencies a re
measurable clusters of KSAs that are critical in determining how results
will be achieved. Exam ples of competencies are customer service, written
or oral commtmication, creative thinking, and dependability.

• The second step in the behavior approach involves identifying observable
indicators that w ill allow us to understand the extent to which each
individual possesses the competency in question. These ind icators are
behavioral m anifestations of the tmderlying (unobservable) competency.

• In describing a competency, one must first clearly define it, then describe
behavioral ind icators showing the presence of the competency, describe
behavioral indicators showing the absence of the competency, and list
suggestions for developing the competency.

• After the behavioral indicators have been identified, the third and
final s tep in the behavior approach includes choosing an appropriate
measurement system, either comparative o r absolute.

• Comparative systems base the measurement on comparing employees
relative to one another and include simple rank order, alternation rank order,
paired comparisons, relative percentile, and forced distribution. Comparative
systems are easy to explain and the resulting data are easy to interpret, w hich
facilitates administrative decisions. Also, employees are usually compared
to one another in terms of one overall single category, instead of in terms
of specific behaviors or competencies. This reduces the usefulness of the
feedback for employees in their future improvem ent.

• The performance d istribution is usually not normal (i.e., bell-shaped).
This means that there is a minority of em ployees who perform at
substantially higher levels than others. These star performers are critical
for an organization’s success. To prod uce more star performers, it is useful
to identify and eliminate situational constraints, allow star performers
to rotate across teams, make s ure sufficient resources are invested in
star performers w ho are m aking clear contributions to an organization’s
core stra tegic objectives, take care of s tar retention by paying attention
to their developmental network, pay special a ttention to star performers
because an organization’s recovery will be difficult if they leave, and use
performance-based incentives.

• Absol ute systems include evaluations of employees’ performance witho ut
making direct reference to other employees. Such systems include essays,
behavior checklists, critical incidents, and graphic rating scales. Essays
are difficult to q uantify, but produce useful and often detailed feedback.
Behavior checklists are easy to use and understand, but the scale points
used are often arbitrary and we cannot assume that a one-point difference
has the same meaning along the entire scale (i.e., the difference between
an employee who scores 5 and an employee who scores 4 may not have

Chapter 5 Measuring Results and Behaviors 147

the same meaning as the difference between an employee who scores 3
and one who scores 2). Critical incidents allow raters to focus on actual
job behavior rather than on vaguely defined traits, but gathering critical
incident data may be quite time-cons uming. Graphic rating scales are
arguably the measurement method most frequently used to assess
performance. For this type of measurement to be most useful, the meaning
of each response category should be clear, the individual interpreting the
ratings (e.g., the human resources manager) should be able to tell clearly
what response was intended, and the performance dimension being rated
should be defined clearly for the rater.

• Much like performance is affected by context, choices in terms of how to
measure performance are also affected by s uch factors as an organization’s
culture, industry, and leadership. To understand why an organization
makes certain choices in terms of how to measure performance, we
must und erstand not just the job in q uestion, the nature of work, and the
relation between results and behaviors, but also the context within which
individuals and organizations are s ituated.

,–
EXERCISE 5-1 MEASURING COMPETENCIES AT MIDWESTERN UNITED STATES
DEPARTMENT OF TRANSPORTATION

The Department of Transportation (DOT) of a large Midwestern sta te uses core
competencies to measure performance in its organization. Two of its core com-
petencies on which all employees are measured are” organizational knowledge”
and “learning and strategic systems thinking.” Organizational knowledge is de-
fined as follows: (1) “Understands the DOT’s c ulture. (2} Accurately explains the
DOT’s organizational str ucture, maj or products/ services, and how various parts
of the organization contribute to one other. (3) Gets work done through formal
channels and informal networks. (4) Understands and can explain the origin
and reasoning behind key policies, practices, and procedures. (5) Understands,
accepts, and communicates political realities and implications.”

Learning and strategic systems thinking is defined as follows: (1) “Accepts
responsibility for continued improvement/learning. (2} Appreciates and can
explain the mission of each individual work unit and the importance of the tie
between them to make the entire operation whole. (3) Acquires new skills and
competencies and can explain how they benefit the DOT. (4} Regularly takes all
transportation forms (e.g., bicycle, light rail, highway) into account in p lanning
and problem solving. (5) Seeks information and ideas from multiple sources.
(6) Freely and intentionally shares ideas with o thers.”

Using the accompanying table as a guide, evaluate each of these two com-
petencies and place a check mark next to each of the components of a good
competency description if the component is present.

Next, using the organizational knowledge and learning and strategic systems
thinking competencies, create a five-point graphic rating scale for each indicato r
using anchors of frequency, amount, agreement, or evaluation.

148 Part II System Implementation

In describing a competency, the follow1ng components must be present

Oefin1tion
Description or spec,ric behaVioral indicators that can be observed when someone demonstrates a
competency errectively
Description or spec1ric behaViors !hat are likely to occur when someone does not demonstrate a
competency errectively (what a competency is not)
List or suggestions ror developing the competency in question

Source: Ada pted from D. Gro te, “PubJjc Sector Organizations: Today’s innovative leaders in Performance
agement/’ Public Pt->rSOmtel Mauagemeut29 (Spring 2000): 1- 20.

EXERCISE 5-2 CREATING BEHAVIORALLY ANCHORED RATING SCALES (BARS)
FOR EVALUATING BUSINESS STUDENT PERFORMANCE IN TEAM PROJECTS

In many universities, students are required to conduct team projects. A descrip –
tion of these “job” d uties is the following:

Work with team members to deliver project outcomes on time and
according to specifications. Complete all individual assignments to the
highest quality, completing necessary background research, making any
mathem atical analysis, and preparing final documents. Foster a good
working environment.

Please do the following:

1. Generate a list of competencies fo r the position described.
2. Identify a list of critical behavioral indicators for each competency.
3. Generate critical incidents (high, average, and poor performance) for each

behavioral ind icator.
4. Create graphic rating scales using BARS to measure each competency.

CASE STUDY 5 -1

Accountabilities, Objectives, and Standards at Disney

Below is an actual job description for a purchas-ing and procurement internship position that was available at Disney Consumer Products/
Studios. Based on the information in the job descrip-
tion, create accountabilities, objectives, and s tandards
for this position.

Title
Graduate Associate, Purchasing & Procurement
(Disney Consumer Products/Studios)

The Position
• Provide analytical support for projects

impacting business units, specifically targeting
Disney Consumer Products & Studios.

• Survey current pricing models and develop
new approaches to pricing/buying various
prod ucts and services that yield creative and
business advantage.

• Support the continuing efforts to increase the
percentage of spend influenced, specifically
as it relates to business units where we have
had only a minor impact.

• Assist in the development of key stakeholder
lists and savings opportunities regarding
existing contracts.

• Assist in developing overall Purchasing &
Procurement strategy for partnering with
business units, specifically targeting Disney
Consumer Products & Studios.

The Company
The Walt Disney Company is a diversified, inter-
national fam ily entertainment and media company
with 2016 annual revenues of US$55.63 billion. Its
operations include theme parks and resorts, filmed
entertainment, includi ng motion p ictures and

television shows, home video and DVD prod ucts,
records, broadcast and cable networks, Internet
and direct marketing, consumer products, radio
and television stations, theatrical productions,
publishing activit ies, and professional sports
enterprises.

The Ideal Candidate
• Ability to conceptualize issues and problems

and develop hypotheses around appropriate
responses.

• Intellectual curiosity and professional
commitment to excellence.

• Superior analytical skills defined by an ability
to identify and rearticulate critical aspects of
a business situation from a large data pool
(both qualitative and quantitative).

• Superior Microsoft Excel modeling skills.
• Strong written and verbal communication

skills with the ability to build relationships.
• Ability to work independently.
• Demonstrated ability to manage multiple

tasks, meanwhile retaining focus on project
deliverables and strategic priorities.

The Opportunity
This will be an opportunity for an MBA intern to
utilize project management skills he or she has learned
in the classroom. The intern will be faced with dif-
ficult and/ or skeptical clients and will learn how to
work with them. This will also be an opportunity
for those individuals who have not experienced
working in Corporate America, and for those that
have had some experience, to further their learnings.
The intern will gain experience from working in the
Media and Entertainment industry. Through these
various experiences, we hope the intern will find
value in the internship we are offering.

CASE STUDY 5-2

Evaluating Objectives and Standards at Disney

U sing the results from Case Study 5-1, use the accompanying checkl ist to evaluate each objective and s tandard you pro-
duced. For each objective and standard, use the
firs t column in the checklist and place a check
mark next to each of the ideal characteristics if

the characteristic is present . Then, use the Com-
ments column to provide a description of why o r
why not each objective and standard meets the
ideal. Finally, review your tables and provide an
overall assessment of the quality of the objectives
and standards you created.

Objectives must have the following characteristics: Comments

Specific and clear

Challenging

Agreed upon

Significant

Priontlzed

Bound by time

Ach1evable

Fully communicated

Flexible

Um1ted in number

1

Performance standards must have the following characteristics: Comments

Related to the position

Concrete, specific, and measurable

Practical to measure

Meaningful

Realistic and achievable

Rev1ewed regularly

1SO

Chapter 5 Measuring Results and Behavio rs 1151

— ——- – –

ENDNOTES

1. The following discussion of accountabilities, objectives, and standards is based on Grote, D.
(19%). The complete guide to performance appraisal (Chap. 4). New York, NY: AMACOM.

2. Trotter, G. & Elejalde-Ruiz, A. (2017). Wor king at Kraft Heinz means com petition,
cost-cuttin g, and, for some, Reward. LaCrosse Tribun e. Retrieved fro m http://
Jacrossetribune.com /working-a t -kraft-heinz-means-competition-cost-cutting-and-for I
artide_55601 020.{)92e-597c-aff6-0a8af735dd81.htm I

3. Hindle, T. (2009). Man agement by objectives. The Economist. Retrieved fro m http://www
.econom ist.com / node/ 14299761

4. Bryant, A. (2010). Are you a C.E.O. of something? New York Times. Retrieved from http://
www.nytimes.com / 2010/01 /31 / business/31corner.h tml ?pagewanted = 2&_r = 4&, and
McCloskey, H. (2015). How organizations li ke Coogle, Linked In an d Zynga do O KRs.
User Voice. Retrieved fro m https:// community. uservoice.com/blog/ google-okrs/

5. Stanley, T. L. (2017). The best management ideas are timeless. Superoision, 78(2), 15-17.
6. Adapted from G rote, D. (19%). The complete guide to performance appraisal (pp. 91-94). New

Yor k, NY: AMACOM.
7. Latham, G., Seijts, G., & Slocum , J. (2016). The goal setting and goal orienta tion labyrinth:

Effective ways for increasing employee perform ance. Organizational Dynamics, 45,271-277.
8. Adapted from Kirkpatrick, D. L. (1982). How to impTDV<‘ perfonnance through appraisal and

coaching (pp. 35-36). New York, NY: AMACOM.
9. Stone, T. H., Webster, B. D., & Sch oonover, S. (2013). What do we know about com petency

modeling? International joumal of Selection and Assessment, 21, 334-338.
10. Kendra, K. A., & Taplin, L. J. (2004). Change agent competencies for informa tion technology

p roject managers. Consulting Psychology joumal: Practice & Research, 56, 2Q-34.
11. Chughtai, J. (2006). Identifying future leaders a t Xerox Capital Services. Strategic HR Review.

Retrieved January 2, 2018, from www.allbusiness.com / periodicals/art icle/892962-1.html
12. Gottfredson, R. K. & Aguinis, H. (2017). Leadership behaviors and follower perform ance:

Dedu ctive and inductive examination of theoretical rationales and un derlying mechanisms .
joumal of Organizational Behavior, 38, 558–591 .

13. Grote, D. (1996). The complete guide to perfonnance appraisal (p. 118). New Yor k, NY:
AMACOM.

14. The material that follows o n comparative an d absolu te systems is based p rimarily on Cascio,
W. F., and Aguinis, H. (2019). Applied psychology in talent management (8th ed.) . Thousand
Oaks, CA: Sage Publicatio n.

15. Marin-Garcia, J. A., Ramirez Bayarr i, L., & A ta res Huertas, L. (2015). Com paring advantages
and disadvantages of ra t ing scales, behavior observation scales and paired comparison
scales fo r behavior assessm ent of competencies in workers: A systematic literature review.
Working Papers on Operations Management, 6(2), 4H;3.

16. Goffm, R. D., Jelley, R. B., Powell, D. M., & johnston, N. G. (2009). Taking advantage of social
comparisons in performance appraisal: The relative percentile method. Human Resource
Management, 48, 251-268.

17. Davis, P., & Rogers, B. (2003). Managing the “C” perform er: An alternati’e to forced rankin g
of appraisals. Retrieved January 2, 2018, from h ttp://www.workinfo.org/index.php/
artides/item/674-man aging-the-c-performer-an-altemative-to-forced -rankin g -of-appraisals

18. McGregor, J. (2006,january). The struggle to measure performance. Business Week. Retrie’ed
January 2, 2018, from http://www.businessweek.com / magazine/content/06_02/b3%6060.htm

19. Baldassarre, L. & Finken, B. {2015). GE’s real-time perform ance development.
Harvard Business Review. Retrieved fro m h ttps:// hb r.org/2015/08/
ges-real-time-performan ce-development

20. Duggan, K. (2015). Six Companies that are Redefining Performance Managem ent.
FastCompany. Retrieved from https://www.fastco mpany.com /3054547 I
six-companies-that-are-redefming-performance-management

21. Wall Street Journal. (2014). It’s official: Forced ranking is dead. Retrieved from
http:// deloitte. wsj .com I cio / 2014/06/10/ its-official-forced-ranking-is-dead I

22. Buckingham, M., & Goodall, A. (2015). Reinventing perform ance management. Harvard
Business Review, 93(4), 4Q-50.

1152 Part II System Implementation

23. Moon, S. H., Scullen , S. E., & latha m, G . P. (2016). Precarious curve ahead: The effects of
forced distribution rating systems on job performance. Human Resource Management Review,
26, 166-179.

24. Blume, B. D., Ru b in, R. S., & Baldwin, T. T. (2013). Wh o is a ttracted to an organizatio n using
a forced distribution perform ance m anagement system? Human Resource Management journal,
23, 360-378.

25. Gorman, C. A., Meriac, J. P., Roch, 5. G., Ray, J. L , & Gamble, J. 5. (2017). An explora to ry
study of current performance management practices: Hum an resource executives’
perspectives. International journal ofSdection and Assessmmt, 25, 193-202.

26. Holland, K. (2006, September 10). Performan ce reviews: Man y need improvement. The New
York Times, Section 3-Money and Business/Financial Desk, 3 .

27. Duggan, K. (2015). Six com panies that are redefining perform an ce man agement. Fast
Company. Retrieved January 2, 2018, from h ttps://www.fastcom pan y.com/ 3054547 I
six-com panies-that-are-redefining-performance-managem e nt

28. Hu n t, 5. (2016). Rating performance may be d ifficu lt, b u t it is also necessary. Industrial and
Organizational Psychology, 9, 2%-304.

29. Aguinis, H., O’Boyle, E., Gonzalez-Mule, E., & joo, H. {2016). Cumulative advantage:
Conductors and insulators of heavy-ta iled p roductivity d istributions an d produ c tivity stars.
Personnel Psychology, 69, 3-66.

30. Aguinis, H., & O’Boyle, E. (2014). Sta r performers in twenty-first-century organizations.
Personnel Psychology, 67, 313-350.

31. Bersin. J. (2014). Th e myth of the bell curve: Look for the hyper-perform ers. Forbes.
Retrieved January 2, 2018, from h ttps://www.forbes.com / sites/ josh bersin/ 2014/02/ 19 /
the-myth-of-the-bell-curve-Jook-fo r-the-hyper- per form ers/ #2b92e62c6bca

32. Kehoe, R. R., & Tzabbar, D. (2015). Lighting the way or s tealing the shine? An exam ination
of the d u ality in star scientists’ effects on firm innovative per fo rmance. Strategic Management
joumal, 36, 709-727.

33. Aguinis, H., & Bradley, K. J. (2015). Th e secret sau ce for organizational s u ccess: Managin g
and producing s ta r performers. Organizational Dynamics, 44,161-168.

34. Finnegan , R. P. (2012). The Pawer of Stay lnteroiews. Alexandria, VA: Society for Human
Resource Management.

35. This table is based o n Bass, B. M., Cascio, W. F., & O’Connor, E. J. (1974). Magnitude
estimations of expressions of frequency and amount. Journal of Applied Psychology, 59,
313-320.

36. Bartol, K. M., Durham, C. C., & Poon, J. M. L (2001). Influence of performan ce evaluation
rating segmenta tion on m otivation and fairness perceptions. joumal of Applied Psyclwlogy, 86,
1106-1119.

37. This table is based o n Spector, P. (1976). Choosing response categories for summa ted rating
scales. journal of Applied Psychology, 61, 374-375.

38. Ru iz, C. E., Ham lin, R. G., & Carioni, A . (2016). Behavioural determinan ts of perceived
m anagerial and leadership effectiveness in Argentina. Human Resource Development
International, 19, 267-288.

39. G ro te, D. (2000, Spring). Pu b lic sector organizatio ns: Today’s inn ovative leaders in
performance management. Public Personnel Management, 29, 1-20.

40. Hauenstein, N., Brown , R., & Sinclair, A. (2010). BARS an d those mysterious, missing middle
anch ors. joumal of Business and Psychology, 25, 663-672.

41. Harrell, A., & Wrig ht, A. (1990). Empirical evidence o n the valid ity and reliability of
Behaviorally Anchored Rating Scales fo r auditors. Auditing, 9, 134-149.

42. Wursthorn, M. (2017, January 7). Broker ages tack to the adviser model. The Wall Street
joumal, 67.

43. Colvin, G. (2017). Can Wells Fargo get well? Fortune, 175(8), 138-146.Addresses learning
needs of special-needs students efficiently

chapter

6
Performance
Analytics

The goal is to tum data into infonnation,
and information into insight

– Carly Fiorina

Learning Objectives
By the end of this chapter, you will be able to do the following :

1. Argue about the ubiQUity and mescapab11ity of 4. Use different methods to comb1ne performance data to
Judgments about performance m organ1zat1ons even arrive at an overall score for each person bemg rated
if they are not made expl1c1t or called ··performance s. Choose an appropriate appra1sal penod and an
r atmgs.”‘ appropriate number of formal performance meetmgs

2. Des1gn appra1sal forms that mclude all maJOr features 6 . Coiled performance mformat1on mvolvmg all of the
to make them a useful component of the performance relevant performance touchpomts. such as superv1sors.
management system (e.g .. accountab1l1t1es. ObJedlves. peers. reports. self. and customers. as well as
and standards: competenc1es and behav1oral1nd1ca· employee performance mon1tonng systems that are
tors: developmental needs. plans. and goals: multiple involved m collectmg 81g Data.
performance touchpomts. employee comments).

7. Appraise the reasons for disagreements m the data
collected from d1fferent performance touchpomts. 3 . Des1gn appra1sal forms that are s1mple, relevant,

descript1ve. adaptable. comprehensive. include clear
defm1tions. are commumcated well, and have a clear
t1me onentat1on.

8. Propose ways to motivate raters to prov1de performance
information that minim1zes mtent1onal distort1on of ratings.

153

154 Part II System Implementation

As discussed in Chapter 2, the performance management process includes several
stages: prereq uisites, performance planning, performance execution, performance
assessment, and performance review. An important component of the performance
assessment stage is perfom?nnce analytics. This involves the systematic collection
and comp ilation of performance data, usually in the form of performance ratings,
w hich are collected from all the relevant performance touch points, such as super-
visors, peers, direct reports, self, and customers, as well as employee performance
monitoring systems that are involved in collecting Big Data.

Chapters 4 and 5 provided a descrip tion of the various approaches and
techniques that can be used to define and measure performance and this chapter
addresses performance analytics, including the use of specific tools (i.e., appraisal
forms, employee performance monitoring) to gather data . For example, this chap-
ter describes how to choose the performance touchpoint from which to collect
data (i.e., supervisors, self, direct reports, peers, or customers), and the use of
electronic performance monitoring. The chapter concludes with a discussion of
reasons why those w ho provide performance data may intentionally distort in-
formation and w hat can be done to improve the accuracy of performance data.

Before we begin, Jet us address once again the hotly debated issue of performance
ratings. Although many companies such as Adobe, Microsoft, Eli Lilly, and The
Gap have announced that they are abandoning performance ratings, Jet us clarify
that they actually engage in various forms of performance analytics and continue to collect
and compile performance data. But instead of using the term “performance ratings,”
they use terms such as “judgments,” “achievement metrics,” and “expecta tions.”
In other words, managers and employees continue to gather and compile data
about performance, and those data are used to make administrative decisions
about employees and evaluations of employees’ on-the-job behaviors and results.

For example, consider the frequently talked about case of Juniper as an example
of a company that has supposedly “abandoned” performance ratings. Juniper is
based in California and develops and markets networking products such as routers,
switches, and network security software. Juniper uses the label “J Players” to refer
to the performance of employees who meet expectations against four performance
elements. Also, the performance of employees is calibrated based on relative
contribution.1 Similarly, other companies use different labels in their performance
analytics efforts, such as “don’t have it,” “have it,” or “knock it out of the park.”
Moreover, companies continue to ask managers about their recommendations
regarding who should receive a pay increase or bonus, and of what size, based on
employee performance-regardless of whether they call this a “rating” or not. For an
additional example that has received quite a bit of popular business press and media
coverage, see Box 6-1 describing the performance managem ent system at The Gap.

The inescapable reality in organizations is that evaluations about performance
are made all the time-explicitly or implicitly- because, simply put, an
organization cannot be successful in accomplishing its goals if the performance of
its employees is not measured in some way. Performance analytics is also critical
for managing individual and team perform ance. Absent performance analytics,
how can an organization understand if its employees a re making progress? How
can an organization make decisions about promotions and compensation? How
can an organization that wants to create a “personal growth and development
c ulture” offer meaningful d evelopment and coaching opportunities absent
knowledge about who is doing what- and how?2 And, even if they do not say
it openly, managers and peers form impressions and evaluate the performance of

Chapter 6 PerFormance Analy tics 11515

Box 6-1

Company Spotlight: Performance Management
“Without Ratings” at the Gap? Not Really . ..
The Gap, Inc., is one of the companies frequently talked
about as being the leader in implementing a performance
management system “without ratings. ” 3 Gap, Inc. is an
American clothing store that includes renowned brands
such as Gap, Banana Republic, Old Navy, Athleta, Intermix,
and Weddington Way. In 2014, the company decided to
revamp their performance management system by “elim-
inating performance ratings.” Their new system is called
GPS, which stands for g row, perform, and succeed (not co-
incidentally Gap’s New York Stock Exchange stock symbol is
also GPS). GPS includes many of the features of best-in-kind
performance management systems described throughout
this text. For example, performance management does not
take place once a year, and instead, is a year-long process
that involves monthly “touch base” sessi ons between
supervisors and d irect reports. Also, each employee has a
limited, yet meaningful, number of goals and this includes
not only what has been achi eved, but also how- which
involves behaviors and competencies. Also, employee goals
are updated throughout the year and are closely li nked
to company goals. For example, the touch base sessions
involve answering the question of whether an employee’s
performa nce is “demonstrating the values of the company. •
How about performance ratings? Rob Ollander-Kra ne,
Seni or Director, Organi zation Performance Effectiveness,

said that “With the removal of ratings, employees are no
longer awarded a grade at the end of the year.” So, how
do managers make decisions about compensation and
development needs? Can these decisions be made fairly
and accurately w ithout performance ratings? Is it really true
that the system is “ratingless”? Well, not really. As noted by
Ollander-Krane, managers •are not giving an A. B, or C, but
they still need to rank their employees [emphasis added] …
They still need to say here’s my number one employee,
here’s my number two, here’s my number three-and to
allocate their merit and bonus pot accordingly.” How about
documentation? Ollander-Krane said that “We’ve had a
new CEO and CHRO since we introduced GPS, and they
have questi oned whether we need to have a bit more of
a written record of employee performance.” The lesson?
It is simply not possible to implement a perfor mance
management system that does not include measures of
performance-regardless of whether those measures are
called ratings, rankings, grades, scores, achievement metrics,
or anything else. As the saying goes, if it looks li ke a d uck,
swims like a duck, and quacks like a duck, then it probably
is a d uck. This appli es quite well to metrics used by many
companies that have seemingly abandoned “performance
ratings.” Ratings are still very much part of their process,
in one way or another.

people around them on a daily basis-even if these evaluations are not written
down or said out loud. So, the fact is that judgments and evaluations of perform-
ance are part of organizational life. This chapter is about adopting a systematic,
transparent, and effective approach to performance analytics.

6-1 USEFUL COMPONENTS O F APPRAISAL FORMS
Information on performance is collected formally by using forms, which are most
often administered online. The availability of apps, and off-the-shelf software
to collect performance data has produced a veritable revolution. Specifically,
performance data are collected in real-time using Web and mobile apps, and the
information can easily be shared, also in real-time. In this way, other team members,
supervisors, direct reports, and also, the HR function have access to the same data.

The availability of performance data gathered electronically also facilita tes
subsequent analyses. For example, this makes comparisons of the relative average

1H Part II System Implementation

performance levels of var ious units within the organization more straightforward.
Finally, using online forms is also beneficial because as changes take place in the
organization (e.g., a new strategic direction) or job in q uestion (e.g., new tasks),
forms need to be revised and updated, and this can be done fast and efficientl y.

Good appraisal forms usually include a combination of the following
components4 :

• Basic emplm;ee information. This section of the form includes basic employee
information such as job title, division, department and other work group
information, employee ID number, and pay grade or salary classification.
In addition, forms usually include the dates of the eval uation period, the
number of months and years the rater has supervised or worked with the
employee, an employee’s starting date with the company and starting date
in the current job, the reason for appraisal, current salary and position in
range, and the date of the next scheduled formal evaluation.

• Accountabilities, objectives, and standards. If the organization adopts a
results approach, this section of the form would include the name and
description of each accountability, objectives agreed upon by manager and
employee, and the extent to w hich the objectives have been achieved . In
many instances, the objectives are weighted in terms of importance, w hich
facilitates the calculation of an overall performance score. Finally, this
section can also include a subsection describing conditions under w hich
performance was achieved, w hich may help explain why the employee
achieved a particular level (high or low) of performance. For example, a
supervisor may have the opportunity to describe specific circumstances
surrounding performance during the review period, includ ing a tough
economy, the introd uction of a new line of products, and so forth .

• Competencies and behavioral indicators. If the organization adopts a behavior
approach, this section of the form includes a definition of the various
competencies to be assessed, together with their behavioral indicators.

• Major achievements and contributions. Some forms include a section in
which a rater is asked to list the two or three major accomplishments of
the individual being rated d uring the review period. These could refer to
results, behaviors, or both.

• Developmental achievements. This section of the form includes information
about the extent to which the developmental goals set for the review
period have been achieved. For example, this can include a summary
of activities, such as workshops attended and online courses taken, as
well as results, such as a description of new skills learned. Evidence of
having learned new skills can be documented, for example, by obtaining
a professional certification or designations (e.g., human resource
management certifications, information systems certifications). Although
some organizations include developmental achievements in the appraisal
form, others choose to include them in a separate form. Sun Microsystems
is an example of an organization that separates these forms. Some
organizations do not include development content as part of the appraisal
form because it is often difficult for employees to focus constructively on
development if they have received a less-than-ideal performance review.

• Developmental needs, plans, and goals. This section of the form is
future-oriented and includes information about specific goals and

Chapter 6 PerFormance A nalytics 1157

timetables in terms of employee development. As noted earlier, some
organizations choose to create a separate development form and do not
include this information as part of the performance appraisal form.

• Multiple perfonnance touchpoints. Some forms include sections to be
completed by different raters involved in different types of performance
touch points, such as customers with whom the employee interacts. Those
involved in performance touchpoints are people who have firsthand
knowledge of and are affected In; the employee’s perfonnance. In most cases,
input is collected by using forms separate from the main appraisal because
not all sources of performance information are in the position to rate the
same performance dimensions. For example, an employee may be rated on
the competency “teamwork” by peers and on the competency “reliability”
by customers. A more detailed discussion of the use of information derived
from different performance touchpoints is offered later in this chapter.

• Empl01jee comments. This section includes reactions and comments provided
by the employee being rated. In addition to allowing formal employee
input, which improves the perceived fairness of the system, the inclusion
of this section helps with legal issues because it documents that the
employee has had an opportunity to participate in the evaluation process.

• Signatures. The fina l section of most forms includes a section in which the
employee being rated, the rater, and the rater’s s upervisor provide their
s ignatures to show they have seen and discussed the content of the form.
The HR function may also provide approval of the content of the form.

Table 6-1 summarizes the major components of appraisal forms. Let us consider
some examples to see which of these components is present in each. The goal of
including these illustrations is that you examine them critically. So, these forms
purposely do not include all of the major components. Let us discuss them in detail to
understand the extent to which they deviate from including all necessary components.

First, consider the form included in Figure 6-1. This is a fairl y generic form
that can be used for almost any position in a company. Let us evaluate this form
in relation to the components listed in Table 6-1. First, the form asks for the
employee’s basic information. Second, while the form asks the manager to list
the expected vers us the actual accountabilities, it does not include objectives o r
s tandards. Third, the form includes five competencies including teamwork and
leadership, but it does not include a definition of those competencies nor does it

Basic employee inFormation

Accountabilities. objectives. and standards

Competencies and behav1ora1 ind1cators

Major achievements and contributions

Developmental ach1evements {could be included in a separate Form)

Developmental needs. p lans. and goals (could be included in a separate Form)

Performance touchpo1nts

Employee comments

Signatures

TABLE 6 -1
M ajor Components of
Comp rehensive A ppraisal
Forms

1 158 Part II System Implementation

FIGURE 6-1
Basic Performance Review Form

P ERFORMANCE REVIEW FORM

Employee Name: L_ ______________________ _J

T itle :

M anager :

Date of Appr aisal Meeting: L_ _________________________ J

Employee Performance Reviews improve employee performance and development by encouraging
commtmication, establishing performance expectations, identifying developmental needs, and setting goals to
improve performance. Performance reviews also provide an ongoing record of employee performance, which is
helpful for both the supervisor and employee.

Use the fo rm be low to list examples of outstanding performance or achievements as well as areas of
performance that need improvement. Please provide open comments on your employee’s performance.
Complete each section and list examples of performance where applicable.

0 Job description/key responsibilities/requi red tasks:

0 Note expected accompl ishments vs. actual accomplishments:

0 List the areas where the e mployee developed in ways enabling him or her to take on additional
responsibilities or be eligible for high-profile assignments:

Chapter 6 PerFormance Analytics 11Sil

FIGURE 6 -1 (Continued)

0 Areas of development for upcoming quarter (i .e., communication skills, teamwork, project
management skills, budgeting experience, etc.):

0 Goals for upcoming quarter (Please list S.M.A.R.T. goals) :

P lease circle the number below that best describes the employee ‘s performance in the following areas:

Achieved Significantly
Areas of Did not meet Achieved most Achieved expectations and exceeded
concentration expectations expectations expectations exceeded on a few expectations
Teamwork I 2 3 4 5
Leadership I 2 3 4 5
Business acumen I 2 3 4 5
CUstomer service I 2 3 4 5
Project I 2 3 4 5
management

I Average Performanc-e Score I I
Employee Use Only:

P lease provide comments and examples of behav iors to describe your performance in the past quarter.

Manager Signature: Date: O ‘ O ‘ O

Employee Signature: Date: 0 ‘ 0 ‘ 0

1&0 Part II System Implementation

list the indicators to look for to determine whether the employee has mastered the
relevant competencies. The form does include space to list major developmental
achievements, developmental needs, and employee comments. The form does not
include information regarding different performance touch points and it seems
that the s upervisor is the only source of performance data. The following table
s ummarizes which of the components are present:

Major Components of Appraisal Forms: Critical Evaluation of Basic Performance
Review Form in Figure 6-1

X Basic employee inFormatiOn

Accountabilities. objectives. and standards

Competencies and indicators

X Major achievements and contributions

X Developmental achievements

X Developmental needs. plans. and goals

Multiple perFormance touchpoints

X Employee comments

X Signatures

As a second example, consider the form included in Figure 6-2, which is used to
evaluate the performance of managers at a university hospital. This form has a section
for basic employee information. Also, there is a section on objectives (i.e.,” goals”),
but no specific section for accountabilities and standards-altho ugh these could
be included in the text boxes. The form includes several behavioral indicators
for each competency, but there is no section for developmental achievements.
Also, the form includes open-ended sections for developmental needs, plans,
and goals. Similar to Figure 6-1, it seems that the form is directed at s upervisors
only, rather than multiple performance touchpoints. Finally, the form includes
a box for the ratee to discuss thoughts on the eval uation. In short, the following
components are present:

Major Components of Appraisal Forms: Critical Evaluation of Manager/Supervisor
Appraisal Form in Figure 6-2

X Basic employee inFormation

Accountabilities, objectives. and standards

X Competencies and •ndicators

Major achievements and contributions

Developmental achievements

X Developmental needs, plans. and goals

Multiple perFormance touchpoints

X Employee comments

X Signatures

Chapter 6 Performance Analytlcs 161

FIGURE 6-2
Performance Appra1sa1 form used for Managers and SupeNisors (lacking Some Components o f an Ideal Form)

MANAG ER/SUPERV ISOR PERFORMANCE AP PRAISAL FORM

Employ”” Name: I H<>Spillll lD: I
.——————————————–

Position Title:: J r———————————————
Ocp.anmenl: I

Mom.h nt
Appr:liSlll l )’pc: Probllionol)’ r Annunl r Rcnpproisal r I Ev:lluOiion l'<riod:

I. At the beg.innin.g of each annual c”aluation period list the pcrfom13nce gools for lhc coming year on page three. Also place
a check mo.rk to len of BO)’ Slmeme:m Or ‘” o requiring by the MonngeriS upcn’isor.
Qi,e a c:opy to the M;a,nagcr/SupcrvHK>r.

At the end of the C-•rt loAtion pcrind, make a dctcmrinntion of the t .h; n t tu which the 1BnJJgcr’Supct’lsor 1hc
Competency standards for category. Enter a numeric score for each cat!’gory1 using Lhc R:Hi ngs Guidelines bclnw.

3. For c-acb stRndartl inc.lit.1tte in the right m:ngin, ” plus t+) performance dCSCf’CS or” minus (-) wh(‘rc
pcrfom1:mce needs auenlion.

4. Complete lhc Goals section by following the instructions on page .3.

S. Review the entire cv11lua.tion. UsiӴ the !being Guidelines. plaa:-lhe corresponding number tluu bcs1 describes your
assessment or ovemll performance sn the 0Ycmll Rating section on page -1.

6 Identify 11ny increase in salary on J>agc 4. 01·c: the Man3!!Cr/Supcrvisor the opportuni1y to rtc.”‘rd h’s!her commcfUS.

RA TlNG GUIDELINES:

l’his scaffmcrnber has made !’ignificn nt comrihunons to advance position of the department nndlor Hospical
to,,ard excellence t1 nd prominonce. Only a small pert:entlige of members who t’thibit uni(c;>m1 exctllcnce 21 nd
initi31i vc will receive rhis rating.

This sca lf member instn uncnmlto the dcp.:utment’.s aud hilS )ll!rfonncd in lln e.xtmpla.ry manner.

stan· member is 1>roricien1. Pertbmllnce is what i.s espec:ted of a fully qualified and e.:periencetl pt!1’$01l.

This stafT member occasionally fai ls to exhibi1 proficlenc y in the job. Jmprovemen11s nocessary to meet th!
for

This s1aff member has seriolls dctidcncles in key nrro5. Perfom1:1ncc fails co mee1 cxpccmtlons arld 15 1l :tcocptablc-.

(Continued)

162 Part II System Implementation

FIGURE 6 -2 (Continued)

MANAGER/SU PERVISOR COMPETENCIES

ADMINISTRJ TIVE COMPETENCIES RATING

r Creates work pl:ms; identifies the- appropritlh! resources and SCl, priorities: ddt!gates
authority and meets deadlines.

r lncorpomtes control systems thoU monitor workflow and tnsurc task completion.
I Ensures department compliance with regulatory standards such as Joint Commission, OSHA. DOH. EEOC.

cte .. so that no serious cilation.s
Undcrsl>nds and <ldhercs to Uni•ersity HospiL11’s coo•pliance standards as they appear in Uni•ersity

I HospiiJll’s Corpornte Complianee Policy, Code of and ConOict of Interest Policy; sponsors and
implements iniaiarivc:-. 10 c the Ho:-.pital’s compliance goals.

r Enforces thrall <Ubordlnates and p.ol’l:Qnally CQmplles \’tth all Hospital d isease prccntion and control,
including tuben;ulosis and hepatitis 8.

I Ensures that budget dollors arc used responsibly: introduces innovative ways to reduce costs.
r {dcntitics CUSIQillCr needs and takes action 10 mcrt those continually searches for ways to increase

custome.r s:ttisfhction.
r Emphasi?..ts the to deliver quality services: dcfi nt.”S Standards for quality and t131uates ago lOSt

those standards in nn cflbn to improve dtparuncntnl performance.

CATEGORY SCORE: r—
LEADERSHIP/STAFF MANAGEMENT: RATING

1 Demonstrates knowledge of the l lospital’s mission and vnlucs and thcor relationship to the dcpann>cnt’s
work.

r DcmonsU’31CS the nbility 10 take charge: gains suppon nod initintcs actiOI’l$ nnd makes logical
decisions.

I Foste-rs K’llln spirit through coopcmtion and trus t: leads by example
r Jn itiOtt’.S new and unique idco.s; DSSU in CS risk and tlCCCpts responsibi lity for results.
r Act! professionally und responsibly within and nut!ideof thc Hospital: contributes to a positive image.
r Hires compcte_nt statT: c,rca1cs and develops work teams through coaching. training. and education.
I Provides sttdfwith continual fl”Cdback: conducts nil perronnance appraisals on recognizes and ce.Jebr.ttes exceptional perfom1ance and takes corrl.oc ti ve al·tion lO improve pour performnnce.

Recognizes the existence of. and need for. diversity in the workplatl!’: supports the employment. r cductllion. and development of minorities and prOtC:ctcd classes: ensures thai decisionS arc based on the
principles of equal employment opport11nity.

CATEGORY SCORE: I
WORK MF.THOOS AND QUALITI ES: RATING

I £.,presses io verbal and written communiC<Jtion: keeps oil appropriate iJldividuaJs infonned
regarding progn .. -ss or problems.

I Accepts the perspecti>CS of others a nd mnintotns a positive ollitudc.
I Analpes own depanm.:ntal nee-ds and omprove• copabiliues to meet 1he chnngi•1S roquircmcnts of the job;

ensun;s or enhances professional pOSition.
I Oemon;trates llexibility; adjusts to shining priori tie$: stays focused during or difficult situations.
r Vorks c iTecth·ely as a member of a team: comribufe$ 10 the achievement of joint objcctivts.

CATEGORY SCORE: I
EV At.UATOR’S COMMENTS:

+ –
II
I I
I I

II

II
II
I I
I I

+ –
II
II
I I
I I
II
II
II

I I

+ –
II
I I
1 r
II
II

Chapter 6 PerFormance Analytics 163

FIGURE 6 -2 (Continuec/)

PERFORMANCE C OALS

INSTRUCnONS:

· list goo Is by order of imponance.

Review goals periodically and make c-hanges to this section if goals or priurili cs: change during the year.

· At the end of t he evaluation period. rate each goal individually 1.1sing the Rating Guidelines li!’ted on page one oft he fonn.

· Consider your individual rn ling for each goal 1-elati e to itS priority. Assign a numeric category score for ovt:rnll goal
achievcmenl.

PRIORITY GOAL DESCRIPTION RESULTS and COMMENTS RATING RATING

I

I

2

I I
3

I I
4

I I
5 I
6

I I
CATEGORYSCOREFORPERFORMANCEGOALS:

(Continued)

1 64 Part II System Imple mentat ion

FIGURE 6-2 (Conti nue</)

EVALUATOR: D iscuss your of1hc Monagcr’s!Supcrvisor’s developmental ncl·ds9 suggest vays the
Manoger/Supcn<tS<>r “”” meet those ne<-ds, ond how you plan to help.

MANAGERISUPBRV ISOR: Distu!;S your on this eyalnation and identify the spct:ific ways the llospital
can help you OJllnfflze your pertOnnance.

OVERALL RATING: r—
I have reviewed my job description n.s of this date nnd it is consistenl with my prcscnl Jl()Silion responsibilities.

Staff Member’s Signa tur<: ——————

Note. Staff member’s signatw·e indica(es review and discussion.

Evaluator’s Name: ——-
Next Level
Manager ‘s arne: ——-

Signa1 ure:_ ———–

Sig nature: ——-

Source: http://www.uhnj.org/ hrweb/forms/manage:rsupe:rvisorfonn.pdf

Date: j,j,j
nun dd yy

Dow: ltl/1
,., .. , dd ).)

mm dd ) )

Chapter 6 PerFormance Analy!ics 165

This analysis shows that although the forms included in Figures 6-1 and 6-2
seem, at first glance, to be quite complete and thorough, they are not. Thus, before
implementing appraisal forms, make sure that all their necessary components are
present. From your own perspective, do you agree with these conclusions about
w hich of the major components is present in each of these forms? What is missing
and sho uld be added? What would the revised and improved versions of these
forms look like?

6-2 DESIRABLE FEATURES OF APPRAISAL FORMS
We should be aware that there is no such thing as a universally correct appraisal
form that can be used for all purposes and in all situations. In some cases, a
form may emphasize competencies, rather than results. This would be the case
if the syste m adopted a behavior approach as opposed to a results approach
to measure performance. In others, the form may emphasize developmental
issues and minimize, o r even completely ignore, both behaviors and results.
In such cases, the form would be used for developmental purposes only and
not for administrative purposes.5 In yet o ther cases, there m ay be a very short
form used for weekly check-ins and a separate and more comprehensive form
used for a quarterly, semi-annual, or even annual review. One s ize does not fi t
all, and different components are appropriate, based on the purposes of the
appraisal.

In spite of the large variability in terms of format, components, and length,
there are certain desirable features that make appraisal forms particularly effective
for all types of jobs and hierarchical positions in the organization:

• Simplicitt;. Forms m ust be easy to understand, easy to administer, quick
to complete, clear, and concise. If forms are too long, convoluted, and
complicated, it is likely that the performance assessment process will not
be effective or may not even happen at all.

• Relevancy. Good forms include information related d irectly to the tasks
and responsibilities of the job; otherwise, they will be regarded as an
administrative burden and not as a tool for performance improvement.
This information is derived d irectly from the work analysis described in
Chapter2.

• Descriptiveness. Good forms require that the raters provide evidence of
performance regardless of the performance level. The form should be
sufficiently descriptive that an outside party (e.g., supervisor’s supervisor
o r HR department) has a clear understanding of the performance
information conveyed.

• Adaptabilih;. Good fo rms allow managers in different functions and
departments to adapt them to their particular needs and situations. Also,
this feature allows for changes over time to reflect changes in the nature
of work and an organization’s strategic direction. This feature encourages
widespread use of the form.

1M Part II System Implementation

TABLE 6-2
Desi rable Features of A ll Appraisal Forms

SimpliCity

Relevancy

Descnpt1veness

Adaptability

Comprehensiveness

Definitional clarity

Communication

Time orientation

• Comprehensiveness. Good forms include all the major areas of performance
for a particular position for the entire review period.

• Definitional clarity. Desirable competencies (and behavioral indicators)
and results are clearly defined for all raters so that everyone evaluates the
sam e attributes. This feature enhances the consistency of ratings across
raters and levels of the organization.

• Communication .. The meaning of each of the components of the form must
be clearly and successfully communicated to all people participating
in the evaluation process. This enhances acceptance of the system and
motivation to participate in it, both as rater and ratee.

• Time orientation. Good forms help clarify expectations about performance.
They address not only the past, but also the future. 6

Table 6-2 includes a summary of the features that are desirable in all
forms, regardless of specific content and format. Let us consider the two
illus trative forms discussed earlier to see how they fare in rela tion to these
desirable features.

First, consider the form shown in Figure 6-1. It is simple because it is easy
to understand and clear. The fact that it includes an essay format implies that
it would take a little more time to complete, but the number of essays is kept
to a minimum. The form is also relevant, but only if the s upervisor enters the
correct job description and actual accountabilities. This form can be extremely
descriptive owing to its narrative nature. The fo rm encourages the manager to
give examples of relevant behavior. Next, the first portion of the form is also
adaptable, perhaps too adaptable; it would be hard to compare performance
across employees because the manager can adapt and change the content of
the form to each employee. Th is form is comprehensive, but again only if the
manager lists all of the expected accountabilities. This form does not have defi-
nitional clarity. Because the competencies listed are not clearly defined, ratings
are likely to be inconsistent across raters. Next, this form can be communicated
across the organization. Manager acceptance may be hard to gain, however,
because of the amount of detail required by the essay answers. Finally, the
form is time-oriented. It asks for past and future performance expectations and
goals. In short, the following table summarizes which of the desirable features
are present in this form:

Desirable Features of Appraisal Forms: Critical Evaluation of
Basic Performance Review Form in Figure 6-1

X Relevancy

X Descriptiveness

X Adaptability

X Comprehensiveness

DefinJtional clanty

X Commun1C8t1on

X Time orientation

Chapter 6 Performance Analytics 1157

Next, Jet us evaluate the form shown in Figure 6-2 in relation to the desirable
features listed in Table 6-2. First, it is not that simple in that it includes many dif-
ferent types of behavioral indicators. Yet, it seems quite relevant and descriptive.
It is particularly relevant for the job of manager/ supervisor, specifically regard-
ing behavioral indicators for each competency. This form is easier to administer
than the form shown in Figure 6-1 because it does not include an essay format.
Although there is a comprehensive list of competencies and behavioral indica-
tors, the actual expectations of the individual employees are not clear, and there
is a Jack of definitional clarity regarding goals. The form seems adaptable. For
example, it would be quite easy to add or delete behavioral indicators and it
would also be easy to change the set of indicators across units and departments.
Next, the form could be communicated throughout the organization. Finally, the
form mentions time in the section on developmental goals and needs. The table
below summarizes this analysis:

Desirable Features of Appraisal Forms: Evaluation
of Manager/Supervisor Performance Appraisal Form in Figure 6-2

SimpliCity

X Relevancy

X Descnpt1veness

X Adaptability

X Comprehensiveness

Definitional clarity

CommuniCation

X Time orientation

From your own perspective, do you agree with the above conclusions about
which desirable features are present in each of these forms? What is missing
and should be added? What would the revised and improved versions of these
forms look like?

168 Part II System Implementation

Many organizations use forms very similar to those presented in Figures 6-1
and 6-2. A careful analysis of these forms against the desired features indicates
that the forms could be improved . An important point to consider regarding
these and other forms is that an exclusive emphasis on the appraisal form should
be avoided; it is just one component of the performance management system.

6-3 DETERMINING OVERALL RATING
After performance data have been gathered for each employee, there is usually a
need to compute an overall performance score. This is particularly necessary for
making administrative decisions such as the allocation of rewards. Computing
overall performance scores is also useful in determining whether employees,
and groups of employees, are improving their performance over time. This is a
critical aspect and ad vantage of approaching performance management with a
perfonnnnce annlytics mindset: We use performance data collected on an ongoing
basis to create useful and meaninghtl insights that help individuals grow and
develop, and data serve the purpose of improving individual and team perfor-
mance in terms of both behaviors and results.

Two main strategies are used to obtain an overall performance score for
each employee: judgmental and mechanical. The judgmental procedure consis ts
of considering every aspect of performance, and then, arriving a t a defensible
summary. This holistic procedure relies on the ability of the rater to arrive a t
a fair and accurate overall score. The mechanical procedure consists of first
considering the scores assigned to each section of the appraisal form, and then,
combining them up to obtain an overall score. When adding scores from each
section, weights are typically used based on the relative importance of each per-
formance dimension measured.

Consider the performance evaluation form shown in Figure 6-3, which is
used to evaluate the performance of sales associates at a supermarket chain7 This
form includes the hypothetical ratings obtained by a sales associate on just two
competencies and just two key results (the complete form probably includes more
than four performance dimensions). You can see that in the Competencies section,
each competency is weighted according to its value to the organization. Specif-
ically, Follow-Through/Dependability is given a weight of 0.7 whereas Decision
Making/Creative Problem-Solving is given a weight of 0.3. For the competency
Follow-Through/Dependability, Patricia Carmello obtained a score of 4 for the
first half of the review period and a score of 3 for the second half of the review
period; consequently, the scores for this competency are 4 x 0.7 = 2.8 for the
first half and 3 x 0.7 = 2.1 for the second half of the review period. Adding up
the scores obtained for the first and second halves in each competency leads to a
total of 3.7 points for the first half and 2.7 for the second half of the review period .

The form also indicates that the key results have d ifferent weights. Specifi-
cally, KR #1 has a weight of 0.6 whereas KR #2 has a weight of 0.4. Consider KR
#1. The objective for the first half was to achieve a sales figure of US$78,000. The
actual sales figure achieved by Patricia was US$77,000, representing a 98.71%
achievement, which is a score of 2. Multiplying this score times the weight of 0.6
yields 1.2 points for the first half of the review period. Similarly, for the second

Chapter 6 PerFormance Analytics 16il

FIGURE 6-3
PerFormance Appraisal Form Used by Grocery Retailer

P E RFORMANCE EVALUATION FORM

For use by Store Director; Co-Director; Meat, Seafood, Produce, Del i/ Bakery, Floral and Grocery Managers

Name I Patricia Carmello I Rev iew Period I 2018 I
Position I Sales Associate I Store I #25 I
Evaluator I ames Garcia I Date I 12/ 15/ 18 I
Competencies: Plea se r ate the Associate on t h e following competencies_ D ete rmine the point total and
multiply by the weight fa ctor to ach ieve the poi n t total for t h e compe te n cies_

I st 2nd Wgt Pts Pts
Follow-T hrough/Dependability Poi nts: 4 1 3 0.7 1 2.8 12. 1

4 3 2 I

Work is completed Work is usually Work is completed as Work can seldom be
correctly and on time completed correctly and assigned and results can rel ied upon. Often
w ithout supervis ion. on a timely basis w ith usually be relied upon fai ls to complete
Anticipates some supervision. Very with nonnal supervis ion. tasks correctly.
Extremely organized. organized. Organized. Unorgani zed.
Comments:

1st 2nd Wgt Pts Pts
Decision Making/Creative Problem Solving Points : 3 I 2 o.3 I o.9 I o.6

4 3 2 I

Anticipates, recognizes, Defines and addresses Acknowledges and attempts Has difficulty
and confronts problems problems wel l. to solve most problems recognizing
w ith extraordinary skill. Typically reaches useful when presented. Usually problems and
Perseveres until solution solutions and decisions comes to conclusions on making decisions.
is reached. Extremely are sow1d. lrmovative, solving basic issues. Little Always needs
innovative and takes with above-average risk im10vation and sometimes guidance. No
risks. taking. takes risks. innovation and

never takes risks.

Comments :
Total Scor e for Competencies Section 3.7 1 2.7

(Continued)

170 Part II System Implementation

FIGURE 6-3 (Continued)

Res u lts: Rate each area to the performance demonstrated in the achievement of budgeted numbers.

KR # 1: Achieved Budgeted Sales CU.S. dollars)

%of achievement
Budgeted Actual ( 1, 2 , 3,4)

Wgt
1st half objective I $78,000 J $77,000 J 2 _ I 0.6
2nd half objective I $80,000 I $83,000 I 3 I Pts

4= 108%+ 3 = 107- 103% 2 = 102-98% I = Below97% uJ 1.8
Comments:

KR # 2: Margin Balance (gain/loss jn U.S. d ollars)

% of achievement
Budgeted Actual (1, 2, 3,4)

Wgt
1st half objective I $30,000 I $29,000 I I I 0.4
2nd half objective I $31,000 I $34,000 I 4 I Pts

4 = 108%+ 3 = 107- 103% 2 = 102- 98% I = Below97% o.4 I 1.6
Comments:

TOTAL SCORE FOR KEY RESULTS: 1.6 1 3.4

Circle Rating:
Excellent
3.6- 4.0

Associate
Store Director

Comp. Score 1st half Comp. Score 2nd KR Score 1st KR Score Subtotal
half half 2nd half

3.7 2.7 1.6 3.4 I 1.4/4 = 2.85
Above Aver age Average Unsatisfactory

2.6-3.5 1.6 – 2.5 I – 1.5
Date
Date

half, the goal was US$80,000 and Patricia surpassed it by achieving a figure of
US$83,000, which represents a score of 3 (i.e., 103.75% achievement); therefore,
the score for the second half is 3 x 0.6 = 1.8. Finally, the form shows that the
total score for the first half for all key results combined is 1.6, whereas the score
for the second half is 3.4. These scores were computed by simply adding the
scores obtained in each half.

In the end, the form shows the scores obtained for the competencies and the
key results in each of the two halves of the review period. To obtain the overall

Chapter 6 PerFormance Analytics 171

performance score, we simply take an average of these four numbers: (3.7 + 2.7 +
1.6 + 3.4)/ 4 = 2.85. This puts Patricia in the 2.6-3.5 range, which represents a
qualification of “above average.”

Now, suppose that we do not follow a mechanical procedure to compute
the overall performance score, and instead, we use a judgmental method .
That is, s uppose raters have no information on weights. How would James
Garcia, Patricia’s supervisor, compute the overall performance score? One
possibility is that he migh t give equal weights to all competencies and would
therefore consider that Follow-Through/Dependability is as impor tant as
Decision Making/Creative Problem-Solving. This wou ld lead to different scores
compared to using weights of 0.7 and 0.3. Or, as an alternative, the supervisor
may have his own ideas about w ha t performance dimensions should be given
more weight and decide to ignore how the work is done (i.e., behaviors), and
instead, assign an overall score based p rimarily on the key results (i.e., sales
and margin balance) .

The use of weights allows the s upervisor to come to an objective and clear
overall performance score for each employee. As this example illustrates, the use
of clearly specified weights allows the supervisor to obtain a verifiable score for
each employee. Th us, the supervisor and the employees can be sure that the overall
performance rating is reflective of the employee’s performance in each category.

Which strategy is b est, judgmental or mechanical? In most cases, the
mechanical method is s uperior to the judgmental method.8 A supervisor is
more likely to introduce her own biases in com puting the overall perfo rm-
ance score when no clear rules exist regarding the relative importance of the
various performance dimensions and there is no d irection on how to combine
the various performance dimensions in calculating the overall score.9 As far
as the computation of overall scores goes, the mechanical method is superior
to the judgmenta l method .

Finally, you will notice that the form included in Figure 6-3 has sections
labeled comments. These open-ended sections are common in most appraisal
forms. However, this inform ation is typically not used effectively.10 Likely, there
are two chief reasons why this is the case. First, it is not easy to systematically
categorize and analyze such comments. Second, the quality, length, and content
of these comments may be m ore a function of the culture of the organization
and the writing skills of the person filling o ut the form than actual KSAs of the
employee being rated . Regarding the firs t challenge, a recent analytics innovation
is the increasing sophistication of comp uter-aided text analysis (CATA) software
that allows for an analysis of text (as opposed to numbers) and more and better
use of such information. For example, the software package DICTION 5.0 allows
for the analysis of text by first creating categories of terms or phrases, and then,
counting the relative frequency of each. 11 So, an organization may wish to classify
the comments in terms of, for example, task and contextual performance. Then, a
“dictionary” of terms and phrases related to each of these performance dimensions
is created and the software autom atically counts the number of times that such
types of behaviors are mentioned in the comments. The second challenge is
more d ifficult to overcome because if raters are not given any training or general
instructions on what to write, comments may range from none a t all to very

172 Pa rt II System Implementation

detailed descriptions of what employees have done (i.e., past orientation) and
very detailed descriptions of what employees should do (i.e., future orientation) .
Thus, to overcome this second challenge, it is important to first establish the goals
of the information that raters are asked to include in these open-ended sections,
and then offer raters training on how to do that in a systematic and standard ized
fashion across ratees. If these two challenges are overcome, then the information
included in the open-ended sections can be used to supplement the quantitative
information offered on the forms.

6-4 APPRAISAL PERIOD AND NUMBER OF FORMAL MEETINGS
Let us be clear that this sec tion addresses the issues of the appraisal period
and fonnal sit-down reviews. If we want to create a culture of performance and
encourage everyone to improve performance on an ongoing basis, conversations
about performance should be part of everyone’s routine. This is why so many
companies currently implement check-in systems in which employees can talk
about what they are doing and how and the results they are generating with several
performance touchpoints such as peers and supervisors. Again, Web-based and
mobile apps now make this easier. In fact, there are dozens of vendors that offer
these prod ucts. All you need to do is Google “performance appraisal apps” and
you will find them right away.

Regarding the evaluation period, the first question we should answer is: How
long should the appraisal period be? In other words, what period of time should
be included in the appraisal form? Most organizations typically conduct a formal
annual review. However, others choose to cond uct semiannual or even quarterly
formal reviews. Conducting only an annual review is usually not sufficient for
most employees to discuss performance issues in a formal setting. In garticular,
Millennials value more frequent feedback about how they are doing. 2

The recommendation then is to conduct formal s it-down reviews semiannually
or quarterly. For example, Colorado-based Hamilton Standard Commercial Aircraft
uses a semiannual review system. 13 Twice a year, the company performs a modified
360-degree appraisal, meaning that performance information is collected from
performance touch points from all around (hence, the “360-degree” label). This type
of system allows individuals to receive feedback and adjust goals or objectives, if
necessary, in preparation for the more in-depth annual review. An example of a
company implementing formal q uarterly reviews is Synygy, Inc., a Philadelphia-
based compensation software and services company.14 Each quarter, employees
receive a summary of comments and specific examples from coworkers about
how they are performing. Synygy states that the goal of the system is to encour-
age open communication. Employees are trained to write effective comments to
their coworkers that will facilita te growth by pointing out positive and negative
areas of performance. In areas that need improvement, coworkers are encouraged
to suggest ways that employees could improve their performance.

When is the best time to complete formal sit-down reviews? Most organizations
adopt one of two possibilities. First, the appraisal form could be completed on
or around the annual anniversary date. In the case of semiannual reviews, the
first review would be six m onths before the annual anniversary date and the
second review would be on or around the annual anniversary date. The biggest

Chapter 6 PerFormance A nalytics 173

advantage of this choice is that the supervisor does not have to fill out everyone’s
forms a t the same time. The disadvantage of this choice is that because results
are not tied to a common cycle for all employees, resulting rewards cannot be
tied to the fiscal year.

The second choice is to complete the appraisal forms toward the end of the
fiscal year. In the case of a system including semiannual reviews, one review would
be completed halfway through the fiscal year and the other one toward the end
of the fiscal year. Adopting this approach leads to the completion of the appraisal
form for all employees at about the same time, which facilita tes cross-employee
comparisons as well as the distribution of rewards. An additional advantage of
following the fiscal year cycle is that individual goal setting can be more easily
tied to corporate goal setting because most companies align their goal cycle with
their fisca l year. This helps employees synchronize their work and objectives
with those of their unit and organization. But what about the additional work
imposed on the supervisors who need to evaluate all employees at once during
a short period of time? This can be a major problem if the performance manage-
ment system is not implemented using the best practices described in this book,
and instead, performance appraisal is a once-a-year event. If there is ongoing
communication between the s upervisor and the employee about performance
issues throughout the year, completing appraisal forms should not uncover any
major surprises and filling out the appraisal form should not create a major time
burden for the supervisors.

Performance management systems can include six formal meetings between
the direct reports and the s upervisor15:

• System inauguration
• Self-appraisal
• Classical performance review
• Merit/salary review
• Development plan
• Objective setting

Recall that informal performance discussions take place throughout the year
and involve ongoing check-ins. In addition, however, there should be regularly
scheduled formal meetings for the specific purpose of discussing the various
aspects of performance and the performance management system. The fact that
the supervisor allocates time to this activity sends a message that performance
management is important.

The first meeting, system inauguration, includes a discussion of how the sys-
tem works and the identification of the requirements and responsibilities resting
primarily on the employee and on the s upervisor. This discussion includes the
role of self-appraisal and the dates when the employee and supervisor will meet
formally to discuss performance issues. This meeting is particularly important
for new employees, who should be introduced to the performance management
system as soon as they become members of the organization.

The second meeting, the self-appraisal, involves the employee’s assessment
of herself. This meeting is informational in nature, and a t this point, the supervi-
sor does not pass judgment on how the employee regards her own performance.
This meeting provides an opportunity for the employee to describe how she sees
her own performance during the review period. It is helpful if the employee is

174 Part II System Implementation

given the same form to be filled out later by the supervisor so that she can pro-
vide self-ratings using the same d imensions that will be used by the supervisor.

The third meeting, the classical performance review meeting, during which
employee performance is discussed, includes both the perspective of the supervi-
sor and the employee. Most performance management systems include this type
of meeting only. No other formal meetings to discuss performance are usually
scheduled . This meeting is mainly past-oriented and typically does not focus on
what performance should look like in the future.

The fourth meeting, the merit/ salary review, discusses what, if any, compensation
changes will result as a consequence of the period’s performance. It is useful to
separate the discussion of rewards from the discussion of performance so that the
employee can focus on performance first, and then on rewards. If these meetings
are not separated, employees may not be very attentive during the discussion of
performance and are likely to feel it is merely the price they must pay to move
on to the part of the meeting that really matters: the discussion about rewards.
Although these meetings are separate, supervisors should explain clearly the link
between the employee’s performance, d iscussed in detail in a previous meeting,
and the rewards given. Rewards are not likely to carry their true weight if they
are not linked directly to performance.

The fifth meeting, the development plan, discusses the employee’s developmental
needs and what steps will be taken so that performance will be improved d uring
the following period . This meeting also includes information about what types
of resources will be provided to the employee to facilitate the development of
any required new skills.

The sixth and final meeting, objective setting, includes setting goals, both
behavioral and results-oriented, regarding the following review period. At this
point, the employee has received very clear feedback about her performance
during the past review period, knows what rewards will be allocated (if any),
understands developmental needs and goals, and knows about resources available
to help in the process of acquiring any required skills.

Although these six meetings are possible, not all six take place separately. For
example, the self-appraisal, classical performance review, merit/salary review,
development plan, and objective setting meetings may all ta ke place during
one umbrella meeting. Nonetheless, it is best to separate the various types of
information discussed so that the employee and the supervisor will focus on
each of the components separately.

Take the case of Johnsonville Foods, one of the largest sausage-making
prod ucers in the Unites States, making such prod ucts as brats, Italian sausage,
breakfast sausage in fully cooked and fresh varieties, chicken sausage, meatballs,
and summer sausage. Johnsonville Foods has a performance management system
that includes the following meetings: self-appraisal, classical performance review,
merit/ salary review, development plan, and objective setting.16 Team members
(i.e., employees) and coaches (i.e., s upervisors) write six-month contracts stating
their goals for the following six months and how they plan to meet those goals
(objective setting) . This contract also asks the employee to state developmental
goals for the upcoming six months (development plan). These goals may include
reading a book on leadership or learning a new computer software program. In
addition, each month, the employee writes up a contract with his goals for the
month. That contract is posted on the company electronic bulletin board and sent
to three internal customers, who evaluate that employee’s performance over the

Chapter 6 PerFormance Analytics 1715

Box 6-2

Company Spotlight: Performance Review Meetings
at McCoy Federal Credit Union
McCoy Federal is a nonprofit o rganization that provides
f inancial services to those who join on a membership basis.
It is the result of a merger with Central Florida Healthcare
Federal Credit Union and one of the largest credit unions
in Central Florida, with over 63,000 members, assets over
USS565 million, and 14 locations. The credit union utilizes
a Web-based system that allows tailoring each position’s
performance evaluation to specif ic duties performed. The
performance management system al so involves quarterly
meetings and goal setting, which allow both supervisor
and employee to t rack progress. The frequent performance
reviews, including self-appraisals, were instituted in o rder

to ensure that all employees receive regular performance
feedback f rom supervisors, who might otherwise spend more
t ime focusing on those whose performance is considered
substandard. This allows employees and supervisors to
focus regularly on progress toward goals. The information
systems facilit ate the process by allowing both supervisor
and employee to keep track of progress in almost real-time.
In summary, McCoy Federal utilizes a performance manage-
ment system that incl udes f requent performance review
meetings, combined with an emphasis on setting goals and
t racking progress to ensure all employees and supervisors
are focused on performance management. 17

month. The next month, employees and their coaches discuss how the goals were
met (classical performance review) and how much bonus the employee should
receive (merit/salary review), and they set new goals for the upcoming month
(objective setting). If the employee does not expect to meet his goals, a meeting
is scheduled halfway through the month to discuss options.

In short, Johnsonville Foods includes all the forma l meetings tha t can take place
in a performance management system; however, it does not involve six separate
meetings. Instead, the company holds only two formally scheduled meetings,
but the system allows for the addition of more meetings if the need arises.
Box 6-2 includes an example of how performance reviews are implemented in
an organization in the nonprofit sector: McCoy Federal Credit Union.

6-5 PERFORMAN CE TOUCHPOINTS: SOURCES
OF P ERFORMANCE DATA

So far, we referred to the supervisor as a primary source of performance information.
This is the case in many organizations because the s upervisor usually observes
employees directly and has good knowledge about performance s tandards.
However, there are multiple performance touchpoints, which are all the relevant
sources that have firsthand knowledge of the employee’s performance. Let us
consider the use of the direct supervisor as a source of performance information,
followed by the use of other sources, including peers, direct reports, self, and
customers.18 Then, we will discuss the issue of electronic performance monitoring,
which is used by many organizations to collect Big Data about their employees.

6 ·5·1 S u pervisors
An advantage of using supervisors as a source of performance information is
that they are usually in the best position to evaluate performance in relation to

1715 Part II System Implementation

strategic organizational goals. Also, supervisors are often those making decisions
about rewards associated with performance evaluation. Moreover, in some cultural
contexts, supervisors are seen as the exclusive source due to the pervasiveness of
hierarchical organizational structures. For example, a survey of 74 HR directors
in Jordan revealed that in every one of these organizations, the supervisor had
almost exclusive input in terms of providing performance information; 95% of
respondents reported that peers had no input; 82% reported that employees had
no input; and 90% reported that customers had no input either.19 Accordingly,
supervisors are often the most important source of performance information
because they are knowled geable about strategic issues, understand performance,
and are usually in charge of managing employee performance.

Although supervisors are usually the most important- and sometimes, only-
source of performance information, other sources should be considered as well. For
example, we have already seen that self-appraisals are an important component
in the performance review process. In addition to self-appraisals and supervisor
appraisals, performance information can be collected from peers, customers, and
direct reports (assuming there are any). Alternative sources are usually considered
because for some jobs, such as teaching, Jaw enforcement, or sales, supervisors
may not be performance touch points because they do not observe direct reports’
performance on a regular basis. Also, performance evaluations given by the s u-
pervisor may be biased because the supervisor may evaluate performance based
on w hether the ratee is contributing to goals valued by the supervisor as opposed
to goals valued by the organization as a whole. For example, a supervisor may
provide high performance ratings to employees who help the supervisor advance
his career aspirations within the company, as opposed to those who engage in
behaviors conducive to helping achieve organizational s trategic goals.

6·5·2 Peers
Many organizations use performance evaluations provided by peers. Take, for
examgle, the system implemented a t a large international financial services
bank. Through acquisitions, the bank has been growing rapidly and has as its
strategic goal the consolidation of its offices. Change management is extremely
important to the successful implementation of this consolidation. The company
is therefore revising how it assesses the competency “teamwork” a t the senior
and middle management levels, with the belief that successful teamwork is
crucial to change management initiatives. Specifically, one-third of the score for
this competency is determined by ratings provided by peers. As an additional
example, the Australian Na tional University Medical School recently introd uced
a system in which students rate their peers in terms of personal and professional
performance. Students begin to provide anonymous ratings online a t the end
of their first year in medical school. The system allows students to share their
assessment of their peers and provides faculty with early-warning signs to assis t
students who may not be performing up to personal or professional standards2 1

Although the use of peers as a source of performance data is often described
as a “breakthrough” or “new” fea ture in many performance management systems,
they have been around for quite some time. For example, in the 1940s and 1950s,
they were called “budd y ratings” and were used to select military Jeaders.22

Chapt er 6 Performance Analytics 177

Peer evaluations suffer from three problems, however. First, such
evaluations may not be readily accepted when employees believe there is
friendship bins a t work.23 In other words, if an employee believes that ratings
provided by his peers will be lower than those provided for another employee
because the other employee has more friends than he does, then performance
evaluations will not be taken seriously. In this s ituation, it is not likely that
the employee will use the feedback received to improve his performance.
A second problem with peer eval uations is tha t peers are less d iscriminating
among performance d imensions compared to supervisors. In other words, if
one is rated high on one dimension, one is also likely to be rated high on all
the other d imensions, even though the performance dimensions rated may
not be related to one another and may requi re very different knowledge,
skills, and abili ties . This is what is called the halo effect. Finally, peer evalua-
tions are likely to be affected by what is called context effects24 For example,
consider the s ituation in which peers evaluate communication behaviors .
The salience of such behaviors will be affected by context: these behaviors
are much more salient when there is a conflict as compared to routine daily
work. The resulting peer evaluations can thus be quite d ifferent, based on
whether the peer providing the rating is thinking about one specific situation
versus another one, or communication behaviors across s itua tions in general.
This issue should remind you of the description of maximum versus ty p ical
performance described in Chapter 4.

Given these weaknesses of peer evaluations, it would not be wise to use
them as the sole source of performance information. Peer evaluations can be part
of the system, but information should also be obtained from additional sources
involved in performance touchpoints.

6-5-3 D irect Reports
Direct reports are a good source of information regarding the performance of
their managers. For example, direct reports are in a good position to evaluate
leadership competencies, including delegation, organization, and communication.
In addition, direc t reports may be asked to rate their manager’s ability to
(1) remove barriers that employees face, (2) shield employees from politics, and
(3) raise employees’ competence. Be aware that direct reports may hesitate to
provide upward feedback if put on the spot; however, if managers take the time
to involve employees in the process by soliciting their input, employees are more
likely to give hones t feed back.25

Many organizations take upward feedback very serious ly because it
provides tangible benefits-especially long-term benefits- as demonstrated
by results of a study in a Korean public institution with about 2,500 employees
that performs research, development, tests and evaluation.26 Managers received
upward feedback once a year during a period of seven years. Then, the data
were analyzed, based on whether managers were classifie d as low, med ium,
o r high-performers. Results showed that those in the low-performing group
benefited the most.

For an example of a company that you may know well because of the
pervasiveness of its prod ucts, take the case of computer giant Dell. Dell employs

178 Part II System Implementation

over 100,000 individuals worldwide. More than 30 years ago, Michael Dell founded
Dell, based on the simple concept of selling computer systems directly to custom-
ers. At Dell, all employees rate their supervisors, including Michael Dell himself,
who is currently chairman and CEO, every six months, using “Tell Dell” surveys.
Michael Dell said, “If you are a manager and you’re not addressing [employee]
issues, you’re not going to get compensation. And if you consis tently score in
the bottom rungs of the surveys, we’re going to look a t you and say ‘Maybe this
isn’t the right job for you.”m

The intended purpose of the evaluation provided by direct reports has
an impact on the accuracy of the information provided. Overall, performance
information provided by direct reports is more accurate when the resulting ratings
are to be used for developmental purposes, rather than administrative purposes.
When evaluation data are intended for administrative purposes (i.e., whether the
manager should be promoted), direct reports are likely to inflate their ratings.28
Most likely, this is because direct reports m ay fear retaliation if they provide low
performance scores. Confidentiality is key if direct reports are to be used as a
useful and valid source of performance information.

6-5-4 Self
As discussed earlier, self-appraisals are an important component of any performance
management system. They have become particularly prominent, given the
increasingly popular view regarding the need to shift from performance appraisal
to performance management. If the only focus is appraisal, collecting data from
supervisors may suffice. However, if we want to implement a state-of-the-science
performance management system that serves as a tool for continuously identifying,
measuring, and developing the performance of individuals and teams, it is crucial
to include self-evaluations as well .

When employees are given the opportunity to participate in the performance
management process, their acceptance of the resulting decision is likely to increase
and their defensiveness d uring the appraisal interview is likely to decrease. An
additional advantage associated with self-appraisals is that the employee is in
a good position to keep track of activities during the review period, whereas a
supervisor may have to keep track of the performance of several employees. On
the contrary, self-appraisals should not be used as the sole source of information
in making administrative decisions because they are more lenient and biased
than ratings provided by other sources, such as a d irect supervisor.29 This m ay
explain why only 16% of HR managers report that their organizations include
self-appraisals as part of their performance management systems.30 Fortunately,
self-ratings tend to be less lenient when they are used for d evelopmental as
opposed to ad ministrative purposes. In addition, the following suggestions a re
likely to improve the quality of self-appraisals:

• Use comparative as opposed to absolute measurement systems. For example,
instead of asking individuals to rate themselves using a scale ranging from
“poor” to “excellent,” provide a relative scale that allows them to compare
their performance with that of others (e.g., “below average,” “average,”
“above average”). Other options in terms of comparative systems were
d iscussed in Chapter 5.

Chapter 6 PerFormance A naly!lcs f7SI

• Allow employees to practice their self-rating skills. Provide multiple
opportunities for self-appraisal because the skill of self-evaluation may
well be one that improves with practice.

• Assure confidentiality. Provide reassurance that performance information
collected from oneself will not be disseminated and shared with anyone
o ther than the direct supervisor and other relevant parties (e.g., members
of the same work group) .

• Emphasize the future. The development plan section of the form should
receive substantial attention. The employee should indicate his plans for
future development and accomplishments.

6-5-5 Customers
Customers provide yet another source of performance information because they
participate in performance touchpoints in many types of industries, occupations,
and jobsJ 1 Although collecting information from customers can be a costly and
time-consuming process, performance information provided by customers is
particularly useful for jobs that require a high degree of interaction with the
public. Moreover, performance information can also be collected from internal
cus tomers. For example, line managers may provide performance data regarding
their HR representative.

Although the clients served may not have full knowledge of the organization’s
strategic direction, they can nevertheless provide useful performance data. For
example, consider how this is done at Federal Express (Fed Ex), which has revised
its performance management system to include measures of customer service.32
FedEx employees 400,000 employees; has a total income of US$1.82 billion; and on
average, it ships more than 13 million packages every business day. In 2017, it
was ranked as one of Fortune’s “100 Best Places to Work For.” The company uses
a six-item customer-satisfaction survey which is evaluated by a representative
sample of the employee’s customers at the end of the year. As a result of adding
customer input and customer-developed goals to the performance review process,
employees are more focused on meeting customer expectations.

Fed Ex already uses external customer input in evaluating performance, but
organizations in other industries have some catching up to do. For example, a
study examining appraisal forms used to evaluate the performance of account
executives in the largest advertising agencies in the United States found that much
more emphasis is placed on internal than on external customers.33 Specifically,
external client feed back was measured in only 12% of the agencies studied. About
27% of agencies do not evaluate the contributions that account executives make to
client relationships and to growing the client’s business. In a yet more recent study
involving individuals in charge of the HR function, only 8% reported that clients
and customers provide performance evaluations of employees.34 In short, many
companies might benefit from assessing the performance of employees-including
managers- from the perspective not only of internal, but also external customers.

6-5-6 Employee Performance Monitoring and Big Data
In Chapter 1, we discussed the concept of electronic performance monitoring (EPM)
briefly. In the past, EPM included surveillance camera systems and computer and

180 Part II System Implementat ion

phone monitoring systems. At present, EPM includes wearable technologies and
smartphones, includ ing Fitbits and mobile GPS tracking applications. Indeed, in
the contemporary workplace, every email, instant message, phone call, and mouse
click leaves a digital footprint, all of which can be used as data to be included in
the performance management system.

EPM sparked a lot of enthusiasm about the availability of Big Data, a generic
label used to describe large datasets. Essentially, Big Data is a fancy label for
“a lot of data.” The availability of Big Data related to the behavior of people in
organizations has Jed to the emergence of “people analytics,” “HR analytics,”
“talent analytics,” and “workforce analytics.” 35 Essentially, these are different
labels used to describe how to collect and analyze Big Data.

But the key issue in terms of collecting, compiling, and analyzing perform-
ance data is not Big Data, but Smart Data. An analytics mindset means that we
collect, compile, and analyze data with the goal of gaining insights that can be
used to enhance individual, team, and organizational performance, as well as
individual well-being. Having a lot of data does not mean we have good data.
We should not be enamored by the presence of Big Data, and instead, should
think about the criteria that make data useful and accurate. For example, is the
information related to the position in question; are the issues measured specific,
concrete, meaningful, and under the control of the employee? From the perspec-
tive of employees, is EPM considered usehtl, or a nuisance and an invasion of
privacy? The motto “garbage in- garbage out” is particularly relevant in the
domain of Big Data and performance analytics.36

When implemented well, EPM can lead to very useful data. For example, it
can used to collect information on the various dimensions of performance we
d iscussed in previous chapters, including task performance (e.g., productiv-
ity) and counterproductive performance such as cyberloafing (i.e., spending
time on the Internet engaging in non-work behaviors such as online shopping
or gaming). As an il lustration, consider tracking software such as WorkiQ
and Desk Time, which allows companies to condense real-time employee
behavior data into weekly or quarterly reports that are emailed directly to
the employee, outlining how she used her computer time throughout the
week. Also, mobile tracking systems can yield useful time-oriented data to
help employees engage in safer behaviors. This is precisely what semi-truck
company Ryder implemented recently: A driver-facing camera and a satellite-
based monitoring system to record both positive and negative personal d river
behaviors, such as speeding, safe turning, abrupt braking, and authorized and
unauthorized s tops.37

But EPM certainly has challenges, as was learned the hard way by
Intermex, a money transfer company based in the United States. For example,
EPM can result in feelings of invasion of privacy, perceptions of unfairness,
decreased job satisfaction and organizational commitment, and even increased
counterproductive performance- just the opposite of what EPM is trying to
achieve.38 You can Jearn more about some unintended consequences of EPM
by reading Box 6-3.

Clearly, EPM and Big Data are becoming more and more prominent in orga-
nizationallife as we continue to see technological advancements. So, given that
EPM is likely to be part of most firms, consider the following four evidence-based
suggestions to improve the chances that EPM will lead to positive results39:

Chapter 6 PerFormance Analy tics 181

Box 6-3

Company Spotlight: Employee Performance
Monitoring at Intermex
lntermex is licensed in 49 states in the United States to send
money to 17 countries in latin America. lntermex offers
customers the ability to send money online o r in any of
over 4,400 locations. The company’s management required
employees to download a mobile resource management
appl ication called Xora t hat provided useful on-the-go web
services for employees that often engage in client-related
communication and travel. The goal was for the app t o
gather useful information about employee whereabouts
and transportation metrics during work hours. But Xora
also collected location information via GPS 24 hours a day,
7 days a w eek in order to function effici ently. M yrna Arias,
an lntermex employee, objected to the constant surveillance
and requested that the application only be activated during

work hours. Her manager insisted that Xora be active at
all times for client call purposes, but also bragged to Arias
about the except ional accuracy of the application, claiming
that he cou ld see how fast she was driving at any g iven
time, including outside of work ing hours. Perturbed by
the manager’s indiscreet use of the application and her
now perceived loss of privacy, she decided to deactivate
the application for her own p rivacy concerns. Desp it e
being an excellent employee, Arias was scolded for her
actions and was soon f ired for noncompliance, leading to
a lengthy lawsuit with damages of more than US$500,000 for
lost wages. The lesson? It is critica l to consider employee
reacti ons bef ore impl ementing employee performance
monitoring systems.40

1. Be transparent. Employees need to know that they are being monitored. In
fact, employee reactions will be affected by their perceptions of justice and
the most negative reactions to EPM come from employees who do not
know whether they are being monitored, why they are being monitored,
or how they are being monitored.

2. Be aware of all potential employee reactions. Even when perceived as fair, EPM
is nevertheless likely to be perceived as invasive. Also, employees respond
d ifferently to two types of EPM because they target different aspects of the
employee. First, passive monitoring typically concerns artifacts of employee
behavior, such as emails and number of phone calls. Second, active
monitoring involves evaluating real-time location (i.e., GPS, surveillance
cameras), computer (i.e., time spent on computer), or Internet use (i.e.,
website tracking). Consider making sure you do the following to minimize
negative reactions: (1) if there is a choice, use the least invasive technique
possible, (2) make sure employees understand the reasoning behind the
decision and have an opportunity to voice their opinions and concerns,
and (3) make sure employees understand the details of the monitoring
system (e.g., what information is collected and stored and how is it used) .

3. Use EPM for learning and development. Employees are more likely to
accept EPM when it is used for learning and development purposes. For
example, in the case of Ryder, it would be important to use the resulting
data in subsequent training programs teaching drivers how to improve
their safe-turning skills.

4. Restrict EPM to job-related behaviors and behaviors. As in the case described
in Box 6-3, EPM can blur the boundaries between work and personal life.
Make sure that data collected are job-related.

182 Part II System Implementation

6-5-7 Disagreement Across Sources of Performance Data: Is This
Rea lly a Problem?

If performance information is collected from more than one source, it is likely
that there will be some overlap in the dimensions measured.41 For example, a
manager’s peers and direct supervisor may rate him on the same competency
“communication.” In addition to the overlapping dimensions across sources,
each source is likely to evaluate performance dimensions that are unique to each
source. For example, direct reports may evaluate “delegation,” but this compe-
tency may not be included on the form used by the d irect supervisor. Once the
competencies and results that need to be measured are identified for a particular
position, a decision needs to be made regarding which source of information will
be used to assess each dimension. Regardless of the final decision, it is important
that employees take an active role in deciding which sources will rate which
dimensions. Active participation in the process is likely to enhance acceptance
of results and perceptions that the system is fair.

When the same dimension is evaluated across sources, we should not necessarily
expect ratings to be sirnilar.42 Different sources disagreeing about an employee’s
performance is not necessarily a problem. For example, self-ratings of salespeople
do not necessarily agree with the ratings given by their direct supervisor, which
may indicate misunderstandings regarding the nature of performance.43 Also,
those rating the same employee may be drawn from different organizational levels,
and they probably observe different facets of the employee’s performance, even
if they are eval uating the same general competency (e.g., “communication” or
“sales behavior”). In fact, the behavioral indicators for the same competency may
vary across sources. For example, an employee may be able to communicate very
well with his superior, but not very well with his direct reports. The important
issue to take into account is that for each source, the behaviors and results to be
rated must be defined clearly so that biases are minimized. In terms of feedback,
however, there is no need to come up with one overall conclusion regarding the
employee’s performance. On the contrary, it is important that the employee receive
information on how her performance was rated by each of the sources used. This
is the crux of what are called 360-degree feed back systems, which are discussed in
more detail in Chapter 8. When feedback is broken down by source, the employee
can place particular attention and effort on the different performance touchpoints.

If disagreements are found, a decision must be made regarding the relative
importance of the rating provided by each source. For example, is it equally
important to please external and internal customers? Is communication an
equally important competency regarding direct reports and peers? Answering
these questions can lead to assigning differential weights to the scores provided
by the different sources in computing the overall performance score used for
administrative purposes.

6-6 UNDERSTANDING INTENTIONAL RATING DISTORTION:
A MODEL OF RATER MOTIVATION

Regardless of who rates performance, performance ratings may be intentionally
distorted or inaccurate. When this happens, incorrect decisions may be made;
employees are likely to fee l they are treated unfairly; and the organization is more

Chapter 6 PerFormance Analy tics 183

prone to litigation. In other words, when performance ratings are distorted, the
performance management system not only fails to result in desired outcomes, but
also, may lead to very negative consequences for employees and the organiza-
tion. To prevent these negative outcomes, we need to understand why raters are
likely to provide d istorted ratings. We address intentional distortion here and
unintentional distortion in Chapter 7.

Intentional rating behaviors are influenced by (1) the motivation to provide
accurate ratings and (2) the motivation to distort ratings.44 The motivation to
provide accurate ratings is determined by whether the rater expects positive
and negative consequences of accurate ratings and by whether the probability
of receiving these rewards and punishments will be high if accurate ratings are
provided. Similarly, the motivation to d istort ratings is determined by whether
the rater expects any positive and negative consequences of rating distortion
and by the probability of experiencing such consequences if ratings are indeed
distorted. Consider a supervisor and his motivation to provide accurate ratings.
What will the supervisor gain if ratings are accurate? What will he lose? Will
his own performance be rated higher and will he receive any rewards if this
happens? Or will the relationship with her direct reports suffer? The answers to
these questions provide information about whether this supervisor is likely to
be motivated to provide accurate ratings. Similarly, are there any positive and
negative consequences associated with rating distortion? What is the probability
that this will indeed happen? The answers to these questions will determine the
supervisor’s motivation to distort ratings.

There are motivational barriers that prevent raters from providing accurate
performance information. Raters may be motivated to distort performance in-
formation and provide inflated or deflated ratings.45 Rating inflation is usually
called lenienClJ e”or (i.e., when raters assign high lenient ratings to most or all
employees) and deflation is usually called severity error (i.e., raters assign low
ratings to most or all employees).46 In fact, supervisors may not even be trying to
measure performance accurately, and instead, may attempt to use performance
ratings for other goals that are unrelated, and often run completely counter, to
what a good performance management system is trying to accomplish.47 For
example, a supervisor may be motivated to provide inflated ratings to:

• Maximize the merit raise and rewards. A supervisor may want to produce
the highest possible reward for her employees and she knows this will
happen if she provides the highest possible performance ratings.

• Encourage employees. A supervisor may believe that employees’ motivation
will be increased if they receive high performance ratings.

• Avoid creating a written record. A supervisor may not want to leave a
“paper trail” regarding an employee’s poor performance because such
documentation may eventually lead to negative consequences for the
employee in question. This situation is possible if the supervisor and
employee have developed a friendship.

• Avoid confrontation with employees. A supervisor may feel uncomfortable
providing negative feedback, and to avoid a possible confrontation with
the employee, he may decide to take what may seem like a less painful
path and give inflated performance ratings.

• Promote undesired employees out of unit. A supervisor may believe that if
an employee receives very high ratings, he may be promoted out of the

184 Part II System Implemen tation

unit. The supervisor may regard this as an effective way to get rid of
undesirable or disliked employees.

• Make the manager look good to his own supervisor. A supervisor may believe
that if everyone receives very high performance ratings, she will be
considered an effective unit leader. Moreover, when the performance
ratings for the manager himself depend on the performance of her direct
reports, managers are likely to inflate their direct reports’ ratings.48

We can understand each of the reasons for a supervisor’s choosing to inflate
ratings using a model of rater motivation. For example, looking good in the eyes
of one’s own supervisor can be regarded as a positive consequence of providing
inflated ratings. Avoiding a possible confrontation with an employee can also
be regarded as a positive consequence of providing inflated ratings. Thus, given
these anticipated positive consequences of rating inflation, the supervisor may
choose to provide distorted ratings.

Supervisors may also be motivated to provide ratings that are artificially
deflated. Some reasons for this are to:

• Shock an employee. A supervisor may believe that giving an employee a
“shock treatment” and providing deflated performance ratings will jolt the
employee, demonstrating that there is a problem.

• Tench a rebellious emplm;ee a lesson. A s upervisor may wish to punish an
employee or force an employee to cooperate with the s upervisor and
believes that the best way to do this is to give deflated performance ratings.

• Send a message to the emplm;ee that he should consider leaving. A supervisor
Jacking communication skills may wish to convey the idea that an
employee should leave the unit or organization. Providing deflated
performance ratings may be seen as a way to communicate this message.

• Build a strongly documented, written record of poor perfonnance. A supervisor
may wish to get rid of a particular employee and decides that the best way
to do this is to create a paper trail of substandard performance.

We can also understand the psychological mechanisms underlying the deci-
sion to provide deflated ratings. For example, if shocking employees and build-
ing s trongly documented records about employees are considered to be positive
consequences of rating deflation, it is likely that the s upervisor will choose to
provide distorted ratings.

Fundamentally, this discussion should allow us to see that the process of
eval uating performance can be filled with emotional overtones and hidden
political and personal agendas that are driven by the goals and motivation
of the person providing the rating.49 If raters are not motivated to provide
accurate ratings, they are likely to use the performance management system
to achieve political and o ther goals, s uch as rewarding allies and punishing
enemies or competitors, instead of using it as a tool to improve employee, and
ultimately, organizational performance.50 Thus, it is important to understand
the influence of context on the accuracy of performance ratings and also be
aware that performance measurement does not take place in a vacuum, but as
mentioned this text, in an organizational context with written and
unwritten norms. 1

Chapter 6 Performance Analytics 185

Rating Inflation Rating Deflation

Max1mize the merit raise and rewards

Encourage employees

Avoid creaung a written record

Avoid a confrontation with employees

Promote employees out of unit

Make manager look good to his or her supe!VIsor

Shock employees

Teach a rebellious employee a lesson

Send a message that employee should

consider leaVing

BUild a record of poor performance

Table 6-3 s ummarizes the reasons discussed earlier for why raters are likely
to inflate or deflate ratings. What can be done to prevent conscious d is tortion of
ratings? Considering a model of rater motivation, we need to provide incentives
so that raters will be convinced that they have more to gain by providing accurate
ratings than they do by providing inaccurate ratings. 52 For example, if a supervisor
is able to see the advantages of a well-implemented performance management
system, as opposed to one dominated by office politics, she will be motivated to
help the system succeed. Also, if a s upervisor believes there is accountability in
the system, and ratings that are overly lenient are likely to be easily discovered,
resulting in an embarrassing situation for the s upervisor, leniency is also likely
to be minimized. Lenient ratings may be minimized when supervisors under-
s tand they will have to justify their ratings to their own supervisors. 53 In terms
of increasing accountability, specific recommendations include the followinlf:

1. Have raters justify their ratings. Ratings are more accurate when raters are
told they will have to justify their ratings to someone with authority, such
as their own supervisors. However, rating accuracy does not necessarily
improve if raters need to justify their ratings to others with less authority,
such as their own direct report.

2. Have the raters justifi; their ratings in a Jace-tojace meeting. Ratings are also
more accurate when the rating justifications are offered in a face-to-face
meeting, compared to justifications offered in writing only.

In a nutshell, a supervisor asks herself, “What’s in it for me if I provide accurate
ratings versus inflated or deflated ratings?” The performance management sys-
tem needs to be designed in such a way that the benefits of providing accurate
ratings outweigh the benefits of providing inaccurate ratings. This may include
assessing the performance of the supervisor in how she is implementing per-
formance management within her unit, and communicating that performance
management is a key part of a supervisor’s job. Also, supervisors need to have
tools available to make their job of providing accurate ratings and feedback easier.
This includes training on, for example, how to conduct the appraisal interview
so that s upervisors are able to provide both positive and negative feed back and
are skilled at conveying both positive, and especially, negative news regarding
performance.

In sum, raters are likely to make intentional errors in rating performance. To
understand intentional distortion of ratings, it is critical to consider the motivation

TABLE 6 -3
Reasons for Rating Distortion

186 Part II System Implementation

of raters and to provide a clear answer to the “What’s in it for me?” q uestion.
In other words, raters need to be able to see the benefit of providing accurate
ratings compared to providing inaccurate ones.

In addition to conscious and intentional errors in the rating process described
in this chapter, raters are likely to make unintended errors. Observing information
about performance, s toring this information in memory, and then recalling it
when it is time to fill out the appraisal form is a complex task. This task becomes
more diffic ult with m ore complex jobs that include several unrelated performance
dimensions. Because of the cognitive complexity of the performance evaluation
process, raters are likely to m ake not only intentional, but also unintentional
errors in evaluating performance. 55 These errors, and training programs aimed
a t minimizing these unintentional errors, are discussed in detail in Chapter 7.

SUMMARY POINTS

• Judgments and evaluations of performance are ubiquitous and
inescapable in organizations, even if they are not made explicit or called
“performance ratings,” and instead, labeled “judgments,” “achievement
metrics,” or “expectations.” Even if they do not say it openly, s upervisors
and peers form impressions and evaluate the performance of people
around them on a daily basis-altho ugh these evaluations are not written
down or said out loud. Performance analytics involves the systematic use
of techniques for collecting and compiling performance data. Performance
analytics is critical to be able to manage individual and team performance.
Absent performance analytics, it is difficult to understand w hether
employees are making progress, to make decisions about promotions
and compensation, and to create a “personal growth and development
culture” that offers meaningful development and coaching opportunities.

• Appraisal forms are the key data collection tools used to measure
performance. Care and a ttention are required to ensure that the forms
include all the necessary components. The most usehtl forms include the
following components (1) basic employee information; (2) accountabilities,
objectives, and standards; (3) competencies and behavioral indicators; (4)
major achievements and contributions; (5) developmental achievements;
(6) developmental needs, plans, and goals; (7) performance to uch points;
(8) employee comments; and (9) signatures. Note, however, that one size
does not fit all, and different components are appropriate, based on the
purposes of the appraisal.

• Regardless of the specific components included in the appraisal form,
there are several fea tures that m ake appraisal forms particularly effective.
These are (1} simplicity, (2} relevancy, (3) descriptiveness, (4) adaptability,
(5) comprehensiveness, (6) definitional clarity, (7) communication, and

Chap t er 6 Performance Analytics 187

(8) time orientation. Before it is used, each form needs to be evaluated,
based on the extent to which it complies with each of these characteristics.

• For administrative purposes, it is usually desirable to compute an
employee’s overall performance score. Two approaches are available:
judgmental and mechanical. The judgmental procedure considers
every aspect of performance, and then, arrives at a fair and defensible
summary. The mechanical proced ure consists of combining the scores
assigned to each performance dimension, usually taking into account
the relative weigh t given to each d imension. The mechanical procedure
is recommended over the judgmental procedure, which is more prone
to biases. Rounding of overall scores can be implemented (upward or
downward ), based on the information includ ed in the “Comments”
section of the appraisal forms. However, for this to happen, there mus t
be a systematic analysis of this text-based information and raters must be
provided clear guidelines regarding w hat to include in these “Commen ts”
sections.

• It is recommended that the period for the formal review be six months
(i.e., semiannual) or three months (i.e., quarterly) . This provides fairly
frequent opportunities for a formal discussion about performance issues.
It is more convenient if the completion of the appraisal form coincides
with the fiscal year so that rewards can be allocated shortly after the
employee has received her performance review.

• Performance management systems can include up to six separa te
formal meetings between the s upervisor and the direct report (1) system
inauguration, (2) self-appraisal, (3) classical performance review,
(4) merit/salary review, (5) development plan, and (6) objective setting.
In practice, these meetings are usually condensed into two or so meetings
during each review cycle. One point that sho uld be emphasized is that
these are fomlfll meetings. Informal “check-in” meetings involving a
d iscussion of performance issues should take place on an ongoing basis.
To create a c ulture of performance improvement, conversations about
performance should be routine and part of everyone’s job.

• Several sources can be used to obtain performance information and these
includ e all of the relevant performance touchpoints: supervisors, peers,
d irect reports, self, and customers, as well as performance monitoring
systems that prod uce Big Data. Before selecting a source, one needs to
be sure that it has firsthand knowledge of the employee’s performance
(i.e., that it is indeed a performance touchpoint). Using each of these
sources has advantages and disad van tages, none o f which is foolproof,
and not all may be available in all sit uations. However, it is important
that employees take part in the process of selecting which so urces will
evaluate which performance dimensions. Active employee participation
in the process is likely to enhance acceptance of results and perceptions
that the system is fair.

• Employee performance m onitoring (EPM) is now pervasive, given
technological advancements. However, to make sure that the resulting Big
Data are “Smart Data” (i.e., useful, accurate, and fair), it is important to be

1U Part II System Implementation

transparent (i.e., employees need to know that they are being monitored),
to be aware of all potential employee reactions (i.e., even when perceived
as fair, EPM is nevertheless likely to be perceived as invasive so it is
important to explain how data are collected and how they will be used),
use EPM for learning and development purposes, and restrict EPM to
job-related behaviors and behaviors.

• When multiple performance touchpoints are used to collect
performance data, there may be disagreements in the resulting ratings,
even if these multiple sources are rating the same performance
dimension. The people rating the same employee may be drawn from
different organizational levels, and they may observe d ifferen t facets
of the employee’s performance, even if they are evaluating the same
general competency (e.g., “communication”). If an overall score is
needed that considers all sources, then a weighting mechanism is
needed. For example, a decision needs to be made regarding whether
performance information provided by the supervisor has more or less
relative importance than that provided by customers. There is no need
to summarize the information across the sources for feedback purposes;
in fac t, it is beneficial for the employee to receive feedback broken down
by source so the employee can place particular attention and effort on
the interactions involving any source that has detected performance
deficiencies.

• In providing performance information, raters may make intentional
errors. These errors may involve inflating or deflating performance scores.
For example, a supervisor may want to avoid a confrontation with his
employees, and so, inflate ratings. A peer may believe that providing
accurate ratings may jeopardize the relationship with a colleague, and
may, consequently, provide inflated ratings.

• When raters provide performance ratings, they are faced with providing
either accurate or inaccurate ratings. They weigh the costs and benefits of
choosing one or the other path. If the cost/benefit equation does not favor
providing accurate ratings, it is likely that ratings will be distorted. When
this happens, incorrect decisions may be made, employees are likely to
feel they have been treated unfairly, and the organization is more prone to
litigation. In other words, when performance ratings are distorted because
raters are not motivated to provide accurate scores, the performance
management system not only will fail to achieve desired outcomes, but
also may lead to very negative consequences for employees and the
organization.

• Intentional distortion in ratings can be minimized by providing raters
with information about how rating employees accurately will provide
them with direct and tangible benefits. No performance management
system is foolproof, and performance ratings are inherently subjective;
however, implementing interventions that enhance accountability such
as having to justify ratings to superiors in a face- to-face meeting and
incentives associated with accurate ratings provides raters with the
needed motivation to minimize intentional distortion.

Chapter 6 Performance Analy!ics 189

EXERCISE 6-1 CHOOSING A PERFORMANCE APPRAISAL FORM VENDOR

The goal of this exercise is to critically review the performance appraisal forms
offered by various vendors. At the end of your exercise, you will present your
findings to the rest of the class.

Steps:

1. Conduct a Google search for performance appraisal vendors and identify
five that you will use for this exercise.
a. Useful websites include, for example, those maintained by the Society

for Human Resource Management (SHRM); HR-Guide,b and Capterrac
2. Eval uate the performance appraisal forms that the vendors provid e.

a. As a first step, examine if the forms contain the following components:
(Hint: Section 6-1 Usehtl Components of Appraisal Forms provides
greater detail about each of these components.)
• Basic employee information
• Accountabilities, objectives, and stand ards
• Competencies and behavioral indicators
• Major achievements and contributions
• Developmental achievements
• Developmental needs, plans, and goals
• Performance touchpoints
• Employee comments
• Signatures

b. Second, assign a score from 0 (lowest) to 10 (highest) to each form on
each of the features listed below, and note the reasons for the score
you assign. Total the score for each form. (Hint: Section 6-2 Desirable
Features of Appraisal Forms provides greater d etail about each of
these features.)
• Simplicity
• Relevancy
• Descriptiveness
• Adaptability
• Comprehensiveness
• Definitional clarity
• Communication
• Trme orientation

“Society for Human Resource Management. (20 17). Performance management. Avail able at: http://vendor·
d irectory.shrm.orgtcategoryltalent·managementlperformance·management
b HR·Guide.com. (2017). Performance appraisal systems/vendors. Available at: http://www.hr..guide.com/
Performance/Appr aisai_Systems_ Vendors.htm
c capterra . (201 7). Top performance appraisal software products. Available at: http://www.capterra.com/
performance·appraisai<>Software/

1.0 Part II System Implementation

c. Next, review how the form computes the overall performance score.
(Hint: Section 6-3 Determining Overall Rating clarifies and provides
examples of these strategies.)
• Does it use a judgmental or mechanical strategy?
• Does it include space for “Comments” or “Feedback? ”

3. Examine the vendor’s website to determine what other performance
management software/applications/sol utions they offer. These may
include, for example:
a. Skills-matrices and competency worksheets
b. App-based software that allows for real-time performance

measurement entry
c. Observation checklists
d. Employee evaluation dashboards
e. Rater training programs

4. Based on your critical assessment, identify the top two appraisal forms
and the top two performance appraisal vendors (Note: The top two forms
may or may not come from the top two vendors) .
a. For the forms, remember to take into account all three aspects listed

in Step 2 (i.e., components, total score for features, and overall score
computing method)

b. For the vendors, consider issues such as customizability, ease-of-use
and implementation, and cost.

5. Prepare a brief report, including a 10-minute presentation describing the
best vendors and forms yo u fo und.
a. Make sure to highlight why you chose the particular forms/vendors.
b. Note at least two improvements that could be made to each of the

top-two forms.

EXERCISE 6-2 EMPLOYEE PERFORMANCE MONITORING AT TUMGO: GOOD
OR BAD IDEA?

Tumgo, a leading energy drink maker, was facing a challenge in managing
its sales force and distributing its drinks to custo mers and retailers spread
throughout the nation. As the company’s sales force continued to grow, it
needed a better way to manage its d istribution network and the g rowing
number of remote employees. Faced with this challenge, Tumgo’s Vice
President of Sales decided to implement TumStreets mart (Tum), an employee
performance m onito ring system (EPM) that uses mobile phones’ GPS to track
employees’ locations.

Tum allows dispatchers to see the exact location of remo te employees
on a map, and uses mobile forms to gather data from the field, such as how

Chapter 6 PerFormance Analytics 191

fast em ployees a re d riving at any given point of time to assist and automate
d ispatch decisions. a,b By doing so, Tum enables companies to improve dispatch
decisions, reduce fuel consumption and overtime, and increase the productiv-
ity and efficiency of the fleet. The system also allows the employer to know
exactly when employees s ign in using m obile apps, rather than paper time
sheets, a nd their location (e.g., whether someone signs in from home) .< Finally,
information fro m the system is integrated with payroll software, simplifying
the payment process and saving administrative time, thus allowing for more
accurate billing. Overall, the system increases efficiency by saving time, saving
fue l, providing faster customer service. In order to func tion as efficiently as
possible, Tum needs to collect information via its GPS technology 24 hours a
day, 7 days a week.

By implementing Tum, Tumgo will be able to track how many miles per
hour are covered by its sales force, how many s tops they made each day, and
how long they spent at each stop. This will also enable the company to improve
customer service by making sure every store is visited regularly. To implement
Tum, Tumgo req uired all employees to d ownload the application onto their
mobile devices, and to ensure the efficiency of the software, keep the application
activated 24 hours a day.

Steps:
One group of students will argue in favor of the employee performance
management system (Tu m), while the o ther group will argue against the
system . As you develop arguments agains t o r for Tum, consider the fo llowing
issues:

• Usefulness in achieving the company’s goals (Is the data being collected
useful and accurate? Is the information being collected related to the
position in question?)

• Effectiveness in delivering goals (Will the EPM provide data on issues that
are specific, meaningful, and under the control of the employees?)

• Employee reactions to the system (e.g., perceptions of fairness, job
satisfaction/morale, commitment, stress and employee well-being)

• Effect of system on employee performance (effects on counterproductive
workplace behaviors, s uch as absenteeism or tardiness, productivity
changes)

• Acceptability of the system
• Legal and ethical issues
• Privacy concerns
• Implementation of the system

” This case is based loosely o n Rock.star Energy: Xora. (n.d.) . Retrieved January 3, 2018, from htt p:llwwwstg
.xora.comlblog/success·stories/rockstar·energy/
b Tomczak, D. L , Lanzo, l. A , & Aguinis, H. (2 018). Evidence-b ased recommendations for employee perfor·
mance monit oring. Business Horizons, 61, 251-259.
c Zetlin, M. (2009, May). Keeping t abs on mobile workers. Inc. Retrieved January 3, 2018, from httpsJ/
www.inc.com/telecom/articles/200905/tracking.html

CASE STUDY 6-1

Judgmental and Mech anical Method s of Assigning
Ov erall Performan ce Score at The Daily Planet

The form here shows performance ratings obtained by David Kuhn, a hypothetical reporter at a major newspaper in the United
States. First, use the judgmental method to come up
with his overall performance score. What is Kuhn’s
overall• performance score?

Second, the form below actually omitted weight
information for the various competencies. The
weights are the following:

Now, compute Kuhn’s overall performance score
using the weights in the table. Is there a difference
between the score computed using a subjective,
rather than the mechanical method? If yes, what
are the implications of these differences for the
employee being rated, for the supervisor, and for
the o rganization?

Quality of work

Oependab•l•ty and adherence to company values and
policies

Contribution to effectlveness of others/unit

Name: David Kuhn Job Title:
Reporter

Dept.: International Supervisor.
John OuBoss

Performance Period: from Jan 19 to Dec 19

.50

.25

.10

Job Description: Researches and writes news, features, analyses, human interest stories. Develops and cultivates news
sources and contacts. Completes assignments by deadlines, ensuring accuracy by verifying sources. Attends newsworthy
events and interviews key sources. Respects confidenti ality as appropriate.

Does not Significantly
fully meet Fully meets exceeds

Unacceptable standards standards standards Outstanding
Productiv•ty-ProduCtion is high rei alive to time and re-
sources consumed: develops expected number of sto-
ries and covers beat adequately to ensure stories are 1 ell 3 4
detected as they break: stories are developed within
time frame that enables deadlines to be met and ap.
propriate rev•ews are performed as they are refined.

“Adapted from R. J. Greene, 2003, “‘Contri buti ng to Organizational Success Through Effective Performance Appraisal, .. Alexandria,
VA. Society for Human Resource Management.

5

Chapter 6 Performance A nalytlcs 1•s

Quality of work-Work meets quality standards and
established editorial standards: stories are wntten
in clear and appropriate manner. are consistent with
ed1torial policy, and are fair and balanced; research
is thorough and encompasses all relevant sources. 1 2 3 11> 5
which are venfied to ensure accuracy: works with
editors to revise and improve content: develops and
maintains network of contacts who can provide early
notification o f breaking stories.

Dependability and adherence to company values and
policies-Consistently meets deadlines; conforms to
attendance policies: adapts to work demands; con-
forms to established values and policies: adheres to 1 2 3 4 ®
ethical standards of the paper and the profession; re-
spects confidentiality as appropriate; behaves in man-
ner that enhances the image o f the paper.

Contribution to effectiveness of others/unit-Works
with others within and outside the unit in a manner that
improves their e ffectiveness: shares information and
resources; develops e ffective working relationships; 1 <%l 3 4 5
builds consensus: constructively manages conHict
contnbutes to the e ffectiveness o f own uniVgroup and
the paper.

CASE STUDY 6-2

Minimizing Distortions in Performance Data at Expert
Engineering, Inc.

Under various engineer titles, veteran engineer Demetri worked for Expert Engineering, Inc. for almost 15 years. He has recently been promoted
to the position of Principal at the engineering firm. The
firm’s performance evaluation history is both unique
and long. All principals are involved in evaluating
engineers because the founders of the firm believed
in multiple source evaluation and feedback to prevent
favoritism and promote a merit-based culture. At the
same time, the firm has a long history of using quality
performance appraisal forms and review meetings to
better ensure accurate performance evaluations. Several
months ago, however, the firm initiated a big hiring
initiative of a dozen new engineers, nine of whom turn
out to be graduates from Purdue University, which is

the same university from which Demetri graduated.
Indeed, Demetri was active in moving forward the
hiring initiative. There is tension and d iscontent among
the other principals, who fear that a time of unchecked
favoritism, biased performance ratings, and unfair
promotion decisions is on the rise.

1. Provide a detailed discussion of the
intentional rating distortion fac tors that may
come into play in this situation.

2. Evaluate the kinds of interventions you
could implement to minimize intentional
rating distortion, and its reasons, that you
have described. What do you recommend
and why?

194 Part II System Implementation

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e m p loyee appraisal. Academy of Managemezzt Executive, 1, 183-193.

46. Dewberry, C., Davies-Muir, A., & Newell, S. (2013). Impact an d causes of ra ter severity I
leniency in appraisals without postevaluatio n comm unication between raters and rates.
lntmzationaljoumal of Selection and Assessment, 21,286-293.

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o f job perform an ce. Industrial and Organizational Psyclzology, 1,197-205.

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48. Spen ce, ) . R., & Keeping, L. M. (2010). The impact of non-per fo rmance information o n ra tings
of job performan ce: A policy-capturing approach.Joumal of Organizational Behavior, 31,
587…008.

49. Rosen, C. C., Kacmar, K. M., Harris, K. )., Gavin, M. B., & Hochwarter, W. A. (2017).
Workplace politics and performan ce appraisal: A two-study, m ultilevel fie ld investigation.
joumal of /..i’adership and Organizational Studies, 24, 20-38.

50. Xiaoye May, W., Kin Fai Ellick, W., & Kwong,). Y. (2010). The roles of ra ter goals and ratee
performance le’els in the d is tortion of performance ratings.joumal of Applied Psychology, 95,
546-561.

51. Murphy, K. R. {2008). Explaining the weak relationship between job perform ance and ratings
of job performan ce. Indu strial and Organizational PsyclJOiogy, 1,148-160.

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ratings: A m e ta-analytic review. Human Resource M.anagemeut Review, 27, 121-133.

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chapter

7
Rolling Out
the Performance
Management System

Good governance with good intentions is the hallmark of our government.
Implementation with integrity is our core passion.

-Narendra Modi

Learning Objedives
By the end of th is c hapter, you will be able to do the foll owi ng :

1. Prepare the rollout and 1mplementat1on of a new or up- and possibly. a manager 1n the role of arbitrator
dated and rev1sed performance management system by and final decision maker.
sett1ng up a commumcat1on plan. appeals process. rater s. Antic1pate unmtent1onal ratmg errors such as s1milar to
tra1mng program. and pilot test me. contrast. halo. pnmacy. recency. negat1v1ty. f1rst lm-

2. Create a commumcahon plan that answers the followmg key pression. stereotype. and attr1but1on.
quest1ons: What IS performance management? How does 6. Design and 1mplement rater errors. frame of reference.
performance management lit 1n the orgamzabon·s strategy7 and behavioral observat1on trammg programs to mmi-
How does everyone benefrt from the system7 How does the mize the impact of umntent1onal ratmg errors.
performance management system work7 What are every- 7. Devise a pilot test of the performance management system
one’s responsrb1ht1es7 How IS performance management using a selected group of employees and managers from
related to other key organrzatronal inrt1at1ves7

3. Prepare interventions aimed at dealing with cognitive
biases (i.e .. selective exposure. selective perception.
selective retention) and resistance to change, involve all
employees and understand their needs. provide facts and
consequences of the system. and use multiple channels of
communication and credible communicators.

4. Devise an appeals process to enhance the integrity of the
performance management system that involves the human
resources (HR) department. a panel of managers and peers.

the organization.
8. As soon as the performance management system is in place.

collect various measurements. such as number of individuals
evaluated, quality of performance informat1on gathered.
quality of performance discussion meetings. user satisfac-
tion with the system. overall cosUbenefit ratio. and unrt- and
organization-level performance indicators-all of these will
provide information regarding the system’s effectiveness
and the extent to which it is working the way rt should and
whether it is producing the expected results.

197

1518 Part II System Implementation

Chapters 4 and 5 described operational details about how to define and
measure performance. Chapter 6 described operational details about perfor-
mance analytics- the process of collecting and compiling performance data.
This chapter, the last one in Part II, continues to address operational issues in
implementing a performance management system. Specifically, it addresses
the steps needed to roll out the system, such as setting up good communica-
tion and appeals procedures that will gain system acceptance, implement
training programs to minimize unintentional rating errors, and pilot test the
system. Finally, the chapter describes how to monitor the system as soon as
it is in place to make s ure it is working properly. Taken together, these s teps
are necessary to make s ure that performance management is implemented
w ith integrity.

Before we begin, here is an important clarification: The term “implementation”
of the performance management system does not refer only to launching an
entirely new system . In most cases, an organization will alread y have some type
of performance management system, although it may be closer to a once-a-year
performance appraisal system and not very effective. So, by using the term
“implementation” we are referring not only to launching a new system from
scratch, but also to revising and improving an existing one. For example, it may
be the case that the organization is under new leadership, and this new leadership
wants to implement a better system.

7-1 COMMUNICATIO N PLAN
In general, having more and better knowledge of the performance management
system leads to greater employee acceptance and satisfaction.1 Organizations
often design a communication plan to ensure that information regarding the
performance management system is disseminated widely in the organization.
A good communication plan answers the following questions2 :

• What is performance management? Answering this question involves
providing general information about performance management,
how performance management systems are implemented in other
organizations, and the general goals of performance management systems.

• How does perfonnance management fit into our strategy? To answer this
question, we should provide information on the relation between
performance management and strategic planning. Specifically, information is
provided on how the performance management system will help accomplish
strategic goals. Recall that Chapter 3 addressed this issue in detail.

• What is in it for me? A good communication plan describes the benefits of
implementing performance management for all those involved.

• How does it work? Answering this question entails giving a detailed
description of the performance management process and time line: for
example, w hen meetings will take place, what the purposes of each
meeting are, and when decisions about rewards will be made.

• What are my responsibilities? The communication plan should include
information on the role and responsibilities of each person involved at

Chapter 7 Rolli ng Out the Performance Management System 1H

each stage of the process. For example, it includes a description of the
employees’ and supervisors’ main responsibilities in the performance
management process.

• How is perfonnance management related to other initiatives ? The
communication plan should include information on the relationship
between performance management and o ther initiatives and systems,
such as training, promotion, and succession planning.

Figure 7-1 summarizes the questions that should be answered in a state-of-the
science performance management communication plan. As an example, consider
the performance management system for the position of Senior Executive Service
(SES), which is a position in U.S. federal agencies such as the Department of Justice,
Department of Interior, Department of Energy, and Department of Commerce.3
SES members serve in key leadership positions directly below the top presidential

Performance Management
Communication Plan

FIGURE 7-1
Performance Management
Communication Plan: Basic
Components

200 Part II System Implementation

appointees. SES members link the appointees to the rest of the federal govern-
ment, and they are charged with overseeing various governmental functions in
U.S. federal agencies.

The communication plan that the Department of Justice implemented for
this performance management system answers each of the questions described
earlier and included in Figure 7-1:

• What is performance management? The plan states the reasons for the
department’s implementing a performance management system and
d iscusses what it is expected to accom plish. For example, it explains
that performance management aims at promoting efficient and effective
attainment of the department’s mission, program objectives, and
strategic planning initiatives, and it also aims at m otivating high levels
of achievement and accountability. It also includes definitions of several
key terms, including performance management system, performance, progress
review, rating levels, and annual summary rating.

• How does performance management fit into our strategy? The plan includes
a list of principles that g uide the system, including, “The Department of
Justice federal leaders and managers create a climate for excellence by
communicating their vision, values and expectations clearly.” It goes on to
detail all of the ways in which leaders in the agency do this. In addition,
the director of the Office of Personnel Management (OPM) describes
how the system would be used to implement key principles, including
excellence.

• What is in it for me? There is clear information on how the performance
management system will help the SES members be more effective leaders
so that the department’s mission can be achieved.

• How does it work? The plan outlines the steps in a performance
management process, detailing the managers’ responsibilities at each step.
For example, it o utlines the performance dimensions, the rating categories,
and how to assign an overall rating.

• Wlzat are my responsibilities? The communication plan outlines the
responsibilities of theSES members as well as their rating official, the
person in charge of rating their performance. The plan em phasizes
that leaders must create a high-performing culture by continually
communicating expectations and rewarding high-achieving performers.

• How is performance management related to other initiatives? The
communication plan touches briefly on the importance of linking system
outcomes to performance-based pay. The importance of training to
maximize performance is also considered.

In summary, the communication plan implemented by the Department of
Justice is quite detailed and provides answers to most, if not all, of the key ques-
tions that should be addressed by a good plan. However, even if a communication
plan answers all or most of the important questions, the fact that the information
has been made available does not necessarily mean the communication plan will
be successful in gaining acceptance of the system. This is because people have
cognitive biases that affect what information is taken in and how it is processed .
Also, in the case of an organization that alread y has a system in place, and a better

Chapter 7 Ro lling Out the PerFormance Managemen t System 201

one is being rolled out, it is likely that many people will not be comfortable with
the change, and might engage in what is called resistance to change.4 We discuss
these issues next.

7 ·1·1 Dealing wit h Cognitive Biases and Resistance to Change
There are three types of biases that affect the effectiveness of a communication
plan, regardless of whether it includes the six components shown in Figure 7-1 .
Also, these biases are accentuated when people are not willing or interes ted in
change. The biases are selective exposure, selective perception, and selective retention..5
First, selective exposure is a tendency to expose our minds only to ideas with
which we alread y agree. Those employees who already agree that performance
management is a good idea may become involved in the communication plan
activities, including reading about the system and attending meetings describing
how the system works. On the contrary, those who do not see much value in a
performance management system may choose not to read information about it
and to not attend meetings about it. Second, selective perception is a tendency to
perceive a piece of information as meaning what we would like it to mean even
though the information, as intended by the communicator, may mean the exact
opposite. Someone who believes performance management is about only rewards and
punishments may incorrectly interpret that receiving formal performance feedback
a t the end of each quarter translates exclusively into receiving a pay increase or a
bonus. Third, selective retention is a tendency to remember only those pieces of
information with which we alread y agree. U an employee perceives his employer
as vindictive, that employee is not likely to remember information about how the
appeals process works or about other fair and equitable aspects of the system.

Selective exposure, selective perception, and selective retention biases are
pervasive and could easily render the communication plan ineffective. Fortunately,
there are several ways to minimize the negative impac t of these biases, and
therefore, help gain support for the system. Consider the following6:

• Involve employees. Involve employees in the d esign of the system. People
s upport what they help create. The higher the level of participation is in
designing the system, the greater the support for the system will be.

• Understand employee needs. Understand the needs of the employees and
identify ways in which these needs can be met through performance
management. For example, do they want more feedback? Are they
interested in development activities that would eventually lead to a
promotion or a different job w ithin the organization?

• Strike first. Create a positive attitude toward the performance
system before any negative attitudes and rumors are created. Make
communications realistic and do not set up expectations yo u cannot
deliver. Discuss some of the arguments that might be used against the
system and provide evidence to counter them.

• Provide facts and consequences. Because of the presence of cognitive biases,
facts do not necessarily speak for themselves. Clearly explain facts about
the system and also explain what they mean or what the consequences
are. Do not Jet employees draw their own conclusions because they may
differ from yours.

202 Part II System Implementation

• Put it in writing. In Western cultures, written communications are usually
more powerful and credible than spoken communications because they can be
carefully examined and challenged for accuracy. Create documentation, which
is often posted online for everyone to download, describing the system.

• Use multiple channels of communication. Use multiple methods of
communication, including face- to-face (especially in the case of small
and medium-size organizations) and virtual meetings, email, TED
talks, and short video clips. In o ther words, allow employees to be
exposed repeatedly to the same message delivered us ing different
communication channels . Of course, make sure that all channels convey
consistent information.

• Use credible communicators. Use credible sources to communicate the
performance management system. In companies where HR department
members are perceived as “HR cops” because they continually emphasize
what cannot be done as opposed to how one’s job can be done better, it
may be better to use a different department or group. In s uch situations,
communication should be delivered by people who are trusted and
admired within the organization. It also helps if those delivering the
communication and endorsing the system are regarded as key and
powerful organizational players.

• Say it, and then, say it again. Repeat the information frequently. Because
people can absorb only a small amount of information at a time, and may
be resistant to change, the information must be repeated frequently.

Table 7-1 summarizes what can be done to minimize cognitive biases,
including selective exposure, selective perception, and selective retention.
Consider the Department of Jus tice communication process, described earlier
in this chapter. That p lan a ttempts to mirtimize negative biases and gain sup-
port for the performance management system. For example, although it is a
government agency and the performance management system is a federal
mandate, the Office of Personnel Management (OPM) offered to help managers
tailor the systems to their specific agencies. This is likely to help employees
become more involved and is also helpful in addressing the specific needs of
the employees in the various agencies.
The director of the OPM, who is a ·· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
credible so urce of information on the TABLE 7 ·1
performance management system, set
a positive tone and even appealed to
employees’ patriotism by including a
message from the United States Presi-
dent, reminding them of the importance
of serving the “American people.” The
communication plan also provides facts
and conclusions about the system. For
example, it explains the reasoning for
realigning the performance management
system with the fiscal year, how to carry
o u t this time line, and the importance of

Interventions to M ini mize the Effects of
Cognitive Biases and Resistance to Change

Involve employees

Understand employee needs

Stnke flfst

Provide facts and consequences

Put it in wnting

Use multiple channels of communication

Use credible communicators

Say 1t, and then, say 1t again

Chapter 7 Rolling Out the Performance Management System 203

doing so. The communication plan is also posted on the department’s website.
There are also links to other websites with information about performance
management. It is not clear w hether the Department of Justice d issemina ted
the information using o ther media, such as short video clips. But all in all, the
p lan implemented by the Department of Justice is a good example of a com-
munica tion plan that attempts to minimize the detrimental impact of cognitive
b iases and resistance to change.

In addition to implementing a communication plan, support for the performance
management system can be gained by implementing an appeals process. This
topic is discussed next.

7-2 APPEALS PROCESS
The inclusion of an appeals p rocess is important in gaining employee acceptance
for the performance management system. The reason is that it allows employees
to understand that if there is a disagreement regarding performance ratings o r
any resulting decisions, then such d isagreements can be resolved in an amicable
and nonretaliatory wal In add ition, the inclusion of an appeals process increases
the system’s fairness.

When an appeals process is in place, employees have the ability to question
two types of issues: judgmental and adrninistrative.8 Judgmental issues center
on the validity of the performance eval uation. For exam ple, an employee may
believe that a manager ‘s performance ratings for that employee do not reflect
his actual performance. Ad ministrative issues involve whether the policies
and procedures were followed. For example, an employee may argue that her
supervisor d id not meet with her as frequently as he had with her coworkers
and that the feedback she is receiving about her performance is not as thorough
as that received by her coworkers. Figure 7-2 includes a surnrnary of the three
main levels involved in an appeals process.

Typically, when an appeal is first filed, the HR department serves as a mediator
between the employee and the supervisor. An appeal sent to the HR department
is usually called a Level 1 appeal. The HR department is in a good position
to judge wheth er policies and procedures have been implemented correctly,
and also, has good information about the various jobs, levels of performance
expected, and levels of performance of other employees within the unit and
o rganization. The HR department gathers the necessary facts and brings them
to the attention of either the rater to encourage reconsideration of the decision
that caused the appeal or to the complainant to explain why there have been
no biases or violations. In other words, the HR d epartment either suggests
corrective action to the supervisor or informs the employee that the decision or
procedures were correct.

If the rater does not believe corrective action sho uld be taken or if the
employee does not accept the HR decision, and the appeal continues, then the
process moves to Level 2. In Level 2, there is an outside arbitrator that usually
consists of a panel of peers and managers. The pan el reviews the case, asks
q uestions, interviews witnesses, researches precedents, and reviews policy. Then,
they simply take a vote to make the decision. In some cases, the vote represents

204 Part II System Implementation

FIGURE 7-2
Steps in A ppeals Process

• Appeal sent to human resource (HR) Department
• HR gathers necessary facts
• HR contacts rater and suggests corrective action

(if neocesary)

• Appeal sent to outside arbitrator (e.g., panel of peers
and managers)

• Arbitrator reviews the case, gathers additional
inforrnatoin as needed, votes, and/or forwards to a
high-level manager

• High-level manager (e.g., vice president)
• Takes panel’s vote into consideration and makes final
decision

the final decision. In other cases, the vote is forwarded to a high-level manager
(vice president or higher level), who takes the panel’s vote into consideration in
making the final decision.

Box 7-1 shows some of the key sections of the performance management
appeals process for employees at the University of Lethbridge in Canada.
The appeals process is intended to air concerns and to resolve disagreements.
The purpose of this specific policy is to provide employees and management
with a means for resolving disagreements involving performance evaluations.

The information shown in the box describing the appeals process at the
University of Lethbridge spells out the steps involved, the time line that should
be followed, and the various outcomes that could be expected. Given that such a
policy is in place, employees are given assurances that if there is an appeal, the case
will be treated fairly and as objectively as possible. Once again, this should help
gain support for the performance management system. From yo ur perspective,
how does this process compare to the one s ummarized in Figure 7-2? Is there
anything missing that the University of Lethbridge should consider adding?

Chapter 7 Rolling Out the PerFormance Management System 205

Box 7-1

Company Spotlight: University of Lethbridge
Performance Management Appeals Process
Purpose
The Appeal Process is a means for Employees and Supervisors
to resolve disagreements involving the Performance Evaluation
process. This Appeal Process does not in any way circumvent
or prohibit an employee from the invocation of Article 12;
Grievance Procedure.

Principles
All appeals:

1. Are to be conducted with dipl omacy and
impartiality.

2. Aspire to construct and provide the best possible
information.

3. Maintain confidentiality and respect for the
individual.

Process
If an Employee disagrees with the result of their Performance
Evaluation, as conducted by their Supervisor, the Employee
may appeal in writing to the Office of Human Resources.
A request for appeal must be received within ten (10)
Work Days of the date of the Employee’s signature on
the Performance Evaluation. The deadline for all written
appeal s is the last work day in June. Late applications
shall not be subject to appeal except under extraordinary
circumstances as determined by the Associate VP HR and
Admin. Submi ssion of an appeal must be with the use of
the Performance Evaluation Appeal Form.

Level 1
Following the receipt of an appeal, a member of the
Human Resources Department will conduct a confidential
investigation, gathering information in discussion with
the Employee, the Supervisor, and where necessary other
informed parties. A recommendation for resolution will be

put forward by HR to the Supervisor and Employee. If an
agreement cannot be reached at Level 1 then the appeal
w ill move to Level 2 of the Appeals Process.

Level 2
The appeal will be brought before a Performance Evalu-
ation Committee whose membership sha ll consist of
three (3) AUPE (Alberta Union of Provincial Employees)
Representatives, three (3) Representatives of the Board
and a Facilitator from Human Resources. The committee
members will rema in consistent for all appeals relating
to the evaluation period except in circumstances where
members with a substantial personal or professional
relationship with the employee under appeal shall not
participate in the review.

The committee will consider the information collected by
Human Resources in Level 1, as well as any relevant evidence
that may be offered by the Empl oyee and the Supervisor,
and may seek out other sources that the committee deems
to be of relevance to the appeal. The committee will have
f ive (5) Work Days from the date the committee was
convened to review the evi dence and then forma lly
issue a ruli ng.

Level 3
In the event that an agreement is not achieved in Level 2 the
matter will continue as a grievance commencing at Step 2
of Article 12: Grievance Procedure.

Once a consensus has been reached and si gned by
all parties involved, at any point in the appeal process,
the revi sed Performance Eva luation wi ll be fina l and
not subject to further appeal. All documentati on w ill
be forwarded to the Human Resources department and
will remain confidential. The empl oyee may at anytime
withdraw the appeal request by writing to the Associate
VP HR and Admin who will inform the members of the
committee.

Pe rformance Management- Appeals Process & Appeals Form. AvaiJable online at https://www.uleth.ca/hr/perfonnance–management..appeals·
p rocess-a p peaJs.lonn. Retrieved o n january 2, 2018.

206 Part II System Implementation

7-3 TRAIN ING PROGRAMS FOR MIN IM IZ ING UNINTENTIONAL
RATING ERRORS

Training the raters is another necessary s tep to prepare for the rollout of the
performance management system. Training not only provides participants in
the performance management system with needed skills and tools to do a good
job implementing it, but also helps increase satisfaction with the system.9

In Chapter 6, we discussed wh at to do to minimize intentional rating distortion.
But unintentional errors also affect the accuracy of ratings. Specifically, before rolling
out the performance management system, we should consider implementing
rater training programs that address how to identify and rank job activities and
how to observe, record, and measure performance.

7-3-1 Rater Error Training
Many performance management systems can be plagued with rating errors. In
fact, rating errors are usually the reason why so many performance management
systems are usually criticized. to Accordingly, the goal of rater error training (RE’T)
is to make raters aware of what rating errors they are likel y to make and to help
them develop strategies to minimize those errors. In other words, the goal of RET
is to increase rating accuracy by making raters aware of the unintentional errors
they are likely to make.

RET programs generally include definitions of the most typical errors and a
description of possible causes for those errors. Such programs also allow trainees to
view examples of common errors and to review suggestions on how to avoid making
errors. This can be done by showing video vignettes designed to elicit rating errors
and asking trainees to fill out appraisal forms regarding the sit uations they observed
on the video clips. Finally, a comparison is made between the ratings provided by
the trainees and the correct ratings. The trainer then explains why the errors took
place, which specific errors were made, and ways to overcome the errors in future.

RET does not guarantee increased accuracy. Raters do become aware of
the possible errors they can make, but precisely because many of the errors are
unintentional, simple awareness of the errors does not mean that errors will not
be made. Nevertheless, it may be useful to expose raters to the range of possible
errors. These errors include the following:

• Similar to me error. Similarity leads to attraction, so we tend to favor those
who are similar to us. Consequentl y, in some cases, raters are more likely
to give higher performance ratings to those employees who are perceived
to be more similar to them in terms of attitudes, preferences, personality,
and demographic variables, including race and gender.

• Contrast error. Contrast error occurs when, even if an absolute measurement
system is in place, raters compare individuals with one another, instead
of against predetermined standards. For example, when a rater rates an
individual of only average performance, the rating may actually be higher
than deserved if the other individuals rated by the same rater display
substandard performance levels: the average performer may seem to be
much better in comparison to the others. This error is most likely to occur

Chapter 7 Rolling Ou t the Performance Management System 207

when raters complete multiple appraisal forms at the same time because, in
s uch situations, it is difficult to ignore the ratings given to other employees.

• Halo error. Halo error occurs when raters fail to d istinguish between
the different aspects of performance being rated. Recall, we described
this error in Chapter 6 in the context of peer eval uations. If an
employee receives a high score on one d imension, she also receives
a high score on all other d imensions, even though performance may
not be even across all dimensions. For example, if an employee has a
perfect attendance record, then the rater may give her a high mark on
dedication and productivity. The perfect attendance record, however,
may be caused by the fact that the employee has large loan payments
to make and cannot afford to miss work, not because the employee is
actually an excellent overall performer. In other words, being present
at work is not the same as being a productive employee. This error is
typically caused by the rater’s assigning performance ratings based on
an overall impression about the employee instead of evaluating each
performance d imension independently.

• Primacy error. Primacy error occurs when performance evaluation is
influenced mainly by information collected during the initial phases of the
review period. For example, in rating communication skills, the rater gives
more weight to incidents involving communication that took place toward
the beginning of the review period, as opposed to incidents taking place at
all other times.

• Recency error. Recency error occurs when performance evaluation is
influenced mainly by information gathered during the last portion of
the review period . This is the opposite of the primacy error: raters are
more heavily influenced by behaviors taking place toward the end of the
review period, instead of giving equal importance and paying attention to
incidents occurring throughout the entire review period .

• Negativil:lj error. Negativity error occurs when raters place more weight
on negative information than on positive or neutral information. For
example, a rater may have observed one negative interaction between
the employee and a customer and several positive interactions in which
customers’ expectations were surpassed. The rater may focus on the
one negative incident in rating the “customer service” dimension.
The negativity error explains why most people have a tendency to
remember negative rather than positive news that they read online or
watch on te levision.

• First impression error. First impression error occurs when raters make
an initial fa vorable or unfavorable judgment about an employee, and
then, ignore subsequent information that does not support the initial
impression. This type of error can be confounded with the “similar to me
error” because first impressions are likely to be based on the degree of
similarity: the more similar the person is to the rater, the more positive the
first impression will be.

• Spillover error. Spillover error occurs when scores from previous review
periods unjustly influence current ratings. For example, a rater makes
the assumption that an employee who was an excellent performer in the

208 Part II System Imp lementation

previous period ought to be an excellent performer during the current
period also, and provides performance ratings consistent with this belief.

• Stereol:l;pe error. Stereotype error occurs when a rater has an oversimplified
view of individuals, based on group membership. That is, a rater
may have a belief that certain groups of employees (e.g., women) are
unassertive in their communication style. In rating women, therefore,
he may automatically describe communication as being “unassertive”
without actually having any behavioral evidence to support the rating.n
This type of error can also lead to biased evaluations of performance
when an individual (e.g., woman) violates stereotypical norms by
working in an occupation that does not fit the stereotype (e.g., assembly
of airplane parts). 12 This type of error can also result in consistently lower
performance ratings for members of certain groups. For example, a s tudy
including an identical sample of black and white workers found that white
raters gave higher ratings to white workers relative to black workers than
did black raters. In other words, if a white worker is rated, then it does
not really matter whether the rater is black or white; however, if a black
worker is rated, the rater’s ethnicity matters because this worker is likely
to receive a higher rating from a black rater than from a white ratern

• Attribution error. The attribution error takes place when a rater
attributes poor performance to an employee’s dispositional tendencies
(e.g., personality, abilities) instead of features of the situation
(e.g., malfunctioning equipment). In other words, different raters may
place different relative importance on the environment in which the
employee works in making performance evaluations. If raters make
incorrect inferences about the employees’ dispositions and ignore situational
characteristics, actions taken to improve performance may fail because the
same situational constraints may still be present (e.g., obsolete equipment).14

As a recap, Table 7-2 includes a summary list of unintentional errors that raters
may make in assigning performance ratings. RET exposes raters to the different
errors and their causes; however, being aware of unintentional errors does not
mean that raters will no longer
make these errors. 15 Awareness TABLE 7 -2
is certainly a good first step, Un intentional Errors Likely to Be Made in Providing
but we need to go further if we Performance Ratings
want to minimize unintentional .. ____________ _
errors. One fruitful possibility is

Contrast the implementation of a frame of
reference training. Halo

7·3·2 Frame of Reference
Training

Frame of reference (FOR) training
helps improve rater accuracy by
thoroughly familiarizing raters
with the various performance
dimensions to be assessed. t 6 The

Primacy

Recency

Negativity

F1rst impression

Spillover

Stereotype

Attribution

Chapter 7 Roll ing Ou t th e PerFormance Managemen t System 209

overall goal is to give raters skills so that they can minimize unintentional errors
and provide accurate ratings on each performance dimension by developing a
common FOR.

A typical FOR training program includes a discussion of the job description for
the individuals being rated and the duties involved . Raters are then familiarized
with the performance dimensions to be rated by reviewing the definitions for each
dimension and discussing examples of good, average, and poor performance. Raters
are then asked to use the appraisal forms to be used in the actual performance
management system to rate fictitious employees usually shown in video practice
vignettes. The trainees are also asked to write a justification for the ratings. Finally,
the trainer informs trainees of the correct ratings for each dimension and the
reasons for such ratings and d iscusses d ifferences between the correct ratings
and those provided by the trainees. Typically, FOR training programs include
the following formal steps17:

1. Raters are told that they will eval uate the performance of three employees
on three separate performance dimensions.

2. Raters are given an appraisal form and instructed to read it as the trainer
reads aloud the definition for each of the dimensions and the scale
anchors.

3. The trainer discusses various employee behaviors that illustrate various
performance levels for each rating scale included in the form. The goal
is to create a common “performance theory” (frame of reference) among
raters so that they will agree on the appropriate performance d imension
and effectiveness level for different behaviors.

4. Participants are shown a video clip of a practice vignette, including
behaviors related to the performance dimensions being rated, and are
asked to evaluate the employee’s performance using the scales provided.

5. Ratings provided by each participant are shared with the rest of the group
and discussed . The trainer seeks to identify which behaviors participants
used to decide on their assigned ratings and to clarify any discrepancies
among the ratings.

6. The trainer provides feedback to participants, explaining why the
employee should receive a certain rating (target score) on each dimension,
and shows discrepancies between the target score and the score given by
each trainee.

Consider how the Canadian military uses FOR training. 18 First, the training
program includes a session regarding the importance of performance management
systems in the military. In the next session, raters are told that they will be
evaluating the performance of four direct reports. They are given the appraisal
form to be used and information on each of the scales included in the form. As
the trainer reads through each of the scales, participants are encouraged to ask
questions. At the same time, the trainer gives examples of behaviors associated
with each level of performance. The trainer thus makes sure that the trainees
come to a common FOR concerning what behaviors constitute the different levels
of performance. Participants are shown a video clip of a soldier and are asked to
evaluate the performance using the appraisal form explained earlier. Next, the

210 Part II System Impl ementation

ratings are discussed as a group, focusing on the behaviors exhibited in the video
clip and the ratings that would be most appropriate in each case. This process
is repeated several times. Finally, the participants are given three more samples
of behavior to rate, as displayed by three hypothetical soldiers, and they receive
feedback on how well they evaluated each sold ier.

It should be evident by now that FOR training can take quite a bit of time
and effort to develop and administer, but it is well worth it. Specifically, as a
consequence of implementing this type of training, raters not only are more
likely to provide consis tent and more accurate ratings, but they are also more
likely to help employees design effective development plans. This is because
sharing a common view of what constitutes good performance allows super-
visors to provide employees with better guidelines to employ to reach s uch
performance levels. 19

7-3-3 Beh avioral Observation Training
Behavioral observation (BO) training is another type of program implemented to
minimize tmintentional rating errors. BO training focuses on how raters observe,
store, recall, and use information about performance. Fundamentally, this type
of training improves raters’ skills a t observing performance.

For example, one type of BO training involves showing raters how to use
observational aids such as notes or diaries. These observational aids help raters
record a preestablished number of behaviors on each performance d imension.
Using these aids helps raters increase the sample of incidents observed and
recorded during a specific time period. In addition, an aid such as a diary is an
effective way to standardize the observation of behavior and record of critical
incidents throughout the review period . In addition, it serves as a memory aid
when filling out evaluation forms. Memory aids are beneficial because ratings
based on memory alone, without notes or d iaries, are likely to be distorted
due to factors of social context (e.g., friendship bias) and time (i.e., duration of
supervisor-direct report relationship).20

Consider how BO training is also implemented by the Canadian military. The
Canadian military has found that a combination of FOR and BO training works
best. Earlier, we described how the Canad ian military uses FOR training. BO
training is added to the FOR training program. In addition to FOR training,
there are sessions on the importance of BO and common BO errors, including
first impression, stereotypes, and halo effects. Finally, the participants are
trained in the importance of keeping diaries and taking notes on their direct
reports throughout the year. Furthermore, the trainer explains the criteria for
each performance d imension and provides written descriptions of the different
levels of performance. The participants are given a chance to practice keeping
a diary while watching the video clips used in the FOR training section of the
training program. After watching each video clip, participants are given tips on
note-taking and recording behaviors as well as the resulting outcomes.

In summary, raters are likely to make several types of urtintentional errors
when providing performance information. Unintentional errors are the product
of the complex tasks of observing, encoding, storing, and retrieving performance
information- and resistance to change exacerbates these errors. Through the
implementation of three different types of training programs, these errors can
be substantially minimized. Training programs focus on describing the errors

Chapter 1 Rolling Out t he Performance Management System 211

that raters usually make (i.e., RET programs). In addition, they sh ould allow
raters to generate a common FOR to be used in evaluating performance as well
as offer raters tools to improve observation and memory skills and help mitigate
the discomfort generated by the interpersonal demands of the performance
managem ent process. FOR training is particularly beneficial when performance
measurement emphasizes behaviors. On the contrary, BO training is particularly
beneficial when performance m easurement emphasizes results because raters
learn not only how to observe behaviors, b ut also how these behaviors are linked
to results.

Th us far, this chapter has described how to prepare for the launching o f
a perform ance management system by designing a communication plan and
an appeals p rocess and by d elivering training programs that w ill minimize
unintentional rating distortions . Next, we turn to the fina l set of activities
required before the performance management system is put into practice:
p ilot testing.

7-4 PILOT TESTING
Before the performance management system is fully rolled out, it is a good idea
to test a version of the entire system so that a djustments and revisions can be
made as needed.21 In th e pilot test of the system, evaluations are not record ed in
employee files; however, the system is implemented in its entirety from beginning
to end, including all the steps that would be included if th e system had actually
been implemented . In other words, meetings tak e place between supervisor and
employee, performance d ata are gath ered , developmental plans are d esigned ,
and feedback is provided. The most important aspect of the pilot test is that all
participants maintain records, noting any difficulties they encountered, ranging
from problems with the appra isal form and how performance is measured to the
feed back received. The pilot test allows for th e id entification and early correction
of any flaws before the system is implemented throughout the organization.

We should not assume that the performance management system will
necessarily be executed or that it will prod uce the anticipated results. The pilot
test allows us to gain information from the perspective of users on how well the
system works, to learn about any difficulties and unforeseen obstacles, to collect
recommend ations on how to improve all aspects of the system, and to understand
personal reactions to it. In a d dition, conducting a pilot test is yet another way to
achieve early acceptance from a small group who can th en act as champions for
the performance management system, rather than putting the burd en on the HR
department to sell the idea. A final reason for conducting a pilot test is that users
are likely to have a higher system acceptance rate, knowing that stakeholders
in th e company had a say in its design, rather than feeling that the system was
created by the HR department alone.

In larger organizations, an important decision to be made is the selection of
the group of employees with whom the system will be tested. In choosing this
group, we n eed to und erstand that the managers w h o will be participating should
be willing to invest th e resources required to do the pilot test. In addition, this
group should be mad e up of managers who are flexible and willing to t ry new
things. Thus, managers should know what the system will look like and receive
a realistic preview before they decide to participate in the pilot test.

212 Part II System Implementation

In selecting the group, we must also consider that it should be sufficiently large
and representative of the entire organization so that reactions will be generaliz-
able to the rest of the organization. Thus, in selecting the group, we should select
jobs that are similar to those throughout the company, and the group selected
should not be an exception in either a positive or a negative way. Specificall y,
the group should not be regarded as particularly productive, hardworking, lazy,
and so forth. For example, at The Gap, Inc., the pilot testing of their revamped
performance management system was conducted in one store, given that it is a
self-contained business unit.22

Pilot tests provide crucial information to be used in improving the system
before it is actually put in p lace. Pilot testing the system can provide huge
savings and identify potential problems before they become irreversible and the
credibility of the system is ruined permanently. For example, consider the case
of the Washington State Patro1.23 This organization realized that several changes
were occurring, jus t like similar changes were occurring in patrol departments in
other s tates, which prompted the revision of its performance management system.
It established a committee to develop the new appraisals. Before implementing
the system, the sta te patrol pilot tested it in two districts. First, the committee
prepared a training chapter that included a pre-appraisal work group meeting. In
this meeting, employees discussed their roles and expectations surrounding the
performance management system and applied those discussions to a common
goal. The training also focused on how new developments in the patrol Jed to
new elements in the performance management system. During the training, the
trainers encouraged the participants to ask questions regarding the shift to the
new approach. The trainers then used the feedback received in these sessions to
fix specific operational issues before introducing the training to the entire agency.
After the appraisal process was fine-tuned, it was submitted for the approval of
the troopers’ and sergeants’ associations. A select number of individuals across
the districts received “train the trainer” training. Finally, the system was instituted
agency-wide. Each of these steps allowed for the identification of potential barriers
that could have prevented the system from being successful.

7-5 ONGOING MONITORING AND EVALUATION
When the testing period is over and the performance management system has
been implemented organization-wide, it is important to use clear measurements
to monitor and evaluate the system14 This also involves understanding the extent
to which the training programs are achieving the objective of minimizing rating
errors. In a nutshell, a decision needs to be made about how to evaluate the system’s
effectiveness, how to evaluate the extent to which the system is being implemented
as planned, and how to evaluate the extent to which it is producing the intended
results. As an illustration, the U.S. federal government takes the evaluation of
performance management systems very seriously. Specifically, several Jaws have
been passed and bills are being prepared that mandate federal agencies to develop
a strategic plan, a performance plan, and a performance report.25 Although these
initiatives concern agencies and not individuals, ultimately, the performance of anx
agency depends on the performance of the individuals working in that agency. 6
The net result of such Jaws as the Government Performance and Results Act is an

Chapter 7 Rolling Out the Performance Management System 213

increase in accountability and funding allocation based on performance. Thus,
federal agencies are required to evaluate the relative efficiency of their various
management practices and initiatives including performance management systems.

Evaluation data should include reactions to the system and assessments of
the system’s operational and technical requirements. For example, a confidential
survey could be administered to all employees, asking about perceptions and
a ttitudes regarding the system. This survey can be administered during the initial
s tages of implementation, and then, at the end of the first review cycle to find
out if there have been any changes. In addition, regarding the system’s results,
one can assess performance ratings over time to see w hat positive effects the
implementation of the syste m is having. Finally, interviews can be conducted with
key stakeholders, including managers and employees w ho have been involved
in developing and implementing the performance management system.27

Several additional measures can be used on a regular basis to monitor and
evaluate the system:

• Number of individuals evaluated. One of the most basic measures is to assess
the number of employees who are actually participating in the system. If
performance evaluations have not been completed for some employees,
we need to find o ut who they are and why a performance review has not
been completed.

• Quality of non-quantitative performance data. An indicator of quality of the
performance data refers to the information provided in the open-ended
sections of the appraisal forms. For example, how much did the rater
write? What is the relevance of the examples provided?

• Quality of follow-up actions. A good indicator of the quality of the system is
whether it leads to important follow-up actions in terms of development
activities or improved processes. For example, to w hat extent do follow-up
actions involve exclusively the supervisor as opposed to the employee? If
this is the case, then the system may not be working as intended because it
may be an indicator that employees are not sufficiently involved.28 Also, to
what extent have employees learned from their successes and failures and
applying those lessons to the fu ture?

• Quality of perfonnance discussion meeting. A confidential survey can be
distributed to all employees on a regular basis to gather information
about how the supervisor is managing the performance discussion
meetings. For example, is the feedback useful? Has the s upervisor made
resources available so the employee can accomplish the developmental
plan objectives? How relevant was the performance review discussion
to one’s job? To what degree have developmental objectives and plans
been discussed? To what extent does the s upervisor’s way of providing
feedback encourage direct reports to receive more feedback in the htture?29

• System satisfaction. A confidential survey could also be distributed to assess
the perceptions of the system’s users, both raters and ratees. This survey
can include questions about satisfaction with equity, usefulness, and
accuracy.

• Overall cost/benefit ratio or return on investment (ROI). A fairly simple way to
address the overall impact of the system is to ask participants to rate the
overall cost/benefit ratio for the performance management system. This

214 Part II System Impl ementation

is a type of bottom-line question that can provide convincing evidence
for the overall worth of the system. The cost/benefit ratio question can be
asked in reference to an individual (employee or manager), her job, and
her organizational unit.

• Unit-level and organization-level perfonnance. Another ind icator that the
system is working well is provided by the measurement of unit- and
organization-level performance. Such performance indicators might be
customer satisfaction with specific units and indicators of the financial
performance of the various units or the organization as a whole. We need
to be aware that it may take some time for changes in individual and
group performance level to be translated into unit- and organization-
level results. We should not expect results as soon as the system is
implemented; however, we should start to see some tangible results a t the
unit level a few months after the system is in place.

Consider the case of Caterpillar, which designs, develops, engineers,
manufactures, markets and sells machinery, engines, financial products,
and insurance. Caterpillar is a leading manufacturer of construction and
mining equipment, d iesel and natural gas engines, industrial gas turbines,
and diesel-electric locomotives. In 2017, Caterpillar was ranked #74 on the
Fortune 500 list and #264 on the Global Fortune 500 list. In their own words,
Caterpillar’s “value advantage” is that they “have the people, processes, tools
and investments to deliver the quality, reliability and durability customers
expect from Caterpillar in each new product introduction.” Given this val ue
proposition, Caterpillar has a strategic view of how managers should improve
the performance of their people, so they have had a performance management
system in place for many years. Caterpillar embarked on an impressive
initiative to eval uate their performance management system. Specifically, the
goal of this evaluation was to assess the cost/benefit ratio-return on invest-
ment (ROI)- of the training sections of the system that targeted managers
and included modules about goal setting and coaching, among o thers. This
eval uation included three steps. First, there was an estimated ROI, based on
how much performance management training would cost and its expected
benefits. This information was used prior to implementing the program to
establish the program’ s business case. Second, there was an ROI forecast,
which enabled the program’s leaders to better understand how to make full
deployment of the initiative successful. Participants in this study completed a
questionnaire in which they described the potential financial and nonfinancial
effects of the program. Third, an ROI study was conducted three months after
the performance management training intervention to Jearn about financial as
well as non tangible returns. This was done via focus groups that documented
how training participants had used the knowledge they had acquired and
the business impact and financ ial benefits. Finally, a fo llow-up stud y was
conducted two months later to confirm the results of the third step . This final
s tudy included an online questionnaire completed by the direct reports of
the managers who had participated in the program. This fina l s tep provided
cross-validation data from the perspective of d irect reports.

Results were quite impressive. For example, results of the ROI study
ind icated that 88 percent of respondents believed the program had a positive

Chapter 7 Rolling Out the PerFormance Management System 2115

impact on the organization; 5 percent reported that their personal productivity
increased; 28 percent reported that prod uct quality improved; and 33 percent
reported that costs were reduced. The overall ROI was calculated as fol-
lows: [(Benefits – Costs)/Costs] x 100. Benefits were annualized, treated as
s ustainable benefits to the business, and one-time benefits were excluded, and
were not treated at face val ue- rather, they included weighting fac tors. For
example, assume a respondent who reported that his productivity increased
5 hours per week, his estimate of percentage of these hours saved d ue to the
performance management training program was 60 percent, and his confi-
dence in this estimate is 75%. If the hourly rate is estimated a t US$65 and we
consider 48 weeks per year, then 5 hours x $65 x 48 = $15,600. This estimate
was revised, taking into account the answers to the follow-up questions (i.e.,
hours due to performance management and confidence in the estimate). In
other words, $15,600 x 60% x 75% = $7,020. This resulting dollar figure was
added to the total benefits pool. Finally, costs included all those associated
w ith the program, including administration, communication, training design
and delivery, evaluation, vendor fees, and so forth. What was the bottom-line?
The fina l calcula tion indicated an impressive ROI of 194 percent.30

Now, Jet us return to the performance management system at the Washington
State Patrol to examine how it has evaluated effectiveness since the system was
implemented ? 1 The patrol has several measures in place for continual evaluation
of the effectiveness of the program. First, before all employees were reviewed
using the system, they were surveyed regarding their satisfaction with the new
system. This input was then used to further improve the appraisal process. In
addition, the patrol used the results of a biyearly citizen’s survey conducted by
Washington Sta te University. The results of this survey are used to determine
whether the state patrol’s customers are satisfied with its performance, and the
data are also used to adjust and reprioritize performance objectives. In addition,
the data are used to measure division-level performance, one indicator of the
s uccess of the performance management process. The Washington State Patrol
collects other types of data as well. For example, every six months, division
managers give presentations regarding performance management to their peers
and to several executives. Initially, the meetings focused on efforts to implement
the new performance management system and increase quality, but this will
change as new issues arise. The presentation is 30-40 minutes long, followed by
20-30 minutes of questions from peers and executives. The feedback from these
presentations is used to measure how well the system is being implemented,
and feed back on the success of the meetings will be used to make any necessary
changes to the system. The Washington State Patrol may also want to consider
measuring how many people are participating in the system. The patrol would
also benefit from assessing w hether the new system is distinguishing high- from
low-level performers and from ascertaining the overall cost/benefit ratio of
implementing the system.

Box 7-2 describes the process of rolling out the performance management
system at BT Global. As you will see, this included a communication plan, training,
and ongoing commitment to monitoring and improvement.

The next chapter addresses a critical goal of good performance management
systems: Employee development. This includes the creation of personal development
plans, the role of one’s supervisor, and the use of 360-degree feedback systems.

2115 Part II System Implementation

Box 7-2

Company Spotlight: Performance Management
System Rollout at BT Global Services
BT Global Services, a global communication services company,
employs more than 17,000 people worldwide, and provides
information and communications technology services to 5,500
multinational companies in 180countries. They provide ser-
vices in three core areas (a) digital customer (aimed at driving
deeper and richer interactions with their end customers),
(b) d igital busi ness (aimed at increasing business agility and
innovation through the move to cloud), and (c) digital em-
ployee (aimed at creating a productive and efficient business
environment by facilitating employee col laboration across
technologies). BT Global Services utilized several steps to
effectively roll out a new performance management system,
called “Maximizing Performance,” designed to bring new
consistency to managing and developing employees and to
create a high-performance cu lture. After obta ining support
f rom senior management, the first steps included a series
of communications, including a workshop for executives
so all employees would receive a clear message about why

a new system was being developed, what roles empl oyees
would play, and how those roles wou ld contribute to the
success of the company. The next step included training line
managers, to ensure involvement and commitment, includ-
ing the important rol e these managers pl ay in ensuring
success. Among other areas covered, training included how
to set effective goals with employees, and how to provide
coaching and feedback to facilitate development. Rol es
were reviewed and clarified to ensure empl oyees under-
stood expectati ons and how their work contributes to the
success of their team, business unit, and the company as a
whole. For ongoing monitoring of the program, data were
collected through employee surveys, face-to-face meetings
w ith line managers, and team meetings. In summary, BT
Global Services illustrates an example of an effective roll-
out of a new performance management system, including
communicati on plan, training, and ongoing commitment
to monitoring and improvement.32

SUMMARY POINTS

• Four important steps need to be taken before the new or revised and
updated performance management system is launched and implemented.
These include (1) implementing a communication plan and then (2) an
appeals process, which will help gain system acceptance, (3) training
programs for raters, which will help minimize unintentional errors
in performance ratings, and (4) pilot testing the system, which will
allow revisions and changes to be made before the system is actually
implemented. Careful attention to these pre-system implementation steps
will help improve the integrity and success of the system.

• The main goal of the communication plan is to gain support for the
system. A good communication plan addresses the following questions:
• What is performance management? What are its general goals? How

have performance management systems been implemented in other
organizations?

• How does performance management fit with the organizational
strategy?

• What are the tangible benefits of the performance management system
for all parties involved?

• How does the system work? What are the various steps in the process?

Chapte r 7 Rolling Out the Performance Management System 217

• What are the roles and responsibilities of each organizational member?
• How does performance management relate to other initiatives and

programs, such as training, promotion, and compensation?

• Including detailed, convincing, and clear answers for each of these
questions is likely to help increase support for the system.

• People engage in unconscious cognitive processes in how they take in
and process information. Even though a good communication plan may
be in p lace, these biases create rnisperceptions about the system, and also,
resistance to change. First, selective exposure is a tendency to expose
our minds only to ideas with which we already agree. Second, selective
perception is a tendency to perceive a piece of information as meaning
what we would like it to mean even though the information, as intended
by the communicator, may mean the exact opposite. Finally, selective
retention is a tendency to remember only those pieces of information with
which we already agree.

• The negative effects of the unconscious cognitive processes can be
minimized by involving employees in system design, considering
employees’ needs in designing and implementing the system, delivering
the communication plan before negative attitudes are established and
rumors start circulating, putting information concerning the system
in writing, providing facts and consequences and not just facts, using
multiple channels of communication to present information about the
system, using credible and powerful communicators, and repeating the
information frequently. A good communication plan includes as many of
these fea tures as possible.

• In addition to a communication plan, the establishment of an appeals
process helps gain system acceptance. An appeals process allows
employees to understand that if there is a disagreement regarding
performance ratings or any resulting decisions, such disagreements can be
resolved in an amicable and nonretaliatory way.

• The appeals process begins with an employee filing an appeal with the HR
department, which serves as a mediator between the employee and her
supervisor. This is a Level 1 appeal. If the appeal is not resolved, then an
outside and unbiased arbitrator makes a final and binding resolution. This
is a Level 2 appeal. The arbitrator for a Level 2 appeal is usually a panel
that includes peers and managers. Finally, the Level3 appeal involves the
participation of a senior level manager, who makes the final decision.

• In rating performance, raters may make unintentional errors, which
occur because observing, encoding, storing, and retrieving performance
information is a complex cognitive task. Unintentional errors include the
following (1) similar to me, (2) contrast, (3) halo, (4) primacy, (5) recency,
(6) negativity, (7) first impression, (8) spillover, (9) stereotype, and (10)
attribution. Unintentional errors can be minimized by implementing three
types of rater training program.

• Rater error training (RET) exposes raters to the different errors and their
causes. RET does not guarantee rating accuracy, but becoming aware of
what types of errors are likely to occur and the reasons for these errors is a
very good first step in minimizing them.

218 Part II System Implementation

• Frame of reference (FOR) training familiarizes raters with the various
performance dimensions to be assessed. The goal is that ra ters will
develop a common FOR in observing and evaluating performance. This
type of training is most appropriate when performance measurement
foc uses on behaviors.

• Behavioral observation (BO) training focuses on how ra ters observe, store,
recall, and use inform ation about performance. For example, this program
teaches raters how to use aids such as d iaries to standard ize performance
observation. This type of training is most appropriate when performance
measurement focuses on counting and recording how frequently certain
behaviors and results take place.

• Pilot testing the system before it is rolled out fully is useful because it
allows potential problems and glitches to be discovered and corrective
action to be taken before the system is p ut in place. Pilot testing consists
of implementing the entire system, including all of its components, but
only with a select group of people. Results are not recorded in employees’
records. Instead, the goal is that the people participating in the pilot test
provide feed back on any possible problems and on how to improve the
system.

• The group participating in the pilot test needs to understand that the
test will take time and resources. A representative group should be
selected so that conclusions drawn from the group can be generalized
for the organization as a whole. The group should not be regarded as an
exception in either a positive or negative way.

• As soon as the system has been implemented, there should be a
measurement system to evaluate the extent to which it is working the way
it sho uld and producing the results that were expected. Such measures
include confidential employee surveys assessing perceptions and attitudes
about the system and whether there is an upward trend in performance
scores over time. Other measures include number of individ uals
evaluated, quality of performance information gathered, quality of
performance discussion meetings, user satisfaction with the system,
overall cost/benefit ratio, and unit- and organization-level performance
indicators. Taken together, these indicators are a powerful tool that can be
used to dem onstra te the value of the performance management system.

EXERCISE 7-1 TRAINING RATERS AT BIG QUALITY CARE CENTER

Located near the city of Caesarea, Israel, Big Quality Care Center (BQCC) is a
nursing home facility for the elderly, serving about 125 residents. Because of the
sheer size and diverse range of occupants served, the Center predominantly relies
on highly skilled nursing professionals. Since Caesarea has had a long-term short-
age of quality nursing professionals, the Center has some of the state-of-the-art
management p ractices to both retain and maximize the performance of the
Center’s nurses.

Recently, however, BQCC has received several anonymous complaints
from the nursing staff that many ratings seemed inaccurate and inconsistent.

Chapter 7 Ro lling Out the Performance Management System 21e

Concerned that the Center may lose many of its quality nurses to competitors if
the complaints are left unaddressed, the head of HR has decided to implement an
organization-wide rater training program to correct for any true rater inaccuracies
and inconsis tencies.

Your performance management consulting business is now thriving, and
luckily for you, the head of HR has gathered enough trust in you that she has
decided to Jet yo u design the rater training program. But before hiring you to
do so, she wants you to create a five-minu te video presentation offering an
overview and details of your recommended training program. This video clip
will be shown to the company’s CEO and the rest of the senior staff. Although
you are somewhat nervous and scared, yo u soon regain your confidence and
comfort level when you find out that you had kept a copy of a textbook called
“Performance Management.”

Using the information in Section 7-3 Training Programs for Minimizing
Unintentional Rating Errors, create this five-minute video presentation to include
(a) a brief explanation of the nature of your suggested rater training program;
(b) anticipated benefits; and (c) its requirements in terms of resources (e.g., time, cost).

EXERCISE 7-2 PROPOSING AN APPEALS PROCESS FOR NURSING HOMES

As a follow-up to Exercise 7-1, your training proposal for Big Quality Care
Center (BQCC) was a success. Congratulations! Your proposal has been accep ted
and the training program, together with the entire performance management
system is now in place at BQCC. In fac t, BQCC’s CEO is so pleased with
your work that she has forwarded yo ur name to the American Association
of Americans and Canadians in Israel (AACI), which keeps a list of nursing
homes in Israel. And now, several nursing homes have reached out to yo u to
solicit your consulting services so they can improve their own performance
management systems.

To make your services more scalable, you decided to create online tools
and services that you can offer to several nursing homes w ithout the need
to have to physically visit each. This is particularly important for you, given
that you do not reside in Israel. Although no nursing home o ther than BQCC
has reached out to you yet, BQCC’s CEO told yo u that she heard through the
grapevine that this will happen soon. So, you decided to create a five-minute
video presentation describing what an appeals process is and how it wo uld
work a t a nursing home.

You have done your homework about nursing homes and know that in
addition to regis tered and licensed nurses, they typically employ administration
s taff (HR, accounting, operations), and also, support staff including custod ians,
maintenance staff, and groundskeepers. Using the information in Section 7-3
Training Programs for Minimizing Unintentional Rating Errors, and in Section
7-2 Appeals Process, create this five-minute video presentation to include (a) a
brief explanation of the nature of an appeals process; (b) its anticipated benefits;
and (c) its requirements in terms of resources (e.g., time, cost).

CASE STUDY 7-1

Implementing a Performance Management
Communication Plan at Accounting, Inc.

A ccounting, Inc. is a consulting and accounting firm headquartered in Amsterdam, the Netherland s. Recently, Accounting, Inc.
implemented a performance management system.
The first step in the implementa tion of the new system
was the development of a set of core competencies
that would be used to evaluate most employees,
regardless of function or level. In addition, each
e m ployee was evaluated using more job-specific
performance dimensions.

As the first step in the communication plan, the
employees received individ ual email messages, asking
them to define what the core competencies meant to
them and to give descriptions and examples of how
each of the core competencies played out in their
specific positions. Next, the company held meetings,
handed o ut freq uently asked questions (FAQs)

sheets, and placed posters around the company,
detailing how the core competencies were related
to the organization’s strategic priorities and how
performance scores would be related to monetary
rewards. In these communications, Accounting, Inc.,
detailed how the performance system worked, how
the raters were chosen, how performance feed back
was used, and other details about the system. The
information also outlined the benefits employees could
expect from the new system as well as employees’
responsibilities regarding the system.

Please evalua te Accounting, Inc.’s communication
plan. Specifically, does it answer all of the questions
that a good communication plan should answer
(Hint: see Figure 7-1)? Which questions are left
unanswered? How would you provide answers to
the unanswered questions (if any)?

Source: A dapted from Brotherton. P. (2003). Meyners pays for performance: Changing a compensation system is a sensitive undertaking.
Here’s how one f irm handled it . Journal of Accountancy,: 196, 4 1-46.

CASE STUDY 7-2

Implementing an Appeals Process at Accounting, Inc.

Following up on Case Study 7-1, when the system was implemented , many e mployees were not happy with the ratings and the type
of performance feedback information they received
from their supervisors. If you were to design an

220

appeals process to handle these complaints well,
what would the appeals process be like? (Hint: Use
the appeals process shown in Box 7-1: UniversihJ of
Lethbridge Perfomumce Management Appeals Process as
a model.)

Chapter 1 Rolling Out the Performance Management System 221

—— —-

ENDNOTES

1. Kim, M. Y., & Par k, S. M. (2017). Antecedents an d outcomes of acceptan ce of per fo rmance
appraisal system in Korean non-profit organizations. Public Management Review, 19,479-500.

2. Grote, D. (1996). The complete guide to perftmnanceappraisal. New Yor k, NY: AMACOM.
3. U.S. Department o f Commerce, Human Resources, Senior Executive Service Performance

m anagement system. Retrieved January 2, 2018, from h ttp://hr.commerce.gov I sf groups/
p u blic/@doc/@doasa/@ohrm/ documents/ content/ dev01_006513.pdf

4. Rafferty, A. E., & Jimmieson, N. L. (2017). Subjective perceptions of organizational change
and e mp loyee resistan ce to change: Direct and mediated relationships with employee
well-being. British journal of Management, 28, 24&-264.

5. Kahne man, D. (2011). Thinking fast and slow. New York, NY: Farrar, Straus, and Girou x.
6. Morhman, A. M., Resnick-West, S. M., & Lawler, E. E. (1989). Designing performance appraisal

systems (p. 133). San Francisco, CA: Jossey-Bass.
7. O’Reilly, J. T. (2001). Burying Caesar : Replacement of the vete rans appeals p rocess is needed

to p rovide fairness to claiman ts. AdministratiV<‘ Law Review, 53,223-256.
8. G rote, D. (1996). The complete guide to perftmnance appraisal (pp. 263-269). New York, NY:

AMACOM.
9. Spears, M. C., & Par ker, D. F. (2002). A probit an alysis of the impact of training on

performance appraisal satisfaction. American Business Review, 20, 12-16.
10. Agu inis, H., Joo, H., & Gottfredson, R. K. (2011). Wh y we hate performan ce management-

An d why we shou ld Jove it. Business Horizons, 54,503-507.
11. Agu inis, H., & Adams, S. K. R. (1998). Social-ro le versus stru ctur al models of gender

and influence use in organizations: A strong inference approach. Group and Organization
Management, 23,414–446.

12. Heilman, M. E., Wallen, A. S., Fuchs, D., & Tam kins, M. M. (2004). Penalties fo r success:
Reactio ns to women who succeed at male gender-typed tasks. journal of Applied Psychology,
89,411H27.

13. Sta uffer, J. M., & Buckley, M. R. (2005). The existence and nature of racial bias in su per v isory
ratings. journal of Applied Psychology, 90, 58Cr591.

14. Jawahar, I. M. (2005). Do raters consider the influence of situational factors on observed
performance when evaluating performance? Evidence fro m three experim ents. Group &
Organization Management, 30, IH1.

15. London, M., Mone, E. M., & Scott, J. C. (2004). Perform ance man agement and assessment:
Methods fo r improved ra te r accuracy an d e m ployee goal settin g. Human Resource
Management, 43, 319-336.

16. Agu inis, H., Mazurkiewicz, M. D., & Heggestad, E. D. (2009). Using web-based
fra me-of-reference training to decrease biases in personality-based job analysis: An
experimental field s tudy. Personnel Psychology, 62, 405-438.

17. Pulakos, E. D. (1986). The developm ent of training program s to increase accuracy w ith
d ifferent rating tasks. Organizational Behavior and Human Decision Processes, 38, 7Cr91.

18. Noonan, L. E., & Sulsky, L. M. (2001). Impact of fram e-of-referen ce an d behavio ral
observation training o n a lternative training effectiveness crite ria in a Canadian military
sam ple. Human Performance, 14,3-26.

19. Gorman, C. A., & Rentsch, J. R. (2017). Retention of assessment center rater training:
Improving performance schema accuracy using fram e-of-referen ce training.jounzal of
Personnel Psychology, 16,1-11.

20. Duarte, N. T., Goodson, J. R., & Klich, N. R. (2004). Effects o f dyadic quality an d duration on
performance appraisal. Academy of Management journal, 37, 499-521.

21. Grote, D. (1996). The complete guide to perfonnance appraisal (pp. 254-256). New York, NY:
AMACOM.

22. Gap Inc. en courages employees to grow, per fo rmance and succeed without ra tings.
Retrieved January 2, 2018 fro m https:f/www.e-reward.co.uk/ u p loads/ editor I files/Gaplnc
_Case_Study.pdf

23. Cederblo m, D., & Pem er l, D. E. (2002). From perfo rmance appraisal to perform an ce
m anagement: One agency’s exper ience. Public Personnel Managemmt, 31, 131-140.

24. Grote, D. (1996). The complete guide to perfonnanceappraisal (pp. 260-263). New York, NY:
AMACOM.

222 Part II System Implementation

25. Somers, M. (2017). Governm ent accountability legislation gets house backing, heads to
senate. Federal Ntws Radio. Retrieved jan uary 2, 2018, fro m https:// federalnewsradio .com/
congress/2017 /01 I govemment-accoun tabil ity-legislation-gets-house-backing-heads-senate/

26. Aguinis, H., Davis, G. F., Detert, ) . R., G lynn, M. A., Jackson, S. E., Koch an, T., . .. Sutcliffe,
K. M. (2016). Using organizational science research to address U.S. federal agencies’
m anagement and la bor needs . Behavioral Scimct & Policy, 2{2),

27. Harper, S., & Vilkinas, T. (2005). Determining the impact of an o rganisation’s performance
m anagement system. Asia Pacific journal of Human RPsourcts, 43, 76-97.

28. Fletcher, C. (2008). Appraisal,feedbock, and dt’Vf’lopment: Making perfonnanct r<‘Vitw work. New
Yor k, NY: Routledge.

29. Dipboye, R. L., & de Pontbriand, R. (1981). Correlates of employee reactio ns to performan ce
appraisal and appraisal systems. journal of Applied Psychology, 66, 248-251.

30. Goh, F. A., & Anderson, M. C. {2007). Driving business value from performance man agement
at Caterpillar. Organization Dtvtlopmtnl joumal, 25(2), 219-226.

31. Cederblom , D., & Pemerl, D. E. (2002). From perform ance appraisal to performan ce
m anagement: One agency’s experience. Public Ptrsomrel Managtmmt, 31,131-140.

32. Kelly, S. (2004). Maximizing performance a t BT Global Services. Strategic HR RPvitw, 3, 32-35.

22:1

chapter

8
Performance
Management and
Employee Development

One of the tests of leadership is the ability to recognize
a problem before it becomes an emergena;.

– Arnold H. Glasow

Learning Objectives
By t he end of this cha pter, you will be able to do t he following:
1. Design your own personal developmental plan that ad·

dresses how you can continually learn and grow in the
next year, how you can do better in the future. how you
can avoid performance problems faced in the past. and
where you are now and where you would like to be in
terms of your ca reer path.

2. Formulate a developmental plan so you can improve your
own reflective, communicative, and behavioral ca reer
competencies.

3. Prepa re a developmental plan that includes professional
development needs, resources/support needed, and a
ti meline for meeting each need with the goals of improving
performance in current position, sustaining performance in
current position. preparing employees for advancement .
and enriching the employee’s work experience.

4. Produce a development plan that includes a range of
activities (e.g .. on-the-job training, courses. self-guided
studying, mentoring. attending a conference or trade
show. mixing with the best. job rotation. getting a degree).

5. Propose a developmental plan that highlights the key role
of the supervisor as a guide and facilitator of the devel-
opmental process (e.g., explaining what is required of the
employee to reach a required performance level. referring
to appropriate developmental activiti es. reviewing and
making suggestions about developmental objectives).

6. Implement a multisource (i.e .. supervisors. peers. self, di-
rect reports. customers) feedback system with the goal of
providing feedback on and improving performance.

7. Implement multisource feedback systems t hat takes ad-
vantage of all of its benefits (e.g .• increased awareness
of expectations. improved performance, reduced ” undis-
cussables” and defensiveness).

8. Implement multisource feedback systems that minimize
potential risks and pitfalls (e.g .• could hurt employees’ feel·
ings. individuals may feel uncomfortable with the system and
believe they will not be rated honesHy and treated fairly, is un·
likely to work well in organizations that have highly hierarchical
cultures that do not support open and honest feedback).

225

226 Part Ill Employee and Leadership Development

Part I of this text described strategic and macro-organizational issues in designing
a performance management system. Part II described operational and technical
details on how to roll out and implement the system. As is mentioned throughout
this book, employee development is a key result of state-of-the-science performance
management systems. Accordingly, Part III incl udes two chapters dealing with
developmental issues and pertains to two key stakeholders in the developmental
process: (1) the employees of the organization, who are improving their own
performance, and (2) the managers (i.e., performance management leaders), who
g uide and facilita te the process of employee development for their direct reports
so that it can successfully occur. Development planning is a joint activity entered
into by both the employee and the manager. This chapter addresses how to use a
performance management system to help employees develop and improve their
performance. Chapter 9 add resses the leadership skills needed by managers so
that they can best manage the performance of their employees. Let us begin this
chapter by discussing personal developmental plans.

8-1 PERSONAL DEVELOPMENT PLANS
Personal development plans specify courses of action to be taken to improve
performance. Also, achieving the goals stated in the development plan allows
employees to keep abreast of changes in their field or profession. Such plans
highlight an employee’s strengths and the areas in need of development, and they
provide an action plan to improve in areas of weaknesses and further develop
areas of strength.1 In a nutshell, personal development plans allow employees
to answer the following questions:

• How can I continually learn and grow in the next year?
• How can I do better in the future?
• How can I avoid performance problems faced in the past?
• Where am I now and where would I like to be in terms of m y career path?

Development plans can be created for every job, ranging from entry level to
the executive suite (e.g., CEO, CFO). No matter how high up the position within
the organization and how simple or complex the nature of the job in q uestion,
there is always room for improvement. Information to be used in designing
development plans comes from the appraisal form. Specifically, a development
plan can be designed based on each of the performance dimensions evaluated . For
example, if the performance dimension “communication” is rated as substandard,
this area would be included in the development plan.

Development plans focus on the short term and on specific roles and positions,
but also on the knowledge and skills needed for more long-term career aspirations
and career development. Specifically, good development plans also focus on
developing career competencies, includ ing the following three sets of competencies2:

• Reflective career competencies . Being aware of one’s career and combining
personal reflections with one’s professional career. The two competencies
that comprise this dimension are reflection on motivation, which refers
to reflecting on values, passions, and motivations with regard to one’s
career; and reflection on qualities, which refers to reflection on strengths,
shortcomings, and skills with regard to one’s career.

Chapt er 8 Performance Management and Employee Development 227

• Communicative career competencies . Being able to effectively communicate
with o thers to improve one’s chances of career success. The two
competencies are networking, which refers to the awareness of the presence
and professional value of one’s network, and the ability to expand this
network for career-related purposes; and self-profiling, which refers to
presenting and communicating one’s personal knowledge, abilities, and
s kills to individuals inside and outside the organization.

• Behavioral career competencies. Being able to shape one’s career by
taking action and being proactive. The two specific competencies are
work exploration, which refers to actively exploring and searching for
work-related and career-related opportunities inside and outside the
organization, and career control, which refers to actively influencing
learning processes and work processes related to one’s career by setting
goals and planning how to reach these goals.

Now, pause for a few minutes and give yourself some time to think about the
three aforementioned sets of career competencies. Where do you stand regarding
reflective, communicative, and behavioral career competencies? What are your
s trongest and your weakest competencies? Which ones should you be working
on to improve your future career prospects?

In addition to improved short-term performance and career path clarity, the
inclusion of development plans, and in more general terms, the identification
of employee strengths and weaknesses as part of the performance management
system have another important benefit: employees are more likely to be satisfied
w ith the performance management system.3 For example, a study including
137 employees a t a production equipment facility in the southern United States
showed that the greater the extent to which employees believed that the system
was being used for development purposes, the more satisfied they were with
the system. On the contrary, perceptions of the extent to which the system was

Box 8-1

Company Spotlight: Individual Development Plans
at General Mills
At General M ills, individual development plans (l OPs) are promote the process for employees by host ing speakers,
promoted strongly throughout the company. The Minneapolis, offering Web-based learning tools, and holding workshops
Minnesota-based General Mills is an international foods for employees and managers t o get the most out of the
company. Some of the best-known brands include Annie’s process. Some of these sessions are specifically ta ilored
Homegrown, Betty Crocker, Yoplait, Colombo, Totino’s, to d ifferent k inds of posit i ons within t he company w ith
Pillsbury, Old El Paso, Haagen-Dazs, Cheeri os, Tri x, Cocoa d ifferent needs in the development process. Also, the IDP is
Puffs, and Lucky Charms. The formally written lOPs are kept separate f rom t he annual performance appraisal, as the
completed annually, but the expectati on is for ongoing beli ef is that development planning cannot be suffi cient ly
conversatio ns wit h managers and empl oyees, f ocusing addressed in the context of appraisal. In summary, General
not only on competencies t hat are well devel oped and M ills provides an example of a company that has made
those that are in need of improvement, but also on the a strong commitment to the growth and learning of all
employee’s career aspirations. The company’s IDP sessions employees.•

228 Part Ill Employee and Leadership Development

used for evaluative purposes did not relate to employee satisfaction with the
system. In other words, using the system for evaluative purposes d id not relate
to employee satisfaction, but using the system for development purposes had a
positive relationship with satisfaction. This is precisely the reason why so many
companies, such as the The Gap, Ely Lilly, Microsoft, and Accenture, emphasize
that their performance management systems have a strong focus on employee
development. Box 8-1 describes how development plans, including short- and
long-term objectives, are implemented at General Mills.

Finally, another important aspect of personal development plans is that they
allow organizations to gather information that can be used for succession planning
purposes.5 For example, based on individual career aspirations, an organization is
able to identify employees who may be interested and able to serve in leadership
positions in the future. Many “high-potential” programs are essentially based
on combining employees’ current performance and future aspirations with the
organization’s future talent needs. Thus, development plans serve an important
strategic role in helping an organization address fu ture possible talent gaps.

8·1·1 Development Plan Objectives
The overall objective of a development plan is to encourage continuous learning,
performance improvement, and personal growth. In addition, development plans
have other, more specific objectives:

• Improve performance in a1″ent position. A good development plan helps
employees meet performance standards. Thus, a development plan
includes suggested courses of action to address each of the performance
dimensions that are deficient. This is an important point, given that
surveys have shown that about 25 percent of federal employees and
between 11 percent and 16 percent of private sector employees in the
United States are not performing up to standards.6

• Sustain perjom1nnce in current position .. A good development plan provides
tools so that employees can continue to meet and exceed expectations
regarding their current position. Thus, the plan includes suggestions
about how to continue to meet and exceed expectations for each of the
performance dimensions included in the appraisal form.

• Prepare employees for advancement. A good development plan includes
ad vice and courses of action that should be taken so that employees will
be able to take advantage of future opportunities and career advancement.
For example, a good p lan indicates which new competencies should be
learned to help with career ad vancement.

• Enrich the employee’s work experience. Even if career opportunities
within the organization are not readily available, a good plan provides
employees with growth opportunities and opportunities to Jearn new
skills. These opportunities provide employees with intrinsic rewards and
a more challenging work experience, even if the new skills learned are
not a formal part of their jobs.7 Such opportunities can make jobs more
attractive and serve as a powerful employee retention tool. In addition, the
new skills can be useful in case of lateral transfers within the organization.

As an illustration, consider the employee development plan used for staff a t
Texas A&M University in College Station, Texas. Because the development plan

Chapter 8 Performance Management and Employee Development 229

is a forma l component of the university’s performance management system, the
development plan is included within the appraisal form. The appraisal form used
by Texas A&M first lists the six objectives of the performance management system:

1. Provide employees with feedback to improve or maintain job
performance.

2. Outline areas for employee development.
3. Set standards for the next review period.
4. Recognize job-related accomplishments.
5. Enhance communication and working relationships.
6. Identify job performance deficiencies (any factor “Does Not Meet

Expectations”) and report to the next level of supervisory responsibility.

Based on objective 2, the employee development plan is an important component
of the performance management system. The inclusion of this objective upfront
sets the tone for the development process by helping managers understand
that this is an important issue.

After the sections in the form in which the manager rates employee performance,
the following material is included:

i Please list professional development activities to be completed and resources
needed to support these activities, if appl icable

Professional Develop ment
Needs

Resourc.es/Su pport Needed Time f rame

The inclusion of this information after performance ratings allows the
manager and employee to focus on developmental areas identified as weaknesses
in the performance review process. In this way, the development plans created
for e mployees at Texas A&M are directly related to performance dimensions
important for the unit and the overall organization. In addition, including the
development plan a t the end of the review and after setting annual performance
goals allows the employee to determine whether there are areas he o r she needs
to develop in order to a ttain the specified goals.

8·1·2 Content of Development Plan
Wha t does a developmental plan look like? Plans should include a description of
specific steps to be taken and specific objectives to reach. In other words, what is
the new skill or knowledge that w ill be acquired and how will this occur? This
includes information on the resources and strategies that will be used to achieve

230 Part Ill Employee and Leadership Development

the objectives. For example, will the employee Jearn the skill from a cowor ker
th rough on-th e-job training? Will the company reimb urse the employee for
expenses associated w ith taking an online course?

The plan’s objectives should include not only the end produ ct, such as
the new s kill to be learned , but also, th e completion date and w hat evidence
will be gathered to know w h ether the new skill h as indeed been acquired. For
example, in the case of an online course, the objective could state that it w ill be
completed b y July 23, 2019, and th e employee is expected to receive a grad e of
B+ or better. Overall, objectives included in the development plans should be
practical, specific, time-oriented, linked to a standard, and developed jointly by
the supervisor and the employee.

An a dditional important feature of d evelopment plans is that it should keep
the needs of both the organization and the em p loyee in mind. As mentioned
earlier, state-of-the-science developm ent p lans are used strategically to connect
th e organization’s future talen t needs with an employee’s performance and
aspirations. The choice of what specific skills or performance areas will be
improved is influenced by the needs of the organization , especially w h en
the organization is investing substantial resources in the plan. In a dd ition, the
plan created is influenced by the needs of the employee. The supervisor and
the employee need to agree on what development or new skills will help enrich
the employee’s work experience, as well as help accomplish organizational goals
now or in the near future.

As an example, Jet us consider once again the con tent of the development p lan
a t Texas A&M. First, employees a re directed to a website that includes examples
of possib le developmental activities. This list includ es worksh ops; certifications;
local, state, and national conferences; on-the-job training; and other activities.
This information p resents employees and managers with various options th ey
can use to ach ieve the d evelopmental objectives. Second, the form includes
space so that each professional developm ental need is paired with a d escription
of resources o r support needed and a time frame for completion. For example,
the developmental plan for an administra tive assistant in the business school
may look like this:

SECTION B: PROFESSIONAL DEVE LO PMENT PLAN

Please list profess ional development activities to be completed and resources
needed to support these activit ies, if appl icable

P rofessional Develop ment
R esources/Supp ort Needed Time fra me Needs

I. Knowledge of Excel Reimbursement for online Course to be completed by
(spreadsheet program) course August I, 2019

2. Customer service ski lls in Reimbursement for one-day Workshop to be completed
dealing with students and workshop. Time to receive by October 15, 2019.
fac ulty on-the-job training from On-the-job training to be

administrative assistant in completed by November
communications department 8,2019

Chapter 8 Performance Management and Employee Development 231

Overall, the Texas A&M p lan includes all of the required components .
There is a description of developmental objectives, activities that will be
conducted to reach these objectives, and dates of completion. One important
piece seems to be missing, however. The p lan does not include specifics of
how the accomplishment of each objective will be measured. Specifically,
how will the s upervisor know if the administrative assis tant has a good work-
ing knowledge of Excel after he has completed the online course? How will
the s upervisor know if the administrative assistant’s customer service skills
have improved after he has attended the workshop and has undergone on-
the-job training? Excel proficiency could be measured by the administrative
assistant’s performance in the course or by examining answers to questions
abo ut knowledge of Excel that faculty, and others giving Excel assignments to
the administrative assistant, answer in filling out appraisal forms. Regarding
customer service skills, the accomplishment of the objective might be measured
by gathering data from those customers served by the administrative assistant
(i.e., faculty and s tudents).

8-1-3 Developmental Activities
C learly, developmental activities are dependent on an organization’s
strategic goals and objectives, and also, on resources that may or may not
be available. For example, on-the-job training is more likely to take place
in s mall, compared to large organizations, which ma y have a training and
development unit, or have s ufficient resources to offer in-house courses, or
pay for an employee to take a course at a local university. There are several
ways through which employees can reach the objectives s ta ted in their
development p lans, including:

• On-the-job training. Employees are paired with a peer or supervisor
who designs a formal on-the-job training course. The design of these
“mini-training programs” includes how many hours a day or week
training will take place and specific learning objectives.

• Courses. Some large organizations, such as McDonald’s, Motorola,
Capgemini, Ernst & Young, and others, offer in-house courses given at
their own corporate universities. Other organizations may provide tuition
reimbursement. Given the proliferation of online courses, there is a wide
variety of options from which to choose.

• Self-guided studying. Employees can read books, watch video presentations,
and study other materials on their own. Once again, it is important that an
objective be set regarding what will be read and within what time frame,
as well as what measure(s) will be used to assess whether learning has
taken place.

• Mentoring. Many organizations have mentoring programs. In general
terms, mentoring is a developmental process that consists of a one-on-one
relationship between a senior (mentor) and junior (protege) employee.
For such programs to be s uccessful, it is best to allow the mento r and
protege to choose each other, rather than arbitrarily assigning who will
be mentoring w hom. In general, mentors serve as role models and teach
proteges what it takes to succeed in the organization. In more specific
terms, mentors can help proteges gain targeted skills.

232 Part Ill Employee and Leadership Development

• Attending a conference or trade show. Another way to acquire required
knowledge and skills is to sponsor an employee’s attendance a t a conference
or trade show. It is useful to require that the employee provide a written
report and deliver a brief presentation upon returning from the conference.
In this way, it is easier to assess what has been learned, and in addition, the
knowledge gained can be shared with other organizational members. As
is true for most developmental activities, they have to be directly linked to
an employee’s development plan and also an organization’s needs. This
principle clearly applies to attending off-site conferences and trade shows,
given that this developmental activity is particularly prone to abuse.8

• Mixing with the best. A developmental activity particularly targeting
entrepreneurs and high-level executives involves the “Genius Network,”
a by-application-only network whose participants pay $100,000 to
a ttend three meetings a year. This network connects high-achieving
entrepreneurs, industry innovators, and best-selling authors and their goal
is to help them grow their business tenfold.9

• Getting a degree. Some organizations provide tuition reimbursem ent
benefits fo r their employees to obtain additional degrees or certifications.
For example, the organization can sponsor an employee’s MBA program
or an employee’s taking specialized co urses with the goal of earning a
certification designation (e.g., Certified Novell Administrator, Professional
in Human Resources). In most cases, em ployees commit to continuing
the relationship with their employer for a prespecified amount of time
after completing the degree. If the employee leaves the organization
before this time frame, she may have to reimburse the organization for the
cost of her ed ucation. As an example, the firm Boston Consulting Group
(BCG) sponsors “BCG MBA Fellows,” w hich is a scholarship program
that includes not only a tuition reimbursement, but also ind ividual
mentorship by senior BCG consultants. To be eligible for this program,
a BCG employee m ust work for the company for at least two years, and
then, be enrolled in a full-time MBA program approved by BCG. This is a
developmental activity that serves an important strategic p urpose for BCG
because it helps build a talent pool needed for its succession planning
needs, given that it has more than 80 offices in 48 countries and more than
14,000 employees.

• Job rotation. Another way to gain necessary skills is to be assigned to
a different job on a temporary basis. This is the model followed in the
medical profession in which residents have to rotate across specialty areas
for several months (e.g., OB-GYN, psychiatry, pediatrics). For example,
residents may be required to rotate across the various emergency medicine
services for a 19-month period.

• Temporary assignments. A less systematic rotation system includes the
opportunity to work on a challenging temporary assignment. This allows
employees to gain specific skills within a limited time frame.

• Membership or leadership role in professional, trade, or nonprofit organizations.
Some employers sponsor membership in professional, trade, or nonprofit
organizations. Such an organization distributes publications to its members
and holds informal and formal meetings in w hich employees have an
opportunity to Jearn about best practices and other useful information for

Chapter 8 Performance Management and Employee Development 233

On-the-job training

Courses

Self-guided studying

Mentoring

Attend1ng a conference or trade show

Mixing with the best

Getting a degree

Job rotation

Temporary assignments

Membership or leadership role in professional, trade, or nonprofit organizations

their jobs. For example, this could include the Society for Human Resource
Management, Chartered Institute of Personnel and Development for
Human Resources (HR) Professionals or the Australian Human Resources
Institute. Also, presentation, communication, planning, and other skills can
be learned while serving in a leadership role in a volunteer organization
outside of work (e.g., local charity, church, or synagogue).

Table 8-1 includes a summarized list of developmental activities that may be
available to achieve goals included in a development plan. Based on your own
preferences and learning style, which of these activities do you believe would be
most beneficial to you? Please rank these activities in terms of your preference.
Does the organization yo u work for now, or worked for most recently, offer any
of these opportunities? If not, to what extent is this a factor that would motivate
you to look for a job elsewhere, where more of these developmental activities
would be made available to you?

An example of a development plan is included in Figure 8-L The development
plan can be part of the appraisal form, or it can be included in a separate form.
The form included in Figure 8-1 shows that employees have several choices in
terms of developmenta l activities. Note that the form includes space so that
information can be inserted regarding what activities will take place when, what
the objectives are, and whether the objective has been met or not.

Many of the activities listed above are relevant for employees a t all levels.
However, some, such as the “mixing with the bes t” activity, pertain specifically to
high-level managers. In fact, the issue of managerial development is very important
on its own because it is directly related to s uccession planning- as discussed
earlier. For example, employees who aspire to secure managerial positions should
evaluate all developmental activities to understand which ones would be most
beneficial to achieve this particular career goal. 10

Consider your future career expectations and developmental needs. Then, fill
out the form included in Figure 8-1, assuming your current or future employer
will be willing to provide any developmental opportunities of your choosing.
What does your plan look like? What did you discover about what yo u would
like to Jearn in the future? What does this information tell yo u about your level
of aspirations and fu ture prospects for your career advancement?

TABLE 8 -1
Summary List o f
Development Activities

234 Part Ill Employee and Leadership Development

FIGURE 8 -1
Example of a
Development
Plan Form

Update Date:
Name:
Job TiUe/Job Code:
Department
Prima1y Reviewer:
Education:
Prior Training:
Job History:
Career Goals:

Next !year
Next 2 years
Next 3years
Next 5 years

OptionsOJT … ,I
(on-the-job) Type of
Training Development

Classes Current Quarter

Conferences

On-line

Self-study

Job rotation Next Quarter

Videos

Books

Temporary
assignment

Mentorship Current +£

Other (specify)

II Current +il.

I I Completed I Hours Comments-
How (ThiS Approximate Objectives/

When Long Quarter) Cost-Other Evaluation

8-2 DIRECT SUPERVISOR’S ROLE
The direct superv isor has an important role in the creation and comple-
tion of the employee’s development plan. Because of the pivotal role of the
direct supervisor in the employee development process, it is a good idea for
the superv isor to have her own development plan a s well . This will help
the s upervisor understand the process from the employee’s perspective,
anticipate potential road blocks and defens ive attitudes, and create a plan in
a collaborative fashion. n

Chapt er 8 Performance Management and Employee Development 2315

In terms of the specific role of the supervisor, consider the following five
ftmctions:

1. explaining what is required of the employee to reach a required
performance level

2. referring to appropriate developmental activities
3. reviewing and making suggestions about developmental objectives
4. checking on the employee’s progress toward developmenta l objective

achievement
5. offering the opportunity for regular check-ins and reinforcing positive

behaviors

Let us d iscuss each of these functions in tum. First, the supervisor needs
to explain what would be required for the employee to achieve the desired
performance level, including the steps that an employee must take to improve her
performance. This information needs to be provided togeth er with information on
the probability of success if the employee completes the suggested steps. A good
tool that supervisors can use to accomplish this goal is to use the feedforward
interview (FFD. The goal of the FFI is to understand the types of behaviors and
s kills that individuals have that a llow them to perform well, and to think about
ways to use these same behaviors and skills in other contexts to make further
improvements in the fu ture. The FFI includes a meeting between the s upervisor
and employee and involves the following three steps12:

1. Eliciting a success story. The s upervisor sets the stage as follows: “All of us
have both negative and positive experiences at work. I would like to meet
w ith you to discuss some positives aspects only and see how we can Jearn
from those experiences about things that work well.” Then, the supervisor
can ask, “Could you p lease tell me a story about an event or experience a t
work during which you felt at your best, full of life and in flow, and you
were content even before the results of your actions were known?” It is
important that the story be very specific about an actual incident and not a
general statement about “In general, these are the things I do at work …. ”
So, the story must be situated w ithin a specific context. After the s upervisor
hears the story, she can summarize it for the employee to hear it, and then,
the s upervisor can ask whether any information is missing or anything
else should be added to the story. A follow -up question is, “Would you
be happy to experience a similar process again?” If the answer is in the
affirmative, then the s ubsequent questions attempt to go deeper into the
details of the story. If the story is associated with mixed feelings and is not
completely positive, then a different story must be elicited.

2. Uncover the underlying success factors . The second step involves
understanding the factors that Jed to the successful story. For example,
the supervisor can ask, “What were some of the things you did or did not
d o, s uch as your specific personal strengths and capabilities, that made
this success story possible?” and “Wha t were the conditions that made
this success story possible?” It is important to uncover both the personal
and contextual factors that Jed to the success s tory. This step is similar
to cond ucting d etective work to try to understand the various factors

2315 Part Ill Employee and Leadership Development

that Jed to success, includ ing the role that the work environment (e.g.,
technology) and o thers (e.g., customers, peers) played in the story.

3. Extrapolating the past into the future. The third step involves asking
questions that will lead to an employee’s ability to replicate the conditions
that Jed to success in the past into the fu ture. So, the supervisor can
first note that “The conditions you have just described seem to be your
personal code for reaching [insert the key achievement in the story such
as happiness at work, optimal performance, outstanding leadership,
etc.].” Then, follow up with questions such as, “Think about your current
actions, priorities, and plans for the near future (e.g., next week, month,
or quarter) and tell me how you think you may be able to replicate these
conditions to be able to achieve the same level of [insert satisfaction,
achievement, performance, etc.] as you d id before.”

An experiment involving all 25 managers in the sales and customer service
units of a business equipment firm in Canada provided evidence regard ing the
effectiveness of the FFI. 13 The managers and their direct reports were randomly
assigned to one of two experimental cond itions (a) feedforward interview
(n = 13 managers, 70 employees), or (2) traditional feedback (n = 12 managers,
75 employees). Results showed that compared to traditional feedback, the FFI
increased performance four months later. So, the effects of the FFI are relatively
enduring. Also, the training required to teach managers how to use the FFI is
fairly short. In this particular experiment, it took just two-and-a-half hours to
train 13 managers, which helped shift the role of the manager from a judge or
critic of an employee’ s past performance to apprecia tive inquiry of what an
employee will do in the future.

As an outcome of the FFI, there may be resources that the employee may
need to achieve his developmental goals. Thus, as a second important function,
the supervisor has a primary role in referring to appropriate developmental
activities that can assist the employee in achieving her goals. For example, this
includes helping the employee select a mentor, appropriate study resources,
courses, and so forth .

Third, the supervisor reviews and makes suggestions about the developmental
objectives. Specifically, the supervisor helps assure the goals are achievable,
specific, and doable (recall our discussion about goals in Chap ter 5) .

Fourth, the sup ervisor has primary responsib ility for checking on the
employee’s progress toward achieving the developmental goals. For example,
the supervisor can remind the employee of due dates and revise goals, if needed.

Finally, in addition to regular check-ins, the supervisor need s to provide
reinforcements so the employee will be motivated to achieve the developmental
goals. Reinforcements can be extrinsic and include rewards such as bonuses and
additional benefits, but reinforcements can also include the assignment of more
challenging and interesting work that takes advantage of the new skills learned .

To be successful in performing the five aforementioned func tions, supervisors
themselves need to be motivated to support the employees’ completion of
their developmental objectives. For this to happen, s upervisors must be held
accountable and rewarded for doing a good job in helping their employees de-
velop. 14 Consider how this is done a t KLA-Tencor Corporation, one of the world’s
top 10 developers and manufacturers of inspection and measurement equipment
for the semiconductor and nanoeletronics ind ustries. KLA-Tencor is a global

Chapt er 8 Performance Management and Employee Development 237

company including 6,000 people in 17 countries, united by a “culture that rewards
innovation and recognizes the power of collaboration to deliver breakthroughs.”
At KLA-Tencor, between 10 percent and 30 percent of supervisors’ bonus pay is
directly tied to employee development, which is measured in terms of employee
training and certification levels. Managers are given at least quarterly updates
on the status of their s taff development. In addition, employees themselves
are rewarded for engaging in developmental activities. In fact, only employees
with up-to-date trairting and certification levels are eligible for bonuses. Thus,
employee development is successful a t KLA-Tencor because both employees and
managers are directly rewarded for employee development. After several years
of implementing these practices, employee development has become the norm
and is part of the KLA-Tencor’s culture. 15 As an additional example specifically
regarding the role of supervisors in implementing the development plan, Jearn
how this is done at Diageo, as described in Box 8-2.

In sum, direct supervisors play a key role in the success of the development plan
because they are directly involved in the assessment of objective accomplishment
and monitor progress toward accomplishing developmental objectives. Also, they
must be highly committed to the development of their employees and motivated
to help their employees fulfill their career aspirations. To do so, supervisors must
be evaluated, in part, based on how well they manage the developmental process
for their employees. When these conditions are present, the development plan
becomes an integral part of the performance management system, all employees
have a plan (including managers from all levels in the organization), all employees
are able to access different types of developmental opportunities on an ongoing
basis, and alignment between employee and organizational goals is enhanced.16

Box 8 -2

Company Spotlight: Role of Direct Supervisor
in Development at Diageo
Diageo makes and distributes alcoholic beverages that devel opment goals that are aligned with the employee’s
include brands such as Smirnoff (the worl d’s best-sell ing career aspirations. Monthly meetings, referred to as “call
vodka), Johnnie Walker (the world’s best-sell ing bl ended overs,” are hel d to review progress toward goa ls and
Scotch whisky), Baileys (the world’s best-selling liqueur), to adjust goal s as necessary. Also, t he supervisor helps
and Guinness (the world’s best-sell ing stout). Also, Diageo provid e a mea ns for development and reach ing goa ls
owns 34 percent of Moet Hennessy, whi ch owns brands by ensuring employees receive t raining, course work, or
including Moet & Chandan, Veuve Clicquot, and Hennessy. studying mat erial on relevant topics. Another strategy
Di ageo sells its products in more than 180 countries and has incl udes g iving assignments outsi de of one’s current po-
offices in about 80 countries. The company has recogni zed sition responsibilities, such as leading a project, to test
the va lue of empl oyee development and expects supervi- one’s skills and practice what the employee has learned
sors to play an important role in the development of their in the devel opment process. In summary, Diageo has
d irect reports. Specifically, the company’s career devel op- recognized the critical role t hat managers shou ld play
ment program includes a formal review and goal setting, in the employee devel opment process. Th i s involvement
along with regular meetings to keep development fresh benefits the individua l employee’s g rowth and al so aids
in the minds of empl oyees. The supervisor faci litates the in ali gning employee skills and acti ons with the strategi c
process in several ways. The supervisor helps identify specific goal s of the o rganizati on as a whole.”

238 Part Ill Employee and Leadership Development

Next, we address an important tool used for employee development
purposes: multisource feedback systems. Although these systems are called
using different labels, such as 360-degree systems, multi-rater, multisource, full
circle, or 450 feedback, the basic principle is the same: We gather the most useful
information about employee’s development needs when we use multiple sources
of performance information.18

8-3 MULTISOURCE FEEDBACK SYSTEMS
The multisource feedback system has become a preferred tool for helping employees,
particularly those in supervisory roles, improve performance by gathering information
on their performance from different sources.19 As mentioned above, multisource
feedback systems are usually called “360-degree” systems because information is
gathered from sources all around the employee. Specifically, information on what
performance dimensions could be improved is gathered from superiors, peers,
customers, and direct reports. This information is usually collected anonymously
to minimize rating inflation. Employees also rate themselves on the various
performance dimensions and compare self-perceptions with the information
provided by others. A gap analysis is conducted to examine the areas for which
there are large discrepancies between self-perceptions and the perceptions of others.
A multisource feedback system report usually includes information on dimensions
for which there is agreement that further development is needed. This information
is used to create a development p lan, as described earlier in the chapter.

A multisource feedback system is most helpful when it is used for developmental
purposes only and not for administrative purposes.20 This is because people
are more likely to be honest if they know the information will be used to help
individuals improve and not to punish or to reward them. However, it is possible
to implement such systems successfully for administrative f.urposes after they
have been in p lace for some time-usually, two years or so. 1

Feedback reports usually include graphs showing the areas in which employees’
perceptions differ the most from the perceptions of other sources of performance
data. They can also show average scores, across sources of information, so that
the areas that need improvement are readily identified . The result ing report is
usually mad e available to the employee and his supervisor so that both have an
opportunity to review it before meeting to create a development plan.

A trend adopted by many vend ors that offer online multisource feedback
systems is to offer a bundle of systems, includ ing multisource feedback together
with learning management, compensation, and even recruiting and succession
planning.22 These integrative applications, usually called “talent management”
systems, allow to manage data abou t employees in a systematic and
coordinated way. Such integrative software applications allow organizations to
create an inventory of their human capital and better understand their strengths
and weaknesses at the organizational level. For example, an organization that uses
such applications is quickly able to deploy project teams with the appropriate mix of
skills and experience after doing a quick search in the database. Another important
advan tage of these integrative applications is that performance management can be
more easily linked to recruiting, compensation, training, and succession planning.
In other words, the system can keep track of an employee’s developmental needs
and how these needs have been ad dressed (e.g., via training) over time.

Chapt er 8 Performance Management and Employee Development 239

As an illustration, consider a system offered by Profiles International, called
CheckPoint 360. This system, designed for em ployees in supervisory roles, in-
cludes information on the following competencies:

• Communication (listens to others, processes inform ation, communicates
effectively)

• Leadership (instills trust, provides direction, delegates responsibility)
• Adap tability (adjusts to circumstances, thinks creatively)
• Relationships (builds personal relationships, facilitates team s uccess)
• Task management (works efficiently, works competently)
• Production (takes action, achieves results)
• Development of others (cultivates individ ual talent, motivates

s uccessfully)
• Personal d evelopment (displays commitment, seeks improvement)

The CheckPoint 360 system includes self-evaluations as well as evaluations
provided by the direct supervisor, d irect reports, and peers. After performance
information has been collected from all these sources, the manager evaluated re-
ceives feed back in the form of the graph shown in Figure 8-2. This graph illustrates
the discrepancies between self- and others’ ratings as well as the scores obtained
for each compe tency. For example, this graph shows tha t this particular manager
has the g reatest gap for the competency “development of others.” Specifically,
the manager assigned a score of abo ut 4.5 to herself, whereas the average score
p rovided by her direct s upervisor, direct reports, a nd peers is only 2.55. The
CheckPoint system uses the following scale to rate competencies:

0

2

3

4

5

Not Applicable (not averaged into scores)

Never demonstrate s this

Seldom demonstrates this

Sometimes demonstrates this

Usually demonstrates th1s

Always demonstrates this

In this particular illustration, the manager believes that she displays behaviors
indicating the competency ” development of others” somewhere between “usually”
and “always.” By contrast, her s upervisor (i.e., “boss”), employees, and peers
believe that she dem onstra tes these behaviors somewhere between “seldom”
and “sometimes.” In other words, the self-rating falls within the favorable zone
whereas the ra tings provided by others do not.

To explore this gap further, the report provided to the manager also includes
more detailed information on the scores provided by each source of information. The
Reference Group Comparison chart included in Figure 8-3 shows this informa tion.
An examination of the scores p rovided for the competency “development of
others” indicates that all sources, except for the manager herself, agree that work is
needed regarding this competency because all scores are between the “seldom” and
“sometimes” categories. By contrast, the manager believes she is doing an exceptional
job of cultivating individual talent (score of 5) and motivating successfully (score of 4).

240 Part Ill Employee and Leadership Development

FIGURE 8-2
Checkpoint 360-degree
Competency System:
Executive OveNiew.
© Profiles International, Inc.,
Waco, Texas, USA

Executive Overview
Overview of Self vs. All Observers

Total CheckPoint Scores

I

Colorll.cy: O &tf
4-GfV+: All Obtl’r.ffib} I p(llll Wlll(lf’i’.

Differential
0.34

Source Bob Strategic Busin ess Partner of Profiles Internatio na l, lnc. SQS.634–7748, [email protected]
com, h ttp://v.rww.ga.telyoonsulting.oom/chkpointhtm. Courtesy of Profiles In ternationa l, Inc.

Chapter 8 PerFormance Management and Employee Development 241

Reference Group Comparison
with Management Alignment of Self and Boss

StiiiSm I I Ptrforman« A111lysis
low

I ….. ‘ ·-Conmtunication
Listens To O!hers

Processes Information

Communicates

Leadership
lustUI.s T mst

Provides Direction

Delegates Re:,ponsibility

Adaptahilitv
Adjlists to Circumstances

Thinks

Relationshill!!
Builds Personal Relationships

FaciliwJes Team

Task Management
Works Ejjicielllly

Work.t Compelently

Production
Takes Action

Acbif!l.Y!S Resulls

Development Of Others
Culthtllf!S bu/i,•idutd Talents

.IIJotivGies Succes.sfu/Jy

Personal Development
Commifmenr

Seeks lmprovemem

Total CheckPoint Scores
I , ..

• • Sdf Qu. C)l’ftN

Source: Bob Strategic Business Partner of Profiles International, Inc. 508-634–7748, bob®gate:lyconsulting.
com, http://www.gate:lyoonsulting.com/ chkpoinlhtm. Courtesy of Profiles international, Inc.

FIGURE 8-3
Checkpoint 360-degree
Competency System:
Reference Group
Comparison. © Profiles
International, Inc., Waco.
Texas, USA

242 Part Ill Employee and Leadership Development

FIGURE 8-4
Checkpoint 360-d egree
Competency System:
Deve lop me nt Summary.
© Prof1les In ternational, Inc.,
Waco, Texas, U SA

It is not sufficient, however, just to provide scores regarding each of the
competencies. Becoming aware that there is a problem with a competency is
a very good firs t step, but a good multisource feedback system also provides
concrete suggestions about what to do to improve competencies.24 The CheckPoint
system does this by providing what is called a development summary. The
development summary describes strengths and areas that should be developed
further. An example of this is shown in Figure 8-4. According to the graph, this

Development Summary
for Darcy Walker

SkiiiS.t

Strengths
A consensus of youneference gmup Jatings shows these competencies are clear
strengths. as they fall in or above the Favornble Zone.

1.’1 Oisploys Commilmcnt
Works Competentl y

Achieves
Takes J.ction
Bu1lds Personal Relationships
Works Efficiently
II Adjusts to Circumstances
Instills T•·ust
Listens To Others

Development Areas
A consensus of yourreference gmup Jatings shows these competencies (which faiJ
below the Favornble Zone) as in need of improvement and should be considered a lop
pliotity foryou.rcat-eerdevelopment.

Thinks Creatively
1iJ Communicates EITecth·ely

Facilitates Team Succe.ss
II Information m Seeks lmprO’tment
Motivates
Cultivates Individual Talents m PrO’ides Direction

Delegates Rt”Sponsibility

Critical Devetopme1n Area!

Critical Developme.Jlt Area!

Critical Development Area!
Critical Development Area!

The critical development areas ate deteonined by input from Boss and Self and the
telalionship of the Favornble Zone.

,1,.

,1,.

All Obs<rvtrs Rating

• , ….

‘ , ….

‘ , ….
Source-: Bob Strateg ic Business Partne r of Profi les Internationa l, lnc. SQS.634–7748, [email protected] telyoonsulting
.com, http://’ “‘”vw.gatelyconsulting.oom/ chkpoint.htm. Co urtesy of Profi les Internationa l, lnc.

Chapt er 8 Performance Management and Employee Development 243

particular manager has several strengths, but also, some areas that deserve
further development. For example, there is a need to work on the “facilitates
team success” dimension of the competency “relationships.” The report also
includes specific suggestions on how to improve this competency, which are
shown in Figure 8-5. Specifically, the manager is given tips and advice regarding
concrete steps to be taken to improve performance. For example, in terms of
learning to collaborate on team decisions, the manager is given advice about
how to compromise and reach win-win decisions and how to gain support for
decisions.

Suggestions for Improvement
tor Darcy Walker

following suggestions will help direct your development efforts:

Facilitates Team Success

• Don’t ignore conflict. thinking it will disappear. 11 won’t. And don’t expect a conflict-free workplace.
Some discord is inevitable and constructively dealing with it will create a more productive work
environment.

• Listen carefully to all viewpoints in a disagreement. Define the problem. Tiren begin tlte process of
resolution.

• Explore multiple options. Tiren resolve with solutions that are acceptable to all involved
parties.

• When recognizing outstanding perfonnance, go beyond the acknowledgment of individual successes.
Give equal emphasis to team achlevernents and effective cooperntion among learns.

• Validate the importance of each and eve!)’ team member’s contribution.

• Prnctice tlte art of compromise when making decisions. creating win/win situations.
• To gain support fordecis ions. involve the team in considering altemative approaches. Strive for

consensus in orderto increase commitment to O•e final decision.

ESS>lishT Elm Obju tive.

• As much as possible involve the team in fonnu lating goals consistent with. and supportive of. tlre
overnll mission of your business. Also solicit input when planning the implementation of the goals.

• Make sure evel)’one under:stands tlte team’s goals, as well as tlreirrole in attaining the goals.
• Keep evel)’One apprised of team progress.

D& Eiqt Gro.p Dynmics Thai:BrirgO<.tttEII.S:inEva-ya-e

• Recruit individuals witlr talents tlrat will complement tire skills of otlrertearn member:s.
• Capitalize on each per:son’s strengths and experiences to create a potent team effort.

Souru: Bob Strategic Business Partner of Profiles international, Inc. 508-634–7748, bob®gate:lyconsulting
.com, http://v.rww.gatelyoonsulting.oom/chkpoinlhtm. Courtesy of Profiles International, Inc.

FIGURE 8-5
Checkpoint 360-degree
Competency System:
Suggestions for
Improvement. ©Profiles
International, Inc., Waco.
Texas, USA

244 Part Ill Employee and Leadership Development

8-3-1 Benefits of Multisource Feedback Systems
Organizations and individuals can gain several ad vantages as a consequence
of implementing a multisource feedback system. These include the following:

• Decreased possibilif:lJ of biases. Because these systems include information
from more than one source, there is a decreased possibility of biases in the
identification of employees’ weaknesses.

• Increased awareness of expectations. Employees become aware of others’
expectations about their performance. This includes not only the
s upervisor’s expectations, but also, the expectations of other managers,
peers, direct reports, and customers.

• Increased commitment to improve. By using multisource feedback systems,
information about performance is no longer a private matter. Thus,
employees become aware of what others think about their performance,
which increases their commitment to improve in the future.

• Improved self-perceptions of performance. Employees’ distorted views of
their own performance are likely to change as a result of the feedback
received from other sources. In other words, it is difficult to continue
to have distorted views of one’s own performance in the presence of
overwhelming evidence that these perceptions may not be correct.

• Improved perfonnance. Although receiving information about one’s
performance is not sufficient cause to improve, it is certainly a very important
s tep. Thus, having information on one’s performance, if paired with a good
development plan, is likely to lead to performance improvement.

• Reduced “undiscussables” and defensiveness. Multisource feedback systems
provide an excellent opportunity for coworkers, s uperiors, and direct reports
to give information about performance in an anonymous and nonthreatening
way. Many supervisors may feel uncomfortable about providing negative
feedback and some issues become “tmdiscussables.” But a multisource
system makes providing such feedback easier. Also, from the perspective
of employees, it is harder to ignore and become defensive regarding the
accuracy of performance feedback w hen it originates from multiple sources.25

• Employees enabled to take control of their careers. By receiving detailed and
constructive feed back on weaknesses and strengths in various areas,
employees can gain a realistic
assessment of w here they TABLE 8 ·2
should go with their careers. Summary Ust of Benefits Resulting From a
Table 8-2 includes a summa-

rized list of benefits that organiza-
tions can obtain from implementing
a multiso urce feedback system.
Consider an organization for which
you have worked that has imple-
mented a multisource feedback
system. If you carmot think of one,
talk to friends or family members
and ask them about a system they

Multisou rce Feedback System

Decreased possibility of biases

Increased awareness of expectations

Increased comm1tmentto improve

Improved self-perceptions of performance

Improved performance

Reduced · undiscussables” and defensiveness

Employees enabled to take control of tihelf careers

Chapter 8 Performance Management and Employee Development 245

have experienced. Then, consider the list of benefits listed in Table 8-2. Which
of these were not actually realized by the system? Why not?

8-3-2 Risks, Contingencies, and Potential Pitfalls
in Implementing Multisource Feedback Systems

We have discussed the many advantages of multisource feedback systems, but
we should also consider that there are some risks and potential pitfalls involved.26
For example, negative feedback can hurt an employee’s feelings, particularly if
those giving the feedback do not offer their comments in a constructive way.
Second, the system is likely to lead to positive res ults only if individuals feel
comfortable with the system and believe they will be rated honestly and treated
fairly. User acceptance is an important determinant of the system’s success.
Third, when very few raters are providing the information, say, two or three, it
may be easy for the employee being rated to identify who the raters are. When
anonymity is compromised, raters are more likely to distort the information they
provide. Fourth, raters may become overloaded with forms to fill o ut because
they need to provide information on so many individuals (peers, superiors, and
direct reports). Finally, implementing a multisource feedback system sho uld
not be a one-time-only event. The system should be in place and data collected
over time on an ongoing basis. The implementation of ongoing multisource
feedback systems is sometimes labeled a 720-degree feedback Sljstem, referring to
the fact that the collection of multisource data takes place at least twice. In short,
admirtistering the system only once will not be as beneficial as administering
the system repeatedly.

In addition, we need to be cognizant that multisource feedback systems are
not necessarily beneficial for all individuals and all organizations. For example,
individuals who are high on self-efficacy (i.e., they believe they can perform any
task) are more likely to improve their performance based on feedback received
from peers compared to individuals low on self-efficacy.27 Also, the effect of
receiving feedback from multiple sources is most beneficial for individuals who
perceive there is a need to change their behavior, react positively to feedback,
believe change is feasible, set appropriate goals to improve their performance, and
take concrete actions that lead to performance improvement.28 On the other hand,
individuals who score lower on self-efficacy pay more attention to the feedback
received from their line managers. In other words, an employee’s confidence in
her own performance influences which sources of fee dback are most useful to her.

In terms of organizational characteristics, multisource systems work best in
organizations that have cultures that support open and honest feedback. Also,
these systems work best in organizations that have a participatory, as opposed
to authoritarian, leadership style in which giving and receiving feedback is
the norm and is regarded as valuable. For example, consider the case of the
Patent Office of the United Kingdom. This organization is characterized by a
hierarchical structure, typical of many civil service organizations, as opposed to
a fla t structure, where employees are involved and teamwork is the norm. The
implementation of a multisource feedback system did not lead to the anticipated
positive results, and there was a mismatch of expectations between w hat the board
members wanted (i.e., better working relations and a culture change) and what

24S Part Ill Employee and Leadership Development

the employees wanted (i.e., individual improvement). Moreover, managers did
not show a good understanding of the behaviors they were expected to display,
and their performance did not show improvement. Overall, the multisource
feedback system was not sufficiently linked to o ther HR systems and policies.29

Answering the following questions can give a good indication as to whether
implementing a multisource system would be beneficial in a specific organization:

1. Are decisions that are made about rewards and promotion fairly free of
favoritism?

2. Are decisions made that take into account the input of people affected by
such decisions?

3. Do people from across departments usually cooperate with each other
and help each other?

4. Is there little or no fear of speaking up?
5. Do people believe that their peers and direct reports can provide valuable

information about their performance?
6. Are employees trusted to get the job done?
7. Do people want to improve their performance?

In short, the successful implementation of a multisource feedback system is
heavily d ependent on the culture of the organization and the work context.30 If the
answer to most of these questions is “yes,” the implementation of a multisource
feed back system is likely to be successful and lead to performance improvement.

The risks associated with implementing a multisource system can be illustrated by
Watson Wyatt’s Human Capital Index (HCI)3 1 This is an ongoing stud y of the effects
of HR practices on the stock value of more than 700 publicly trad ed companies. One
particular result was especially alarming. Of the companies surveyed, those that had
implemented multisource feedback had lower stock value! Specifically, the companies
that used peer reviews had 4.9 percent lower market value than did similar companies
that did not implement peer reviews. Furthermore, companies that implemented
upward feedback, where employees rated managers, had a 5.7 percent lower stock
value than did similar companies that did not implem ent upward feedback. Does
this necessarily m ean that implementing multisource feedback systems causes the
stock price to decrease? Based on the data collected, there is no d efinitive answer to
this question. It could be that organizations that are not performing well financially
decide to implement multisource feedback systems precisely to help improve their
performance. Nevertheless, these results highlight the importance of following best
practices in implementing multisource feedback systems to avoid any negative con-
sequences of implementing such a system, which we ad dress next.

8·3·3 Characteristics of a Good Multisou rce Feed back System
Fortunately, there are several things that can be done to maximize the chance that
the system will work properly. When systems have the following characteristics,
they are most likely to be successfuJ32:

• AnonymihJ In good systems, feedbac k is anonymous and confid ential.
When such is the case, raters are more likely to provide honest
information regarding performance, particularly when direct reports are
providing information about superiors.

Chapt er 8 Performance Management and Employee Development 247

• Observation of employee perfonnance. Only those with good knowledge and
firsthand experience with the person being rated should participate in the
process. There is no point in asking for performance feedback from people
who are not able to observe performance directly.

• Feedback interpretation. Good systems allow the person being rated to
d iscuss the feedback received with those genuinely interested in the
employee’s development. In most cases, feedback is discussed with
the d irect supervisor. In other cases, the discussion can involve a
representative of the H R department, a superior, or peer to w hom the
person does not report directl y.

• Follow-up. The information gathered has little value if there is no follow-up
action. Once feedback is received, it is essential that a development plan is
created right away.

• Used for developmental purposes only (at least initially). When multisource
fee d back systems are used for adminis trative p urposes such as
p romotions and compensation, raters a re likely to d istort the
information provided. Make it clear that the purpose of the system
is developmental, and developmental only. Ini tially, the information
collected sho uld not be used for making reward allocations or any
o ther administrative decisions. However, the syste m may be used fo r
administrative purposes after it has been in place fo r some time-
approximately, two years or so.

• Avoidance of rater fatigue. Rater fatigue can be avoided if individuals a re
not asked to rate too many people at the sam e time. For exam ple, data
collection can be staggered so that not all surveys are distributed a t the
same time.

• Emphasis on behaviors. Altho ugh systems can include feedback on
both behaviors (com petencies) and res ul ts, it is better to e mphasize
behaviors. Focusing on behaviors can lead to the identification of
concrete actions that the person being rated can take to improve
performance.

• Raters go beyond ratings. In addition to providing scores on the various
dimensions, raters should provide written descriptive feedback that gives
detailed and constructive comments on how to improve performance.33
It is helpful if this information also includes specific examples that help
s upport the ratings and recommendations provided.

• Raters are trained. As in the case of provid ing eval uations for
ad ministrative p urposes, raters should be trained. Mainly, this incl udes
s kills to discriminate good from poor performance and how to provide
feedback in a constructive manner.

Table 8-3 includes a summ arized list of characteristics of good multisource
feedback systems. Given this list, consider the case of AAH Pharmaceuticals,
described in Box 8-3. Based on this information, which characteristics are present?
Which are absent?

In closing, this chapter referred to the important role of supervisors in the
employee development process. But for managers to become true “performance
management leaders,” they require specific knowledge and skills. This is the topic
that we will address in Chapter 9.

248 Part Ill Employee and Leadership Development

TABLE 8-3
Characteristics of a Good
Multlsource Feedback
System

Box 8 -3

Anonymity

Obse,vation of employee performance

Feedback Interpretation

Follow-up

Used for developmental purposes only (at least initially)

Avoidance of rater fa tigue

Emphasts on behaViors

Raters go beyond ratings

Raters are trained

Company Spotlight: Multisource Feedback
at AAH Pharmaceuticals
AAH Pharmaceuticals (AAH) utilizes a multisource feedback several sources through an automated online system of
system that incl udes several characteristics of a good system. quest i onnaires, ensuring that inf ormation was anonymous
The company, which has nine depots around t he United and confidential. After the results were obtained, participants
Kingdom, including locations in Belfast, Glasgow, and Sussex, attended a one-day meeting about the results away f rom
is a wholesaler of pharmaceuticals, providing medical products the office that included one-on-one interpretation and d is-
and services in the UK. AAH, with the help of professional cussion w ith the consultant to initiate a development plan.
consultants, f ound the multisource feedback process helpful Six-month follow-up meetings were held to review progress
in providing feed back and useful information for develop- toward developmental obj ectives. AAH found the process
ment planning. To help ease employee concern, the company to be successful w ith a f irst g roup of managers who went
clearly outlined for employees that development planning through the process and made plans for a broad rollout of
and f eedback were t he on ly purposes, and information the program for more employees to take advantage of de-
would not be used for any other purpose. Employees were velopmental opportunities. In summary, the system utilized
also given the option of sharing information w ith supervi- by AAH provides an example of several of the characteristics
sors. The system included gathering performance data f rom of a successful multisource feedback instrument.34

SUMMARY POINTS

• Personal developmental plans are a key component of a performance
management system because they specify courses of action to be taken
to improve performance. A performance management system that Jacks
information about how to improve performance will not help employees
Jearn skills beyond what they know and use already. In a nutshell, a
good development plan allows employees to answer the following four
questions: How can I continually Jearn and grow in the next year? How
can I do better in the future? How can I avoid performance problems faced

Chapt er 8 Pe rformance Management and Employee Development 24e

in the past? Where am I now and w here would I like to be in terms of my
career path?

• Development plans focus on both the short term and the long term.
Specifically, development plans address how to improve performance
in the current position, how to sustain good levels of performance in the
cu rrent position, and how to prepare employees for future ad vancement.
In addition, development plans provide employees with growth
opportunities so that even if advancement within the organization is
not clear, employees are able to enrich their daily work experiences.
In terms of the future, good development plans also help employees
build th ree types of career competencies: reflective (i.e., refl ection on
motivation, reflection on qualities), communication (i.e., networking and
self-profiling), and behavioral (i.e., work explora tion and career control).
A long-term orientation is also important fo r organizations because
it allows them to use development plans strategically and to gather
information usehtl for succession planning.

• Good development plans include a description of the specific s teps to
be taken and specific developmental objectives . A good plan includes
information about (1) developmental objectives, (2) how the new s kills
or knowledge will be acqu ired, (3) a time line regarding the acquisition
of the new skills o r knowledge, and (4) standards and measures tha t
will be used to assess w hether the objectives have been ach ieved.
Learning objectives should be designed s tra tegically to take into
account both the needs of the individual and those of the organization.

• Developmental objectives can be achieved by one or more of the following
activities (1) on-the-job training, (2) courses, (3) self-guided stu dying, (4)
men to ring, (5) attending a conference or trade show, (6) mixing with the
best, (7) getting a degree, (8) job rotation, (9) tem porary assignments, and
(10) membership or leadership role in professional, trade, or nonprofit
o rganizations. Developmental activities for specific objectives are chosen
by the employee and the d irect supervisor. This choice is guided by taking
into account the employee’s learning preferences, the developmental
objective in q uestion, and the organization’s available resources. Many of
these activities are suited fo r all positions, but some are particularly suited
for managerial jobs (e.g., mixing with the best) .

• The d irect supervisor has a key role in helping the employee define
the scope of the development plan and in explaining the relationship
between the developmental objectives and strategic priorities for
the unit and the organization. The direct s upervisor also has direct
responsibility for checking on the em ployee’s progress toward
achieving the developmental objectives and provid ing resources so
that the employee will be able to engage in the appropriate activities
(e.g., courses, mentoring) . Also, supervisors can help employees
uncover the factors that lead to achievement and job satisfaction by
cond ucting feedforward interviews, whose goal is to understand the
types of behaviors and s kills that individ uals have that allow them to
perform well and to think abo ut ways to use these same behaviors and
s kills in other contexts to m ake further improvements in the future.
Supervisors must reinforce an employee’s accom plishments toward
completing a development p lan so that the employee remains m otivated.
Fina lly, supervisors themselves must be m otivated to perform all these

2110 Part Ill Employee and Leadership Development

functions in support of their employees’ development p lans. To do so,
supervisors’ performance regarding how well they help their employees
develop should be measured and rewarded appropriately. In short, the
supervisory role includes the following five functions (1) explaining
what is required of the employee to reach a required performance level,
(2) referring to appropriate developmental activities, (3) reviewing and
making suggestions about d evelopmental objectives, (4) checking on the
employee’s progress toward developmental objective achievement, and
(5) offering the opportunity for regular check-ins and reinforcing positive
behaviors.

• Multisource feed back systems are tools that help employees build
new skills and improve their performance in general by gathering and
analyzing performance information from several sources, including peers,
superiors, direct reports, and oneself. Performance information gathered
from oneself is compared to information gathered by other sources to
perform a gap analysis showing discrepancies between how one sees
one’s own performance in relation to how o thers see one’s performance.
These types of systems are also used to identify performance dimensions
for which all, or most, performance information sources agree there is
little or substantial room for improvement. Accordingly, this information
can be used in creating a development plan.

• The implementation of multisource feedback systems can produce many
benefits, including (1} decreased possibility of biases, (2) increased
awareness of performance expectations, (3) increased commitment to
improve, (4) improved self-perceptions of performance, (5) improved
performance, (6) reduction of undiscussables and defensiveness, and
(7) increased career control on the part of employees.

• In spite of the many advantages associated with implementing
multisource feedback systems, there are some risks involved . For
example, negative feedback can hurt an employee’s feelings; ind ividuals
may not be read y to receive such feedback and may therefore not
participate willingly; anonymity may be compromised, and therefore,
information may be distorted ; and raters may be overloaded with forms
to fill out. These risks, and the associated failure of the system, are
particularly high when the organization does not value participation
in decision making; there is little cooperation among employees; there
is favoritism; employees do not value the opinion of others (i.e., peers,
direct reports); decisions are based on hearsay; and/or employees are not
trusted to get the job done.

• There are some characteristics that will enhance the success rate of a
multisource feedback system. These features include the following: there
is anonymity; raters have firsthand knowledge of the performance of the
person being evaluated; feedback is interpreted by a person genuinely
interested in the development of the person evaluated; there is follow-up
after receiving feedback; the system is used for development purposes
only; raters do not become fatigued; there is an emphasis on behaviors,
instead of on results; raters provid e information beyond performance
ratings only; and raters are trained. The presence of these characteristics is
likely to lead to the successful design and implementation of the system.

I_

Chapter 8 PerFormance Management and Employee Development 2151

EXERCISE 8-1 MAKING THE CASE FOR A TOP-NOTCH MULTISOURCE
FEEDBACK SYSTEM DEMO

You are in charge of selecting a multisource feed back system that will be purchased
b y the organization for which you work for or have most recently worked for.
First, you need to make sure the system has as many of the ideal characteristics
as possible as described in this chapter. Second , you need to select a system that
will be particularly s uitable to your organization’s culture and goals, ind ustry
context, as well as resource constraints.

As a firs t s tep, do a Google search for “360-d egree” and “multisource”
feedbac k system demos. For example, one such demo is availab le at h ttps://
www.hr-survey.com/360FeedbackDemos.htm. Second, critically rev iew a few
of the demos, taking into account their positive and less positive features.
Third, select a good system and prepare a 5-10 minute presentation to be
delivered to the rest of the class, describing the reasons you selected the system
you did. Keep in mind that you need to describe, at a minimum, what the
good features o f the system are and why this system is appropria te for your
particular organization.

EXERCISE 8-2 OBTAINING MULTISOURCE FEEDBACK ON YOUR OWN
PERFORMANCE

The goal in this exercise is to conduct a multisource feedb ack system regard ing
your performance in this class. First, create a list of competencies that are related
to the performance of a s t udent taking a performance management course
(hint: see Figure 8-2). Second, create a rating form including these competencies
(hint: see Figure 8-3) . Third, fill out the form and also give the same form to a t
least three other classmates. After you collect th e forms, create a list of strengths
and development areas (hint: see Figures 8-4 and 8-5). Finally, sched ule individual
meetings with each of the classmates who filled out the forms to discuss areas
in which there was d isagreement. What were those areas? What are the reasons
for disagreements across raters? Also, what are your strengths? What are your
areas in need of development and what specific actions would you take to
address each?

CASE STUDY 8-1

Content of a Personal Development Plan at Brainstorm, Inc.

Cathy is a sales manager at Brainstorm, Inc., a computer software training company that sells Microsoft, Novell, Corel, and Open Office
training software, located in Lehi, Utah. One of Ca thy’s
responsibilities is to complete annual performance
evaluations with all of her direct reports and create

Performance Appraisal Form

individual development plans for th ese employees,
based on their performance eval uations. Recently,
Jay, an inside sales representative and Cathy’s direct
report, finished his first year’s performance evaluation
w ith Cathy. Cathy’s performance evalu ation of Jay’s
key competencies and key results is as follows:

Key Competencies Supervisor Comments Score

Sales and Marketing: Demonstrate knowledge of pnnciples and
methods for showtng, promoting. and selling products or seNices.

Customer and Personal Service: Knowledge of principles and
processes for providing high-quality customer and personal
services.

Interpersonal Communication: Talking to others to convey
informat1on effectJvely as well as giv1ng full attention to what other
people are say1ng, taking time to understand the points being
made, and asking questions as appropriate.

Persuasion and N egotiation: Persuading others to change their
minds or behavior. Bringing others together and t;ying to reconcile
differences.

Problem Sensitivity and Ethics: The ability to tell When something
is wrong or is likely to go wrong. ethically or otheiW1se. It does not
involve solving the problem, only recognizing there is a problem.

Could be more proficient w1th greater product
knowledge. Needs greater understanding of
the benefitS of each of the products.

Good verbal and sales skills most of the time.
Had a couple occasions when customers felt
like they weren’t getting enough personal
assistance with recently purchased products.

Very good. Always enthusiastic w1th
customers and quickly develops a good
rapport with new customers.

Adequate. but could be more direct and
persuasive With customers.

Excellent. Shown great ability to anticipate if
contract negotiat1ons are taking an unethical
or unprofitable turn for the worse.

B-

B+

A-

B

A

Key Results Supervisor Comments Score

Degree to which employee met monthly sales goals
($50,000 In sales revenue a month):

Degree to which employee met referral goals
(10 referrals a month):

Number of cold calls made monthly (2 50):

Place yourself in Cathy’s shoes, and use the above
performance evaluation to develop an individual

2152

Adequate. Met sales goals 66 percent of the
time 1n the last six months.

Needs improvement. Met referral goals
50 percent of the time in the last six months.

Excellent. Tlfeiessly exhibits persistence and
hard work in reaching out to businesses.

B

B-

A

development p lan for Jay (Hint: use information
included in Section 8-1 Personal Development Plans).

CASE STUDY 8-2

Improving a Personal Dev elopment Plan at Brainstorm,
Inc.-Part II

Joe, o ne of the Partners of Brains torm, Inc., has been looking into development plans as a pos-s ible wa y of increas ing the productiv ity and
morale of the co mpany’s sales force. To help him in
this project, Cathy has adapted a development plan
form from a business magazine she has recently seen
and as ks you for feedback. Since Cathy is unfamiliar
w ith the characteristics of good development plans,
s he is particularly interested in your critique of a
development plan that s he developed for a sales
representative, Jay. Note: Brainstorm, Inc., may not be

Brainstorm , Inc., Development Plan

Updated: June 28, 2019

Name: Jay

Job Title/Job Code: Sales Representative

Department: Sales

Developmental Options
OJT (On·the·job training)
Courses
SeiF·guided studying
Mentoring
Attending a conFerence or trade show
Mixing with the best
Getting a degree
Temporary assignments

able to finance much in the way of outs ide learning;
however, the company could provide some paid
time off and may be able to negotiate some better
rates for attending classes or conferences, based on
various indus try memberships.

1. How would you improve and/or change the
following form and its content?

2. Because there are only six employees in the
company, how would you adapt the form
to meet the needs of this small business?
Provide an example.

Membership or leadership role (proFessional, trade, non· profit organizations)
Other (speciFy)

Description
Type or Development
When
How Long
Completed Hours (this Quarter)
Comments-Approximate Cost-Other
Objectives/
Evaluation

Current Quarter

Next Quarter

(Cononuedj

2113

2114 Pa rt Ill Employee and Leadership Development

Primary Reviewer: Cathy

Education: High school graduate

Prior Training: Bachelor’s degree in Sales and Marketing

Job History: 10 years of experience in sales. Two years of experience in software training sales.

Career Goals:

Next1 year

Next2 years

Next3 years

Next 5 years-Become head of sales and lead sales trainer.

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Review, 34, 663-680.

30. Maurer, T. )., Barbeite, F. G., & MitcheJJ, D. R. (2002). Predic tors of attitudes toward a
360-degree feedback system and involvement in post-feedback management developmen t
activity. jounza/ of Occupational & Organizational PsyciJOiogy, 75, 87-107.

31. Pfau, B., & Kay, I. (2002). Does 360-degree feedback negatively affect com pan y performance?
HR Magazine, 47(6), 54–59.

32. Some of these recommen dations are adapted from DeNisi, A. S., & Kluger, A. N. (2000).
Feedback effectiveness: Can 360-degree appraisals be improved? Academy of Management
Executive, 14, 129-139; and McCarthy, A. M., & Caravan, T. N. (2001). 360° feedback p rocess:
Performance, improvement and employee career de•elopment. journal of European Industrial
Training, 25, 5-32.

33. Kabins, A. (2016). Why the qualms with qualitative? Utilizing qualitative methods in
360° feedback. Industrial and Organizational PsyciJOiogy, 9, 806-810.

34. Town er, N. (2004, February). Turning appraisals 360 degrees. Personnel Today, 18. Retrieved
January 2, 2018, from http://www.personneltoday.com/ Art ides/2004/02/17 / 22398/
tuming-appraisals-36Q-degrees.htrnl

chapter

9
Performance Management
Leadership

The ability to learn is the most important qualihj a leader can have.

– Shen;l Sandberg

Learning Objectives
By the end of th is chapter, you will be able to do the following :

1. Become an effect1ve performance management leader by
be1ng a coach who creates a good relat•onshtp with direct
reports. understands that the employee IS the source and
director of change. that each employee IS umque. and
that you. as a performance management leader. are the
factlltator of the employee growth process.

2 . Prepare a program that (a) abtdes by the key
pnnc1ples of a good manager-employee relationshtp, an
understanding that the employee 1s the source and dtrector
of change. and that each employee 1s umque; (b) includes
acltonable funcltons such as aclvlce. prov1d1ng guid-
ance. gtV1ng support. and employee confidence
and competence; and (c) 1ncludes spectfic behaviors such
as establishing development obJeCtives. communicating
effecltvely. motivating employees. documenting perfor ·
mance. giving feedback. diagnosing performance problems
and performance decline. and developing employees.

3 . Assess your own coaching style as a driver, persuader,
amiable. or analyzer.

4 . Minimize time. Situa tional. and activity constraints
that create biases when assessing t he extent to which

employees have made progress 1n develop-
mental goals.

5. Give effective pratse (i.e .. also called “postltve feed-
back”) and construct1ve (t.e .. also called ·negat•ve”)
feedback that helps bUild conf1dence and self-eff1cacy.
develops employee competence and engagement,
mimmizes defens•veness. and cons1ders generat1onal
and mdtvtdual dtfferences m feedback preferences and
reactions.

6 . Implement a disCiplinary or termtnation process 1f an em-
ployee does not overcome performance problems over t1me.

7. Design and lead formal performance rev1ew meetings
t hat serve the purposes of all owmg employees t o
improve their performance. bu ild ing a good relation-
ship between the supervisor and the employee. and
identifying import ant factors that will motivate sta r
performers to stay in the organ ization.

8. Lead effective performance review meetings by estab-
lishing and maintaining rapport. bemg empathetic and
open-minded. observing verbal and nonverbal cues. min-
imizing threats. and encouraging employee participation.

2 5 7

2!58 Part Ill Employee and Leadership Development

9-1 COACHING

Chapter 8 addressed issues about employee d evelopment. Specifically, Chapter 8
discussed how to use a performance management system to help employees
develop and improve their performance, and also address more long-term career
goals and aspirations. However, performance management systems are not likely
to help employees d evelop and improve their performance if managers do not
guide and facilitate the employee development process. To do so, managers must
Jearn several important skills to become performance management leaders. These
skills include being able to serve as coach es, to observe and documen t performan ce
accurately, to give both positive feedback (i.e., praise) and constructive feed back
(referred to as “negative” feedback), and to cond uct useful performance review
discussions- including discussions about employee termination and the retention
of star performers. Unfortunately, these skills seem to be in short supply; hence,
this chapter addresses each of these topics. Let us begin with the first of these
issues: coaching.

Coaching is a collaborative, ongoing process in which the managers interact
with their direct reports and take an active role and interest in their performance.
In general, coaching involves directing, motivating, and rewarding employee
behavior. Coaching is a d ay-to-day and ongoing function that involves observing
performance, complimenting good work, and helping to correct and improve
performance when it does not meet expectations and standards. Coaching is
also concerned with long-term performance and involves ensuring that the
development plan is being achieved . Being a coach thus is similar to serving as
a consultant, and for coaching to be successhtl, a coach must establish a helping
relationship. 1 Establishing this helping and trusting relationship is particularly
important when the supervisor and direct report do not share similar cult ural
backgrounds, as is often the case w ith expatriates or when implementing g lobal
performance management systems.2 In such situations, a helping and trusting
relationship allows for what is labeled cultural transvergence in performance
management, which means that cultural d ifferences are discussed openly,
and alternate practices, which enhance individ ual and team performance, are
implemented.

Coaching is a pervasive organizational activity, and since the mid-1990s,
there has been an explosion of interest in coaching. Currently, organizations are
becoming more aware that the tight pool of talent makes employee d evelopment
mu ch more attractive and cost-effective than replacement; the massive retirement
of baby boomers has forced organizations to think seriously and systematically
about succession planning; and at the same time, many man agers Jack performan ce
management skills and time and often outsource feedback and development of
employees to external consultants. 3

The increased importance given to coaching is certainly justified , given its
positive results. For example, consider a study involving sales teams of between
6 and 12 members each and district managers in a U.S. affiliate of a global
pharmaceuticals company.4 Results showed that managerial coaching skills had
a s ignificant, direct effect on sales goal attainment. In this particular study, the
reason why coaching was effective is that it helped improve team role clarity. In

Chapter 9 Performance Management Leadership 21Sil

o ther words, managers who had better coaching skills were able to help sales
teams resolve ambiguity in what they should and should not do to reach their
sales goals. In addition, coaching is not beneficial to large organizations only. On
the contrary, it is particularly important in small and medium-sized enterprises
(SMEs) as well. A study conducted in the United Kingdom involving more than
1,200 SME managers over a three-year period revealed that coaching training was
seen as a very positive experience. Moreover, for some of the SME managers, it
was seen as a “life changing experience.”5 Also, coaching seems to be a worldwide
phenomenon. For example, a study involving 324 employee-supervisor pairs
from 11 service companies in Taiwan found that coaching has positive effects on
both employees’ task performance and their proactive career behaviors. In other
words, coaching helped employee development regarding their current positions
as well as their future career prospects and advancement.6

Taken together, the evidence regarding coaching effectiveness is quite
convincing. A review and integration of 17 different empirical studies found
that employees who received coaching do their jobs better and improve their
task-related as well as affective-related skills. As a result, coaching also improves
performance measured in terms of results and overall organizational performance
as well. These effects were larger when coaching was done by an internal
organizational coach (e.g., one’s direct supervisor), as compared to an external
coach (i.e., external consultant).7

Although many theories on coaching exist, there are four guiding principles
that provide a good framework for understanding successful coaching8:

1. A good coaching relationship is essential. For coaching to work, it is
imperative that the relationship between the coach and the employee
be trusting and collaborative. As noted by Professors Farr and Jacobs,
the “collective trust” of all stakeholders in the process is necessary.9 To
achieve this type of relationship, first, the coach must listen in order
to understand. In o ther words, the coach needs to try to walk in the
employee’s shoes and view the job and organization from the employee’s
perspective. Second, the coach needs to search for positive aspects of
the employee because this is likely to lead to a better understanding
and acceptance of the employee. Third, the coach needs to understand
that coaching is not something done to the employee, but done with
the employee. Overall, the manager needs to coach with empathy and
compassion. Such compassionate coaching will help develop a good
relationship with the employee. In addition, there is an important
personal benefit for the coach. This type of compassionate coaching has
the potential to serve as an antidote to the chronic stress experienced by
many managersw Specifically, this type of coaching can ameliorate stress
because the experience of compassion elicits responses within the human
body that arouse the parasympathetic nervous system (PSNS), which can
help mitigate stress.

2. The employee is the source and director of change. The coach must
understand that the employee is the source of change and self-growth.
After all, the purpose of coaching is to change employee behavior and
set a direction for what the employee will do better in the fu ture.n This
type of change will not happen if the employee is not in the driver’s

2150 Part Ill Employee and Leadership Development

seat. Accordingly, the coach needs to facilitate the em ployee’s setting the
agenda, goals, and direction.

3. The emplm;ee is whole and unique. The coach m ust understand that
each employee is a unique individ ual with several job-related and
job-unrelated identities (e.g., computer network specialist, fa ther, skier)
and a unique personal history. The coach must try to create a whole and
complete and rich picture of the employee so that employees bring their
whole selves to work and are fully engaged.12 It will be beneficial if the
coach has knowledge of the employee’s life and can help the employee
connect his life and work experiences in meaningful ways.

4. The coach is the facilitator of the employee’s grmvth. The coach’s main role is one
of facilitation. A coach must direct the process and help with the content
(e.g., of a developmental plan), but not take control of these issues. The coach
needs to maintain an attitude of exploration; help expand the employee’s
awareness of strengths, resources, and challenges; and facilita te goal setting.

In m ore actionable terms, coaching involves the following functions13:

• Giving advice to help employees improve their performance. In other
words, coaching involves not only describing what needs to be done, but
also, how things need to be done. Thus, coaching is concerned with both
results and behaviors.

• Providing employees with guidance so that employees can develop
their skills and knowledge appropriately. Coaching involves provid ing
information both about the skills and knowledge that a re required to do
the work correctly and information about how the employee can acquire
these skills and knowledge.

• Providing employees support and being there only when needed .
Coaching involves being available when the employee needs help,
but it also involves not monitoring, controlling, and micromanaging
an employee’s every move. In the end, coaching is about facilitation.
As already mentioned, the responsibility for improving performance
ultimately rests on the shoulders of the employee.

• Giving employees confidence that will enable them to enhance their
performance continuously and to increase their sense of responsibility
for m anaging their own performance. Coaching involves giving positive
feedback that allows employees to feel confident about what they do,
but it also involves giving feed back on things that can be improved (i.e.,
constructive feedback).

• Helping employees gain greater competence by guid ing them toward
acquiring knowledge and sharpening the skills that can prepare them
for m ore complex tasks and higher-level positions. Coaching involves a
consideration of both short-term and long-term objectives, including how
the employee can benefit from acquiring new skills and knowledge that
could be usehtl in future positions and in novel tasks and responsibilities.

Based on this list of the various actionable functions of coaching, it is evident
that coaching requires a lot of effort from the managers. But when done right,
mangers become performance management leaders and an organization is able
to create a “coaching culture,” as illustrated in the case of Becton, Dickinson, and
Company (BD), described in Box 9-1.

Chapter 9 Performance Management Leadership 261

Box 9 -1

Company Spotlight: Turning Managers into
Performance Management Leaders at Becton,
Dickinson, and Company
A coaching culture and leadership development are viewed
as competitive strengths at Becton, Dickinson, and Company
(BD). The Washington, D.C.-based company manufactures
and sells medical supplies, devices, laboratory instruments,
antibodies, reagents, and d iagnostic products to health-care
organizations, clinical laboratories, private industry. and the
public. BD provides innovative solutions that help advance
medical research and genomics, enhance the diagnosis of
infectious diseases and cancer, improve medication man-
agement, promote i nfection prevention, equip surgical and
interventional procedures, and support the management
of diabetes. The coaching culture at BD includes the fol-
lowing points, as noted by Joseph Toto, who served as the
company’s director of leadership development and learning
for about a decade:

1. We place high expectations on corporate leaders to
model coaching as a productive and effective way to
improve performance.

2. We expect leaders at all management levels to be
coached, as well as to coach the development of others.

3. We establish coaching as a norm. Leaders must
view coaching and development as one of the key
responsibi lities and deliverables in their roles.

Part of the company’s t raining program includes developing
ski lls through peer coaching and building management skills
through peer interaction, support, and guidance. The training
sessions emphasize several skil ls, including listening, asking
facilitating and open-ended questions, sharing experiences,
and challenging assumptions or discussing actions that might
not be productive i n the view of t he coach. Training of manag-
ers also involves self-assessment of strengths and weaknesses
and identifying behaviors that would assi st them in any given
circumstance in which they might find t hemselves as managers
in the company. In summary, BD has uti lized training programs
to turn managers into performance management leaders by
developing and reinforcing a coaching culture. This culture is
credited with developing performance management leaders
who play a critical role in helping people develop and grow
w ithi n a very chal lenging context of a constantly changing
industry and business environment. ••

Given the available empirical evidence, coaching helps turn feedback into
results. For this to happen, coaches need to engage in the following specific
behaviors:

• Establish development objectives. The manager works jointly with the
employees in creating the development plan and its objectives.

• Communicate effectively. The manager maintains regular and clear
communication with employees about their performance, including both
behaviors and results.

• Motivate entployees. Managers mus t reward positive performance. When
positive performance is rewarded, employees are motivated to repeat the
same level of positive performance in the future.

• Document perfonnance. Managers observe employee behaviors and
results. Evidence must be gathered regarding instances of good and poor
performance.

• Give feedback. Managers measure employee performance and progress
toward goals. They praise good performance and point o ut instances of
s ubstandard performance. Managers also help employees avoid poor
performance in the future.

262 Part Ill Employee and Leadership Development

TABLE 9 ·1
Coaching: Guidi ng
Principles, Actionable
Functions, and Specific
Behaviors

• Diagnose performance problems and performance decline. Managers must listen
to employees and gather information to determine whether performance
deficiencies and declines in performance are the result of a lack of
knowledge and skills, abilities, or motivation or whether they stem from
situational and contextual factors beyond the control of the employee.
Diagnosing performance problems is important because such a diagnosis
d icta tes whether the course of action should be, for example, providing
the employee with resources so she can acquire more knowledge and
skills, or addressing contextual issues that may be beyond the control of
the employee (e.g., the employee is usually late in delivering the product
because he receives the parts too late).

• Develop employees. Managers provide financial support and resources for
employee development (e.g., funding training, allowing time away from
the job for developmental activities) by helping employees plan for the
future and by giving challenging assignments that force employees to
learn new things.

Not all coaches abide by the guiding principles, fulfill the coaching func-
tions, and engage in the specific coaching behaviors described here. Managers
who do so, of course, are highly effective performance management leaders. In
fact, some have become legendary. Consider Table 9-1, which summarizes the
key coaching principles, functions, and behaviors, and let us examine the case
of Jack Welch, who was extremely dedicated to performance management w hen
he was CEO of General Electric (GE) .15 To get involved with his employees,
Welch spoke during a class held at a three-week developmental course for
GE’s high-potential managers. Over the course of his career, he attended more
than 750 of these classes, engaging over 15,000 GE managers and executives.
During these presenta tions, he answered hard questions, and he communicated
honestly and candidly with his employees. After the class, he invited all the
participants to talk with him after the course concluded . In addition to attend-
ing these sessions, he held meetings with his top 500 executives every January.
Although Welch did not engage in formal coaching, he used the opportunities
to communicate his expectations and receive feedback from the various busi-
ness groups at GE.

Welch also conducted formal performance reviews in which he engaged in
several of the behaviors included in Table 9-1, including establishing developmental

Principles Functions Behaviors

I. A good coaching
relat1onsh’P is essenual

2. The employee is the
source and of
change

3. The employee is Whole
and un1que

4. The coach is the facilitator
of the employee’s growth

1.
2.
3.
4.
5.

Give adv1ce
Prov1de guidance
Prov1de support
Give confidence
Promote greater
competence

1. Establish developmental objectives
2. Commun1cate effectively
3. Mot1vate employees
4. Document performance
5. Give feedback
6. D1agnose performance problems

and performance decline
7. Develop employees

Chapter 9 Performance Management Leadership 2153

objectives, motivating employees, documenting performance, giving feed back,
and diagnosing performance problems. He set performance targets and monitored
them throughout the year. Each year, the operating heads of GE’s 12 businesses
received individual, two-page, handwritten notes about their performance. Welch
a ttached the previous year’s comments to the new reviews with comments in the
margin about the progress made by the individual managers toward his goal or
the work that he still needed to do to reach the goal. Then, he distributed bonuses
and reiterated the goals for the upcoming year. This process cascaded throughout
the organization, as other operating heads engaged in the same performance
review discussions with their direct reports.

Another example of Welch’s coaching behaviors occurred after he had heard
customer complaints about a specific product. Welch charged the manager of the
d ivision with improving the productivity of that product fourfold. The manager
sent Welch detailed weekly reports over the course of the next four years.
Welch would send the reports back every three or fo ur weeks, with comments
congratulating successes or pointing o ut areas in which the m anager needed to
improve. The manager stated that the fact that the CEO took the time to read
his reports each week and send back comments motivated him to reach the lofty
goal that Welch had set for him.

In add ition to this, Jack Welch took the time to recognize hourly workers
and managers w ho impressed him. For example, after one high-ranking leader
turned down a promotion and transfer because he did not want his daughter
to change schools, Welch sent him a personal note stating that he admired the
man for many reasons and he appreciated his decision to put his family first.
The employee explained later that this incident proved that Welch cared about
him both as a person and as an employee.

In short, Jack Welch was a legendary performance management leader who
developed his employees by setting expectations, communicating clearly, docu-
menting and diagnosing performance, motivating and rewarding his employees,
and taking an interest in their personal development. In fact, he followed the
principles, played the functions, and engaged in virtually all the behaviors listed
in Table 9-1.

Now, give yourself some time to reflect on the following issue. How does
Jack Welch compare to the CEO of your current company, or to a CEO you have
known or heard abo ut? Which of the principles, functions, and behaviors are
missing? What would happen in the organization if these missing principles,
ftmctions, and behaviors were put in place?

9-2 COACHING STYLES
A manager ‘s personality and behavioral preferences influence his or her coach-
ing style. There are fo ur main coaching styles: driver, persuader, amiable, and
analyzer. First, coaches can adopt a driving s tyle in w hich they tell the employee
being coached what to do. Assume that the coach wants to provide guidance
regarding how to deal with a customer. In this situation, the preference for a
driver is to say to the employee, “You must talk to the customer in this way.”
Such coaches are assertive, speak quickly and often firmly, usually talk about

2154 Part Ill Employee and Leadership Development

tasks and facts, are not very expressive, and expose a narrow range of personal
feelings to others. Second, coaches can use a persuading style in which they try
to sell w hat they want the employee to do. Someone who is a persuader would
try to explain to the employee w hy it is beneficial for the organization, as well
as for the employee himself, to talk to a customer in a specific way. Like drivers,
persuaders are assertive, but they tend to use expartSive body gestures, talk more
about people and relationships, and expose others to a broad range of personal
feelings. Third, o ther coaches may adopt an amiable style and want everyone to
be happy. Such coaches are likely to be m ore subjective than objective and direct
employees to talk to customers in a certain way because it “feels” like the right
thing to do or because the employee feels it is the right way to do it. Such coaches
tend not to be very assertive and to speak deliberately and pause often, seldom
interrupt others, and make many conditional statements. Finally, coaches m ay
have a preference for analyzing performance in a logical and systematic way,
and then, follow rules and procedures when providing a recommendation. To
use the same example, such analyzer coaches may tell em ployees to talk to a
customer in a specific way “because this is what the m anual says.” Analyzers,
then, are not very assertive, but like d rivers, are likely to talk about tasks and
facts, rather than personal feelings.

Which of these fo ur s tyles is best? Are drivers, persuaders, amiable coaches,
or analyzers most effective? The answer is that no style is necessarily superior to
the o thers. Performance management leadership involves sometimes providing
direction, sometimes pers uading employees how to do things a certain way,
sometimes showing e mpathy and creating positive effects, and sometimes paying
close attention to established rules and procedures. One thing is for sure, however:
an exclusive emphasis on one of these four styles is not likely to help employees
develop and grow. Ineffective coaches stick to one style only and cannot adapt to
using any of the other styles. On the other hand, adaptive coaches, w ho are able
to adjust their style according to an em ployee’s needs, are most effective. In fact,
56% of participants in a s urvey of employees who had a coach a t work reported
that coaching was not helping them because th ere was a mismatch between
coaching style and employee need.16 In sum, a combination of styles is needed.

9-3 COACH ING PROCESS
The coaching p rocess is shown in Figure 9-1. We alread y discussed the firs t
three stages of the process in previous chapters. The first step involves setting
developmental goals. As discussed in Chapter 8, these developmental goals are
a key component of the developmental plan. These goals must be reasonable,
a ttainable, and derived from a careful analysis of the areas in w hich an employee
needs to improve. In add ition, goals sho uld take into account both short- and
long-term career objectives.

The second step in the coaching process is to identify developmental activi-
ties and needed resources tha t will help the employee achieve the developmental
goals. As discussed in Chapter 8, these activities can include on-the-job training,
courses, self-guided stud ying, mentoring, attending a conference or trade show,
mixing with the best, getting a degree, job rotation, temporary assignments, and
membership or leadership role in professional, trade, or nonprofi t o rganizations.

FIGURE 9 -1
Overview of Coaching Process

Chapter 9 Perfo rmance Management Leadership 265

• Goals are reasonable, attainable, and based on
employee and organizational needs and short-
and long-term objectives (see Chapter 8)

• Possibilities include on-the-job training, courses,
self-guided studying, mentoring, attending a
conference or trade show, mixing with the best,
getting a degree, job rotation, temporary
assignments, and membership or leadership role
in professional, trade, or non-profit organizations
(see Chapter 8)

• Begin developmental activities

• Gather data to assess the extent to
which each developmental goal has been
achieved

• Based on the extent to which each of the goals
has been achieved, the developmental goals are
revised and the entire p rocess begins again.

2M Part Ill Employee and Leadership Development

The third step involves implementing the particular developmental
activities that will allow the em ployee to achieve the developmental goals.
For exam ple, the e m ployee may begin her job rotation plan or enroll in an
onl ine course.

The fourth step in the process is to collect, evaluate, and document data to
assess the extent to which each of the developmental goals has been achieved .
For example, did the employee comp lete the developmental activity within the
agreed-upon timeline? What are the standards and measures that are used to
assess w hether the objectives have been achieved and has the emp loyee met
these standards (e.g., becoming certified in a particular knowledge domain)?

Finally, the coach provides feedback to the employee. Based on the extent to
which each of the goals has been achieved, the developmental goals are revised
and the entire process begins again.

Let us discuss the two last stages in the coaching process in detail: observing
and documenting developmental behaviors and results, and giving feedback.

9·3·1 Observation and Documentation of Developmental
Behaviors and Results

As described in Chapters 6 and 7, respectively, people may make intentional
errors and unintentional errors w hile observing and evaluating performance.
Similar errors may occur in observing and evaluating behaviors and results
related to developmental goals. For example, a manager might make a halo error
by assuming that if an employee does a good job at working toward one devel-
opmental goal (e.g., improving her programming skills), she is also doing a good
job of working toward a different developmental goal (e.g., improving customer
service). As is the case for performance in general, it is important to observe and
document behaviors and results specifically related to developmental activities.
In add ition to data collected by supervisors, other data can also include memos,
letters, email messages, hand written notes, comments, observations, descriptions,
and evaluations provided by peers.17

The discussion presented in this section complements information given in
previous chapters because although it is specifically related to behaviors and
results regarding developmental activities, it can be easily generalized to behaviors
related to performance in general. In other words, the following discussion
applies to the observation of performance in general, not just those displayed
while working toward achieving developmental goals.

Observing an employee’s progress in achieving developmental goals is not
as easy as it may seem. Consider the following constraints that people might
experience in attempting to observe an employee’s performance regarding
developmental activities:

• Time constraints. Managers and peers may be too busy to gather and
document information abo ut an employee’s progress toward his
developmental goals. Consequently, too much time may elapse between
the assignment of the activity and when there is a check on the employee’s
progress.

• Situational constraints. Managers are often unable to observe employees
as they engage in developmental activities, and therefore, may not have

Chapter 9 PerFormance Management Leadership 267

firsthand knowledge about their performance. For example, managers do
not observe the extent to which an employee enrolled in an online course
is an active participant and contributor or is a passive learner. In this
context, it may be appropriate to gather performance data from peers or
o thers who are able to observe performance directly.

• Activity constraints. When the developmental activity is highly unstructured,
such as an employee reading a book, the manager may have to wait until
the activity is completed to assess whether the activity has been beneficial.

How can we address these constraints and make sure that a manager will be
able to observe and evaluate an employee’s performance regarding developmental
activities? The recommendations provided in Chapter 7 regarding the observa-
tion and evaluation of performance in general apply here as well. Specifically,
a good communication plan should explain the benefits of implementing a
development plan effectively. This helps managers accept the plan. Also, managers
should be trained so that they minimize errors (i.e., rater error training), share
notions of what it means to complete developmental activities successfully (i.e.,
frame-of-reference training), and observe performance accurately (i.e., behavioral
observation training). As an example, Box 9-2 includes a description of how
managers are trained at Hallmark.

Finally, we need to understand the forces that motivate managers to invest
time and effort, or not, in the development of their employees. Clearly, some
managers will be more motivated than o thers to help their d irect reports
because they may be “givers” rather than “takers.” 18 In o ther words, there
are individual differences in how different people behave toward o thers.
However, in spite of differences in how people tend to behave naturally, it
is important that managers see a direct connection between their efforts to
develop people around them and outcomes for themselves. In other words,

Box 9-2

Company Spotlight: Turning Managers into
Performance Management Leaders at Hallmark
Hallmark sought to improve management communica- with employees. Training sessions included self -assessment,
tions with employees and initiated a train ing program small group role-p laying, and viewing video cl ips to
that has been well received and viewed as a strategic enhance understanding of the role of communication.
benefit to the company. U.S.-based Hallmark is a retailer Engagement training focused on ga ining the trust of
and wholesaler o f greeting cards, stationery, f lowers, employees as well as their involvement and ownership in
and gifts, w ith operations in the Un ited States and Great business outcomes. Fo llow-up resources were also made
Britain. The company initi ated training to help managers availa bl e for managers to continue to improve their lead-
become performance management leaders. The training ersh ip competency. Following the train ing in this area,
program sought to provide skill devel opment in increasing managers gave positive feed back, and employee surveys
two-way communicat ion, with a great er f requency of have shown that employee engagement has increased at
communication and increased interaction of managers all levels of the organization.••

268 Part Ill Employee and Leadership Development

wha t does the manager gain if her employee’s developmental activities are
supervised app ropriately? Wha t does the manager gain if she becomes a
performance management leader?

The importan ce of documenting an employee’s progress toward the
achievement of developmental goals cannot be overemphasized. Similarly, it is
critical to document employee performance in general. Why is it so important
for performance management leaders to do so? Consider the following reasons:

• Minimize cognitive load. Observing and evaluating developmental
activities, and performance in general, is a complex cognitive task. Thus,
documentation helps prevent mem ory-related errors.

• Create trust. When documentation exists to support eval uations, there
is no mystery regarding the o utcomes. This, in turn, promotes trust and
acceptance of decisions based on the evaluation provided .

• Plnn for the future. Documenting developmental activities and their
outcomes enables discussion about specific facts instead of assumptions
and hearsay. A careful examination of these facts permits better planning
of developmental activities for the fu ture.

• Provide legal protection. Specific Jaws prohibit discrimination against
members of various classes (e.g., sex or religion) in how developmental
activities are allocated. For exam ple, it is p rohibited to provide
male employees with better developmental opportunities than female
employees. In addition, some court rulings have determined that
employees working under contract may challenge a dismissal. Thus,
keeping accurate records of what developmental activities employees
have completed and with w ha t degree of success, as well as performance
in general, p rovides a good line of defense in case of litigation based on
d iscrimination or w rongful termination.

The importance of keeping thorough performance documentation and tak-
ing actions consistent with this documentation is illustra ted by the outcome of
several legal cases. In one such case, John E. Cleverly, an a t Western
Electric Co., was d ischarged after 14 years of good service.2 Western Electric
was found gu ilty of age discrimination, and Cleverly was awarded back pay
because the documenta tion indicated that Cleverly had been given adequate
performance ra tings and increases to his salary over a course of 14 years. Upon
his d ischarge, six months before his pension vested, Cleverly was informed
tha t one reason for his d ischarge was to make room for younger employees. As
illustrated by this case, documentation of p erformance should be taken seri-
ously. In th is case, the documentation available indicated the employee had a
valid claim. In other cases, documentation co uld be used to discount charges
of discrimination. If Cleverly had alleged age d iscrimination, but the com pany
could show that his performance was declining over time, then the com pany
could have won the case.

What can performance management leaders do to document performance
regarding developmental activities, and perform ance in general, in a useful and
constructive way? Consider the following recommendations2 1:

Chapter 9 Perfo rmance Managemen t Leadership 26il

• Be specific. Document specific events and outcomes. Avoid making general
s tatements, such as “He’s lazy.” Provide specific examples to illustrate
your point, for example, “He turns in reports after deadlines at least once
a month.”

• Use adjectives and adverbs sparingly. The use of eval uative adjectives
(e.g., good, poor) and adverbs (e.g., speedily, sometimes) may lead to
ambiguous interpretations. In addition, it may not be clear whether the
level of achievement has been average or outstanding.

• Balance positives with negatives. Document instances of both good and
poor performance. Do not focus only on the positives or only on the
negatives.

• Focus on job-related information. Focus on information tha t is
job-related, and specifically, related to the developmental activities
and goals a t hand.

• Be comprehensive. Include information on performance regarding all
developmental goals and activities and cover the entire review period
as opposed to a shorter time period. Also, document the performance of
all employees, not just those who are not achieving their developmental
goals.

• Standardize procedures. Use the same method and format to document
information for all employees.

• Describe observable behavior and results. Phrase your notes in behavioral and
results terms and avoid statements that would imply subjective judgment
or prejudice.

Obviously, not all managers do a good job of documenting performance about
the accomplishment of developmental goals or performance in general. Table 9-2
includes a summarized list of recommendations to follow in the documentation
process.

Now, consider the recommendations listed in Table 9-2 in evaluating the
set of quotes appearing in Table 9-3 taken from actual employee performance
evaluations in a large corporation in the United Sta tes.22 We can be sure that
the employees at the receiving end of these quotes would not be very happy
with them. It also goes without saying that this type
of documentation would be extremely de trimental … .. … ..
to the performance management system. In fact, this
organization would have serious problems beyond the
scope of its performance evaluation system.

Now, Jet us tum to the final important component
of the coaching process: giving feedback.

9-3-2 Giving Feedback
Giving feedback to an employee regard ing her prog-
ress toward achieving goals is a key component of the
coaching process.23 Feedback is information about past

Documenting Developmental Performance Activities and
Performance in General: Some Recomme ndations

Be specific.

Use adjectives and adverbs sparingly.

Balance posit1ves w1th negat1ves.

Focus on job·related information.

Be comprehensive.

Standardize procedures.

Descnbe observable behaVior.

270 Part Ill Employee and Leadership Development

TABLE9-3
Individual Quotes Taken
f rom A ct ual Employee
Pe rformance Evaluations

Since my last report, th1s employee has reached rock bouom .. . and has started to dig.

I would not allow this employee to breed.

This employee 1S really not so much of a has-been, but more of a definllely won’t be.

Works well when under constant supe!Vision and cornered like a rat in a trap.

He would be out of his depth 1n a parking lot puddle.

He sets low personal standards and then consistently fails to achieve them.

This employee 1S deprlv1ng a village somewhere of an idiot.

This employee should go far … . and the sooner he starts, the beller.

He’s been working w11h glue too much.

He would argue w11h a signpost.

He has a knack for mak1ng strangers immediately detest h1m.

He brings a lot of joy whenever he leaves the room.

If you see two people talk1ng and one looks bored … he’s the other one.

Donated his brain to science before he was done using 1t.

Gates are down. the lights are nashing, but the train 1sn’t coming.

If he were any more stupid, he’d have to be watered twice a week.

If you gave him a penny for his thoughts, you’d get change.

If you stand close enough to him, you can hear the ocean.

One neuron short of a synapse.

Some drink from the fountain of knowledge … he only gargled.

Takes him 2 hours to watch 60 Mmutes.

The wheel is turning. but the hamster is dead.

… …. .. …. .

performance with the goal of improving future performance. Altho ugh “back” is
part of feedback, giving feedback has both a past and a future component. This is
why, when done properly, feed back can be relabeled feedforward- as described
in Chapter 8 regard ing the feedforward interview.

Feed back includes information about both positive and negative aspects of job
performance and lets employees know how well they are doing with respect to
meeting the established standards.24 For example, the so-called 2 + 2 performance
appraisal model for teachers includes peer teachers w ho observe each other per-
form in the classroom, and then, offer two compliments and two suggestions for
improvement.25 Feed back is important in the context of performance regarding
development activities and goals. Our discussion of fee dback, however, goes
beyond that and includes feed back abo ut performance in general. Feed back is
not a m agic bullet for performance improvement26; however, it serves several
important purposes:

• Helps build confidence and self-efficaet;. Praising good performance builds
employee confidence regarding future perform ance. It also lets employees
know that their manager cares about them . In addition, praising good
performance enhances self-efficacy: An employee’s belief that she will

Chapter 9 Performance Management Leadership 271

s ucceed in specific situations or accomplish a task.27 Note that self-efficacy
is not the actual probability that the employee will succeed, but an
employee’s subjective belief that she will. Self-efficacy is critical because
if an employee does not believe he has a good chance of improving his
performance, he is not likely to even try.

• Develops competence. Communicating clearly about what has been done
right and how to do the work correctly is valuable information that helps
employees become more competent and improve their performance. In
addition, communicating clearly about what has not been done right and
explaining what to do the next time provides useful information so that
past mistakes are not repeated.

• Enhances engagement. Receiving feed back and discussing performance
issues allow employees to understand their roles in the unit and
organization as a whole. This, in turn, helps employees become more
engaged in the unit and the organization.

Unfor tunately, however, the mere presence of feedback, even if it is
delivered correctly, does not necessarily mean that all of these purposes will
be fulfilled. For example, a review of 131 studies that examined the effects
of feedback on performance concluded that 38% of the feedback programs
reviewed ha d a negative effect on performance.28 In other words, in many
cases, the implementation of feed back Jed to lower performance levels. Th is
can happen when, for example, feedback does not include useful information
o r is not delivered in the right way.

As an alternative perspective and course of action, now consider the possible
cost of not providing feedback. First, organizations would be depriving employees
of a chance to improve their performance. Second, organizations might be stuck
with chronic poor performance because employees do not recognize any per-
formance problems and feel justified in continuing to perform a t s ubstandard
levels. Finally, employees migh t develop inaccurate perceptions of how their
performance is regarded by others.

Given that, overall, feedback systems can be beneficial, what can we d o
to make the most of them? Consider the following suggestions to enhance the
positive effects of feedbacJ<29:

• Timeliness. Feed back should be delivered as close to the performance
event as possible. For feed back to be most meaningful, it must be given
immed iately after the event.

• Frequency. Feedback should be provided on an ongoing basis; daily,
if possible. If perform ance improvement is an ongoing activity, then
feedback about perform ance sho uld also be provided on an ongoing basis.

• Specificity. Feedback should include specific work behaviors, results,
and the situation in which these behaviors and results were observed.30
Feed back is not about the employee and how the employee “is,” but
about behaviors and res ults and situations in which these behaviors and
results occurred .

• Verifiability. Feedback should include information that is verifiable
and accurate. It sho uld not be based on inferences or rumors. Using
information that is verifiable leads to more accura te feed back and
subsequent acceptance.

272 Part Ill Employee and Leadership Development

• ConsistenetJ Feedback should be consistent. In o ther words, information
about specific aspects of performance sho uld not vary unpredictably
between overwhelming praise and harsh criticism.

• Privacy. Feedback sho uld be given in a place and at a time that prevents
any potential embarrassment. This applies to both criticism and praise,
because some employees, owing to personality or cultural background,
may not wish to be rewarded in public.

• Consequences. Feedback should include contextual information that allows
the employee to understand the importance and consequences of the
behaviors and results in question. For example, if an employee became
frustra ted and behaved inappropria tely with an angry cus tomer and the
customer’s complaint was not addressed satisfactorily, feedback should
explain the impact of these behaviors (e.g., behaving inappropriately)
and results for the organization (e.g., the customer’s problem was not
resolved, the customer was upset, the customer was not likely to give
repeat business to the organization).

• Description first, evaluation second. Feedback should first focus on
describing behaviors and results rather than on evaluating and judging
behaviors and results. It is better first to report what has been observed,
and once there is agreement about what happened, to eval uate what has
been observed. If evaluation takes place first, employees may become
defensive and reject the feedbac k.

• Perfonnance continuum. Feed back should describe performance as a
continuum, going fro m less to m ore in the case of good performance,
and from m ore to less in the case of poor performance. In other
words, feedback sho uld include information on how to d isplay good
performance behaviors m ore often and poor performance behaviors
less often. Thus, performance is a m atter of degree, and even the worst
performer is likely to show nuggets of good performance that can
be described as a starting point for a discussion on how to improve
performance.

• Pattern identification. Feed back is most useful if it is about a pattern of poor
performance, rather than isolated events or mistakes. Identifying a pattern
of poor performance also allows fo r a better understanding of the causes
leading to poor performance.

• Confidence in the employee. Good feedback includes a statement that the
manager has confidence that the emp loyee will be able to improve her
perform ance. It is important for the employee to hear this from the
manager, as this enhances em ployee self-efficacy. This reinforces the
idea that feedback is about performance and not the performer. Note,
however, that this sho uld be done only if the manager indeed believes
the employee can improve her performance. In the case of a chronic poor
perform ance, this type of information co uld be used out of context later if
the employee is fired.

• Advice and idea generation. Feedback can include ad vice given by the
supervisor about how to improve performance. In add ition, however, the
employee should play an active role in generating ideas about how to
improve performance in the future.

Chapter 9 Performance Management Leadership 273

Consider the following vignette in which Alexandra, a supervisor, has
observed a specific performance event and provides feedback to her direct
report. Alexandra is the manager of a small retail store with approximately five
employees. With a small staff, Alexandra looks for coaching opportunities on a
weekly basis. Alexandra is working with Caleb today, and she has just witnessed
him complete a customer sale. Caleb did not follow several steps, however, that
should be included at each sale, and because the s tore is now empty, Alexandra
decides it is a perfect opportunity for a coaching session.

A LEXAN DRA: Hey, Caleb, that was great the way that you just assisted
that customer in finding her correct size in the jeans.
Thanks for taking the extra time to help her.

CALEB: Thanks, Alexandra, not a problem.
A LEXAN DRA: I would like to go over the sales transaction with you.
CALEB: Sure.
A LEXAN D RA: After you helped the woman find her jeans, you

promptly brought her over and rang her up. That was
a good sale because those jeans were a full-priced
item; however, you didn’t complete all of the tasks
associated with closing a sale. In the training last week,
we discussed the importance of adding on add itional
sales, entering the customer’s personal contact
information in our system, and Jetting them know
about upcoming sales.

CALEB: Yes, I just remembered us talking about that. When
customers seem in a hurry, I feel bad about asking them
additional questions.

A LEXAN DRA: That’s a very valid concern. Can you think of ways to
increase the efficiency of adding these few steps into the
sales transaction process so that you feel comfortable
performing them in the fu ture? I would like to help you
do that because increasing the number of items you
sell during each transaction could help you win the
upcoming sales contests.

CALEB: That would be great. I would really like some new ideas
about talking to customers.

A LEXAN DRA: No problem; I know that you are a very capable
salesperson. You have great customer service skills, and
I think that you can improve your sales and possibly
win one of the upcoming contests.

Alexandra and Caleb then generate ideas about how to improve Caleb’s
performance.

In this vignette, Alexandra demonstrated several of the behaviors listed
in Table 9-4. She was specific about the behaviors and results, the information
was verifiable, and it was timely because the behavior had just occurred. In
addition, since Alexandra communicates her expecta tions on a weekly basis,

274 Part Ill Employee and leadership Development

TABLE9-4 the information s he provides is consistent. Finally, she
Characteristics of Effective Feedback described the behavior first, and then, evaluated its

effec tiveness; she communicated confidence in Caleb
and she offered to help him generate ideas about how to
improve his effectiveness. On the other hand, Alexandra
left out several important things while coaching Caleb.
First, she did not communicate the consequences of his
behavior, for example, that his failure to follow the pro-
cedures could hurt sales for the entire store. Although
the vignette does not describe the idea generation por-
tion of the feedback session, Alexandra did not describe

Timely

Frequent

Specific

Verifiable

Cons1stent

Private

Consequential

Descriptive first and evaluative second
small behaviors that Caleb could use to improve his
performance. Finally, Alexandra did not communicate
to Caleb whether this behavior was a one-time incident
or whether it was a pattern that was affecting his overall
work performance.

Related to a performance conunuum

Based on identifiable patterns o f performance

A conf1dence builder for employees

A tool for generating advice and ideas
Overall, if Alexandra continues to look for coaching

opportunities with her employees, her relationship with
her employees and their performance in the store will

continue to improve. To be more effective as a performance management leader,
however, she may need to work on communicating the patterns of behavior that
result in poor performance and the consequences of continued poor performance.
Now, let us discuss the nuts and bolts of how to give two types of feedback: praise
and constructive (i.e., “negative”).

Giving Praise Good feedback includes information about both good and poor
performance. Although most people are a lot more comfortable giving feedback
on good performance than they are on poor performance, some guidelines must
be followed when giving praise-also called “positive feedback”-so that the
feedback is useful in terms of future performance.

First, praise should be sincere and given only when it is deserved. If praise
is given repeatedly and when it is not deserved, employees are not able to see
when a change in direction may be needed .31 Second, praise should be about
s pecific behaviors or res ults and be given within context so that employees
know what they need to repeat in the future. For example, a manager can say
the followint2:

Naomi, thanks for providing such excellent service to our client. Your
efforts helped us renew our contract with them for another two years.
It’s these types of behaviors and results that our group needs to achieve
our goal for this year. And, this is exactly what our company is all about:
providing outstanding customer service.

Third, in giving praise, managers should take their time and act pleased,
rather than rush through the information, looking embarrassed . Finally, avoid
giving praise by referring to the absence of the negative, for example, “not bad”
or “better than last time.” Instead, praise should emphasize the positives and
be phrased, for example, as “I like the way you did that” or “I admire how you
did that.” 33

Consider the following vignette, which illus trates how a manager might
give praise to her employee.

Chapter 9 Performance Management Leadership 275

After the successful completion of a three-m onth project a t a large telecom-
munications company, Hannah, the manager, wants to congratulate Jacob on
a job well done. Hannah calls Jacob into his office one day after the project is
completed.

H ANNAH :

JACOB:

H ANNAH :

Thanks for s topping by Jacob, and thank you for all of
your hard work over the past three months. I know that
I might not have congratulated you on every milestone
you reached along the way, but I wanted to take the
time to congratulate you now. Your organizational
skills and ability to interact successfully with multiple
departments Jed to the successful completion of the
project on time and within budget.
Thanks, Hannah. I have really been putting extra effort
into completing this project on time.
It shows, Jacob, and I appreciate all of your hard work
and dedication to this team and our department. Thanks
again and congratulations on a great end to a long three
months.

In this vignette, Hannah delivered praise to Jacob successfully and followed
the recommendations provided earlier. She was sincere and made sure not to
praise Jacob too often, so that when she did praise him, it was meaningful. She
described how Jacob’s organizational and project management skills Jed to the
successful completion of the project. Finally, Hannah took her time in delivering
the praise and made sure that Jacob took the praise seriously.

Giving Constructive Feedback Constructive feed back includes information
that performance has fallen short of accepted standards. This type of feed back is
sometimes referred to as “negative feedback,” but we use constructive feedback
because this label has a more positive and future-oriented connotation.

The goal of providing constructive feed back is to hel p employees improve
their performance in the htture; it is not to punish, embarrass, or chastise them.
It is important to give constructive feed back w hen it is warranted because the
consequences of not doing so can be detrimental for the organization as a whole.
For example, Francie Dalton, founder and president of Columbia, Maryland-based
Dalton Alliances, Inc., noted the following:

In organizations where management imposes no consequences fo r poor
performance, high achievers will leave because they don’t want to be
where mediocrity is tolerated. But med iocre performers will remain
because they know they’re safe. The entire organizational culture,
along with its reputation in the marketplace, can be affected by poor
performers. 34

In spite of the need to address poor performance, managers are usually not
very comfortable provid ing constructive feedback. Why is this so? Consider the
following reasons:

• Negative reactions and consequences. Managers may fear that employees will
react negatively. Negative reactions can include being defensive and even
becoming angry at the information received. In addition, managers may

2715 Part Ill Employee and Leadership Development

fear that the working relationship, or even friendship, with their direct
reports may be affected adversely and that giving constructive feedback
can introduce elements of mistrust and annoyance.

• Negative experiences in the past. Managers themselves may have received
constructive feedback at some point in their careers and have experienced
firsthand how feelings can be hurt. Receiving constructive feedback can
be painful and upsetting, and managers may not want to put their direct
reports in such a s ituation.

• Plnying “God.” Managers may be reluctant to play the role of an
all-knowing, judgmenta l God. They may feel that giving constructive
feedback puts them in that position.

• Need for irrefutable and conclusive evidence. Managers may not want to
provide constructive feedback until after they have been able to gather
irrefutable and conclusive evidence about a performance problem.
Because this task may be perceived as too onerous, managers may choose
to skip giving constructive feed back al together.

Nhat happens when managers avoid giving constructive feedback and employees
avoid seeking it? A feedback gap results, in which managers and employees mutually
instigate and reinforce lack of communication, which creates a vacuum of meaningful
exchanges about poor performance.35 A typical consequence of a feedback gap is
that in the absence of information to the contrary, the manager gives the employee
the message that performance is adequate. When performance problems exist,
they are likel y to become more intense over time. For example, clients may be so
dissatisfied with the service they are receiving that they may eventually choose to
close their accounts and work instead with the competition. At that time, it becomes
impossible for the manager to overlook the performance problem, and she has no
choice but to deliver the feed back. At this stage of the process, however, feedback
is delivered too late and often in a punitive fashion. Of course, feedback delivered
so late in the process and in a punitive fashion is not likely to be helpful.

Alternativel y, constructive feedback is most useful when early coaching has
been instrumental in id entifying warning signs and the performance problem is
still manageable. Constructive feedback is also useful when it clarifies unwanted
behaviors and consequences and focuses on behaviors that can be changed. There
is no point in providing feedback on issues that are beyond the employee’s control
because there is not much she can do to improve the situation. In addition, employees
are more likely to respond positively to constructive feedback when the manager
is perceived as being trustworthy and making a genuine attempt to improve the
employee’s performance. In other words, the manager needs to be perceived as
credible, and also, as instrumental in improving the employee’s performance in
the future.36 Finally, constructive feedback is most likely to be accepted when it
is given by a source who uses straight talk and not subtle pressure and when it
is supported by hard data. The supervisor must control her emotions and stay
calm. If managers follow these suggestions, it is more likely that employees will
benefit from constructive feedback, even if employees are not particularly open
to receiving it.37 Following these suggestions leads to what has been labeled
“actionable feedback,” meaning that such feedback will allow employees to respond
in constructive ways and will lead to learning and performance improvement.38

Chapter 9 Performance Management l eadership 277

A final and important issue to consider when giving constructive feedback is
to use a strengths-based approach.39 The traditional, also called weaknesses-based
approach, involves identifying employee weaknesses (e.g., deficiencies in terms
of their job performance, knowledge, and skills); providing negative feedback on
what the employees are doing wrong or what the employees did not accomplish;
and finally, asking them to improve their behaviors or results by overcoming
their weaknesses. In contrast, using a strengths-based approach involves iden-
tifying employee strengths in terms of their exceptional job performance and
asking them to improve their behaviors or results by making continued or more
intensive use of their strengths. The key issue is to highlight how strengths can
generate s uccess on the job, as this motivates employees to intensify the use of
their strengths to produce even more positive behaviors and results.

How is this done? First, the conversation can s tart with something like
“I want to talk to you about some of the great things that you’ve been doing
lately, as well as areas where you can improve. I’d like this time to be about
how I can help yo u be your very best.” The s upervisor can request assistance
from the employee in identifying strength areas by asking, “In what ways do
you feel like you’ve been stand ing out?” Then, the last step involves identifying
how employee strengths, which are used in some types of behaviors and results,
can be used in others.

Generational and Individual Differences Regarding Feedback Reactions
and Preferences Regardless of whether feedback includes praise or constructive
comments, an important contemporary issue that we should consider is related
to feedback reactions and generational differences regarding feedback preference
and reactions.40 Specifically, socioemotional selectivity theory (SST) suggests that
younger individ uals, because they are closer to the beginning of their life cycles,
anchor the concept of “time” as time since birth, and in their minds, time is m ostly
open-ended. As a consequence of this particular time orientation, Millennials and
Post-Millennials (i.e., Generation Z) tend to have work-rela ted goals that are clearly
future-oriented: knowledge acquisition, career planning, and the development of
ability and skills that will pay off in the future. In contrast, older workers (e.g.,
Baby Boomers) anchor the concept of time as time left in their careers and in life
in general, and thus, see time as more limited . Consequently, they tend to have
work-related goals that are more present-oriented: regulating their emotions to
be positive and the pursuit of positive social relationships at work (i.e., “social
awareness” goals). Offering support for SST, a recent study found that older
workers were more open to feedback regarding social awareness issues, but less
open to feedback that can be readily used to improve future performance and
achieve desired career goals (i.e., “utility” goals) compared to younger workers.
The lesson? Performance management leaders are aware of the needs and feedback
o rientations and reactions of their employees. Accordingly, they m odify the type
of feedback so that it is most useful, given individual needs and orientations.

Pause for a moment to consider how open yo u are to receiving feedback
about your performance. What is yo ur personal feedback orienta tion? How
receptive are you to receiving feedback? Are you more interested in social
awareness or utility feedback? Given your own age, is you r feedback orientation
consistent w ith other members of your generation? To help you ponder on

278 Part Ill Employee and Leadership Development

these issues, answer the fo llowing questions, which are part of the Feedback
Orientation Scale.41 In answering these questions, use a 5-point scale, ranging
from strongly d isagree to strongly agree. Then, compare you r scores w it h those
of a coworker, classmate, or family member who is a member of a different
generation:

Social Awaren ess:

1. I try to be aware of what other people think of me.
2. Using feedback, I am more aware of what people think of me.
3. Feedback helps me manage the impression I make on others.
4. Feedback lets me know how I am perceived by others.
5. I rely on feedback to help me make a good impression.

Utility:

1. Feedback contributes to my success a t work.
2. To develop my skills a t work, I rely on feedback.
3. Feedback is critical for improving performance.
4. Feedback from supervisors can help me advance in a company.
5. I find that feedback is critical for reaching my goals.

In addition to generational differences, individ u als also d iffer in what is called
feedback-seeking behavior.42 In other words, individuals differ in the amount of
effort they devote toward und erstanding the extent to which they are performing
well. Specifically, people differ regarding the extent to which they proactively
ask peers, supervisors, and others for feedback, and also, in the extent to which
they proactively monitor their own performance themselves. What this means
in terms of being a performance management leader is that feedback-giving
should be proactive and ongoing. O therwise, individuals who are higher on
the feedback-seeking behavior continuum are more likely to receive feedback
compared to those who are lower. This is particularly important for newcomers
in the organization because not receiving sufficient feedback early on may mean
that they may not be able to meet organizational objectives, and possibly, remain
within the organization in the long term.

Making the Tough Calls: Disciplinary Process and Organizational Exit This
last section about giving feed back is about making some tough calls. In some
cases, an employee may not respond to the feed back provid ed and may not make
any improvements in terms of performance. Giving bad news is never an easy
process.43 But in such cases, there is one intermediate step that can be taken before
the employee enters a formal disciplinary process, which involves a verbal warning,
a written warning, and may lead to termination. The employee can be given a
once-in-a-career decision-making /eave.44 This is a “day of contemplation” that is
paid and allows the employee to stay home and d ecide whether working in this
organization is what he or she reall y wants to do. This practice is based on a d ult
learning theory, which holds individ uals responsib le for their actions. Unlike a
formal disciplinary action, the decision-making leave does not affect employee pay.
As noted by Tun Field , principal of a consulting firm in Los Angeles, California,
“This element of holding people accountable without negatively impacting their

Chapter 9 PerFormance Management Leadership 27SI

personnel file or payroll tends to catch people off guard, because problem em-
ployees, like problem children, are often expecting negative attention for their
bad behavior.” How can the decision to grant an employee a decision-making
leave be communicated? Assuming this is a company policy and there is senior
management support, you can communicate the leave as follows45:

Hailey, as you know, you and I have met on several occasions to talk about
your performance. In spite of these feedback sessions, I see that you are
still having some difficulties with important tasks and projects. Consistent
with my observations, I have received comments from some of your
peers related to some performance deficiencies they have a lso noticed .
I think that issuing a written warning would be counterproductive-! am
concerned that it may decrease your motivation and do more harm than
good. Instead, what I am going to do is to put you on what we call a
“decision-making leave” for a day. This is a type of intervention that has
worked very well with other individuals in your same position in the
past. I want you to know that this is a once-in-a-career benefit that you
should use to your advantage and I decided to do this because I truly
believe that you are capable of improving your performance. It works
like this. I am going to ask you to not come to the office tomorrow but
you will be paid for that day, so you don’t have to worry about your
paycheck being affected. While you are away from the office tomorrow,
I want you to give serious thought about whether you really want to
work in this company. You and I will meet when you return to the office
the day after tomorrow and I will ask you to tell me whether you’d
rather resign and look for work elsewhere. I will understand and will
be fully supportive if that is your decision. On the other hand, if when
we meet, you tell me you want to keep your job here, then I will give
you an additional assignment the day you return to the office. I will ask
you to prepare a one-page Jetter addressed to me, convincing me that
you assume full and total responsibility for the performance issues we
discussed during our feedback sessions. You will have to prov ide clear
and specific arguments as well as describe a specific set of actions you
will take to convince me that you will address the problems. I will keep
the Jetter in a safe place but I am not planning on including it in yo ur
personnel file for now. To be clear, however, this Jetter is a personal com-
mitment from you to me and our agreement is that if you don’t s tick to
the terms of your Jetter, you will essentially fire yourself. This is a very
important moment for you and also for me and it could be a t urning point
in yo ur career development. Now that I have explained the process, I
would like to hear any questions or comments you may have about this
“decision-making leave day” that you will be taking tomorrow.

Using a decis ion-making leave as part of the performance management
system can be a powerful tool to give problem employees an opport unity to
improve their performance. However, this tool may not lead to the desired
outcomes and the employee may have to enter into a disciplinary process.
Note that a demotion or transfer may be a more appropriate action when there
is evidence that the employee is actually trying to overcome the performance
deficiencies, but is not able to do so. However, termination is the appropriate

280 Part Ill Employee and Leadership Development

action w hen performance does not improve and the employee continues to
make the same mista kes or fails to meet s tandards. Also, termination is the
appropriate course of action when an employee engages in serious violations
of policies, laws, or regulations such as theft, fra ud, fa ls ifying documents, and
related serious offences.

The disciplinary process should not come as a surprise to the em ployee or
supervisor if there is a good perform ance management system in p lace because
there are ongoing check-ins and p lenty of opportunities for the employee to
overcome performance problems and for the supervisor to offer support and
feedback so that willing and able employees will be able to do so. However, when
a disciplinary process seems to be the only recourse, it is important to follow a
set of steps so as not to fall into legal problems. Also, all employees, even those
w ho are terminated, deserve to be treated with respect and dignity. Nevertheless,
even if there is a top-notch performance m anagement system in place, there a re
several pitfalls that mus t be avoided and specific actions supervisors can take
to do so, which are the following46:

1. Pitfall1: Acceptance of poor performance. Many supervisors may just want
to ignore poor performance, hoping that the problem will go away.
Unfortunately, in m ost cases, the performance problems escalate and
become worse over time.
Suggested course of action: Do not ignore the problem. Add ressing it as soon
as possible can not only avoid negative consequences for the employee
in q uestion, peers, and customers, but also help put the employee back in
track in terms of his career objectives.

2. Pitfall2: Failure to get the message through. The poor performing employee
may argue that she did not know the problem was serious or that it
existed at all.
Suggested course of action: In the decision-making leave described earlier,
make sure to be very specific about the performance problem and the
consequences of not addressing it effectively. Make sure you document
the action plan and that you have secured the em ployee’s agreement
regard ing the plan.

3. Pitfall3: Performance standards are “unrealistic” or “unfair.” The employee
may argue that performance standards and expectations are tmrealistic or
unfair.
Suggested course of action: Remind the employee that his performance
standards are s imilar to o thers hold ing the same position. Also,
remind the employee tha t performance standards have been
developed over time with the participation of the employee in
question and s hare with h im documentation regarding past review
meetings, incl uding past appraisal forms with the employee signature
on them.

4. Pitfall 4: Negative affective reactions. The employee may respond
emotionally, ranging from tears to shouts and even threats of violence.
This, in turn, creates an emotional response on the part of the supervisor.
Suggested course of action: Do not let em otional reactions derail you
from your mission and role as a performance management leader,
which is to describe the nature of the problem, what needs to be done,

Chapter 9 Performance Management Leadership 281

and consequences of not doing so. If the employee is crying, do offer
compassion and give him some space to compose himself. You can give
the employee some time and resume the meeting a few minutes later or
a rescheduling of the meeting at a later time may be a good alternative.
If the employee reaction involves a threat or suggest possible violence,
call security immediately. If such threats do take place, report them to the
human resources (HR) department.

5. Pitfall 5: Failure to consult HR. There are hundreds of wronghtl termination
cases that have cost millions of dollars to organizations that have not
followed the appropriate termination procedures.
Suggested course of action: If you are planning on implementing a disciplinary
or termination process, consult with your HR department regarding legal
requirements. For the most part, if you have a good performance management
system in place, you have all necessary steps in place. However, consulting
with HR is a good idea to ensure you are following all appropriate steps.

Avoiding the above pitfalls will minimize the possibility of problems during
the forma l disciplinary process. If the goals are not reached, there will be a need
for a termination meeting. This meeting is, of course, extremely unpleasant for
all involved, to say the least. However, it is the right and fair thing to do at this
s tage. Suggestions for the termination meeting are as follows47:

1. Be respectful. It is important to treat the terminated employee with respect
and dignity. Keep the information about the termination confidential,
although it is likely others will learn about it in subsequent days.

2. Get right to the point. At this stage, the less said, the better. You can start
by saying “There is no easy way to say this . . . ,” and then, summarize the
performance problems, actions taken to try to overcome these problems,
outcomes of these actions, and the decision abo ut termination that you
have reached.

3. Let the employee grieve.48 It is important to Jet the employee grieve because
it is likely that there will be a sense of loss. Show empathy with phrases
such as “I know this is sad for you .. . “and “Go ahead and take a
moment . . . when you’re ready, we’ll continue.”

4. Wish the employee well. The purpose of the meeting is not to rehash every
single reason why you are Jetting the employee go and every single
instance of poor performance. Instead, use the meeting to wish the person
well in her next job and endeavors and tell her that she will be missed.

5. Send the emplm;ee to HR. Let the employee know that she needs to go
to HR to receive information on benefits, including vacation pay, and
also to receive information on legal rights. If you are working in a small
business, seek outside legal counsel regarding the information to give to
the terminated employee.

6. Have the employee leave immediately. Keeping the terminated employee
on-site can lead to gossip and conflict, and disgruntled employees may
engage in sabotage.

7. Have the temtination meeting at the end of the day. It is better to conduct the
termination meeting at the end of the day so the employee can leave the
office as everyone else and there are fewer people around .

282 Part Ill Employee and Leadership Development

The aforementioned information regarding the disciplinary process and
termination may be used as a follow-up to a formal performance review meeting
held because of a Jack of remedial action on the part of the employee. So, Jet us
discuss performance review meetings next, which may or may not lead to the
disciplinary process and termination we just discussed.

9-4 COACH ING, DEVELOP MENT, AND PERFORMANCE
REVIEW MEETINGS

Performance management leaders often feel uncomfortable in this role because
managing performance requires that they judge and coach at the same time.49
In other words, supervisors serve as judges by eval uating performance and
allocating rewards. In addition, supervisors serve as coaches by helping employees
solve performance problems, identify performance weaknesses, and design
developmental plans that will be instrumental in h1ture career development. In
addition, supervisors feel uncomfortable because they feel they need to convey
bad news and employees may react negatively. In other words, there is a concern
that managing performance unavoidably leads to negative surprises.

Because performance management leaders play these paradoxical roles,
it is usually helpful to separate the various meetings related to performance.
Separating the meetings also minimizes the possibility of negative surprises. 50
Moreover, when meetings are separated, it is easier to separate the discussion
of rewards from the discussion about future career development. This allows
employees to give their full attention to each issue, one at a time.

Chapter 6 noted that performance management systems can involve as many
as six formal meetings. Each of these sessions should be seen as a work meeting
with specific goal, including the following:

• System inauguration. The purpose of this meeting is to discuss how the
performance management system works and which requirements and
responsibilities rest primarily on the employee and which rest primarily
on the supervisor.

• Self-appraisal. The purpose of this meeting is to discuss the self-appraisal
prepared by the employee.

• Classical performance review. The purpose of this meeting is to discuss
employee performance, including the perspectives of both the supervisor
and the employee.

• Merit/sa/an; review. The purpose of this meeting is to d iscuss what, if any,
compensation changes will result as a consequence of the employee’s
performance during this period.

• Developmental plan. The purpose of this meeting is to discuss the
employee’s developmental needs and what steps will be taken so that
performance will be improved during the following period.

• Objective setting. The purpose of this meeting is to set performance goals,
both behavioral and results-oriented, regarding the following review period.

Although six types of meetings are possible, not all s ix take place as sepa-
rate meetings. For example, the self-appraisal, classical performance review,

Chapter 9 Performance Management Leadership 283

merit/salary review, development p lan, and objective setting meetings may
all take place during one umbrella meeting, labeled “performance review
meeting.” As noted above, however, it is better to separate the various types
of information discussed so that the employee and supervisor focus on each of
the components separately. Note, however, that the conversation about com-
pensation should be related to performance (i.e., employees must understand
the direct link between performance and compensation decisions).

Regardless of the specific type of meeting, there are several steps that performance
management leaders take before the meeting takes placeY Specifically, it is useful
to give at least a two-week advance notice to the employee to inform her of the
purpose of the meeting and enable her to prepare for it. Also, it is usehtl to block
out sufficient time for the meeting and arrange to meet in a private location
without interruptions. Taking these steps sends a clear message that the meeting
is important and that, consequently, performance management is important.

As noted above, most organizations merge several meetings into one labeled
“performance review meeting.” The typical sequence of events for such a meeting
is the following52:

• Explain tlte purpose of the meeting. The first step includes a description of the
purpose of the meeting and the topics to be discussed.

• Conduct self-appraisal. The second step includes asking the employee to
summarize her accomplishments during the review period. This is more
easily accomplished when the employee is given the appraisal form to be
used by the supervisor before the meeting. This portion of the meeting
allows the employee to provide her perspective regarding performance.
The role of the supervisor is to listen to what the employee has to say
and to summarize what he hears. This is not an appropriate time for the
supervisor to disagree with what the employee says.

• Share perfonnance data and explain rationale. Next, the supervisor explains
the rating he provided for each performance dimension and explains the
reasons that led to each score. It is more effective to start with a discussion
of the performance dimensions for which there is agreement between the
employee’s self-appraisal and the supervisor’s appraisal. This is likely to
reduce tension and to demonstrate to the employee that there is common
ground and that the meeting is not confrontational. Also, it is better to
start with a discussion of the performance dimensions for which the
scores are highest, and then, move on to the dimensions for which the
scores are lower. For areas for which there is disagreement between self-
and supervisor ratings, the supervisor must take great care in discussing
the reason for his rating and provide specific examples and evidence to
support the score given. At this point, there should be an effort to resolve
discrepancies and the supervisor should take extra care with sensitive
areas. The employee should be provided with the opportunity to explain
her viewpoint thoroughly. This is a very useful discussion because it leads
to clarifying performance expectations. For dimensions for which the
score is low, there should be a discussion of the possible causes for poor
performance. For example, are the reasons related to lack of knowledge,
lack of motivation, or contextual fac tors beyond the control of the
employee?

284 Part Ill Employee and Leadership Development

• Discuss development. After the supervisor and employee have agreed
on the scores given to each performance dimension, there should be a
d iscussion about the developmental plan. At this point, the supervisor and
the employee should discuss and agree on the developmental steps that
will be taken to improve performance in the future.

• Ask employee to swmnarize. Next, the employee should summarize, in her
own words, the main conclusions o f the meeting: which performance
dimensions are satisfactory, w hich need improvement, and how
improvement will be achieved. This is an important component of the
meeting because it gives the supervisor an opport unity to determine
whether he and the employee are in accord.

• Discuss rewards. The next step d uring the meeting includes discussing
the relationship between performance and any reward allocation. The
s upervisor should explain the rules used to allocate reward s and how the
employee would be able to reach higher reward levels as a consequence o f
future performance improvement.

• Schedule follow-up meeting. Before the meeting is over, it is important to
schedule the next performance-related forma l meeting. It is important that
the employee understand that there will be a formal follow-up and that
performance management is not just about meeting with the s upervisor
once a year. Usually, the next meeting will take place just a few weeks
later to review whether the d evelopmental plan is being implemented
effectively.

• Discuss approval and appeals process. Finally, the s upervisor asks the
employee to sign the form to attest that the evaluation has been
discussed with him. This is also an opportunity for the employee to
add any comments or additional information he would like to see
included on the form. In a d d ition, if d isagreements about ratings have
not been resolved , the s upervisor should remind the employee of the
appeals process.

• Conduct final recap. Finally, the supervisor should use the “past-present-
future mod el.” In other words, the supervisor summarizes what happened
during the review period in terms of performance levels in the various
dimensions, reviews how rewards will change based on this level of
performance, and sums up what the employee w ill need to do in the next
year to maintain and enhance performance.

Performance review discussions serve very important purposes. First,
these discussions allow employees to improve their performance b y identifying
performance problems and solutions for overcoming them. Second, they help
build a good relationship between the s upervisor and the employee because
the supervisor shows that she cares about the employee’s ongoing growth and
development and that she is willing to invest resources, including time, in h elping
the e mployee improve. Third, s§ood performance management lead ers use review
discussions as stay interviews. Stay interviews focus on finding out what makes
e mployees s tay in the organization and help managers create strategies to enhance
employee engagements and retain star performers. As part of the stay interview,
managers can ask questions such as (a) Have you ever thought about leaving
our team? (b) How can I best support you? (c) What do yo u want to Jearn here?
(d) What can you Jearn here that will make you feel good when you go home

Chapter 9 PerFormance Managemen t l eadership 2815

every day? Although stay interviews will not ensure that a star employee will
never move, they can be very useful in identifying the factors that matter most
to a firm’s or team’s most impactful contributors.

Unfortunate ly, these purposes are not always realized because employees
may be defensive and many supervisors do not know how to deal w ith
this attitude because they Jack the necessary skills to conduct an effective
performance review. How can we tell when an employee is being defensive?
Typically, there are two patterns of behavior that indicate defensiveness. 54
First, employees may engage in a fight response. This includes blaming others
for performance deficiencies, staring mutely at the supervisor, and other, more
aggressive responses, such as raising her voice or even pounding the desk.
Second, employees may engage in a flight response. This includes looking away,
turning away, speaking softly, continually changing the subject, or quickly
agreeing with what the s upervisor is saying w ithout basing the agreement
on a thoughtful and thorough discussion about the issues at stake. When
employees have a fight-or-flight response during the performance review
d iscussion, it is unlikely that the meeting will lead to improved performance in
the fu ture. What can supervisors do to prevent defensive responses? Consider
the following suggestions:

• Establish and maintain rapport. It is important that the meeting take place
in a good climate. As noted earlier, this can be achieved by choosing a
meeting p lace that is private and by preventing interruptions from taking
place. Also, the supervisor should emphasize two-way communication
and put the employee at ease as quickly as possible. This can be done by
s itting next to the employee as opposed to across a desk, by saying his
name, by thanking him for coming, and by beginning with small talk to
reduce the initial tension. When good rapport is established, both the
s upervisor and the employee are at ease, relaxed, and comfortable. They
can have a friendly conversation and neither is afraid to speak freely. Both
are open-minded and can express disagreement without offending. On
the other hand, when there is no good rapport, both participants may be
nervous and anxious. The conversation is cold and formal and both may
fear to speak openly. The supervisor and employee are likely to interrupt
each other frequently and challenge what the other is saying.

• Be empathetic. It is important for the s upervisor to put herself in the shoes
of the employee. The supervisor needs to make an effort to understand
why the employee has performed at a certain level during the review
period. This includes not making attributions that any employee success
was caused by outside forces (e.g., a good economy) or that employee
failures were caused by inside forces (e.g., employee incompetence).

• Be open-minded. If the employee presents an alternative and different
point of view, be open-minded and d iscuss them directly and openly.
There is a possibility that the employee may provide information that is
relevant and of which you are not aware. If this is the case, ask for specific
evidence.55

• Observe verbal and nonverbal cues. The s upervisor should be able to read
verbal and nonverbal signals from the employee to determine whether
further clarification is necessary. The s upervisor should be attentive
to the employee’s emotions and react accordingly. For example, if the

286 Part Ill Employee and Leadership Development

employee becomes defensive, the supervisor should stop talking and
allow the employee to express her point of view regarding the issue being
d iscussed.

• Minimize threats. The performance review meeting should be framed as a
meeting that will benefit the em ployee, not punish him.

• Encourage participation. The employee needs to have her own
conversational space to speak and express her views. The supervisor
should not dominate the meeting; ra ther, she should listen without
interrupting and avoid confrontation and a rgument.

In spite of these suggestions, defensiveness may be unavoidable in some
s ituations. In such situations, supervisors need to recognize that employee
defensiveness is inevitable, and they need to allow it. Rather than ignoring the
defensive attitude, su pervisors need to deal with the situation head on. First, it is
important to Jet the employee vent and to acknowledge the employee’s feelings.
To do this, the supervisor may want to pause to accept the employee’s feelings.
Then, the supervisor may want to ask the employee for additional information and
clarification. If the situation is reaching a point where communication becomes
impossible, the supervisor may want to suggest suspending the meeting tmtil a
later time.56 For example, the supervisor may say,

I understand that you are angry, and that you believe you have been
treated unfairly. It’s important that I understand your perspective, but
it’s difficult for me to absorb the irlformation when you are so upset.
This is an important matter. Let’s take a break, and get back together a t
3:00P.M. to continue our discussion.

To be sure, if the relationship between the supervisor and the employee is
not good, the performance review meeting is likely to expose these issues in a
blatant and often painful way.

Consider the following vignette. Hannah is the manager at a large accounting
firm, and Sofia is one of the employees on her team. She chooses a conference
room with privacy away from the other offices.

HANNAH: Hi, Sofia. I wanted to meet with you today to discuss
your performance appraisal for this quarter. At any time,
please offer your input and ask questions if you have any.

S OFIA: OK.
H AN NAH:

S OFIA:
HANNAH:
S OFIA:

HANNAH:

You did meet two important objectives that we set this
quarter: sales and customer service. Thanks for your
hard work.
No problem.
You d id miss three of the other objectives.
What? I worked as hard as I could! It wasn’t my fault
that the other people on the team d id not carry their
weight.
Sofia, I am not here to blame anyone or to attack you.
I want to generate some ideas on what we can do to
ensure that you meet your objectives and receive your
bonus next quarter.

S OFIA:

H ANNAH :

S OFIA:
H ANNAH :

S OFIA:

H ANNAH :

S OFIA:

Chapter 9 Performance Management Leadership 287

5/IT/NG BACK WITH CROSSED ARMS: I told you I worked as
hard as I could.
I know that you worked hard, Sofia, and I know how
hard it is to balance all of the objectives that we have in
our department. When I first s tarted, I had a hard time
meeting all of the objectives as well.
It is hard and I try my best.
Sofia, can you think of anything that we can work
on together that would help you meet the last three
objectives? Is there any additional training or resources
that you need?
I am having a hard time prioritizing all of my daily
tasks. There is a class offered online on prioritizing, but
I feel I am too busy to take it.
That is good that you think the class will help. Take the
class online, w hich will not disrupt your work schedule,
and I will go to all of your meetings and follow up with
clients as needed.
Thanks, Hannah. I really appreciate your help.

How did Hannah do in dealing with Sofia’s defensiveness? Overall, she
did a good job. Hannah was empathetic, she picked up on Sofia’s nonverbal
behavior, she had Sofia offer her input, she held the meeting in a comfortable,
private location, and she emphasized that the meeting was to work on future
performance and not to punish Sofia. In the end, she was able to address Sofia’s
defensiveness and turned a meeting that could have gone very poorly into a
productive exchange of information and ideas.

In closing, this third section in the book addressed employee development
(Chapter 8) and skills that managers need to acquire and things they need to do
to become performance management leaders (Chapter 9). The next section will
address additional important issues in all performance management systems.
Specifically, Chapter 10 will address the relation between performance management
and rewards and performance management and the Jaw, and Chapter 11 will
discuss team performance management.

SUMMARY POINTS

• To become performance management leaders, managers must acquire
several important skills. Managers need to serve as coaches, to observe
and document performance accurately, to give both positive and
constructive feedback, and to conduct performance review meetings-
including meetings that address disciplinary and termination issues.

• Coaching is a collaborative and ongoing process in which the manager directs,
motivates, and rewards employee behavior. Successful coaching involves a
good manager-€mployee relationship, an understanding that the employee is
the source and director of change, and that each employee is unique.

2U Part Ill Employee and Leadership Development

• Effective coaching involves giving advice about performance expectations
and how to perform well, giving employees guidance so they know how
to improve their performance, providing employees with support without
being controlling, and enhancing employees’ confidence and competence.
Coaching must be based on a helping and trusting relationship. This is
particularly important when the supervisor and the direct report do not
share similar cultural backgrounds.

• Performance management leaders need to engage in a complex set of
behaviors to perform the various coaching functions. These include the
following: establish developmental objectives, communicate effectively,
motivate employees, document performance, give feedback, d iagnose
performance problems, and help employees improve their performance.

• Managers’ personalities and behavioral preferences influence their
coaching style. Some managers prefer to be drivers and jus t tell
employees what to do. Others prefer to be persuaders and try to sell
what they want the employees to do. Yet others adopt an amiable style in
which feelings take precedence and urge the employee to d o what feels
right or what the employee feels is the right way to do things. Finally,
others prefer to be analyzers and have a tendency to follow rules and
procedures in recommending how to perform. None of these four styles is
necessarily better than the others in all conditions. The best performance
management leaders are able to change their styles and adapt to the needs
of the employees.

• The coaching process is ongoing and cyclical, and it includes the
following five components: (1) setting developmental goals, (2)
identifying the activities needed to achieve the developmental goals
as well as securing resources that will allow employees to engage
in activities to achieve their developmental goals, (3) implementing
developmental activities (e.g., enrolling the employee in an online course),
(4) observing and documenting developmental behaviors (e.g., checking
on the progress of the employee toward the attainment of developmental
goals), and (5) giving feedback (e.g., providing information to the
employee that w ill help him adjust his current developmental goals and
guide his future goals) .

• Observing and documenting developmental behaviors and results and
performance in general is not as easy as it may seem. Tune constraints
can play a role when managers are too busy to gather performance
information. Situational constraints may prevent managers from
observing the employee directly. Finally, activity constraints may be a
factor; w hen developmental activities are unstructured, such as reading
a book, the manager may have to wait until the activity is completed to
assess whether any new skills and knowledge have been acquired.

• Observation and documentation of performance can be improved in
several ways. These issues, which were described in detail in Chapter 7,
include implementing a good communication plan and establishing
training programs that help managers minimize rater errors (i.e., rater
error training); share notions of what it means to complete developmental
activities successfully (i.e., frame-of-reference training); and observe
performance more accurately (i.e., behavioral observation training) .

Chapter 9 PerFormance Management leadership 289

• Documenting an employee’s progress toward achieving developmental
goals and improving performance in general has several important
benefits. These include the reduction of the manager’s cognitive load,
the enhancement of trust between the employee and the manager, the
collection of important input to be used in planning developmental
activities in the future, and the development of a good line of defense in
case of litigation.

• For performance documentation to be most useful, it must be specific, use
adjectives and ad verbs sparingly, balance positives with negatives, focus
on job-related information, be comprehensive, be standardized across
employees, and be stated in behavioral and results terms rather than
subjective judgments.

• Feed back about performance in general, and about developmental
activities in particular, serves several important purposes. These include
building employee confidence and self-efficacy, developing employee
competence, and enhancing employee engagement with the unit and the
organization as a whole.

• The mere presence of feedback does not mean that there will be positive
effects on fu ture performance. For feedback to be most usehtl, it must
be timely, frequent, specific, verifiable, consistent over time and across
employees, given in private, and tied closely to consequences (e.g.,
rewards); address description firs t, and evaluation second; discuss
performance in terms of a continuum and not in terms of d ichotomies (i.e.,
in terms of more and less and not in terms or all versus nothing or present
versus absent); address patterns of behavior and events and not isolated
errors or mistakes; include a statement that the manager has confidence
in the employee; and include the active participation of the employee in
generating ideas about how to improve performance in the htture.

• When giving praise (i.e., “positive feedback”), it is important to be sincere
and to give it only when it is deserved . Also, praise should be about
specific behaviors or results and be given within context so that employees
know what they need to repeat in the future. In addition, in giving praise,
managers should take their time and act pleased, rather than rush through
the information looking embarrassed . Finally, avoid giving praise by
referring to the absence of the negative-for example, “not bad” or “better
than last time.”

• In general, managers do not feel comfortable about giving constructive
(i.e., “negative”) feedback. They may fear that employees will react
negatively because they themselves have been given constructive feed back
in the past in a way that was not helpful and do not want to put their
employees in the same situation, because they do not like playing God, or
because they think they need to collect an onerous amount of information
and evidence before giving constructive feedback. When constructive
feedback is warranted, however, and managers refuse to give it, poor
performers may get the message that their performance is not that bad.
Eventually, the situation may escalate to the point that the manager has
no choice but to give feedback; the situation then becomes ptmitive, and
feedback is not likely to be useful. For constructive feedback to be useful,
it must be given early when the perform ance problem is still manageable.

290 Part Ill Employee and Leadership Development

• Performance management leaders play the paradoxical roles of judge
and coach at the same time. These roles are most evident during the
performance review meetings, w hich can include as many as six
separa te formal meetings: system inauguration, self-appraisal, classical
performance review, merit/salary review, developmental plan, and
objective setting. In most organizations, these meetings are merged into
one or two meetings. It is most effective to separate the meetings so that
employees can focus on one issue at a time (e.g., supervisor’s view on the
employee’s performance, rewards allocation, developmental plan).

• In giving feedback, it is important to consider genera tional and
individual d ifferences and prefe rences and reactions. In general,
Millennials and Post-Millennia is (i.e., Generation Z) tend to have
work-related goals that are more future-oriented (i.e., “utility”
goals) compared to Baby Boomers. In contrast, older workers tend to
have work-related goals that are m ore present-oriented (i.e., “social
awareness”): regulating their emotions to be positive and the pursuit
of positive social relationships at work. Also, ind ivid uals d iffer in the
extent to w hich they proactively seek feedback about their performance
(i.e., fee d back-seeking behavior). Good performance management
leaders are aware of the need to p rovide feed back to all employees to
make sure nobod y falls through the cracks.

• In some cases, an employee may be unwilling or unable to overcome
performance problem s. When that happens, there is a need to implement
a formal disciplinary process, including a verbal warning, followed
by a written warning, and eventually, if needed, termination. When
implementing a disciplinary process, supervisors must be aware of several
pitfalls including the acceptance of poor performance, failing to get the
message through, arguments that performance standards are unfair or
unrealistic, employee and supervisor emotional reactions, and the failure
to consult with HR.

• The termination meeting creates important challenges and is extremely
unpleasant for both the employee and supervisor. For termination
meetings to be m ore effective and less painful, supervisors must (1) be
respectful, (2) get right to the point, (3) Jet the employee grieve, (4) wish
the employee well, (5) send the employee to HR (or offer information,
based on the ad vice of outside counsel), (6) have the employee leave
immediately, and (7) conduct the termination meeting a t the end of the
day. Overall, all employees deserve to be treated with d ignity and respect,
even those who are being terminated .

• When all the performance review meetings are merged into one, the
components of such a meeting include the following (1) explanation
of the p urpose of the meeting, (2) self-appraisal, (3) d iscussion of
the supervisor ‘s performance ratings and rationale and resolution
of discrepancies with self-appraisal, (4) developmental discussion,
(5) employee summary, (6) rewards discussion, (7) setting up follow-up
meeting, (8) approval and appeals process d iscussion, and (9) final recap.

• Performance management leaders also use the perform ance review
meetings to conduct “stay interviews,” which involve gathering
information on what makes employees stay in the organization and help
managers create strategies to enhance employee engagements and retain

Chapter 9 Perfo rmance Management Leadership 291

s tar performers. As part of the stay interview, managers can ask questions
s uch as (a) Have you ever thought abo ut leaving our team? (b) How can
I best support you? (c) What do you want to Jearn here? (d) What can you
Jearn here that will make yo u feel good w hen you go home every day?

• In meeting with the supervisor to discuss performance issues, employees
may become defensive. Defensiveness is indicated by a fight-or-flight
response. The supervisor can minimize defensiveness by (1) establishing
and maintaining rapport, (2) being empathetic, (3) observing verbal and
nonverbal cues, (4) minimizing threats, and (5) encouraging employee
participation. When defensiveness becomes unavoidable, the employee’s
a ttitude must be recognized and allowed expression. If the situation becomes
intolerable, the meeting may be interrupted and resched uled for a later time.

EXERCISE 9-1 WHAT IS YOUR COACHING STYLE?

Below are 15 rows of four words each. From each row, select and circle two words
out of the four that best describe the way you see yourself. If all four words sound
like you, select the two that are most like you. If none of the four sounds like
you, select the two that are closest to the way you are. Then, total the number of
words selected under each respective column.

A B C 0

All· business Bold Personable Deliberate

2 O rganized listening Telling Courteous listening

3 Industrious Independent Companionable Cooperauve

4 No-nonsense Decisive Talkauve Reflective

5 Serious Determined Warm Careful

6 To-the-point Risk-taker Amiable Moderate

7 Pract1ca1 Aggress1ve Empathetic Nonassert1ve

8 Self-controlled Authoritative Shows emotions Thorough

9 Goal-directed Assert1ve Friendly Pauent

10 Methodical Unhesitating Sincere Prud ent

11 Businesslike Definite Sociable Prec1se

12 Diligent Firm Demonstrative Particular

13 Systematic Strong·m1nded Sense of humor Thinking

14 Formal Confident Expressive Hes1tauve

15 Persevering Forceful Trusung Restrained

Total

After you have totaled the number of words circled under each respective
column, plot those numbers on their respective axes of the grid on the following
page. For example, if you circled six words in column A, mark the A axis next to
the 6. Complete the same procedures for columns B, C, and D. Then extend the

2512 Part Ill Employee and Leadership Development

Goa/driven
Chang
Stress
“Doer”

e addicted
drN8n

Driver

4 12 10
A

ANIIyzer

8 6 4 2

nd procedures Rules a
Logica I
They are the only people

in the world
Info flow charts

B

0

14
12
10

6
4
2
2 4 6 8

2
4
8


10
12
14

Visionary
ssib/lities

good at
entlng

Seea//po
No/as

imp/em
“Trost me•

Ex pres
Persua

10 12 1 4 c

Amlabl •
Heart bafo
Likes ave

re head
1)1’ne to

be happy
Passionate

marks into each respective quadrant to create a rectangle. For example, consider
the example of circling nine words from the A list, eight from the B list, seven
from the C list, and eight from the D list. The rectangle would be the following:

B
14
12
10

8
6
4

2
14 12 10 8 6 4 2 2 4 6 8 10 12 14

c
2
4
6
8

10
12
14

0

Chapt er 9 Performance Management Leadersh ip 2•3

In this p