Topic 1

Introduction

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Introduction

In today’s globalised world, it is relatively easy to gain access to the competition’s technology and
products. Thanks to the Internet and the high speed of communications, among other reasons,
technological and product differentiation is no longer a key competitive advantage in most industries. For
example, most banks offer the same types of product (e.g., different types of savings accounts and
investment opportunities). And, if a particular bank decides to offer a new product or service (e.g., on-line
banking), it will not be long before the competitors offer precisely the same product.
So, what makes some businesses more successful than others? What is today’s key competitive
advantage? The answer is people. Organisations with motivated and talented employees offering
outstanding service to customers are likely to get ahead of the competition, even if the products offered
are similar to those offered by the competitors. Customers want to get the right answer at the right time,
and they want to receive their products or services promptly and accurately. Only people can make these
things happen. Only people can produce a sustainable competitive advantage.
Two unique aspects of human resources (people)
Inimitability
Human resource does not exactly mean people physically, but it is all about experience, judgement,
training, intelligence and insight of individual managers and workers in a firm. All of these aspects of
HR cannot be imitated by anyone or any organisation.
Now with equal opportunities to companies to acquire technology and finance, the cutting edge of the
organisation will be its human resource. People differ from one organisation to another, and resulting in
other organisations gaining more competitive advantage than others.
One can copy the strategies, best practices (HR benchmarking) and technologies used by other
organisations but it is impossible to copy the skills and creativity of its human resource
Unsubstitutability
Most organisations are trying to substitute HR with technology, ATMs for example, but however they
have come into realization that a person has to intervene so that these machines can operate. HR drives all
other factors of production so that the final goal of productivity can be achieved
In light of the above HR has been defined as the set of difficult to trade and imitate, scarce, appropriable
and specialized resource and capabilities that bestow the firm’s competitive advantage.
Performance Management Systems

At this stage of human resource management (HRM), we now have employees in our organization who
can do the work, we’ve given them at least some initial training, and they are now doing their individual
jobs. What’s next? The next issue that we need to figure out is how to manage their performance over
time to ensure that they remain productive, and hopefully become even more capable, as they progress in
their careers.

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Performance management is thus premised on the notion that human resources are typically one of the
few options available to create a sustainable competitive advantage for the firm. So we need to ensure that
our human resources perform at the highest possible level.
A change in perspective: From employment to performance
It is no good having all the right people all in the right place, but not delivering the goods/ services. It has
been suggested that there is a general change of emphasis in attitude to the contract between the parties
away from a contract of employment towards a contract for performance. Even before the development of
Taylor’s scientific management methods a century ago, getting the most out of the workforce (that is;
their performance) has always been a predominant management preoccupation, and the management
literature is full of studies on the topic.

We all have to perform effectively. A large part of achieving effective performance is getting the
organisational processes right, but within the organisational framework there are the teams, groups and
individuals who do the work. Also within that framework we have to understand what it is that motivates
people to perform so that we deploy leadership skills (performance management) that match those
motivations.

Organizations do exist to meet the needs of their stakeholders and the ability of any organisation to do
such (i.e. meet its ends) is very much dependent on the performance of its employees.

The now asked question is what is meant by performance?

Definition of terms

The meaning of performance

Performance is often defined simply in output terms – the achievement of quantified objectives. But
performance is a matter not only of what people achieve but how they achieve it.

The Oxford English Dictionary confirms this by including the phrase ‘carrying out’ in its definition of
performance: ‘The accomplishment, execution, carrying out, working out of anything ordered or
undertaken. This refers to outputs/outcomes (accomplishment), but also states that performance is about
doing the work as well as being about the results achieved. Performance is indeed often regarded as
simply the outcomes achieved: a record of a person’s accomplishments.

A more comprehensive view of performance is achieved if it is defined as embracing both behaviour and
outcomes. High outcomes results from appropriate behaviour, especially discretionary behaviour, and the
effective use of the required knowledge, skills and competencies. This was well put by Brumbach (1988)
“Performance means both behaviours and results”. Behaviours emanate from the performer and
transform performance from abstraction to action. Not just the instruments for results, behaviours are also
outcomes in their own right – the product of mental and physical effort applied to tasks – and can be
judged apart from results.

This definition of performance leads to the conclusion that when managing performance both inputs
(behaviour) and outputs (results) need to be considered. It is not a question of simply considering the
achievement of targets, as used to happen in ‘management by objectives’ schemes. Competency factors

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need to be included in the process. This is the so-called ‘mixed model’ of performance management,
which covers the achievement of expected levels of competence as well as objective setting and review.

Put simple; the word performance (noun) comes from the verb perform meaning to do which will then
lead to organisational performance.

Perform (to do, carry-out or execute) Performance (Individual behaviours and results) =
Organisational performance (success of the business)

This concept of performance leads to the conclusion that when managing the performance of individuals
and teams, a number of factors have to be considered including both inputs (behaviour) and outputs
(results). As such performance refers to the achievement of pre-planned goals by an individual, team or
the organization.

Performance management defined

Performance management is an approach to managing people. It is thus; a management process for

ensuring employees (as individuals or groups) are focusing their work efforts in ways that contribute to
achieving the organization’s mission.

Performance management is a continuous process of identifying, measuring and developing performance

in organisations by linking each individual’s performance and objectives to the organization’s overall
mission and goals.
Let’s consider each of the definition’s two main components:
1. Continuous process. Performance management is ongoing. It involves a never-ending process of
setting goals and objectives, observing performance, and giving and receiving ongoing coaching and
feedback.
2. Link to mission and goals. Performance management requires that managers ensure that employees’
activities and outputs are congruent with the organization’s goals and, consequently, help the organisation
gain a competitive business advantage. Performance management therefore creates a direct link between
employee performance and organizational goals, and makes the employees’ contribution to the
organisation explicit.
Performance management can be defined as a strategic and integrated approach to delivering sustained
success to organizations by improving the performance of the people who work in them and by
developing the capabilities of teams and individual contributors.
Evolution of performance management
Performance management has evolved through different stages. The origin of performance management
could be traced as back as when paid work emerged/ industrialization (though it was not called such),
where the employer expected good results from the employee in terms of performance (Taylor Scientific
Management thinking; control of employees for efficiency). It was then officially mentioned in the early
1960’s when the performance appraisal systems were introduced.
During this period, Annual Confidential Reports (ACR’s) also known as Employee service Records were
maintained for controlling the behaviours of the employees (the performance of employees was not
revealed to employees kept to management and supervisors only) and these reports provided substantial
information on the performance of the employees.

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In the progression of time there was a slight development in administration of ACRs, where in the late
1960’s till early 1970’s, only employees’ adverse remarks were incorporated in the performance reports
and communicated to the employees so that they could take corrective actions for overcoming such
deficiencies.
From early 1970 till mid-1970 ACRs were replaced by performance appraisal. One of the key changes
that were introduced in this stage was that the employees were permitted to describe their
accomplishments/activities in the confidential performance reports, several new components were
considered by many organizations which could measure the productivity and performance of an employee
in quantifiable terms such as targets achieved, etc
The term performance management gained its popularity in early 1990’s when total quality management
programs received utmost importance for achievement of superior standards and quality performance. It
was during this period where a general change of emphasis in attitude to the contract between the parties
away from a contract of employment towards a contract for performance and maturity in the approach of
handling people’s issues.
Since year 2000 the Balanced Score Card approach has been regarded as the newest version of
performance management which was propounded by two American scholars, Kaplan and Norton.
*The performance management system is still evolving and in the near future one may expect a far more
objective and a transparent system.
Performance Management Concerns
Performance management strategy is basically concerned with;
1. Performance improvement- in order to achieve organizational, team and individual effectiveness
organizations have ‘to get the right things done successfully’.
2. Performance management strategy is concerned with employee development. Performance
improvement is not achievable unless there are effective processes of continuous development. This
addresses the core competences of the organization and the capabilities of individuals and teams.
Performance management should really be called performance and development management.
3. Performance management strategy is concerned with satisfying the needs and expectations of all
the organization’s stakeholders – owners, management, employees, customers, suppliers and the
general public, It is thus concerned about quality. In particular, employees are treated as partners in
the enterprise whose interests are respected and who have a voice on matters that concern them,
whose opinions are sought and listened to. Performance management should respect the needs of
individuals and teams as well as those of the organization, although it must be recognized that they
will not always coincide.
4. Performance management strategy is concerned with communication and involvement. It aims to
create a climate in which a continuing dialogue between managers and the members of their teams
takes place to define expectations and share information on the organization’s mission, values and
objectives. Performance management can contribute to the development of a high-involvement
organization by getting teams and individuals to participate in defining their objectives and the
means to achieve them.
The main features/ characteristics of Performance Management
1. Strategic- create line of sight between what the individual does and organisational needs. One of
the most fundamental purposes of performance management is to align individual objectives to
organizational objectives. This means that everything people do at work leads to outcomes that
further the achievement of organizational goals
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 2. Planned- Performance management is a planned process
3. Agreement- Based in agreement (all parties agree on role requirements, objectives and
performance improvement and personal development plans).
4. Measurement- there should be some basis for measuring performance
5. Feedback- feedback on how people as individuals or teams are performing is one of the major
pillar of performance management
6. Positive reinforcement- desired behaviour is reinforced to ensure it being repeated.
7. Dialogue- It provides the setting for on-going dialogues about performance that involves the joint
and continuing review of achievements against objectives, requirements and plans
8. Integrated (vertically and horizontally)
9. Concerned with inputs and values. The inputs are the knowledge, skills and behaviours required
to produce the expected results. And this is done through appropriate behaviour that upholds core
values.
10. Involving - It is not just a top-down process in which managers tell their subordinates what they
think about them; set objective and institute performance improvements plans. It is not something
that is done to people. As Buchner (2007) emphasises, performance management should be
something that is done for people and in partnership with them.
11. Continuous and flexible process, which involves managers and those whom they manage acting
as partners within a framework that sets out how they can best work together to achieve the
required results. It is based on the principle of management by contract and agreement rather than
management by command. It relies on consensus and co-operation rather than control or
coercion.
12. Considers past, present and future- Performance management focuses on future performance
planning and improvement rather than on retrospective performance appraisal. It functions as a
continuous and evolutionary process, in which performance improves over time.
13. It is about giving employees direction, freedom and get their work done and encouragement not
control.
14. Line manager driven - And not solely the responsibility of HR.
Influences on performance
a) The individual influence
Influencing individual performance within the organisation are individual factors such as the ability of the
person, and the willingness of the person to exert effort (motivation) as suggested by Vroom (1964) that
performance is a function of ability and motivation as depicted in the formula;
 Performance = ƒ (Ability& Motivation).
The effects of ability and motivation performance are not additive but multiplicative. People need both
ability and motivation to perform well, and if either ability or motivation is zero, there will be no effective
performance.
Another formula for performance was originated by Blumberg and Pringle (1982). Their equation was;
 Performance = Individual Attributes X Work Effort X Organizational Support.
By including organizational support in the formula they brought in the organizational context as a factor
affecting performance.
Research carried out by Bailey et al (2001) concluded that another factor affecting performance is the
opportunity to participate. They noted that ‘organizing the work process so that non-managerial

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employees have the opportunity to contribute discretionary effort is the central feature of a high
performance work system’. (This was one of the earlier uses of the term ‘discretionary effort’.)
The ‘AMO’ formula put forward by Boxall and Purcell (2003) is a combination of the Vroom and Bailey
et al ideas. This model posits that performance is a function of Ability + Motivation + Opportunity to
Participate
b) The work systems
Performance here is influenced by systems as well as person factors. These include the support people get
from the organization, the leadership and support they get from their managers, and other contextual
factors outside the control of individuals. Jones (1995) made the radical proposal that the aim should be to
‘manage context not performance’, and goes on to explain that:
In this equation, the role of management focuses on clear, coherent support for employees by providing
information about organization goals, resources, technology, structure, and policy, thus creating a
context that has multiplicative impact on the employees, their individual attributes (competency to
perform), and their work effort (willingness to perform). In short, managing context is entirely about
helping people understand; it is about turning on the lights.

The Performance Management Contribution

There are many advantages associated with the implementation of a performance management system. A
performance management system can make the following important contributions:
1. 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 of one’s past successes provide the fuel for future
accomplishments.
2. High performance work culture is enhanced
Performance management establishes a high performance culture in which individuals and teams take
responsibility for the continuous improvement of business processes and for their own skills and
contributions within a framework provided by effective leadership.
3. Self-esteem is increased.
Receiving feedback about one’s performance fulfils a basic need to be appreciated and valued at work.
This, in turn, is likely to increase employees’ self-esteem.
4. Managers gain insight about subordinates.
Direct supervisors and other managers in charge of the employees’ performance gain new insights into
the person’s performance and personality which then helps the manager in building a constructive
relationship with that person and the contribution they make in the organisation.
5. The job definition and criteria are clarified.
The job of the person being concerned 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 successful performer (i.e., which
criteria define job success).
6. Self-insight and development are enhanced
The participants in the system are likely to develop a better understanding of themselves and of the kind
of development activities of value to them as they progress through the organisation. Participants in the
system also gain a better understanding of their strengths and weaknesses, which can help them better
define future career paths.
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 7. Personnel actions are more fair and appropriate
Performance management systems provide valid information about performance, which can be used for
personnel 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 decisions based on a sound performance management system lead to improved interpersonal
relationships and enhanced supervisor–subordinate trust.
8. Organizational goals are made clear
The goals of the unit and the organisation are made clear, and the employee understands the link between
what he or she does and organizational success. This is a contribution to the communication of what the
unit and the organisation 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., organizational and unit level).
9. Employees become more competent.
An obvious contribution is that the performance of employees is improved. In addition, there is a solid
foundation for developing and improving employees by establishing developmental plans.
10. 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.
11. There is better and more timely differentiation between good and poor performers.
Performance management systems allow for a quicker identification of good and poor performers. Also,
they force supervisors to face up to and address performance problems on a timely basis (i.e., before the
problem is too costly and cannot be remedied).
12. Supervisors’ views of performance are communicated more clearly.
Performance management systems allow managers to communicate to their subordinates their judgments
regarding performance. Thus there is greater accountability in how managers discuss performance
expectations and provide feedback.
13. Organizational change is facilitated.
Performance management systems can be a useful tool to drive organizational change. For example,
assume an organisation decides to change its culture to give top priority to product quality and customer
service. Once this new organizational direction is established, performance management is used to align
the organizational culture with the goals and objectives of the organisation to make change possible.
Employees are provided with training in the necessary skills, and are also rewarded for improved
performance so that they have both the knowledge and the motivation to improve product quality and
customer service.
Disadvantages/Dangers of Poorly Implemented PM Systems
What happens when performance management systems do not work as intended? What are some of the
negative consequences associated with low-quality and poorly implemented systems? Consider the
following:
1. Employees may quit due to results
If the process is not seen as fair, employees may become upset and leave the organisation.
They can leave physically (i.e., quit) or withdraw psychologically (i.e., minimize their effort until they are
able to find a job elsewhere).
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 2. False or misleading information may be used
If a standardized system is not in place, there are multiple opportunities for fabricating information about
an employee’s performance.
3. Self-esteem may be lowered.
Self-esteem may be lowered if feedback is provided in an inappropriate and inaccurate way. This, in turn,
can create employee resentment.
4. Time and money are wasted.
Performance management systems cost money and quite a bit of time. These resources are wasted when
systems are poorly designed and implemented.
5. Relationships are damaged.
As a consequence of a deficient system, the relationships among the individuals involved may be
damaged, often permanently.
6. Motivation to perform is decreased.
Motivation may be lowered for many reasons, including the feeling that superior performance is not
translated into meaningful tangible rewards (e.g., pay increase) or intangible rewards (e.g., personal
recognition).
7. Employees suffer from job burnout and job dissatisfaction.
When the performance assessment instrument is not seen as valid, and the system is not perceived as fair,
employees are likely to feel increased levels of job burnout and job dissatisfaction. As a consequence,
employees are likely to become increasingly irritated.
8. There is increased risk of litigation.
Expensive lawsuits may be filed by individuals who feel they have been treated unfairly.
9. Unjustified demands are made upon managers’ resources.
Poorly implemented systems do not provide the benefits that well-implemented systems provide, yet they
still take up managers’ time. Such systems will be resisted because of competing obligations and
allocation of resources (e.g., time). Worse, managers may simply choose to avoid the system altogether.
10. Standards and ratings vary and are unfair.
Both standards and individual ratings may vary across and within units, and may also be unfair.
11. Biases can replace standards.
Personal values, biases and relationships are likely to replace organizational standards. Which this breeds
unethical behaviour at work.
12. Mystery surrounds how ratings were derived.
Because of poor communication, employees may not know how their ratings are generated or how the
ratings are translated into rewards.
Aims and Role of PM Systems
The information collected by a performance management system is most frequently used for salary
administration, performance feedback and the identification of employee strengths and weaknesses.
In general, however, performance management systems can serve the following purposes:
(a) Strategic,
(b) Administrative,
(c) Information,
(d) Developmental,
(e) Organizational maintenance, and
(f) Documentation.
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 a) Strategic Purpose
The first purpose of performance management systems is to help top management achieve the strategic
business objectives. By linking the organization’s goals with individual goals, the performance
management system reinforces behaviors consistent with the attainment of organizational goals. Put
simply the following are the strategic roles of PM
Specifically, performance management is about aligning individual objectives to
organizational objectives and ensuring that individuals uphold corporate core values.
The aim is to develop the capacity of people to meet and exceed expectations and to achieve
their full potential to the benefit of themselves and the organization.
Focusing employee’s tasks on the right things and doing them right. Aligning everyone’s
individual goals to the goals of the organization. It thus brings all the employees under a
single strategic umbrella.
It enables a business to sustain profitability and performance by linking the employees' pay to
competency and contribution (improve organisational performance)
b) Administrative Purpose
A second function of performance management systems is to furnish valid and useful information for
making administrative decisions about employees. Such administrative decisions include salary
adjustments (to decide upon the pay rise), promotions, retention or termination, recognition of individual
performance, identification of poor performers, layoffs and merit increases. So the implementation of
reward systems based on information provided by the performance management system falls within the
administrative purpose.
c) Information 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 the
organizations and the supervisor’s expectations, and what aspects of work the supervisor believes are
most important.
To enable supervisors and subordinates an equal opportunity to express themselves under
structured conditions.
Proactively managing and resourcing performance against agreed accountabilities and
objectives.
d) Developmental Purpose
As noted above, feedback is an important component of a well-implemented performance management
system. This feedback can be used in a developmental way. Managers can use feedback to coach
employees and improve performance on an ongoing basis. This feedback allows for the identification
both of strengths and weaknesses and of the causes of performance deficiencies (which could be due to
individual, group 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. And feedback is useful
only when employees are willing to receive it. Organisations should strive to create a ‘feedback culture’
that reflects support for feedback, including feedback that is non-threatening and is focused on behaviors,
and coaching to help interpret the feedback provided. Another aspect of the developmental purpose is that
employees receive information about themselves that can help them tailor their career paths. Thus, the
developmental purpose refers to both short-term and long-term development aspects.
For developmental purposes it also helps;
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 It provides opportunities for intensive personal development and career growth (provide the basis
for personal development).
To confirm the services of probationary employees upon their completing the probationary period
satisfactorily
To check the effective & efficiency of individuals, teams & organization
e) Organizational Maintenance Purpose
A fifth purpose of performance management systems is to provide information to be used in workforce
planning. Workplace planning is a set of systems that allows organisations to anticipate and respond to
needs emerging within and outside the organisation, to determine priorities, and to allocate human
resources where they can do the most good. An important component of any workforce planning effort is
the talent inventory, which is information on current resources (e.g., skills, abilities, promotional potential
and assignment histories of current employees). Performance management systems are the primary means
through which accurate talent inventories can be assembled. Other organizational maintenance purposes
served by performance management systems include;
Assessing future training needs,
Evaluating performance achievements at the organizational level, and evaluating the effectiveness
of HR interventions (e.g., whether employees perform at higher levels after participating in a
training programme).
PM can be used to determine whether HR programmes such as selection, training, and transfer
have been effective or not.
These activities cannot be conducted effectively in the absence of a good performance management
system.
f) Documentation Purpose
Finally, performance management systems allow organisations to collect useful information that can be
used for several documentation purposes. First, performance data can be used to validate newly proposed
selection instruments. For example, a newly developed test of typing skills can be administered to all
administrative personnel. Then scores on the test can 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 applicants for the administrative positions. Second, performance
management systems allow for the documentation of important personnel decisions. This information can
be especially useful in the case of litigation.
A summary table of purposes served by a performance management system
Strategic To help top management achieve strategic business
objectives
Administrative To furnish valid and useful information for making administrative
decisions about employees
Information To inform employees about how they are doing and about
the organization’s and the supervisor’s expectations

Developmental To allow managers to provide coaching to their employees

Organizational To provide information to be used in workplace planning
maintenance and allocation of human resources

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Documentation To collect useful information that can be used for various

Topic 2
High performance cultures
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A high-performance culture is one in which people are aware of the need to perform well, and behave
accordingly in order to meet or exceed expectations. Such a culture embraces a number of interrelated
processes which together make an impact on the performance of the organization through its people, in
such areas as productivity, quality, levels of customer service, growth, profits, and ultimately, in profit-
making firms, the delivery of increased shareholder value. In our more heavily service- and knowledge-
based economy, employees and their performance have become the most important determinant of
organizational success.
Characteristics of a high-performance culture
The following characteristics of a high-performance culture were defined by Lloyds (2003):
 People know what is expected of them, they are clear about their goals and accountabilities.
 They have the skills and competencies to achieve their goals (training and development).
 High performance is recognized and rewarded accordingly.
 People feel that their job is worth doing, and that there is a strong fit between the job and their
capabilities.
 Managers act as supportive leaders and coaches, providing regular feedback, performance
reviews and development.
 A pool of talent ensures a continuous supply of high performers in key roles.
 There is a climate of trust and teamwork, aimed at delivering a distinctive service to the
customer.
Developing a high-performance culture
There are three approaches that can be adopted to developing a high-performance culture:
 The implementation of high-performance working through a high-performance work system;
 The use of rewards;
 The use of systematic methods of managing performance.

High-Performance Work Systems (HPWSs)

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To begin with, HPWSs provide the means for creating a performance culture. They symbolize ways of
thinking about performance in organizations and how it can be improved. They are concerned with
developing and implementing bundles of complementary practices which as an integrated whole will
make a much more powerful impact on performance than if they were dealt with as separate entities.
High Performance Work Systems (HPWS) are organizations that utilize a fundamentally different
approach to managing than the traditional hierarchical approach associated with mass
production/scientific management. At the heart of this emerging approach is a radically different
employer-employee relationship.

Bohlander and Snell (2004:690) regard HPWS as “a specific combination of HR practices, work
structures, and processes that maximizes employee knowledge, skill, commitment and flexibility” Lawler
(1992:29) is also in agreement as he also notes “The small business unit that controls its own fate and
involves everyone in the business is the best image for the involvement oriented approach.” Becker and
Huselid (1998) described a high-performance work system (HPWS) as an internal consistent and coherent
HRM system that is focused on solving operational problems and implementing the firm’s competitive
strategy.

They suggest that such a system ‘is the key to the acquisition, motivation and development of the
underlying intellectual assets that can be a source of sustained competitive advantage.
High Performance Work Systems, sometimes known as High Involvement or High Commitment
Organizations, Mutual Gains Enterprises are organizations that use a distinctive managerial approach that
enables high performance through people.

The main idea of HPWS is to create an organization based on employee involvement, commitment
empowerment and engagement, not employee control. The particular set of managerial practices will vary
from company to company. While HPWS denote a Universalist approach there is a general trend that
much of what is contained within this High Performance Bundle is the softer versions of HRM.
Organisational Development Interventions on the other hand while varied do share the same notion with
HPWS that the organisation is whole and should be guided by principles of creating career opportunities,
giving choice to participate and provision of clear and explicit outcomes. OD interventions may occur at
individual, team or organisational level. Individual interventions are designed to help organisational
members through various stages of the change process, including recognition of the need to change,
motivating the acceptance of change, respecting the benefits and drawbacks of change, learning new
skills.

Common individual interventions include coaching, mentoring, self-appraisal, career planning and the
360 feedback system. Team or group interventions on the other hand focus on where people with
complimentary skill, committed to a common goal and who hold echo the mutually accountable. New
forms of teams have emerged with self-directed work teams, cross functional and virtual teams becoming
a common feature in organisations. Interventions are generally aimed at managing common problems in
teams relating to unclear goals, coping with conflict, long and unproductive meetings, lengthy decision
making cycles and duplication of efforts. Simulations and exercises are a key feature and they employ a
problem solving approach to team building.

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Organisational level interventions target the entire organisation and seek to address problems affecting
almost everyone. The idea is to make long lasting change in the character and performance of an
organisation. Such large scale interventions involve cultural analysis, redesigning of the organisation and
work processes, TQM, BPR, structure, strategy and people practices.

Organizational Development Interventions and High Commitment HRM

In recent years, there has been much interest in the notion of ‘Best Practice’ Human Resource
Management (HRM). This notion has been enshrined in the titles ‘High Performance Work Systems’
(Berg 1999; Appelbaum2000), ‘High Commitment’ HRM (Walton 1985; Guest 2001) or ‘High
Involvement’ HRM (Wood 1999). Whatever the terminology, the idea is that a particular set (or number)
of HR practices has the potential to bring about improved organizational performance for all
organisations. Since the 1990s, a number of publications have demonstrated the contribution of HPWS
towards firm performance specifically on outcomes of turnover, satisfaction and productivity (Huselid
1995, Guest 1998).

Characteristics of HPWSs:

As already stated different HRM authors have emphasized slightly different features and management
practices in describing HPWS, the essential characteristics are seen in the seven key dimensions identified
by Pfeffer in The Human Equation (1998). These are:

1. Employment security and Internal Labour Markets.

2. Selective hiring of new personnel. It links the firm’s selection and promotion decisions to
validated competency models.
3. Self-managed teams and decentralization of decision making as the basic principles of
organizational design.
4. Comparatively high compensation contingent on organizational performance. It enacts
compensation and performance management policies that attract, retain and motivate high-
performance employees.
5. Extensive Training and Development.
6. Reduced status distinctions and barriers, including dress, language, office arrangements, and
wage differences across levels.
7. Extensive sharing of financial and performance information throughout the organization.
Employment Security and Internal Labour Markets

Employment security refers to the extent to which an organization provides stable employment for
employees. One of the most basic ways in which organizations can improve their performance is by
ensuring employment security (Pfeffer, 1994). Employment security encourages a long-term perspective
and represents an investment of time and resources in employees, which would be reciprocated in terms
of loyalty to the organization. Trust in management will also result from employment security, which is
desirable to the extent that trust in management is associated with organizational productivity. Pfeffer
(1998) regards employment security as fundamentally underpinning the other six HR practices,
principally because it is regarded as unrealistic to ask employees to offer their ideas, hard work and
commitment without some expectation of employment security and concern for their future careers.

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Comprehensive and selective hiring

Selective hiring focuses on the fit between employees and their work environment. Huselid (1998) noted
that comprehensive employee recruitment and selection procedures will lead to organisational
productivity. The recruitment procedures have to provide a large pool of qualified applicants and paired
with a reliable and valid selection regimen, which will have a substantial influence over the quality and
type of skills new employees possesses.

Self-Managed Teams and Decentralized Decision Making

Self-managed team and decentralized decision making will increase employee performance. This is so
because, teamwork and decentralized decision making foster familiarity and demand greater cohesion.
Employees working in autonomous teams experience fewer problems than did employees who worked
individually. Working in teams causes individuals to feel more responsible for their own and each-others’
work.

Compensation Contingent on Performance

Well-paid employees feel valued by the organization, and by explicitly choosing which behaviours are to
be rewarded, organizations signal unambiguously which behaviours are valued. The effectiveness of even
highly skilled employees will be limited if they are not motivated to perform. HPWS can affect employee
motivation by encouraging them to work harder. Productivity is enhanced by directing and motivating
employee’s behaviour through the use of performance appraisals that assess individual or .work group
performance. The appraisals should be linked with incentive compensation systems, the use of internal
promotion systems that focus on employee merit, and other forms of incentives intended to align the
interests of employees with those of shareholders.

Extensive Training

Bailey (1993) argued that HRM practices can affect discretionary efforts by providing formal and
informal training experiences, such as basic training, on-the-job experience, coaching, mentoring, and
management development, will further influence employees’ development thereby increasing
productivity. Extensive training allows employees to acquire greater competencies to control their work,
leading to them performing their jobs more productivity.

Employee Participation and Involvement

Third, participation can provide management with some legitimacy for its actions on the grounds that
ideas have been put forward by workers and/or at least considered by them before decisions are ultimately
made. Even if management has more power at its disposal than do workers, the employment relationship
is not complete and legally defined in detail but open to interpretation and disagreement over how it is
enforced on a daily basis. Of course there are also arguments that workers have a moral right to
participation and involvement.

Reduced Status Distinctions

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Status distinctions in organizations are ever-present, create unwanted barriers between people that breed
resentment, and harm motivation and performance (Pfeffer, 1994). Status distinctions also have the
negative effect of reducing the familiarity between top management and shop floor employees. Once
there are no distinctions between management employees this would improve on productivity because
they will be greater participation. Furthermore, Bailey (1993) noted,” that the contribution of a highly
skilled and motivated workforce will be limited if the jobs are structured, or programmed, in such a way
that employees, who know their work better than anyone else, do not have the opportunity to use their
skills and abilities to design new and better ways of performing their roles.” HPWS influence firm
performance all the way through by the situation of organisational structures that give confidence to
employees to participate amongst employees and allow them to improve how their jobs are performed.

Symbolic manifestations of classlessness seen in the HR practices of some Japanese companies are meant
to convey messages to manual workers and lower grade office staff that they are valuable assets who
deserve to be treated in a similar way to their more senior colleagues. It is also seen as a way to encourage
employees to offer ideas within an ‘open’ management culture. This can be seen through egalitarian
symbols, such as staff uniforms, shared canteen and car-parking facilities, but it is also underpinned by
the harmonization of many terms and conditions of employment – such as holidays, sick-pay schemes,
pensions, and hours of work (IRS Employment Review 784a 2003). The principal point behind moves to
single status and harmonization, is that it seeks to break down artificial barriers between different groups
of staff, thus encouraging and supporting team-working and flexibility

Information Sharing

Information sharing across organizational levels is critical for high performance. Organizations with
better information sharing were characterized by more open discussion between management and
employees. Similarly, when employees felt comfortable discussing work issues with their supervisors,
they would be more highly committed to the organisation.

Management is expected to have open communications about financial performance, strategy and
operational matters not only ensures workers are informed about organisational issues, it also conveys a
symbolic and substantive message that they are to be trusted and treated in an open and positive manner.
Second, for team-working to be successful workers require information in order to provide a basis from
which to offer their suggestions and contribute to improvements in organisational performance

The aims of HPWSs

Becker et al (2001) stated that the aim of such systems is to develop a ‘high-performance perspective in
which HR and other executives view HR as a system embedded within the larger system of the firm’s
strategy implementation’.
As Nadler (1989) commented, they are deliberately introduced in order to improve organizational,
financial and operational performance. Nadler and Gerstein (1992) characterized an HPWS as a way of
thinking about organizations. It can play an important role in strategic HRM by helping to achieve a ‘fit’
between information, technology, people and work.
In answering a question; why high performance work systems pay off Appelbaumet al (2000) stated that
HPWS facilitate employee involvement, skill enhancement and motivation.

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HPWS are generally associated with workshop practices that raise the levels of trust within workplaces
and increase workers’ intrinsic reward from work, and thereby enhance organizational commitment. They
define high performance as a way of organizing work so that front-line workers participate in decisions
that have a real impact on their jobs and the wider organization.
It is sometimes believed that HPWSs are just about HR policies and initiatives. But as Godard (2004)
suggested, they are based on both alternative work practices and high-commitment employment
practices. He called this the high-performance paradigm, and described it as follows.
Alternative work practices that have been identified include:
Alternative job design practices, including work teams (autonomous or non-autonomous), job
enrichment, job rotation and related reforms; and
Formal participatory practices, including quality circles or problem-solving groups, town hall
meetings, team briefings and joint steering committees. Of these practices, work teams and
quality circles can be considered as most central to the high performance paradigm.
High-commitment employment practices that have been identified include:
Sophisticated selection and training, emphasizing values and human relations skills as well as
knowledge skills;
Behaviour based appraisal and advancement criteria;
Contingent pay systems, especially pay-for-knowledge, group bonuses, and profit sharing;
Job security;
Above-market pay and benefits;
Grievance systems; etc.
Components of an HPWS
There is no generally accepted definition of an HPWS, and there is no standard list of the features or
elements of such a system. However, an attempt to define the basic components of an HPWS was made
by Shih et al (2005):
 Job infrastructure – workplace arrangements that equip workers with theproper abilities to do
their jobs, provide them with the means to do their jobs, and give them the motivation to do their
jobs. These practices must be combined to produce their proper effects.
 Training programs to enhance employee skills – investment in increasing employee skills,
knowledge and ability.
 Information sharing and worker involvement mechanisms – to understand the available
alternatives in as far as information sharing and worker involvement is concerned and make
correct decisions.
 Compensation and promotion opportunities that provide motivation – to encourage skilled
employees to engage in effective discretionary decision making in a variety of environmental
contingencies.
Developing an HPWS
An HPWS has to be based on a high-performance strategy which sets out intentions and plans on how a
high-performance culture can be created and maintained. The strategy must be aligned to the context of
the organization and to its business strategy.
Every organization will therefore develop a different strategy. The approach to developing an HPWS is
based on an understanding of what the goals and performance drivers of the business are, what work
arrangements are appropriate to the attainment of those goals, and how people can contribute to their

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achievement. This leads to an assessment of what type of performance culture is required and what
approach to reward is appropriate for the different segments of the workforce.
The development programme requires strong leadership from the top.
Stakeholders – line-managers, team leaders, employees and their representatives – should be involved as
much as possible through surveys, focus groups and workshops.
An HPWS is the basis for developing a performance culture, and provides the framework for managing
performance.

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Topic 3
Performance Management and Performance Appraisal
______________________________________________________________________________

How is performance managed within the organization? Many organisations have what is labeled a
‘performance management’ system.
However, we must distinguish between performance management and performance appraisal.
A system that involves employee evaluations 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.
Although performance appraisal (i.e., the systematic description of an employee’s strengths and
weaknesses) is an important component of performance management, it is just a part of the whole.
Performance appraisal process is thus not the only thing that’s done in performance management.
Performance management is the process of identifying, measuring, managing, and developing the perfor-
mance of the human resources in an organization. It is basically concerned with figuring out how well
employees perform and then to ultimately improve that performance level. When used correctly,
performance management is a systematic analysis and measurement of worker performance (including
communication of that assessment to the individual) that is used to improve performance over time.
Performance appraisal, on the other hand, is the evaluation employee performance. Performance
appraisals are reviews of employee performance over time, so appraisal is just one piece of performance
management.

Understanding Performance Appraisal

Performance Appraisal (also called performance evaluation or appraisal) is the measurement and
assessment of an employee’s job performance. It is basically a process of evaluating an employee’s
performance of a job in terms of its requirements.

Traditionally performance appraisal systems have provided a formalised process to review employee
performance, usually each year. And so, have been regarded as the step where the management finds out
how effective it has been at hiring and placing employees.What is actually measured in performance
appraisal is the extent to which the individual conforms to the organisation.
They are centrally designed, usually by the HR function, requiring each line manager to appraise the
performance of their staff. At the end of the year employees’ performance would be assessed by their
supervisors on elaborately designed assessment forms, which are generic to all employees within the
organisation. The form would measure such performance criteria as;
 Time consciousness
 Cost consciousness
 Teamwork
 Initiative
 Quantity and quality of work
 Growth potential etc.

The manager (appraiser) and employee (appraisee) take part in a performance review meeting; where
information on the evaluation of employees’ performance is shared with them as well, and searching for
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ways to improve their performance.Elaborate forms are often completed and stored in the archives of the
HR department, and the issue of performance is often neglected until the next round of performance
review meetings.

Performance appraisal is thus a backward activity, which seeks to assess historical performance with a
view of using it to influence future performance.

Attributes of Accurate Performance Measures

Performance should be accurately measured so employees will know where they can improve. Knowing
where to improve should lead to training employees to develop new skills to improve. To be an accurate
measure of performance, our measure must be valid and reliable, acceptable and feasible, specific, and
based on the mission and objectives. As discussed below.

Valid and reliable; as with all areas of our people management process, we must make sure that all of our
performance management tools are valid and reliable. A valid measure is “true and correct.” When a
measure has validity, it is a factual measure that measures the process that you wanted to measure. A
reliable measure is consistent; it works in generally the same way each time we use it.

Acceptable and feasible- In addition to validity and reliability, we need to look at a couple of other
characteristics of our performance measures. We need to analyse acceptability and feasibility.
Acceptability means that the use of the measure is satisfactory or appropriate to the people who must use
it. However, in performance appraisal, this isn’t enough. Acceptability must include whether or not the
evaluation tool is feasible. Is it possible to reasonably apply the evaluation tool in a particular case? As an
example, if the performance evaluation form is two or three pages long and covers the major aspects of
the job that is being evaluated, and both managers and employees believe that the form truly evaluates
performance measures that identify success in the job, then they are likely to feel that the tool is
acceptable and feasible. If, however, the manager must fill out a 25-page form that has very little to do
with the job being evaluated, the manager may not feel that the form is acceptable or feasible, at least
partially due to its length, even if the employee does.
Conversely, if managers fill out a two-page evaluation that they feel is a true measure of performance
in employees’ jobs but the employees feel that the evaluation leaves out large segments of what they do in
their work routine, they may not feel that the form is acceptable and feasible. If either management or
employees feel that the form is unacceptable, it most likely will not be used correctly. So, we always have
to evaluate acceptability and feasibility of a measure. Specific- Next, we want any evaluation measure to
be specific enough to identify what is going well and what is not. The word specific means that something
is explicitly identified, or defined well enough that all involved understand the issue completely. In
performance appraisal, specific means that the form provides enough information for everyone to
understand what level of performance has been achieved by a particular employee within a well-identified
job.
Creating specific measures is the only way that we can use a performance appraisal to improve the
performance of our employees over time. The employees have to understand what they are doing
successfully and what they are not. Many times, evaluation forms may be too general in nature to be of
value for modifying employee behaviours because we want the form to serve for a large number of
different types of jobs. This can create significant problems in the performance appraisal process.

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Based on the mission and objectives- Finally, you want to make sure that your performance management
system leads to accomplishment of your organizational mission and objectives. As with everything else
we do in HR, we need to ensure that the performance management process guides our employees toward
achievement of the company’s mission and objectives over time. As managers in the organization,
making sure of this connection will allow us to reinforce employee behaviours that aim at achieving
organizational goals and to identify for our employees things that they may be doing that actively or
unintentionally harm our ability to reach those goals.

Appraisal Methods and Forms

The formal performance appraisal usually involves the use of a standard form developed by the HR
department to measure employee performance. Again, “If you can’t measure it, you can’t manage it.”
But one has to be careful on how he/she measure success, as the assessment should be as objective as
possible, not subjective. Employees need to know the standards and understand what good performance
looks like, and they need to be able to measure their own performance.
If you are stuck with a form that has subjective sections, work with your employees to develop clear
accurate standards.
Ex
Performance Appraisal Measurement Methods and Forms hib8-2 Performance Appraisal
Measurement Methods and Forms
Evaluative ----- 1———------ 2 ———— 3 ——————4——————5 ————— 6
Development
Decisions Decisions
Ranking Graphic BARS Narrative MBO Critical
method Rating Form Method or Method Incidents
Scales Form Method

The figure above shows the commonly used performance appraisal measurement methods and forms and
displays them on a continuum based on their use in administrative evaluative and developmental
decisions.
1. Critical Incidents Method
The critical incidents method is a performance appraisal method in which a manager keeps a written
record of positive and negative performance of employees throughout the performance period. There is
no standard form used, so it is a method.
Here or each of the other methods and forms, let’s answer two questions: Why and when is it used, and
how is it used?
Why and when do we use the critical incidents method?

Most formal reviews take place only once or twice a year. Do you want to wait for formal reviews to talk
to employees about what they are doing well and when they are not performing up to expectations? Of
course you want to let them know how they are doing on an on-going basis. Also, let’s say you are a
manager with 12 employees. Can you remember everything each of them did well, and when they messed
up, and on what dates, so we can evaluate their total performance for the past 6–12 months? Very few, if
any, of us can say yes. However, many managers don’t keep a record of critical incidents, which leads to
problems of accurate measures during the formal review meeting.

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We use critical incidents to do a good assessment of the entire review period, and we coach when needed
during the entire review period for developmental decisions. With clear standards and coaching, you can
minimize disagreements over performance during the formal performance appraisal because there are no
surprises, because employees know what is coming.
Although critical incidents are commonly used for developmental decisions, they are also used for
evaluative decisions. For legal purposes, a list of documented critical incidents is especially important to
have leading up the evaluative decision of firing employees.
How do we use critical incidents?
Managers commonly simply have a file folder for each employee, which can be hard copy or electronic.
Critical incidents are important employee actions, not minor ones, which help or hurt performance. Every
time employees do something very well, such as beat a tough deadline or save angry customers from
terminating their business relationship with the firm, a note goes in the employees’ file. Notes also go into
the file every time the employees’ behaviour hurts performance, such as coming to work late or the
quality of work not meeting standards.
2. Management by Objectives (MBO) Method
The Management by Objectives (MBO) method is a process in which managers and employees jointly set
objectives for the employees, periodically evaluate performance, and reward according to the results.
Although it is a three-step process, no standard form is used with MBO, so it is a method. MBO is also
referred to as work planning and review, goals management, goals and controls, and management by
results.

Why and when do we use the MBO method?

The MBO method is one of the best methods of developing employees. Like critical incidents, employees
get on-going feedback on how they are doing, usually at scheduled interval meetings. We can use the
MBO method successfully with our employees if we commit to the process and truly involve employees
rather than trying to make them believe that our objectives are theirs—accurate measures.
On an organization-wide basis, MBO is not too commonly used as the sole assessment method. It is more
commonly used based on the evaluative assessment during the development part of the performance
appraisal. One difficult part of MBO is that in many situations, most, if not all, employees will have
different goals, making MBO more difficult and time-consuming than using a standard assessment form.

How do we use the MBO method?

MBO is a three-step process:

Step 1-Set individual objectives and plans. The manager sets objectives jointly with each individual
employee. The objectives are the heart of the MBO process and should be accurate measures of
performance results. To be accurate, objectives should be SMART. They need to be Specific, Measurable,
Attainable, Relevant, and Time-based. Being specific, measurable, and time-based is fairly easy to
determine in a written goal, but being attainable and relevant is more difficult.
Step 2-Give feedback and evaluate performance. Communication is the key factor in determining MBO’s
success or failure, and employees should continually critique their own performance. Thus, the manager

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and employee must communicate often to review progress. The frequency of evaluations depends on the
individual and the job performed. However, most managers do not conduct enough review sessions.
Step 3-Reward according to performance. Employees’ performance should be measured against their
objectives. Employees who meet their objectives should be rewarded through recognition, praise, pay
raises, promotions, and so on. Employees, who do not meet their goals, so long as the reason is not out of
their control, usually have rewards withheld and even punishment when necessary.
3. Narrative Method or Form
The narrative method or form requires a manager to write a statement about the employee’s
performance. There often is no actual standard form used, but there can be a form, so narrative can be a
method or a form.

Why and when do we use the narrative method or form?

A narrative gives managers the opportunity to give their evaluative assessment in a written form that can
go beyond a simple “check of a box” to describe an assessment item. Managers can also write up a devel-
opmental plan of how the employee will improve performance in the future. Narratives can be used alone,
but are often combined with another method or form. Although the narrative is on-going, it is commonly
used during the formal review.

How do we use the narrative method or form?

The system can vary. Managers may be allowed to write whatever they want (method), or they may be
required to answer questions with a written narrative about the employee’s performance (form).
The no-form narrative method can be the only assessment method used during the formal review process.
But the narrative method, when used alone, is more commonly used with professionals and executives,
not operative employees. How we write the formal narrative assessment varies, as writing content and
styles are different. A narrative based on critical incidents and MBO results is clearly the best basis for
the written assessment.
The narrative is also often used as part of a form. For example, you have most likely seen an assessment
form (such as a recommendation) that has a list of items to be checked off. Following the checklist, the
form may ask one or more questions requiring a narrative written statement.
a. Graphic Rating Scale Form
The graphic rating scale form is a performance appraisal checklist on which a manager simply rates
performance on a continuum such as excellent, good, average, fair, and poor. The continuum often
includes a numerical scale, for example from 1 (lowest performance level) to 5 (highest performance
level).

Why and when do we use the graphic rating scale form?

Graphic rating scales are probably the most commonly used form during the formal performance
appraisal (primarily for evaluative decisions), but they should lead to development decisions as well. Why
the popularity? Because graphic rating scales can be used for many different types of jobs, they are a kind
of “one form fits all” form that requires minimal time, effort, cost, and training. If we walk into an office
supply store, we can find pads of them. But on the negative side, graphic rating scales are not very

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accurate measures of performance because the selection of one rating over another, such as an excellent
versus good rating, is very subjective.

How do we use the graphic rating scale form?

It is very simple, and we have most likely all used one. For example, many colleges have student
assessments at the end of the course. All we do is check off, or usually fill in a circle for, our rating. One
problem is that some of us don’t bother to actually read the questions. Based on our biases, some of us
just go down the list checking the same rating regardless of actual performance on the item. To be fair,
this problem is not common with managers formally evaluating their employees. However, it does tend to
occur when customers evaluate products and services.
To overcome this problem, which is unfortunately not commonly done, we can reverse the scale from
good to poor on different questions.

b. Behaviourally Anchored Rating Scale (BARS) Form

The Behaviourally Anchored Rating Scale (BARS) form is a performance appraisal that provides a
description of each assessment along a continuum. Like with rating scales, the continuum often includes a
numerical scale from low to high.

Why and when do we use the BARS form?

The answer to why and when is the same as for graphic rating scales. So let’s focus on the differences
between graphic rating scale and BARS forms. BARS forms overcome the problem of subjectivity by
providing an actual description of the performance for each rating along the continuum, rather than one
simple word (excellent, good, etc.) like graphic rating scales. A description of each level of performance
makes the assessment a more objective accurate measure. So if BARS forms are more accurate, why
aren’t they more commonly used than graphic rating scale forms?
It’s partly economics and partly expertise. Again, the graphic rating scale can be used for many
different jobs, but BARS forms have to be customized to every different type of job. And developing
potentially hundreds of different BARS forms takes a lot of time (which costs money) and expertise. Even
when a firm has an HR staff, the question becomes whether developing BARS forms is the most effective
use of staff members’ time. Obviously, it depends on the types of jobs being evaluated and the resources
available to complete the evaluation process.

How do we use BARS forms?

Like graphic rating scales, we simply select a level of performance along the continuum. College
accreditation associations are requiring more measures of student outcomes as assurance of learning, and
as part of the process they want more BARS rubrics as evidence. So in college courses, especially for
written assignments, lecturers give out rubrics that describe in some detail the difference between
excellent (A), good (B), average (C), poor (D), and not acceptable (F) grades for multiple criteria put
together to provide a final grade. Here is a very simple example of making a graphic rating scale item into
the more objective BARS form.
Attendance—excellent, good, average, fair, poor
Attendance—number of days missed 1, 2, 3–4, 5, 6 or more
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There shouldn’t be any surprises or lack of agreement on performance levels during the formal
performance appraisal interview.

c. Ranking Method
The ranking method is a performance appraisal method that is used to evaluate employee performance
from best to worst. There often is no actual standard form used, and we don’t always have to rank all
employees.

Why and when do we use the ranking method?

Managers have to make evaluative decisions, such as who is the employee of the month, who gets a raise
or promotion, and who gets laid off. So when we have to make evaluative decisions, we generally have to
use ranking. However, our ranking can, and when possible should, be based on other methods and forms.
Ranking can also be used for developmental purposes by letting employees know where they stand in
comparison to their peers—they can be motivated to improve performance. For example, when one of the
authors passes back exams, he places the grade distribution on the board.
How do we use the ranking method?
Under the ranking method, the manager compares an employee to other similar employees, rather than to
a standard measurement. An offshoot of ranking is the forced distribution method, which is similar to
grading on a curve. Predetermined percentages of employees are placed in various performance cat-
egories, for example, excellent, 5%; above average, 15%; average, 60%; below average, 15%; and poor,
5%. The employees ranked in the top group usually get the rewards (raise, bonus, promotion), those not at
the top tend to have the reward withheld, and those at the bottom sometimes get punished.
Who Should Assess Performance?
There are a number of different options concerning who should evaluate the individual employee. The
following are the options for who should evaluate an employee.
Supervisor
When we ask who should evaluate employees, the most common response is their immediate supervisor.
Why would the supervisor be the best person to evaluate an employee?
 Well, the supervisor is supposed to know what the employee should be doing, right?
 Certainly, supervisors are frequently one of the best and most commonly used options to choose
as evaluators for the employees under their control.
However, this is not always the case due to problems with supervisor performance assessments.
Problems with supervisor evaluations
 What if the supervisor doesn’t see the employee very frequently? This may not be all that
uncommon in a modern organization. Many times today, supervisors may be in a different
building or even a different city than the individuals they supervise. Virtual teams, Internet-linked
offices, telecommuting, and other factors cause supervisors to not be in constant touch with their
employees, unlike the situation 20 or 30 years ago.
 What if there’s a personality conflict? Supervisors are human, just like their employees, and may
just not relate well to some of their employees. This may cause a personal bias for, or against,
certain employees that may invalidate the appraisal process if it’s significant enough.

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  What if the supervisor doesn’t know what employees are supposed to be doing in their jobs?
Aren’t supervisors always supposed to know every job for which they are responsible? Again, 30
years ago this may have been true. However, in today’s work environment, with the amount of
information necessary to do the complex tasks that organizations must accomplish in order to
compete, nobody can know every job. There’s just too much information for any one individual
to learn. So jobs have been segmented down into smaller and smaller areas, and the supervisor
may not know each of those jobs in great detail.
Avoiding supervisor review problems
A simple answer to overcome these problems is to have others, in addition to the supervisor, assess
performance. Also, multiple measures can make a performance assessment more accurate. For
example, using other evaluators can help overcome personal bias and provide information that
supervisors don’t always know about.
Peers
Another possible option is to use co-workers or peers of the individual employee as appraisers. When
would it be valuable to use peer evaluations in an organization? If the supervisor is absent or has
infrequent contact with the employees, but all employees have multiple co-workers that they interact with
on a frequent basis, peer evaluations may be valuable. Peers or co-workers also often know the job of the
individual employee better than the supervisor does, and they are more directly affected by the
employee’s actions, either positive or negative.
Problems with peer reviews
There are certainly issues that can come up in peer evaluations that can cause the process to become less
objective. In fact, research evidence regarding the validity of peer evaluations is really unclear.
 Personality conflicts and personal biases can affect how individual employees rate their peers.
Individuals within a group or team may just have significantly different personality types, and
these differences can cause friction within the work group that may spill over when it comes
time to evaluate those with whom they are in conflict.
 Additionally, no matter how much we try and protect against it, personal biases can affect
working relationships and may show up in peer evaluations.
Avoiding peer review problems
Peer evaluations can give good insight into the inner workings of a group or team when the supervisor has
infrequent contact with the team.
Subordinates
The other available option is the subordinates of an individual supervisor in the firm. We would typically
only use subordinate evaluators for manager-level employees. Subordinate evaluations can give good
insight into the managerial practices and potential missteps of people who control other employees in our
organization. As a result, subordinate evaluations may give us valuable information that we would be
unable to find out using any other means.
Problems with subordinate reviews
 Can subordinate evaluations cause a problem within the department or work group? Is the
potential for bias, especially from subordinates who have been disciplined by the supervisor,
significant in this type of evaluation? Of course there is a potential for bias. Obviously, the

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 subordinates may try to get back at their supervisor for giving them tasks that they did not want to
perform, or for disciplining them for failure in their jobs.
 There may be a personality conflict, or some subordinates certainly may be biased against their
supervisor or manager. So there are certainly negative aspects to subordinate evaluations.
 On the other end of the scale, the subordinates may inflate the capabilities of the manager, at least
partly because of a lack of understanding of all the tasks and duties required of the manager. In
fact, in a recent survey, about two thirds of employees rated their managers higher than the
managers’ self-ratings.
Avoiding subordinate review problems
 In all of these problem areas, if we know that there is a potential problem, we can most likely
guard against it. In many cases, as we go through a group of subordinate evaluations, we will see
one or two outliers providing either very high or very low marks for the supervisor. In such a case
we should probably throw those outliers out of the calculation when determining overall marks
for the supervisor. It’s honestly surprising how often these outliers are extremely easy to spot in a
subordinate evaluation process.
 Another significant issue in the case of subordinate evaluations is confidentiality. Subordinate
evaluations must be confidential in nature, or it is unlikely that the subordinates will provide an
honest evaluation of their supervisor. Why is this the case? Obviously, if the evaluation is not
confidential, the supervisor can and may take retribution on subordinates who provide
unflattering evaluations. So, if the evaluation is not anonymous, many of the subordinates will
likely inflate the capabilities of the supervisor, which minimizes the value of the evaluation
process itself.
Self
Self-assessment is also an option in the performance appraisal process. Virtually all employees do a self-
assessment whether they are actually formally asked to do so as part of the assessment or not. It is
required with MBO. Even when not asked to do a self-assessment, employees will still walk into the
review discussion with some informal self-assessment that they compare to the supervisor’s rating. But
are self-evaluations valuable, or will the employees overestimate their individual capabilities and tell us
that they’re perfect?
Problems with self-assessments
 Most of the research evidence shows that self-assessments tend to overestimate the individual’s
ability to do a job. However, some of the research says that employees either underestimate or
accurately estimate their job performance over time. A significant portion of the evidence seems
to show that individuals with lower levels of knowledge and skills within their field tend to
inflate their self-assessment of their abilities.
 Conversely, as individuals become more knowledgeable and more skilled, the evidence tends to
show that they will either accurately estimate or even underestimate their capabilities in their
jobs.
Avoiding self-assessment problems
Based on the fact that most of the evidence shows that employees overestimate their ability to do their
job, is this a valid performance measure? Here again, even though the measure may have validity

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concerns, if we know that self-evaluations tend to be skewed, we can most likely adjust for this factor. In
addition, receiving information from individuals concerning their perception of their skill set is extremely
valuable in a number of management processes, including plans for training and development
opportunities, providing work assignments, and counselling and disciplinary measures, among others.
Customers
We may also want to ask customers to evaluate individuals within the company. We use the word
customers in a broad sense to include people outside the organization, including customers for our
products and services and suppliers to the firm. Customers can also be internal including people in other
departments of the firm.
Problems with customer assessments
 One problem is that customer assessments commonly use simple rating scales, which we
discussed as being very subjective.
 Also, customers are usually not trained to do an accurate assessment. So bias is a problem. For
these and other reasons, the popular opinion is that customer evaluations are almost always
skewed to the negative. However, research shows that this is not necessarily the case. In some
situations, customer evaluations actually exceed evaluations of the individual that are internal to
the firm or department.
Avoiding customer assessment problems
Regardless of whether or not customers will tell us when we’re doing an exceptional or acceptable job,
customer evaluations provide us with valuable information concerning our employees who have direct
customer contact. If this is the case, can we adjust the evaluation process knowing that customer eval-
uations are frequently skewed either positively or negatively? Obviously, we can. One of the basic
methods of adjusting the customer evaluation process is to compare the individuals being evaluated and
identify the ratios of negative and positive comments to allow us to identify more successful and less
successful employees. Although this is an imperfect measure, it still provides value to the firm in the fact
that customers’ perception is critical to our relationship with them. So, we need to measure this
relationship.
360º Evaluation
As a final option, we can do “all of the above.” The 360° evaluation, in effect, analyses individuals’
performance from all sides—from their supervisor’s viewpoint, from their subordinates’ viewpoint, from
customers’ viewpoint (if applicable), from their peers’ viewpoint, and using their own self-evaluation.
Obviously, the 360° evaluation would give us the most accurate, best possible analysis of individuals and
their performance within the company. DuPont developed 360° reviews back in 1973, but they are still
popular today. With the trend of structuring work in teams, peer evaluations are now being used regularly.
Those who fill out the appraisal form usually do so confidentially. The feedback from all these people is
used to evaluate and develop the employee.
Problems with 360º evaluations
If they are the best, then why don’t we always use 360° evaluations? The simple answer is “time and
money.” It takes a significant amount of time for a group of individuals to evaluate one person if we use a
360° format. By using up so much organizational time, it obviously also costs us a significant amount of
money. If we multiply the numbers based on the time required to evaluate one individual to count every-
one in the organization, the costs can quickly become massive.

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Avoiding problems with 360º degree evaluations
Unfortunately, there really is no simple way to avoid such problems, besides what is commonly done—
not using 360° evaluations. When used, the 360° evaluation format tends to be most valuable if it is used
for purposes of individual development, rather than for making administrative evaluative decisions. A
good 360° feedback system can provide specific suggestions about how to improve individual
competencies. It can also go a long way toward minimizing some of the most common problems with the
performance appraisal process.

Performance Appraisal Problems to Avoid

During the performance appraisal process, there are common problems that we face. However, knowing
these common problems, we can take measures to avoid them. So in this section we discuss the problems
first with simple ways to avoid each of them as an individual. Then we discuss what the organization can
do to overcome these problems on an organization-wide basis. We can actually overcome multiple
problems with the same method.

Common Problems with the Performance Appraisal Process

Bias-Bias is simply a personality-based tendency, either toward or against something. In the case of
performance assessment, bias is toward or against an individual employee. All human beings have biases,
but supervisors especially cannot afford to allow their biases to enter into their evaluation of subordinates
in the firm. This is very easy to say, but very difficult to do.
A supervisor may have a personal bias based on such things as race, religion, gender etc. and unduly rate
the subordinate’s performance.
Biases make the evaluation process subjective rather than objective, and certainly provide the opportunity
for a lack of consistency in effect on different groups of employees. So to overcome the bias problem, we
need to be objective and not let our feelings of liking or disliking the individual influence our assessment.
Stereotyping- Stereotyping is mentally classifying a person into an affinity/similar group, and then
identifying the person as having the same assumed characteristics as the group. Though stereotyping is
almost always assumed to be negative, there are many incidents of positive stereotypes. However,
regardless of whether the stereotype is positive or negative, making group assumptions, rather than
explicitly identifying the characteristics of the individuals, creates the potential for significant error in
evaluations. So we can avoid stereotyping by getting to know each employee as an individual and
objectively evaluating individual employees based on their actual performance.
Halo Error/ Effect - This error occurs when the evaluator has a generally positive or negative impression
of an individual (negative halo error is sometimes called “horns error”), and the evaluator then artificially
extends that general impression to many individual categories of performance to create an overall
evaluation of the individual that is either positive or negative. In other words, if employees are judged by
their supervisor to be generally “good” employees, and the supervisor then evaluates each of the areas of
their performance as good, regardless of any behaviours or results to the contrary, the supervisor is guilty
of halo error. We can avoid halo error by remembering that employees are often strong in some areas and
weaker in others, and we need to objectively evaluate individual employees based on their actual
performance for each and every item of assessment.

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Distributional errors- These errors occur in three forms: severity or strictness, central tendency, and
leniency. They are based on a standard normal distribution,
In severity or strictness error, the rater evaluates everyone, or nearly everyone, as below average.
Strictness means being unnecessarily critical to the subordinate’s performance and giving low
marks unduly.
Central tendency error occurs when raters evaluate everyone under their control as average-
nobody is either really good or really bad. The biggest shortcoming of appraisal is that
supervisors would prefer the “safer zone” where they don’t award marks or low ones but just
settle in the middle.
Finally, leniency error occurs when the rater evaluates all others as above average. Leniency
means giving underserved high marks to the subordinates. Leniency error, therefore, is basically a
form of grade inflation. We can avoid distributional errors by giving a range of evaluations. The
distribution is often based on the ranking method of evaluation and forced distribution.
Similarity error-This error occurs when raters evaluate subordinates that they consider more similar to
themselves as better employees, and subordinates that they consider different from themselves as poorer
employees. We all have a tendency to feel more comfortable with people who we feel are more similar to
ourselves, and if we are not careful, we can allow this feeling of comfort with similar individuals to be
reflected in the performance appraisal process. We can avoid similarity error by embracing diversity and
objectively evaluating individual employees based on their actual performance, even if they are different
from us and don’t do things the same way that we do.
Proximity error- This error states that similar marks may be given to items that are near (proximate to)
each other on the performance appraisal form, regardless of differences in performance on those
measures. We can avoid proximity error by objectively evaluating employees’ actual performance on
each and every item on the assessment form.
Contrast error-the rater compares and contrasts performance between two employees, rather than using
absolute measures of performance to measure each employee. For example, the rater may contrast a good
performer with an outstanding performer, and as a result of the significant contrast, the good performer
may seem to be “below average.” This would be a contrast error. We can avoid contrast error by
objectively evaluating individual employees based on their actual performance. We must use the ranking
method correctly; first we assess each individual based on the items on the assessment form—then we
rank the individuals based on their assessments
Attribution error-In simplified terms, attribution is a process where an individual assumes reasons or
motivations (such as attitudes, values, or beliefs) for an observed behaviour. So, attribution error in
performance appraisal might occur when the rater observes an employee action- such as an argumentative
answer to a question—and assumes that the individual has a negative attitude toward the job and is a poor
performer. This may not be true, and in such a case the rater would be guilty of an attribution error. We
need to avoid attribution error because it is based on our subjective conclusion. When in doubt, we
shouldn’t assume we know why the employee did or didn’t do something. We should talk to employees to
find out so that we can objectively evaluate employees based on their actual performance.
Recency error- This error occurs when raters use only the last few weeks or month of a rating period as
evidence of their ratings of others. For instance, if a warehouse worker has been a strong performer for

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most of the appraisal period, but right before his annual evaluation he knocks over a stack of high-cost
electronic equipment while driving a forklift, he may be rated poorly due to recency error. We can avoid
the recency error by evaluating the employee based on the entire assessment period, commonly 6–12
months. Using the critical incidents method really helps our recall and assessment of the entire period
more objectively.
Avoiding Performance Appraisal Process Problems
As you can see above, there are a significant number of ways that performance appraisals can fail to
provide an accurate assessment of the capabilities and the behaviours of individual employees. Thus far
we have only provided simple things we can do to overcome these problems as individuals. How can a
firm avoid these problems on an organization-wide basis throughout the performance appraisal process?
Luckily, there are a number of fairly simple steps that we can take within the organization to minimize the
negative issues that occur in the performance appraisal process. All we have to do is look at the problems
noted, and we can fairly quickly come up with some possible solutions to at least the majority of those
problems using the same methods. Let’s discuss how the firm can limit the potential for the appraisal
process to go astray by developing accurate performance measures, training evaluators, and using
multiple raters.

1. Develop Accurate Performance Measures

If the performance appraisal methods and forms are not accurate measures, the entire performance
appraisal process will have problems. Therefore, the organization should have its own HR specialist or
hire consultants to develop the assessment process and measures. Now, let’s discuss two things HR
specialists commonly do to help ensure accurate measures.
Use multiple criteria- One method of overcoming some of the problems with the appraisal process is to
ensure that we use more than one or two criteria to evaluate an individual’s performance over time. We
should generally have at least one evaluation criterion for each major function within an individual job.
As we noted earlier, behaviors and results that occur over the entire course of the evaluation period are
typically the best criteria to use in the process of evaluating an individual’s performance, but employees
behave in many different ways in different circumstances throughout the course of a year, so we shouldn’t
limit the appraisal process to one or two actions on the part of that individual employee. By evaluating
multiple criteria, we have the ability to lower the incidence of halo, recency, contrast, and attribution
errors, and may even be able to affect bias and stereotyping, because many criteria, not just one or two,
are being analyzed.
Minimize the use of trait-based evaluations. The next method of overcoming problems within the
appraisal process is to minimize the evaluation of individual traits. As we noted in the section on what we
have the ability to evaluate, trait-based evaluations tend to be more subjective than behaviour- or results-
based evaluations and as a result should generally not be used unless there is a specific reason why the
particular trait must be exhibited in order to be successful in a job. Only when we have specific reason for
trait-based evaluations should those traits be measured and evaluated in the appraisal process.
In addition, because of their subjectivity, trait-based evaluations are much more difficult to defend in
cases where the organization used the evaluation process for later disciplinary action with an individual
employee. By minimizing the evaluation of traits, we lower the incidence of bias, stereotyping, similarity
error, and potentially attribution error. So, minimizing trait evaluations lowers the ability of the rater to
make some of the most significant mistakes that can occur in the appraisal process.

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 2. Train Evaluators
Once we have accurate measurement methods and forms, the next thing that we should do to help
overcome some of the issues with the appraisal process is to train our evaluators concerning the common
errors and problems that occur and how to use the methods and forms.
Train evaluators to overcome the common problems of assessment. Simply through the process of
training, many of the common problems are mitigated, if not eliminated. Once evaluators become aware
that the common errors occur with some regularity, they almost immediately begin to evaluate such errors
and guard against them. Even the bias and stereotyping errors may be mitigated through the rater training
process. Most of our employees want to do a good job, and once they know that an error is being
committed, they will make attempts to correct that error. So, rater training provides them with knowledge
of these errors and allows them the opportunity to correct them.
Train evaluators to use the measurement methods and forms. Evaluators should also be trained to use the
various performance assessment methods and forms. Because the critical incidents method is not
commonly used as a formal assessment method, evaluators should be taught to use it to help overcome
recency error. Evaluators need training to effectively use MBO and to write a good narrative. When a
rating scale is used, some training should be given to better understand the differences between the word
descriptors along the continuum (excellent, good, etc.). BARS and ranking forms are fairly
straightforward, but when they are used, some training can help overcome problems.

3. Use Multiple Raters

The next tool to minimize errors in the evaluation process, at least in some cases, is to use multiple raters
to evaluate an individual. As we noted earlier, this becomes expensive very quickly, so we must decide
whether or not the value inherent in using multiple evaluators overcomes the cost of the process. If it
does, using multiple evaluators can conquer some significant problems in the appraisal process. What will
the process of using multiple evaluators do to improve the appraisal process? Multiple evaluators limit the
ability of one individual appraiser to provide a biased opinion concerning an employee’s performance, as
well as limiting the ability for stereotyping in the appraisal process. In addition, halo, similarity, contrast,
and attribution errors become less likely, and distributional errors tend to even out among multiple raters.
It is for these reasons that 360° evaluations have gained favour in many organizations over the past 20
years.
Fair appraisal
Appraising employees in a manner that accurately reflects how they performed relative to the
expectations defined in their work plan and in a manner that is not influenced by factors irrelevant to
performance.
Highlights of the system
• The appraiser and the appraisee jointly set the Key Result Areas (KRA’s) and assign mutually
agreed weightage expressed as a percentage.
• Simple mathematical relationship between set weightage and accomplishment gives a final
numerical score on KRA’s
• To evaluate all management personnel on company values and leadership attributes a new section
has been added entitled “Values in Action”
What is a key result area?
• A KRA refers to a target that needs to be achieved by the appraisee in a given time;
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 • KRA’s are the set of performance expectations from the appraisee;
• The focus is on tangible outputs. However this does not mean that tasks that have a qualitative
output cannot form a KRA
The difference between performance management (PM) and performance appraisal
PM is NOT Performance Appraisal
It is sometimes assumed that performance appraisal is the same thing as performance management. But
there are significant differences;

Performance appraisal can be defined as the formal assessment and rating of individuals by their
managers at, usually, an annual review meeting. In contrast, performance management is a continuous
and much wider, more comprehensive and more natural process of management that clarifies mutual
expectations, emphasizes the support role of managers who are expected to act as coaches rather than
judges, and focuses on the future.

Performance management is thus the integration of performance appraisal systems with other HRM
systems for the purpose of aligning the employees’ work behaviors and results with the organization’s
goals
In other words performance appraisal is just one of the elements of performance management it is rather
the last step in performance management process.

The following are the key differences

Performance Appraisal Performance Management
Emphasis is on relative evaluation of individuals Emphasis is on performance of individuals, team &
organisation.
Top down assessment, with management setting Joint process through dialogue or bottom-up with
performance objectives individual setting hid own objectives
An event-Annual exercise A process- continuous process
Use of ratings Ratings less common
Focus on quantified objective Focus on values and behaviours as well as
objectives
Monolithic system Flexible process
Rewards & recognition of good performance i.e. Performance rewarding may or may not be integral
often linked to pay part i.e. less likely to be linked to pay
Is all encompassing- with appraisal being the only Has three elements with appraisal being infact one
component of the system of the elements of the system
Bureaucratic- complex paperwork Documentation kept at minimal
Designed & monitored by HR department Designed by HR dept. but monitored by respective
department.
Ownership is mostly with the HR department. Ownership is with the line managers, HR facilitates
its implementation

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Performance appraisal has been discredited because too often it has been operated as a top-down and
largely bureaucratic system owned by the HR department rather than by line managers. It has been
perceived by many as solely a means of exercising managerial control.
Performance appraisal tended to be backward looking, concentrating on what had gone wrong, rather than
looking forward to future development needs. Performance appraisal schemes existed in isolation. There
was little or no link between them and the needs of the business. Line managers have frequently rejected
performance appraisal schemes as being time-consuming and irrelevant. Employees have resented the
superficial nature with which appraisals have been conducted by managers who lack the skills required,
tend to be biased and are simply going through the motions.

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Topic 4
Performance Management Process
______________________________________________________________________________
Performance Management Process
The process of performance management can be described as a continuous self-renewing cycle. However,
when a system is first implemented, the process follows the following stages
1. Pre - requisites,
2. Performance planning,
3. Performance execution,
4. Performance assessment,
5. Performance review, and
6. Performance renewal and re-contracting.
The Performance Management cycle/ process

Stage 1: Prerequisites
There are two important prerequisites that are needed before a performance management system is
implemented:
1. Knowledge of the organization ’ s mission and strategic goals and
2. Knowledge of the job in question.
If there is a lack of clarity regarding where the organization wants to go, or the relationship between the
organization ’ s mission and strategies and each of its unit ’ s mission and strategies is not clear, there will
be a lack of clarity regarding what each employee needs to do and achieve to help the organization get
there.
An organization ’ s mission and strategic goals are a result of strategic planning, which allows an
organization to clearly define its purpose or reason for existing, where it wants to be in the future, the
goals it wants to achieve, and the strategies it will use to attain these goals. Once the goals for the entire
organization have been established, similar goals cascade downward, with departments setting objectives
to support the organization ’ s overall mission and objectives. The cascading continues downward until
each employee has a set of goals compatible with those of his or her unit and the organization.

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As an example, an organisation can successfully develop a performance management system that is
aligned with the strategic plan of the organization.
To do this, an organisation can first involve managers at all hierarchical levels to develop an organization
mission statement. Next, they develop goals and strategies that would help achieve key organization’s
mission. The mission statement, goals, and strategies at the organizational level serve as the foundation
for developing the strategies for individual departments and units.
To develop these, senior managers need to meet with each department manager to discuss the
organization’s goals and strategies and to explain the importance of having similar items in place in each
department. Subsequently, each of the departmental managers meets with his or her employees to develop
a department mission statement and goals. One important premise in this exercise was that each
department’s mission statement and objectives had to be aligned with the corporate mission statement,
goals, and strategies.
After organizational and departmental goals and strategies are aligned, managers and employees reviewed
individual job descriptions. Each job description will be tailored so that individual job responsibilities are
clear and contribute to meeting the department’s and the organization’s objectives. Involving employees
in this process helps them to gain a clear understanding of how their performance affects the department
and, in turn, the organization.

The second important prerequisite before a performance management system is implemented is to

understand the job in question. This is done through job analysis. Job analysis is a process of
determining the key components of a particular job, including activities, tasks, products, services, and
processes. There are numerous types of job analytic tools, including some that focus on specific
personality traits needed for various positions. A job analysis is a fundamental prerequisite of any
performance management system. Without a job analysis, it is difficult to understand what constitutes the
required duties for a particular job. If we don’t know what an employee is supposed to do on the job, we
won’t know what needs to be evaluated and how to do so.
Stage 2: Performance Planning
The performance planning stage has the goal for employees to have a thorough knowledge of the
performance management system.
In fact, at the beginning of each performance cycle, the supervisor and the employee meet to discuss, and
agree on, what needs to be done and how it should be done. This performance planning discussion
includes a consideration of (1) results, (2), behaviors, and (3) development plan.
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 producing results.
A discussion of results also includes specific objectives that the employee will achieve as part of his
accountability. Objectives are statements of important and measurable outcomes. 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 about acceptable and unacceptable performance
(for example, quality, quantity, cost, and time). Consider the job of university professor. Two key
accountabilities are
(1) Teaching (preparation and delivery of instructional materials to students) and

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 (2) Research (creation and dissemination of new knowledge). An objective for teaching could be “to
obtain a student evaluation 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 refereed journals per year.” Thus, the
objective is the desired level of performance, whereas the standard is usually a minimum
acceptable level of performance.
Behaviors- Although it is important to measure results, an exclusive emphasis on results can give an
incomplete picture of employee performance. This is particularly true today because, in contrast to the
hierarchical organization chart of the 20th - century organization, the 21st - century organization is far
more likely to look like a web: a flat, intricately woven form that links partners, employees, external
contractors, suppliers, and customers in various collaborations. Accordingly, 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, in addition to sales figures, salespeople like to be appraised on such
behavioral criteria as communications skills and product knowledge.
A consideration of behaviors includes discussing competencies, which are measurable clusters of
knowledge, skills, and attitudes (KSAs) that are critical in determining how results will be achieved.
Examples of competencies are customer service, written or oral communication, creative thinking, and
dependability.
Development plan- An important step before the review cycle begins is for the supervisor and employee
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. 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. 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?

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
targeted by the development plan. In addition, however, development plans focus on the knowledge and
skills needed for more long - term career aspirations.

Stage 3: Performance Execution

Once the review cycle begins, the employee strives to produce the results and display the behaviors
agreed on earlier as well as to work on development needs. The employee has primary responsibility and
ownership of this process. Employee participation does not begin at the performance execution stage,
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however. As noted earlier, employees need to have active input in the development of the job
descriptions, performance standards, and the creation of the rating form. In addition, at 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.
Although the employee has primary responsibilities for performance execution, the supervisor also needs
to do his or her share of the work. Supervisors have primary responsibility over the following issues:
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.
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).
Feedback. Feedback on progression toward goals and coaching to improve performance should
be provided on a regular basis, and certainly before the review cycle is over.
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 funding to perform the job properly.
Reinforcement. 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.
What determines whether an employee is performing well or not? A combination of three factors allows
some people to perform at higher levels than others:
(1) Declarative knowledge,
(2) Procedural knowledge, and
(3) Motivation.
Declarative knowledge is information about facts and things, including information regarding a given
task’s requirements, labels, principles, and goals.
Procedural knowledge is a combination of knowing what to do and how to do it and includes cognitive,
physical, perceptual, motor, and interpersonal skills.
Motivation involves three types of choice behaviors:
(1) Choice to expend effort (for example, “I will go to work today”),
(2) Choice of level of effort (for example, “I will put in my best effort at work” versus “I will not try very
hard”), and
(3) Choice to persist in the expenditure of that level of effort (for example, “I will give up after a little
while” versus “I will persist no matter what”).
Because performance is affected by the combined effect of three different factors, managers must find
information that will allow them to understand whether the source of the problem is declarative
knowledge, procedural knowledge, motivation, or some combination of these three factors. If an
employee lacks motivation but the manager believes the source of the problem is declarative knowledge,
the manager may send the employee to a company - sponsored training program so that he can acquire the
knowledge that is presumably lacking. On the other hand, if motivation is the problem, then the
implementation of some type of CP plan may be a good intervention. This is why performance
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management systems need not only to measure performance but also to provide information about the
source of any performance deficiencies, which is done in the performance assessment stage.

Stage 4: Performance Assessment

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 (for example, peers or
subordinates), 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
manager fills out his or her appraisal form, and the employee should also fill out his or her form. The fact
that both parties are involved in the assessment provides good information to be used in the review phase.
When both the employee and the supervisor are active participants in the evaluation process, there is
greater likelihood that the information will be used productively in the future. Specifically, the inclusion
of self - ratings helps emphasize possible discrepancies between self - views and the views that important
others (that is, supervisors) have. It is the discrepancy between these two views that is most likely to
trigger development efforts, particularly when feedback from the supervisor is more negative than are
employee self - evaluations.
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 acceptance of the system.
Stage 5: Performance Review
The performance review stage involves the meeting between the employee and the manager to review
their assessments. This meeting is usually called the appraisal meeting or discussion.
The appraisal meeting is important because it provides a formal setting in which the employee receives
feedback on his or her performance. In spite of its importance in performance management, the appraisal
meeting is often regarded as the “Achilles’ heel of the entire process” (Kikoski, 1999). This is because
many managers are uncomfortable providing performance feedback, particularly when performance is
deficient (Ghorpade & Chen, 1995). This high level of discomfort, which often translates into anxiety and
the avoidance of the appraisal interview, can be mitigated through training those responsible for providing
feedback.
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.

At times feedback might be negative; providing such a feedback is equally an essential part of the
performance review process. Identifying areas for improvement can help employees develop their skills,
and enhance their future career prospects. However, negative feedback is not always well received. To
help reduce the risk of your performance review ending up in an angry confrontation, or potential HR
issues, there are a few common things to avoid when delivering negative feedback.
Seven Common Triggers to Avoid When Giving Negative Feedback
Personal criticism- Try to keep things factual and job based rather than making it about the person
themselves.

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Lack of recognition or having requests ignored- These can lead to resentment and anger that can in turn
lead to an extreme reaction to criticism.
Making the employee feel like a failure- Try to be constructive in your negative feedback and
encouraging where possible.
Humiliating or embarrassing an employee- Always conduct performance reviews in private, and avoid
giving informal negative feedback in front of peers or colleagues.
Catching them off guard- The element of surprise can lead to a defensive response. Make sure you lead
into your negative feedback, and prepare the employee beforehand.
Restricting employees with mundane tasks- If there is a performance issue around an area of work that
an employee is responsible for, it is better to have the conversation about what is wrong rather than
restrict the scope of what an employee can and can’t do. This can lead to resentment and de-motivation as
well as frustration.
Unfair treatment- Make sure any negative feedback is reasonable and fair and measured against factual,
documented criteria, and that all employees are treated equally.

The purpose of the appraisal interview is to discuss performance, not personality. It is future oriented,
rather than past oriented. Emphasis should be on what the employee will do in the future and not on what
has been done in the past. However, a discussion of past performance is essential as the basis for the
future.
Ten Guidelines to Remember
The following general principles apply to all performance interviews regardless of the form that is used or
whether a self-appraisal has been completed.
1. Establish and maintain rapport. Rapport can be defined as the climate in which the interview
takes place. First of all, the location of the interview is important. It should be a place where both
people can feel relaxed. The chairs should be comfortable. There should be a minimum of noise.
No one else should be able to see the two people. If it will help to put the employee at ease, the
manager and the employee should sit alongside each other rather than face each other across the
desk. The words as well as the nonverbal communications of the manager should make it clear
that two-way communication will take place and that the employee should speak freely and
frankly. A cup of coffee might help to create this comfortable climate. It is debatable whether to
begin the interview by talking about hobbies or some current event or whether to begin by saying,
‘‘as you know, the purpose of this interview is to . . . .’’ If the two people have a common hobby,
that may be a good place to start. Or if there was an unusual political or sporting event that just
happened, that may be a good opener. Socializing for a few minutes is well worth the time if it
creates rapport. The following list contrasts an interview climate characterized by rapport to an
interview climate that lacks it:
Rapport Lack of Rapport

At ease, relaxed Nervous, fearful, anxious

Comfortable Uncomfortable
Friendly, warm Formal, cold
Not afraid to speak freely and frankly Afraid to speak openly
Believing, trusting Challenging

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Listening Interrupting
Understanding Misunderstanding
Open-minded Closed-minded
Accepting criticism without resentment Resenting criticism
Disagreeing without offending Arguing, downgrading

2. Clearly explain the purpose of the interview. Make it clear to the employee what you want to
accomplish. State it in positive terms, such as: ‘‘the purpose of the interview today is for us to
discuss your performance and agree on your strengths and areas that can be improved. Then we
are going to talk about your future and how we can work together.’
3. Encourage the employee to talk. The interview must include two way communication. Some
employees are eager to talk, while others are reluctant because of shyness or fear. The
establishment of rapport helps to overcome this reluctance. In some situations, the manager must
ask specific questions to get the employee to talk. In others, the employee talks freely with little
encouragement.
4. Listen and don’t interrupt. The word ‘‘listen’’ here means to really listen. It means more than
merely keeping quiet or not talking. It is an active process of finding out the thoughts as well as
the feelings of the other person. And if both parties start to talk at the same time, the manager
should quit talking and encourage the employee to go ahead. This backing down is quite difficult
for some managers, but it pays off in maintaining two-way communication throughout the
interview. It tells the employee, ‘‘what you have to say is more important to me than what I have
to say to you!’’
5. Avoid confrontation and argument. Even though differences of opinions are expressed, the
manager should avoid confrontation and argument. It is obvious to both parties that the manager
has more authority and power than the employee. Therefore, there is a chance of ending up in a
win-lose situation where the manager wins and the employee loses. Unfortunately, winning by
the manager can be very costly, because it can destroy rapport and result in the employee’s
deciding not to communicate freely and frankly. If this happens, the interview will not achieve its
objectives and might even do more harm than good. By keeping the discussion free and open, a
win-win situation can be created so that the needs of both people are met.
6. Focus on performance, not personality. This is a performance appraisal interview, and
emphasis should be on performance, not personality. This does not mean that such items as
attitude, integrity, dependability, appearance, or initiative are not mentioned. It means that these
characteristics are mentioned only as they relate to performance.
7. Focus on the future, not the past. This does not mean that past performance is not discussed.
But the emphasis is on what can be learned from the past that will help in the future.
8. Emphasize strengths as well as areas to improve. Every employee has strengths as well as areas
of performance that can be improved. Don’t ignore the strengths. Recognize and build on these
strengths, and also discuss job segments that must be corrected if performance is to improve.
9. Terminate the interview when advisable. Don’t hesitate to terminate an interview at any point if
you think it’s a good idea. Any number of reasons could justify the termination, including loss of
rapport, the need for manager or employee to go somewhere, the end of the work day, lack of
progress, fatigue, or an important interruption. If you end the interview before accomplishing all
of the objectives you set, agree on when the interview will continue.
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 10. Conclude on a positive note. Be sure that the employee leaves the interview in a positive frame
of mind instead of feeling resentful of the negative aspects of the discussion. After the interview
is over, the employee should say (or at least feel), ‘‘Thanks. I’m glad we had a chance to get
together and discuss any performance. Now I know where I stand and what I should do in the
future. And I know that you are going to work with me.’’ A warm handshake at the conclusion of
the interview is one way to end on a positive tone. Another is for the manager to say, ‘‘Thanks for
coming in. I feel that this has been a very profitable discussion, and I know I can count on you in
the future. I’ll be glad to help you in any way I can.’’
Stage 6: Performance Renewal and Re-contracting
The final stage in the performance process is renewal and re-contracting. Essentially, this is identical to
the performance planning component. The main difference is that the renewal and re-contracting stage
uses the insights and information gained from the other phases. For example, some of the goals may have
been set unrealistically high given an unexpected economic downturn. This would lead to setting less
ambitious goals for the upcoming review period.

The performance management process includes a cycle that starts with prerequisites and ends with
performance renewal and re-contracting. The cycle is not over after the renewal and re-contracting stage.
In fact, the process starts all over again: there needs to be a discussion of prerequisites, including the
organization’s mission and strategic goals and the job’s KSAs. Because markets change, customers’
preferences and needs change, and products change, there is a need to continuously monitor the
prerequisites so that performance planning, and all the subsequent stages, are consistent with 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 these strategic goals, it is unlikely that the performance management
system will be instrumental in accomplishing the strategic goals.
Performance Rating
Most performance management schemes include some form of rating, which is usually carried out during
or after a performance review meeting. The rating indicates the quality of performance or competence
achieved or displayed by an employee by selecting the level on a scale that most closely corresponds with
the view of the assessor on how well the individual has been doing. A rating scale is supposed to assist in
making judgments and it enables those judgments to be categorized to inform performance or
contribution pay decisions or simply to produce an instant summary for the record of how well or not so
well someone is doing.
Performance rating is all about observing an individual doing a specified task under defined workplace,
that is, measuring the time an employee takes to come out with a unit of an output.

Performance rating: The rationale for rating

is necessary in modern organizations as it helps in financial management, quality control, Result Based
Management , financial cost management and efficiency, appreciate Human capital by a way of cognition
of work achievement (Murthy, 1989).Modern organizations are faced with technological changes that
affect production hence the organization has to continuous monitor progress towards their goals.
Performance rating helps the organization to identify the training gaps that employees need.
There are four arguments for rating by Armstrong (2006):

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 1. It recognizes the fact that we all form an overall view of the performance of the people who work
for us and that it makes sense to express that view explicitly against a framework of reference
rather than hiding it. Managers can thus be held to account for the ratings they make and be
required to justify them.
2. It is useful to sum up judgments about people – indicating who are the exceptional performers or
under-performers and who are the reliable core performers so that action can be taken
(developmental or some form of reward).
3. It is impossible to have performance or contribution pay without ratings – there has to be a
method that relates the size of an award to the level of individual achievement. However, many
organizations with contribution or performance pay do not include ratings as part of the
performance management process.
4. It conveys a clear message to people on how they are doing and can motivate them to improve
performance if they seek an answer to the question, ‘What do I have to do to get a higher rating
next time?’
Performance rating assists in quality control, employee performance feedback, employee training and
development, layoff decisions, compensation decisions, Human Resource Planning, succession and
replacement planning, employee recognition, career development, motivation and talent management.

When an employee is aware that his/her performance is always accessed, he/she will strive to produce
good quality knowing that it will contribute to his final performance rating. Evaluation gives management
a chance to recognize employees who performed well during the review period. When an employees’
achievement is recognized it motivates them to do more and increase production that benefits the
organization. Employee ratings also assist the organization in rewarding bonuses. It can provide a basis
for identifying high flyers for a talent management programme.

The overall aim of performance management is to establish a high performance culture in which
individuals and teams take responsibility for the continuous improvement of business processes and for
their own skills and contributions within a framework provided by effective leadership. Specifically,
performance management is about aligning individual objectives to organizational objectives and
ensuring that individuals uphold corporate core values. It also help the organization to see if the goals and
objectives of the organization are understood by the employees and the level at which they have
accomplished those goals and objectives.

Cummings (1972) views performance rating necessary as it allows managers to help employees with
career development as it will be discovered where an employee is excelling and the areas that need
improvement will. Rating helps management to develop plans with specific tasks to help employees
develop in their career and meet goals that benefit the company. Performance rating increase employees’
commitment to the firm and productivity. Employees that add value to the firm are considered first when
better positions open up and employers decide to promote from within. This then leads to employee
engagement, loyalty, commitment and citizenship behaviour.
When an organization is deciding to layoff some people, performance ratings helps in determining who
will be laid off. Possibly those who are under performing will face the axe. This helps employees to be
competitive and to strive for better ratings which ultimately leads to higher productivity.
Types of rating scales

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Rating scales can be defined alphabetically (a, b, c, etc), or numerically (1, 2, 3, etc). Initials (ex for
excellent, etc) are sometimes used in an attempt to disguise the hierarchical nature of the scale. The
alphabetical or numerical points scale points may be described adjectivally, for example, a = excellent, b
= good, c =satisfactory and d= unsatisfactory.
Alternatively, scale levels may be described verbally as in the following example:
 Exceptional performance: Exceeds expectations and consistently makes an outstanding
contribution that significantly extends the impact and influence of the role.
 Well-balanced performance: Meets objectives and requirements of the role; consistently
performs in a thoroughly proficient manner.
 Barely effective performance: Does not meet all objectives or role requirements of the role;
significant performance improvements are needed.
 Unacceptable performance: Fails to meet most objectives or requirements of the role; shows a
lack of commitment to performance improvement, or a lack of ability, which has been discussed
prior to the performance review.
Problems with rating
However, ratings are largely subjective and it is difficult to achieve consistency between the ratings given
by different managers. Even if objectivity is achieved, to sum up the total performance of a person with a
single rating is a gross over-simplification of what may be a complex set of factors influencing that
performance – to do this after a detailed discussion of strengths and weaknesses suggests that the rating
will be a superficial and arbitrary judgment. To label people as ‘average’ or ‘below average’, or whatever
equivalent terms are used, is both demeaning and de-motivating.
The whole performance review meeting may be dominated by the fact that it will end with a rating, thus
severely limiting the forward-looking and developmental focus of the meeting, which is all-important.
This is particularly the case if the rating governs performance or contribution pay increases.
Achieving consistency in ratings
The problem with rating scales is that it is very difficult, if not impossible without very careful
management, to ensure that a consistent approach is adopted by managers responsible for rating, and this
means that performance or contribution pay decisions will be suspect. It is almost inevitable that some
people will be more generous, while others will be harder on their staff. Some managers may be
inconsistent in the distribution of ratings to their staff because they are indulging in favoritism or
prejudice.
Ratings can, of course, be monitored and challenged if their distribution is significantly out of line, and
computer-based systems have been introduced for this purpose in some organizations.
But many managers want to do the best for their staff, either because they genuinely believe that they are
better or because they are trying to curry favour. It can be difficult in these circumstances to challenge
them. The basic methods for increasing consistency described below are training, calibration and
monitoring. More draconian methods of achieving consistency, also described below, are forced
distribution and forced ranking.
Training
Training can take place in the form of ‘consistency’ workshops for managers who discuss how ratings can
be objectively justified and test rating decisions on simulated performance review data. This can build a
level of common understanding about rating levels.
Calibration (peer reviews)

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Groups of managers meet to review the pattern of each other’s ratings and challenge unusual decisions or
distributions. This process of calibration or peer reviews is time-consuming but is possibly the best way to
achieve a reasonable degree of consistency, especially when the group members share some knowledge of
the performances of each other’s staff as internal customers.
Monitoring
The distribution of ratings is monitored by a central department, usually HR, which challenges any
unusual patterns and identifies and questions what appear to be unwarrantable differences between
departments’ ratings.

Topic 5
Human Resource Best Practice Benchmarking and Performance Management
Definition of Benchmarking

Benchmarking is the process of identifying, understanding and adopting outstanding practices and
processes from organizations anywhere in the world to help your organization improve its performance
(American Productivity and Quality Centre).

It entails comparing specific measures of performance against data on these measures in other best
practices (Mathis etal :2004). It involves indentifying good practice in other organizations, comparing
these practices with practices within the bench marker’s own organization, and drawing conclusions on
the lessons learnt from good practice elsewhere that can be applied within an organization. The
comparison concentrate on the areas for improvement that have been identified and the aim is to learn as
much as possible about how other organizations have tackled similar problems, bearing in mind that what
works well in organization does not necessarily work well in another.

Also referred to as “best practice benchmarking” or “process benchmarking” this process is used in
management and particularly strategic management , in which organizations evaluate various aspects of
their processes in relation to best practice companies’ processes, usually within a peer group defined for
the purposes of comparison. This then allows organizations to develop plans on how to make
improvements, or adopt specific best practices, usually with the aim of increasing some aspect of
performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which
organizations continually seek to improve their practices.

Cole (2000) adds that strategic benchmarking is considered as an ongoing structural and objective process
of measuring and improving products, services, practices and processes against the best that can be
identified world-wide to achieve and sustain competitive advantages. Brooks et al (2000) concurs that it
enables organizations to improve business performance, learn about and improve on best practice, achieve
realistic targets, integrate improvements into your strategy, use best practices as an inspiration for

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innovation, be externally focused, be purposeful about continuous improvement, innovation and
development and measure performance and improvement.

Stages of Benchmarking

According to Long bottom (2000) there are basically seven stages of benchmarking which are preparation
and planning, data collection, data analysis, reporting, establishing learning from best practice, planning
and implementing improvement action and institutionalizing learning.

Preparation and Planning

As with any other project, thorough preparation and planning are essential of the outset. Recognize the
need for benchmarking, determine the methodology you are going to use and identify the participants in
your project.

Data Collection

Involves deciding what you are going to measure and how you will measure it. What is to be
benchmarked and what is to be excluded. There is also need to determine the most appropriate vehicle
for data collection.

Data Analysis

The key activities here are the validation and normalization of data. Data should be validated to establish
its accuracy and completeness – some form of data normalization is usually required to enable
comparisons to be made between what may be very different operational subjects. The analysis must
indicate the bench marker’s strengths and weakness, determine gaps between the benchmarker’s
performance and the leader’s and provide recommendations for the focus of performance improvement
efforts.

Reporting

The analysis must then be reported in a clear and easily understood format via an appropriate media.

Learning from Best Practices

In this step, the top-performing organizations share their best practices, to the mutual benefit of all the
bench-markers of course, when some of the bench-markers are true competitors, the options for sharing
may be limited and alternative approaches may be required to establish learning.

Planning and Implementing

Once the learning points have been ascertained, each organization should develop and communicate on
action plan for the changes that it will need to make in order to reach improvements. The learning point
should feed into the organization’s strategic plan and should be implemented via its performance
improvement processes.

Institutionalizing Learning

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The insights that you have achieved must be fully embedded within the organization, it’s critical to ensure
that the gains are rolled out throughout the business and sustained over time.

Purposes of Benchmarking

The following are some of the purposes of benchmarking:

 To enhance the effectiveness of the organization and therefore its value to stakeholders.
 To enhance organizational performance.
 To achieve world-class status.
 To realize a strategic competitive advantage over competitions.
 To adopt a culture of continuous improvement, innovation and development.
 Share knowledge of best practice.
 Quantify gaps between the bench markers performance and world class performance.

Types of Benchmarking

Benchmarking is a multipurpose tool that can be applied in a variety of ways to meet a range of
requirements for improvement. These include strategic benchmarking, performance or competitive
benchmarking. Process benchmarking, functional benchmarking, internal benchmarking, external
benchmarking and international benchmarking.

Internal Benchmarking- This is the continuous effort of establishing good practice uniformly and
company-wide by continuously comparing what takes place in all the various operations of business
organizations and this can be done when implementing change within the organization. Whilst it can be
relatively easy to implement, it has a low requirement in terms of resources and time. It is however
targeting an internal standard only. It is also used to compare standards of performance between groups
or branches within the same organization.

External benchmarking/competitive benchmarking - this is concerned with comparing key metrics

against direct competition, or comparing processes with organization in the same industry sector. It aims
at comparing specific models or functions with main competitors.

Best practice benchmarking - it is concerned with comparing the best that can be found anywhere,
irrespective of industry or geography.

Generic benchmarking - it is the ultimate in terms of benchmarking application and it applies to all
areas of a business operation. It encourages the continuous effort of comparing generic multi-functional
processes with those of the best in class.

Strategic benchmarking involves observing how others compete. This type is usually not industry
specific, meaning it is best to look at other industries.

Functional benchmarking - a company will focus its benchmarking on a single function to improve the
operation of that particular function, complex functions such as Human Resources, Finance, and
Accounting and Information and Communication Technology are unlikely to be directly comparable in
cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.
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Process benchmarking - the initiating firm focuses its observation and investigation of business
processes with a goal of identifying and observing the best practices from one or more benchmark firms.
Activity analysis will be required where the objective is to benchmark cost and efficiency: increasingly
applied to back-office processes where outsourcing may be a consideration.

Financial benchmarking- performing a financial analysis and comparing the results in an effort to assess
your overall competitiveness and productivity.

Performance benchmarking - allows the initiator firm to assess their competitive position by comparing
products and services with those of target firms.

Product benchmarking - the process of designing new products or upgrades to current ones. This
process can sometimes involve reverse engineering which is taking apart competitors products to find
strengths and weaknesses.

Competitive benchmarking - compares how well (or poorly) an organization is doing with respect to the
leading competition, especially with respect to critically important attributes, functions, or values
associated with the organization’s products or services. For example, on a scale of one to four, four being
best, how do customers rank your organization’s products or services compared to those of the leading
competition? If you cannot obtain hard data, marketing efforts may be misdirected and design efforts
misguided.

Advantages of Benchmarking

Benchmarking has the following advantages:

It is a global management tool. Benchmarking is a multi-purpose tool that can be used to meet a range of
requirements for improvement. It is used to gauge successes and it point shortcomings. It has the
potential of lowering labour costs for example the use of robotic system. It enhances improvement of
product quality and increase in sales profitability. It also can result in improvement in performance
through emulation of best practice. It brings about new paradigms that make organizations get out of
their comfort zones and also brings about change and helps organizations to focus on the change.

Disadvantages of Benchmarking

Benchmarking has the following disadvantages.

Zairi et al (1996) argues that benchmarking has a number of disadvantages. It reveals standards attained
by the competitor but does not consider to circumstances under which the competitor attained such. If the
competitor’s goals and vision were flawless or restricted, the benchmarking organization runs the risks of
trying to instate such flawed standards or settling for extremely lower standards. There is also the danger
of complacency and arrogance, especially when organizations excel beyond their competitors standards.
Organizations make the mistake of undertaking benchmarking as a standalone activity, yet benchmarking
is only a means to an end while it helps organizations in measuring the efficiency of their operational
metrics, it does not measure the overall effectiveness.

Why Benchmark HR?

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The case for benchmarking is strong: It provides the means to review both the effectiveness and
efficiency of the HR team and its processes.

It supports the monitoring and review of HR objectives.

It highlights the relative strengths and weaknesses of current HR practices, in relation to
perceived 'good practice'. The HR Benchmarks and HR Measures bring huge pressure on the
standardization of HR Processes, their detailed description and following the process maps. The
HR employees were always excellent in maneuvering based on the current needs and the
workload, but the HR Benchmarks push the employees to follow the standardized HR Processes.
The HR Benchmarks help to identify the gaps in the current set-up of Human Resources
departments. The HR Management Team should always focus on the whole set of HR
Benchmarks to identify the strengths and weaknesses of Human Resources in the comparison
with the external market.

The HR Benchmarks can set the new corporate culture of Human Resources as the employees do not
discuss about other employees, but they discuss the numbers and they can come to conclusion quicker.
The HR Benchmarks are easy-to-understand concept and they can speed up many discussions. The HR
Benchmarks give the guidance for setting the stretched and realistic goals to HR employees. The
employees can see, the goal is achievable, but it is still extremely challenging. Human Resources
Management with HR Benchmarks becomes extremely challenging, but it is still fun.

Labour turnover rates provide a valuable means of benchmarking the effectiveness of HR policies and
practices in organizations. They do not tell the whole story, but if turnover is significantly higher than in
comparable organizations, this should stimulate action to investigate why this is the case and to do
something about it. Benchmarking can be carried out by networking with other organizations, possibly
forming a ‘club’ to exchange information regularly. Labour turnover is one of the indices used to measure
the organisation’s pulse and such rates are useful in ascertaining the industrial relations climate and the
pulse of the organisation. It therefore follows that when formulating HR strategies, the pulse can be
checked through various means such as opinion surveys, satisfaction surveys, turnover indices to name a
few and these will guide us in crafting strategies that are suitable for the organisation to be able to retain
its staff.

Business process re-engineering techniques are deployed as instruments for downsizing. Benchmarking to
establish which organizations are in fact doing more with less (and if so how they do it) is another popular
way of preparing the case for ‘downsizing’. Kingdom bank introduced a voluntary retrenchment scheme
in 2009 where if one volunteered to be retrenched they would get a package of about ten thousand dollars
($10 000). Things were really bad at the bank in face of competition from other banks and the takeover by
the KMHL merger was not helping. Due to these uncertainties, a number of their staff voluntarily left the
bank and were paid their packages and the bank remained with few staff who took it to where it is today.
RBZ had started the downsizing campaign which Kingdom bank followed suit and successfully
implemented theirs. However, we also have other institutions/corporates like Air Zimbabwe who have
downsized but are yet to pay out their departed staff. If they had benchmarked against at least these
success stories, then maybe the story would have been different.

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To ensure that pay levels are competitive, it is necessary to track market rates for the jobs within the
organization, especially those that are particularly vulnerable to market pressures because of scarcity
factors. Job evaluation schemes can be used to determine internal relativities, but, in themselves, they
cannot price jobs. To a large extent, pay levels are subject to market forces which have to be taken into
account in fixing the rates for particular jobs. Some specialized jobs may not be subject to the same
external pressures as others, but it is still necessary to know what effect market rates are likely to have on
the pay structure as a whole before deciding on internal pay differentials which properly reflect levels of
skill and responsibility. It has also to be accepted that market pressures and negotiations affect
differentials within the firm.

The period 2007 to early 2009 witnessed a serious global meltdown in world economies. Companies were
closing and some were retrenching at a very massive scale. Econet Wireless voted 2010 the Employer of
Choice was no exception as it saw a massive exodus of its most wanted resource who is the engineer.
Econet’s main business is that of selling airtime but for that to be possible, there is need for cellphone
lines as well as the network in order to encourage more airtime purchase. It therefore follows that its
critical staff are the various engineers and technicians who are working flat out to make sure that there is
network all the time. Since these are the most sought after skills, the company decided to benchmark the
salaries and benefits of this group of staff against the regional powerhouses with whom we were
competing for talent and skill. The organisation employed an independent consultant to do the benchmark
exercise and in 2009 a report was presented to the Directors who then implemented it. After the
implementation, the pecks for the critical skills were aligned to that of their regional counterparts and
since then most of the staff in that category have been slowly coming back to the organisation. The
company deliberately benchmarked against the regional heavyweights in order to be competitive and to
retain their staff as well as attract back its staff. In 2010, in a poll conducted for many organisations,
Econet was voted the Employer of Choice in Zimbabwe, a status which has however led to a serious
malpractice of the HR department coz today they think they are the best employer and they have become
very arrogant shutting all doors for conversation and/ or suggestions.

Most Zimbabwean organisations do benchmarking as far as salaries are concerned. The danger for doing
that is that you benchmark against the remuneration only but the working conditions and other benefits
will be different. Most of the surveys that are carried out time and again are only about remuneration
issues. It’s high time that Zimbabwean organisations benchmark all round HR practices so that we don’t
only become pay specialists but HR specialists that are drivers for motivation and performance within the
workplace. It’s high time we measure what successful organisations are doing, emulate best practices
from leaders and bundle our HR practices in order to remain competitive.

Only relying on benchmarking data may prove to be ineffective in face of obsolescence and decay.
Mintzberg spoke of strategies being overtaken by time and events and the advent of emergent strategies
on the way and therefore concluded that strategies are really the products of the environment in which the
business is operating. Best practices may be overtaken by time especially in the Zimbabwean situation
which

What works today will not work tomorrow. By the time we finish assessing best practice of any one firm,
that firm would have already established other ways to remain competitive and relevant hence when we

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finally introduce the best practices in our own organisation they won’t be best practice anymore as time
and competition would be forcing the organisation re-strategize quickly.

Availability of all information is also not very easy hence even when we engage an independent firm to
do benchmarking for us against the powerhouses, it’s imperative to note that not all information would be
made available to the consultants hence what we will be labeling ‘best practice’ would actually not be
adequate and sometimes not suffice.

Topic 7
Monitoring Performance through Technology
________________________________________________________________________
Electronic Performance Monitoring

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EPM includes the surveillance, measurement, recording, and compilation of work - related activities of
employees using electronic means (Bates & Holton, 1995 ; Stanton, 2000 ). Thus, EPM primarily
contributes to the effort to measure performance, via indicators such as productivity, accuracy, speed, and
errors. The ability to collect information continuously and in real time provides several benefits: objective
measurement, continuous observational opportunity, immediate reporting, and assessment of physically
distant employees.
EPM allows management to know if employees are actually working or doing personal things during
work hours. The biggest upside to EPM seems to be that it provides information for concrete results-
based performance evaluations.
While EPM generally addresses the need to measure employee behavior and outputs, it may also
contribute to other goals of performance management, such as the provision of feedback, by allowing
managers to achieve the conditions of specificity, accuracy, and timeliness needed to provide effective
feedback to subordinates (Stanton, 2000 ). EPM may also contribute to the development of performance
standards by requiring managers to contemplate the content and frequency of assessment measures prior
to requesting monitoring data.
The use of EPM has been questioned by some for invading employee privacy, and has been connected to
increased stress and health complaints, lower - quality work relationships, and lower employee control
perceptions (Bates & Holton, 1995 ; Hawk, 1994 ).
As a result, a stream of research has provided guidance on best practices for the development of EPM
systems to yield the most positive employee response. The scope of tasks monitored has been related to
employee reactions, such that EPM focused only on job - relevant activities is related to greater
acceptance of EPM, reduced perceptions of invasion of privacy, and increased
procedural justice perceptions (Alge, 2001; Grant & Higgins, 1991; McNall & Roch, 2007 ). Employee
control also impacts reactions to EPM systems with individuals reporting more positive responses when
given discretion as to when they are monitored or what types of tasks are monitored. Employees who are
offered an opportunity to participate in the development of the EPM system or to voice their opinions
about the system generally possess more positive attitudes and perceptions as well.
The purpose of the monitoring is also related to employee response. EPMs designed for employee
development rather than prevention of undesirable behavior are viewed more positively, and those
connected with feedback and appraisal systems are also favored. Monitoring at the group rather than
individual level also has promise in terms of fostering positive employee reaction. This approach may
mitigate the increased stress related to EPM and improve acceptance. Use of a combination of individual
and group monitoring may also lead to greater acceptance. Other factors that warrant consideration
include frequency of monitoring and the roles and number of people who receive monitoring results.
Performance Management: Using Technology for Succession Planning
Technology also has the potential to contribute to organizational succession planning. Data generated
through performance management stages and stored in a performance management system can be used to
identify and track high - potential employees, determine and offer developmental opportunities, and
establish potential mentoring relationships.
Systems data could facilitate turnover analyses to identify areas of concern for the retention of promising
employees. Portals may be developed for employees to post internal WebPages similar to social
networking sites (for example, Facebook; Bersin,2007 ) with their experiences and interests so that
matches can be made across the enterprise with any developmental or mentoring opportunities (for
example, short - term job assignments or permanent position openings). Succession planning may also be
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facilitated through the use of technology solutions for the actual delivery of developmental and
promotional assessments, simplifying the process of identifying and matching high performers to
appropriate positions.
Such technologies include online media - rich assessments, such as virtual reality simulation or video -
based simulation, and computerized adaptive testing. Integrated personnel assessment platforms can assist
in capturing and compiling all essential personnel information.
Technology As a Challenge: What Complications Does Technology Create in the Performance
Management Process?
Automating a performance management system offers several benefits, most notably those related to the
centralization of data, integration of performance data with information from other systems, and ease of
data input and retrieval.
Unfortunately, the same characteristics of technology that make these benefits possible can also create
challenges if the technology does not function properly, is used inappropriately, or is relied on too
heavily. Below, several challenges associated with using technology for performance management
purposes are outlined. These challenges should be considered fully during the development of
specifications for an automated solution and a model of the performance management process.
Information Overload- Technology allows for voluminous amounts of performance data to be
continuously collected and instantaneously accessed, making information overload a real concern for both
managers and employees. Research has shown that information technologies exacerbate information
overload and that information overload can have detrimental effects on the fulfillment of job
responsibilities, experience of stress, and likelihood of working overtime and taking work home.
Overexposure
Making the collection and sharing of performance - related information through an automated system a
frequent work behavior runs the risk of diluting the importance and value of the information due to
overexposure. This challenge has been tackled in the area of surveys, where the phenomenon has been
labeled “survey fatigue” and “over - surveying”.
Time Requirements
Although automation of paperwork alleviates some time commitments on individuals responsible for the
performance management process, particularly those in human resources, if the system is clunky or slow,
it could require more time from others, particularly employees inputting information into the system or
trying to access data through integrated portals. Couple the increased time commitment with a negative
experience from user - interface inadequacies, and those utilizing the system will likely experience
substantial computer frustration, resulting in
decreased productivity and negative affective reactions.
Over - Reliance on Automation
Given the money and time required to develop and implement an automated performance management
system, organizational leaders may be inclined to assume that the technology will now do the work of
performance management, but this is not the case. Technology facilitates the process of performance
management, but performance management is still largely a people process, meaning that every
employee, in varying ways, must be accountable for performance management, and select individuals
must be champions and owners of the performance management process.
Miscommunication
Technology can greatly support the communication of information during performance management;
however, the use of technology to communicate information related to an important and emotionally
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charged topic such as job performance can also create opportunities for confusion and frustration. Two
points are worth mentioning here with respect to communication challenges when using technology for
performance management. First, this issue has been cited as a challenge for some time in the broader
context of sharing any type of information via tools such as email and instant messaging. The ease of
using these tools has resulted in information being shared without thorough consideration of the content
by the sender, which also enhances the opportunity for misinterpretation by the receiver. While this issue
may be relevant in the case of a performance management system, the use of a separate performance -
specific system to enter and access this information will likely mitigate this problem.
Technology Literacy
By definition, an automated performance management system requires system users to possess certain
knowledge and skill to use the technology. The extent to which this poses a challenge is dependent upon
several factors, including who will be interacting with the system (for example, all employees or only
human resource personnel),

Topic 8
Integration with Other Personnel and Development Activities
______________________________________________________________________________

Performance management systems serve as important ‘feeders’ to other personnel 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 organisations will use their training resources
in the most efficient way (i.e., to train those who need it and in the areas needed most).
Performance management also provides key information for workforce planning. Specifically, an
organisation’s talent inventory is based on information collected through the performance management
system. Development plans then provide information on what skills will be acquired in the near future.

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This information is also used in making recruitment and hiring decisions. Knowledge of an
organisation’s current and future talent is important to decide what types of skills need to be acquired
externally and what types of skills can be found within the organisation.
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.
In short, performance management is a key component of talent management in organisations.
It allows for an assessment of the current talent, and makes predictions about future needs at both the
individual and organizational levels. Implementing a successful performance management system is a
requirement for the successful implementation of other HR functions including training, workforce
planning, recruitment and selection, and compensation

Topic 9
Internal marketing as a source of high performance

What is internal Marketing?

Internal marketing as the application of marketing within the company, utilizing programs of
communication and guidance targeted at internal audiences (employees) to develop responsiveness and
unified sense of purpose among them. The idea is to satisfy, motivate and raise levels of commitment and
engagement on the part of employees so that they will directly transmit that to customers (Dibb and
Simkin, 2012)

Generically, internal marketing is a management philosophy of taking care of those who will then take
care of the customer needs. It is thus, treating employees as customers. Close to this is the principle from
Gronroos (2007) which says if you treat your employees as kings they will treat the customers in the same

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manner. He argued that marketing and satisfaction should firstly be done internally and this will then
make it easy for it to be extended to the external.

It can be defined as a continuous process by which managers actively encourage, stimulate and support
employee commitment to the company’s goods and services. The emphasis should be placed on the word
continual. Managers who consistently provide encouragement and words of praise to employees strive to
help employees understand the benefits of performing their jobs and emphasise the importance of
employee actions on both company and employee results are practitioners of internal marketing (Peter,
James and Donnelly, 2009)

The importance of having customer oriented, frontline people cannot be overstated. If frontline service
personnel are unfriendly, unhelpful, uncooperative or uninterested in the customer, the customer will tend
to project that same attitude to the whole organisation.

The character and personality of an organisation reflects the character and personality of its top
management. Management must develop programs that will stimulate employee commitment to customer
service

1. A careful selection process in hiring- to do this management has to define clearly the skills the
service person must bring to the job.
2. A clear, concrete message- that conveys a particular service strategy that frontline people can
begin to act on. People delivering service need to know how their work fits in the broader scheme
of business operations.
3. Significant modelling by managers- thus, managers demonstrate the behaviour that they intend
to reward employees for performing.
4. An energetic follow through process- in which managers provide training support and incentives
necessary to give the employees the capability and willingness to provide quality service
5. An emphasis on teaching employees to have good attitude- this type of training usually focuses
on specific social techniques, such as eye contact, smiling tone of voice and standard of dress.

Internal marketing is premised on the belief that service quality goes beyond the relationship between a
customer and a company- it is the personal relationship between a customer and a particular employee
that the customer happens to be dealing with at the time of the service encounter that ultimately
determines service quality.

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