IHRM Week 5 Student Version

PERFORMANCE
MANAGEMENT
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IHRM
Week 5 / Quartile 4
Today’s topics Preparation
• Theory Introducing IHRM, Hook & Jenkins
‒ Performance Management
‒ Performance Management Systems Ch. 7: Performance Management and Appraisal
‒ Performance appraisal
• Exercise
‒ Midterm practice exam questions
What is employee performance management?
A continuous process which ‘establishes a shared understanding about what is to be

achieved and an approach to leading and developing people which will ensure it is achieved.’
(Armstrong and Baron, 2004)
This process involves communicating and clarifying:

• Job responsibilities
• Priorities
• Performance expectations
• Development actions that will optimize an individual’s performance
What is the purpose of performance management?
• Achieve organizational goals

‒ The individual’s performance should align with the organization’s goals.
• Ensure everyone in the organization is working in the same direction
• Motivate, coach and support employees for performance
• Develop employee and organizational competencies
• Make “reward” decisions:
• Pay for performance
• Training
• Development opportunities
Employees need to:

• know and understand what is expected of them
• have the necessary skills
• be supported in developing their capacity
• receive feedback
• discuss and contribute to individual and team aims and objectives
(Armstrong and Baron, 1998)

Performance management is a part of a Performance Management System.
Executive and Senior

Senior Leadership Leadership
Managers
Employee
Senior Leadership
Manager
Managers
Employee
Manager
Employee
Managers have a key enabling role in PM which involves:
• The organization of resources for performance

• Training
• Coaching
• Accessibility in case of problems
• Review and confirmation or adjustment of targets
• Recognition and reward
• Motivating employees
• Improving team performance
• Collection of performance evidence
Measuring performance
Selecting the right measures will “steer” performance in the right direction.
• Choose metrics that will promote the performance you want.

• Set attainable targets (may be slightly “stretch” targets).
• Ensure the link between individual efforts and team/department/company performance is clear
Remember the HRM landscape?
USA Germany Japan
Management Short term based on costs Long term based on consensus Long-term based consensus and
focus (shareholder approach) (stakeholder approach) competitive strategy
Employment Not guaranteed - poor Many legal restrictions in Life-time tradition.

and loyalty performers are dismissed employment practices. Workers
quickly. Highly competitive labor tend to stay with same organization. Workers are more flexible and
market. move around the organization.
Internal labor markets are
Workers seek to gain supported by training systems.
experience and will leave for
better opportunities.
Union Trade unions have peripheral Formal works councils / industry- Enterprise (company) based, not
role, if present at all. level collective bargaining. industry based
Incentives Individual, based on Team based; pay differentials are Pay systems reward seniority and
performance. relatively low. long service.
Decision Evidence based; standardized Consensus based with general Influenced by personal
making and universal rules rules developed and applied across relationships, not universal rules
Performance management is different across cultures.
Power Do you accept that power should be Impacts the process of reaching agreements and objectives.
Distance distributed unequally within society? Low power distance means open dialogue with the purpose of
reaching an agreement which may include open confrontation.
Individualism Should you only look after yourself Impacts sense of duty and responsibility for organizational objectives.
and direct family? High leads to direct communication…“be honest, even if it hurts” and
(Loyalty with sense of duty) give the other person a fair chance to learn from mistakes.
Masculinity Are you driven by competition, Impacts career progression and status
achievement, and success? High leads to “vertical careers” to reach significant status within
society.
Uncertainty Should you try to control the future Impacts the amount of regulations
Avoidance instead of dealing with ambiguity? High leads to precise rules, formal criteria and time-frames. Details
are equally important to create certainty that a certain topic or project
is well-thought-out.
Long Term Should you adapt your traditions Impacts expectations of long-term employment with the company
Orientation and assess a situation bases on the High demonstrates an ability to adapt and seek development within
context and time? the company.
The impact of the HRM landscape on the stages in a PM system.
What is the expected outcome

for achieving results? Are goals assigned or
- Pay for performance agreed?
- Training & Development
- Promotion
Is there direct, clear or actionable

feedback / coaching?
A balanced PM system pays attention to what the employer and the employee
want.
The employer's perspective The employee's perspective
Outcomes
Employee motivation Employee and job satisfaction (little job stress)
Organizational commitment Occupational commitment
Processes
Supervisor appraisals Self evaluation and peer evaluations
Supervisor decision making Employee involvement
HR practices
Pay for performance Fixed pay (permanent contract)
Knowledge and skills transfer needed for the job Opportunities for personal growth and development
Close monitoring by supervisor Self regulation; autonomy
Work practices
Centralization of decision making; working in the office or new Employee autonomy and flexible work arrangements (better work
ways of working (reducing office space costs) life balance opportunities)
Evaluation of employee performance is a part of the
Performance Management System.
Performance appraisal Performance management systems
- Formalised processes to review - A continuous process
employee performance - Identifies, measures and develops the
- Centrally designed performance of individuals and teams
- Often only once a year - Aligns performance with the strategic
- Reports are archived goals of the organisation
- Often seen as an ineffective - Addresses both the ‘what’ and the ‘how’
administrative exercise of performance
- Often competency based
Past Future
Performance Management is NOT about:
“Completing forms once a year”

(it should be an ongoing process throughout the year…appraisal is only a part of it)
Punishing or blaming
(it should have motivational value, it is about preventing and solving problems)
Trap/Pitfall: HR is too concerned with PM forms

and software rather than focusing on what should
result from the process (improved performance).
Aim of appraisals:
PERFORMANCE
• Improve current performance by providing feedback on
APPRAISALS strengths/weaknesses
• Agree on future objectives
• Focus on career development
Appraisals are used as a rating system for • Solve problems
performance assessment. • Increase motivation and improve performance
(A formal management tool)
Benefits of Performance Appraisals
Rating of individuals is based on
For the organization For the employee
(quasi-)objective criteria or standards
relevant for performance. • Improved communication of business • Increased understanding of strategic
goals aims
• Improvement in work performance - • Increased motivation
> improved business performance • Increased job satisfaction
• More objective distribution of • Development of potential
rewards • Opportunity to publicize ambition
• Retention
• Better understanding of the link
• Training based on actual needs between effort, performance and
• Evaluation of effectiveness of reward
selection criteria
Different appraisal methods
• Narrative/written report
• Rating scales
• 360-degree feedback (multisource feedback)
• Appraisal interview
An appraisal interview in combination with rating scales is a commonly used method.
Problems with appraisal schemes

• Lack of clear purpose
• Links with pay
• Appraiser attacking appraisee’s character
• Being too subjective in judgement
• Linking to disciplinary process
The role of line managers in performance appraisal
Advantages Disadvantages
Line managers know about their direct report’s Personality conflicts
jobs and their performance
Creates a time for discussion Subjectivity

Give’s the employee the manager’s attention Seen by managers as a low priority
Next week:
 We will discuss appraisal interviews more in-depth and practice feedback &
coaching.

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PERFORMANCE

Logo photo designed by rawpixel.com / Freepik

A continuous process which ‘establishes a shared understanding about what is to be

This process involves communicating and clarifying:

• Achieve organizational goals

Employees need to:

(Armstrong and Baron, 1998)

Executive and Senior

• The organization of resources for performance

• Choose metrics that will promote the performance you want.

Employment Not guaranteed - poor Many legal restrictions in Life-time tradition.

What is the expected outcome

Is there direct, clear or actionable

Employee motivation Employee and job satisfaction (little job stress)

Organizational commitment Occupational commitment

Supervisor appraisals Self evaluation and peer evaluations

Supervisor decision making Employee involvement

Pay for performance Fixed pay (permanent contract)

Close monitoring by supervisor Self regulation; autonomy

“Completing forms once a year”

Trap/Pitfall: HR is too concerned with PM forms

An appraisal interview in combination with rating scales is a commonly used method.

Problems with appraisal schemes

Creates a time for discussion Subjectivity

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