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PERFORMANCE MANAGEMENT
Lecture Notes by : Prof. M. K. Ravi

Unit-1

Introduction to Performance Management and Appraisal

Modern Appraisal
Performance appraisal may be defined as structured formal interaction between a
subordinate and supervisor. That usually takes the form of a periodic interview
(Annually or semi annual).With a view to identify weaknesses and strength as well as
opportunities for improvement and developments of skills.

The link to rewards

(Bannister and Balkin, 1990) greater acceptance of the appraisal process and feel
more satisfied with it, when the process directly linked to rewards.

Goal settings
Is the foundation for a good performance management system “Key Result Area”
(KRA’s)

Regular Review
Review gives timely feed back to the individuals. It gives the individual opportunity to
discuss his or her achievement during the given period and to look at areas of
improvement.

Annual Appraisal:-
 Confidential Report
Report is written cy supervisor not shown to the individuals.
 Report by Supervisor
Shown or given to the individuals and discussed.
 Self-Appraisal by Individual

Linkage to Reward system:-

Linkage to process such as compensation, rewards, progression and succession
planning.

Dr. Deming in his book, “out of the crisis” mentions the important of taking system
variables in to accountant while dealing with the performance.

Performance Management Basics

Performance management is ongoing, continuous process of communicating and
clarifying job responsibilities, priorities and performance expectations in order to
ensure mutual understanding between supervisor and employee. Performance
management involves clarifying the job duties, defining performance standards, and
documenting. Evaluating and discussing performance with each employee.
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Objective of performance management are:-

1. Increase two-way communication.
2. Clarify mission, goals, responsibilities, priorities and expectation.
3. Identify and resolve performance problems.
4. Recognize quality performance.
5. Provide a basic for administrative decision such as promotion, succession.

Principles of Developing a Performance Management Plan

1. Performance Management is considered a process, not an event.
2. The performance management Plan is primarily a communication tool.
3. Element for discussion and evaluating should be job specific.
4. Documentation : The process of creating a paper trail to record data.
5. Objectives or result : Statement of what an employee is supposed to
achieve.
6. Ongoing Performance Communication: NO SURPRISSES
7. Performance Review : Refers to a meeting to review and evaluating
performance.
8. Performance Appraisal : The regular(usual annual) process

Performance Management
Process of defining what employee should be doing, on going communication during
the year.

Performance Planning
The process of communication between manger and employee that results in mutual
understanding of what the employee is to be doing during the next period of time.

Technological Changes
How does a manager asses the performance of a home worker when there is a little
or no personal contact between the two.
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Unit- 2

Concept of Performance Management

Introduction
Performance management reminds us that being busy is not the same as
producing results.

Performance management should also be focus on:-

 The organization
 Departments
 Processes
 Programme
 Products and services
 Projects
 Teams or groups

Exploring organizational effectiveness:-

The phrase, “organizational effectiveness” is commonly referred to when discussing
organization that has achieved maximum performance.

Suggested capacities for organizational effectiveness

Latt, Ryan and Grossman(1998) suggest five key capacities for organizational
effectiveness
1. Adoptive capacity : it is the ability of a organization to maintain the focus
on the external environment of the organization, through attention to
assessment, collaborating and networking, assessments and planning.
2. Leadership Capacity : It is ability to set direction for the organisation and
its resources and also guide activities to follow that direction through to
vision, establishing goals, direction, motivation , making decision and
solving problems.
3. Management Capacity : It is the ability to ensure effective and efficient
use of the recourses in the organisation through coordination of resources.
4. Technical Capacity : It is the ability of the organisation to positively
charge its external environment.

Key Terms in performance management:

1. Review organisational goals
2. Specify desired result.
3. Ensure the domain’s desired result.
4. Weight, or prioritize, desired result.
5. Measures to evaluate.
6. Identify standards.
7. Documents a performance.
8. Ongoing observations.
9. Exchange ongoing feedback.
10. Conduct a performance appraisal.
11. If performance meets, reward for performance.
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A View of Performance Measurement:

Look for Domains (or Areas of Focus) in the Organization: Swanson suggests four
performance domains in organizations
 Mission
 Process
 Critical Performance
 Individual.

Four Types of Assessments of Outcomes:

Swanson designed a two-row, four- cell matrix to depict four types of drivers.
 Basic : Outcomes are known in advance expected to occur soon.
 Type1: Improvement efforts are rather straightforward, but take a longer time.
 Type2: Performance result may appear anywhere and take to longer to
appear.
 Type3: Result are less predictable.
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UNIT 3

Process of Performance Management

Introduction
Performance measurement is process of assessing toward achieving predetermined
goals -
1. Performance planning where goals and objectives are determined.
2. Performance coaching where a manager intervenes to give feedback and adjust
performance.
3. Performance appraisal where individual performance is formally documented and
feedback delivered.

Application Performance Management (APM) refers to the discipline within

system management that focuses on monitoring.

Business Performance Management (BPM) set of processes that help business

discover efficient use of their business units.

Operational Performance Management (OPM) focus is on creating methodical and

predictable ways.

Planning : Planning refers to setting performance expectations and goals for groups
and individual to channelize their efforts toward achieving organizational objectives.

Monitoring : Monitoring well means consistently measuring performance and

providing ongoing feedback to employees and work groups.

Developing : Developing in this instance means increasing the capacity to perform

through training, giving assignment that introduce new skills or higher levels of
responsibility, improving work processes, or other methods.

Rating : Rating means evaluating employee or group performance against the

elements and standard in an employee’s performance plan and assigning a
summary rating of record.

Rewarding : Rewarding means recognizing employees, individually and as

members of groups, for their performance and know edging their contribution to the
agency’s mission.

Corporate Performance Management : Corporate performance management

(CPM) is a concept introduced by Gartner research in 2001, which is “all of the
processes, methodologies, metric and system needed to measure and the
performance of an organisation”.
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UNIT-4

Business Process and Performance Management Framework

Introduction
Performance management methodology was made popular by Kaplan and Norton in
their excellent book The Balanced Scorecard in 1996. Six Sigma is about locating
and rectifying defects in progress to improve efficiency and therefore performance.
Corporate performance management: Integrated with business intelligence (BI)
strategy scorecard, corporate budgeting and planning.

Line of Business Performance Management

Integrated with operational system such as ERP.

Operational Performance Management

Process- oriented business activity monitoring.

Operational Performance Management

Operational performance management today includes operational dashboards,
operational reports well as BAM, alerts and automated recommendations.
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UNIT-5

Performance Appraisal Platforms

Introduction
Performance appraisal, known as employee appraisal, is a method by which the
performance of an employee is evaluated (generally in terms of quality, quantity, cost
and time).

The main aim of the evaluation is to identify the performance gap when performance
does not meet the standard set by the organisation as a acceptable.

The main aim of the feedback system is to inform the employee about the quality of
his or her performance.

Benefits of Appraisal
 Motivation and Satisfaction.
 Training and Development.
 Recruitment and Introduction.
 Employee evaluation.

Appraisal Methods
Locher and Teel (1997) found the three most common appraisal methods in general
rating scale (56%) essay methods (25%) results- oriented or MBO methods(13%).

Rating scale
Rating scale method offers a high degree of structure for appraisal ranging fro “poor”
to “excellent”.

Traits assessed on the scale include employee attributes such as cooperation,

communication ability, initiative, punctuality and technical competence.

A peer review program may be designed by a task force of three to six workers, set
the goals, benefits, and objectives of the program.

Self review are based on the idea that employee are most familiar with their work.
Self review tend to have low halo error and little paperwork for managers.

Upward assessments may be run with managers who have three or more direct
reports.
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UNIT-6

Performance Appraisal Methods

Performance Appraisal Methods: written essay, the simplest essay method, is a

written narrative assessing an employee’s strength, weakness, past performance.
Potential, and provides recommendations for improvements.

1. Comparative standards or Multi- person Comparison

Compares one employee’s performance with that of one more others.
 Individual ranking the supervisor lists employee from highest to lowest.
 Paired comparison the supervisor compares each employee with every
other employee in the group and rates each as either superior or weaker
of the pair.

2. Critical Incidents
The supervisor’s attention is focused on specific or critical behaviour that
separate effective from ineffective performance.

3. Graphic Rating Scale: This method lists a set of performance factors such as
job knowledge, work quality, cooperation that the supervisor uses to rate
employee performance using an incremental scale.]

4. Behaviourally Anchored Rating Scales (BARS)

This combines critical incident and graphic rating scale approaches.

5. Management by Objective
MBO evaluates how an employee has accomplished objectives determined to
be critical in job.

6. 360 Degree feedback

This multi-source feedback method provides a comprehensive perspective of
performance by utilizing feedback from the circle of people with whom the
employee interacts supervision, subordinates and co-workers.

Appraisal Judgement
The halo effect is a rating error that occurs when ratter’s knowledge of an
employee’s performance on one favourable or unfavourable incident collars the
rating on all others
The equal employment opportunity to avoid discrimination based on sex, race, color,
religion, age, or national origin.

Traditional Methods

Essay Appraisal Method : Known as “Free From method” involves a description of

performance of an employee by his superior.
Straight Ranking Method : Oldest simplest techniques appraiser ranks the
employees from the best to the poorest on the basis of their overall performance.
Paired Comparison : Method compares each employee with all others in the group,
one at a time.
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Critical Incidents Methods : Evaluator rates the employee on the basis of critical
events and how the employee behaved during those incident. Includes both negative
and positive points. Reduce the superior personal bias.

Checklist Method : The rate is given a checklist description of the behaviour of the
employees on job.

Graphic Rating Scale : An employee’s quality and quantity of work is assessed in a

graphic scale indicating different degrees of a particular trait. Job knowledge may be
judged on range of average, above average, outstanding or unsatisfactory.

Forced Distribution : To eliminate the element the bias from the ratter’s rating. The
ratter choose the appropriate fit for the categories on his own discretion.

Feedback
Seeking: Larson(1989) has described a social game played by poor performers the
game is called feedback-seeking.
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UNIT-7

Performance Appraisal by Data Management

Introduction
Traditional approach of performance appraisal is characterised by-

 Mere evaluation.
 Being linked to financial reward and sanctions.
 Excludes participation of the employee being assessed.

Employee would desire that the appraisal system should aim at

 Their personal development.

 Their work satisfaction.
 Their involvement in the organization.

Performance appraisal serves the purpose of

 Providing information about human resources and their development.

 Measuring compensation packages to employee.
 Maintaining organisational control.

Approaches and Techniques in Performance Management

 Intuitive approach : supervisor or manager judges employee based on their

perception of the employee’s behaviour.
 Self appraisal approach : Employee is evaluated their own performance
using a common format.
 Group approach : The employee evaluated by a group of persons.
 Trait approach : Conventional approach, supervisor evaluates the employee
on the basis of observable dimensions of personality, integrity, honesty,
dependability, punctuality.
 Behavioural method : focused on observed behaviour and observable
critical incident.

Appraisal Techniques
 Essay appraisal method : Brief essay providing an assessment of the
strengths weakness and potential of the subject.

 Graphic rating method : Graphic scale ‘assesses a person on the quality of

his or her work (average, above average, outstanding, or unsatisfactory)

 Field review method : They inadvertently introduce bias in their ratings.

 Forced-choice rating method : forced-choice method does not involve

discussion with supervisors.
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 Critical incident appraisal method : supervisor describes critical incidents

giving details of both positive and negative behaviour of the employee.

 Management by Objective : the employee are asked to set their own

performance goals.

 Work Standard approach : management establishes the goals openly and

sets targets against realistic output standard.

 Alteration ranking method : alteration ranking method usually involves

rating by more than one assessor.

 Paired comparison : every individual in the group is compared with all others
in the group.

 Person to person rating : Names of the actual individuals known to all the
assessors are used as a series of standards. Standard may be defined as
lowest, low, middle, high and highest performers.

 Checklist method : the assessor is furnished with checklist of rescaled of

behaviour.

 Behaviourally Anchored Rating Scales (BARS) : Consists of sets of

behavioural statements describing good or bad performance with respect to
important qualities. These qualities refer to inter personal relationships,
planning and organizing abilities, adaptability and reliability.

 Assessment centres : Technique is used to predict future performance of

employees were they to be performed.

This bias must inevitably leads to a distortion of the appraisal process.