What is Performance Mangagement?

Performance management is a term that is used by many and understood by few. The most common error is in its confusion with the term performance appraisal. To set the record clear, here are the differences:

Performance Appraisal: A methodology for periodically evaluating, documenting and discussing employee performance. Traditional performance appraisal relies on the promise of economic reward and the threat of punishment to motivate employees toward desired behaviors.

Performance Management: A methodology for continually motivating employees toward desired behaviors by means of ongoing training, coaching, guiding, demonstrating, counseling and encouraging. Performance management relies on continuous feedback and positive reinforcement.

Key Reasons for a Performance Management Program

  • To improve employee performance
  • To encourage and improve employee/manager 2-way communication
  • To guide decisions about:
    • economic rewards
    • promotions/demotions
    • transfers
    • terminations
    • training needs
    • developmental needs (counseling, coaching)
    • backup/succession planning
How to Design a Performance Appraisal Program

Performance Management programs must be aligned with the company's culture and value, as well as its business and organizational goals. Working with management and employee representatives:

  • Consider your company's culture, values, and business and organizational goals. All else flows from this.
  • Choose a methodology and techniques for assessing performance. Your options include:
    • Factor rating: Uses a fixed set of factors (e.g. accuracy, attendance, productivity, planning and organization of work, decision-making, meeting time commitments, written communication) to pinpoint strengths and weaknesses.
    • Flexible Factor Rating: Raters (often together with job incumbent) customize factors for each job by selecting from a pre-approved list. These factors may be weighted for their relative importance to the job.
    • Narrative (or Essay): Rater writes one or more paragraphs describing the performance of the employee. The scope can include employee promotability, special talents/skills, strengths and weakness. Specific incidents are often documented. The content may be semi-structured or structured by guidelines and/or topic headings.
    • Goal Setting: Performance goals are agreed to, in advance, by supervisor and subordinate and serve as measuring rods for performance rating.
    • Job Standards: These are quantified yardsticks against which performance can be evaluated. Standards can be customized by job or by work unit. Some standards are applicable for all jobs, organization-wide. Typically, standards are used in manufacturing operations or where an organization has a structured workflow.
    • Behaviorally Anchored Rating Scale(s)–BARS: Based on observed employee behaviors, the rater selects the closest description provided on a scale or continuum of behaviors, thereby determining a performance evaluation point value. The rater uses as many behaviorally anchored scales as needed to reflect the dimensions of performance in question. Two examples of dimensions are job knowledge and problem solving.
    • Accountabilities: This approach uses the job description as the basis for measuring performance. All the statements in job description can be used, or some statements can be selected for the purpose of performance appraisal. Statements may be weighted for importance. Accountabilities may also be translated into job standards and/or goals.
    • Rank comparison: Employees can be ranked or grouped into performance rating categories. This approach lends itself to a forced distribution or hierarchy of ratings. Ranking can be done by comparing each individual against all others in total performance, or the ranking may be done by selected criteria or factors.
    • Critical Incident: This approach calls for continuous documentation of events, both good and bad. At the end of the performance period, this record is reviewed and used to arrive at an overall appraisal.
    • 360 Degree (Multi-Rater) Feedback: Some companies expand the number of people who rate an employee's performance to include his/her peers, subordinates and, less frequently, people outside the company with whom the employee regularly works (e.g., customers, vendors, consultants). Multi-rater feedback is best used for developmental purposes only.
  • Eliminate uphill battles by finding and attracting the right person for each job.
  • Remember that excellent results are created by excellently valued, trained and motivated employees. Your human resources investment will be paid back with huge dividends!