PERFORMANCE MANAGEMENT

[Audio] Chapter 6 - Performance Management Presented by: Erwin de Guzman.

[Audio] This chapter emphasizes the importance of performance management as a strategic HR tool. It highlights the principle that what is measured, managed, and rewarded will be prioritized. The chapter will delve into three key components of performance management: Managing Performance: This involves setting clear expectations, providing regular feedback, and coaching employees. Measuring Performance: This entails assessing performance against established goals and standards using methods like performance appraisals and KPIs. Rewarding Performance: This recognizes and rewards employees for their achievements, both monetarily and non-monetarily. Although there's no single ideal performance management system (PMS), any PMS should meet the unique needs of an organization. To understand performance management, three perspectives are proposed: Performance management as a system for managing organizational performance Performance management as a system for managing employee performance Performance management as a system for integrating the management of organizational and employee performance. These perspectives help connect and manage performance at both individual and organizational levels..

[Audio] Performance Management at the Organizational Level Performance management at the organizational level is focused on the big picture, aligning individual and team efforts with the overall strategic goals of the company. When performance management is used as a system for managing organizational performance, 1. The focus is on the determination of the organization's strategy, 2. And implementation of that strategy through: organization's structure technology business systems and procedures. Key Activities: Performance Planning- includes activities such as formulating the organization's vision and strategy and defining what is meant by performance. Performance Improvement- takes a process perspective, including such activities as business process re-engineering and continuous process improvement, benchmarking, and total quality improvement. Performance Review- embraces performance measurement and evaluation and includes analyzing results to identify areas for improvement..

[Audio] 2. Employee Performance Management Employee performance management is a system designed to improve individual performance by focusing on goal setting, regular feedback, and development. It involves three key stages: Planning: Goal Setting: Defining clear, measurable, achievable, relevant, and time-bound (SMART) goals. Behavior Identification: Pinpointing specific behaviors that contribute to goal achievement. Performance Measure Selection: Choosing metrics to track progress towards goals. Managing: Monitoring: Tracking employee performance against established goals and standards. Coaching and Feedback: Providing regular feedback to help employees stay on track. Reinforcement: Recognizing and rewarding desired behaviors and achievements. Appraising: Formal Review: Conducting regular performance reviews to assess progress. Development Planning: Identifying areas for improvement and creating development plans. Goal Setting for the Future: Setting new goals for the next performance period. By following these steps, organizations can create a culture of performance excellence, motivate employees, and drive business success. 3.Integrated Performance Management System An integrated performance management system aims to align individual and organizational performance by connecting employee efforts to broader business goals. This approach involves: Strategic Alignment: Ensuring that individual performance goals are directly linked to the organization's strategic objectives. Integration with HR Functions: Utilizing performance data to inform decisions in areas like training, development, compensation, and succession planning. Continuous Improvement: Fostering a culture of continuous learning and improvement..

[Audio] II. Performance Management Approaches Performance management is guided by approaches used by organizations. Key principle: Align corporate strategic goals with business and departmental objectives. Steps in the process: Set performance and development goals. Create performance plans between individuals and supervisors. Continuously monitor progress and provide feedback. Conduct formal performance reviews. Approaches are customized based on the organization's unique needs. Approaches can be applied independently or combined. A. Mixed Model Approach to Performance Management The mixed model approach to performance management combines both results and behaviors in evaluating employee performance. It's particularly useful in dynamic environments where outcomes may be influenced by factors beyond individual control. Key Components of the Mixed Model: Performance Planning: Setting clear, measurable, achievable, relevant, and time-bound (SMART) goals. Identifying the necessary competencies and behaviors to achieve those goals. Creating a performance plan that outlines expectations and timelines. Performance Monitoring and Coaching: Regularly tracking progress towards goals. Providing ongoing feedback and coaching to support employee development. Addressing performance issues promptly. Performance Evaluation and Development Discussion: Conducting formal performance reviews to assess performance against established criteria. Identifying strengths, weaknesses, and development needs. Developing action plans to address performance gaps and enhance future performance. Rewarding Performance: Recognizing and rewarding both performance results and demonstrated competencies. Using a variety of rewards, both monetary and non-monetary, to motivate and incentivize employees. By combining a focus on both results and behaviors, the mixed model approach can help organizations drive performance, improve employee engagement, and achieve strategic goals..

[Audio] B. The Balanced Scorecard The balanced scorecard is a strategic performance management tool that helps organizations track their progress towards achieving their goals. It does this by measuring performance across four key perspectives: Financial Perspective: Measures the organization's financial performance, such as revenue, profitability, and shareholder value. Customer Perspective: Measures customer satisfaction, retention, and acquisition. Internal Process Perspective: Measures the efficiency and effectiveness of internal processes, such as product development, operations, and service delivery. Learning and Growth Perspective: Measures the organization's ability to innovate and improve, such as employee skills, training, and culture. By balancing these perspectives, the balanced scorecard provides a comprehensive view of organizational performance and helps organizations make informed decisions. The European Foundation for Quality Management (EFQM) Excellence Model is a framework for assessing and improving organizational performance. It focuses on nine criteria, divided into five enablers and four results: Enablers: Leadership: The organization's leadership and its ability to inspire and motivate employees. Strategy: The organization's strategic planning and its alignment with its vision and mission. People: The organization's ability to attract, develop, and retain talented employees. Partnerships and Resources: The organization's relationships with external partners and its effective use of resources. Processes: The organization's processes and their efficiency and effectiveness. Results: People Results: The organization's impact on its employees' satisfaction and development. Customer Results: The organization's impact on customer satisfaction and loyalty. Society Results: The organization's impact on society, such as environmental sustainability and social responsibility. Key Performance Results: The organization's overall performance, including financial performance and market share. By assessing these nine criteria, organizations can identify strengths and weaknesses, set improvement goals, and track progress over time. The EFQM model is a valuable tool for organizations seeking to achieve excellence and sustainable performance..

[Audio] D. Performance Prism The Performance Prism is a strategic management framework that helps organizations understand and manage their relationships with stakeholders. It focuses on five key elements: Stakeholders: Identifying key stakeholders and their wants and needs. Strategies: Developing strategies to satisfy the wants and needs of both the organization and its stakeholders. Processes: Implementing processes to deliver on the strategies. Capabilities: Developing the capabilities required to execute the processes effectively. Performance: Measuring and managing performance against the organization's goals and objectives. By considering these five elements, the Performance Prism helps organizations to: Align strategy with stakeholder needs: Ensure that the organization's strategy is aligned with the wants and needs of its key stakeholders. Identify critical performance drivers: Identify the key drivers of performance and focus on improving them. Measure and manage performance: Develop a comprehensive set of performance measures to track progress towards goals. Improve decision-making: Make informed decisions based on a clear understanding of the organization's performance. The Performance Prism is a flexible and adaptable framework that can be used by organizations of all sizes and industries. It is a valuable tool for improving organizational performance and achieving sustainable success. E. Investors in People (IIP) Investors in People (IIP) is a framework for improving organizational performance by investing in people. It focuses on four key principles: Commitment: Organizations must be committed to investing in their people to achieve business goals. Planning: Organizations must develop a plan for how they will develop their people's skills and capabilities. Action: Organizations must implement training and development programs that are aligned with their business objectives. Evaluation: Organizations must evaluate the impact of their training and development initiatives. By following these principles, organizations can improve employee engagement, productivity, and overall performance. IIP is a valuable tool for organizations of all sizes, and it can help them to achieve their business goals..

[Audio] II. Measuring Performance Performance measurement is a critical aspect of effective management. It involves assessing progress against set standards and goals to ensure organizational success. As the famous quote by Peter Drucker states, "You can't manage what you don't measure." Key reasons for performance measurement include: Visibility and Accountability: By measuring performance, organizations can identify areas of strength and weakness, hold individuals and teams accountable, and make informed decisions. Strategic Alignment: Performance measurement helps align individual and team goals with broader organizational objectives. Continuous Improvement: It provides a baseline for tracking progress, identifying opportunities for improvement, and implementing corrective actions. Motivation and Reward: By recognizing and rewarding performance, organizations can motivate employees and foster a positive work culture. Effective performance measurement requires the use of relevant and reliable metrics. These metrics should be: Meaningful: They should measure what matters most to the organization. Objective: They should be unbiased and based on factual data. Quantifiable: They should be measurable and comparable. By implementing a robust performance measurement system, organizations can enhance their overall performance, achieve their strategic goals, and stay competitive in the marketplace. The Need for Performance Measurement Performance measurement is essential for several reasons: Improving Performance: By measuring current performance, organizations can identify areas for improvement and take corrective action. Decision Making: Performance metrics provide valuable data to inform decision-making, such as resource allocation, strategic planning, and operational improvements. Monitoring Strategic Plans: Tracking performance metrics helps organizations assess their progress towards long-term goals. Evaluating Performance: Performance measurement is used to evaluate individual, team, and organizational performance. This information can be used for rewards, promotions, and development planning. Diagnosis: By analyzing performance data, organizations can identify root causes of problems and implement solutions. Continuous Improvement: Performance measurement is a key tool for driving continuous improvement and innovation. Motivation: Recognizing and rewarding performance can motivate employees and boost morale. Benchmarking: Comparing performance to industry standards and competitors can help organizations identify areas for improvement. Documentation: Performance data can be used to document achievements and demonstrate compliance with regulations. Fairness: Performance measurement can help ensure fair and equitable treatment of employees. By focusing on both results (contributions) and behaviors (competencies), organizations can gain a comprehensive understanding of performance and make data-driven decisions..

[Audio] B. Performance Measurement Systems A performance measurement system is a set of tools and techniques used to evaluate an organization's progress towards its goals. It involves measuring the performance of individuals and teams, and aligning their efforts with the overall strategic direction of the organization. Over time, performance measurement systems have evolved from traditional methods like annual ratings to more sophisticated approaches such as: Trait Appraisal: Assessing individual personality traits. Behavioral Measurement: Evaluating employee behaviors and actions. Goal-Driven Appraisal (Management by Objectives): Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals. Behaviorally Anchored Rating Scale (BARS): Using specific behavioral examples to rate performance. 360-Degree Feedback: Gathering feedback from multiple sources, including supervisors, peers, subordinates, and customers. By implementing effective performance measurement systems, organizations can improve decision-making, identify areas for improvement, and drive organizational success . Management by Objectives Management by Objectives (MBO) Management by Objectives (MBO) is a performance management approach that involves setting specific, measurable, achievable, relevant, and time-bound (SMART) goals for employees. This collaborative process between managers and employees aims to: Align Individual and Organizational Goals: Ensure that individual goals contribute to the overall organizational objectives. Improve Performance: Motivate employees and focus their efforts on achieving specific goals. Enhance Communication: Facilitate open communication between managers and employees. Provide Feedback: Offer regular feedback on progress and areas for improvement. The MBO process typically involves the following steps: Goal Setting: Setting clear and measurable goals for the organization and individual employees. Performance Planning: Developing action plans to achieve the set goals. Performance Monitoring: Tracking progress towards goals and providing regular feedback. Performance Review: Conducting formal performance reviews to assess progress and identify areas for improvement. Goal Setting (Repeat): Setting new goals for the next period. While MBO can be a powerful tool for improving performance, it's important to avoid a narrow focus on quantitative measures and to consider qualitative factors as well..

[Audio] 2. Behaviorally Anchored Rating Scales (BARS) Behaviorally Anchored Rating Scales (BARS) is a performance appraisal method that uses specific behavioral examples to rate employee performance. It aims to improve the accuracy and consistency of performance evaluations by providing clear and objective criteria. Key advantages of BARS: Clarity and Objectivity: BARS provides specific behavioral examples, reducing subjectivity and improving the accuracy of ratings. Focus on Behavior: BARS emphasize observable behaviors rather than general traits or personality characteristics. Reduced Rater Bias: By providing concrete examples, BARS can help reduce bias in performance evaluations. However, BARS also have some limitations: Time-Consuming Development: Developing BARS can be time-consuming and requires careful job analysis. Limited Generalizability: BARS may not be easily transferable to other jobs or organizations. Potential for Rigidity: Overreliance on BARS may limit flexibility and adaptability in performance evaluations. Despite these limitations, BARS can be a valuable tool for improving the accuracy and fairness of performance appraisals, especially when used in conjunction with other methods. 3. Quantitatively Measurable Performance Criteria Quantitatively measurable performance criteria focus on numerical measures, such as sales figures, production rates, or customer satisfaction ratings. While these metrics can provide objective data, they have limitations: Limited Scope: They may not capture all aspects of job performance, particularly qualitative factors like creativity, teamwork, or problem-solving skills. Potential for Bias: Even quantitative measures can be subject to bias if not carefully designed and interpreted. Short-Term Focus: Overemphasis on quantitative measures may lead to a short-term focus and neglect long-term goals. Artificial Creation of Metrics: In some cases, metrics may need to be artificially created to measure aspects of performance that are not easily quantifiable. Therefore, while quantitative measures can be valuable, it's important to use them in conjunction with qualitative measures to obtain a more comprehensive assessment of performance..

[Audio] 4. 360-degree Feedback 360-degree feedback is a performance appraisal method that gathers feedback from multiple sources, including supervisors, peers, subordinates, and customers. This multi-rater approach provides a more comprehensive and objective view of an employee's performance. Key benefits of 360-degree feedback: Reduced Bias: By collecting feedback from multiple sources, it can mitigate biases and provide a more accurate assessment. Enhanced Self-Awareness: It helps employees gain a better understanding of their strengths and weaknesses. Improved Performance: It can lead to improved performance by identifying areas for development and providing targeted feedback. Enhanced Communication: It fosters open communication and builds stronger relationships between employees. Succession Planning: It can be used to identify high-potential employees and develop future leaders. By using 360-degree feedback effectively, organizations can improve employee performance, engagement, and overall organizational effectiveness. IV. Rewarding Performance Rewarding performance is a crucial aspect of effective performance management. It involves recognizing and rewarding employees for their contributions to the organization's goals. Key points to consider when designing a reward system: Alignment with Organizational Goals: The reward system should align with the organization's overall strategy and values. Fairness and Equity: Rewards should be distributed fairly and equitably based on performance. Timely Recognition: Timely recognition and rewards can significantly boost employee motivation. Variety of Rewards: A mix of monetary and non-monetary rewards can cater to different employee preferences. Feedback and Development: Rewards should be linked to feedback and development opportunities. By implementing a well-designed reward system, organizations can motivate employees, improve performance, and foster a positive work environment..

[Audio] Thank you for listening,. Thank you. The End.