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Chapter 10
Managing Employees’ Performance
This chapter examines a variety of approaches to performance management. It begins by
describing the activities involved in managing performance and then discussing the purpose of
carrying out this process. Next, the chapter identifies specific approaches to performance
management, including the strengths and weaknesses of each approach. It also looks at various
sources of performance information. The following section of the chapter explores the kinds of
errors that commonly occur during the assessment of performance, as well as ways to reduce
those errors. Then the chapter describes ways of giving performance feedback effectively and
intervening when performance must improve. Finally, it summarizes legal and ethical issues
affecting performance management.
This chapter may present a different challenge from the preceding chapters. While the content
may be recognizable, student experiences with performance management, specifically
performance evaluations; may be mixed and quite possibly negative.
Chapter Outline
• Performance management is the process through which managers ensure employees’
activities and outputs contribute to the organization’s goals.
The Process of Performance Management
• Step 1: Identifying what the company is trying to accomplish (i.e., its goals or
objectives).
• Step 2: Developing employee goals and actions to achieve these outcomes.
• Step 3: Providing employees with training, necessary resources and tools, and ongoing
feedback between the employee and manager.
• Step 4: Evaluating performance.
• Step 5: Both the employee and the manager identifying what the employee can do to
capitalize on performance strengths and address weaknesses.
• Step 6: Providing consequences for achieving (or failing to achieve) performance
outcomes.
Purposes of Performance Management
• Organizations establish performance management systems to meet three broad purposes:
• Strategic purpose
• Administrative purpose
• Developmental purpose
Criteria for Effective Performance Management
• Fit with strategy
• Validity
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• Reliability
• Acceptability
• Specific feedback
Methods for Measuring Performance
• Comparisons
• Ratings
• Measuring results
• Total quality management (TQM)
Sources of Performance Information
• Performance information may come from an employee’s self-appraisal and from
appraisals by the employee’s supervisor, employees, peers, and customers.
• Organizations may combine many sources into a 360-degree performance appraisal.
Errors in Performance Measurement
• Organizations can minimize appraisal politics by establishing a fair appraisal system,
involving managers and employees in developing the system, allowing employees to
challenge evaluations, communicating expectations, and having open discussion.
Giving Performance Feedback
• Performance feedback should be a regular, scheduled management activity, so that
employees can correct problems as soon as they occur.
Finding Solutions to Performance Problems
• The final feedback stage of performance management involves identifying areas for
improvement and ways to improve performance in those areas.
Legal and Ethical Issues in Performance Management
• A system is more likely to be legally defensible if it is based on behaviors and results,
rather than on traits, and if multiple raters evaluate each person’s performance.
Learning Objectives
LO 10-1: Identify the activities involved in performance management.
LO 10-2: Discuss the purposes of performance management systems.
LO 10-3: Define five criteria for measuring the effectiveness of a performance management
system.
LO 10-4: Compare the major methods for measuring performance.
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LO 10-5: Describe major sources of performance information in terms of their advantages and
disadvantages.
LO 10-6: Define types of rating errors and explain how to minimize them.
LO 10-7: Explain how to provide performance feedback effectively.
LO 10-8: Summarize ways to produce improvement in unsatisfactory performance.
LO 10-9: Discuss legal and ethical issues that affect performance management.
Society for Human Resource Management Body of Competency &
Knowledge
This chapter contains content, which may be identified within the following content areas:
• Employee Engagement
• Organizational Effectiveness & Development
• Diversity & Inclusion
• U.S. Employment Law & Regulations
• Business & HR Strategy
• Learning & Development
• Total Rewards
• Technology & Data
Human Resource Certification Institute’s A Guide to the HR Body
of Knowledge
This chapter contains content, which may be identified within the following content areas:
• Business Management & Strategy
• Human Resource Development
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Question Guidance to Vignettes and Discussion Questions
Best Practices
Goldman Sachs Makes Performance Management a Priority
1. How would it support the organization’s strategy to give employees specific guidance in
how to improve?
2. Which of the changes described here contribute to the developmental purpose of
Goldman’s performance management system?
HR Oops!
Employees Unclear on Performance Expectations
1. What problems will an organization experience if its employees don’t fully understand
what is expected of them?
2. For the developmental purpose of performance management, a company might search
through its database of performance feedback to find employees with accomplishments
that make them good candidates for projects or promotions. How would specific (instead
of general) feedback support this purpose?
Fundamentals of Human Resource Management, 8e Instructor’s Manual
Did You Know?
Top Metrics in Performance Appraisals
1. Of the measurements shown, which would you consider to be the most important? The
least important?
HRM Social
Apps Are Enabling Real-Time Feedback
1. Would you expect co-workers’ feedback on an app to be mostly helpful or unhelpful?
Why?
2. Would you expect managers’ feedback to be mostly helpful or unhelpful? Why?
HR How To
Delivering Positive Feedback
1. When you receive feedback (at work, in school, or in your personal life), is it easier for
you to accept praise or criticism? Do you think you learn equally well from both?
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2. Think about an example of praiseworthy behavior you have observed recently, at work or
anywhere else. Imagine you have an opportunity to give this person positive feedback.
Applying the list of guidelines, write a brief statement of positive feedback for the
person. (If you have the chance, give the feedback, and observe the person’s reaction.)
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End of Chapter Questions and Cases
Thinking Ethically
What Are the Ethical Boundaries of Tracking Employee Activities?
1. How can high-tech collection of performance data be done consistently with the basic
human rights upheld by the U.S. Constitution, such as the rights of free speech and due
process?
2. Imagine you work for a hospital that wants to track the travel patterns of its nurses to
ensure they work efficiently and that each patient is visited a certain number of times
each day. What measure would you recommend to promote fairness in the way the
system is implemented?
Review and Discussion Questions
1. How does a complete performance management system differ from the use of annual
performance appraisals? (LO 10-1)
2. Give two examples of an administrative decision that would be based on performance
management information. Give two examples of developmental decisions based on this
type of information. (LO 10-2)
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Hill Education.
decision making related to employee retention, termination for poor behavior, and hiring
or layoffs. Suggested responses for the administrative decisions may include deciding the
percentage of hourly wages to offer as a pay incentive and deciding which benefits to
offer employees in a cafeteria plan.
Developmental purposes of performance management serve as a basis for developing
employees’ knowledge and skills. Effective performance feedback makes employees
aware of their strengths and of the areas in which they can improve. Suggested responses
for the developmental decisions may include requiring an employee to attain higher
education for his or her job or sending an employee to another facility in order to learn
the operation of a specific piece of equipment.
3. How can involving employees in the creation of performance standards improve the
effectiveness of a performance management system? (Consider the criteria for
effectiveness listed in this chapter.) (LO 10-3)
4. Consider how you might rate the performance of three instructors from whom you are
currently taking a course. (If you are currently taking only one or two courses, consider
this course and two you recently completed.) (LO 10-4)
a. Would it be harder to rate the instructors’ performance or to rank their performance?
Why?
b. Write three items to use in rating the instructors—one each to rate them in terms of an
attribute, a behavior, and an outcome.
c. Which measure in (b) do you think is most valid? Most reliable? Why?
d. Many colleges use questionnaires to gather data from students about their instructors’
performance. Would it be appropriate to use the data for administrative decisions?
Developmental decisions? Other decisions? Why or why not?
5. Imagine that a pet supply store is establishing a new performance management system to
help employees provide better customer service. Management needs to decide who
should participate in measuring the performance of each of the store’s salespeople. From
what sources should the store gather information? Why? (LO 10-5)
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6. Would the same sources be appropriate if the store in Question 5 used the performance
appraisals to support decisions about which employees to promote? Explain. (LO 10-6)
7. Suppose you were recently promoted to a supervisory job in a company where you have
worked for two years. You genuinely like almost all your co-workers, who now report to
you. The only exception is one employee, who dresses more formally than the others and
frequently tells jokes that embarrass you and the other workers. Given your preexisting
feelings for the employees, how can you measure their performance fairly and
effectively? (LO 10-7)
8. Continuing the example in Question 7, imagine that you are preparing for your first
performance feedback session. You want feedback to be effective—that is, you want the
feedback to result in improved performance. List five or six steps you can take to achieve
your goal. (LO 10-7)
9. Besides giving employees feedback, what steps can a manager take to improve
employees’ performance? (LO 10-8)
10. Suppose you are a human resource professional helping to improve the performance
management system of a company that sells and services office equipment. The company
operates a call center that takes calls from customers who are having problems with their
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equipment. Call center employees are supposed to verify the problem is not one the
customer can easily handle (for example, equipment that will not operate because it has
come unplugged). Then, if the problem is not resolved over the phone, the employees
arrange for service technicians to visit the customer. The company can charge the
customer only if a service technician visits, so performance management of the call
center employees focuses on productivity – how quickly they can complete a call and
move on to the next caller. To measure this performance efficiently and accurately, the
company uses electronic monitoring. (LO 10-9)
a. How would you expect the employees to react to the electronic monitoring? How
might the organization address the employees’ concerns?
b. Besides productivity in terms of number of calls, what other performance measures
should the performance management system include?
c. How should the organization gather information about the other performance
measures?
Answer: While electronic monitoring provides detailed, accurate information, employees
Taking Responsibility
Asana’s Performance Management Aligns with Its Values
1. How well do you think Asana’s approach to performance management meets the (a)
strategic, (b) administrative, and (c) developmental purposes of performance
management? Use evidence from the case to support your opinions.
2. Like other high-tech companies, Asana is struggling to build a more diverse workforce.
Identify two ways the company is or could be ensuring that its performance management
system does not discriminate.
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managerial decision making or appraisals are taking place, acknowledgment of potential
ratings errors, based on common tendencies.
Managing Talent
Deloitte’s Approach to Performance Management Pays Off
1. What changes did Deloitte make in the kinds of data it collects? What are some pros and
cons of the changes?
2. Based on the information given, how well does the new system meet each of the criteria
for effective performance management (strategic, valid, reliable, acceptable, and specific)
HR in Small Business
Retrofit’s Mobile Performance Management
1. What methods for measuring performance would be most suitable for the system Retrofit
is using? Why?
2. What advice would you give managers at Retrofit to help them deliver performance
feedback effectively when they meet with their employees?
Fundamentals of Human Resource Management, 8e Instructor’s Manual
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Hill Education.
goals that were jointly set, get the feedback, and then make necessary changes in order to
improve performance.
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Recommended Connect Activities
Criteria for Conducting Employee Evaluations
Learning Objective: 10-03 Define five criteria for measuring the effectiveness of a performance
management system.
Activity Summary: In this case analysis, students evaluate the effectiveness of performance
measures at Heavenly Handbags, a fictional company.
Follow-Up Activity: Using the “Did You Know” box feature on page 310, students should
provide specifics on how the five criteria would be exampled/measured for the listed
performance measures. This could be done as an entire class activity, or individually as a post-
assessment.
Appraisal Methods: Rating Behaviors
Learning Objective: 10-04 Compare the major methods for measuring performance.
Activity Summary: In this matching exercise, students will discover terms associated with
behavioral and attribute-based ratings and place them in the appropriate category.
Follow-Up Activity: Read about the appraisal process of McDonald’s in the UK on their
website. Working in small groups, have students come up with specific McDonald’s examples
for each of the six criteria provided in the original activity.
Caroline’s Performance Evaluation
Learning Objective: 10-07 Explain how to provide performance feedback effectively.
Activity Summary: This case analysis focuses on improving the performance appraisal and
feedback process.
Follow-Up Activity: Role play the appraisal process among students or between the instructor
and a student. Prior to this appraisal, students would need to provide a short summary of their job
responsibilities, problems they have experienced, and what they would like to achieve. The
“manager” would start the conversation with the open-ended questions found in Learning
Objective 10-7. Recreating a specific example may take too many resources, but practice in
asking/answering questions would be very beneficial from the managerial perspective.
CHRO Conversations: Executive VP of HR Mirian Graddick-Weir, Merck
Learning Objective: 10-01 Identify the activities involved in performance management.
Activity Summary: This video case helps students understand the importance of employee
performance feedback and how that feedback can be offered.
Follow-Up Activity: Activities can revolve around the entire performance management
improvement process, or it can be broken up in to the main strategies discussed in the video. In
either form, students should take the strategies used by Merck and then apply them to their own
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work situations. For example, would a three rating system work at your organization and what
would it look like? All Merck strategies can be used in the activities and discussions.
Fundamentals of Human Resource Management, 8e Instructor’s Manual
Classroom Exercises
Students may benefit from exercises that illustrate the concepts of the chapter. Use these along
with CONNECT activities.
1. Understanding Performance Management
Instructors may engage students in a general discussion meant to support the
understanding of performance management. They may first ask for a student’s general
experience—what was it and how was it? Instructors may then ask students to respond to
Review and Discussion question #1. As students reflect and respond, instructors may
have students compare and contrast their own personal experience pertaining to whether
it was a full performance management system or an annual performance appraisal.
2. Performance Feedback Practice
To understand and practice feedback in performance management, instructors may have
students discuss question #2 in both the HR How To and the HR in Small Business.
Instructors may further urge students to consider the impact of feedback on performance
by utilizing Review and Discussion question #9.
3. Methods for Measuring Performance Discussion
Instructors may have students review Table 10.1 and the content in this section. Then,
instructors may ask students to review the Did You Know? vignette and discuss the merits
and relative pros/cons of using the approach described. Then, instructors may have
students discuss question #1 in HR in Small Business and compare the merits of the
immediate assessment occurring through the mobile devices to the performance appraisal
described in the vignette.
4. HRM Career Considerations
Instructors may wish to have students identify components in Chapter 10 within both the
Society for Human Resource Management Body of Competency & Knowledge and the
Human Resource Certification Institute’s A Guide to the HR Body of Knowledge.
Discussion could focus on how these chapter concepts are important to the development
of their careers and potential certification.
5. Vignette Discussions
Any of the vignettes (see above), may be employed for classroom discussion. Students
could be asked to respond as individuals or placed into groups for discussion. Individuals
and/or groups may then be asked to defend their responses and rationale when comparing
and contrasting other responses.