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Chapter 9
CONDUCTING PERFORMANCE MANAGEMENT
Opening Case: Managing Human Resources at Frito-Lay
Frito-Lay products are put on store shelves by route sales representatives
(RSRs), who are measured using sales figures, because the job was paid on
commission. However, because of low productivity and high turnover of the
RSRs, supervisors now evaluate each RSR on sales tasks, driving and delivery
tasks, and merchandising tasks. RSRs have two types of routes: low-sales-
volume routes, which had many small retailers, and high-sales-volume routes,
which had only a few retailers but where each retailer sold much more product.
Analysis showed that sales skills had the greatest impact on the low-volume
routes. More specifically, being able to negotiate greater shelf space was critical
to sales and customer satisfaction on these routes. On high-volume routes,
driving and delivery skills had the greatest impact on sales and customer
satisfaction, primarily because of the tight delivery windows large retailers
imposed on RSRs. Thus Frito-Lay was able to restructure the job of RSRs so
that the most important tasks for the specific type of route assigned to RSRs
were the highest priority. The new measures made it possible to track
performance on the tasks that mattered most and helped RSRs understand how
to increase sales and maximize their commissions.
CHAPTER OUTLINE
I. THE STRATEGIC IMPORTANCE OF PERFORMANCE MANAGEMENT
The common objectives served by effective performance measurement and
feedback include: enhancing employee motivation and productivity, facilitating
strategic change, and ensuring legal compliance.
Performance management is a formal, structured process used to measure,
evaluate, and influence employees’ job-related attitudes, behaviors, and
CHAPTER 9 Conducting Performance Management
A. Enhance Motivation and Productivity
Exhibit 9.2 presents an integrated model of employee motivation and
performance. The core element of the model is expectancy theory. This
theory says that people choose their behaviors and levels of effort based
on their perception of the extent to which their effort will lead to desired
behaviors and outcomes. An employee’s motivation is based on how an
employee answers three questions:
1. Performance Goals
Research supports goal setting—accepted goals that are clearly
2. Expectancy Theory
If an employee makes an effort, will the employee be able to perform
as intended? Effective selection and training help employees feel
confident in their ability to perform. What consequences, if any, will
follow from an employee’s decision to perform? An HRM system must
3. Interdependent Others
Eventually, your own motivation suffers if your performance is not
4. Satisfaction
The model in Exhibit 9.2 indicates that employee job satisfaction is
Teaching Note: Both expectancy theory and equity theory are part of the
Teaching Note: Equity theory states that an individual compares the ratio
of their outcomes to their inputs with the outcome/input ratio of a relevant
other.
B. Support of Strategic Objectives
C. Detection of Performance Problems
Performance management can be used to detect problems associated
II. PERFORMANCE MANAGEMENT WITHIN AN INTEGRATED HRM
SYSTEM
A. The Internal Environment
1. Performance-Driven Company Culture
As competitive pressures increase, many employers are paying
greater attention to performance measurement. It is not unusual for
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2. Technology
Technology also makes it possible for employees to receive detailed
1. Laws and Regulations
2. Country Cultures
Because performance management occurs through interpersonal
interactions, it naturally reflects differences in country cultures.
Addressing such cultural differences is a significant challenge for many
MNCs, as we describe later in this chapter under Current Issues.
C. Other HR Activities
Because performance management is so central to managing human
resources, all other HR activities should also be closely aligned. For
example, the development of fair and legally sound performance
opportunities.
III. THE HR TRIAD
Performance management systems often do not achieve their objectives
because line managers, HR professionals and employees do not have clearly
defined roles in the process. The feature The HR Triad: Roles and
Responsibilities for Measuring Performance and Providing Feedback provides
a summary of what needs to be done by the various players in the process.
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The primary performance management responsibilities of employees are
C. HR Professionals
The responsibilities of HR professionals include ensuring that the
organization’s performance management practices are integrated with
other elements of the HR system, that they support the organization’s
objectives, and that they meet legal requirements of the system. HR
professionals also ensure that the system gets implemented appropriately.
1. Provide Support to Managers
HR professionals should be proactive in developing an organization’s
2. Hold Managers Accountable
A common barrier to the effective use of performance measurement
3. Provide Support to Employees
HR professionals can support employees by talking to them about
IV. WHAT TO MEASURE
Performance criteria are the dimensions against which the performance of an
incumbent, team, or work unit is evaluated. Job analysis should provide much
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of the needed input here. Three types of performance criteria often assessed
are personal traits, behaviors, and objective results.
A. Personal Traits
Focusing on personal characteristics such as loyalty, dependability,
conscientiousness, and leadership, these criteria have often led to
B. Behaviors
Behavioral criteria focus on how work is performed. Desirable work
behaviors are identified and the employee’s performance is assessed in
terms of whether or not those behaviors are exhibited on the job.
Customer service jobs and managerial jobs are examples of how
behavioral criteria can be used to measure performance.
1. Task-Related Behaviors
2. Organizational Citizenship Behaviors
C. Objective Results
What was accomplished or results obtained, not how they were obtained,
is the focus here. This approach may not be appropriate for every job and
may miss critical aspects of the job that are difficult to quantify.
D. Multiple Criteria
Most jobs are composed of many different duties and tasks that require
many different competencies. Given this, different types of criteria (e.g.,
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V. WHEN TO MEASURE
A. Focal-Point Approach
In this system, all employees are appraised at the same time, usually the
B. Anniversary Approach
By doing appraisals on the anniversary of an employee’s joining the
C. Natural Time Span of the Job
Another approach is to schedule reviews to correspond with the natural
VI. WHO PARTICIPATES
There are many sources of performance data, including organizational records,
supervisors, employees themselves, peers or team members, subordinates,
and customers. Each source has advantages and disadvantages. To
compensate, organizations involve multiple participants when measuring
performance and providing feedback.
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A. Supervisors
The employee’s immediate boss should know a great deal about the
B. Self-Appraisal
These tend to increase employees’ satisfaction with the appraisal process
Teaching Note: This type of appraisal may not work well with employees
who are from a collectivist culture.
C. Peers
D. Subordinates
Sometimes called upward appraisal, this is still in the process of catching
Teaching Note: This type of feedback will only be successful if it is
delivered anonymously.
E. Customers
Asking customers to provide feedback about service, the way employees
treated them, etc. is increasing in popularity. Using customers as
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F. 360-Degree Appraisals
Information is collected from a variety of people who surround the
employee and interact with him/her in many different ways. The 360
VII. HOW TO MEASURE
Although some direct measures for performance appraisal are available for
some jobs, the most widely used formats are judgmental.
A. Comparative Formats
For many HR decisions, the fundamental questions often are: Who is the
best performer in the group? Who should be retained if cutbacks are
made? Who should be assigned a specific task? For these types of
1. Straight Ranking
The appraiser lists the focal employees or teams in order, from best to
2. Forced Distribution
The rater distributes the employees across several categories of
B. Absolute Standards Formats
1. Graphic Rating Scales
Introduced in the 1920s, direct output measures are not needed in
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2. Behaviorally Anchored Rating Scales (BARS)
Dissatisfaction with graphic rating scales led to formats that include
3. Behavioral Observation Scales (BOS)
A recent development, raters are asked not to judge the level of job
Teaching Note: Ask students if they would prefer an appraisal based on
graphic rating, BARS or BOS, and ask them to explain their reasoning.
Does the type of job matter?
C. Results-Based Formats
1. Direct index approach
2. Management by Objectives (MBO)
VIII. THE RATING PROCESS
Bias, cognitive errors, the social setting, and specific organizational
characteristics all may affect the rating process. Many errors may creep
into the process at various junctures.
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A. Rating Errors
B. Improving Rater Accuracy
Strategies for enhancing the accuracy of performance appraisal ratings
include rating scale formats, memory aids, rater training, rewards for
accurate and timely appraisals, and the use of multiple raters.
1. Precise Rating Scale Formats
Performance appraisal ratings tend to be more accurate when the
performance criteria and rating scales are precise. Effective rating
scale formats include:
• Each performance dimension addresses a single job activity
2. Memory Aids
3. Rater Training
4. Rewards for Accurate and Timely Appraisals
5. Multiple Raters
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IX. PROVIDING FEEDBACK
A. Understanding Attributions
Performance discussions are most productive when both parties agree to
suggestions on how to improve future performance. This may be difficult if
B. Timing
C. Preparation
A source of conflict is the differing perspectives the participants bring to
the process. For subordinates, the focus is outward, on the environment
D. Content of the Discussion
Supervisors should use the interview as a problem-solving session, where
they listen and reflect back to the subordinate.
1. Diagnosis
The objective of diagnosis is to understand the factors that affect an
2. Removing Roadblocks
The results of the diagnostic process can guide both the supervisor
and subordinate in forming an action plan to address problems that are
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E. Follow-Up
Verification of understanding, feedback, and reinforcement should be part
of an effective follow-up if behavior is going to change as expected.
Positive reinforcement involves using positive rewards to increase the
occurrence of the desired performance. It is based upon two fundamental
F. When Nothing Else Works
Some situations require drastic steps, including when:
➢ performance gets worse.
X. CURRENT ISSUES
A. Automated Performance Management
Technological advances that allow for the automation of an integrated
performance management system can:
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B. Monitoring through Technology
Technological advances when applied to performance management have
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QUESTIONS FOR REFLECTIVE THINKING AND DISCUSSION
1. What are the advantages and disadvantages of Frito Lay’s approach to
performance measurement?
Advantages include having all employees on a single, integrated plan; linking
2. Why is job analysis essential for the development of appropriate
performance measures?
Job analysis provides the framework for creating a performance appraisal
3. Under what conditions do you think an HPWS is likely to not be
beneficial?
4. What are the advantages and disadvantages of 360-degree appraisals?
5. How can poorly-designed performance measures contribute to poor
employee performance? Can well-designed measures contribute to
improving performance? Explain.
By not linking performance measures to the strategy of the organization, the
6. Assume you are supervising employees who fall into one of three
categories:
a. Effective performers who have lots of potential for advancement.
b. Effective performers who are happy to stay where they are and
who lack motivation or ability (or both) for advancement.
c. Ineffective performers.
You’ve assessed their performance, and now it’s time to have a
feedback session. Explain how your discussions will be similar and how
they will be different.
In order to preserve fairness, the interviews would all be consistent in that
7. Explain how the differing attributions of employees and their
supervisors can create conflicts or disagreements in performance
appraisal and feedback discussions.
Performance discussions are most productive when both parties agree to
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8. Do you think employers should be allowed to use biometric technology
to track the movement of all employees? Or is such monitoring
demeaning and unnecessary? Explain your opinion.
CASE STUDY: 360-DEGREE APPRAISALS AT GE
DISCUSSION QUESTIONS:
NOTE: This production facility has a highly autonomous team oriented
culture in which the teams are accustomed to making their own decisions
and engaging in self governance. Rather than Sims acting contrary to that
culture by making the decisions regarding each of the following questions,
it might be better to train at least one member from each of the nine teams
in terms of the 360-degree appraisal process and have them work within
their teams to share that training and then have each team develop their
own answers to the following questions. The trained person from each
team could then become part of a committee consisting of representatives
of all teams to work out differences and develop a final plan to be
presented in a meeting with Sims. Sims could then negotiate with that
committee and hopefully develop a mutually satisfactory approach but she
must recognize her ultimate responsibility for the plan and thus must take
the risk that she may have to reject some aspect of the committee’s plan
and thus create dissatisfaction. However, any dissatisfaction using this
approach is likely to be less since the plan would have been largely
imposed on the workers by themselves.
1. Will you use one set of performance dimensions for everyone, or will
people in different jobs be evaluated on different dimensions? Explain your
logic.
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2. How will you determine the specific content of the 360- degree appraisal
form?
3. What type of format will be used to make the appraisal ratings?
4. For members of the nine production teams, who will provide
performance assessments? All members of the team? Members of other
teams? Will Sims provide evaluations of all employees?
5. How will feedback be handled?
6. The plant is operating well right now. What steps will you take to ensure
that this new activity doesn’t reduce the plant’s productivity?
See the above note. If the system to evaluate employees is largely developed by
CHAPTER 9 Conducting Performance Management
VIDEO CASE STUDY: METROPOLITAN BAKERY
Instructors: The following video case can be found on the companion DVD. The
video can be used in class as an introductory activity or a post-lecture activity, as
well as an online assignment for those students using CourseMate.
DISCUSSION QUESTIONS:
1. Metropolitan Bakery rewards good performance through feedback. How
effective does that appear to be?
2. How is feedback related to raises? Would you like that system if you
were an employee? Does the fact that this is a small business (in which
you would know the owners) make a difference?
Answers will vary. Since the firm is relatively small, it does not function in the
3. How effective is the performance appraisal system at the bakery?
The firm does have an appraisal form and it is discussed with employees at
4. It is possible that good performance may result in a raise. What is the
potential outcome of bad performance? What seems to be some of the
things that will be viewed as bad performance – other than
incompetence?