CHAPTER 8
PERFORMANCE MANAGEMENT
CHAPTER OUTLINE
8.1 Performance Management Systems
8.1a The Purposes of Performance Management
8.2 Developing an Effective Performance Management System
8.2a What Are the Performance Standards?
8.2b Do Your Performance Reviews Comply with the Law?
8.2d Putting It All Together: 360-Degree Evaluations
8.2e Training Appraisers
8.3 Performance Review Methods
8.3b Behavioral Methods
8.3d Which Performance Review Method Should You Use?
8.4 Performance Review Meetings and Feedback Sessions
8.4b Conducting the Performance Review Meeting or Feedback Session
8.4c Improving Performance
LEARNING OUTCOMES
After studying this chapter, students should be able to:
1. Explain what performance management is and how the establishment of goals, ongoing
performance feedback, and the evaluation process are part of it.
GENERATING INTEREST
Acquaint students with a free online HR resource that requires registration:
www.workforce.com. Give them a brief overview of the site, ending with the Research
Center. After showing them the Research Center’s search feature and topic areas and
explaining that regular updates on these topics are provided, click on “Performance
Appraisals” and select a story to feature.
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Ask students based on their reading of the chapter what factors may contribute to this
apparent bias creeping into the performance ratings.
Possible responses: supervisors need to (1) make a greater effort to ensure that they are
communicating performance standards equally well to all employees, (2) eliminate rater
error, and (3) emphasize coaching as a means of taking a more active role in the success of
minority employees’ performance.
DEALING WITH TROUBLE SPOTS
Figure 8.10, “Performance Diagnosis,” can be challenging to understand. Nevertheless,
because it focuses on how to improve performance, it may warrant extra class time to
ensure that students understand its importance and how to use it. If employees are not
performing well, supervisors should find out what is causing the poor performance
(diagnosis) and determine an appropriate course of action to improve the performance.
LECTURE OUTLINE
Discussion Starter #1: A substantial number of organizations, including Adobe Systems, the Gap,
Microsoft, General Electric, and IBM, have abolished their performance reviews in favor of
continuous feedback and coaching. What advantages do continuous feedback and coaching offer
over performance reviews?
ANSWER: Providing continuous feedback rather than conducting annual or semiannual performance
8.1 Performance Management Systems Figure 8.1
Figure 8.2
Figure 8.3
Performance management is the process of creating a work environment in which people
Teaching Tip: Use Figure 8.1 to discuss how the performance review fits into the performance
management process.
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Strategic Relevance
Strategic relevance refers to the extent to which the performance standards relate to
the strategic objectives of the organization in which they are applied.
Criterion Deficiency
The performance standards should capture the entire range of an employee’s
performance.
Criterion Contamination
Factors outside the employee’s control can influence his or her performance.
Reliability
Reliability refers to the stability or consistency of a standard or the extent to which
Fairness and Acceptability
8.2b Do Your Performance Reviews Comply with the Law?
Performance reviews must meet certain legal requirements. Some court decisions
indicate that employers might face legal challenges when evaluations indicate an
employee’s performance is acceptable or above average but then the person is later
passed over for promotion, disciplined for poor performance, discharged, or laid off
from the organization.
Performance reviews should meet the following legal guidelines:
• Performance ratings must be job-related with performance standards
developed through a job analysis.
• Employees must be provided with clear, written job standards in advance of
Chapter 8: Performance Management 5
• The reviews should be discussed openly with employees and counseling or
8.2c Sources of Performance Review Information
Employees can be rated by many people.
Teaching Tip: Use Figure 8.5 as you discuss possible raters.
Manager/Supervisor
Manager and/or supervisor evaluation is a performance evaluation done by an
employee’s manager and often reviewed by a manager one level higher.
The Employee
Self-evaluation is a performance evaluation done by the employee being evaluated,
generally on an evaluation form completed by the employee prior to the evaluation
meeting.
Subordinates
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Video Highlight #1: Section 8.2c: Sources of Performance Review Information
VIDEO: How to Write an Effective and Powerful Self-Evaluation for a Performance Review (1:32)
A management and sales trainer provides tips on how to write an effective and powerful self-
8.2d Putting It All Together: 360-Degree Evaluations
Teaching Tip: Use Figure 8.6 to evaluate the pros and cons of 360-degree appraisals.
Video Highlight #2: Section 8.2d: Putting It All Together: 360-Degree Evaluations
VIDEO: The 3 Don’ts of 360 Feedback (4:36)
8.2e Training Appraisers
Train appraisers to improve the performance review process. Supervisors should be
evaluated on their ability to evaluate and develop their subordinates.
Establishing a Review Plan
A training program for raters is most effective when it follows a systematic process
Eliminating Rating Errors
Several types of errors occur.
• Distributional errors occur when a single rating is skewed toward an entire
group of employees.
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• Error of central tendency is a performance rating error in which all
employees are rated about average.
Leniency or strictness error is a performance rating error in which the
appraiser tends to give employees either unusually high or unusually low
ratings.
Forced distribution is a performance ranking system whereby raters are
required to place a certain percentage of employees into various
Feedback Training
A training program for raters should teach managers how to provide feedback.
Make corrections immediately. Feedback training should include three areas:
• communicating effectively to gain the employee’s support
EOC Discussion Question #2: What sources could be used to evaluate the performance of people
working in the following jobs?
a. Sales representative
Chapter 8: Performance Management 11
Express Appreciation
Minimize Criticism
Criticism should be given in small doses and should be constructive.
Establish Goals
Focus on the future rather than the past.
Follow Up Day to Day
All types of employees can benefit from ongoing performance conversations with
their managers.
8.4c Improving Performance
Although performance management systems can often tell us who is not
performing well, they typically cannot reveal why.
Identifying the Sources of Ineffective Performance
A person’s performance is a function of several factors, but perhaps it can be boiled
down to three primary concerns: ability, motivation, and environment.
Teaching Tip: Use Figure 8.9 to discuss the three factors that can influence people’s performance.
Use Figure 8.10 to discuss causes of an employee’s poor performance.
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Performance Diagnosis
If someone is not achieving the desired results, it may be due to factors beyond his
or her control.
Managing Ineffective Performance
Once the sources of performance problems are known, a course of action can be
Discussion Starter #3: Discuss how you would go about diagnosing an employee’s performance
problems. List several factors to consider.
ANSWER: A person’s performance is a function of several factors, but perhaps it can be boiled down to
EOC Discussion Question #4: Discuss how you would go about diagnosing an employee’s
performance problems. List several factors to consider.
ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS
1. Performance management is the process of creating a work environment in which people
can perform to the best of their abilities in order to meet a company’s goals. This process is
2. A variety of sources could be used to evaluate the performance of people working in the
following jobs.
a. Sales representative: Manager/Supervisor, the Employee, Peers, Customers
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3. a. The tell-and-sell method requires the ability to persuade an employee to change his
or her behavior in a certain way. The tell-and-listen method requires the ability to
communicate the strong and weak points of an employee’s performance and to
4. A person’s performance is a function of several factors, but perhaps it can be boiled down
to three primary concerns: ability, motivation, and environment. Figure 8.9 in the chapter
HRM EXPERIENCE
Performance Diagnosis
1. Noting that Carl works very hard on the gopher problem may offer a clue that his problem
2. Clark may be having external problems at home (e.g., the cost of the swimming pool that
his family wants—putting extra financial and emotional strain on Clark). Obviously, we
3. There could be several explanations, including lack of sales training or perhaps his college
degree is in a different field that is of greater interest to him. Students will have various
explanations.
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VIDEO CASE DISCUSSION GUIDE
On the Job: Video Cases
NOTES FOR END-OF-CHAPTER CASE STUDIES
Case Study 1: Adobe Ditches Formal Performance Reviews—And Wants to
Help Other Companies Do So Too
1. Problems with the traditional system of reviews included the following: (1) Workers didn’t
feel the reviews were helpful. (2) Workers prefer feedback in the moment. (3) Reviews
2. Students’ answer will vary. Formal performance reviews are not always bad. They
document a worker’s ability and progress over a long period of time.
Case Study 2: “Project Oxygen” Resuscitates Google’s Poor-Performing Bosses
1. Project Oxygen concluded that having the greatest amount of technical expertise was not
2. Students’ answer will vary. Some students might think that Google’s research did not
surprise them considering their high turnover rate despite providing many job perks. It was
FLIP-TIPS
Group Activity
Step 1: Read the following article before coming to class:
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Step 2: Divide into groups of two and enact a performance appraisal scenario, taking turns
as the interviewer and the interviewee. Each student should follow one of the three
approaches discussed in the article.
Step 3: Present a short oral report to the class.