[Music] let's take a look at managing performance identifying desired behaviors and targets and then measuring how well employees are doing is performance management performance management is the process through which managers ensure that employees activities and outputs contribute to organizational goals this process requires knowing what activities and outputs are desired observing whether they occur and providing feedback to help managers meet expectations managers and employees can identify performance problems and establish ways to resolve them effective performance management can tell top performers that they're valued encourage communication between managers and their employees and establish consistent standards for evaluating employees to meet these objectives companies must think of effective performance management as a process not an event an effective performance management process contributes to the company's overall competitive advantage and must be given visible support by leadership the first two steps of the process involve identifying what the company is trying to accomplish its goals or objectives and developing employee goals and actions to achieve them the third step in the process organizational support involves providing employees with training necessary resources and tools and ongoing feedback between the employee and the manager step four involves evaluating performance the manager and employee discuss and compare targeted goals in supporting behavior with actual results this step includes the annual performance review the final steps of the performance management process involve both the employee and the manager identifying what the employee can do to capitalize on performance strength and address weakness the entire process should be reviewed each year to ensure alignment with the organization's goals and objectives organizations establish performance management systems for strategic administrative and developmental purposes the administrative purpose of performance management refers to the ways in which organizations use the system to provide information for day-to-day decisions about salary benefits and recognition because performance management supports these administrative decisions the information in a performance appraisal can have a great impact on the future of individual employees finally performance management has a developmental purpose it serves as a basis for recognizing and developing employee knowledge and skills employees who are meeting expectations can become more valuable when they hear and discuss feedback managers are charged with inspiring and empowering their people rather than simply rating them there are many ways to measure the performance of an employee selecting performance measures is a critical part of planning a performance management system several criteria determine the effectiveness of performance measures a performance management system should aim at achieving employee behavior and attitudes that support the organization's strategies goals and culture feedback should help employees improve in those areas in the case of performance appraisal validity refers to whether the appraisal measures all relevant aspects of performance and emits irrelevant aspects with regard to a performance measure reliability describes the consistency of the results that a performance measure will deliver in general employees are likely to see feedback as fair and therefore acceptable if it compares their recent performance with their earlier performance rather than ratings that compare the performance of co-workers a performance measure should specifically tell employees what's expected of them and how they can meet those expectations being specific helps performance management meet the goals of supporting strategy and developing employees the ideal process is to learn what methods of performance management are effective and to apply those lessons organizations have developed a wide variety of methods for measuring performance some methods rank each employee to compare employee performance other methods break down the evaluation into ratings of individual attributes behaviors or results simple ranking requires managers to rank employees into their group from highest performer to poorest the major downside of ranking involves validity to state a performance measure as broadly as best or worst doesn't define what exactly good or bad about the person's contribution to the organization ranking therefore raises questions about fairness another way to compare employee performance is with the force distribution method this type of performance measurement assigns a certain percentage of employees to each category in a set of categories for example the organization might establish the following percentages and categories exceptional at five percent exceeds standards at twenty-five percent meet standards at fifty-five percent room for improvement at ten percent or not acceptable at five percent the problem is that a manager who does very well at selecting motivating and training employees will have a group of high performers and would have difficulty assigning employees at the bottom ones another variation on rankings is the paired comparison method this approach involves comparing each employees with each other and establishing rankings performance measurement can look at each employee's performance relative to a uniform set of standards the measurement may evaluate employees in terms of attributes believe desirable or the measurements might identify whether employees have behaved in desirable ways such as closing sales or completing assignment to rate behaviors the organization begins by defining which behaviors are associated with success on a job the appraisal form asks the manager to rate an employee in terms of each of the identified behaviors one way to rate behaviors is with the critical incident method this approach requires managers to keep a record of specific examples of the employee acting in ways that are either effective or ineffective a behaviorally anchored rating scale or bars method is intended to define performance dimensions specifically using statements of behavior that describe different levels of performance management by objectives is a system in which people at each level of the organization set goals in a process that flows from top to bottom so employees at all levels are contributing to organizations overall goals these goals become standards for evaluating each employee's performance all the methods of performance measurement require decisions about who will collect and analyze information using just one person as a source of information poses certain problems one person is likely to see an employee in a limited number of situations to get as complete an assessment as possible some organizations combine information from most or all the possible sources in what's called 360 degree performance appraisal the most used source of performance information is the employee's manager supervisors have extensive knowledge of the job requirements and they have enough opportunity to observe their employees another advantage of using managers to evaluate performance is that they have incentive to provide accurate and helpful feedback because their own success depends so much on employee performance another source of performance information is the employee's peers or co-workers peers are an excellent source of information about performance in a job where the supervisor doesn't often observe the employee peer evaluations obviously have some potential disadvantages friendships or rivalries have the potential to bias ratings research however has provided little evidence that that's a problem for evaluating the performance of managers subordinates are especially a valuable source of information subordinates the people reporting to the manager often have the best chance to see how well a manager treats employees subordinate evaluations have some potential problems because the power relationships involved subordinates are reluctant to say negative things about their manager and they might prefer to provide feedback anonymously self ratings are rarely used alone but they can contribute valuable information a common approach is to have employees evaluate their own performance before the feedback session services are often produced and consumed on the spot so the customer is often the best source of performance information many companies and service industries have introduced customer evaluations of employee performance the weaknesses of customer surveys for performance measurements is their expense one reason for hearing from multiple sources is that performance measurements are not always completely objective people often tend to give a higher evaluation to people they consider similar to themselves unfortunately it's sometimes wrong and when similarity is based on characteristics such as race or sex the decisions may be discriminatory if the raider compares an individual not against an objective standard but against other employees contrast errors occur a competent performer who works with exceptional people may be rated lower than competent simply because of the contrast raters make distributional errors when they tend to use only one part of a rating scale the error is called leniency when the reviewer rates everyone near the top and strictness when the raider favors lower rankings raters can be trained to avoid these errors and a growing number of organizations are bringing data analytics into the rating process however unintentional errors are not the only cause of inaccurate performance measurement sometimes the people rating performance distort an evaluation on purpose to advance their personal goals appraisal politics are most likely to occur when raiders are accountable to the employee being rated the goals of rating are not compatible with one another or performance appraisal is directly linked to highly desirable rewards organizations can help managers give accurate appraisals by training them to use the appraisal process encouraging them to recognize accomplishments and fostering a climate of openness about weakness organizations can minimize appraisal politics by establishing an appraisal system that's fair once the manager and others have measured the employee's performance this information must be given to the employee although the feedback stage of performance management is essential it's uncomfortable for managers and employees fortunately managers can do much to smooth the feedback process and make it effective the custom at many organizations is to give formal performance feedback once a year but managers are responsible for correcting performance deficiencies as soon as they occur performance feedback is the most effective when the information doesn't surprise the employee employees should receive feedback so often that they know what the manager will say during their annual performance review employees want to know if they're on the right track in this way frequent feedback supports employee engagement managers should be well prepared for each formal feedback session the content of the session and the type of language used can determine the success of the meeting managers should also enable the employee to be well prepared the manager should ask the employee to complete a self-assessment ahead of time managers can improve employee satisfaction with the feedback process by letting employees voice their opinions and discussing performance goals open-ended questions that seek the employee's view can help them get to a two-way conversation the content of the feedback should be specific emphasizing behavior not personality the feedback session should end with goal setting and a decision about when to follow up goal setting is essential because it's one of the most effective motivators of high performance the final feedback stage of performance management involves identifying ways to improve performance the most effective way to improve performance varies according to the employee's ability and motivation in general when employees have high levels of ability and motivation they perform at or above standards the type of action called for depends on what the employee lacks when a motivated employee lacks knowledge skills and abilities in some area the manager may offer coaching training or more detailed feedback managers with an unmotivated employee can explore ways to demonstrate that employee is being treated fairly and rewarded adequately the solution may be as simple as more positive feedback if the employee lacks both ability and motivation performance may improve if the manager directs the employee's attention to the significance of the problem by withholding rewards or providing specific feedback if the employee does not respond the manager might have to demote or terminate the employee generally employees who combined high ability with high motivation are solid performers they're likely to want opportunities for development and may be able to contribute even more than they already do to maintain high motivation levels the manager should use rewards direct feedback and growth opportunities performance management systems should meet legal and ethical standards such as protection of employees privacy because performance measures play a central role in decisions about pay promotions and discipline employment-related lawsuits often challenge an organization's performance management system discrimination claims often allege that performance management systems discriminated against employees on the basis of their race or sex many measures are subjective and measurement errors can occur with regard to lawsuits file on the ground of unjust dismissal the usual claim is that the person was dismissed for reasons besides the ones that the employer states in this type of situation courts generally focus on the employer's performance management system looking to see whether the firing could have been based on poor performance to defend itself the employer would need a performance management system that provides evidence to support its employment decisions to protect against both kinds of lawsuits it's important to have a legally defensible performance management system based on valid job analysis and with requirements for job success clearly communicated to employees performance measurement should evaluate behavior or results rather than trades and the organization should use multiple raters including self-appraisals and train writers in how to use the system along with feedback the system should include a process for coaching or training employees to help them improve rather than simply dismissing poor performers organizations must protect the privacy of performance measurements as they must do with employee records as 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