Performance Management for Dummies

Implement best-in-class performance management systems

Performance Management For Dummies is the definitive guide to infuse performance management with your organization's strategic goals and priorities. It provides the nuts and bolts of how to define and measure performance in terms of what employees do (i.e., behaviors) and the outcome of what they do (i.e., results) —both for individual employees as well as teams.

Inside, you’ll find a new multi-step, cyclical process to help you keep track of your employees' work, identify where they need to improve and how, and ensure they're growing with the organization—and helping the organization succeed. Plus, it’ll show managers to C-Suites how to use performance management not just as an evaluation tool but, just as importantly, to help employees grow and improve on an ongoing basis so they are capable and motivated to support the organization’s strategic objectives.

• Understand if your performance management system is working
• Make fixes where needed
• Get performance evaluation forms, interview protocols, and scripts for feedback meetings
• Grasp why people make some businesses more successful than others
• Make performance management a useful rather than painful management tool

Get ready to define performance, measure it, help employees improve it, and align employee performance with the strategic goals and priorities of your organization.

Herman Aguinis, PhD, is the Avram Tucker Distinguished Scholar and Professor of Management at The George Washington University School of Business in Washington, DC. He's been ranked among the top 100 most prolific and influential business and economics researchers in the world.

Introduction 1

About This Book 2

Foolish Assumptions 3

Icons Used in This Book 3

Beyond the Book 3

Where to Go from Here 4

Part 1: Getting Started with Performance Management 5

Chapter 1: Introducing Performance Management 7

Why Do You Need Performance Management? To Succeed (of Course) 8

Why performance management is alive and well 8

Imagining an organization without performance management 10

Making Performance Management Work in Your Business 10

Distinguishing performance management from performance appraisal 10

Adapting performance management to today’s reality 11

Adapting performance management for different generations 14

Designing and Implementing a Performance Management System 14

Step 1: Establishing prerequisites 15

Step 2: Planning performance 20

Step 3: Executing performance 22

Step 4: Assessing performance 23

Step 5: Reviewing performance 25

Chapter 2: Making the Case for Performance Management 29

Using Performance Management to Achieve Multiple Purposes 30

Strategic objectives 30

Administrative objectives 30

Informational objectives 30

Developmental objectives 31

Organizational maintenance objectives 31

Documentation objectives 33

Answering the “What’s in It for Me” Question 33

Convincing top management of performance management’s value 34

Building support in the entire organization 34

Realizing the awesome benefits of performance management 36

What an Ideal Performance Management System Looks Like 39

Contextual issues: Making everything fit 39

Practical issues: Striving for effectiveness and fairness 41

Technical issues: Sweating the details 42

Taking Care of Talent Management Functions 45

Training and development 45

Workforce planning 46

Compensation 46

Chapter 3: Designing and Implementing Effective Performance Management 47

Ensuring Performance Management Delivers Strategic Value 48

Key ingredients of a strategic recipe 48

Making performance management strategic 49

Developing Performance Management Leadership Skills 50

Becoming an effective coach 51

Giving effective feedback 52

Defining and Measuring Performance 54

Measuring performance as behaviors 55

Measuring performance as results 55

Developing Employee Performance 56

Creating development plans 56

Implementing development plans 57

Assessing Performance Management Effectiveness 57

Using quantitative measures 58

Using qualitative measures 58

Chapter 4: Anticipating and Minimizing Negative Consequences 61

Anticipating Damage Caused by Flawed Performance Management 63

Damage caused to employees 63

Damage caused to managers 63

Damage caused to relationships 63

Damage caused to the organization 64

Learning from Flawed Performance Ratings 64

Why Performance Ratings Are Here to Stay 65

Setting Up an Appeals Process 66

Dealing with judgmental and administrative issues 66

Setting up a three-level appeals process 67

Setting Up a Communication Plan and Dealing with Resistance to Change 70

Questions that your communication plan should answer 70

Dealing with cognitive biases 73

Part 2: Designing an Effective Performance Management System 77

Chapter 5: Delivering Strategic Business Results 79

Linking Performance Management with Strategic Business Objectives 80

Making sure the strategic plan does what it is supposed to do 80

Making sure HR does what it is supposed to do 84

Conducting an External and Internal Analysis of Strengths, Weaknesses, Opportunities, and Threats 86

Analyzing the external environment 86

Analyzing the internal environment 88

Conducting a gap analysis 89

Creating and Understanding Your Organization’s Mission and Vision 91

Creating your mission 91

Creating your vision 91

Setting Up Objectives and Strategies Based on Your Mission and Vision 94

Setting up objectives 95

Setting up strategies 96

Linking Your Organization’s and Unit’s Strategic Plans with Job Descriptions 96

Linking the strategy of the organization and its units 97

Linking the organization and units with job descriptions 98

Chapter 6: Becoming a Performance Management Leader 101

Becoming an Effective Coach 101

Four guiding principles of effective coaches 102

Seven behaviors of effective coaches 103

Understanding your coaching style 105

Observing and Documenting Performance 106

Why documenting performance is so important 108

Documenting performance accurately 109

Giving Feedback Effectively 110

Making sure feedback serves a purpose 110

Avoiding the very high cost of NOT providing feedback 111

Making sure feedback is beneficial 112

An example of effective feedback 113

Giving praise 115

An example of effective praise 115

Giving constructive feedback 116

Giving feedback to Millennials, Post Millennials, and Baby Boomers 118

Chapter 7: Defining Performance 121

Performance is All about Behaviors and Results 121

Defining performance as behaviors 122

Defining performance as results 123

Causes for Excellent and Poor Performance 123

How individual differences affect performance 124

How knowledge and skills affect performance 126

How context affects performance 127

Anticipating performance problems 129

Focusing on Four Different Performance Dimensions 130

Task and contextual performance 131

Key differences between task and contextual performance 133

Counterproductive performance 134

Adaptive performance 136

When to Define Performance as Behaviors or Results and Why 137

When to define performance as behaviors 137

When to define performance as results 138

Chapter 8: Measuring Performance as Results 143

Measuring Performance as Results 143

Determining accountabilities and their importance 144

Determining objectives 146

Choosing a Measurement System Congruent with Context 149

Considering the role of organizational culture 149

Considering the role of industry trends 150

Considering the role of leadership 150

Chapter 9: Measuring Performance as Behaviors 151

Measuring Competencies 151

Measuring two types of competencies 152

Describing competencies 154

Measuring Behaviors Using Comparative Systems 155

Rank order 155

Alternation rank order 155

Paired comparisons 156

Relative percentile 156

Forced distribution 156

Considering Advantages and Disadvantages of Comparative Systems 158

Anticipating problems caused by forced distributions 159

Understanding the shape of the performance distribution and producing star performers 161

Measuring Behaviors Using Absolute Systems 163

Essays 163

Behavior checklists 164

Using a graphic rating scale system 169

Chapter 10: Using Performance Management Analytics 173

The Jury is Out: All Firms Collect Performance Data 174

Why all organizations collect performance data 174

Setting the evaluation period 176

Including Critical Components in Effective Performance Appraisal Forms 177

Saying goodbye to paper performance evaluation forms 177

Nine critical components of effective evaluation forms 177

Evaluating the components of a sample evaluation form 179

Including Critical Characteristics to Make Evaluation Forms Effective 182

Eight critical characteristics of effective evaluation forms 183

Evaluating the characteristics of a sample evaluation form 184

Computing Overall Performance Score 185

Using judgmental and mechanical procedures to compute overall score 185

Using Multiple Performance Touchpoints 189

Using supervisors 189

Using peers 190

Using direct reports 191

Using employees themselves 192

Using customers 193

Using electronic performance monitoring 193

Chapter 11: Minimizing Rating Distortion 197

Dealing with Disagreements across Performance Touchpoints 197

Why disagreements across performance touchpoints is not always a problem 198

Dealing with disagreements when giving feedback 198

Minimizing Intentional Rating Distortion 199

Understanding rater motivation 199

Why raters inflate ratings 200

Why raters deflate ratings 201

Increasing accountability in performance ratings 202

Minimizing Unintentional Rating Distortion 203

Designing rater error training 203

Designing frame of reference training 206

Designing behavioral observation training 208

Part 3: Implementing Performance Management Effectively 209

Chapter 12: Creating and Implementing Personal Development Plans 211

Creating Personal Development Plans 211

Using development plans to answer four key career questions 212

Using development plans to improve your short- and long-term career goals 212

Using development plans for succession planning 214

Setting your development plan objectives 214

Setting the content of your development plan 216

Setting the activities of a development plan 218

Facilitating Employee Development 221

Performing five functions in the development process 223

Using the feedforward interview 223

Motivating supervisors to facilitate employee development 225

Using Multisource Feedback Systems in Implementing Development Plans 227

Maximizing benefits of multisource feedback systems 228

Minimizing risks of multisource feedback systems 229

Deciding whether a multisource feedback systems will work in your organization 230

Implementing a state-of-the-science multisource feedback system 231

Chapter 13: Conducting Effective Review, Disciplinary, and Termination Meetings 233

Conducting Effective Review Meetings 234

Setting up review meetings 234

Implementing an optimal sequence for review meetings 236

Dealing with employee defensiveness 238

Making the Tough Calls: Disciplinary Process and Organizational Exit 241

Offering decision-making leave 241

Avoiding five common pitfalls in the disciplinary process 243

Dealing with terminations 244

Chapter 14: Implementing Team Performance Management 247

Not All Teams Are Created Equal 248

Reasons why teams exist in all organizations 248

Designing a State-of-the Science System 249

Anticipating dangers of poorly designed systems 250

Setting necessary conditions for an effective system 251

Implementing a system for virtual teams 251

Accountability as a key purpose of team performance management 254

Implementing a State-of-the-Science System 255

Step 1: Establishing prerequisites 257

Step 2: Performance planning 259

Step 3: Performance execution 260

Step 4: Performance assessment 261

Step 5: Performance review 263

Connecting team performance management with team rewards 265

Chapter 15: Evaluating Your System 269

Pilot Testing the Performance Management System 269

Reasons for doing a pilot test 270

Selecting the pilot test group 270

Ongoing Monitoring and Evaluation of the Performance Management System 271

What to measure 272

How to measure 273

Part 4: Connecting Performance Management with Rewards and the Law 275

Chapter 16: Offering Financial and Nonfinancial Rewards 277

Not All Rewards are Created Equal 278

Financial rewards 278

Nonfinancial rewards 278

Different Types of Financial Rewards 278

Base pay 278

Cost-of-living adjustments and contingent pay 279

Short-term incentives 279

Long-term incentives 280

Income protection 281

Allowances 281

Different Types of Nonfinancial Rewards 282

Relational 282

Work-life focus 283

Linking Performance Management with Different Types of Rewards 283

Rewards with low dependency on performance management 284

Rewards with high dependency on performance management 284

Rewards with moderate dependency on performance management 285

Chapter 17: Setting Up an Effective Pay System 287

Setting Up Traditional and Contingent Pay Plans 287

Traditional pay plans 288

Contingent pay plans 289

Implementing Contingent Pay Plans 289

The benefits of CP plans 290

Reasons why contingent pay plans fail 291

Selecting a Contingent Pay Plan 294

Traditional versus involvement cultures 295

Strategic direction 296

What pay can and cannot do about improving performance 297

Turning recognition and other nonfinancial incentives into rewards 301

Chapter 18: Staying on the Right Side of the Law 305

Implementing the Golden Rule 306

Implementing the golden rule around the world 306

When the golden rule breaks down 306

Six Legal Principles Affecting Performance Management 307

Employment at will 307

Negligence 308

Defamation 309

Misrepresentation 310

Adverse impact/unintentional discrimination 311

Illegal discrimination/disparate treatment 311

Laws Affecting Performance Management 313

Laws affecting performance management around the world 314

Lawful performance management in global organizations 315

Putting it all together: A legally defensible performance management system 315

Part 5: The Part of Tens 317

Chapter 19: Ten Reasons for Implementing Effective Performance Management 319

Six Useful Purposes 319

Self-Insights, Development, Motivation, and Self-Esteem 320

Better Understanding of Job Requirement 320

More Employee Engagement and Voice Behavior 321

Improved Commitment and Decreased Turnover 321

Early Detection of Performance Declines and Less Employee Misconduct 321

Differentiation between Good and Poor Performers 322

Common Understanding of What is Good Performance 322

More Fair and Legally Defensible Administrative Decisions 322

Easier Organizational Change 323

Chapter 20: Ten Key Factors for Delivering Outstanding Results 325

Congruence with Strategy and Context 325

Thoroughness and Inclusiveness 326

Meaningfulness 326

Practicality 327

Reliability, Validity, and Specificity 327

Identification of Effective and Ineffective Performance 327

Standardization and Thoroughness 328

Openness 328

Correctability 328

Acceptability, Fairness, and Ethicality 329

Chapter 21: Ten Tips for Becoming a Great Performance Management Leader 331

Become an Effective Coach 331

Develop a Good Coaching Relationship and Facilitate Employee Growth 332

Understand Your Own Coaching Style 332

Make the Employee the Director of Change 333

Learn How to Evaluate Performance Accurately 333

Document Performance Accurately 333

Give Feedback Effectively 334

Conduct Effective Performance Review Meetings 334

Be Fair and Direct in the Disciplinary Process 335

Be Fair and Direct in the Termination Process 335

Index 337 

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