Voluntary turnover Involuntary turnover Progression of withdrawal Job satisfaction job enrichment Prosocial motivation Performance management

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1 Human Resources Chapter 7: Managing Employee Engagement and Performance Introduction Retention rates among employees are related to retention rates among customers. Voluntary turnover turnover initiated by employees (often whom the company would prefer to keep.) Involuntary turnover turnover initiated by the organization (often among people who would prefer to stay.) Driving Engagement: Preventing Voluntary Turnover Process of Job Withdrawal Job withdrawal is a set of behaviors that dissatisfied individuals enact to avoid the work situation. Progression of withdrawal theory that dissatisfied individuals enact a set of behaviors in succession to avoid their work situation. Job Satisfaction and Job Withdrawal Job satisfaction a pleasurable feeling that results from the perception that one s job fulfills or allows for the fulfillment of ones important job values. Job satisfaction is a function of values. Different employees have difference views of which values are important. Third important aspect of job satisfaction is perception. Sources of Job Dissatisfaction Key areas of improvement are recognition, career opportunities, effectiveness of management, development opportunities and compensation and benefits. Sources of job dissatisfaction most under the control of all employers include basic issues such as providing safe working conditions, pay and benefits, supervisors and co-workers and the tasks and roles the employee is assigned. Primarily supervisors and co-workers. There is a strong positive relationship between task complexity and job satisfaction. One of the major interventions aimed at reducing job dissatisfaction is job enrichment enriches jobs that are boring, repetitive or low in scope through interventions such as ensuring workers have opportunities for input into important organizational decisions involving their work. Many job enrichment programs are based on the job characteristics theory. As well, the degree to which scheduling is flexible affects satisfaction. Most important in terms of generating satisfaction is the degree to which it is meaningfully related to core values of the worker. Prosocial motivation the degree to which people are energized to do their jobs because it helps other people. Managing Performance Performance appraisal is now an annual ritual. Performance management the means through which managers ensure that employees activities and outputs are congruent with the organization s goals. It is central to gaining competitive advantage. An effective performance management system has 3 parts: defining performance, measuring performance and feeding back performance information. Performance appraisal the process through which an organization gets information on how well an employee is doing his or her job. Performance feedback the process of providing employees information regarding their performance effectiveness.

2 An Organizational Model of Performance Management In the past, performance appraisal was used as a measurement technique. The goal was to measure individual employee performance reliably and validly. Individual s attributes are the raw materials of performance. These aw materials are transformed into objective results through the employee s behavior. Another important component in our organizational model of the performance management system is the organization s strategy. Performance planning and evaluation (PPE) any system that seeks to tie the formal performance appraisal process to the company s strategies by specifying at the beginning of the evaluation period the types and level of performance that must be accomplished in order to achieve the strategy. Employees must have certain attributes to perform a set of behaviors and achieve certain results. To gain competitive advantage, the attributes and results must be ties to the company s strategy. Purposes of Performance Management There are 3 purposes of performance management systems: strategic, administrative and developmental. A performance management system should link employee activities with the organization s goals. Performance management is critical for companies to execute their talent management strategy. Organizations use performance management information in many administrative decisions: salary administration, promotions etc. Performance management is key to talent management. Performance management develops employees who are ineffective at their jobs. When people aren t doing their best, PM seeks to improve their performance. Performance Measures Criteria Criteria to use to evaluate performance management systems strategic congruence, validity, reliability, acceptability and specificity. Strategic congruence the extent to which the performance management system elicits job performance that is consistent with the organization s strategy, goals and culture. If a company focuses on something, then the performance management system should assess how well its employees are performing that something. Validity the extent to which a performance measure assesses all the relevant and only the relevant aspects of job performance. Often called content validity. For a performance measure to be valid, it must not be deficient or contaminated. It s deficient if it does not measure all aspects of performance. A contaminated measure evaluates irrelevant aspects of performance or aspects that are not job related. Reliability The consistency of a performance measure; the degree to which a performance measure is free from random error. Interrater reliability is the consistency among the individuals who evaluate the employee s performance. A performance measure has interrater reliability if 2 individuals give the same evaluations. The measure should be reliable over time test-retest reliability. Acceptability the extent to which a performance measure is deemed to be satisfactory or adequate by those who use it. It is affected by the extent to which employees believe the performance management system is fair.

3 Specificity the extent to which a performance measure gives detailed guidance to employees about what is expected of them and how they can meet these expectations. It is relevant to both the strategic and developmental purposes of performance management. Approaches to Measuring Performance Approaches include: comparative, attribute, behavioral and results approaches to measuring and managing performance. The Comparative Approach This requires the rater to compare an individual s performance to that of others. At least 3 techniques fall under the comparative approach: ranking, forced distribution and pair comparison. 1. Ranking simple ranking requires managers to rank employees within their departments from highest performer to poorest performer. Alternation ranking consists of a manager looking at a master list of employees, deciding who is the best and placing that person as number one on a new list that will eventually rank all employees. Goes back and forth between best and worst. 2. Forced distribution uses a ranking format, but employees are ranked in groups. This forces managers to categorize employees based on distribution rules determined by the company, not on their performance. 3. Paired comparison requires managers to compare every employee with every other employee in the work group, giving an employee a score of 1 every time they are considered the higher performer. Manager then computes the number of times each employee received the favorable decision and this becomes the employee s performance score. This tends to be time consuming. The Attribute Approach This focuses on the extent to which individuals have certain attributes believed desirable for the company s success. Graphic Rating Scales the most common form. A list of traits is evaluated by a 5 point rating scale. Manager considers one employee at a time. They can provide a number of different points (a discrete scale) or a continuum along which the rater simply places a beck mark (continuous scale). The Behavioral Approach This attempts to define the behaviors an employee must exhibit to be effective in the job. The techniques used for this approach define those behaviors and then require managers to assess the extent to which employees exhibit them. Critical Incidents requires managers to keep a record of specific examples of effective and ineffective performance on the part of each employee. Behaviorally Anchored Rating Scales (BARS) this builds on the critical incidents technique. It is designed to define the performance dimensions by developing behavioral anchors associated with different levels of performance. Review in book. Assessment Centers individuals usually perform a number of simulated tasks. Assessors observe the individuals behavior and evaluate their skill or potential as managers. The Results Approach This focuses on managing the objective, measurable results of a job or work group. Management by Objectives popular in private and public organizations. Originally developed in a large accounting firm. The top management team first defines the

4 company s strategic goals. These goals are passed to the next layer of management and they define they goals they must achieve for the company to reach its goals. This continues down. MBO systems have 3 common requirements they require specific, difficult, objective goals. Can have a very positive effect. Choosing a Source for Performance Information 5 primary sources managers, peers, subordinates, self and customers. Managers They are the most frequently used source of performance information. Peers This is good, as supervisors do not always observe the employee. Subordinates They often have the best opportunity to evaluate how well a manager treats employees. Upward feedback managerial performance appraisal that involved subordinates evaluations of the manager s behavior or skills. Self These tend to be inflated. Customers This is most appropriate when an employee s job requires direct service to the customer. These can be expensive. The best source of performance information depends on the job. The 360-Degree Feedback Process 360-degree feedback systems a performance appraisal system for managers that includes evaluations from a wide range of persons who interact with the manager. The process includes self-evaluations as well as evaluations from the manager s boss, subordinates, peers and customers. This provides a means for minimizing bias. Rater Errors in Performance Measurement We often use heuristics or simplifying mechanisms to make judgments. These heuristics, which appear often in subjective measures of performance, can lead to rater errors. Types of errors include: similar-to-me errors, contrast errors (comparing people with one another instead of against standard), distributional errors (using only one part of the rating scale leniency error occurs when a rater assigns high (lenient) ratings to all employees, strictness error is when a manager gives low ratings and holds all employees to unreasonably high standards, central tendency is when a manager rates all employees in the middle of the scale), and halo and horns errors (failing to distinguish among different aspects of an employee s performance. Halo effect occurs when one positive performance aspect causes the rater to rate all other aspects well. Horns effect occurs when one negative aspect results in the rater making everything low.) Appraisal Politics Appraisal politics a situation in which evaluators purposefully distort ratings to achieve personal or company goals. This is more likely to occur when raters are accountable to the employee being rates, there are competing rating goals and a direct link exists between performance appraisal and highly desirable rewards.

5 Reducing Rater Errors and Politics and Increasing Reliability and Validity of Ratings 2 training approaches to reduce rater errors: rater error training attempts to make managers aware of rating errors and help them develop strategies for minimizing those errors. Shown to be effective for reducing errors but there is evidence that reducing rating errors can also reduce accuracy of performance ratings. Rater accuracy training, also called frame-of-reference training, attempts to emphasize the multidimensional nature of performance and thoroughly familiarize raters with the actual content of various performance dimensions. Seems to increase accuracy. What Managers can do to Diagnose Performance Problems and Manage Employees Performance Diagnosing the Causes of Poor Performance Managers should conduct a performance analysis. Actions for Managing Employees Performance Marginal employees an employee performing at a barely acceptable level because of lack of ability and/or motivation to perform well, not poor work conditions. Managers need to take into account whether employees lack ability, motivation or both. Employees with high ability and motivation are likely solid performers. Poor performance resulting from lack of ability but mot motivation is called misdirected effort. Employees who have the ability but now the motivation are underutilizes. Chronic poor performance by employees with low ability and motivation are called deadwood. Developing and Implementing a System that Follows Legal Guidelines The most common human rights complaints related to employment are based on mental or physical disabilities, with family status, religious beliefs and race cited next. Electronic Monitoring for Performance Management Electronic tracking systems are being used to ensure that employees are working when and how they should be. These include security cameras, fingerprint recognition, GPS, etc. This is used on blue and white-collar employees. This is subject to scrutiny in 5 areas of the law: privacy, labor relations, human rights, evidence admissibility and criminal law. Managing Involuntary Turnover If an employer terminates an employee for just cause, no severance pay is required. Just cause a legal term meaning an employer has a justifiable (and legally defensible) reason for terminating an employee without providing reasonable notice or payment in lieu of notice. General reasons for just cause include: Serious misconduct Incompetence (or habitual neglect of duty) Conflict of interest (incompatible conduct at work) Willful disobedience Wrongful dismissal an allegation against a former employer by a terminated employee that wrongful termination of the employment contract has occurred due to failure (on the part of the employer) to provide just cause for termination of employment.

6 Constructive dismissal a unilateral and fundamental change to a material term or condition of employment. Read more in book. Some employers also pay off the employee with thousands of dollars in excess severance pay in return for waiving his or her right to sue for wrongful dismissal. Fairness and Principles of Justice Employees are more likely to respond positively to negative feedback regarding their performance if they perceive the appraisal process as being fair on 3 dimensions. Outcome fairness the judgment that people make with respect to the outcomes received relative to the outcomes received by other people with whom they identify. Procedural justice a concept of justice focusing on the methods used to determine the outcomes received. The person being dismissed may accept the decision with minimum anger if the procedures used to arrive at the decision are consistent, unbiased, accurate, correctable, representative and ethical. Procedural justice deals with how a decision was made. Interactional justice a concept of justice referring to the interpersonal nature of how the outcomes were implemented. Read more in book. Progressive Discipline and Alternative Dispute Resolution Termination should come at the end of a systematic discipline program. Effective discipline programs have 2 central components: documentation and progressive punitive measures. Alternative dispute resolution (ADR) a method of resolving disputes that does not rely on the legal system. Often proceeds through the 4 stages of open door policy, peer review, mediation and arbitration. Employee Assistance and Wellness Programs Employee assistance program (EAP) employer prgrams that attempt to ameliorate problems encountered by workers who are drug dependent, alcoholic or psychologically troubled. Costs and benefits of the programs are evaluated annually. Outplacement Counseling Outplacement counseling counseling to help displaced employees manage the transition from on job to another.