Each question must be answered with equal word count. Overall total should be 1500 words or more. Please make sure it is answered in apa format and sources mustbe cited with no less than four scholarly sources. Case Study Analysis: Read Case Study Network Solutions 1-2 in your text. 1.Based on the systems described in Network Solutions what will be the disadvantages and negative outcomes from implementing this PM system and why? 2.Overall what is the overlap between the Network Solutions and the ideal PM system? Describe the gap? Is there an ideal or perfect PM system? What is the goal of a PM system?
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Third Edition
Performance Management
Herman Aguinis
Kelley School of Business
Indiana University
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Boston Columbus Indianapolis New York
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Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
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Library of Congress Cataloging-in-Publication
D Data
R
Aguinis, Herman
Performance management / Herman Aguinis. — 3rd ed.
A
p. cm.
ISBN-13: 978-0-13-255638-5 (alk. paper)
ISBN-10: 0-13-255638-3 (alk. paper)
1. Employees—Rating of. 2. Performance—Management. I. Title.
HF5549.5.R3A38 2013
658.3’125—dc23
2011037274
10 9 8 7 6 5 4 3 2 1
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ISBN 10: 0-13-255638-3
ISBN 13: 978-0-13-255638-5
Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
CONTENTS
Preface viii
Acknowledgments xiii
Dedication xiv
About the Author xiv
PART I Strategic and General Considerations 1
Chapter 1 Performance Management and Reward Systems in Context
1.1
1.2
1.3
1.4
1
Definition of Performance Management (PM) 2
The Performance Management Contribution 4
Disadvantages/Dangers of Poorly Implemented PM Systems 8
Definition of Reward Systems 10
1.4.1
1.4.2
1.4.3
1.4.4
1.4.5
1.4.6
1.4.7
1.4.8
Base PayG 10
A Adjustments and Contingent Pay 11
Cost-of-Living
Short-Term
T Incentives 11
Long-Term Incentives 11
Income E
Protection 12
Work/Life
SFocus 13
Allowances 13
,
Relational Returns 13
1.5 Aims and Role of PM Systems 14
1.5.1
1.5.2
1.5.3
1.5.4
1.5.5
1.5.6
StrategicDPurpose 15
Administrative
Purpose 16
E
Informational Purpose 16
A
Developmental
Purpose 16
Organizational
N Maintenance Purpose 16
Documentational Purpose 17
D
1.6 Characteristics of an Ideal PM System 18
R
1.7 Integration with Other Human Resources and Development
Activities 23
A
1.8 Performance Management Around the World 24
왘 CASE STUDY 1-1: Reality Check: Ideal Versus Actual Performance
Management1System 28
왘 CASE STUDY 1-2: Performance Management at Network Solutions, Inc. 31
1
왘 CASE STUDY 1-3: Distinguishing Performance Management Systems from
Performance2
Appraisal Systems 32
Chapter 2 Performance Management
Process
3
37
2.1 Prerequisites 38
T
2.2 Performance Planning 46
2.2.1 Results S46
2.2.2 Behaviors 46
2.2.3 Development Plan 47
Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
iii
iv
Contents
2.3
2.4
2.5
2.6
Performance Execution 48
Performance Assessment 49
Performance Review 50
Performance Renewal and Recontracting 52
왘 CASE STUDY 2-1: Job Analysis Exercise 55
왘 CASE STUDY 2-2: Disrupted Links in the Performance Management Process
at “Omega, Inc.” 55
왘 CASE STUDY 2-3: Performance Management at the University of Ghana 56
Chapter 3 Performance Management and Strategic Planning
59
3.1 Definition and Purposes of Strategic Planning 60
3.2 Process of Linking Performance Management to the Strategic
Plan 61
3.2.1
3.2.2
3.2.3
3.2.4
Strategic Planning 65
Developing Strategic Plans at the Unit Level 74
Job Descriptions
76
G
Individual
and
Team
Performance 77
A
3.3 Building Support 79
T 3-1: Evaluating Vision and Mission
왘 CASE STUDY
Statements
Eat Pepsico 82
왘 CASE STUDY 3-2: Dilbert’s Mission Statement Generator 83
S 3-3: Linking Individual with Unit and Organizational
왘 CASE STUDY
Priorities 84
,
왘 CASE STUDY 3-4: Linking Performance Management to Strategy at
Procter & Gamble 84
D
87
E
Defining Performance and Choosing a Measurement Approach
4.1 Defining A
Performance 88
4.2 Determinants
N of Performance 89
4.2.1 Implications for Addressing Performance Problems 90
D
4.2.2 Factors Influencing Determinants of Performance 91
R Dimensions 91
4.3 Performance
A to Measuring Performance 95
4.4 Approaches
PART II System Implementation
Chapter 4
87
4.4.1 Behavior Approach 95
4.4.2 Results Approach 96
1
4.4.3 Trait Approach
99
왘 CASE STUDY
1 4-1: Diagnosing the Causes of Poor Performance 101
왘 CASE STUDY 4-2: Differentiating Task from Contextual Performance 102
2 4-3: Choosing a Performance Measurement Approach at
왘 CASE STUDY
Paychex, 3
Inc. 102
왘 CASE STUDY 4-4: Deliberate Practice Makes Perfect 103
T
S
Measuring Results
Chapter 5 Measuring Results and Behaviors
5.1
106
107
5.1.1 Determining Accountabilities 107
Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
Contents
5.1.2 Determining Objectives 109
5.1.3 Determining Performance Standards 111
5.2 Measuring Behaviors 112
5.2.1 Comparative Systems 115
5.2.2 Absolute Systems 118
왘 CASE STUDY 5-1: Accountabilities, Objectives, and Standards 126
왘 CASE STUDY 5-2: Evaluating Objectives and Standards 126
왘 CASE STUDY 5-3: Measuring Competencies at the Department of
Transportation 127
왘 CASE STUDY 5-4: Creating BARS-Based Graphic Rating Scales for
Evaluating Business Student Performance in Team Projects 128
Chapter 6 Gathering Performance Information
6.1
6.2
6.3
6.4
6.5
130
Appraisal Forms 131
Characteristics of Appraisal Forms 137
DeterminingGOverall Rating 140
Appraisal Period and Number of Meetings 143
A
Who Should Provide Performance Information? 146
6.5.1
6.5.2
6.5.3
6.5.4
6.5.5
6.5.6
T 146
Supervisors
Peers 146
E
Subordinates 147
S
Self 148
, 149
Customers
Disagreement Across Sources: Is This a Problem? 149
6.6 A Model of Rater Motivation 150
D
6.7 Preventing Rating Distortion Through Rater Training
Programs E153
왘 CASE STUDY 6-1: Evaluating an Appraisal Form Used in Higher Education 157
A
왘 CASE STUDY 6-2: Judgmental and Mechanical Methods of Assigning
Overall Performance
Score at The Daily Planet 162
N
왘 CASE STUDY 6-3: Minimizing Intentional and Unintentional Rating Errors 164
D 6-4: Minimizing Biases in Performance Evaluation at Expert
왘 CASE STUDY
Engineering,R
Inc. 165
Chapter 7 Implementing a A
Performance Management System
168
7.1 Preparation: Communication, Appeals Process, Training
Programs, and Pilot Testing 169
1
7.2 Communication Plan 170
1
7.3 Appeals Process
174
7.4 Training Programs
for the Acquisition of Required Skills 176
2
7.4.1
7.4.2
7.4.3
7.4.4
Rater Error Training 177
3
Frame of Reference Training 180
T Observation Training 181
Behavioral
Self-Leadership
Training 182
S
7.5 Pilot Testing 184
7.6 Ongoing Monitoring and Evaluation 185
Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
v
vi
Contents
7.7 Online Implementation 188
왘 CASE STUDY 7-1: Implementing a Performance Management
Communication Plan at Accounting, Inc. 192
왘 CASE STUDY 7-2: Implementing an Appeals Process at Accounting, Inc. 192
왘 CASE STUDY 7-3: Evaluation of Performance Management System at
Accounting, Inc. 192
왘 CASE STUDY 7-4: Training the Raters at Big Quality Care 193
PART III Employee Development
195
Chapter 8 Performance Management and Employee Development
195
8.1 Personal Developmental Plans 196
8.1.1 Developmental Plan Objectives 197
8.1.2 Content of Developmental Plan 199
8.1.3 Developmental Activities 200
8.2 Direct Supervisor’s Role 203
G Feedback Systems 206
8.3 360-Degree
8.3.1 Advantages
of 360-Degree Feedback Systems 213
A
8.3.2 Risks of Implementing 360-Degree Feedback Systems 215
T
8.3.3 Characteristics of a Good System 215
E 8-1: Developmental Plan Form at Old Dominion University 220
왘 CASE STUDY
왘 CASE STUDY 8-2: Evaluation of a 360-Degree Feedback System Demo 220
S
왘 CASE STUDY 8-3: Implementation of 360-Degree Feedback System at Ridge
Intellectual
, 221
왘 CASE STUDY 8-4: Personal Developmental Plan at Brainstorm, Inc.—Part I 221
왘 CASE STUDY 8-5: Personal Developmental Plan at Brainstorm, Inc.—
Part II 222
D
Chapter 9 Performance E
Management Skills
226
9.1 CoachingA 227
9.2 Coaching Styles 233
N
9.3 Coaching Process 233
D
9.3.1 Observation
and Documentation of Developmental Behavior
and Outcomes
235
R
9.3.2 Giving Feedback 239
A
9.3.3 Disciplinary Process and Termination 245
9.4 Performance Review Meetings 248
왘
왘
왘
왘
CASE STUDY 9-1: Was Robert Eaton a Good Coach? 256
1
CASE STUDY 9-2: What Is Your Coaching Style? 257
CASE STUDY
1 9-3: Preventing Defensiveness 259
CASE STUDY 9-4: Recommendations for Documentation 260
2
3
PART IV Reward Systems,
Legal Issues, and Team
T Management 263
Performance
Chapter 10 Reward Systems
S and Legal Issues 263
10.1 Traditional and Contingent Pay Plans 264
10.2 Reasons for Introducing Contingent Pay Plans 265
Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
Contents
10.3
10.4
10.5
10.6
Possible Problems Associated with Contingent Pay Plans 268
Selecting a Contingent Pay Plan 270
Putting Pay in Context 272
Pay Structures 276
10.6.1 Job Evaluation 277
10.6.2 Broad Banding 279
10.7 Performance Management and the Law 280
10.8 Some Legal Principles Affecting Performance
Management 281
10.9 Laws Affecting Performance Management 284
왘
왘
왘
왘
CASE STUDY 10-1: Making the Case for a CP Plan at Architects, Inc. 289
CASE STUDY 10-2: Selecting a CP Plan at Dow AgroSciences 289
CASE STUDY 10-3: Contingency Pay Plan at Altenergy LLC 290
CASE STUDY 10-4: Possible Illegal Discrimination at Tractors, Inc. 291
Chapter 11 Managing TeamG
Performance
294
11.1 Definition and
A Importance of Teams 295
11.2 Types of Teams and Implications for Performance
T
Management 296
11.3 Purposes E
and Challenges of Team Performance
Management
S 298
11.4 Including Team Performance in the Performance Management
,
System 299
11.4.1
11.4.2
11.4.3
11.4.4
11.4.5
11.4.6
Prerequisites 300
Performance
D Planning 302
Performance Execution 303
E
Performance Assessment 304
A Review 305
Performance
Performance
N Renewal and Recontracting 306
11.5 Rewarding Team Performance 307
D 11-1: Not All Teams Are Created Equal 309
왘 CASE STUDY
왘 CASE STUDY
R 11-2: Team Performance Management at Duke University
Health Systems 310
A 11-3: Team-Based Rewards for the State of Georgia 312
왘 CASE STUDY
왘 CASE STUDY 11-4: Team Performance Management at Bose 313
Index 315
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Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
vii
PREFACE AND INTRODUCTION
In today’s globalized world, it is relatively easy to gain access to the competition’s technology and
products. Thanks to the Internet and the accompanying high speed of communications, technological and product differentiation is no longer a key competitive advantage in most industries. For
example, most banks offer the same types of products (e.g., various types of savings accounts
and investment opportunities). If a particular bank decides to offer a new product or service
(e.g., online banking), it will not be long until the competitors offer precisely the same product. As
noted by James Kelley, performance management project leader at Idaho Power, “technology is a
facilitator, but not a guarantor, of effectiveness or efficiency of a company’s workforce.”1
So, what makes some businesses more successful than others? What is today’s key competitive advantage? The answer is people. Organizations with motivated and talented employees
offering outstanding service to customers are likely to pull ahead of the competition, even if
the products offered are similar to those offered by the competitors. This is a key organizational
resource that many label “human capital” and gives organizations an advantage over the competition. Customers want to get theGright answer at the right time, and they want to receive their
products or services promptly and accurately. Only having the right human capital can make
A
these things happen. Only human capital can produce a sustainable competitive advantage. And,
performance management systems
T are the key tools that can be used to transform people’s talent
and motivation into a strategic business advantage. Unfortunately, although 96% of human
E that performance management is their number 1 concern,
resources (HR) professionals report
fewer than 12% of HR executivesS
and technology managers believe that their organizations have
aligned strategic organizational priorities with employee performance.2
,
This edition includes the following
six important changes. More detailed information on
each of these issues is provided in the section titled “Changes in This Edition.”
• There is an emphasis on the
D role of the context within which performance management
takes place.
E knowledge generated regarding performance management is
• This edition emphasizes that
essentially multidisciplinary.
A
• This edition emphasizes the important interplay between science and practice.
• This edition describes the N
technical aspects of implementing a performance management
system in detail and, in addition, it emphasizes the key role that interpersonal dynamics
D
play in the process.
• This new edition includesR
new cases in almost every chapter. Taken together, this new
edition includes a total of 43 case studies.
A new sections.
• Each of the chapters includes
SOME UNIQUE FEATURES
1 OF THIS BOOK
Performance management is a continuous
process of identifying, measuring, and developing the
1
performance of individuals and teams and aligning their performance with the strategic goals of
2
the organization. Performance management
is critical to small and large, for-profit and not-for-profit,
3
Generating buzz: Idaho Power takes
T on performance management to prepare for workforce aging. (2006,
June). Power Engineering. Retrieved November 26, 2010 from http://www.powergenworldwide.com/index/
display/articledisplay/258477/articles/power-engineering/volume-110/issue-6/features/generating-buzzS
idaho-power-takes-on-performance-management-to-prepare-for-workforce-aging.html
1
2
Workforce performance is top HR priority. (2005). T+D, 59(7), 16.
viii
Performance Management, Third Edition, by Herman Aguinis. Published by Prentice Hall. Copyright © 2013 by Pearson Education, Inc.
Preface and Introduction
domestic and global organizations, and to all industries. In fact, the performance management
model and processes described in this book have been used to create systems to manage the performance of college students.3 After all, the performance of an organization depends on the performance of
its people, regardless of the organization’s size, purpose, and other characteristics. As noted by
Siemens CEO Heinrich von Pierer, “whether a company measures its workforce in hundreds or
hundreds of thousands, its success relies solely on individual performance.” As an example in the
not-for-profit sector, the government in England has implemented what is probably the world’s
biggest performance management system, and, by statutory force, the performance of teachers and
“headteachers” (i.e., school principals) is now evaluated systematically. This particular system
includes a massive national effort of approximately 18,000 primary schools, 3,500 secondary schools,
1,100 special schools, 500 nursery schools, 23,000 headteachers, 400,000 teachers, and an unspecified
number of support staff.4
Unfortunately, few organizations use their existing performance management systems
in productive ways. Performance management is usually vilified as an “HR department requirement.” In many organizations, performance management means that managers must comply
with their HR department’s request and fill out tedious, and often useless, evaluation forms.
These evaluation forms are often completed only because it is required by the “HR cops.”
G
Unfortunately, the only tangible consequence
of the evaluation process is that the manager has to
spend time away from his or her “real” job duties.
A
This book is about the design and implementation of successful performance management
systems. In other words, it focuses T
on research-based findings and up-to-date applications that
help increase an organization’s human capital. Performance management is ongoing and cyclical;
however, for pedagogical reasons, theEbook needs to follow a linear structure. Because performance
observation, evaluation, and improvement
are ongoing processes, some concepts and practices
S
may be introduced early in a cursory manner but receive more detailed treatment in later sections.
, and describes the necessary steps to create a top-notch
Also, this book focuses on best practices
performance management system. As a result of practical constraints and lack of knowledge about
system implementation, many organizations cut corners and do not implement systems that
follow best practices because of environmental
and political issues (e.g., goals of raters may not be
D
aligned with goals of the organization). Because the way in which systems are implemented in
Esystem, the book includes numerous examples from actual
practice is often not close to the ideal
organizations to illustrate how systems
A are implemented given actual situational constraints.
N
CHANGES IN THIS EDITION
D
This edition includes important updates and additional information. In preparation for revising
R
and updating this book, I gathered more than 300 potentially relevant articles and books. About
150 of those were most relevant, and
A about 50 of those new sources are now included in this
edition. These sources have been published since the second edition of the book went into
production. This vast literature demonstrates an increased interest in performance management
on the part of both academics and practitioners.
1
This edition includes five important changes throughout the book. First, there is an emphasis
1performance management takes place. Performance manageon the role of the context within which
ment does not operate in a vacuum. Rather, it takes place within a particular organizational context,
2
and organizations have a particular …
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