8.3 Designing a Performance Management System
As stated prior, there are a number of factors to consider before designing or revising an existing performance management system. For the purposes of this chapter, let us assume we can create a system that will provide value to the organization and the employee. When designing this system, we should recognize that any process has its limitations, but if we plan it correctly, we can minimize some of these.
Defining Performance
The first step in the process of designing a performance management system is to define the performance that is to be measured. By now, it is probably obvious to you that this definition will stem from a job analysis.
Performance Appraisal
Feedback Frequency
The first step in the process is to determine how often performance appraisals should be given. Please keep in mind that managers should constantly be giving feedback to employees. The performance appraisal is a formal process for managing performance on a scheduled basis. Some organizations choose to give performance evaluations once per year, while others give them twice per year or more. The advantages to giving an evaluation twice per year, of course, are more feedback and more opportunity for employee development. The downside is the time it takes for the manager to write the evaluation and discuss it with the employee. If done well, it could take several hours for just one employee. Depending on your organization’s structure, you may choose one or the other.
Evaluators
The person evaluating (evaluator) an employee’s performance is most often their direct manager. However, performance input may also be provided by subordinates, clients, other managers, and those who having regular work related dealings with. The employee is also encouraged to conduct a self-evaluation or appraisal. Figure 7.3.1 “Advantages and Disadvantages of Each Source for Performance Evaluations” shows some of the advantages and disadvantages of each source of information for performance evaluations. Ultimately, using a variety of sources might garner the best results.
| Source | Advantages | Disadvantages |
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| Manager/Supervisor |
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| Self |
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| Peer |
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| Customer/Client |
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| Subordinate |
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Reliability and Validity
As seen earlier in the book, any measurement has to be reliable and valid. Reliability refers to how consistent the same measuring tool works throughout the organization (or job title). When we look at reliability in performance appraisals, we ask ourselves if two raters were to rate an employee, how close would the ratings be? If the ratings are far apart from one another, the method may have reliability issues. To prevent this kind of issue, we can make sure that performance standards are written in a way that will make them measurable. For example, instead of “increase sales” as a performance standard, we may want to say, “increase sales by 10 percent from last year.” This performance standard is easily measured and allows us to ensure the accuracy of our performance methods.
A common practice is developing SMART goals – specific, measurable, achievable, relevant, and time bound. Also, HRM often performs calibration meetings to ensure that evaluators understand the performance standards being assessed. During these meetings, supervisors, and an HR representative openly discuss their evaluations and, most importantly, the rationale behind them. This allows the supervisors (the raters) to establish a common, more uniform perspective on the process so that their evaluations are more reliable.
Validity is the extent to which the tool measures the relevant aspects of performance. The aspects of performance should be based on the essential skills and responsibilities of the job, and these should be reviewed often to make sure they are still applicable to the job analysis and description. There are two common issues that compromise the validity of performance appraisals – contamination and deficiency.
- First, contamination occurs when extraneous elements (i.e., factors that are unrelated to performance) influence the evaluation. For example, think of a retail company that uses ‘weekly sales’ as a performance measure for its salespeople and applies this standard equally for its store in DIX-30 (a large and busy commercial centre) and its store in Magog (a small municipality). The location would contaminate this measure (i.e., sales will naturally be higher in the high-traffic store). There are many ways to contaminate a performance appraisal. A supervisor liking one employee more than another (or disliking an employee) is another classic example.
- Deficiency occurs when the measure fails to capture the entire range of performance. Sales revenue can also be an example of a deficient measure if it is the only criteria used because it fails to capture other areas that may be important such as customer service, collaboration, etc.
Essentially an effective performance assessment process is one that captures the whole spectrum of an employees’ performance. This level of precision is only an ideal because it is very hard to achieve in organizations. The role of HRM is to try, as much as possible, to minimize the presence of contamination and deficiency in the performance appraisal system. This can be done through various means such as a good design of the appraisal tool and proper training on how to use it.
“8.3 Designing a Performance Management System” from Human Resources Management – 3rd Edition by Debra Patterson is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
