8.2 Managing Performance

Performance Management and Compensation

The answer to these questions might seem obvious but HR managers have to consider it carefully when developing a performance evaluation process. There is research that shows employees have a greater acceptance of performance reviews if the review is linked to rewards (Bannister & Balkin, 1990). The linking of performance to compensation requires some careful analysis. Think of determining bonuses for salespeople: what should be the bonus for a salesperson working at Garage, a fashion retailer based in Montreal? What should be the objective? Should it be set monthly (a bonus level for every $20,000 in sales) or weekly ($5,000)? Should the bonus be adjusted to store location: the store on St Catherine has higher volume than the store in St Jerome, but it also has more sales employees! All this to say, that this can be a delicate exercise.

It is even more delicate when the data is subjective (i.e., supervisor ratings instead of hard sales). Are supervisors fair in their evaluations or do they play favourites? Are they confident enough in their assessment to distinguish between good and poor performers or will they ‘play it safe’ and rate everyone the same? Basically, this process involves the translation of ‘soft data’ (i.e., performance) into ‘hard data’ (i.e., dollars) and when this translation takes place, employees pay attention so it must be done well!

One indirect impact of linking performance evaluations with compensation is that it takes away employee’s focus from another purpose: their use for development.

Performance Management and Employee Development

Performance management is important for employee development. In order for this development to occur, employees need to know what is expected of them and where they stand: what aspect of their work they need to work on (weaknesses) and what aspects they can capitalize on (strengths). Performance management provides the feedback essential for this awareness and change to take place.

However, for most people, receiving feedback is not an easy thing. One often becomes defensive and finds ways to discredit the feedback, especially if it is negative. Conversely, giving feedback is also difficult. Managers tend to shy away from these difficult conversations by either avoiding them or by simply ‘sugar coating’ the message. HR managers play an important role in structuring the process so that both employees and managers are equipped and supported when they have these conversations.

Performance Management and Employee Records

A third and final use for performance management is to document HRM decisions and actions – maintaining a full employee history. Basically, this data provides a record of performance ratings and  discussions that took place over the years and the actions agreed upon by employees and supervisors. These records are important in the case of employee discipline and termination, or further development and advancement. It is important to note that employee records, and ‘paper trails’, are a legal requirement when taking legal action against an employee for non-performance and termination.

One approach to evaluate performance at the organizational level is the balanced scoreboard which a management system that aligns the company goals into a set of performance objectives and is measured, monitored and changed as needed to ensure all the goals are met.  HR departments play an important role in designing and monitoring balanced scoreboards.

“Performance Management Systems” from Human Resources Management – 2nd Ontario Edition by Elizabeth Cameron is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.