Performance Management : Key Strategies and Practical Guideline

Performance Management Performance Management Key strategies and practical guidelines Second edition Michael Armstrong First published in 1994 Second edition 2000 Apart from any fair dealing for the purposes of research or private study,or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries con- cerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: Kogan Page Limited Kogan Page Limited 120 Pentonville Road 163 Central Avenue, Suite 2 London N1 9JN Dover NH 03820 UK USA ' Michael Armstrong, 1994, 2000 The right of Michael Armstrong to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. British Library Cataloguing in Publication Data A CIP record for this book is available from the British Library. ISBN 0 7494 2628 4 Typeset by Saxon Graphics Ltd, Derby Printed and bound in Great Britain by Clays Ltd, St Ives plc Contents 1 The Basis of Performance Management 1 Background 1 Performance management defined 1 Principles of performance management 6 Performance management as an integrative process 8 Performance management, not performance appraisal 10 The process of performance management 12 Conclusion 13 2 The Performance Management Process 14 A conceptual model 14 A basic, practical model 15 Performance management as a process 15 Organizational and individual contributions 21 3Performance Planning 23 The planning process 23 Performance agreements: content 25 Drawing up the plans 30 Evaluating the performance planning process 32 4 Defining Objectives and Performance Standards 33 Objectives 33 Performance standards 39 5 Defining Capability Requirements 40 What is capability? 40 vi Contents Competence and competency 41 Analysing capability requirements 43 Methodology 46 6Measuring Performance 52 Measurement issues 53 Criteria for performance measures 54 Classification of metrics 55 Types of measures organizational 55 Types of measures individual 61 7 Managing Performance Throughout a Year 62 The continuous process of performance management 63 Updating objectives and work plans 64 Managing continuous learning 64 8 Conducting Performance Reviews 67 The performance review meeting 67 Performance review issues 69 Organizational issues 72 Performance review skills 76 Preparing for review meetings 79 Conducting a performance review meeting 83 Evaluating performance reviews 85 Self-assessment 87 9Improving Performance 91 Taking action 91 Managing underperformers 93 Capability procedure 99 10 Performance Rating 103 Arguments for and against rating 104 The validity of ratings 106 Performance-level definitions 107 Number of rating levels 109 Achieving consistency 113 Conclusions 115 11 360-Degree Feedback 116 Definition 116 Purpose 117 Methodology 119 Contents vii Development and implementation 121 Advantages and disadvantages of the method 122 Criteria for success 124 12 Feedback, Counselling and Coaching 125 Feedback 125 Coaching 127 Counselling 129 13 Performance Management Documentation 132 Purpose of the documentation 133 The forms as working documents 133 Form design 134 Variations on a theme 136 14 Managing Organizational Performance 138 Requirements for high organizational performance 138 Performance management at the organizational level 141 Performance management at the individual level 146 Integrating organizational and individual performance management 147 Performance management in smaller organizations 147 15 Managing Team Performance 149 Purpose and process 149 Team and teamworking objectives 151 Team work plans 153 Team performance reviews 154 Team rewards 155 Team and individual performance 157 16 Personal Development Planning 158 A definition 158 The overall process 160 Development needs and wants 161 Action planning 162 Introducing personal development planning 163 17 Performance Management and Pay 165 The link between performance management and pay 165 Approaches to contingent pay 166 Reconciling performance management and pay 169 viii Contents 18 Developing Performance Management 172 The development framework 172 A performance management development programme 174 Overall design: points to consider 185 19 Performance Management Training 191 Objectives of training 192 Training programmes 192 Distance learning 193 Face-to-face training methods 193 20 Evaluating Performance Management 196 General method for monitoring and evaluation 196 A typical approach 197 Points to be covered 198 Outcome of evaluation 200 21 The Practice of Performance Management 201 Research findings 201 Performance management in action 206 22 Conclusions: performance issues and ways of dealing with them 214 Issues in performance management 214 Dealing with the issues 216 Appendix A Examples of statements of key result areas/main tasks and objectives 218 Appendix B Checklist of factors affecting managerial performance 225 Appendix C Analysis of performance problems 230 Appendix D Performance review evaluation form 233 Appendix E Example guidance notes on performance management for employees 235 Appendix F Introducing performance management: questions and answers 239 Appendix G Example of a performance-management training programme 243 Contents ix Appendix H Performance management role-playing exercises 245 Appendix I Performance management attitude-survey questionnaire 249 References 251 Index 255 1 The Basis of Performance Management Background The concept of performance management has been one of the most important and positive developments in the sphere of human resource management in recent years.The phrase was first coined by Beer and Ruh in 1976. But it did not become recognized as a distinctive approach until the mid-1980s, growing out of the realization that a more continuous and integrated approach was needed to manage and reward performance. For crudely developed and hastily implemented performance-related pay and appraisal systems were all too often failing to deliver the results that, somewhat naively, people were expecting from them. Performance management rose like a phoenix from the old-established but somewhat discredited systems of merit rating and management by objectives. Performance management defined Performance management is a strategic and integrated process that delivers sustained success to organizations by improving the performance of the people who work in them and by developing the capa- bilities of individual contributors and teams. Performance management is strategic in the sense that it is concerned with the broader issues facing a business if that business is to function effectively in its environment, and with the general direction 2 Performance Management in which the business intends to go to achieve its longer-term goals. Performance management is integrated in two senses: (1) vertical integration, linking or aligning business, team and individual objectives with core competences; and (2) horizontal integration, linking different aspects of human resource management, especially organizational development, human resource development, and reward, so as to achieve a coherent approach to the management and development of people. In United Distillers,as described by Chris Bones (1996),performance management initiatives were driven by the business vision and strategic imperatives.The company s initiatives and the ways in which they interconnected are illustrated in Figure 1.1. Style Shared Systems values Synergy Skills Structure People Figure 1.1 Integration at United Distillers Source: adapted from Chris Bones (1996) The Basis of Performance Management 3 The meaning of performance Performance management is,of course,about performance.But what is meant by that word? It is important to clarify what it means, because if performance cannot be defined,it can t be measured or managed.Bates and Holton (1995) have pointed out that performance is a multi-dimen- sional construct, the measurement of which varies depending on a variety of factors . They also state that it is important to determine whether the measurement objective is to assess performance outcomes or behaviour. There are different views on what performance is.It can be regarded as simply the record of outcomes achieved. On an individual basis, it is a record of a person s accomplishments. Kane (1996) argues that performance is something that the person leaves behind and that exists apart from the purpose . Bernadin et al (1995) are concerned that performance should be defined as the outcomes of work because they provide the strongest linkage to the strategic goals of the organization, customer satisfaction, and economic contributions . The Oxford English Dictionary defines performance as the accomplishment, execution, carrying out, working out of anything ordered or undertaken . This refers to outputs/outcomes (accomplishment) but also states that performance is about doing the work as well as being about the results achieved. Performance could therefore be regarded as behaviour the way in which organizations, teams and individuals get work done. Campbell (1990) believes that performance is behaviour and should be distinguished from the outcomes because they can be contaminated by systems factors . A more comprehensive view

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