Performance Management
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1 Third Edition A "2.T4 %4if. Oo$ Performance Management Herman Aguinis Kelley School of Business Indiana University PEARSON Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
2 CONTENTS Preface viii Acknowledgments Dedication xiv xiii About the Author xiv PART I Strategic and General Considerations 1 Chapter 1 Performance Management and Reward Systems in Context Definition of Performance Management (PM) The Performance Management Contribution Disadvantages/Dangers of Poorly Implemented PM Systems Definition of Reward Systems Base Pay Cost-of-Living Adjustments and Contingent Pay Short-Term Incentives Long-Term Incentives Income Protection Work/Life Focus Allowances Relational Returns Aims and Role of PM Systems Strategic Purpose Administrative Purpose Informational Purpose Developmental Purpose Organizational Maintenance Purpose Documentational Purpose Characteristics of an Ideal PM System Integration with Other Human Resources and Development Activities Performance Management Around the World 24 CASE STUDY 1-1: Reality Check: Ideal Versus Actual Performance Management System 28 CASE STUDY 1-2: Performance Management at Network Solutions, Inc. 31 CASE STUDY 1-3: Distinguishing Performance Management Systems from Performance Appraisal Systems 32 Chapter 2 Performance Management Process Prerequisites Performance Planning Results Behaviors Development Plan 47 Hi
3 iv Contents 2.3 Performance Execution Performance Assessment Performance Review Performance Renewal and Recontracting 52 CASE STUDY 2-1: Job Analysis Exercise 55 CASE STUDY 2-2: Disrupted Links in the Performance Management Process at "Omega, Inc." 55 CASE STUDY 2-3: Performance Management at the University of Ghana 56 Chapter 3 Performance Management and Strategic Planning Definition and Purposes of Strategic Planning Process of Linking Performance Management to the Strategic Plan Strategic Planning Developing Strategic Plans at the Unit Level Job Descriptions Individual andteam Performance Building Support 79 CASE STUDY 3-1: Evaluating Vision and Mission Statements at Pepsico 82 CASE STUDY 3-2: Gilbert's Mission Statement Generator 83 CASE STUDY 3-3: Linking Individual with Unit and Organizational Priorities 84 CASE STUDY 3-4: Linking Performance Management to Strategy at Procter & Gamble 84 PART II System Implementation 87 Chapter 4 Defining Performance and Choosing a Measurement Approach Defining Performance Determinants of Performance Implications for Addressing Performance Problems Factors Influencing Determinants of Performance Performance Dimensions Approaches to Measuring Performance Behavior Approach Results Approach Trait Approach 99 CASE STUDY 4-1: Diagnosing the Causes of Poor Performance 101 CASE STUDY 4-2: Differentiating Task from Contextual Performance 102 CASE STUDY 4-3: Choosing a Performance Measurement Approach at Paychex, Inc. 102 CASE STUDY 4-4: Deliberate Practice Makes Perfect 103 Chapter 5 Measuring Results and Behaviors Measuring Results Determining Accountabilities 107
4 5.1.2 Determining Objectives Determining Performance Standards Measuring Behaviors Comparative Systems Absolute Systems 118 CASE STUDY 5-1: Accountabilities, Objectives, and Standards 126 CASE STUDY 5-2: Evaluating Objectives and Standards 126 CASE STUDY 5-3: Measuring Competencies at the Department of Transportation 127 CASE STUDY 5-4: Creating BARS-Based Graphic Rating Scales for Evaluating Business Student Performance in Team Projects 128 Chapter 6 Gathering Performance Information Appraisal Forms Characteristics of Appraisal Forms Determining Overall Rating Appraisal Period and Number of Meetings Who Should Provide Performance Information? Supervisors Peers Subordinates Self Customers Disagreement Across Sources: IsThis a Problem? A Model of Rater Motivation 150 Contents 6.7 Preventing Rating DistortionThrough RaterTraining Programs 153 CASE STUDY 6-1: Evaluating an Appraisal Form Used in Higher Education 157 CASE STUDY 6-2: Judgmental and Mechanical Methods of Assigning Overall Performance Score at The Daily Planet 162 CASE STUDY 6-3: Minimizing Intentional and Unintentional Rating Errors 164 CASE STUDY 6-4: Minimizing Biases in Performance Evaluation at Expert Engineering, Inc. 165 Chapter 7 Implementing a Performance Management System Preparation: Communication, Appeals Process,Training Programs, and PilotTesting Communication Plan Appeals Process Training Programs for the Acquisition of Required Skills Rater ErrorTraining Frame of Reference Training Behavioral ObservationTraining Self-LeadershipTraining PilotTesting Ongoing Monitoring and Evaluation 185
5 vi Contents 7.7 Online Implementation 188 CASE STUDY 7-1: Implementing a Performance Management Communication Plan at Accounting, Inc. 192 CASE STUDY 7-2: Implementing an Appeals Process at Accounting, Inc. 192 CASE STUDY 7-3: Evaluation of Performance Management System at Accounting, Inc. 192 CASE STUDY 7-4: Training the Raters at Big Quality Care 193 PART III Employee Development 195 Chapter 8 Performance Management and Employee Development Personal Developmental Plans Developmental Plan Objectives Content of Developmental Plan Developmental Activities Direct Supervisor's Role Degree Feedback Systems Advantages of 360-Degree Feedback Systems Risks of Implementing 360-Degree Feedback Systems Characteristics of a Good System 215 CASE STUDY 8-1: Developmental Plan Form at Old Dominion University 220 CASE STUDY 8-2: Evaluation of a 360-Degree Feedback System Demo 220 CASE STUDY 8-3: Implementation of 360-Degree Feedback System at Ridge Intellectual 221 CASE STUDY 8-4: Personal Developmental Plan at Brainstorm, Inc. Part I 221 CASE STUDY 8-5: Personal Developmental Plan at Brainstorm, Inc. Part II 222 Chapter 9 Performance Management Skills Coaching Coaching Styles Coaching Process Observation and Documentation of Developmental Behavior and Outcomes Giving Feedback Disciplinary Process andtermination Performance Review Meetings 248 CASE STUDY 9-1: Was Robert Eaton a Good Coach? 256 CASE STUDY 9-2: What Is Your Coaching Style? 257 CASE STUDY 9-3: Preventing Defensiveness 259 CASE STUDY 9-4: Recommendations for Documentation 260 PART IV Reward Systems, Legal Issues, and Team Performance Management 263 Chapter 10 Reward Systems and Legal Issues Traditional and Contingent Pay Plans Reasons for Introducing Contingent Pay Plans 265
6 Contents vii 10.3 Possible Problems Associated with Contingent Pay Plans Selecting a Contingent Pay Plan Putting Pay in Context Pay Structures Job Evaluation Broad Banding Performance Management and the Law Some Legal Principles Affecting Performance Management Laws Affecting Performance Management 284 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 Team Performance 294 Index Definition and Importance ofteams Types ofteams and Implications for Performance Management Purposes and Challenges ofteam Performance Management IncludingTeam Performance in the Performance Management System Prerequisites Performance Planning Performance Execution Performance Assessment Performance Review Performance Renewal and Recontracting RewardingTeam Performance 307 CASE STUDY 11-1: Not All Teams Are Created Equal 309 CASE STUDY 11-2: Team Performance Management at Duke University Health Systems 310 CASE STUDY 11-3: Team-Based Rewards for the State of Georgia 312 CASE STUDY 11-4: Team Performance Management at Bose 313
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