Performance Measurement and Management

Summer Business Institute

Villanova School of Business

Overview

Importance of performance measurement and management– Levels of analysis

Focus: organization level Focus: individual level

Importance of Performance Measurement and Management “What you measure is what you get” What might companies be interested in

measuring? Levels of analysis

– Individual/employee– Work team– Organization– Industry– National economy

Focus: Organization Level

Kaplan & Norton’s Balanced Scorecard Four perspectives:

– Customer– Internal business– Innovation and learning– Financial

Application: Villanova University

Focus: Individual Level

Purpose:– Feedback– Development– Documentation

Ever been in a situation with really good or bad performance management?

The Appraisal Process

1. Establish performance standards

2. Mutually set measurable goals

3. Measure actual performance

4. Compare actual performance with standards

5. Discuss the appraisal with the employee

6. If necessary, initiate corrective action

Methods of Appraisal Family 1: Use of absolute standards

– Critical incident appraisal (specific observed behaviors)– Checklist appraisal– Adjective rating scale appraisal (quality of work, job knowledge,

dependability)– Forced-choice appraisal (occupational survey)– BARS (Behaviorally Anchored Rating Scales) – combines 1 and 3,

more specific incidents are rated Family 2: Use of relative standards

– Group order ranking– Individual ranking– Paired comparison

Family 3: Use of achieved outcomes– Management by objectives (MBO)

Difficulties in Appraisal We are human… so therefore we err!

– Leniency error– Halo error– Similarity error– Low appraiser motivation – appraisal could

harm employee, evaluator may not give a realistic evaluation

– Central tendency– Inflationary pressures

Creating More Effective Systems

Emphasize BEHAVIOR, not traitsUse both absolute and relative standardsProvide ongoing feedbackHave multiple raters

Use peer evaluations and 360 appraisals

Rate selectivelyTrain appraisers

International Issues in Appraisal

Cultural differences are important to consider!– Language– Customs– Basic cultural differences

• e.g., differing emphasis on individualism

– Evaluation formats• Universal or country specific?

Learning Points

Why performance measurement and management are important

The balanced scorecard– organization level performance measurement

Methods of appraisal at the individual level What individual pitfalls to avoid and how to

create a better overall system