HRM3706
PERFORMANCE MANAGEMENT
STUDY UNIT 1
PERFORMANCE MANAGEMENT IN CONTEXT
1.1
Origins and evolution of performance management

Appraisal practices in the 1960s shifted to a greater emphasis on goal setting and assessment
of performance – related abilities and more recently competencies rather than personalities.

From late 1980s and whole of 1990s saw major changes in organisations

Fletcher states that performance appraisal became a central mechanism in a more holistic
approach towards managing people and business in general.

This means that a manager gets his or her work done by getting other people to do it.

During 1980s people became more performance oriented

During the 1990s things shifted again in this field and performance management began to seen
as more of a core management process to grow out of its “appraisal box” developing into an
integrated, strategic and grown-up cousin of the original idea of what performance used to be.
1.2
Defining performance appraisal

Aguinus defines as “continuous process of identifying, measuring and developing the
performance individuals and teams, and aligning performance with strategic goals of the
organisation.
(i)
Continuous process: Performance is ongoing and involves a never ending process of
setting goals and objectives, observing performance and receiving ongoing coaching
and feedback. See figure 1.1 page 7 in study guide.
(ii)
Alignment with strategic goals: It is necessary that whatever activities and tasks that
employees do the manager has to ensure that they are in line with the strategic goals of
the organisation. Performance is therefore the direct link between employee
performance and organisational gals and makes employee contribution to the
organisation explicit.
1.3
Performance management process Comprises six stages according to Aguinis
(i) Prerequisites: There are two necessary for implementation
 Knowledge of the organisation’s mission and strategic goals
 Knowledge of the job in question
(ii) Performance planning
 The supervisor and employee meet at the beginning of the performance management cycle,
where the process is discussed and agreed upon as well as what not only needs to be done
but how it should be done i.e setting of standards. This step also involves discussion about
results , behaviours as well as developmental plans
(iii) Performance execution:
 In this step the employee is working or striving to produce the results and display the
behaviour that was agreed to in step 2, as well as work on developmental needs.
(iv) Performance assessment
 Both the employee and the manager are responsible for evaluating the extent to which the
desired behaviours have been displayed and whether what was agreed upon has been
accomplished. This also includes an evaluation of the developmental plan and whether this
has also been achieved.
(v) Performance review
 This stage involves the meeting between the employee and the manager to review his/her
assessment. This is usually referred to as the performance appraisal meeting or discussion.
The employee receives feedback on his/her performance.
(vi) Performance renewal and recontracting:
 This is the final stage and is identical to the performance planning stage.
1.4
Distinction between performance management and performance appraisal
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
1.5
1.5.1
1.5.2
1.5.3
1.5.4
1.5.5
1.5.6
Performance appraisal: Refers to a system that involves employee evaluation once a year
without any effort to provide feedback and coaching so that performance can be improved. It
is a systematic description of an employee’s strengths and weaknesses.

Performance management: It is the ongoing process rather than a once-off event or done
annually or by annually. It is comprehensive, continuous and flexible approach to the
management of the organisations, teams and individuals, which involves the maximum amount
of dialogue between those concerned.
Aim and role of performance management in the organisation.
The information collected is most frequently used for salary administration, performance feedback
and the identification of employee strengths and weaknesses. Aguinis points to six purposes:
Strategic purpose:

To help top management achieve strategic business objectives

By linking the organisational goals with individual goals, the performance management system
reinforces behaviour consistent with the attainment of organisational goals.

Moreover even if for some reason individual goals are not achieved, linking individual goals
with organisational goals serves as a way to communicate what the most crucial business
strategic initiatives are.
Administrative purpose:

To furnish valid and useful information for making administrative decisions about employees.

These include salary adjustments, promotions, employee retention, or termination of service,
recognition of superior individual performance, identification of poor performance, layoffs and
merit increases.

The implementation of the reward system falls under the administrative purpose.
Informal purpose:

PM (performance management) serves as an important communication device.
(i)
Informs employees about how they are doing and provides them with information on
specific areas where they need improvement.
(ii)
Related to the strategic purpose it provides information on the organisation’s and
supervisor’s expectations and what aspects of work the supervisor believes are most
important.
Developmental purpose;

Managers can use the information gathered during the performance management system,
specifically feedback to coach employees and improve performance on an ongoing basis.

This feedback allows for identification of strengths and weaknesses as well as the causes for
performance deficiencies which could be due to individual, group or contextual factors.
Organisational maintenance purpose:

The PM system also provides information to be used in workforce planning.

Workforce planning comprises a set of systems that allow organisations to anticipate, and
respond to needs emerging within and outside the organisation, to determine priorities and to
allocate human resources where they can do the most good.

An important component of any workforce planning effort is the talent inventory, which is
information on current resources (e.g skills, abilities, promotional potential and assignment
history of current employees)

PM systems are the primary means through which accurate talent inventories can be
assembled.

Other: assessing future training needs, evaluating performance achievements at organisational
level and evaluating the effectiveness of HR interventions (skills learnt on training
programmes being transferred into workplace)
Documentational purpose:

Performance data can be used to validate newly proposed selection instruments. (collect scores
for test of computer literacy and correlate with performance scores. If there is a high
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1.6
1.6.1
1.6.2
1.6.3
1.6.4
1.6.5
1.6.6
1.6.7
1.6.8
1.6.9
1.6.10
1.6.11
1.6.12
1.6.12
1.7
correlation the test can be used for selection purposes)

The PM system allows for documentation of important administrative decisions (useful in
court cases for “unfair dismissals” accusations)

The documents are filed and can be used to see why certain decisions were made such as
promoting or not promoting an individual and reasons why.
Contributions of performance management to employees and organisation
Motivation to perform is increased: knowledge about how you are doing and being given
recognition for work well done serves as a future motivational tool to achieve even more
Self-esteem is raised; As mentioned being given recognition for achievements fulfils the basic need
to be recognised and valued at work.
Managers gain insight into subordinates: This will enable the manager to build better
relationships with their subordinates. The supervisor is also more aware of the personal contribution
that the subordinate is making to the organisation. This information is useful not only to the
immediate supervisor but ones at a higher level as well.
Definition of a job and criteria clarified: Employees gain a better understanding of which
behaviours and results are required for successful performance.
Self-insight and development enhanced: The participants can see which development activities
will add value to their careers as they progress through the organisation.
Administrative actions are more fair and appropriate: The information gathered can be used
objectively because it is valid for salary or merit increases, promotions, transfers and terminations.
PM systems ensure fairness and equity that rewards are distributed on a credible basis.
Organisational goals are clear; The goals of the unit and orgnaisation are made clear and
employees understand the link between what they do and orgnaisational success.
Employees become more competent: Employees performance improves but in addition due to the
developmental plans there is a solid foundation for helping employees become even more successful.
There is better protection from court cases: PM system helps organisation to be legally compliant
in the case of equal treatment for all regardless of age, gender, race etc.
Better and more timely differentiation between good and poor performers: PM system allows
for quicker and more accurate identification of good and poor performers. It also forces mangers to
face up to performance problems timeously, before the problem escalates and cannot be fixed easily.
Manager’s view of performance is communicated more clearly: PM system allows managers to
communicate to their subordinates their judgements regarding performance
Organisational change is facilitated: Where an organisation wants to change a culture this
initiative can be added to the employees’ list of responsibilities and be subject to review, together
with other performance areas
Motivation, commitment and intention to stay in the organisation are enhanced: When
employees are satisfied with their organisation’s PM system they are more likely to be motivated to
perfrom well, to be committed to their organisation and not try to leave.
Conditions for the successful implementation of performance management. (Pieters (2009)
 When developing and implementing a PM system it is important to convey to all participants the
reasons for such a system
 It is especially important to ensure that there is top management support and commitment
otherwise the PM system will fail.
 All participants should take an active part in both the development and implementation of the
PM system.
 If the organisational culture is not characterised by a focus of delivering outputs the chances of
success are limited.
 All managers should be properly trained in applying the PM system. If this does not happen
then the managers will do as they please and the PM system will lose its credibility.
 PM system should not be implemented in isolation. All other human resource systems such as
recruiting, training and development compensation etc should be allow for the PM system.
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1.8
Performance management policy:
 To get managers and employees to buy into the whole performance management process as well
as its outcomes there should be policy to guide it.
 The policy should be developed to give clear guidelines to both managers and employees on
how to deal with performance and capability issues
 The performance policy and procedures are used in all cases where performance and capability
are such that they warrant informal or formal action.
 Issues such as ill health, sickness absence and any issues of misconduct do not fall under the PM
policies and procedures but fall under the labour relations Act and basic conditions of service.
See PM policy page 24
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STUDY UNIT 2
PERFROMANCE MANAGMENT PROCESS
2.1 Prerequisites stage
 This is the first stage of PM. The two important prerequisites for implementation of the PM system
are
(i) Knowledge of the organisation’s mission and strategic goals.
(ii) Knowledge of the job in question
2.1.1 Knowledge of the organisation’s mission and strategic plan.
 There has to be a link between strategic goals and individual performance see page 37 figure 2.1
2.1.2 Knowledge of job in question:
 This is done through the process of job analysis.
 This involves a job description (KSA which are the knowledge, skills and abilities required to
carry out the task) as well as the specifications for the job such as experience, education,
personality etc.
2.2
Performance planning:
 The planning at this stage is different from the planning at strategic level.
 This planning is done between the manager and the employee
 He manager and employee meet to discuss what performance has to be accomplished and how
this is to be done in order to meet the objectives of the organisation.
 Planning gives direction to other the management and the employees because they know what
activities and tasks need to be carried out for successful achievement of long term goals of the
organisation.
 Planning as one of the performance management stages includes a consideration of results and
behaviour as well as developmental plans.
 Factors to consider during the performance planning discussion
2.2.1. Results: These refer to what needs to done or what needs to be produced and includes three
things
 The key accountabilities or broad areas of the job for which the employee is responsible for
producing results. This information usually comes from the job description.
 Identification of specific objectives that an employee will achieve as part of each
accountability
 Finally discussing the results also means discussing performance standards
2.2.2 Behaviour:
 It is important how the job is being done be taken into account.
 In other words what behaviour does the employee have to display for successful performance.
 For some jobs it is difficult to establish precise objectives and standards.
 For some jobs the employee may have control over how they do their jobs but not over the
results of their behaviour (sales person’s figures being affected by a poor territory)
2.2.3 Developmental plan
 The manager and the employee need to agree on a development plan.
 At a minimum this plan should include identifying areas that need improvement and setting
goals to be achieved in each area.
 These plans highlight an employee’s strengths and areas in need of development and they
provide an action plan on how are we going to address them.
 Including a development plan in the planning stage of PM allows an employee to determine
whether there are areas they need to develop in order to attain the specified goals.
 The following are the three required components of the developmental plan
1. Description of developmental objectives
2. Activities that will be carried out to achieve these objectives
3. Date of completion.
 The manager and employee need to agree on what development or new skills need to be learnt
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2.3
2.4
2.5
to enrich the employee’s work experience.
 Developmental plans should therefore be included in the performance appraisal form. See page
46 for a developmental plan.
Performance execution: The employee now takes ownership of the process.
 According to Aguinis the following factors must be present in the performance execution stage.

Primary responsibilities of employees
(i) Commitment to goal achievement: The employee must be committed to the goals that they
agreed to. This is why they formed an active part in the process of setting the goals
(ii) Ongoing performance feedback and coaching: Employees should not wait for the
official assessment in order to get feedback on their performance. They should also not
wait until a serious problem develops before asking for help or coaching.
(iii) Communication with the manager: There should be regular and open communication
between the manager and the subordinate. Employees should fell that they can approach
their manages for clarity on issues and roles.
(iv) Collecting and sharing performance information: Employees should provide the
manager with regular updates on progress towards goal achievements in terms of both
behaviour and results. These relate to the ones agreed upon in the performance planning
stage.
 Primary responsibilities of managers:
(i) Observation and documentation; Managers must observe and document performance on a
daily basis. It is important to keep track of both good nd poor performances.
(ii) Updates: As the goals of the organisation may change especially in turbulent times it is
necessary to updates or revise initial objectives, standards and key accountabilities and
competency areas
(iii) Feedback; This should be provided on a regular basis as regards the progression towards
goals and coaching to improve performance.
(iv) Resources: Managers must ensure that the employees have the adequate resources and
opportunities to participate in developmental plans. They should encourage and sponsor
participation in training, classes and special assignments. Managers have a responsibility
to ensure necessary supplies and funding to perform the job properly.
(v)Reinforcement: It is important that managers let their employees know that their outstanding
performance has been noticed and recognised. In addition negative feedback also needs to
be done in order for the employee to be aware of this deviation from agreed standards of
performance and what remedies can be put in place to rectify this. All performance
problems should be diagnosed as soon as they are discovered.
Performance assessment:
 In the assessment stage both employee and manager are responsible for evaluating the extent to
which the desired behaviour has been displayed and whether the desired results have been
achieved. This also includes the evaluation of developmental plan.
Performance review: This is the meeting between the employee and the manager and involves the
following steps as per Aguinis.
(i) Identify what the employer has done well and poorly by citing specific positive and negative
behaviour.
(ii) Solicit feedback from your employee about the types of behaviour. Listen for reactions and
explanations
(iii) Discuss the implications of changing or not changing. Positive feedback is best, but an employee
must be made aware of what happened if any poor performance continues
(iv) Explain to the employee how skills used in past achievements can help him/her overcome any
current performance.
(v) Agree on an action plan. Encourage the employee to invest in improving his/her performance
by asking questions such as what ideas do you have etc”
(vi) Set up a meeting to follow up and agree on the behaviour, actions and attitudes to be evaluated.
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2.6
Performance renewal and contracting:
 This is the final stage in the performance management process.
 This is essentially identical to the performance planning stage
 The main difference is that this stage uses the insights and information gained from the other
phases
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STUDY UNIT 3
PERFROMANCE APPRAISAL
3.1
The essence of performance appraisal
 PA (performance appraisal) should not be seen as a separate personnel function .
 Instead it should be viewed as an integral part of the process of performance management.
 In essence after the job analysis has been done, candidates are recruited, selected and the energy
of employees are directed towards delivering specific outputs
 The extent to which these outputs are delivered should be evaluated to determine training needs
and levels of remuneration.
 There is a distinction between
 Informal performance: management is not well structured and takes place by chance
 Formal performance: management is well structured and well planned and takes place
according to specific rules.
 Organisations should apply a formal system to promote:
 Consistency
 Completeness
 Comparability
 Fairness
3.2
Defending performance appraisal:
 It has been acknowledged that there are no clear –cut definitions of both performance
management and performance appraisal.
 Pieters has come up with a definition: Performance appraisal: This refers to the allocation of
numerical values according to specific rules and procedures. These are applied to the
evaluation of behavioural characteristics and/or work outputs to determine the extent of
the deviation (if there is any) from the required performance standards.
3.3
The purpose and value of performance appraisal
 The main purpose of conducting PA is to develop employees and/or determine levels of
remuneration.
 The value of PA according to Peiters is that is provides information that can be used as follows:
 Training and development can be identified. Lack of performance could be due to lack of
knowledge and skills and can be remedied through training.
 Career guidance can be given. Top performers can be advised what additional skills they
need to develop for promotion. On the other hand the poorer performers can be advised to
temper their expectations
 Selection and placement success can be evaluated. Sub standard performance may be
linked to poor recruitment or person being put in the wrong job.
 Succession planning can be conducted Staff members with the right potential can be
identified and trained for senior positions
 A personnel audit can be conducted. Management can get an overview of the current level
of knowledge and skills available and which knowledge and skills need to be developed.
 Opportunities can be created for communication between supervisor and subordinate.
 This links to stage 2 of the PM system.
3.4
What performance is and what it is not
 Performance management systems usually include measures of both behaviour (what the
employee does) and results (outcomes of the employee behaviour)
 The definition of performance does not include the results of an employee behaviour but only
the behaviour itself.
 Performance is about behaviour or what employees do, not about what they produce or the
outcomes of their work.
 Aguinis gives two additional characteristics of the behaviour labelled performance
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(i) It is evaluative: The behaviour can be judged as negative, neutral, or positive for individual,
unit/departmental or organisational goals.
(ii)
It is multidimensional: There are many different kinds of behaviour that have the
capacity to advance or hinder organisational goals.
3.5
Determinants of performance: Aguinis states that there is a combination of three factors that
allows people to perform at a higher level than others.
 Declarative knowledge: This is information about facts and things, including information
regarding a given task’s requirements, labels, principles and goals.
 Procedural knowledge: This is the combination of knowing what to do and how to do it and
includes cognitive, physical, perceptual, motor and interpersonal skills
 Motivation: This involves three types of choices:
(i) Choice to expend effort (I will go to work today)
(ii)
Choice of level of effort (i will try or not try very hard today)
(iii) Choice to persist in the expenditure of that level of effort ( I will persist or not persist)
 All three determinants of performance must be present for performance to reach high levels,
these three have multiplicative relationship
 Performance = Declarative knowledge x Procedural knowledge x Motivation
3.6
Factors influencing determinants of performance: Aguinis identifies three:
 The employees abilities and previous experience
 HR practices
 The work environment.
 These three factors should basically serve as a point of departure when managers address
performance problems. This means that managers must first identify which of these factors is
hampering performance then help employees improve their performance.
3.7
Approaches to measuring performance
 Employees do not work in a vacuum.
 The work in the organisational context, engaging in certain behaviour that produces certain
results.
 The same employee may behave differently and produce different results if placed in a different
situation such as working for a different supervisor or using worse equipment. See fig 3.1 page
68
3.7.1 Trait approach:
 This approach emphasise the individual and ignores the situation, behaviour and results.
 Raters look at the personality and abilities such as intelligence and conscientiousness.
 This approach is justified based on the positive relationship between abilities and
conscientiousness.
 Some challenges posed by implementing the trait approach
 Traits are no under the control of individuals and they are fairly stable overtime. They are not
likely to change even if the individual puts in lots of effort so individuals may become
resentful of this system because the development of these trait are usually beyond their
control.
 Just because n individual possesses certain trait such as intelligence does not necessarily
mean that this will lead to desire results and behaviour.
 Sometimes the trait approach is justified. If an organisation has to restructure it is useful to
determine individual traits so that people can be relocated in a fair and just manner.
3.7.2 Behavioural approach:
 This approach emphasises what people do on the job and not trait or the outcomes.
 This is most appropriate in the following circumstances
 The link between behaviour and results is not obvious. This happens when a salesman
may not be able to close a deal because of a downturn in the economy, or a pilot may not
check everything on the checklist before the flight but the flight is still successful.
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
 Outcomes are attained in the distant future: Think of the Gau Train. It is still work in
progress since 2005. It would the appropriate to assess performance of all the role players
from the planning phase, then design phase, then construction phase right up to completion
phase, by measuring every six months.
 Poor results are due to causes beyond the performer’s control. It makes sense to assess
behaviour in the following example. The example given is two assembly line workers
where one works day shift and the other night shift. If the assembly line breaks down
during the day there i immediate technical assistance and the assembly line is up and
running again in 5 minutes. If this happens at night where there is very little technical
assistance if may take up to an hour to be up and running again. If results were measured
the night shift worker would be penalised.
Behaviour oriented rating methods
(i) Narrative essay: The strengths and weaknesses and potential together with suggestions for
improvement is written down by the evaluator. The underlying assumption is that the
rater knows the employee well. The advantage of this method is that it gives the
employee detailed feedback regarding performance. The disadvantage is that it is
impossible to do comparisons across individuals, groups and departments because the
focus is on the different aspects of the individual. The results of this technique not only
rests on the performance o the individual but also on the writing skills of the rater
(ii)
Ranking: The evaluator ranks the employee form bets to worst in terms of an overall
criterion. The advantage is that it is quick and easy when there are a small number of
employees involved. In groups larger than 20 it is very difficult t do this and
performance differences among subordinates are not indicated. The top and bottom
performers are easy to identify but then it becomes increasingly more difficult.
(iii) Paired comparison: This is a more systematic way of comparing individuals with each
other. Each employee is compared to every other employee based on each employee’s
overall ability to execute a task. The number of times one employee is preferred to his or
her colleagues is indexed and determines his or her position on the ranking order scale.
He advantage is that it useful for purposes such as salary administration. He
disadvantage is that these comparisons provide little basis for individual feedback and
development.
(iv)
Forced distribution: With his method the evaluator is asked to rate employees in a fixed
category, for example 10% in the weakest group, 20% in the low group, 40 in the
average group, 20% in the high average group and 10% in the above average group. The
advantage of this method is that the type of distribution eliminates clustering almost all
employees at the top of the distribution (rater leniency), at the bottom of the distribution
(rater severity) or in the middle (central tendency). It is useful if a large number of
employees must be rated and there is more than one rater. The disadvantage is that it can
lead to a great deal of employee resentment in an entire group of employees as the group
is either superior or substandard. See page 73
(v)Behavioural checklist: Here the rater is provided with a series of statements that describe
job-related behaviour. He rater must choose the words which best describe the
employee’s behaviour o characteristics. Each category is weighted for example 5
(always) to 1 (never). The scores are added up see page 74.
(vi)
Graphic rating scale: his is a popular appraisal technique. The rater receives a list of
characteristics against which he or she must rate employees. See table 3.2. This rating is
quantifiable because it is doe on a scale from 1-9. The advantage is that it allows results
to be expressed in quantitative terms, they consider more than one performance
dimension and since the scales are standardised, they facilitate comparison across
employees. The disadvantages are thy are very time consuming to develop and
sometimes the dimensions or scale points are not defined clearly.
(vii) Behaviourally anchored rating scales (BARS): These scales make use of critical
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incidents as anchor statements on a scale. The main advantage is that they define the
dimension to be rated in behavioural terms and use critical incidents to describe various
levels of performance. The disadvantage is that they are very time consuming.
3.7.3 Results approach
 This emphasises the outcomes and results produced by the employees.
 It does not consider the traits employees may possess or how the employees do the job. This is a
bottom-line approach and is not concerned about employee behaviour and processes, but focuses
on what is produced. (sales, number of units) Defining and measuring results usually takes up
more time than defining and measuring the behaviour needed to achieve these results. This is
also more cost effective because results are easier to track than behaviour. It is also more
objective therefore more appealing.
 This approach s most appropriate when:
 Workers are skilled in the needed behaviour: When workers have he necessary knowledge
and skills to do the work. Workers know the specific behaviours that are needed to achieve
the desired results. Hey are also sufficiently skilled to know what to do to correct any
process-related problems when the desired results are not obtained: It is just a matter of
assessing whether they do the work or not.
 Behaviour and results are obviously related: Certain results can only be obtained if the
worker engages n specific types of behaviour. This is the case in repetitive jobs. The
example is using a results approach for a newspaper deliverer. Performance can be
measured by delivering to every customer at a specific time by using the most effective
delivery route. If these types of behaviour are not present then the newspaper will not be
delivered on time.
 Results show consistent improvement over time: This is an indication that workers are
aware of the behaviour needed to do the job successfully. In this case a results approach is
best.
 Here are many ways to do the job right: An emphasis on results can be beneficial because
it could encourage employees to achieve the desired outcomes in creative and innovative
ways.
 The following are results-oriented rating methods:
(a) Management by objectives: This is a well-known process of managing that relies n goal
setting to establish objectives for the organisation as a whole, for each department, for
each manager within each department and for each employee. His is not a measure of
employee behaviour but rather each employee’s contribution to the success of the
organisation. Key people have to do three things
 Meet to agree on the major objectives for a given period (every year, every six months
etc)
 Develop plans for how and when the objectives will be accomplished.
 Agree on the standards or “yardsticks” for determining whether the objectives have
been met.
Progress reviews are held regularly until the end of the period for which the objectives
have been established. Then new objectives have to be set.MBO promotes success in
employee because as each employee succeeds so do the employee’s manager, the
department and the organisation. This will only happen to the extent that everyone’s goals
are compatible. The advantage is that it focuses on results and on identifying each
employee’s contribution o the success of the organisation. The disadvantages:
 It is generally short-term oriented
 It provides little insight into employee behaviour
 It does no facilitate comparison across employees.
(b)Work planning and review: Similar to MBO but places greater emphasis on the periodic
review of work plan by both the supervisor and subordinate in order to identify goals
attained, problems encountered and the need for training. His method is based primarily on
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each supervisor’s judgement about whether goal has or has not been attained, whilst MO
relies more on objectives and quantifies reliable evidence. The advantage is the frequent
interaction between the supervisor and the subordinate. The disadvantage is that it is time
consuming to implement properly and does not facilitate comparisons across employees.
What technique to use when

If the objective is to compare employees across raters for important employment decisions
(promotions, merit pay do not use MBO or work planning and review They are not standardised rating
schemes for all employees.

If BARS is used a diary should be kept during the process. This will improve the accuracy of th
ratings ad will help managers to distinguish between efficient and inefficient employees.

If objective performance data is available, MBO is best strategy to use. Work planning and review is
not as effective as MBO under these circumstances.

In general appraisal methods that are best in a broad, organisational sense BARS and MBO are
difficult to use and maintain

Methods that focus on describing, rather than evaluating behaviour (BAS, summed rating scales
produce results that are interpretable across raters. The help remove the effects of individual
differences in raters.

No rating method has been an unqualified success when used as a basis for merit pay and promotional
decisions.

When certain statistical corrections are made the correlations between scores on alternative rating
formats are very high.
3.8 GATHERING PERFOMANCE INFORMTION –WO SHOULD APPRAISE
PERFROMANCE?
3.8.1 Manager: The main advantage is that the manager is usually in the best position to evaluate
performance in relation to the strategic organisational goals. Managers also make decisions about
rewards associate with performance. It may not always be the most effective method because some
jobs such as teaching, law enforcement or sales the manager may not observe subordinate’s
performance on a regular basis.
3.8.2 Peers: Peers can provide a perspective on performance that is different from that of immediate
managers. Thus a police officer‘s partner is far better to rate day-to-day performance. Peer evaluation
suffers from the following weaknesses
 These evaluations may not be readily accepted when employees believe there is friendship bias at
work.
 Peers are less discriminating among performance dimensions than are managers. They may rate all
dimensions on the same scale even though some may require different KSA’.
 They are likely to be affected by what is called the “context effect”. The evaluation is only related to
a specific situation and not against situations in general.
3.8.3 Subordinates: These are more accurate when the resulting ratings are to be used for developmental
purposes rather than administrative purposes or merit increases and promotions. Confidentiality is key
to this method for fear of retaliation from the manager.
3.8.4 Self: If employees are part of the rating process they are more likely to accept the result and decisions
that come from the appraisal. It also helps employees to clarify their own goals and expose their
weaknesses. Employees are also in a good position to track their performance during the review
period. Disadvantages of self rating:
 They tend to be too lenient
 They are less variable
 They are more biased
 They tend to show les agreement with the judgement of others.
Ways to improve self – appraisals
 Use comparative as opposed to absolute measurement: Use a quantitative scale rather than “poor
to excellent” so that they can compare themselves to others.
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 Allow employees to practice their self-rating skills: Practice will improve the appraisal process.
 Assure confidentiality: Assure individual that the information will be not be shared with the
manager.
 Emphasise he future: Employees should indicate their plans for future development and
accomplishments.
3.8.5 Customers: This can be costly and time consuming process. This method is useful where jobs
require a high degree of interaction with the public (purchasing managers, sales reps etc)
Information can also be collected from internal customers for example managers rated the HR
representatives.
3.9
ERRORS IN PERROMANCE APPRAISALS: (Training should be given to ensure that these
errors are highlighted o the raters.)
 Similar to me error: We tend to favour people who are similar to us in term of attitudes,
preferences, personality and demographic variables including race and gender.
 Contrast error: Supervisors rate employees against one another instead of predetermined
standards. A supervisor may rate someone average but this could be higher than deserved if the
other employees sow superior performance levels.
 Leniency error: his is when the manager rates employees higher than they deserve. Could be to
get maximum increases, curry favour with subordinates, Individuals with certain personality
traits such as low on conscientiousness and high on agreeableness tend to be more lenient
 Severity error: Here the subordinates are all given low scores. This could be so that he manager
socks employees in order to improve performance, may be nasty and want to teach employees a
lesson or send a message to employee that the employee should resign etc.
 Central tendency: This occurs when only the average scores are given. This is caused by
managers who want to make it safe. It s difficult to make performance- distinctions among
employees
 Halo error: The employee scores high on one dimension so the manager than rates him or her
high on al dimensions even though this is incorrect. The example given is hat an employee has a
perfect attendance record so they are rated high on productivity and dedication. When in actual
fact the employee has huge debts so cannot afford to miss work. He person may not en be
productive at work.
 Primacy error: This is when information collected in the initial stages f the interview are given
higher scores such as good communication skills when the interview started rather than as the
interview progressed.
 Recency error: his occurs when the information that is appraised is the one most recently
observed. Performance from the beginning of the year or review period is overlooked.
 Negativity error: This happens when the rater places more emphasis on the negative aspects of
the performance rather than the positive ones.
 First impressions: This occurs when raters either get a favourable or unfavourable impression
when they first encounter the individual. They then ignore all subsequent information that does
not support this view.
 Spillover effect: Scores from previous review periods unjustly influence current ratings. This
happens when because you were an excellent performer in the previous period you ought to be
an excellent performer in the current period too and rates or gives scores according to this belief.
 Stereotype error: This is when the manager has an over simplified view of the individual based
on group membership. Women are rated unassertive because their group is perceived as such.
 Attribution theory: This happen when managers rate the individual according t personality or
abilities causing the poor performance when in actual fact the machine or equipment is faulty.
3.10 PERFOMANCE FEEDBACK
 Most company polices require results to b discussed with employees.
 Most supervisors still use a “tell and sell” approach.
 Organisations now use the 360° feedback.
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


3.11
3.12
Information is gathered from supervisors, subordinates, peers, and customers
This information is generally collected anonymously to minimise rating inflation.
The employees rate themselves and compare the self-perceptions with the information provided
by others.
 A gap analysis is conducted to examine areas for which here are large discrepancies between
self-perceptions and perceptions of others.
 This is also helpful for development purposes.
 The internet can now be used for 360° feedback See page 92 on how this is done.
RISKS OF IMPLEMENTING 360-DEGREE FEEDBACK
 Negative feedback may hurt the employee
 Positive results will only occur if the individual feels comfortable with the system
 If there are only two or three raters the individual may be able to identify the raters so he raters
distort the information.
 Raters may have so many individuals to rate that they become bogged down in the paperwork.
 The system should be administered more than once per annum.
 To avoid feelings of resentment from employees and encourage performance improvement the
following should be done:
 Communicate frequently with employees about their performance
 Get training in performance feedback and performance appraisal interviewing
 Encourage subordinates to prepare.
 Encourage participation
 Judge performance, not personality
 Be specific and be an active listener
 Avoid destructive criticism
 Set mutually agreeable goals
 Continue to communicate and assess progress towards goal regularly
 Make organisational rewards in line with performance.
DEALING WITH POOR PERFROMANCE see activity page 93
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STUDY UNIT 4
MANAGING TEAM PERFORMANCE
4.1
DEFINITION OF THE IMPORTANCE OF TEAMS
 A team is in place when two or more people interact dynamically and independently and share a
common and valued goal, objectives or mission.
 The purpose of teams:
 Businesses are facing increased pressure especially with the advent of global competition and
the use of teams may improve products and services as well as productivity. In order to
meet global requirements it ma necessitate having teams with members from different
parts of the world.
 Organisations have had to downsize and create flatter structures. Using teams provides a lot
more flexibility.
 Product and services have become very complex and this requires many people with diverse
talents to provide the input to the same project. Rapidly changing business environments
mean that teams an respond much quicker the individuals.
 The system should not only target the individual’s performance but also the contribution of the
individual to the team’s performance.
4.2
4.3
4.4
TYPES OF TEAMS AND IMPLICTIONS FOR PERFROMNCE MANAGEMENT
 Work or service teams: Known as process teams they are engaged in routine tasks, including
manufacturing or service tasks. In most cases teams members will be multiskilled with each
member being cross trained so they can undertake all the work done.
 Project teams These teams are assembled for a specific purpose and are expected to disband
once their task has been completed. The task will be outside the core production or service f the
organisation and will not be as routine as those of work and service teams. Members of these
teams will come from different functions in the organisation. They enjoy a high degree of
autonomy. They can exist for a short period or a long period.
 Network/parallel teams: These teams include members who are not constrained by time or
space and members who are not limited by organisational boundaries. These teams are generally
geographically dispersed and stay in touch via telecommunications technology. An example
would be teams that meet periodically to consider ways of improving product quality or
workplace safety.
 The implications of performance methods:
 The type of team should be considered. Different performance measurement methods are
particularly appropriate depending on the team being evaluated.
 Service and work teams can benefit from peer ratings because not only are they familiar with
the similar work but they are in close proximity to observe.
 Project teams d not stay together for long periods so measuring results at te end o the project
may no add to te development of the team. It would be better to do measures periodically
as he tea work on the project so that corrective action can be taken. Before the project is
completed.
 Network/process teams engage in unique tasks on a as-needed basis. Trying to measure
outcomes is difficult. The emphasis is o the future and focuses on the development of
individual competencies such as the members capacity to solve problem, adapt and be
flexible.
PURPOSES AND CHALLENGES OF TEAM PERFROMANCE
 How do we assess relative individual contribution?
 How do we balance individual and team performance?
 How do we identify individual and team measures of performance?
INCLUDNG TEAM PERFORMANCE IN PERFORMANCE MANAGEMENT SYSTEM
THERE ARE SC PRINCIPLES.
(i) Make sure that your team really is a team: There has to b a common goal rather than a
Page 15 of 36


competing one
(ii) Make the investment to measure: measuring team performance takes time and effort. Identify
accountabilities among team members, objectives expected of the team, what the performance
standards are and what critical competencies are in determining how results will be achieved.
iii) Use a multimethod approach to measurement. Team measurement is complex so different
methods o appraising performance as well as different sources of gathering performance
information should be considered.
(iv) Define measurement goals clearly: his means will it be used for administrative purposes,
developmental purposes or both. This decision must e made before measures for the team
performance are designed.
(v) Focus on process as well as outcomes: The behavioural measures emphasise what the team
does on the job, while the result measures emphasise te outcomes and results produced by the
team.
(vi) Measure long-term changes: he performance management system should be ale to link team
performance with strategic goals of the organisation.
4.4.1 Prerequisites:
(i)
There is a need to have good knowledge of the organisation’s mission.
ii)
There is a need to have good knowledge of the job in question: The KSAs
The common KSAs that determine team success

Communication

Decision making

Collaboration: helps the team deal with conflict effectively , commit to the team and
its goals, value the diversity and experience of other team members an share
accountabilities.

Team leadership: enables individuals to take on the role of team leader, including
knowing how to extract the best out of the team.

Self control: Enables team members t keep emotions under control
4.4.2 Performance planning: Considers the results and behaviour expected of team members as well as
the creation of a developmental plan to meet objectives to e achieved by the team
4.4.3 Performance execution: Autonomous teams are solely responsible for execution however when the
team has a supervisor then both the team and the supervisor share responsibilities.
4.4.4 Performance assessment:
All team members need to do peer evaluations and there are three types of performance that need to be
evaluated.
(i)
Individual performance or task performance: specific activities required by one’s
individual job (programmer’s ability to write quality code)
(ii)
Individual performance or contextual performance: Specific activities that
contribute to team performance such as cooperating with each other.
(iii) Team performance as a whole: The following are four dimensions fo measuring
team performance as a whole;
 Effectiveness: This is the degree that both internal and external stakeholders of
the team are satisfied with the results. (quantity, quality, time and cost
 Efficiency: The degree to which the internal team process support one another.
Communication, collaboration, and decision making.
 Learning and growth: he degree to which the team is able to learn new skills
and improve performance over time. (innovation, documented learning, best
practices and process improvements)
 Team member satisfaction: Specific measures can include perceptions regarding
the extent to which teamwork contributes to their growth and personal well being.
4.4.5 Performance review

This takes place when team members meet with their supervisor or manager o discuss how
they have been working.
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
If it is autonomous teams than a team leader or representative would meet with the
performance review board.

At least two meetings are needed where the past, the present and future are emphasised.
i)
The supervisors meet with all the team members together Focus is on overall
performance of team. (information provided by team’s evaluation and supervisor)
ii)
The supervisor meets each team member individually: The focus would be on the
individual’s contribution to the results of the group. (Information provided from
individual peer rating and individual’s rating).
4.4.6 Performance renewal and contracting: Identical to the performance planning stage
4.5
REWARDING TEAM PERFROMANCE
Performance management systems that include team performance mus design their rewards system
to reward team performance.
Page 17 of 36
STUDY UNIT 5
PERFROMANCE MANAGEMENT AND REWARDS
5.1
LINKING PERFROMANCE WITH REWARDS

An organisation that has developed its human capital has the competitive edge.

Intellectual capital resides in individuals.

The way in which people are managed is the key to unleashing and utilising this under-valued
capacity.

Employees regard rewards and reward-related decisions as subjective statements on their
individual worth, relative o others.

They communicate very clearly what he organisation or manager values or considers to be
important.

As such they place a value on individual’s and have tremendous potential impact, positive or
negative on the employee-manager relationship.
5.2
GENERAL OBJECTIVES OF PERFROMANE – RELATED REWARD PLANS
(a) Economic objectives: There are three specific motives
 Increasing task motivation: Includes using performance-linked rewards to motivate or
“incentivise” greater work effort per unit of time worked, which should translate into
increased labour productivity and reduced labour costs.
 Altering performance standard: This entails using a combination of forma performance
measurement and performance-contingent rewards to renegotiate pre-existing performance
criteria or standards.
 Increasing labour cost flexibility: Also known as ‘financial flexibility” which involves
using performance-contingent pay to vary pay level and aggregate labour in line with
changes over time in the organisation’s “capacity to pay”.
 Attracting retaining and motivating talent: By paying for performance a company signals
that it is interested in employees who want to be paid for good performance. This is more
likely to attract good peformers as opposed to poor performers.
5.4
THREE MAIN CATEGORIES OF PERFROMANCE-RELATED REWARDS
(a) Individual performance –related rewards: based o individual employee’s assessed work
behaviour or results or a combination of the two. They typically have a time frame of no more
than one year. They can be cash or non cash nature. Described as short-term incentives (STI)
(b) Performance-related rewards based on the measured results of large or small workgroups
internal to the organisation as a whole. Considered to be STI since can vary from one month
to one year. Rewards for group performance usually monetary however recognition of group
may be non-financial.
(c) Collective performance-related rewards based on results achieved by organisation as a whole.
Organisational performance would amount o a STI. is defined in terms of market share criteria
(movements of ordinary share prices and/or dividend payments over a number of years). The
reward take the form of actual or potential equity and this plan is considered a long-term
incentive (LTI) See table 5.1 page 123
 Shield groups these rewards into three categories:
(i) Merit pay for individual performance (cash)
(a) Merit raises or increments: Increments made on an annual basis and increases base
pay.
(b) Merit bonuses: Lump sum methods. This is made separately from the base pay. They
are not automatic and must be earned.
(c) Piece rates: Divided into two. Straight or standard rate (flat amount of money for each
unit produced) and scientific rate (a rate or number of units produced is set and if
worker exceeds this he or she gets a higher than the base rate (125%) and the opposite
if lower than standards (80%))
(d) Sales commissions: They can be flat-rate, scaled progressively or a stand alone
(commission only) or as an overlay of base pay. Usually expressed as percentage of the
Page 18 of 36
sale made.
(e) Goal-based bonuses: Individual performance payments are based on individual goal
achievements and not behavioural assessment. Called goal-based bonuses they entail
annual or quarterly bonus payments linked to the individual’s goal achievement.
(ii) Collective short-term incentives
(a) Profit – sharing: This is a formal agreement under which bonus payments additional to
base pay are made to some or all employees on a regular basis usually one year. There is
a formula used which links the size of the total bonus pool to some accounting measure
such as annual net profit before or after tax.
(b) Gain-sharing: This is a collective performance related pay which management shares
with all employees in a particular production plant or business unit. Could be based on
sales volume, productivity and material wastage rates as well as non financial results
such as customer satisfaction, environmental compliance and workplace accident rates.
(c) Goal-sharing: A collective incentive plan whereby group performance is measured and
rewarded in terms of goal achievement over short time frames, typically monthly,
quarterly or annually. Goal- sharing is based on the future (Annual goals of productivity,
quality or customer satisfaction). If reached each group member gets say R10 000.
(d) Team incentives: This is where teams are largely self-managed and there is little
interdependence between teams and emphasis is on cooperation within the individual
teams. If teams are highly interdependent then it would better for goal-sharing
incentives to be paid.
(iii) Collective long-term incentives:
(a) Share bonus plans: Also known as share grants. Employees receive a gift of fully paid
shares of the firm. Shares are fully paid if the price of the shares has been fully met and
no acquisition debt is incurred by the recipient.
(b) Share purchase plans: Employees have the opportunity to purchase part or all of a
specified quota of shares of the company. Employees typically pay a small deposit say
10% with the balance paid over a period of time.
(c) Share option plans: This gives the right to the employee to buy a specified number of
company shares at a pre determined price at a specified future date such as the third
anniversary of the option grant date. The price payable is usually at or below the
market price. If the share price increases the option holder stands to make a net gain by
exercising the option to acquire shares then selling them on the general market.
5.4.1 Choice between individual and group plans.
 See table 5.2 page 129.
5.4.2 Advantages and disadvantages of performance-related rewards in general. The following are
disadvanatges
 Rewards undermine intrinsic interest in the job. Financial incentives are seen as a bribe.
 Rewards motivate people to pursue one thing over everything else: the reward: Employee
will only engage in that behaviour for which they will be rewarded. All unrewarded behaviour is
ignored even if it id desirable.
 Rewards punish: They are seen as manipulating tools for employees to change behaviour
 Rewards rupture cooperative work relationships: By rewarding individual performance and
fostering individual competitiveness merit pay may serve to undermine cooperation and
teamwork.
 Rewards ignore underlying reasons for work problems: Incentive pay addresses symptoms
rather than the underlying causes. Managers fall into the trap of relying on incentive pay rather
than looking at effective management strategies such as appropriate job design, providing
meaningful performance feedback, providing adequate opportunity to develop skills and
competencies and giving employees’ discretion and autonomy to be creative.
 Rewards discourage risk-taking: As well as creativity because the focus is narrow on
expected behaviour compliance rather than creativity and initiatives.
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Problems associated with pay-for-performance plans:
 A poor performance management system is in place: A poorly designed and implemented
pay system lacks credibility and can be challenged by employees especially if it is biased and
performance measures includes areas that are not related to the job. Good performers will leave
the company and the poor performers who stay may be very demotivated.
 There is the folly of rewarding A while hoping for B. This happens when the system rewards
results and behaviour that does not help the organisation to succeed. The example id executives
who are rewarded on quarterly results and are expected to focus on long term growth of the
organisation.
 Rewards are not considered significant: This happens when rewards are so small or
insignificant (3%-5%) that they fail to differentiate between the poor performers and the good
performers. Usually 12%-15% would be considered significant.
 Managers are not accountable: This refers to accountability of the performance evaluation.
Managers will probably inflate ratings so that the subordinates get rewards that the manager
thinks is appropriate. Rewards then become the driver of the performance evaluation system
instead of the system being the driver for the rewards.
 Extrinsic motivation exists at the expense of intrinsic motivation: In some cases the extrinsic
values of the reward can supersede the intrinsic value (doing work because it is interesting and
challenging). Motivation can be achieved in other ways other than financial rewards.
 Rewards for executives are disproportionately large compared to rewards for everyone;
This can be avoided if the CEO is paid according to performance.
5.4.3 Advantages and disadvantages of individual performance – related rewards.
 Advantages:
 They make a substantial contribution to raising productivity, lowering production costs and
increasing workers’ earnings.
 Less direct supervision is required to maintain reasonable levels of output than underpayment
by time.
 In most cases systems of payment by results, if accompanied by improved organisational and
work measurement, enable labour costs and increasing workers’ earnings.
 Less direct supervision is required to maintain reasonable levels of output than underpayment
by time
 In most cases systems of payments by results, if accompanied by improved organisational
work and work measurement enable labour costs to be estimated more accurately then
underpayment by time. In other words they improve costing and budgetary control.
 Disadvanatges:
 Greater conflict may emerge between employees seeking to maximise output and managers
concerned about deteriorating quality levels.
 Attempts to introduce new technology may be resisted by employees concerned about the
impact on production standards.
 They reduce employees’ willingness to suggest new production methods for fear of
subsequent increases in production standards.
 There are increasing complaints that equipment is poorly maintained, hindering employee
efforts to earn larger incentives.
 Increased turnover among new employees is encouraged by unwillingness of experienced
workers to cooperate in on-the-job training.
 There are elevated levels of mistrust between workers and management.
5.4.4 Advantages and disadvantages of group/team incentives
 Advantages:
 The mere presence of team members who have some stake in the rewards creates social
pressure and evokes more vigorous and persistent behaviour
 The competition among co-workers is replaced by cooperation
 The strength of the rewards is increased since they are now paired with social rewards such
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5.5
as praise and camaraderie
 The performance of another group member (usually a high perfromer0 can serve as a model,
encouraging other team members to imitate successful behaviour.
 Disadvantages:
 It may produce unintended side effects, such as competition among groups. Such competition
may or may not complement goal attainment. When teams need to cooperate with each
other, incentives that create team competition should be avoided.
 Team incentives also involve administrative responsibilities that are at least as great as those
associated with individual incentive plans.
 Mixing exempt and non-exempt employees in teams creates administrative headaches and
complications
 Although the line-of-sight is clearer with team incentives it may be as clear as with individual
incentives. Some team members may not pull their weight because they know that the
team will succeed and they will get a bonus anyway.
NON-CASH REWARDS: THERE ARE SEVEN BASIC FORMS OF NON-MONETARY
RECOGNIOTN IN CURRENT USE
(i)
Social reinforcers: A pat on the back, respect, positive feedback, staff involvement
(ii)
In-house learning and development opportunities
(iii) Merchandise: Access to self-selected goods and services by means of shopping vouchers or
certificates, retailer-specific debit cards or printed on-line catalogues
(iv)
Travel: All expenses paid trips for families, individuals and groups.
(v)
Symbolic awards: Plaques, personal letters from CEO, pins gold watches etc.
(vi)
Earned time off; time off with pay additional to normal paid leave entitlements
(vii) Flexible or family –friendly work schedules: Ability to adjust working hours to fit personal
needs and family commitments.
Page 21 of 36
STUDY UNIT 6
MANAGING EMPLOYEE PERFROMANCE IMPROVEMENT
6.1
PERSONAL DEVELOPMENT PLANS AN OVERVIEW

According to McNamara “if performance does not meet desired performance standards,
develop or upgrade a performance development plan to address the performance gap”

Developmental plans specify courses of action to be taken to improve performance.

Achieving the goals stated in the developmental plan allows employees to keep abreast of
changes in their field or profession

Such plans highlight an employee’s strengths and the areas in need of development.

Development plans can be created for any job.

Note that not only is it a developmental plan for the future but it also forms part of the
performance management system.

According to McNamara a development plan can be initiated in a variety of situations
 When a performance appraisal indicates performance improvement is needed
 To ‘benchmark” the status of improvement so far in a developmental effort
 As part of professional development for the employee or group of employees, in which case
there is not a performance gap as much as a “growth gap.”
 As part of succession planning to help employees be eligible for a planned change in role in
the organisation, in which case there is not a performance gap as much as an
“opportunity gap”
 To pilot’ or test the operation of a new performance management system
6.2
DEVELOPMENTAL PLAN OBJECTIVES:

The overall objective of a developmental plan is to encourage continuous learning,
performance improvement and personal growth In addition these are some other objectives
 Improve performance in current job: Includes suggested courses of action to address each
of the performance dimensions that are deficient
 Sustain performance in current job: Includes suggestions on how to continue to meet and
exceed expectations for each of the performance dimensions included in the appraisal
form
 Prepare employee for advancement: Includes advice and courses of action that should be
taken so that the employee can take advantage of future opportunities and career
advancement.
 Enrich employees’ work experience: Even if opportunities in the organisations are limited a
good plan provides employees with growth opportunities to learn new skills. These
opportunities give employees intrinsic rewards and a more challenging work experience
even if the skills learnt are not part of the formal job. These opportunities act as a
powerful employee retention tool and these skills can be used for lateral transfers within
the organisation
6.3
CONTENTS OF A DEVELOPMENTAL PLAN.

What new skills or knowledge that will be acquired and how this will occur.

Included must be the completion dates as well as how the manager will know whether the new
skill has indeed being acquired.

Objectives should be practical, specific, time oriented, linked to a standard and developed
jointly by the supervisor and the employee

It should keep the needs of both the individual and the organisation in mind.

See figure 6.1 page 149
 Employees are given a list of examples of possible developmental activities
 This list includes workshops, certification, local, state and national conferences, on-the-job
training courses, mentoring, workshops, membership or leadership roles in professional
or trade organisation.
6.4
DEVELOPMENTAL PLAN ACTIVITIES
Page 22 of 36

6.5
6.6
6.7
On the job training: This is where the employee is paired with either a co worker or a
supervisor who design a formal on-the-job programme. Included will be number of hours
training per day or week and what the specific learning objectives are.

Courses: Can be in-house or provide tuition reimbursement

Self-guided reading; An objective must be set as to what needs to be read

Mentoring: this is a developmental process that consists of a one-on-one relationship between
a senior (mentor) and junior (protégé) employee. It is beat the mentor and protégé choose each
other. The mentor serves as a role model and teaches the protégé what it takes to succeed.

Attending a conference: Sponsor the employee attending the course and then ask for a
written report or even deliver a presentation upon returning from the conference.

Getting a degree: Can be even for MBA or other certification. The employee has to commit
to the organisation for a period of time and if they leave during this period the tuition fees have
to be paid back generally on a pro rata basis depending on the stipulated time period.
Generally 3 years.

Job rotation: Assigning employee to a different job on a temporary basis.

Temporary assignments: Work on a challenging temporary assignment. This allows
employees to acquire specific skills within a limited time frame.

Leadership role in professional or trade organisation: They distribute publications to their
members and also hold informal and formal meetings during which employees learn best
practices and other useful information regarding their jobs.
DIRECT SUPERVISOR’S ROLE IN EMPLOYEE DEVELOPMENTAL PLAN.

The supervisor needs to explain what should be required for the employee to achieve the
desired performance levels including the steps needed to get there.

Has a primary role in referring the employee to the appropriate developmental activities that
can assist the employee in achieving their goals.

Reviews and makes suggestions about the developmental objectives. Specifically ensuring that
the goals are achievable, specific and do able.

Checking on the employee’s progress towards achieveing developmental goals. Remind
employee of due dates and revise goals if necessary.

Provide reinforcements so employee will be motivated to achieve developmental goals.
Rewards can be extrinsic such as monetary and intrinsic such as more challenging and
interesting work so that new skills can be learned.
CHALLENGES IN OBSERVING AND DOCUMENTING BEHAVIOUR AND OUTCOMES.

Time constraints: because the manager is too busy too much time may have elapsed between
the assignment of the activity and the follow up by the manager

Situational constraints: Managers may not be able to observe subordinates and therefore do
not have first-hand knowledge of their performance. The on line course that the subordinate is
involved in is it in an active or passive role.

Activity constraints: When the developmental activity is highly unstructured such as
employee reading a book the manager may have to wait until the activity is completed to
assess whether the activity has been beneficial.

The following are recommendations:
 A good communication plan: this should explain the benefits of implementing a
developmental plan effectively. This helps the manager to accept the plan.
 Train managers so that they minimise errors: (rater error training) share notions of what it
means to complete developmental activities successfully (frame of reference training)
observe performance accurately (behavioural observation training) and are confident and
comfortable in managing employees’ developmental activities (self-leadership training)
 Understand the forces that motivate managers to invest time and effort, or not in the
development of employees. What is the beefit to the manager.
THE ROLE OF COACHING IN EMPLOYEE PERFROMANCE IMPROVEMENT; THE
Page 23 of 36
FOLLOWING NEEDS TO BE DONE

Establish development objectives: The manager works with employees to create the
developmental plan and it objectives

Communicate effectively: The manager maintains regular and clear communication with
employees about their performance

Motivate employees: managers must reward positive performance as this acts as an incentive
to keep performing well

Document performance: gather evidence of instances of both good and bad performance

Give feedback: Praise good performance and point out substandard performance and how to
rectify it in the future.

Diagnose performance problems: listen to employees and gather information to determine
whether performance is up to standard.

Develop employees: provide financial support and resources for employees’ development such
as funding training and allowing time away from job for developmental activities. Help
employees plan for the future and give challenging assignments.
6.7.1 Four guiding principles for understanding successful coaching
(i) A good coaching relationship: The relationship between the coach and the employee must be
trusting and collaborative. The coach must listen in order to understand. Walk in the
employee’s shoes.
(ii) The employee is the source and director of change: Facilitation of employee’s setting the
agenda goals and direction.
(iv) The employee is whole and unique: The employee is a unique individual with several jobrelated and job-unrelated identities (computer network specialist, father) and has a unique
personal history. It would be beneficial if the coach has knowledge of and can help the
employee connect his/her life work experiences in meaningful ways.
(v) The coach as a facilitator of the employee’s growth: The coach’s main role is facilitation.
The coach must direct the process but not take ownership. He or she must maintain an attitude
of exploration, help expand the employee’s awareness of strengths, resources and challenges
and facilitate.
Page 24 of 36
6.7. 2 THE COACHING PROCESS:
Set developmental plan
Identify developmental resources and strategies strategiestegies
Give feedback
Observe and document developmental behaviour
Implement strategies
Page 25 of 36
TOPIC 2
STARTEGIC PERFROMANCE MANAGEMENT

Contemporary trends in global competition, rapid technological development and increased use of
management information systems and the internet, developments in planning and control and
management thinking and changing demographics are putting pressure on profit and non-profit
organisations.

Companies are finding it more and more difficult in achieving sustained performance.

In order to raise to the challenges managers must manage employee performance so that each and
every employee knows what their contribution is towards the organisation’s goals.

Most companies do not align nor integrate their strategic plans with their own activities and actions.

Lots of international leading companies are starting to close the gap through a practice called
integrated performance management (IPM)

IPM is a holistic approach that spans all the processes and technologies related to performance
management from planning, budgeting and forecasting to reporting, performance measurement and
compensation.

IPM makes performance management more effective and more consistent across the entire enterprise,
improving quality and timeliness of information and generating new business insights that help
decision makers steer the organisation to a higher level of performance.

This is called strategic performance management.
Page 26 of 36
STUDY UNIT 7
STRATEGIC PERFROMANCE MANAGMENT IN CONTEXT
7.1 STRATEGIC PERFROMANCE MANAGEMENT: OVERVIEW
 The strategic performance management takes a step further than just the performance of individuals
in the organisation but rather looks at the performance of the whole organisation.
 A performance management system is organised on the basis of the chosen responsibility structure.
 It focuses on distributing financial and non=financial information to organisational members to
support their decision making and action-taking process. See page 173 for aims and purposes of a
strategic performance management system.
7.2
STRATEGIC PERFROMANCE MANAGMENT PROCESS.
 See figure 7.1 page 174
 Strategy development: This results in a clear action strategic action plan fpr measurable
performance improvement. This is based on a thorough understanding of key value drivers that
are aimed at achieving a competitive edge.
 Budgeting/ target setting: This results in a clear operational action plans for improving key value
drivers, for committing resources and for setting financial targets for the coming year.
 Execution/forecasting: During this process organisational members execute the activities that have
lead to desired results. Regular forecasts are made to predict whether the organisation is still on
track or whether corrective actions are needed to solve current or predicted problems.
 Performance measurement: This process collects, processes and distributes data and information to
allow effective execution of the other sub processes. The information is presented in the form of
CSFs and KPIs.
 Performance review: This process periodically reviews actual performance, targets and forecasts in
order to ensure timely preventive and corrective action is taken to keep the company on track.
 Incentive compensation: This links strategic and operational action for key value drivers, in a
balanced way with compensation and benefit policies. This ensure that the organisation rewards
the right performance – driven behaviour of its organisational members.
 Note that the performance management process, in the context of a manager’s work
environment, resembles the planning and control cycle.
 The planning stage of the cycle starts after the long-term strategic objectives of the organisation has
been formulated and the corresponding management information needs have been defined.
 The purpose of this stage is to translate strategic plans into tangible, short-term action plans for each
business unit. See page 175 for when PMS is used in the planning stage.
 The control stage. The purpose
 Inform employees through the performance management system about the strategy, targets,
planned actions and the results to be measured and reported.
 Motivate employees by regularly providing intermediate feedback via the performance
management system on organisations’ results.
 The measurement stage: The purpose
 Collect information in the PMS for feedback purposes
 Study results of the financial and non-financial targets and compare these with the budget.
 Provide feedback via the performance management system to employees on the results and
discuss these with them so that employees achieve the defined targets
 Determine if there is a need for further analysis of the performance management system and
which adjustments to the action are needed.
 Managers use the PMS in the feedback stage when they
 Interpret the KPI results and look for causal relationships between the different variables in
the PMS
 Look into the internal and external environments for explanation for lagging results and then
formulate corrective actions on the basis of this.
 Discuss the information in the PMS and possible adjustments to the action plans with
Page 27 of 36
7.3
7.4
7.5
colleagues.
 Discuss the validity of the formulated strategy and check the underlying assumptions in
quarterly meetings.
 Share information in the performance management system and the outcomes of periodic
meetings with superiors and colleagues, thereby advising superiors about possible
adjustments to strategic programmes
 Record important data from the discussion as well as the outcomes of review and analysis
meetings in the PMS for future use and learning.
TRADITIONAL ORGANISATIONAL PERFROMANCE MANAGMENT SYSTEMS
VERSUS STARTEGIC PERFROMANCE MANAGEMENT: Short comings of traditional
systems:
 One-sided information: Too financially oriented. This was because systems were designed to
satisfy legal requirements, which mainly contain financial data. Non – financial such as
personnel, projects external market information as well as information about client satisfaction
vendor performance, innovation, product quality and intellectual capital was not sufficient
available
 Low-quality information: The end results are measured and not the processes causing the
results. Too often the variances between budgeted and actual figures are not explained enough.
 Tardy information: Information is often supplied too late. This means corrective actions are
taken too late to be effective. Also most reports are in writing which take a long time.
 Information overload: The information does not contain ratios, trends, indicators, graphs,
colours and standardised layouts. Sometimes there are not explanations so the actual problems are
not addressed.
 Low relevance of information: Information is often based on outdated organisational concepts
originally built for manufacturing companies, but nowadays many organisations are the first place
service providers.
 Lack of communication: Discussions on organisational results take place irregularly and in an ad
hoc manner.
 Misalignment culture: In the traditional system the management of information does not foster a
climate of trust and continuous improvement, as a result of which people do not act adequately on
measured results. The focus is on performance measurement (collecting data) not performance
management (acting on information). Because management control and information systems
measure the wrong things they incite people to do wrong things and display the wrong behaviour.
IMPORTANCE OF CSFS AND KPIS IN THE STRATEGIC PERFROMANCE
MANAGEMENT PROCESS.
 Critical success factors (CSF): These refer to the limited number of areas in which results if
they are satisfactory will ensure successful competitive performance for the organisation. These
are the few areas that the business must do right for the business to flourish. Also known as key
performance indicators (KPAs)
 These CSFs should be measured by KPIs which are key performance indicators. The balanced
score card could be used for this. See figure 7.2 page 181
BENEFITS OF STRATEGIC PERFROMANCE MANAGMENT
a. High quality of information: CSFs and KPIs support effective planning and budgeting
because they clarify the relationships between the functions/activities and performance CSFs
and KPIs translate organisational strategy into qualitative and quantitative measures at all
management levels.
b. Timely information: The CSFs and KPIs act as an “early warning system” when things go
wrong giving all the information about potential issues before they actually happen or turn
into real problems. And before they show up in the financial data.
c. Management support: They support the concept of continuous attention and the ‘learning
organisation” by focusing people’s attention on continuous improvement and development.
And by continuously raising performance expectations. CSFs and KPIs implement total
Page 28 of 36


quality management by ensuring that organisational members are driven by customer
expectations both internal and external.
d. Efficient communication: A set of clear CSFs and KPIs forms a common basis for
communication and discussion in the organisation. This makes information transferable
between departments and organisational units, making information less prone to being used
as a means of executive power.
e. Aligned culture: The availability of high-quality information at all management levels that
is empowerment and front – line authority which speeds up the decision making process.
Improved reporting enhances organisational members’ self-management and self-control.
The development of strategic performance management can be summarised as follows;
 Organisations pay increasing attention to the design of the system. The choice of KPIs is as a
result of a structured process which centres on the strategy and CSFs of an organisation.
 Organisations are increasing the number of the CSFs and KPIs in the management control
and information system to monitor the execution of the strategy. More and more CSFs and
KPIs are including goals like quality, delivery time, client satisfaction, competitor ranking
and employee retention.
 Organisations are replacing absolute indicators with relative indicators, with a coherent set of
indicators. Nowadays the pursuit of continuous improvement encourages organisations to
regularly adjust targets upwards. In addition the relations between KPI are also made visible
and KPIs are entered in the balanced measurement system, like BSC.
Why did the strategic performance management system eventually experience a breakthrough?
 Recent developments in technology have created the right facilities for introducing CSFs,
KPIs and the BSC requires collecting, storing and reporting vast quantities of new data.
 Until recently the significance of a performance management system was underestimated.
Managers used to concentrate more on the implementation of TQM and more on operations
and less on decentralisation of information.
 The nature of the economy has shifted focus on intangible assets such as customer
relationships, innovative products and services, high quality and responsive operating
processes, information technology and databases, employee capabilities, skills and
motivation are the main sources of competitive advantage, requires information tools that
describe knowledge – based assets and knowledge-based value-creating strategies. A different
type of management information is needed to keep up the changing sources of value creation.
Page 29 of 36
STUDY UNIT 8
DESIGNING AND IMPLEMENTING CSFS AND KPIS.
8.1
WHY CSFs AND KPIs
 Intangible assets like patents, trademarks and human capital are increasingly seen as major value
source of an organisation.
 Therefore the introduction of CSFs and KPIs provide the solution as it combines non-financial
leading indicators with financial lagging indicators in one system.
 This way it offers management a balanced overview of the organisation’s performance as a
means to check whether the organisation’s strategy is being executed successfully.
OBJECTIVES
 Specific
 Measurable
 Acceptable
 Realistic
 Time bound
 Development process of CSFs and KPIs. Figure 8.1 development process of CSfs and KPIs
KEY PERFROMANCE INDICATORS
CRITICAL SUCCESS FACTORS
 Result
 Effort

Page 30 of 36
8.2
8.3
8.4
CSFs AND KPIs IN THE PERFROMACE MANAGEMENT CONTEXT.

CSF can be defined as a “qualitative description of an element of the strategy in which the
organisation has to excel in order to be successful.

A CSF is made quantifiable with KPIs.

The use of CSFs and KPIs enables the measurement, and thus the management of strategic
objectives.

If performance indicators that measure the execution of the strategy and the creation of value
to the organisation are not included in the performance management process it will unclear
whether or not strategic objectives and value creation are being achieved.

See table 8.1 page 191 for example of CSFs and KPIs.

To determine if each functional area has achieved its CSFs there are generally four types of
measures: see page 192 table 8.2 for some measures (KPIs) frequently used in different
functional areas.
 Quality
 Quantity
 Time
 Money
PERFROMANCE MEASUREMENT PYRAMID.

Figure 8.2 page 194 for performance measurement pyramid.
(i) Mission and strategy: What does the organisation do and what does it want to
accomplish? This is the mission, To formulate a strategy the organisation has to ask how
are we going to achieve our mission? How can we accomplish what we want?
(ii) Strategic objectives, critical success factors and key performance indicators: By
formulating objectives it becomes clear to the company which activities it has to perform
to implement its strategies. Whether strategic objectives are being achieved or not can be
monitored by strategic CSFs and KPIs. Often the BSC is composed of these strategic
indicators.
(iii) Unit objectives, critical success factors and key performance indicators: The
organisation’s objectives can be supported by the organisational units like divisions,
business units and department by translating these strategic objectives into objectives for
their own unit. It is management’s responsibility to ensure that the units’ objectives are
aligned with the strategic objectives.
(iv) Key processes, critical success factors and key performance indicators: A key
process is one that directly influences the achievement and results of objectives and key
processes have to be explicit. Once this is done, organisational members know which
processes to improve when results on specific CSFs and KPIs fail to materialise or
deteriorate. There re various types of processes:
 Manufacturing processes that produce products and services
 Development processes that create new products, services, markets and manufacturing
processes.
 Management processes that steer and manage the organisation and its processes.
 An organisation has many processes so it is important that to identify the key processes of the
organisation, that is the process which directly influence the results of strategic unit and
operational objectives.
 The execution of key processes is also monitored by means of key process CSFs and KPIs.
These operational indictors are used by managers who are directly involved in the BSC
for the organisational unit, which is often a department whose assets the organisation has
to make optimal use of to prevent product costs from becoming too high. See page 196
for example.
(v) Environmental parameters: These are usually factors over which the organisation has
no control. see figure 8.4 page 198
RESULT AND EFFORT INDICATORS
Page 31 of 36




8.5
This is the second stage of the developmental process of CSFs and KPIs.
There are two types of CSFs, result and effort CSFs
A critical effort is an action that is most likely to lead to achieving the desired result.
They can be determined by answering the following questions:
 What is the result when we execute the key process successfully?

The CSFs that are important for monitoring an objective or a key process (effort CSFs) can be
determined by answering
 What do we absolutely have to do to achieve the objective successfully?

A critical effort is an action that is most likely to lead to achieving the desired result.

After identifying the CSFs the organisation needs to answer the following questions to identify
the KPIs for each CSF:
 How do we measure the CSF?
 How can we see the result of the CSF?
QUALITY CTRITERIA FOR CSFs, KPIs AND TARGETS FOR THE KPIs. Quality criteria
that indicators need to meet to be useful for management.

Critical success factors


 Each objective should be measured with at least one result CFs and no more than two CSFs
 For each CSF no more than three KPIs should be developed. This is to limit the amount of
information, development time and costs and to make sure that only relevant information is
included in management reports.
 CSFs should cover not only financial information but also non-financial information to
ensure well balanced view of objectives
 A CSF is a qualitative notion that describes in words how a certain objective can be
measured. It is therefore never quantitative (a number or a percentage)
 A CSF is clear, concise and unambiguous (it can only be interpreted in one way)
Key performance indicators:
 The definition of a KPI should be concise easy to understand and complete (ie every term
used in the definition is described in such a way that the definition can only be interpreted
in one way)
 A KPI can be measured by the organisation. An organisation should have the procedures,
resources and (some) information systems to make measuring possible.
 The definition of a KPI preferably includes a comparison or a relationship between things.
Percentages and ratios provide valuable information than absolute figures.
 A definition of a KPI includes reporting frequency (e.g monthly, quarterly, yearly)
Targets:
 The target for KPIs should be realistic: The manager responsible should think it is feasible
 The target for a KPI has a certain margin. Corrective action should be taken only if the result
is not within the margin (either above or below)
 The target for KPIs is determined together with the mmanager responsible for the result of
the indicator concerned. This fosters support within the organisation.
Page 32 of 36
STUDY UNIT 9
MEASURING ORGNAISATIONAL PERFROMANCE: THE BALANCED SCORECARD.
9.1
WHY DO WE NEED A BALANCED SCORECARD IN MANAGING PERFORMANCE

Drawbacks associated with traditional, financially based performance measurement
approaches
(i)
Outcomes focus: established financial indicators such as profit and turnover before tax
are income indicators. They only alert us when things have gone wrong and the effect
is being felt in the balance sheet. They do not indicate when things may go right or
wrong in the future. They are lagging and do provide us with an early warning system
(ii)
The drivers of business success: A more holistic approach than focussing on the
bottom line is necessary. Like physicians the health of the entire body corporate should
be examined
(iii) Strategy in action: All managed scorecard project will identify and measure activities
needed to deliver planned performance
(iv)
Strategic communication, involvement and ownership: the fact that most business
strategies are not communicated in ways that people understand (ROCE). A wellconstructed scorecard is an effective communication vehicle.

What implementation pitfalls should the organisation avoid when introducing and maintaining
the BSC:
(i)
Vision and strategy not actionable: This happens when the vision and strategy is not
translated that can be understood and acted upon. Lacking clarity and consensus about
what the organisation’s vision and mission really mean will result in different groups
pursuing different agendas, quality, continuous improvement, reengineering and
empowerment according to their own interpretations of vision and strategy.
(ii)
Strategy not linked to resource allocation: This is because there is failure to link
action programmes and resource allocation to long-term strategic planning and shortterm (annual) budgeting. The consequences is that the discretionary funding and capital
allocations are often unrelated to strategic priorities. Another reason is that strategic
planning and finance managers for not seeing how their efforts need to be integrated
and not pursued as separate, functional agendas.
(iii) Feedback that is tactical, not strategic: feedback is lacking on how the strategy is
being implemented and whether it is working. Usually feedback is on short term
operational issues and generally in financial terms. (Quarterly, or monthly budgets).
Little or no time is spent examining indicators of strategy implementation and success.
(iv)
Management style: MBO was considered a failure 25 years ago. The major reason
was management style. BSC is not (i) a tool for imposing a strategy created at the top
of the organisation (ii) a stick to beat people with. It is actually a tool to allow people
to both participate in the strategy process and create objectives and measures that
reflect their business area’s efforts to support the broader corporate strategy. MBo
failed because of highly top down centralised style.
(v)
The paper chase: The BSC will create a need for information that cannot be sourced
from the present financial information systems. This is considered to be both a strength
(building a more holistic approach(labourious paper-based system) and a weakness.
because too much paper work demotivates employees the BSC should be as simple as
possible to build. Also make it easy for staff to drill down and see the true causes of
adverse or positive performance revealed by the scorecard measurements.
(vi)
Centralised measures:
One of the major benefits of the BSC is that it helps staff
understand, develop their own objectives and measures as well as centrally defined
objectives and measures. All areas in organisation need to be involved.
(vii) Lack of integration: The BSC is not another stand alone project or system. It is a
performance management and monitoring system integrating typically a range of
Page 33 of 36
9.2
9.3
different systems, measures and monitoring approaches.
(viii) Ignoring conceptual issues: each organisation’s scorecard will be different. Key
differences include industry strategy and organisational structure. Staff really need to
know how the scorecard works and how it will benefit them.
(ix)
Excluding stakeholders: A hierarchy of scorecards must be built, reflecting the
structure of the organisation and how it adds value to the customer. Outsourcing and off
shoring are now commonplace and these value-generating operations must be included
too.
DEVELOPING A BSC

There are four perspectives: see page 212 figure 9.1
(i)
Innovation;/growth and learning perspective: this measures how often an
organisation introduced new products, services or production techniques. Sometimes
people are included. Measures such as wellbeing, commitment and competence of
people in the organisation are used. (cultural qualities like internal partnership,
teamwork, and knowledge sharing as well as aggregate individual qualities like
leadership, competency and the use of technology)
(ii)
The internal (or process) perspective: This measures the effectiveness of the
processes by which the organisation creates value. It comes after the innovative
perspective because innovation and people influence the ability of the organisation to
create value by implementing and managing effective processes. This process measures
how effective the processes are. It precedes the customer perspective because efficient
processes make it possible for an organisation to stay competitive or become more
competitive.
(iii) The customer perspective: This measures performance in terms of how the customer
experiences the value by the organisation. It comes after the internal processes because
effective processes enable an organisation to provide better service to its customers.
(iv)
The financial perspective; this measure the bottom line such as growth, return on
investment and other traditional measures of business performance. It comes after the
customer perspective because higher appreciation by customers translates into higher
financial results. It is the last of the four perspectives because it is the final result of
good, committed people, of implementing and operating effective processes, of the
ability to renew and innovate and create for its customers.

Note in different organisations the perspectives and the leading indicators can be different, but
the idea is to have a “balanced “ set of indicators that allow an organisation to measure cause
and effect chain by which the customer and shareholder values are added.

The balance in the BSC can be found in several aspects:
 Non-financial data compliments financial data
 Leading information (customer and innovative data) compliments lagging information
(financial and internal)
 Internal information (financial, internal and innovative data) compliments external
information.
ESTABLISHING A CHAIN OF CAUSE – EFFECT RELAITONSHIPS BETWEEN THE
FOUR BASIC BSC PERSPECTIVES:

The chain of cause and effects should pervade all four perspectives of a BSC.

ROCE maybe a scorecard measure in the financial perspective

The driver of this could be repeated or expanded sales from existing customers so customer
loyalty will be included in the scorecard for customer perspective.

To increase customer loyalty an analysis may reveal that on-time delivery is highly valued by
customers so both customer loyalty and OTD (on time delivery) are incorporated into the
customer perspective.

The OTD is expected to lead to higher financial performance. So both customer loyalty and
OTD are incorporated into customer perspective.
Page 34 of 36

9.4
9.5
9.6
To achieve improved OTD the business may need to achieve short cycle times in the operating
processes and high-quality internal processes, both factors could be scorecard measures in the
internal perspective.

How do organisations improve the quality and reduce cycle times of their internal processes?
See figure 9.2 page 216.
LINKING SCORECARDS TO TEAM AND PERSONAL GOALS.

Communication of the BSC’s objectives and measures is a first step in gaining individual
commitment to the business unit’s strategy.

But awareness by itself is not sufficient to change behaviour.

Many organisations have found it difficult to decompose high –level strategic measures,
especially non-financial ones.

Non financial measures such as customer satisfaction and information systems availability are
more difficult to decompose into segregate elements. See page 219 figure 9.3
LINKING REWARD SYSTEMS TO SCORE CARD MEASURES:

Because financial compensation is such a powerful lever, some companies wnat to tie
compensation policy of their senior managers to the scorecard measures as soon as possible.
See examples on page 223. Table 9.2
CRITICISM AGAINST THE BSC:

Imbalance in the number of stakeholder e.g suppliers are left off the BSC.(increased
outsourcing and business interdependence)

Social context and environment do not have an “official” place in the scorecard layout. Many
companies abandon their scorecards because it has been to difficult to implement.

Human element and the management style. BS may not be good for every type of manager.
Intellectual capital and intellectual property are also absent.

Dividing performance indicators over the perspectives of the BSC makes the performance less
understood by lower-level managers, which creates the opposite effect from senior managers.

Several authors argue that there is no causal relationships between the four perspectives
because they are independent. Kaplan and Norton are confusing logical relationships with
causal ones.

Despite all this the BSC remains the management accounting innovation that has had the
biggest impact on scientific theory and organisational practice in the past two decades.

For identified dos and don’ts for successful implementation page 226.
Page 35 of 36
STUDY UNIT 10
LEGAL PERSPECTIVES IN PERFRMANCE MANAGEMENT
10.1 LEGALITY OF PERFORMANCE MANAGEMENT

Six important concepts that are often relevant in the case of litigation related to the
implementation of a performance management system, according to Auginis
(i)
Employment at will: The relationship can be terminated at any time. This means that
the employer could end the relationship without documenting any performance
problems. Note the LRA regulates the termination of the employments contract.
(ii)
Negligence; if the PMS is outlined in the employment contract or other materials and
this system is not implemented as described this could lead to legal problems. (when
and how often they takes place0
(iii) Defamation; the employee can accuse the employer of false and libellous information
done during the PA. The definition of defamation includes the disclosure of untrue
information.(appraised on irrelevant and not job related aspects.
(iv)
Misrepresentation: this is about disclosing untrue favourable performance information
and this causes risk and harm to others (boss giving a bad employee a good reference
so that they can get the job.
(v)
Adverse impact: also called unintentional discrimination and occurs when the PMS
has an unintentional impact on a protected class (previously disadvantaged group in
SA) (fire fighting discriminates against women because it requires strength)
(vi)
Illegal discrimination : also called disparate treatment which means that raters assign
different scores to various employees not based on performance related such as race,
gender etc. As a consequence these employees get more training, opportunities and
promotions than the discriminated employees.
10.2 PERFROMANCE MANAGEMENT AND SOUTH AFRICAN LABOUR LEGISLATION (DO
ACITIVITY ON PAGE 233)
10.3 HOW TO CONDUCT PERFROMANCE APPRAISALS THAT COMPLY WITH THE LAW;
for dos and don’t to be considered in an endeavour to conduct PAs legally see page 236.
10.4
PERFROMANCE APPRIASAL SYSTEM ETHICS

Ethics should be the cornerstone of performance evaluation and the overall objective of high
ethical performance reviews should be to privde an honest assessment of the performance and
mutually develop a plan to improve the employee’s effectiveness. .
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