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BUS301 Study Guide

Unit 5: Performance Management and Measurement

5a. Describe the role of performance management in meeting performance expectations

  • What is the purpose of performance management systems, and how are performance appraisals integral to performance management?
  • Why is it important for HR to establish and communicate clear policies to handle performance issues?
  • What is a mandated issue in the performance issue model?
  • What is one downside of using the checklist scale method in the evaluation process?

HRM should establish clear policies regarding job performance expectations and issues to benefit employees and the organization. For example, the discipline process should aim to help employees meet performance expectations rather than punish them. Policies need to be available and communicated to every employee so they know what the company expects of them. Employees need to be treated fairly and consistently.

A written policy ensures HRM and supervisors follow certain procedures when handling these complex issues, comply with applicable laws, rules, and regulations, and provide employees with a remedy for policy violations. Proper procedures can protect the employee and the organization.

Performance management systems are comprehensive processes involving employees, managers, and executive leadership to improve organizational effectiveness and accomplish the company's mission and goals.

A company's evaluation or performance appraisal process should align with its culture and business needs. For example, a manager may conduct annual evaluations because they feel more frequent meetings could be too disruptive or time-consuming, the job responsibilities are fairly static, or they know staff members regularly discuss progress and goals with each other in less formal ways.

If an employee breaks the rules or does not meet the performance appraisal expectations, the performance issue model can be used to correct the behavior.

HRM categorizes business performance issues in five progressive areas:

  1. mandated;
  2. single incident;
  3. behavior pattern;
  4. persistent pattern; and
  5. disciplinary intervention.

Businesses must address mandated issues immediately. Examples include sharing information in violation of privacy laws, not following safety procedures, and engaging in sexual harassment. For example, a hospital employee who divulges patient information to unauthorized people violates patient privacy. HRM needs to address these indiscretions immediately to protect the rights of their patients and the hospital. Company policies should express these issues and communicate them to employees through orientations, handbooks, and training. Employees need to acknowledge they have received this information in writing.

Various terms are associated with the performance management evaluation process. Some of these concepts are described below.

HRM can usually solve a single incident, a relatively minor rule infraction, with a casual conversation. After advising the employee that their behavior is inappropriate (such as using unacceptable language, running over budget, or submitting a project post-deadline), supervisors expect the employee's behavior to improve, and no further discipline will be necessary.

For example, managers use a checklist scale method to mark feedback on employee job performance with a simple "yes" or "no". While this evaluation is easy and convenient, it does not record more detailed answers or analysis regarding employee performance.

For critical incident appraisals, managers provide specific examples of an employee's effective or ineffective behavior during the evaluation period. Unfortunately, managers who use this method tend to focus on negative incidents during the period.

A work standards approach emphasizes productivity. The employee's performance evaluation is based on a minimum-level, results-focused approach. For example, a manager considers an employee who does not meet a minimum standard sales quota to be non-performing. Unfortunately, this method does not account for reasonable deviations from the minimum standard the manager set. The approach works best in long-term situations where managers consider a reasonable performance measure over a certain period.

Some managers prefer to meet more frequently to confirm everyone shares the same understanding of what needs to be accomplished and has an opportunity to ask questions and make suggestions. Creating regular, formal lines of communication can be invaluable to employees who meet infrequently otherwise. For example, staff may require more frequent guidance when their job responsibilities change as they learn new skills or collaborate with other team members on multiple projects.

HRM must treat employee-related concerns seriously, especially when issues are mandated by outside, legally enforced rules, regulations, or industry-wide practices. These mandates can affect the entire company if HRM does not respond appropriately. HRM may be able to resolve single issues informally, but behavior patterns can develop when they are not addressed correctly. We label these behavior patterns "persistent" when an employee has been corrected for their behavior but continues disregarding the warnings. At this stage, the employee must realize that the company will take further action if their unacceptable behavior continues.

In the United States, the employment-at-will (EAW) principle describes an employer's legal rights to fire an employee and the right of employees to leave an organization at any time without giving any specific cause. In other words, the employer and employee can terminate their relationship at any time. This principle has three exceptions:

  1. public policy exception;
  2. implied contract exception; and
  3. good faith and fair dealing exception.

The Worker Adjustment and Retraining Notification (WARN) Act requires organizations with more than 100 employees who have worked at the organization for more than six months to give employees and their communities at least 60 days' notice of closure or layoffs that affect 50 or more full-time employees. The law does not apply in unforeseeable business circumstances.

Employers and employees create an implied contract through words and actions – in other words, the contract is not written or spoken. Although the parties have no written contract, the law creates an obligation in the interest of fairness based on the parties' conduct or circumstances.

Many collective bargaining agreements include a grievance process that outlines the procedure employees can follow to submit a complaint about something their employer has administered incorrectly according to their contract.

To review, see:


5b. Describe the role of performance appraisals as a component of organizational success

  • How does a performance evaluation system enable employers and employees to meet individual goals and company objectives?
  • What is the importance of setting SMART employee goals, tracking the progress of these goals, and rewarding employees when goals are met? What are two types of appraisals that rely on communication and goal setting?
  • HR professionals should develop policies regarding performance issues. What is the advantage to the organization of having these policies?
  • How does a company's progressive discipline process benefit employees and the company?

A performance evaluation system (also called performance appraisal or assessment) is the systematic procedure businesses follow to examine and measure how well their employees perform according to their expectations. HRM should plan a system that allows managers and employees to provide formal feedback about their job performance.

Businesses implement a systematic performance evaluation system to:
encourage positive performance and behavior;

  1. satisfy employee curiosity as to how well they are performing in their job;
  2. develop the knowledge, skills, and abilities of employees; and
  3. provide a basis for pay raises, promotions, and legal disciplinary actions.
  4. Performance appraisal (also called performance evaluations and performance assessments) describes the methods businesses use to examine how well employees perform in their jobs and obtain other types of feedback.

For example, some companies invite managers and co-workers to evaluate each other's job performance via 360° Feedback, which is especially useful when staff members work in teams and collaborate on projects. In this performance appraisal method, everyone can share their understandings and expectations about how to work together effectively, complement each other's skills and abilities, and meet the organization's expected goals, outcomes, and mission.

Management by objectives (MBO) is a results-oriented approach that invites managers and employees to discuss and formulate mutually acceptable goals and objectives. Employees have "buy-in" because they participate in the process and can use the evaluation to further their skill development.

The written objectives should be SMART goals, meaning they are specific, measurable, attainable, result-oriented, and time-limited. This allows both manager and employee to have mutually agreed-upon objectives that can be tracked, and in addition to meeting stated goals, it also encourages the employee to continue to improve.

The final step in the performance issue model is to provide disciplinary intervention: a series of steps or corrective actions a business takes before terminating an employee who continues to be non-performing.

Progressive discipline typically includes five steps:

  1. First offense: The employer issues an unofficial verbal warning, provides counseling, and issues a restatement of expectations.
  2. Second offense: The employer issues an official written warning that is documented in the employee's file.
  3. Third offense: The employer issues a second official warning and may develop an improvement plan documented in the employee's file.
  4. Fourth offense: The employer suspends employment or issues another form of punishment documented in the employee's file.
  5. Fifth offense: The employer may terminate the employee and begin the process of alternative dispute resolution.

To review, see:


Unit 5 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

  • 360° Feedback
  • checklist scale method
  • critical incident appraisal
  • employment-at-will (EAW) principle
  • grievance process
  • implied contract
  • management by objectives (MBO)
  • mandated issue
  • performance evaluation system
  • performance issue model
  • performance management system
  • progressive discipline
  • SMART goals
  • Worker Adjustment and Retraining Notification (WARN) Act
  • work standards approach