Evaluations &

Performance Management

University of Budapest MBA

Visiting Professor Program

Gary Wheeler SPHR, GPHR, CCP, CBP

Seminar Topics

• Why Employee Evaluations

• Problems With Employee Evaluations

• Evaluation Systems

• Essay’s

• Critical Incidents

• Behavioral Anchored Rating Systems (BARS)

• Management by Objectives

2

Seminar Topics cont.

• Key Performance Indicators (KPI’s)

• Balanced Score Card

• Best Evaluation Systems

• What is a Performance Management System

• Defining Organizational Goals

• Linking Individual Goals

• Management and Employee Training

3

Why Employee Evaluations

• The purpose of an employee evaluation is to measure job performance

• Evaluations may contain quantitative information and/or

• Evaluations may contain qualitative information

• Evaluations should help us determine if the employee is performing the job they were hired to do at the desired level of performance

• Evaluations are used to help determine merit pay increase

4

Why Employee Evaluations cont.

• Evaluations are used to help determine merit pay increase

• Evaluations help are used to help determine who should be considered for promotion

• Evaluations are used to help determine organization and individual training needs

• Evaluations are used for discipline

• Most important – Evaluations should be used to help drive organization success!

5

Problems With Employee Evaluations

• The evaluation system is too complex

• Managers are not trained to properly conduct evaluations

• Employees do not understand the evaluation process

• The goals and objectives are not realistic

• The evaluation is held once at the end of the year

• The performance evaluation does not evaluate what the employee actually does

6

Problems cont.

• The evaluation is very subjective

• The evaluation system does not drive organization results

• The evaluation process is not taken serious

• The evaluation process does not impact compensation

• The evaluation process does not impact promotions, demotions or terminations

• The evaluator is bias toward the employee

7

11–8

Rater Bias

Evaluation Systems

9

• Essays & Summaries

• Critical Incidents

• Behaviorally Anchored Rating Systems (BARS)

• Management By Objectives

• Key Performance Indicators (KPI’s)

• Balanced Score Card

Essays & Summaries

10

• An evaluation used to provide compelling evidence supporting your opinion by using logical reasoning to show that your evaluation is correct

• Challenges• Requires a lot of time

• Can be very subjective

Critical Incidents

11

• The critical incident evaluation process involves using a set of procedures to evaluate human behavior through a series of observations

• A series of observations are used to evaluate better than expected or less than expected performance

• Challenges• Requires a lot time

• Can be very subjective

• Leave out good & bad

Behaviorally Anchored Rating System (BARS)

12

BARS5 – Superior4 – Exceeds Expectations3 – Meets Expectations2 – Needs Improvement1 – Unsatisfactory Performance

BARS Evaluations

• QUANTITY ................................................................................. 1 2 3 4 5 • Meets productivity standards ...................................................... 1 2 3 4 5 • Completes work in timely manner ................................................ 1 2 3 4 5

• QUALITY …................................................................................. 1 2 3 4 5 • Demonstrates accuracy and thoroughness .................................. 1 2 3 4 5 • Displays commitment to excellence ............................................. 1 2 3 4 5

• JOB KNOWLEDGE ...................................................................... 1 2 3 4 5 • Competent in required job skills and knowledge ......................... 1 2 3 4 5

• Challenge• Subjective data• Does not drive organization results

13

Management By Objectives (MBO)

14

• MBO is the process of defining objectives/goals within the organization where management and employees agree with the objectives/goals and understand what they need to do in the organization• Challenge• Individual goals are not aligned to organization

goals

Key Performance Indicators (KPI’s)

15

• KPI’s are used to evaluate organizational and/or individual success using key metrics• KPI’s should be relative to organization success• Challenge• Understanding what is important to the

organization and choosing the right KPI’s

Balanced Score Card

16

• Balances KPI’s into four organization perspectives

1.Financial2.Customer3.Internal Business Processes4.Innovation and Learning• Two to three elements in each area• Challenge• Getting employees to understand indirect

objectives

Best Evaluation Systems

17

• The Best Evaluation System is a Performance Management System using • Key Performance Indicators (KPI)• Balanced Score Card (BSC)

• Handouts

What is Performance Management?

18

• Performance management includes activities which ensure individual goals are consistently met in an effective and efficient manner and are aligned with the organization, division, department, manager and individuals• Individual goals role up to the organization’s

goals and they support the organization’s mission and strategic plan

Key Performance Indicators (KPI’s)

• A Performance Management System consists of objective data also referred to as key performance indicators or KPI’s

• KPI’s are a measure of organization performance

• KPI’s should be results based v. activity based

• KPI goals should be SMART

19

Key Performance Indicators (KPI’s)

• Activity Goal• Sixty (60) client cold calls per month

• Performance Based• 2 – million Forint in sales per month

20

SMART GOALS• KPI’s are created by setting SMART Goals

• S specific

• M measurable

• A achievable

• R realistic

• T timely

21

Defining Organizational Goals

• Organization goals are set at the highest level of the organization

• Board of Directors

• Executive Staff / Leadership

• Owner of the business

• Before setting organization goals, you must have first defined the organization’s vision, mission and values

22

Vision

• The vision should be a short statement that outlines what you would like your organization to be

• Example(s):• UPS – Create Value, Transform and Invest to Grow

• Coca Cola – People, Portfolio, Partners, Planet, Profit and Productivity

23

Mission• Your mission can be one statement or a series of

statements that indicate how you are going to accomplish your mission

• Example(s):• Wal-Mart – People, Saving Money, Living a Better Live

• Facebook – To give people the power to share and make the world more open and connected.”

24

Examples of Organizational Goals (KPI’s)

• Revenue / Sales

• Net Profit before tax

• Average dollar sale

• Quality Index

• Customer Satisfaction Index

• Employee Satisfaction Index

• Employee Turnover

• Productivity

25

Revenue / Sales Goals

26

Linking Individual Goals to the Organization’s Goals

27

Pay for Performance

28

• Performance management systems allow organizations to pay individuals based on their contributions to the organization

• The better your production the more you make

• Individuals are rewarded for achieving results

Benefits of Performance Management

29

• Organization • Outcomes are tied to the mission

• Outcomes are tied to strategy

• Outlines responsibility

• Manager• Identifies expectations

• Creates an objective evaluation system

• Staff• Let’s people know where they stand

• Greater chance of receiving recognition

Who Conducts Appraisals?

11–3

0

Supervisors rating their employees

Employees rating their superiors

Multisource, or 360°, feedback

Outside sources rating

employees

Team members rating each

other

Employees rating

themselves

Sources of Performance Appraisals

11–3

1

Multisource Appraisal

Manager and Employee Training

11–3

2

Appraisal process and

timing

Performance criteria and job

standards

Common rating errors

Compensation reviews

Positive and negative feedback

Training and development

goals

Performance Appraisals

Training Topics

Group Activity

• Build Organization KPI’s• Link individual KPI’s

33

Summary & Best Practices

• Establish a clear vison, mission and values

• Identify your organization goals using KPI’s

• Make sure your KPI’s are SMART

• Create a strategic plan to achieve your goals

• Link the organization goals to divisions and departments

• Link division and departments to individuals

34

Summary & Best Practices cont.

• Train managers and employees on conducting performance evaluations

• Conduct quarterly evaluations

• Use a dashboard to track results monthly or weekly

• Recognize and reward individuals for reaching their performance goals

• Pay for performance

35

Questions?

36