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CHAPTER 6 – PERFORMANCE MANAGEMENT

360-degree feedback (page 192) is being used in more workplaces each year. As an employee, what is your view of this practice? If you are/were to become a supervisor, what would your views be?

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CHAPTER 6 – PERFORMANCE MANAGEMENT 360-degree feedback (page 192) is being used in more workplaces each year. As an employee, what is your view of this practice? If you are/were to become a supervisor, what would your views be? Page 191 6.3STEP 2: PERFORMANCE MONITORING AND EVALUATION MAJOR QUESTION How can performance monitoring and evaluation improve my performance and my ability to manage the performance of others? THE BIGGER PICTURE You're about to learn how monitoring and evaluating are the important next steps after defining and communicating performance expectations. To assure success, it is necessary to accurately measure and evaluate both your progress and ultimate completion of the goals you set in Step 1. You'll learn numerous practical tips to help with both monitoring and evaluating performance. Specifically, you'll learn how your perceptual errors can influence your evaluation of performance and how 360-degree feedback is a tool commonly used to help overcome shortcomings in the measurement and evaluation of performance. Once performance expectations (goals) are defined and communicated it is necessary to monitor and evaluate your and others' progress and ultimate performance. We emphasize the importance of monitoring and evaluating both progress toward the final goal and the ultimate level of goal achievement, as doing so improves final outcomes. To make the point clearer, don't you prefer to know how you're doing in your classes sometime before your final grade report? Of course you do. Yet, in our consulting and own work experience we find that managers and organizations often only monitor and evaluate final outcomes, such as did you meet your sales quota or are your customers satisfied. Having no grades during the semester means you have to wait until you receive your final grade report to determine your performance, which is too late to take corrective action and may not capture all of the relevant aspects of your performance during the course. Therefore, accurately and appropriately monitoring and evaluating both progress and outcomes are critical components of effective performance management and your personal effectiveness. Monitoring Performance—Measure Goals Appropriately and Accurately Monitoring performance involves measuring, tracking, or otherwise verifying progress and ultimate performance. You use the information gathered through monitoring to identify problems (and successes) and opportunities to enhance performance during the pursuit of a goal, and your final outcomes. To do this effectively, you need to use or even create accurate and appropriate measures. So how do you do this? While there is no one right answer, and we could devote an entire book to the subject, the material on goal setting is quite helpful. Table 6.3 shows that many goals can be categorized as behavioral, objective, or task-oriented. How you measure these goals should match. Besides these, your measurement of performance, and thus your monitoring, can be improved further still by also considering and using four other types of measures, some of which overlap with those shown in Table 6.3: Page 192 • Timeliness. Was the work completed on time? Many customer service roles require representatives to answer calls within a certain number of rings, or to respond to customer requests in a certain number of hours or days. • Quality. How well was the work done? A behavioral goal that could fit here is greeting customers warmly, personally, and with a smile by observing and/or reporting that these actually occurred. • Quantity. How much? Sales goals are common examples here, such as dollars sold or number of units. • Financial metrics. What were the profits, returns, or other relevant accounting-financial outcomes? For instance, some law firms measure the performance of attorneys and the larger firm by calculating profits in dollars per partner.23 After you've defined your performance goals and monitored them using accurate and appropriate measures, it is time to evaluate the level or quality of performance. Evaluating Performance It is important that your measures of performance are both relevant and accurate. There is nothing worse than being measured on something that does not matter, or having what is important not be measured. Evaluating performance is the process of comparing performance at some point in time to a previously established expectation or goal. Like the example above, every time you receive a grade for a midterm exam, you take that information and compare it with your goal for your final and overall grade for the course. The midterm grade is the means for both monitoring and evaluating your performance. That said, having this information isn't the end of the story. You then evaluate it—did you perform as you expected? Yes? No? Why? The answers to these questions are important and often influenced by your perceptual processes. Perceptual Errors in Evaluating Performance As you learned in Chapter 4, your attributions and perceptions can greatly influence how you evaluate the information gathered via monitoring. Table 6.4 lists common perceptual errors and recommended solutions around the need to accurately monitor employee performance. TABLE 6.4COMMONLY FOUND PERCEPTUAL ERRORS RELATED TO PERFORMANCE EVALUATION PERCEPTUAL ERROR TENDENCY EXAMPLE RECOMMENDED SOLUTION: KEEP PERFORMANCE NOTES Halo To form an overall impression about a person or object and then use that impression to bias ratings about same. Rating an employee positively across all dimensions of performance because the employee is so likable. To record examples of positive and negative employee performance throughout the year. Remember that an employee's behavior tends to vary across different dimensions of performance. Leniency To consistently evaluate other people or objects in an extremely positive fashion. Rating an employee high on all dimensions of performance regardless of actual performance. To provide specific examples of both good and bad so you can help the employee improve. Remember that it does not help employees when they are given positive, inaccurate feedback. Be fair and realistic in evaluations. Central tendency To avoid all extreme judgments and rate people and objects as average or neutral. Rating an employee as average on all dimensions of performance regardless of actual performance. To define an accurate profile, with high and low points, so you can help the employee improve. Remember that it is normal to provide feedback that contains both positive and negative information. Recency effects To rely on most recent information. If the recent information is negative, the person or object is evaluated negatively. Rating an employee based on the last portion of the review period. To accumulate examples of performance over the entire rating period. Remember to look for trends but accept some variance as normal. Contrast effects To evaluate people or objects by comparing them with characteristics of recently observed people or objects. Rating an employee as average, from a comparison of the employee's performance with the notable performance of a few top performers. To evaluate employees against a standard rather than the performance of some of your most memorable employees. Remember that each employee deserves objectivity in evaluation that a standard can provide. The best-laid goals from Step 1 can be completely undermined if performance toward those goals is not measured appropriately, or if performance is evaluated with bias. Many organizations and their managers have tried to overcome such problems using 360-degree feedback. Overcoming Bias and Other Errors with 360-Degree Feedback In 360-degree feedback individuals compare perceptions of their own performance with behaviorally specific (and usually anonymous) performance information from their manager, subordinates, and peers. Even outsiders, such as customers or suppliers, may be involved. For example, HCL Technologies, one of India's three largest IT services companies, implements a 360-degree feedback program for the CEO and 3,800 managers. The CEO's reviews are transparent, posted on the company's internal web for all 50,000 employees to see. The managers' results are posted too. Vineet Nayar, the former CEO who created the system, described the system as “reverse accountability,” wherein managers are accountable to employees, opposite of the business norm.24 Vineet Nayar is the former CEO of HCL Technologies. He implemented an extensive and highly transparent 360feedback system. Page 193 Collecting performance information from multiple sources helps a person being evaluated to get a broad view of his/her performance. The comparison of ratings across different raters also enables one to see if any potential biases and perceptual errors are occurring. Finally, it also makes it much more difficult for managers to unfairly favor or punish particular employees (recall our discussion of equity and fairness in Chapter 5). PRACTICAL TIP Research on upward and 360-degree feedback, combined with our consulting experience, leads us to favor anonymity and also to discourage use of 360-degree feedback for pay and promotion decisions. When it is used for pay and promotions, managers often resist and/or try to manipulate the process. However, this multisource feedback can be extremely helpful for manager training and development purposes. Now that you have a sense of the importance of monitoring and evaluating performance, as well as some practical tips for doing this accurately, let's move on to the next step and review performance. Page 194 6.4STEP 3: REVIEWING PERFORMANCE AND THE IMPORTANCE OF FEEDBACK AND COACHING MAJOR QUESTION How can I use feedback and coaching to review and improve performance? THE BIGGER PICTURE You're about to learn how different forms of feedback influence performance and how to deliver feedback more effectively. You'll also see how combining feedback with coaching is a powerful means for managing and improving your performance and that of others. Most people agree that feedback—both giving and receiving—has the potential to boost performance. However, most people also admit that they neither receive nor provide feedback as often and as well as they would like. We therefore seek to help you understand some reasons why this happens and what you can do about it. It is safe to say, your feedback skills are some of the most valuable tools you can develop and use throughout your career. Now let's convince you that this bold statement is true. The Importance of Feedback Mike Duke, former president and CEO of Walmart, is a strong proponent of linking goal setting and feedback. Leadership is about … listening and getting feedback from a broad array of constituents. . . . It's about setting aggressive goals and not being afraid to go after very aggressive goals and targets. I think it's even better for a leader to set an aggressive goal and come up a little short than it would be to set a soft goal and to exceed it. . . . Hard feedback is in some environments viewed in a very threatening way, and people don't want to hear feedback. In our environment, I think there is a desire to hear candid feedback. When we leave a meeting, before we'll even drive away, I'll ask, “Well, give me feedback.” I think a leader asking for feedback sets a good tone.25 Despite the clear and important role Mike Duke describes for feedback, it is dramatically underutilized in most every area of our lives. A Watson Wyatt Worldwide survey, for instance, revealed that 43 percent of employees said they “feel they don't get enough guidance to improve their performance.” This is reinforced by a survey of 3,611 employees from 291 companies across the United States and Canada. Furthermore, 67 percent of employees felt they received too little positive feedback in general, and 51 percent too little constructive criticism from their bosses. Worse still, those who said they did not receive enough feedback were 43 percent less likely to recommend their employer to others! 26 Clearly, feedback can affect outcomes across levels of the Integrative Framework. What Effective Feedback Is … and Is Not Students and employees alike appreciate feedback (at least those that are top performers). Both want to know how they're doing and how their performance compares to that of their peers. Feedback is an important, but not always present, cousin of goal setting. Feedback enables you to learn how your performance compares to the goal, which you can then use to modify your behaviors and efforts. We therefore define feedback as information about (individual or collective) performance shared with those in a position to improve the situation. It thus is no surprise that managers in well-run organizations follow up goal setting with a feedback program to facilitate adjustment and improvement, as described in the quote above from Mike Duke at Walmart. Page 195 Effective feedback is only information—it is not an evaluation. Subjective assessments such as, “You're lazy” or “You have a bad attitude,” do not qualify as effective feedback. But hard data such as units sold, days absent, dollars saved, projects completed, customers satisfied, and quality rejects are all candidates for effective feedback programs. Christopher Lee, author of Performance Conversations: An Alternative to Appraisals, clarifies the concept of feedback by contrasting it with performance appraisals: Feedback is the exchange of information about the status and quality of work products. It provides a road map to success. It is used to motivate, support, direct, correct and regulate work efforts and outcomes. Feedback ensures that the manager and employees are in sync and agree on the standards and expectations of the work to be performed. Traditional appraisals, on the other hand, discourage two-way communication and treat employee involvement as a bad thing. Employees are discouraged from participating in a performance review, and when they do, their responses are often considered “rebuttals.”27 Two Functions of Feedback Experts say feedback serves two functions for those who receive it: one is instructional and the other motivational. Feedback instructs when it clarifies roles or teaches new behavior. For example, an assistant accountant might be advised to handle a certain entry as a capital item rather than as an expense item. Feedback motivates when it serves as a reward or promises a reward (remember our discussion in Chapter 5). Hearing the boss say, “You've completed the project ahead of schedule; take the rest of the day off,” is a pleasant reward for hard work, but many employees also appreciate the attention and interest expressed by the very act of providing feedback, regardless of content. Important Sources of Feedback—Including Those Often Overlooked There are three common sources of feedback: 1. Others 2. Task 3. Self It almost goes without saying that you receive feedback from others (e.g., peers, supervisors, lower-level employees, and outsiders). Perhaps less obvious is the fact that the task itself is a ready source of objective feedback. For instance, many tasks—computer programming, landing a jet airplane, or driving a golf ball—provide a steady stream of feedback about how well or poorly you are doing. A third source of feedback is you, but self-serving bias and other perceptual problems can contaminate this source (recall Chapter 4). Those high in self-confidence tend to rely on personal feedback more than those with low self-confidence. And this challenge increases as one moves up the organizational hierarchy because it is more difficult to get useful feedback from others. These challenges aside, feedback can be made even more useful when it is supported by senior managers, or is collected from departing employees and from customers. Each of these is discussed next. The Role of Senior Managers and Leaders Nobody likes to give the boss negative feedback. And frankly, many bosses never ask because they don't want it. For example, one of the authors has worked at multiple universities and multiple companies in various industries, and none of his bosses have solicited feedback—not deans, not department chairs, not managers—none. This problem is compounded by the fact that task feedback is less feasible for senior managers because their day-to-day activities are more abstract than those of frontline employees (e.g., formulating strategy versus closing a sale). This predicament is consequential, as noted by Jim Boomer, a CPA and professional service firm consultant: Page 196 [I]f you don't have a system for holding individuals accountable for their goals, all the work, time and effort that goes into developing these plans is diminished and you've your wasted effort. . . . Leadership tends to hold junior employees accountable but shies away from a formalized system to measure performance at the [senior manager/leader] level. . . . If [senior managers/leaders] are not willing to hold themselves accountable, employees will simply go through the motions and won't buy into a firm-wide performance system.28 So what can an executive or (high-level) manager do? 1. They can seek feedback from others by creating an environment in which employees feel they can be honest and open. 2. Separating feedback from the performance review process also helps, especially for executives who typically are not reviewed formally if at all. 3. They can create a mechanism to collect feedback anonymously. This is useful if the source of the feedback is not particularly important. For example, a CEO based at headquarters in Phoenix is curious how she is perceived by the design team in Shanghai. In this instance she doesn't need to know the views of any specific employee, just the views of employees from that location. 29 The following Example box describes the unique approach to employee feedback at Zappos. How Do You Spell Feedback and Self-Improvement—Z-AP-P-O-S! EXAMPLE Zappos is a perennial member of the Fortune 100 Best Companies to Work for List (no. 31 in 2012).30One of the key elements that enables Zappos to have rock star status with its customers and more than 1,200 employees is the company's approach to performance management. The company puts an extremely high premium on feedback, which it sees as fundamental to continuous improvement.31 FORM OF FEEDBACK Managers are explicitly instructed to provide only instructional feedback (e.g., amount of time spent on calls with customers)—not evaluative. Feedback is no longer quantified on 1–5 (unsatisfactory–satisfactory) scales. It instead is presented as number of times the manager witnessed a particular desirable behavior. The managers must give specific examples of the behavior. LINKED TO VALUES These behaviors, and thus the feedback, are directly linked to the company's 10 core values—deliver WOW through service, embrace and drive change, create fun and a little weirdness, be creative and open-minded, pursue growth and learning, build open and honest relationships with communication, build a positive team and family spirit, do more with less, be passionate and determined, be humble. Their PM and associated feedback are all driven by and based on these values. USE AND FREQUENCY OF FEEDBACK The company no longer does once-a-year reviews, but instead managers are expected to provide feedback and recognize employees continually, as they exhibit particular behaviors. This means managers decide how frequently. Moreover, “these assessments are not used for promotion, pay, or disciplinary purposes. Rather, their purpose is simply to provide feedback on how employees are perceived by others.”32 Page 197 NOT MEETING EXPECTATIONS?If this happens, and of course it does, then the company provides a number of free, on-site courses aimed at skill-building and improvement. YOUR THOUGHTS? 1. 2. 3. 4. What are the advantages to Zappos's approach to feedback? What disadvantages are possible? Explain why you would or would not want to be an employee with such a PM system. Assume you are a manager at Zappos; what would be the pros and cons given this system for you? Exit Interviews Employees quit jobs for many reasons, such as better opportunities, family issues, money, lack of fairness, bullying, and the most common—a horrible boss. Whatever the reason, exit interviews can provide the feedback that uncovers the true reasons. To illustrate, rather than assume that an employee left for family reasons (e.g., to be closer to family in order to help with young kids), we advise employees and employers to conduct exit interviews. The information gathered can help confirm or refute your assumptions. It also gives you guidance on what the organization needs to improve and what it does well. Perhaps the person actually left because of unethical conduct by boss or peers. Sometimes such feedback can uncover very serious misconduct that needs to be addressed urgently. For example, the cause of the fungal meningitis outbreak stemming from contaminated steroids distributed by New England Compounding Center (NECC) was uncovered, in part, by interviews with ex-employees of another company that was owned by the same people. These former employees revealed many shortcuts that compromised the quality and safety of NECC's products.33 Your Perceptions Matter One reason people don't give or get more feedback is because they don't want it. If you don't want it, then how receptive will you be if you are given feedback? How likely will you be to give it if you think it's not wanted? As you learned in Chapter 2, your attitudes affect your intentions, which affect your behavior and also affect your perceptions. What are your attitudes toward feedback? Do you seek it out? Do you only want to hear it if it is positive? To answer these questions and better understand your desire for feedback, go to connect.mheducation.com and complete Self-Assessment 6.1. SELF-ASSESSMENT 6.1 What Is My Desire for Performance Feedback? Go to connect.mheducation.com and take Self-Assessment 6.1 to learn your desire for feedback. 1. Think of a recent instance where you were given feedback by somebody. 2. How does your score help explain your reaction to that feedback? 3. Describe a specific way your desire for feedback (i.e., your score) helps (or hurts) you in college? At work? 4. Given your score, think of how you can improve your receptiveness for feedback. Excerpted and adapted from D. M. Herold, C. K. Parsons, and R. B. Rensvold, “Individual Differences in the Generation and Processing of Performance Feedback,” Educational and Psychological Measurement, February 1996, Table 1, p. 9, Copyright © 1996. Reproduced with permission of Sage Publications, Inc. via Copyright Clearance Center. Many other factors potentially affect your perceptions of feedback. For instance, whether the feedback is negative, the source is credible, the feedback system is fair, and so on, all can influence your perceptions. And of course, your own mindfulness matters (recall Chapter 5). Page 198 Negative Feedback Remember, feedback itself is simply information, neither positive nor negative. It only becomes positive or negative when you compare it to a goal or expectation. Such comparisons are the basis for improvement. (Note: Negative feedback is not negative reinforcement. You'll learn the important difference later in this chapter.) Generally, people tend to perceive and recall positive feedback more accurately than they do negative feedback. But negative feedback (e.g., being told your performance is below average) can have a positive motivational effect. In fact, in one study those who were told they were below average on a creativity test subsequently outperformed those who were led to believe their results were above average. The subjects apparently took the negative feedback as a challenge and set and pursued higher goals. Those receiving positive feedback apparently were less motivated to do better. 34 Nonetheless, feedback with a negative message or threatening content needs to be administered carefully to avoid creating insecurity and defensiveness. Put another way, perception matters. Both negative and positive feedback need to provide clear guidance to improve performance. Feedback is most likely to be perceived accurately, and thus more likely to be acted on, when it is seen as instrumental (remember expectancy theory inChapter 5) to an important or valued outcome.35 Self-efficacy also can be damaged by negative feedback, as discovered in a pair of experiments with business students. The researchers concluded, “To facilitate the development of strong efficacy beliefs, managers should be careful about the provision of negative feedback. Destructive criticism by managers which attributes the cause of poor performance to internal factors reduces both the beliefs of self-efficacy and the self-set goals of recipients.”36 One therefore needs to be careful when delivering feedback, due to the effect of feedback on goals. Factors That Affect Your Perceptions of Feedback Many factors influence how you, and people in general, perceive feedback. For instance, much of what you learned about attributions in Chapter 4 also applies here. All managers and employees are susceptible to the fundamental attribution bias (e.g., your manager attributes your poor performance entirely to you and things you control) and self-serving bias (e.g., you are likely to take credit for positive performance outcomes and attribute poor performance to other, extrinsic factors). Beyond attributions, the following also can influence your perceptions of feedback: 1. Accuracy. A common criticism of PM systems is that they either measure the wrong things or measure the right things wrong. Either way, the feedback received is inaccurate. 2. Credibility of the sources. If one of the members of your project team (for school or work) points out shortcomings in your work, you are likely to put more weight on his feedback if he is an “A” student or top performer than if not. Trust also is critical here. If you don't trust the person delivering the feedback, then you will likely be suspicious of his/her intentions and thereby discount its value. 3. Fairness of the system. If you perceive the process or outcomes—recall equity theory from Chapter 5—are unfair, then you are likely not only to discount the feedback but also to be outraged, withdraw, commit counterproductive work behaviors, and/or quit. Performance appraisals are one of the most common and critical aspects of organizational life that produce issues of fairness. 4. Performance-reward expectancies. Effective performance management, particularly ongoing and open feedback between you and your supervisors, is an important means for managing such expectancies. 5. Reasonableness of the goals or standards. Think goals—challenging is good, unattainable bad. An excellent example: if your manager says, “It is possible for you to earn a bonus up to 50 percent of your salary,” then we encourage you to ask/consider if anybody has actually ever earned that much. If not, you may be the first, but it is more likely that the goal/standard is unreasonable. Any feedback that fails to clear one or more of these cognitive hurdles will be rejected or discounted. Personal experience largely dictates how you weigh these factors. For example, a review of research on disciplinary practices found that people have different perceptions of a disciplinary act based on the sex of the person delivering the discipline, the cultural characteristics of the people involved, and the supervisor's use of apologies and explanations.39 Given these differences in perception, we recommend that supervisors utilize two-way communication, follow up with the employee to make sure the discipline was understood, use empathy (or apologies if appropriate) to lessen the employee's negative reactions (e.g., anger), and focus on helping the employee in the long run. Page 199 Feedback Do's and Don'ts According to Anne Stevens and Greg Gostanian, managing partners at ClearRock, an outplacement and executive coaching firm, “Giving feedback to employees—and receiving feedback yourself—is one of the most misunderstood and poorly executed human resource processes.” 40 Table 6.5 lists some important and fundamental do's and don'ts for giving feedback. TABLE 6.5FEEDBACK DO'S AND DON'TS DON'T37 DO38 Use feedback to punish, embarrass, or put somebody down. Keep feedback relevant by relating it to existing goals. Provide feedback that is irrelevant to the person's work. Deliver feedback as soon as possible to the time the behavior was performed. Provide feedback that is too late to do any good. Provide specific and descriptive feedback. Provide feedback about something that is beyond the individual's control Focus the feedback on things employees can control. Provide feedback that is overly complex or difficult to understand. Be honest, developmental, and constructive. Coaching—Turning Feedback into Change Coaching is a customized process between two or more people with the intent of enhancing learning and motivating change. Once goals and expectations are determined and communicated, performance is monitored, and feedback is collected, one potential next step is coaching. Coaching can either follow or encompass these other steps of performance management. One way to look at coaching is that it is an individualized and customized form of performance management. It is different from training, which typically involves only skill building with the same content delivered to a group of people. It also differs from mentoring, which most often has a career focus, more so than performance, and is exclusively from more senior or experienced employees to more junior. All of these differ from counseling that usually aims to overcome a problem, conflict, or dysfunctional behavior.41 Anne Hawley Stevens, founder of ClearRock, is recognized as one of Boston's top executive coaches. Effective coaching is developmental, has specific performance goals, and typically involves considerable self-reflection, self-assessment, and feedback. In fact, “research from Gallup, McKinsey, and Harvard recommends that giving feedback should be the most used tool in a coach's toolbox.” 42 The SelfAssessments throughout this book can serve as important elements for your own coaching.43 When approached in this way, coaching is not only an important aspect of effective performance management, but also consistent with positive organizational behavior (POB) discussed in Chapter 7. Consider this: If coaching is done in the way described, then who wouldn't appreciate or benefit from coaching?
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