Performance Assessment and Development
Building and Sustaining High-Performance Organizations
Managing Employee Retention and Separation
Motivating Employees
The Value of Motivation
Why it matters:
Happy workers → happy customers → business success.
Unhappy workers → turnover → costly.
Engagement: motivation, passion, commitment.
Intrinsic Rewards: satisfaction from doing a job well (pride, achievement).
Extrinsic Rewards: recognition from others (pay raises, praise, promotions).
Scientific Management
Frederick Taylor (1911): “Father of Scientific Management.”
Goal: study work scientifically → find the “one best way.”
4 Principles: study jobs, set rules, match workers to jobs, fair pay.
Treated people like machines → focus on efficiency.
Example: UPS designs every driver’s movement for maximum efficiency.
Hawthorne Studies – Elton Mayo
Tested lighting & work conditions at Western Electric.
Productivity increased regardless of conditions.
Hawthorne Effect: people act differently when they know they’re being studied.
Key takeaway: Motivation is also psychological & social, not just pay.
Maslow’s Hierarchy of Needs
Motivation comes from unmet needs.
Levels:
Physiological (food, shelter).
Safety (security at work/home).
Social (belonging, friendships).
Esteem (recognition, respect, status).
Self-actualization (develop full potential).
Workplace link: pay/benefits, safe environment, team belonging, recognition, growth opportunities.
Herzberg’s Two-Factor Theory
Motivators (job content): responsibility, achievement, recognition → true motivation.
Hygiene factors (job environment): pay, conditions, job security → prevent dissatisfaction but don’t motivate.
Money = hygiene factor → necessary, but not inspiring.
Maslow’s Hierarchy of Needs vs. Herzberg’s Theory of Factors
McGregor’s Theory X and Theory Y
Theory X Managers:
Believe people dislike work.
Motivate with fear/punishment.
Close supervision.
Theory Y Managers:
Believe people like work, are creative, seek goals.
Motivate with empowerment & trust.
Relaxed supervision, freedom to set goals.
Empowerment: give employees authority, tools, and freedom to act.
Goal-Setting Theory & MBO (Peter Drucker)
Goal-Setting Theory: ambitious but realistic goals + feedback motivate workers.
MBO (Management by Objectives): managers & employees set goals together, monitor progress, reward success.
Key: employees commit more when involved in goal setting.
Expectancy Theory
Motivation depends on expectations of outcomes:
Can I do it?
What’s the reward?
Is it worth it?
Example: students deciding whether effort = high grade.
Equity Theory
Employees compare their inputs (effort) with outputs (rewards) to others.
If they feel unfairly treated → motivation drops.
Perception of fairness = key.
Reinforcement Theory
Positive reinforcement: praise/rewards for good behavior.
Negative reinforcement: remove negative condition when behavior improves.
Punishment: apply negative consequence (suspension).
Extinction: stop rewarding behavior (ignore bad behavior or stop praising good work → motivation drops).
Modern Approaches: Job Enrichment
Focus on making jobs more meaningful & motivating.
Key job characteristics:
Skill variety, task identity, task significance.
Autonomy, feedback.
Strategies:
Job enlargement (combine tasks).
Job rotation (switch roles for skill growth).
Motivation through Communication
Build a culture of open communication.
Managers should: listen, remove barriers, ask what matters to employees.
Self-managed teams: respect, autonomy, decentralization, rewards.
Personalizing Motivation
Different generations motivated differently:
Baby Boomers: job security, prosperity.
Gen X: independence, skepticism, work-life balance.
Millennials (Gen Y): comfort, recognition, collaboration.
Gen Z: grew up in crises, value safety, inclusion, flexibility.
Key: one size doesn’t fit all → tailor motivation.
Building and Sustaining High-Performance Organizations
High-Performance Work Systems (HPWS)
A high-performance work system is when an organization combines the right people, technology, and structure so everything works smoothly toward its goals. Success comes from making these elements fit together, not treating them separately.
Key points:
People matter – hire, train, and motivate the right employees.
Processes help – like flexible manufacturing, total quality management, and just-in-time inventory, but they only work with skilled people.
Integration is key – technology, structure, and HR must support each other.
Benefits – higher productivity and stronger long-term performance.
Example – Massachusetts General Hospital used IT reforms not to cut jobs but to involve teams in redesigning work. This improved efficiency, patient care, and saved money without layoffs.
Simple definition:
HPWS = the right mix of people, technology, and structure to fully use resources and reach organizational goals.
Elements of a High-Performance Work System
A high-performance work system (HPWS) brings together people, tasks, structure, rewards, and information so everything works toward organizational success.
Organizational structure – how people are grouped and managed; should support cooperation and adaptability.
Task design – jobs and team roles should be efficient and encourage quality.
People – hiring, training, and developing the right employees is critical.
Reward systems – performance measures, pay, and incentives that motivate employees to achieve goals.
Information systems – provide access to data employees need to perform and improve.
When these elements align, the system improves productivity, quality, customer satisfaction, and profits while lowering turnover and costs.
Key idea: In HPWS, every part (people, structure, rewards, information) works together to achieve high performance.
Conditions for High Performance
High performance grows where teams do the work, employees are empowered, training is ongoing, rewards link to results, technology supports flexibility, knowledge is shared, and ethics guide behavior. Employees see how their jobs matter, use varied skills, and feel engaged.
High-performance work systems succeed when certain conditions are in place:
Teamwork – employees work in teams.
Participation (Empowerment) – employees help with hiring and decision-making.
Feedback – regular performance reviews and improvement support.
Training – continuous learning is encouraged and rewarded.
Rewards – pay and incentives tied to company performance.
Flexibility – equipment, processes, and technology support interaction and adaptability.
Involvement – employees join in planning changes to work and methods.
Skill variety – jobs use multiple skills.
Purpose – employees know how their work connects to the final product or service.
Ethics – ethical behavior is expected and valued.
Key idea: High performance grows when employees have skills, feedback, fair rewards, involvement, and ethics—all leading to satisfaction and long-term success.
HRM’s Contribution to High Performance
HR drives performance by designing jobs for teamwork and autonomy, recruiting/ selecting for collaboration and problem-solving, training/developing people for current and future roles, managing performance against clear goals, and linking pay to results. The biggest gains come when these practices are integrated and aligned with strategy.
Key terms:
Job design for empowerment: Roles with variety, autonomy, and resources.
Selection for fit: Hiring for teamwork, creativity, and learning ability.
Performance management: Setting goals, measuring results, giving feedback.
Pay for performance: Incentives tied to outcomes (team or individual).
Alignment: HR practices matching business goals and each other.
HRM Technology
Technology boosts HR efficiency and decision quality. Transaction processing handles routine admin; decision support systems test “what-if” scenarios; expert systems guide consistent decisions. An HRIS (often via e-HRM and cloud computing) centralizes data, enables self-service, and supports knowledge sharing across the organization.
Key terms (simple):
Transaction processing: Automating routine HR tasks and reports.
Decision support system (DSS): Software to compare options and outcomes.
Expert system: Software that applies expert rules to recommend actions.
HRIS: Database system for HR data and processes.
e-HRM / intranet / cloud: Online access to HR tools and info anywhere.
Measuring HRM Effectiveness
Measure HR by treating managers and employees as customers and checking if HR meets their needs. Use an HRM audit (scorecard of key HR results) and HR analytics (did programs meet goals and add economic value?). Track efficiency (cost/time) and effectiveness (impact on performance).
Key terms (simple):
Customer-oriented HR: Designing HR services around user needs.
HRM audit: Formal review of HR outcomes (staffing, pay, training, etc.).
HR analytics: Using data to show whether HR programs work and pay off.
Efficiency vs. effectiveness: Doing things right vs. doing the right things.
Managing Performance
Identify the activities involved in performance management
Performance management is the process of making sure employees’ work supports the company’s goals. It includes defining what performance outcomes are important, setting goals, supporting employees with feedback and resources, evaluating results, and giving rewards or corrective actions.
Performance Management: Ensuring employees’ work helps meet company goals.
Feedback: Information to help employees improve.
Evaluation: Checking performance against goals.
Define five criteria for measuring the effectiveness of a performance management system
A good performance management system should (1) fit with company strategy, (2) be valid by measuring only what matters, (3) be reliable with consistent results, (4) be acceptable to those using it, and (5) give specific feedback that guides improvement.
Fit with Strategy: Supports the company’s mission and goals.
Validity: Measures what is important, not irrelevant factors.
Reliability: Produces consistent results across raters and time.
Acceptability: Viewed as fair and practical to use.
Specific Feedback: Tells employees exactly what to improve.
Compare the major methods for measuring performance
Performance can be measured by comparing employees (ranking), rating their attributes or behaviors, or looking at results like productivity. Comparative methods can separate top and bottom performers, while behavior-based methods show what actions lead to success. Result-based methods focus on outcomes but may miss factors outside employees’ control.
Ranking: Ordering employees from best to worst.
Attributes: Traits or characteristics being rated.
Behaviors: Actions employees take to perform well.
Results: Outcomes such as sales, productivity, or cost savings.
Describe major sources of performance information in terms of their advantages and disadvantages
Performance information can come from managers, peers, subordinates, self-appraisals, or customers. Using multiple sources (360-degree appraisal) gives a fuller picture. Each source has pros and cons—for example, managers know job requirements but may not see daily tasks, while peers and customers may offer unique insights but can be biased.
Manager Appraisal: Supervisor rates the employee.
Peer Appraisal: Coworkers provide feedback.
Subordinate Appraisal: Employees rate their manager.
Self-Appraisal: Employees review their own work.
Customer Appraisal: Clients or users give feedback.
360-Degree Appraisal: Combines multiple sources for balance.
Define types of rating errors, and explain how to minimize them
Rating errors happen when managers judge employees unfairly, such as rating everyone too high (leniency), too low (strictness), or in the middle (central tendency). Other errors include halo (letting one good trait influence all ratings) and horns (letting one bad trait overshadow everything). Training and calibration meetings can reduce these errors .
Leniency: Rating everyone too positively.
Strictness: Rating everyone too harshly.
Central Tendency: Putting everyone in the middle.
Halo Error: One strength makes ratings look better overall.
Horns Error: One weakness makes ratings look worse overall.
Calibration Meeting: Managers compare ratings to ensure fairness.
Explain how to provide performance feedback effectively
Feedback should be regular, honest, and focused on behavior, not personality. Managers should create a supportive setting, invite self-assessment, and use a problem-solving approach. Frequent, clear, and specific feedback helps employees improve and stay motivated .
Problem-Solving Approach: Manager and employee work together to fix issues.
Self-Assessment: Employee reviews their own performance before feedback.
Specific Feedback: Clear examples of what was done well or needs improvement.
Summarize ways to produce improvement in unsatisfactory performance
When employees underperform, the response depends on whether the problem is lack of ability, lack of motivation, or both. Coaching and training can build ability, while praise or fair rewards can improve motivation. If both are missing, feedback or discipline may be needed. High performers should also receive growth opportunities .
Ability: Skills or knowledge needed to do the job.
Motivation: Desire or willingness to perform.
Coaching/Training: Support to build ability.
Rewards/Praise: Boosts motivation.
Demotion/Termination: Last resort if no improvement.
Discuss legal and ethical issues that affect performance management
Performance management must be fair, unbiased, and legally defensible. Systems should avoid discrimination, use valid job-based criteria, and protect employee privacy. Ethical issues also arise with electronic monitoring, which should be explained clearly and used respectfully .
Discrimination: Treating employees unfairly based on race, sex, age, etc.
Legally Defensible System: Fair and job-related evaluations that can hold up in court.
Electronic Monitoring: Using technology to track performance.
Privacy: Protecting employees’ personal information and data.
Managing Employee Retention and Separation
Involuntary and Voluntary Turnover
Turnover means employees leaving a company. Involuntary turnover happens when the employer makes an employee leave (for poor performance, layoffs, or discipline). Voluntary turnover happens when employees choose to leave (for better jobs, retirement, or dissatisfaction). Both types cost money and time, and can impact morale and productivity.
Involuntary turnover: Employee forced to leave by employer.
Voluntary turnover: Employee chooses to leave.
Fair Treatment and Justice
Employees judge fairness based on three things: whether outcomes are fair, whether procedures are fair, and whether they are treated respectfully. Clear rules, consistent decisions, and respectful communication help employees trust the system.
Outcome fairness: Are the results fair and consistent?
Procedural justice: Were fair methods used in decision-making?
Interactional justice: Was the employee treated with dignity and respect?
Legal Requirements for Discipline
Organizations must follow the law when disciplining employees. That means no wrongful discharge, no discrimination, protecting employee privacy, and giving proper notice for layoffs. Clear policies and documentation protect both the company and the employee.
Wrongful discharge: Firing that breaks a promise, policy, or law.
Privacy: Respecting personal boundaries when collecting or sharing information.
Fair Discipline Practices
Fair discipline follows the “hot-stove rule”: warnings are clear, consequences are consistent, and action is immediate. A progressive discipline system starts with small steps (like a warning) and increases to suspension or termination if problems continue. Companies can also use dispute resolution, counseling, or mediation to solve issues.
Hot-stove rule: Clear warning, consistent and immediate consequences.
Progressive discipline: Step-by-step system of increasing penalties.
Alternative dispute resolution (ADR): Solving conflicts without going to court (open-door policy, peer review, mediation, arbitration).
EAP (Employee Assistance Program): Counseling for personal or substance problems.
Outplacement counseling: Helping dismissed employees transition to new jobs.
Job Dissatisfaction and Behavior
When employees are unhappy, they may try to change things, leave physically (lateness, absenteeism, quitting), or mentally check out (low involvement or commitment). Dissatisfaction often comes from job tasks, unclear roles, poor relationships, or unfair pay.
Job withdrawal: Pulling away from work physically, mentally, or emotionally.
Role: Expected behaviors for a job.
Role ambiguity: Not knowing what’s expected.
Role conflict: Facing incompatible demands.
Role overload: Having too many demands.
Job involvement: How much someone identifies with their job.
Organizational commitment: Loyalty and willingness to support the company.
Improving Job Satisfaction and Retention
Companies keep employees engaged and satisfied by hiring people with positive attitudes, designing meaningful jobs, clarifying roles, fostering supportive relationships, and offering fair pay and benefits. Regular surveys and feedback help managers spot problems early and improve retention.
Job satisfaction: A positive feeling that comes when a job meets personal values.
Role analysis technique: A method to clarify role expectations with input from everyone involved.
Exit interview: A conversation with a leaving employee to learn why they are leaving.