Performance Management

Publisher’s note
Every possible effort has been made to ensure that the information contained in this bookis accurate at the time of going to press, and the publishers and author cannot acceptresponsibility for any errors or omissions, however caused. No responsibility for loss ordamage occasioned to any person acting, or refraining from action, as a result of thematerial in this publication can be accepted by the editor, the publisher or the author.
First published in Great Britain and the United States in 1994 by Kogan Page LimitedSecond edition 2000Third edition 2006Apart from any fair dealing for the purposes of research or private study, or criticism orreview, as permitted under the Copyright, Designs and Patents Act 1988, this publicationmay only be reproduced, stored or transmitted, in any form or by any means,with the prior permission in writing of the publishers, or in the case of reprographicreproduction in accordance with the terms and licences issued by the CLA.
Enquiriesconcerning reproduction outside these terms should be sent to the publishers at theundermentioned addresses: 120 Pentonville Road 525 South 4th Street, #241London N1 9JN Philadelphia PA19147United Kingdom USAhttp://www.kogan-page.co.uk/© Michael Amstrong, 1994, 2000, 2006
The right of Michael Armstrong to be identified as the author of this work has beenasserted by him in accordance with the Copyright, Designs and Patents Act 1988.ISBN 0 7494 4537 8
British Library Cataloguing-in-Publication DataACIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication DataArmstrong, Michael, 1928–Performance management : key strategies and practical guidelines / MichaelArmstrong.— 3rd ed.p. cm.
Includes bibliographical references and index.
ISBN 0-7494-4537-8
1. Employees—Rating of. 2. Performance standards. 3. Performance. I.Title.HF5549.5.R3A758 2006658.3
125—dc222005021779

Contents

1 The basis of performance management 1
Performance management defined 1;
Aims ofperformance management 2;
Characteristics of performancemanagement 3;
Developments in performance management 4;
Concerns of performance management 5;
Understandingperformance management 6;
Guiding principles of performancemanagement 9;
Performance appraisal and performancemanagement 9;
Views on performance management 10;
Performance management and the psychological contract 11;
The process of performance management 12

2 The process of performance management 15
Performance management as a process of management 15;
The performance management cycle 16;
The performancemanagement sequence 16;
How performance managementworks 16;
Performance management activities 18;
Performancemanagement in action 19

3 The practice of performance management 35
IRS, 2003 35;
Lawler and McDermott, 2003 36;
Chartered Institute of Personnel and Development, 2003 37;
e-reward, 2005 39

4 Performance planning and agreements 49
Performance and development planning 49;
Role profiles 50;
Objective setting 54;
Performancemeasures and assessment 59;
Performance planning 65;
Development planning 66;
The performance agreement 67;
Checklist – performance and development planning 68

5 Managing performance throughout the year 69
The continuing process of performance management 70;
Updating objectives and work plans 71;
Managingcontinuous learning 72

6 Reviewing performance 75
The performance review meeting 75;
Performancereview difficulties 76;
Performance review issues 77;
Organizational issues 79;
On whom should performancereviews focus? 80;
On what should the performancereview meeting focus? 81;
Criteria 81;
The impact ofmanagement style 82;
Performance review skills 82;
Outcome issues 82;
Dealing with positive and negativeelements 83;
Using reviews as a communications channel 84;
Balancing past performance against future potential 85;
When should reviews be held? 85;
Performance review problems 86;
Evaluating performance reviews 88;
Analysisof the issues 89;
Preparing for review meetings 89;
Self-assessment 95;
Giving feedback 98

7 Assessing performance 101
Approach to assessment 101;
Factors affecting assessments 102;
Methods of assessment 103;
Overall analysis of performance 103;
Narrative assessment 104; Rating 105;
Forced distribution 114;
Forced ranking 114;
Quota systems 115;
Visual methods ofassessment 115;
Conclusion 117

8 Improving performance 119
Improving performance at the organizational level 119;
The problems at managerial level 120;
Dealing with the problem –overall strategy 120;
Dealing with the problem – human resourceimprovement 121;
Top management levers for improvingperformance 122;
Performance management at the organizationallevel 123;
Improving team performance 129;
Improvingindividual performance 131;
Managing underperformers 132

9 Performance management administration 137
Purpose 138;
Performance management forms as workingdocuments 139;
Information for the HR department 139;
Form design 140;
Web-enabled performance management 142

10 Performance management and learning 143
Helping people to learn through performance management 144;
Learning opportunities 144;
Personal development planning 146;Coaching 148

11 Performance management and reward 151
Performance management and non-financial rewards 152;
Performance management and pay 153

12 -- 360-degree feedback 157
360-degree feedback defined 157;
Use of 360-degree feedback 158;
Rationale for 360-degree feedback 159;
360-degree feedback –methodology 160;
Development and implementation 162;
360-degree feedback – advantages and disadvantages 164;
360-degree feedback – criteria for success 165

13 Performance management roles 167
Top managers 167;
Line managers 168;
The role ofemployees 173;
The role of HR 173

14 Introducing and developing performance management 175
Approach to development 175;
The developmentframework 179;
Contextual factors 180;
Performancemanagement development programme 180

15 Learning about performance management 189
The rationale for performance management 189;
Contribution 190;
Skills 190;
Formal learning 191;
Less formal learning 193

16 Evaluating performance management 195
Method 195;
Atypical approach 197;
Points to be covered 198;
Outcome 200
References 201
Further reading 205
Author index 211
Subject index 212