core competence

Appraising and Managing Performance

Introduction

In this learning blog entry, I am going to present key concepts, theories and models from reading the chapter 7: Appraising and Managing Performance, from the eight edition (2016) of Managing Human Resources by Gómez-Mejía, Balkin and Cardy. I am going to summarize the key concepts from this chapter including definition of Performance Appraisal, Identifying Performance Dimensions, Measuring Performance and Managing the Performance. I will also present a case of “A Performance Appraisal Horror Story” and two other articles related to this topic.

What is Performance Appraisal?

Performance appraisal is the identification, measurement, and management of human performance in organizations. Identification means determining the specific areas of work the manager should be evaluating when measuring the overall performance. The evaluating should be done with analysis and focus on performance that affects organizational success rather than performance-irrelevant characteristics, race, age or sex for example. (Gómez-Mejía. Balkin & Cardy 2016, 233.)

Measurement is the foundation of the appraisal system including the managerial conclusion whether the employee’s performance was good or bad. This should be done consistently throughout the organization and the assessment standards should be comparable with each other. Management is the overruling goal for all the appraisal systems. Appraisal should always be future-oriented activity that provides employees with useful feedback and instructs them to better performances. (Gómez-Mejía. Balkin & Cardy 2016, 233.)

Appraisal can be used administratively or developmentally. Performance appraisals are used administratively when it is fundamental for the decision about the employee’s work conditions, including promotions, termination or rewards. Developmental appraisals are more goaled towards improving employee’s performance and strengthening their skill sets. This often includes providing feedback, counseling employees on effective work behaviors and offering them training and other learning opportunities to become more efficient in their jobs. (Gómez-Mejía. Balkin & Cardy 2016, 234.)

Identifying Performance Dimensions

Performance appraisal begins by identifying the dimensions, the aspects of performance that determine effective job performance. Dimensions should be identified with tools like job analysis to keep it legally and objectively legit. Performance appraisal process needs to add value for the business and the dimensions should be based on the organizations strategic objectives to make sure that everyone is working towards the same goal. Often popular approach to identifying performance dimensions focuses on competencies, the characteristics related with successful performance. The set of competencies is commonly described as competency model. (Gómez-Mejía. Balkin & Cardy 2016, 234-235.)

Measuring Performance

The methods that are used to measure employee performance are categorized in:

1. Whether the type of judgement called for is relative or absolute

On relative judgement an appraisal format asks supervisors to compare an employee’s performance to the performance of the other employees with the same job description.

On absolute judgement an appraisal format asks supervisors to make judgements about an employee’s performance based exclusively on performance criteria. (Gómez-Mejía. Balkin & Cardy 2016, 236.)

2. Whether the measure focuses on traits, behavior, or outcomes.

Together with relative and absolute judgements, performance measurement systems can be also divided by the type of performance data that they focus on: trait data, behavioral data or outcome data. Trait appraisal instrument is an appraisal tool that asks a supervisor to make judgements about employee’s characteristics that are often consistent and persisting. Behavioral appraisal instrument in the other hand is an appraisal tool that asks managers to assess employee’s behavioral habits. (Gómez-Mejía. Balkin & Cardy 2016, 238.)

All the measures have its advantages and disadvantages. However, the overall quality of assessments is more dependent of the judger’s motivation and proficiency than of the type of instrument chosen.

Managers face five challenges in measuring performance:

– Rate errors & bias

– The Influence of liking

– Organizational politics

– Whether to focus on the individual or the group

– Legal issues (discrimination & employment at will)

(Gómez-Mejía. Balkin & Cardy 2016, 243-244.)

Managing Performance & Challenges to Effective Performance Measurement

The main goal of any appraisal system is performance management. To manage and improve their employee’s performance, managers must investigate the reasons of performance and its problems and react to that. It is important to develop action plans, empower workers to find solutions and use performance-focused communication. (Gómez-Mejía. Balkin & Cardy 2016, 251-254.)

There are some situational factors, organizational characteristics that can positively or negatively influence performance. These situational factors to consider in determining the causes of performance problems.

Poor condition of work activities among workers
Inadequate information or instructions needed to perform a job
Low-quality materials
Lack of necessary equipment
Inability to obtain raw materials, parts or supplies
Inadequate financial resources
Poor supervision
Uncooperative coworkers
Inadequate training
Insufficient time to produce the quantity or quality of work required
A poor work environment
Equipment breakdown

(Gómez-Mejía. Balkin & Cardy 2016, 252.)

The communication between the supervisor and employee is critical to have an effective performance management. Based on what is communicated and how its done can determine whether performance will improve or weaken in the future. (Gómez-Mejía. Balkin & Cardy 2016, 243-253.)

Case PM: A Performance Appraisal Horror Story

This article was published by Jerry Bumgarner on April 12, 2011 in Cascade Employers Association. The article tells about Jerry’s first performance appraisal experience. It was a complete surprise for him to hear from his supervisor a bad feedback of his performance after doing a lot of work and even overtime. It turned out that they did not actually have a good communication between the employee and manager. The expectations and mutual goals did not meet. After having a bad experience of this performance appraisal the HR department soon realized to take action and make a structured plan for compensations and goals for Jerry. The understanding of common goals and targets became more clear and the communication between supervisor and the employee got better. While Jerry was given a clear targets to shoot together with the management it helped them to achieve and exceed the expectations and become more efficient on their jobs. (Bumgarner, 2011).

”Employees are more likely to hit performance targets and contribute to the organization’s success, if they know in advance what the target looks like. While it takes time to do it right, there are many pay-offs. In addition to supporting the supervisor/employee relationship, employees will be more focused and engaged, customers will be happier, and the organization can expect better results”(Bumgarner, 2011).

Article: The Performance Management Revolution

This article was published by Peter Cappelli & Anna Tavis on October 2016 in Harvard Business Review. In the article Brian Jensen explained that a company, Colorcon, had found a more effective way of reinforcing desired behaviors and managing performance than the traditional annual reviews of employees. Instead, supervisors were giving people instant feedback, tying it to individuals’ own goals, and handing out weekly bonuses to employees they saw doing good things.

Cappelli and Tavis also describes how performance management has developed in resent years and why current thinking has changed drastically. Firstly, today’s tight labor market creates a big pressure to keep employees happy and satisfied. Secondly, the quickly changing business environment requires evolving. They also argue that by Prioritizing improvement over pointing fingers, the teamwork gets more efficient. (Cappelli & Tavis, 2016).

”Some companies worry that going numberless may make it harder to align individual and organizational goals, award merit raises, identify poor performers, and counter claims of discrimination—though traditional appraisals haven’t solved those problems, either. Other firms are trying hybrid approaches—for example, giving employees performance ratings on multiple dimensions, coupled with regular development feedback”(Cappelli & Tavis, 2016).

Article: What Solid Research Actually Says About Performance Appraisals

This article was published by Jack Zenger on October 12, 2017 in Forbes. The article brings up the changes in performance appraisals on the resent years . Previously the traditional annual appraisal given in the organizations was more focused on reviewing the past whether now it is rather discussing about future. The typical ratings are being replaced with discussions about performance and the manager and employee are setting stretched goals for the future.

The GE team decided to conduct research within GE on this topic. Their findings were:

1. Criticism by a manager has a negative effect on the recipient.

2. Praise does little to change performance. (Later research suggests praise does improve the manager-subordinate relationship.)

3. Criticism generates defensiveness on the part of the subordinate, which in turn leads to poorer performance.

4. Coaching between a manager and a subordinate should occur day-to-day, and not be reserved for a once-a-year event.

5. Goal setting with clear targets and deadlines improves performance.

6. Participation by the subordinate in that goal setting process produces performance improvement.

7. The need to justify compensation decisions was allowed to eclipse the psychological pain inflicted by the appraisal process.

(Zenger 2017.)

References

Bumgarner, J. 2011. Cascade Employers Blog. A Performance Appraisal Horror Story (With A Happy Ending). URL: http://www.cascadeemployersblog.com/salarytrends/a-performance-appraisal-horror-story-with-a-happy-ending Accessed: 12 February 2020.

Cappelli, P. & Tavis, A. October 2016. Harvard Business Review. The Performance Management Revolution. URL: https://hbr.org/2016/10/the-performance-management-revolution Accessed: 12 February 2020.

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E.

Zenger, J. 12 October 2017. Forbes. What Solid Research Actually Says About Performance Appraisals. URL: https://www.forbes.com/sites/jackzenger/2017/10/12/what-solid-research-actually-says-about-performance-appraisals/#569a0b232b59 Accessed: 12 February 2020.

Cover picture source URL: https://pixabay.com/illustrations/quality-hook-check-mark-excellent-787663/ Accessed: 12 February 2020.

How can a company adapt successfully in a changing market?

PBL Trigger 4 Problem:

How can a company adapt successfully in a changing market?

Keywords: Mission, vision, strategy, changing markets, adaptation, expand, success, business plan, core competence, worldwide, values, business identity, sacrifice, innovation

LO1: What is the difference between Mission and Vision in Business?

LO2: How Mission and Vision leads to Strategy?

LO3: What are the Strategies to keep up successfully in a changing market?

Introduction:

On my this blog post I’m going through the topic of our PBL Trigger 4 problem: ” How can a company adapt successfully in a changing market? ” This research also includes three learning objectives enclosed by the same topic. I will start with defining the difference between Mission and Vision in business life. Then in the second learning objective I will find out that how do these lead to company’s strategy. Now I can argue that do they actually lead to the strategy or are they part of that process? Lastly I am going through some examples of strategies that can lead companies to success in a changing markets and adding the conclusions of it.

What is the difference between mission and vision?

These days companies need to have direction in which way to implement the plans to obtain their goals. The vision and mission statements are usually giving this direction to companies. Also, it is good for the employees of the company to have certain cohesive idea how to work together towards the common goals.(Kirkpatrick 2019.)

If the business doesn’t have any of these goals, vision or mission, at some point it will face a lot of problems with employees and finances. That’s why it is important that the company regularly keeps on track with their goals, mission and vision, to inspire, support and develop the employees and whole business to the desired way. For the company to success, they should review the statements actively.(Kirkpatrick 2019.9

The Mission (also can be called action plans, broad strategy) means company’s smaller agenda and mission to ultimately achieve the bigger goal, a vision. (Examples like daily to do’s, targets, changes to be done…)

Mission can include different task or to do’s that all the workers of the organization participates in. It usually is a statement that can be one statement or different ones, but its purpose is to give the workers in the organization a certain framework or idea how to behave and act in that company. It helps the employees to focus on the tasks that can be done right now and give them a present purpose to work on. The mission statement can change, and companies must adapt it to the changing markets to maintain and reach success.(Kirkpatrick 2019.)

Example of Patagonia’s mission statement: ”We are in business to save our home planet. Build the best product, cause no unnecessary harm, Use business to protect nature, Not bound by convention. ”(Patagonia).

The Vision (also known as core values, overall goals) Statement is a clear precise statement of what the company wants to do and what is the ultimate result/affect after accomplishing your mission. It is the ideal achievement that the company wants to reach. The vision is usually future orientated unlike the mission which is focusing on the present. The idea is that when the company can read their vision statement in present form they will now that it is achieved. Often the organizations can use vision statement in the public purposes, like public relations and marketing. It is important that the company have vision because that will drive it and give a direction for its purposes in a long run.(Kirkpatrick 2019.)

The difference in general is that the mission statement defines what the company is currently doing, or what they need to do to achieve the overall goal. It is giving the employees and other members the guidelines to HOW to achieve the vision. Employees duties, actions and the way they represent the company should include in the mission. The vision in the other hand is giving the idea WHY to the workers; why we are doing the actions we are? It is not very specific and effective way to direct an individual employee actions about the day to day tasks but is does give an overall idea of what the organization want to accomplish.(Kirkpatrick 2019.)

Example of Teach of America’s vision statement: ” One day, all children in this nation will have the opportunity to attain an excellent education.”(TeachForAmerica).

How Mission and Vision leads to Strategy?

Strategy is very much connected to the mission and vision of the company. Strategy could be described as a last step in this ‘process’ that company goes through to achieve the vision. That is why it is crucial for the company to have them both before adding strategic elements to it. When the company is creating the strategy, there can be sometimes additional steps added, like specific objects or targets that they want to reach. These can be used as the base for the overall company strategy.(Miller 2014.)

The organizations strategy should include both long-term and short-term goals and more specifically explain how to achieve the goals that have been set. The company strategy should also be adapted and updated frequently to keep up with the local,- and international economical situations and company’s own needs.(Miller 2014.)


source of the image:  https://upload.wikimedia.org/wikipedia/commons/0/0e/5_STEPS_STRATGIC_PLAN.png accessed: 30.9.2019

The purpose of the company’s strategy is to successfully align the mission with the vision. It is also important that the strategy with its tactics, tasks and ideas are in line with the company’s values. If all these factors are not working with together it is possible that the strategic plan is more likely to fail.

What are the strategies to keep up successfully in a changing market?

There are numerous business strategies that can be implemented in a different way depending of the field and many other factors. According to Udemy’s article about business strategies that make money there are examples of the business strategies that company can create to attract customers and gain its goals.

Cornering a fledgling market. Which means that the company is buying out their competitors or when a larger company merge with a competitor to corner a young market. For example, Facebook buying Instagram. That lead to competitive advantage over google, Microsoft…(Mikoluk 2014.)

By Product differentiation the companies can stand out with the product from the competitors. Unique qualities, brand, superior technology, styling, price.(Mikoluk 2014).

By Gaining a technological advantage. Due to our vastly developing technological innovations around the world, it is an advantage if a company can claim the latest technology to themselves. This means that often companies are investing a lot of money to different researches or they even buy minor companies just to gain access to their technology and patents. Also, some key employees might come as a technical advantage to some companies.(Mikoluk 2014.)

With Pricing strategies, the companies have option to keep the prices low to attract more customers or pricing the product so high that it is not reachable for all the consumers but giving the product endeavored value and status. For example, The Swedish furniture brand Ikea bargain for low prices with suppliers and manufacturers, keeping the margins very low and then selling volume instead. The products are more competitive with the lower price and therefor are selling more.(Mikoluk 2014.)

Core competencies are a great tool for companies to use to identify at what they are unique at. How the company stands out from its competitors.

In the Core Competence of the Corporation (1990) it is introduced that the core competence as something that a firm can do well that meets three conditions: It provides consumer benefits, It is not easy for competitors to imitate & It can be leveraged widely to many products and markets.(Prahalad C.K & Hamel G. 1990.)

However now days the definition of core competencies has evolved and expanded. For example, Susan ward describes the core competencies as:

”key abilities or strengths that a company has developed that give it a competitive advantage over its peers and contribute to its long-term success.” Core competencies are difficult for competing businesses to duplicate.”(Ward 2018.)

Ward is also arguing that the successful companies often have more than one of these core competencies: quality, customer service, value, innovation and marketing.(Ward 2018.)

Conclusions:

There is more than one answer to a question ”How can a company adapt in a changing market?”. It depends a lot about the company and the field. However, regardless of the differences it can be argued that most of the successful companies have the same basic core elements; strategy, mission and vision. Inside the companies strategies there can be a lot of variability yet still many of the key elements like, customer service and innovation, seem to be always present. Overall the strategies are supported by company’s vision and mission statements and other way around. The implementations of these statements and plans guides and drives the companies to success in the changing markets.

Resources:

Kirkpatrick N. January 11, 2019. Article “The Difference Between Vision and Mission” on betterhelp. https://www.betterhelp.com/advice/general/the-difference-between-vision-and-mission/ .Accessed: 30.09.2019

Mikoluk K. January 7, 2014. Article “Business Strategy Examples: Four Strategies Businesses Use to Make money” on Udemy. https://blog.udemy.com/business-strategy-examples/ .Accessed: 30.09.2019

Miller B. September 9, 2014. Article “Strategy, Mission and Vision: How do they all fit together” on HR Daily Advisor. https://hrdailyadvisor.blr.com/2014/09/09/strategy-mission-and-vision-how-do-they-all-fit-together/ -Accessed: 30.09.2019.

Patagonia, 2019, the company’s mission statement: https://eu.patagonia.com/fi/en/company-info.html Accessed: 30.2019

Prahalad C.K & Hamel G. 1990. In the “the Core Competence of the Corporation” .

Ward S. November 4, 2018. “Core competencies in business” on the balance small business. https://www.thebalancesmb.com/core-competency-in-business-2948314 .Accessed: 30.9.2019

Teach for America, 2019, the organizations vision statement: https://www.teachforamerica.org/what-we-do/who-we-are .Accessed: 30.9.2019