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Performance Evaluation. Evaluating, measuring, and rewarding performance are among management’s most difficult tasks There needs to be a tradeoff between short and long-term performance The measures used to evaluate performance need to tie into management’s strategy - they often don’t

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performance evaluation
Performance Evaluation
  • Evaluating, measuring, and rewarding performance are among management’s most difficult tasks
  • There needs to be a tradeoff between short and long-term performance
  • The measures used to evaluate performance need to tie into management’s strategy - they often don’t
    • example: producing handouts for students versus controlling copier costs
other thoughts on performance evaluation
Other Thoughts on Performance Evaluation
  • To put it as simply as possible - YOU GET THE BEHAVIOR YOU REWARD!
  • The people being evaluated should be aware of the measurements being used and have input into what the measures are as well as at what level they should be set
  • People should have the ability to succeed under the system
  • Feedback should be given in a timely and useful manner
  • A significant number of incentive plans fail!
performance evaluation and abm
Performance Evaluation and ABM
  • Such a system would have as part of its measurement system estimates of NVA activities and tying such activities back to particular measures
  • An example would be cutting out the waste generated and captured through the material efficiency variance
  • By focusing on and eliminating NVA, management can then focus on value-added activities
strategy and performance measurement
Strategy and Performance Measurement
  • New strategies and competitive realities demand new measurement systems
  • Need for a broader set of measures than just financial figures (quality, market share, etc.)
  • Traditional accounting system based performance measures are obsolete, and sometimes harmful
  • There is a focus on short-term earnings, often to the detriment of long term value enhancement
  • Triggers for change
    • Quality movement
    • Customer focus
    • Benchmarking
    • Information Technology
incentive plans from why incentive plans cannot work hbr sept oct 1993
Incentive Plans(from “Why Incentive Plans Cannot Work,” HBR, Sept/Oct. 1993)
  • Rewards are only good at temporary compliance
  • People who expect to receive a reward for completing a task do not perform as well as those who expect no reward at all, particularly in more cognizant activities
  • Pay is not the primary motivator (it ranks about fifth)
  • Rewards punish, they are manipulative and controlling
  • Rewards rupture relationships (teams)
  • Rewards ignore reasons
  • Rewards discourage risk-taking; people will focus on measures, not achieving excellence
  • Rewards undermine interest (intrinsic motivation)
star performers
Star Performers
  • Bell Labs
  • Expert Model
    • Core skills and strategies
      • Taking initiative, technical competence
    • Self-management
    • Networking
    • Leadership
    • Teamwork effectiveness
    • Followership
    • Perspective
    • Organizational savvy
    • Show and tell
  • Results showed increased productivity
    • Spots problems, high quality work on time, keeps boss informed, pleases customers, works across organizational boundaries, focuses on competition, understands management decisions
team based performance
Team Based Performance
  • Traditional measurement systems undermine the team approach
  • Measurement system should help achieve two functions
    • Getting functional areas to provide experts to teams when they need it
    • Getting people from different functional areas on a team to speak a common language
  • Principles of team based measurement:
    • Purpose should be to help team, not for management to gauge its progress
    • Empowered teams must take the lead in designing its owm measurement system
    • Measures must track cross-functional processes
    • Teams should adopt only a handful of measures
  • Ties in with balanced scorecard
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