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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