YouTube Video PerfM1 - The Laws of Performance Measures.

YouTube Video PerfM2 - More Steps of Performance Measures.

 MBO, 360 Performance Appraisals, and the Deming Management Method

(Deborah Irons, TNU 4430, 2008)

Business success depends on several key elements including willing workers and leaders who coach and energize.  To produce results, these two elements are essential.  However, management methods and performance appraisals have long led to disgruntled employees and frustrated leaders.  This article looks at Management by Objectives (MBO) and compares it with 360 Performance Appraisal utilizing knowledge attained from the Deming Management Method.

Performance appraisals provide a comprehensive assessment of a worker’s employment activities for a predetermined interval.  These assessments often tie employee performance to expected outcomes for the organization.  Performance problems are determined solely by the manager or jointly with the employee and developmental strategies designed to resolve these problems.  Several forms of performance appraisals exist.  The two discussed here are Management by Objectives and 360 Performance Appraisals.

Management by objectives is a process by which the goals and objectives of an organization link with the performance appraisal in quantifiable terms.  First outlined by Peter Drucker in the early 1950’s, MBO fundamentally allows for the identification of common goals by managers, the outlining of goals for each individual, and the utilization of measures to assess each member’s performance. [1]  The MBO Cycle begins with a review of organizational goals and objectives. Through managerial and employee participation, employee objectives are established. Throughout the cycle, progress is monitored, goals eliminated and incorporated, and feedback given in relationship to established aspirations.  At predetermined intervals, managers perform progress evaluation, often with rewards for goal completion.  The cycle continues with shared revision of goals.

The model of the 360 Performance Appraisals solicits performance feedback from several sources instead of just management, thus the name (360 degrees).  These viewpoints may include customers, peers, or anyone who interacts with the employee.  These perspectives of employee performance provide employees and management with performance improvement goals.  ”Most results for an employee will include a comparison of their ratings to the ratings of their supervisor and average of the ratings from others.”[2]  Problems may arise when sources of the feedback have no knowledge of job description or performance plan.  At this point, a comparison is made of these two types of appraisals utilizing the Deming Management Method. Dr. W. Edwards Deming offered this method as a tool to improve industry.  It provides “Points” to enhance management activities and “Seven Deadly Diseases” which may be fatal to an organization.  This article will incorporate several of these to evaluate the MBO and the 360 Performance Appraisals.

Dr. Deming’s first point is “creating constancy of purpose for improvement of product and service.”[3]  Deming communicated that a company must invest today for the future.  The MBO provides for this constancy of purpose through the goals proposed for employees.  This approach also provides for the goals and objectives of the organization.  The 360 provides a broad view of the employee including their performance, training needs, and customer satisfaction skills. Both methods of appraisal appear to support this point.

Point Five of the Deming Management Method is to “improve constantly and forever the system of production and service.”[4]  This point provides for teamwork, customer satisfaction, and problem solving.  The MBO may be better suited for teamwork as it provides an effective way to maintain employee motivation, support, and all-around goal setting.  Though not always the case, the 360 may decrease team building effectiveness due to the confidential input by peers.  Both types of appraisal promote customer satisfaction though it is more obvious in the 360.  Where the MBO supports self-proposed goals increasing problem-solving skills, the 360 does not.  This, however, may be a need considered for further training by the 360.

Dr. Deming’s sixth point is “institute leadership.”[5]  According to Deming, many supervisors hired have no knowledge of how to supervise.  Whichever form of appraisal utilized, leadership is essential.  In the MBO, accomplishing objectives cannot happen without proper leadership.  Moreover, how will a manager with no knowledge of the job complete the 360-performance evaluation?  The depiction of performance objectives may not be logical and employees have very little participation in deciding these objectives.  Without excellent leadership skills, neither of these appraisals will be highly regarded.  “Dysfunction in one area will affect other areas. Ultimately, the organizational culture suffers which affects teams and stifles excellence.”[6]

After comparing these appraisal processes with the Deming Management Method, be aware that Dr. Deming considers “evaluation of performance, merit rating, or annual review” as one of his “Seven Deadly Diseases.”[7]  According to Dr. Deming, performance appraisals discourage “long-term planning” and “increase reliance on numbers.”[8] He believes this sort of evaluation leaves employees competing with, instead of working with other team members. “The greatest accomplishments of man, Dr. Deming says, have been accomplished without competition.”[9] 

Whatever the type of appraisal utilized, good managers keep goals in mind while taking responsibility for performance planning and coaching.  They provide ongoing evaluations verified through day-to-day feedback.  There should be no ground shaking observations made during the performance review.  With MBO, an employee’s readiness to participation in goal setting requires careful assessment.  Some employees may need a more structured review.  With the 360, more standardization may be necessary. Perhaps, Dr. Deming was correct about performance appraisals.  When not used correctly they can be “Deadly Diseases.” 

Citations

EVALUATING PERFORMANCE EVALUATIONS

By Donna Steinkamp and Eileen Tremblay (TNU 2005)

The idea of performance evaluations often sends shudders through supervisors and workers alike.  Just mention the subject and you will hear a chorus of groans.  As a result, evaluations take low priority until a call comes from the Human Resources Department.  Worse yet is when an employee calls or walks in your office and says, “I just want to remind you that my evaluation was due a month ago.” 

 Should you care whether your performance review process is working or not?   Yes.  Here is why.  If administered properly, the entire performance evaluation system can act like an organization's backbone, tying company goals to employee performance. Performance evaluation systems connect with almost every facet of an organization. Organization guru Craig Stevens' model for excellent management helps to illustrate this connection. 

The performance evaluation system positively affects every component of the excellent management model. It allows Leadership to establish a rational framework for tying employee performance to organizational goals. The constructive environment infuses the organization culture. Teams thrive because excellent employee performance = excellent team performance = excellent organizational performance. Problem Solving improves because employees focus on what is important in their job and to the organization. The organization engages in Continuous Improvement because performance evaluations promote quality and help to identify training and development needs. The ability to meet organizational goals enhances performance measures. In short, good performance evaluation systems help management achieve excellence.

How does setting goals for performance evaluation relate to organizational objectives? The old saying goes "You cannot manage what you cannot measure." Setting organizational objectives is like drawing a blueprint. Employee performance goals are the individual systems that make up and support the plan. Employee performance becomes a function of continuous improvement.

How can an organization create an environment conducive to a positive performance evaluation process? It is a function of team building, requiring support and commitment at all levels. The leadership must create a culture that is accepting of the performance evaluation system. This establishes the commitment level from the lowest to highest levels. It requires continuous communication, vertically and horizontally throughout. The feedback from manager to employee and vice versa must be honest, productive, and open. In this environment, success can become inevitable. The organization lives the mantra: Effectiveness is doing the right thing and efficiency is doing it the right way.

The other side to the positive performance evaluation experience is the wholly ineffective system. A poorly designed or implemented system can be as unproductive as having no system at all. It starts with unclear standards and poorly defined responsibilities. Leadership loses its focus and commitment to the process. Employees fail to meet goals, which ripple through to the organization's objectives. Employee morale drops and management loses trust and respect. Dysfunction in one area will affect other areas. Ultimately, the organizational culture suffers which affects teams and stifles excellence.

In the ineffective system, employees view performance evaluations as an annual event linked to an expected sum of money. Performance evaluations can and should be much more than an exercise linked to compensation. More than 50 years ago behavioral scientist Frederic Herzberg said, “If you want people to do a good job, give them a good job to do.” Herzberg found that achievement and recognition are motivators (Hersey, Blanchard, Johnson). Pay becomes an issue only when it is inadequate.  A positive performance evaluation will focus on improving performance and helping employees develop their maximum potential.

Many an organization has seen good, valuable employees pick up their belongings and make for the rumored greener pastures of some other organization.  While salary and benefits may have much to do with these employee migrations, there are plenty of losses directly attributed to failing to help employees develop their performance.  Smart, healthy, progressive companies do everything they can to give managers and employees a comfort level with the evaluation process.  They emphasize that performance evaluations are a part of an on-going work process and not just an annual event.  

 Keeping the people who keep you in business:

Checklist of targeting employee retention through

the performance management system

 

ü      Both employee and manager participate in appraisals, working together to set goals.

 

ü      Give employees the resources to excel – knowledge is power.  Training employees improves their skills and performance, and sends the message that employees are valued. 

 

ü      Seek performance feedback through a more balanced set of observations, i.e. 360-degree feedback, upward appraisals.

 

ü      Train both the employees and managers on performance evaluation criteria, competencies, and appraisal format. Often managers, particularly new to the management arena, do not have the necessary skills.

 

ü      Train employees through experience, understanding, and encouragement. It is an effective way to maintain employee motivation, alignment, and goal setting.

 

ü      Give everyone a voice.  Employees who know their ideas and work are valued will push their own abilities beyond their comfort zone and display creativity and innovation.  Most employees will embrace the opportunity to reach for higher goals, especially if they have a say in setting the goals.

 

ü      Encourage collaboration, but give employees “ownership” of the project. 

 

ü      Set clear performance standards.  Identify those standards for a particular job and be specific about the outcomes that characterize outstanding (as well as unacceptable) performance.

 

ü      Identify performance barriers.  Start with performance, looking in turn at behavior, system variables, and individual variables.

 

ü      Define responsibilities clearly.  When employees know their roles, it reduces confusion and gives them a better sense of how to meet their objectives.

 

ü      Create an environment that encourages employees to respect one another.  Never criticize an employee in front of others; offer corrective feedback only in private.

 

ü      Recognize and reward results.  Money does not always have to be a motivator.

 

ü      Always expect the best from employees. 

 

ü      Maintain ongoing communication and feedback.  Continuous feedback includes reinforcing an employee who exhibits what the organization believes will help it achieve business goals.  Foster a culture with communication and feedback integrated into the day-to-day work.

 

ü      Encourage the spirit of play.  Play is vital to creativity and innovation and many people need this kind of stimulus to keep the mental gears turning.

 

Ultimately, performance evaluation is just one component of the overall strategy for assessing performance in an organization.  Performance management is directly linked to every area of an organization, all of which need to be included to add value to the organization.  The competition to attract and retain quality staff is only going to increase. Having an effective performance evaluation system, that recognizes employees, as the most valuable resource of an organization, can be a powerful weapon in your arsenal. 

Works Cited 

Westbrook Stevens, LLC.  The Linked Management Models “Building a Foundation with the Seven Attributes of Excellent Management.”  August 2, 2005. http://www.westbrookstevens.com/step_1.htm

Hersey, Paul, Kenneth H. Blanchard, Dewey E. Johnson, Management of Organizational Behavior: Leading Human Resources. New Jersey: Prentice-Hall, Inc., 2001. 

     Management by Objectives (MBO)

     Although viewed by many as risky, leaders use MBO to integrate the goals and objectives of an organization to all individuals.  This concept, designed by Peter Drucker, begins when senior and junior managers identify common goals together, define each individual or department’s responsibility, and measures results by the guidelines initially designed by the managers.  Before managers form any objectives, they must clarify all of the common goals with those involved.  Furthermore, those responsible must periodically compare progress with the actual goals.  Organizations, regardless of size, practice this concept on many different levels and achieve successful outcomes.  Unfortunately, other organizations find this concept unsuccessful.  When considering this route of leadership/Performance Measurements, managers should carefully monitor goals and provide employees with the necessary resources to meet their objectives and provide input (Hersey 139).                                                                                

Eric Dunford (TNU 2006) 

Paul Hersey and Kenneth H. Blanchard, Management of Organizational Behavior: Leading Human Resources 8th Ed. Upper Saddle River: Prentice Hall, 2001.

OTHER 

INTERESTING 

PERFORMANCE MEASURES 

INFORMATION

MBO According to the Wikipedia dictionary, “Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees buy in to the objectives and understand what they are” ( http://en.wikipedia.org/wiki/Management_by_objectives ). “MBO” lays the foundation for the manager and the employee to work toward the objective together. This concept allows the leaders, and employees to set their sights on the same goal for the organization. MBO sets guidelines for both employee and leader to follow that provides instruction to reach any given objective. This concept helps to develop unity within the organization and create a synergy between employee and manager. According to the article, “The Values and Pitfalls of MBO” by James Owen, there are three stages of an MBO program and they are; management defines organizational goals, organizational goals are delegated down the hierarchy, manager and subordinate agree on the subordinate’s contract, implement the plan, and review results.

Darla Sansom (TNU 2005)

United States. Wikipedia, the free encyclopedia. http://en.wikipedia.org/wiki/Management_by_objectives.

Management by Objectives (MBO)

Eileen Tremblay (TNU 2005)

Peter Drucker introduced the business world to the concept of goal setting and measurement. MBO requires managers to identify the goals they share and how each unit will work to meet those goals. Performance toward meeting the goals becomes the benchmark to assess how the organization is progressing.

The system works properly when managers and employees jointly develop employee goals and team or group goals for a specified period. The goals may be "output variables or intervening variables or some combination of the two" (Hersey 139).  The goals are set and at the end of the specified period, and performance analyzed to reach the goals.

Before anything else happens, establish the organization's goals. Only then can individual supporting goals be set. Measurement should be on going. Monitor progress during the period and make adjustments if needed. Some goals may be unworkable or unattainable.

The negative side of MBO is that employees are sometimes skeptical of the process. MBO may also involve more work for employees, to document goals and progress. If goals are too easy to reach or do not seem relevant to the work, the process will quickly be rejected. As stated in class, managers should concentrate on goals and measure what is important. They should definitely not measure everything.