MODULE IN HUMAN RESOURCE MANAGEMENT

PREPARED BY: LALAINE C. COCHON, MPA

CHAPTER IV PERFORMANCE MANAGENEMT AND EMPLOYEE MOVEMENT

Performance management is the process by which managers, supervisors, and executives assess the
performance of employees to ensure that it accords with the company’s objectives. Armstrong defines it as “a
systematic process for improving organizational performance by developing the performance of individuals and
teams.” It is the best way of managing and rewarding performance based on planned goals. Armstrong and
Baron describe it as a “strategic and integrated approach to delivering sustained success to organizations by
improving the performance of the people who work in them and by developing the capabilities of teams and
individual contributors.”
Performance management is effective if it does the following:
1. Identify excellent performance
2. Use appropriate appraisal techniques
3. Provide feedback to employees regarding their performance
4. Evaluate employees fairly
5. Minimize biases
6. Exercises fairness

PERFORMANCE APPRAISAL AND PERFORMANCE MANAGEMENT

Performance appraisal is often synonymous to performance management. Performance appraisal is a
formal annual assessment of employees by their immediate superiors. Periodic performances reviews are done
routinely by managers.
In contrasts, performance management is a continuous and more comprehensive process of managing
people. It is not exclusive to evaluating employees annually or periodically. It is about motivating, guiding, and
rewarding employees, thus helping them on their potential and improve organizational performance.

Planning

Performance
Acting Management Monitoring
Cycle

Reviewing

Performance Management Cycle

Adapted from: Performance Management Cycle by Michael Armstrong,
Performance Management: Key Strategies and Practical Guidelines, 2006

1. Planning – this pertains to the setting of performance goals and expectations of groups (departments and units)
and individuals (subordinates and superiors). It ensures that all efforts work toward the achievement of company
1st Semester, A.Y. 2024-2025 Page 1
MODULE IN HUMAN RESOURCE MANAGEMENT
PREPARED BY: LALAINE C. COCHON, MPA

objectives. All employees are involved in the planning process so that they will understand what the company
wants to achieve. It also explains the importance of managing effective performance and how such management is
to be carried out. Planning covers the following areas which should be defined clearly and comprehensively as a
first step for a successful performance management system:
a. Roles. The manager (immediate superior) and the employee should discuss key result areas and
define their respective roles. Thus, discussion ensures that both possess the necessary behavioral
competencies and the core values that each of them should uphold.
b. Key result areas. The employee at this point should think of the most important tasks that he/she has
been assigned with and the kind of performance that is expected from him/her. He/she should also
find out how others have performed the same tasks before. This examination should be discussed so
that all the tasks (which may appear multiple or many) can be summarized or grouped into key result
areas,
c. Technical competencies. The employee should possess the essential knowledge and skills (e.g.,
procedural, problem-solving, planning, and communication) to be able to do his/her tasks well.
d. Behavioral competencies. The manager or the immediate supervisor should discuss the
behaviors/traits expected by the organization. These traits include drive, teamwork, leadership,
planning, communicative skills, etc.
e. Objectives. The employee and the immediate superior should agree on the performance objectives
(e.g., sales representatives should aim to minimize customer satisfaction). Objectives should be
quantifiable and measurable in terms of sales, income level, output, cost reduction, etc. Importantly,
the employee and the immediate superior should agree on and integrate the performance objectives.

CORPORATE FUNCTIONA TEAM INDIVIDUAL

L
Define the aspects Agree on
Provide a quality of customer service performance Ensure that individual
product that in terms of value standards set standards are in line
satisfies customers, for money, quick previously & with team objectives
coupled with response, superior ensure that they and make sure that
superior customer quality product are congruent to skills & competencies
service and performance, & corporate & required are known
support. customer functional and used.
satisfaction. objectives.

Agreed-upon Integrated Objectives

Adapted from: Two-way Process of Agreeing on Integrated Objectives
By Michael Armstrong; Performance Management: Key Strategies & Practical Guidelines, 2006
f. Core Values of the Organization. The core values of the organization include integrity, loyalty,
industry, and honesty.

2. Monitoring – provides the mechanisms by which performance will be measured. It also entails giving constant
feedback to employees regarding their progress in achieving the goals of the organization. In monitoring
performance, a performance plan using the agreements made during the planning stage is provided. A personal
development plan is also accomplished so that the immediate superior can support the employee’s improvement of
knowledge and skills. This may include coaching, mentoring, job enlargement, or job enrichment activities.
Performance measures can be established in terms of output and outcome. What is quantifiable is an output
whereas what can be visible but cannot be measured in quantifiable terms is called an outcome.
1st Semester, A.Y. 2024-2025 Page 2
MODULE IN HUMAN RESOURCE MANAGEMENT
PREPARED BY: LALAINE C. COCHON, MPA

3. Reviewing – performance is reviewed from time to time and compared with the performance standards, goals, and
expectations which were agreed upon during the planning stage the act of reviewing performance should be a
continuous process. Managers should always allot time to dialogue with their subordinates. During such sessions,
the agreed-upon objectives and development plans should be reviewed to give room for revisions if any are
needed.
Reviewing has the following objectives:
a. Planning. This is the opportunity to find out if there is a need to revise the performance agreement
between the employee and the immediate superior.
b. Motivation. This encourages the employee to grow or take control of his/her performance.
c. Learning and development. This is an opportunity to further develop the employee’s knowledge and
skills to provide hm/her with learning activities that maximize his/her potential.
d. Communication. This promotes two-way communication between the superior and the subordinate.
Roles and performance expectations are clarified and a relationship between them is built on mutual
trust is developed.
4. Acting – this includes activities based on the performance review. It means giving an employee feedback on
his/her accomplishment of organizational goals. Feedback based on evidence which should be fair to the
employee. It should describe what actually happened and should not be based on the mere judgment of the
superior. Thus, it is not all subjective. The manager should focus on the aspects of employee performance that
can still be improved. If there is a need for training – enhancing employee skills or acquiring new tasks and
responsibilities – specific programs should be devised. Outstanding performances, on the other hand, are
rewarded and recognized.

The three R’s of performance management and employee movement are rewards, retention, and
remuneration.

REWARDS
Rewards are tangible manifestations of a job well done or a good deed. They are included in the scope of
performance management because conducting performance appraisal involves acknowledging the employees’
contribution in the attainment of the firm’s objectives. The outstanding performance of employees benefit the
organization. Employees who perform outstandingly, as indicated in the performance appraisal, are rewarded by the
organization in different ways.
Under the performance management system, there are periodic performance assessments conducted
using various tools and techniques, either individually or by group. Performance appraisal determines whether
employees perform effectively and are on a par with the company’s expectations. It concretizes and measures
performance as an aspect of the performance management system. Formal evaluation as opposed to the informal one
is highly preferred and recommend.

RETENTION
Retention is the act of maintaining the employees in the organization. It entails earning their loyalty. One of the
best ways to do this is to evaluate them fairly and objectively.

1. Halo effect – this usually happens when a rater uses one particular aspect of the employee’s good traits.
2. Ambiguous Evaluation Standards – ambiguity occurs if one rater’s standard for outstanding work
performance contradicts that of another rater from a different department. The former may be hard to please
and, therefore, may only give an average rating as compare d to the latter who may give an outstanding rating.
3. Stereotyping Effect – stereotypes may influence the rater’s decision as to who will garner a high ranking and
who will earn a low one.
4. Recency Effect – if recent events prior to the actual evaluation period are easily remembered and given more
weight than the accumulation of performance behaviors for the whole evaluation period, the raters commit the
recency effect.
5. Primacy Effect – raters may have first impressions of the employees that linger and influence that ratings they
give during an evaluation. For these raters, first impressions last and become a dominant assessment
criterion.
6. Central Tendency – in statistics, there are measures of central tendency such as mean, median, and mode.
The central tendency deals mostly with the mean or average.

1st Semester, A.Y. 2024-2025 Page 3

MODULE IN HUMAN RESOURCE MANAGEMENT
PREPARED BY: LALAINE C. COCHON, MPA

7. Hard/Easy to Please Tendencies – there are raters who are hard to please and feel that employees do not
meet their expectations in terms of performance. They set their own high standards that are not only difficult to
meet but are also beyond the standards set by the firm.
8. Mirror Effect – this error happens when a rater gets affected or influenced by his/her, immediately preceding
performance assessment of an employee. To eliminate this error, it is suggested that companies provide
extensive training programs for raters.

Aspects where managers and supervisors who conduct performance appraisals need/require training in the
following:
a. Methods, techniques, and guidelines for setting goals and objectives
b. Ways of evaluating the performance of employees
c. Documentation of performance standards
d. Filling out a performance appraisal form
e. Prevention of performance evaluation errors
f. Questions on appraisal techniques
g. How to answer employee questions and queries
h. Improvement of rapport and communication
i. Uplifting employee morale and motivation
j. How to observe employee performance
k. How to deal with employee resistance to performance evaluation
l. Tracking results
m. Providing constructive feedback
n. Post-review actions
Training can be done through special workshops conducted by professional HR consultants or experts in the field
of HRM. Sessions can be held in seminar halls, training rooms, conference halls, boardrooms, or some other venue
far away from the workplace.

REMUNERATION
Remuneration refers to payments equivalent to the value of the tasks performed. In performance evaluation,
remuneration is equated with employee movement or how performance evaluation transforms an employee’s status –
higher, lower, or at same level by either promoting or demoting him/her or keeping him/her at the same level. It may also
mean quitting or resigning from the organization.

The Four (4) Main Types of Employee Movement

1. Promotion refers to an employee’s movement to a higher level or position. Promotion decisions can be made
either on the basis of seniority or through merit based on performance. Seniority refers one’s length of service in
an organization. Merit is one’s value in terms of performance. Under a straight seniority system, the only factor
considered in promotion is seniority. In the straight seniority system, all employees have the chance to get
promoted if they have worked with the organization long enough.
Advantages
 There is no conflict or competition among employees because the basis of promotion is very clear to them.
 Employees are not pressured at work since what they are building is loyalty to the organization.
Disadvantages
 Not all employees want this kind of system to be the basis of moving up the career ladder.
 Some employees like to be challenged on the job, and the more ambitious employees are not willing to
wait for their turn to get promoted.
 Employees are not motivated to work harder because they are not challenged to perform better on the job.
Promotion by merit uses qualifications and performance as the basis for promotion. This is ideal because good
performance is rewarded. Employees are also encouraged and motivated to perform well because of promotion
opportunities. Performance management is fostered because employees work their way up the career ladder and
the organization promotes managing performance through the use of the set performance standards. However, it
is quite difficult to gauge merit base on the basis of qualifications and performance. There is too much politics as
well as conflicts associated with it. Employees tend to figure conflicts, and personal issues arise due to promotion.
There are questions about how people are selected for promotion.

1st Semester, A.Y. 2024-2025 Page 4

MODULE IN HUMAN RESOURCE MANAGEMENT
PREPARED BY: LALAINE C. COCHON, MPA

Promotion on the basis of a combined seniority and merit produces mixed reactions because of the relative
ways or variations in applying this system. There are promotions where seniority has a higher percentage than
merit, or vice versa.

2. Demotion refers to an employee’s movement to a lower level or position. There are instances when an employee
is demoted because of inefficiency or poor performance. Instead of being terminated, an employee is given the
chance to work in the firm, but in a lower position.

Steps on how to demote an employee without triggering conflicts and issues of unfair treatment:
a. Identify the reasons for demoting an employee
b. Communicate the decision to the employee
c. Make a follow-up after demotion
d. Have a contingency plan

3. Transfer is an employee’s movement to another position but within the same rank or responsibility. It is a part of
job rotation. Transfer may also mean relocation to another branch if the company has many branches nationwide.

Four (4) Types of Employee transfers:

a) Production transfer - shortage on one department & surplus on the other.
b) Replacement transfer – replacing/relieving an old employee from a heavy workload.
c) Remedial transfer – to rectify/correct a faulty selection in recruitment or placement.
d) Versatility transfer – this provides the opportunity for an employee to increase his/her skills by
transferring him/her from one department to another through job rotation. In most instances, this
practice prepares the individual for promotion

4. Separation is an employee’s movement or leave-taking (departure) from the organization. It has four sub-types:
(a) termination with just cause, (b) termination with authorized cause or lay-off, (c) resignation, and (d) retirement.

a. Termination with just cause is due to the employee’s fault. It is the company’s decision to terminate the
employee because of a just or valid cause such as malversation of funds, theft, and fraud. In another
instance, termination with just cause is a result of an employee’s failure to undergo the probationary
period successfully. Unsatisfactory performance means not meeting the standards of the company.
Therefore, the services of an employee under probation are terminated, or he/she is not “regularized.”
b. Termination with authorized cause is often called layoff. It is the company’s decision to lay off
employees on any of the following grounds;
1. A new technology has been introduced and there are positions which have been evaluated as
redundant. The se jobs only duplicate the functions of the newly-installed technology.
2. A department or division will be closed permanently as a labor-saving measure. The tasks of
the office will be taken over by another department.
3. The company will merge with another company. Mergers usually result in two similar jobs or
position. If there are two accountants, one has to be retained and the other has to be laid off.

Layoffs usually entail fair separation packages so that the employees affected may start anew in whatever
way possible. A severance package helps an employee prepare for temporary or permanent unemployment. It
varies from company to company and from one employee to another.
A severance package may include the following:
 The employee’s remaining regular pay
 Additional salary based on remaining months of service
 Payment of unused sick leaves
 Insurance
 Retirement benefits
A company, on the other hand, may consider the following to determine how much to offer as severance
pay:
 Current salary of the employee
 Length of service
 Current position
 Performance (for most recent years)

1st Semester, A.Y. 2024-2025 Page 5

MODULE IN HUMAN RESOURCE MANAGEMENT
PREPARED BY: LALAINE C. COCHON, MPA

c. Resignation is an employee’s voluntary decision to leave the company. The reasons for resignation
are varied. Some employees transfer to other companies to obtain higher salaries and benefits.
Others consider resignation a career move and a chance to look for more challenging jobs and
positions that maximize their skills and potential. A few opt to start and manage their own business
while a number leave the country to work abroad.
One of the pressing problems of companies is employee retention. It is the process by which
management encourage employees to remain with the company. One particular issue under
employee retention is how an organization can prevent employees from leaving.
Employees usually resign to look for better opportunities. They know their value as employees
and, therefore, are easily dissatisfied when companies do not treat them fairly. They are also aware
that other companies would accept them immediately once they decide to apply.
The company should address certain issues that lead to an employee’s resignation:
 Compensation. Employees who have high self-worth and know their bankability always
have high expectations regarding the total compensation package. Compensation issues
should be discussed before an employee is offered a particular job. Employees who
initially have high hopes may end up leaving the company if the latter does not keep its
promise of better salaries and benefits.
 Work relationships. Aside from compensation, some employees resign because of
broken or uneasy relationships either with his/her immediate superior or with co-workers in
the same area or department. Good relationships affect employee motivation. Employees
are enthusiastic to work in a positive, conducive environment. Some employees are
greatly affected by how their co-workers support or relate with them. Some workers are
also uncomfortable with superiors whom they perceive to be unapproachable or
unsupportive.
 Major Changes in the Organization. Tenure has become unpredictable in some
industries. Mergers, acquisitions, and closures have adversely affected employees.
Those who were left after massive layoffs think of leaving as well because they felt
insecure and anxious of getting laid off in the future. People who remain after a mass
layoff face uncertainties.
 Organizational Culture. Employees leave upon discovering that the company culture
does not jibe with their personal values. Another aspect of organizational culture is the
way it shows appreciation for a job well done. In other instances, there are employees who
are dismayed at the top management because it is not supportive of highly effective and
worthy, but quite costly, projects.
 Career Development Program. There are companies that do not pursue career
development programs for their employees. People without foresight and incapable of
imagining the possible top positions they may assume later on in their careers may opt to
resign early. Highly skilled employees do not want to remain in the same position or level
during their entire tenure in a company. If there are no career opportunities in their own
company, they may seek them somewhere else.

d. Retirement is the end of an employee’s career in a company. This happens to people between the
ages of 60 and 65 years. It signals a new beginning for retirees and the opportunity for them to do
other things. An employee retires from an organization either satisfied or dissatisfied depending on
how he/she looks at his/her entire work experience.
 Early retirement. It is availed of by employees who have health-related issues. Due to
poor health, a company may decide to terminate an employee even before his/her actual
retirement age. If it is deemed necessary for the employee to leave the company
permanently to rest and recover from an ailment, then this is also considered a
retirement.

1st Semester, A.Y. 2024-2025 Page 6