{Performance Evaluation Systems}
There are several purposes of performance evaluations
including promoting goal congruence and coordination,
communicating expectations to lower-level managers,
motivating lower-level managers to perform better,
providing feedback both down to lower-level managers
and up to top-level managers,
and benchmarking against various key indicators.
Unit managers may not always make decisions consistent with the overall goals of the organization.
A company will be able to achieve its goals
only if each unit moves in a synchronized fashion toward the overall company goals.
in a synchronous fashion towards the overall company goals.
The performance measurement system should provide incentives
for coordinating the subunits activities.
and direct them toward achieving the overall company goals.
The performance measurement system should spell out the unit’s most critical objectives.
Without a clear picture of what management expects,
unit managers have little to guide their daily operating decisions.
Unit managers are usually motivated to make decisions
that will help to achieve top management’s expectations.
For additional motivation, upper management may offer bonuses
to unit managers who meet or exceed performance targets.
Top management must exercise caution in setting performance targets.
Unattainable goals are demotivaters.
Performance evaluation systems provide upper management
with the feedback it needs to maintain control over the entire organization.
If targets are not met at the unit level,
upper management will take corrective actions,
ranging from modifying unit goals (if the targets are unrealistic)
to replacing the unit manager
(if the targets are achievable but the manager fails to reach them).
Finally, benchmarking is the practice of comparing the unit’s achievements against other company subunits,
or other companies in the same industry,
or best practices in the same industry,
or the subunit’s past performance.
Performance evaluation systems revolve almost entirely
around financial performance.
On the one hand this focus makes sense,
because the ultimate goal of a company is to generate a profit.
On the other hand, current financial performance tends to reveal the results of past actions,
rather than indicate future performance.
We call these lag indicators.
Management needs to know the results of past decisions for sure,
but they also need to know how current decisions may affect the future.
To adequately assess the performance of subunits,
managers need lead indicators in addition to lag indicators.
Another limitation of financial performance measures
is that they tend to focus on the company’s short-term achievements,
rather than on long-term performance.
So performance evaluations are important,
and something to be prepared for.
Like Dwight.
{Loud rock music}
Dwight: Your'e giving me this raise.
I deserve this raise.
Yes, yes, yes.
{Karate yell} Haaaah.
The least you can do is keep my salary consistent with inflation.
{Karate yell} Kaaah-aaaah.
Yes
Why are you going to give me this raise?
Why?
Because . . . I'm awesome!
I am awesome . . . !