Performance Review Articles for Managers

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					Chapter



Ex
              Performance
              Measurement & Rewards


                   Articles
   “Performance Review: Perilous Curves Ahead”
   “From Balanced Scorecard to Strategic Gauges:
    Is Measurement Worth It?”
   “Risky Business: The New Pay Game”
   “Why Incentives Cannot Work”
   Performance: Units vs. Managers



 Measure performance of operating units.
     planning, decision-making, control




                 Measure performance of managers.
                      to hold managers responsible
                      an incentive to perform well
                      promotion, firing, pay raises …
 Performance: Units vs. Managers



 Performance of the manager might
  differ from performance of the unit.



                  expenses over which manager has
                   no control
                       corporate overhead, rent, etc.
                  a good managers might be assigned
                   to a poor division
   Rewards


 Should managers be rewarded?
     incentives to perform well
     attracts talented managers to the firm
     might encourage dysfunctional behavior


                  Reward effort or performance?
                       effort is difficult to measure
                       performance = skill + effort +
                        uncontrollable factors
  Rewards


 How much risk?
     stronger incentives  greater risk
     more uncertainty  greater risk
     most managers are risk averse


                 Managers rarely have complete control.
                     rewards are risky…
                     … but they increase incentives
   Comparative Performance


 Comparing operating units.
     some comparisons are more
      meaningful than others:
          ROI vs. income
          % sales growth vs. $ sales growth



                 an alternative: compare actual
                  performance to a performance target
Performance Targets


  Advantages of targets
      standards against which
       performance can be judged
      to help managers focus their
       effort


           Disadvantages of targets
               incentives to set a low target
               incentives to manipulate the
                numbers
  Performance Targets



 How difficult should targets be?
     conventional wisdom: tight but
      attainable
     depends on how targets are used
     difficulty tells manager where to
      direct attention
  Performance Criteria

 Objective vs. subjective evaluation
      objective measures don’t tell the
       whole story
      subjective evaluations are harder
       to defend and tend to be overly
       positive

                       Financial vs. non-financial measures
                           financial: the bottom line
                           non-financial: can be more
 Satisfaction = 9.0         forward-looking

				
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