Business Performance Management Performance Management 5 — Questions and Answers
Question 1: What is the primary difference between lagging and leading performance indicators?
- Lagging indicators predict future performance; leading indicators measure past results
- Leading indicators predict future performance; lagging indicators measure past results (Correct answer)
- Leading indicators are always financial; lagging indicators are always operational
- Lagging indicators are used only in manufacturing environments
Correct answer: Leading indicators predict future performance; lagging indicators measure past results
Leading indicators are predictive measures that signal future performance, while lagging indicators reflect outcomes that have already occurred.
Question 2: A company wants to reduce bias in performance ratings. Which intervention is MOST evidence-based?
- Eliminating all numerical ratings and using written summaries only
- Training managers on unconscious bias and providing structured rating criteria (Correct answer)
- Having employees rate themselves and averaging with manager ratings
- Removing performance ratings entirely and relying on peer nominations
Correct answer: Training managers on unconscious bias and providing structured rating criteria
Research shows that bias awareness training combined with structured, behaviorally-anchored rating criteria reduces the impact of unconscious bias on appraisals.
Question 3: Which scenario illustrates the 'contrast effect' in performance appraisals?
- A manager rates an average employee lower because they were just evaluated after a star performer (Correct answer)
- A manager gives all employees the same rating to save time
- A manager remembers only the most recent performance events
- A manager rates a likeable employee higher across all dimensions
Correct answer: A manager rates an average employee lower because they were just evaluated after a star performer
The contrast effect occurs when an employee's rating is influenced by comparison to a preceding evaluation rather than absolute standards.
Question 4: How does management by objectives (MBO) primarily motivate employees?
- By tying compensation solely to tenure and seniority
- By involving employees in setting their own goals, increasing commitment and ownership (Correct answer)
- By establishing goals exclusively through top-down executive mandates
- By removing all performance ratings and using only qualitative feedback
Correct answer: By involving employees in setting their own goals, increasing commitment and ownership
MBO engages employees in the goal-setting process, which research shows increases motivation, clarity, and personal accountability for results.
Question 5: An organization uses a 9-box talent grid. What two dimensions are plotted on this grid?
- Education level and years of experience
- Current performance and future potential (Correct answer)
- Compensation and job grade
- Technical skills and personality traits
Correct answer: Current performance and future potential
The 9-box grid plots employees on a matrix of current performance (typically low/medium/high) against future potential, guiding talent decisions.
Question 6: What is the MOST significant legal risk associated with performance appraisal systems in the US?
- Employees sharing their ratings with coworkers
- Discriminatory bias resulting in protected class members consistently receiving lower ratings (Correct answer)
- Managers taking too long to complete reviews
- Using peer feedback in formal evaluations
Correct answer: Discriminatory bias resulting in protected class members consistently receiving lower ratings
If appraisal systems result in disparate impact on protected classes (race, gender, age, etc.), organizations face legal liability under Title VII and other employment laws.
Question 7: Which statement BEST describes the 'attribution error' in the context of performance management?
- Managers attribute high performance to luck and low performance to effort
- Managers attribute an employee's poor performance to internal character flaws rather than situational factors (Correct answer)
- Employees attribute their own success to external circumstances beyond their control
- Managers attribute all performance outcomes equally to the entire team
Correct answer: Managers attribute an employee's poor performance to internal character flaws rather than situational factors
Attribution error (fundamental attribution error) occurs when managers blame poor performance on an employee's disposition while ignoring situational constraints.
Business Performance Management Performance Management 5
What is the primary difference between lagging and leading performance indicators?