CME Performance Management & Metrics 3 — Questions and Answers
Question 1: Which performance appraisal method requires managers to rank all employees from best to worst performer?
- Graphic rating scale
- Forced ranking (Correct answer)
- Critical incident method
- Management by objectives
Correct answer: Forced ranking
Forced ranking (also called stack ranking) compels managers to differentiate employees by placing them in a ranked order from top to bottom.
Question 2: What does a Gantt chart primarily measure in project performance management?
- Budget variance against planned costs
- Task scheduling and progress against timeline (Correct answer)
- Resource utilization across departments
- Quality defect rates by phase
Correct answer: Task scheduling and progress against timeline
Gantt charts visually display project tasks, their durations, dependencies, and progress relative to a planned schedule.
Question 3: In performance management, what is 'recency bias'?
- Favoring newer employees over tenured ones in evaluations
- Over-weighting recent events when evaluating an entire performance period (Correct answer)
- Using the most recently adopted rating scale regardless of accuracy
- Prioritizing recent hires in succession planning
Correct answer: Over-weighting recent events when evaluating an entire performance period
Recency bias occurs when a manager's appraisal is disproportionately influenced by the employee's most recent performance rather than the full review period.
Question 4: Which financial performance metric calculates earnings before interest, taxes, depreciation, and amortization?
- Gross profit margin
- Net income margin
- EBITDA (Correct answer)
- Return on assets
Correct answer: EBITDA
EBITDA is used to assess operational profitability by removing the effects of financing decisions, accounting rules, and tax environments.
Question 5: A manager wants to measure how efficiently the company converts inputs into outputs. Which metric is most appropriate?
- Customer satisfaction score
- Productivity ratio (Correct answer)
- Employee turnover rate
- Market share percentage
Correct answer: Productivity ratio
Productivity ratio measures output per unit of input (labor, capital, or materials), directly assessing operational efficiency.
Question 6: In the context of performance metrics, what distinguishes a 'lagging indicator' from a 'leading indicator'?
- Lagging indicators predict future performance; leading indicators confirm past results
- Lagging indicators measure outcomes after the fact; leading indicators predict future performance (Correct answer)
- Lagging indicators are financial; leading indicators are non-financial
- Lagging indicators are set by executives; leading indicators are set by employees
Correct answer: Lagging indicators measure outcomes after the fact; leading indicators predict future performance
Lagging indicators (e.g., annual revenue) confirm what has happened, while leading indicators (e.g., sales pipeline volume) predict future outcomes.
Question 7: What is the main criticism of forced distribution performance systems (bell curve ratings)?
- They are too expensive to administer
- They assume performance follows a normal distribution, which may not reflect reality in high-performing teams (Correct answer)
- They eliminate the need for managerial judgment
- They cannot distinguish between individual contributors and managers
Correct answer: They assume performance follows a normal distribution, which may not reflect reality in high-performing teams
Forcing ratings into a predetermined distribution is problematic when team performance is genuinely skewed, penalizing good performers on outstanding teams.
CME Performance Management & Metrics 3
Which performance appraisal method requires managers to rank all employees from best to worst performer?