Glossary

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Pay for Performance: A process of linking a significant portion of an employee's compensation to an evaluation of their performance during the compensation period (typically annual). This is distinct from other compensation strategies that base pay on non-performance factors such as seniority, or that fail to distinguish one employee's compensation from another's (e.g., awarding all employees a uniform cost-of-living raise). Sometimes also called a "variable pay" system.

Performance Appraisal: The regular (usually annual) process in which a manager and/or other evaluators rate an employee's performance or capabilities. Performance appraisals may include both subjective competency evaluations and/or performance goal achievements, and often include both numerical ratings and commentary. Appraisals ideally will help an employee understand his or her strengths and how to capitalize on them, and will identify potential weaknesses while providing guidance in addressing them. Appraisals may be done to evaluate employee performance, determine compensation, assess promotion readiness, or simply to help guide an employee’s development. When ratings are provided by more than just a supervisor, including peers, subordinates, and external and/or internal customers, the process is often called 360-degree feedback.

Performance Goal: A target level of the outcome of an activity, or for a product or service, expressed as a tangible measurable objective against which actual achievement can be compared.

Performance Management (Employee Performance Management): An ongoing, broad-based organizational process designed to monitor, measure, empower and improve employee performance and thus to make a profound contribution to the achievements and success of the parent organization. The activities of performance management may include performance appraisal, development planning, aligned goal-setting, 360 degree feedback, talent planning, career planning, salary planning, succession planning, and coaching and training. Employee performance management, often abbreviated as EPM, is also called “workforce performance management.” Note that “performance management” without “employee” at the front means different things in different business contexts. (Also see: Business Performance Management.)

Presenteeism: The phenomenon of people showing up at work when they are sick or otherwise impaired, when they are therefore more likely to work far less efficiently and to spread illness through contagion. (Also see: Absenteeism)

Productivity: The level at which an organization or individual delivers its service or product as a function of resource allocation and consumption (e.g., time, labor, infrastructure). Often difficult to measure at the individual level for knowledge workers; at the aggregate level, productivity is often grossly calculated as revenue divided by number of employees. For this reason, productivity calculations often rise when employees are laid off, though the benefit may be short-term.

Return on Investment (ROI): The ratio of financial gain to financial investment, represented by the equation -

ROI = (Financial Gain - Financial Investment) / Financial Investment

Determining ROI is much easier for stocks and bonds than for human capital investments, where both costs and (especially) benefits are less readily and completely quantified.

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