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PowerPoint Presentation by Charlie Cook The University of West Alabama

Chapter 9 Performance Management and Appraisal

Part Three | Training and Development

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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WHERE WE ARE NOW…

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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After employees have been on the job for some time, you should appraise their performance. The purpose of this chapter is to show you how to do that. The main topics we cover include the performance appraisal process, appraisal methods, appraisal performance problems and solutions, performance management, and the appraisal interview.

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Define performance management and discuss how it differs from performance appraisal.
Set effective performance appraisal standards.
Describe the appraisal process.
Develop, evaluate, and administer at least four performance appraisal tools.
Explain and illustrate the problems to avoid in appraising performance.
Discuss the pros and cons of using different raters to appraise a person’s performance.
Perform an effective appraisal interview.

LEARNING OUTCOMES

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Human Resources Management 12e
Gary Dessler

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Basic Concepts in Performance
Management and Appraisal

Performance Appraisal

Setting work standards, assessing performance, and providing feedback to employees to motivate, correct, and continue their performance.

Performance Management

An integrated approach to ensuring that an employee’s performance supports and contributes to the organization’s strategic aims.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Every manager needs some way to appraise employees’ performance. If employees’ performance is good, you’ll want to reinforce it, and if it’s bad, you’ll want to take corrective action.

Performance appraisal means evaluating an employee’s current and/or past performance relative to his or her performance standards.

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FIGURE 9–1
Online Faculty
Evaluation Form

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Human Resources Management 12e
Gary Dessler

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For most people, “performance appraisal” brings to mind appraisal tools like the appraisal form in Figure 9-1, but appraisal is more than forms.

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Defining the Employee’s Goals and Work Standards

Set
SMART
goals

Assign challenging/ doable goals

Assign specific
goals

Guidelines for Effective
Goal Setting

Assign measurable goals

Encourage participation

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Human Resources Management 12e
Gary Dessler

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Managers should appraise employees based on previously assigned criteria (goals and standards) that they are expected to achieve, such as “add 10 new customers next year.”

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Setting SMART Goals

Specific, and clearly state the desired results.
Measurable in answering “how much.”
Attainable, and not too tough or too easy.
Relevant to what’s to be achieved.
Timely in reflecting deadlines and milestones.

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Human Resources Management 12e
Gary Dessler

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Setting SMART goals assures that a performance appraisal is based on useful, specific, and effective goals.

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An Introduction to Appraising Performance

Is useful in career planning.

Plays an integral role in performance management.

Why Appraise Performance?

Is basis for pay and promotion decisions.

Helps in correcting deficiencies and reinforcing good performance.

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Human Resources Management 12e
Gary Dessler

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Appraisals have several purposes that relate both to the appraised employee and the organization.

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(Un)Realistic Appraisals

Motivations for Soft Appraisals

The fear of having to hire and train someone new.

The unpleasant reaction of the appraisee.

An appraisal process that’s not conducive to candor.

Hazards of Soft Appraisals

Employee loses the chance to improve before being discharged or forced to change jobs.

Lawsuits arising from dismissals involving inaccurate performance appraisals.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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It doesn’t matter which tool you use if you’re less than candid when your subordinate is underperforming. A supervisor who rates an employee too high is doing a disservice to them and to the company. There’s nothing crueler than telling someone who’s doing a mediocre job that he or she is doing well.

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Performance Appraisal Roles

The Supervisor’s Role

Usually do the actual appraising

Must be familiar with basic appraisal techniques

Must understand and avoid problems that can cripple appraisals

Must know how to conduct appraisals fairly

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Supervisors must therefore be familiar with appraisal techniques, understand and avoid problems that can cripple appraisals, and know how to conduct appraisals fairly.

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Performance Appraisal Roles (cont’d)

The HR Department’s Role

Serves a policy-making and advisory role.

Provides advice and assistance regarding the appraisal tool to use.

Trains supervisors to improve their appraisal skills.

Monitors the appraisal system effectiveness and compliance with EEO laws.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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The human resources department serves a policy-making and advisory role. The human resource team should also be responsible for training supervisors to improve their appraisal skills, for monitoring the appraisal system’s effectiveness, and for ensuring that it complies with EEO laws.

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Effectively Appraising Performance

Appraising performance

Steps in Appraising Performance

Defining the job and performance criteria

Providing feedback session

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Human Resources Management 12e
Gary Dessler

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Effective appraisals should follow these three steps.

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Designing the Appraisal Tool

What to Measure?

Work output (quality and quantity)

Personal competencies

Goal (objective) achievement

How to Measure?

Generic dimensions

Actual job duties

Behavioral competencies

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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The manager generally conducts the actual appraisal using a predetermined and formal tool like one or more of those described next. The two basic questions in designing the actual appraisal tool are what to measure and how to measure it.

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Performance Appraisal Methods

Alternation ranking

Graphic rating scale

Paired comparison

Forced distribution

Critical incident

Behaviorally anchored rating scales (BARS)

Narrative forms

Management by objectives (MBO)

Computerized and Web-based performance appraisal

Merged methods

Appraisal Methodologies

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Appraising performance requires choosing an appraisal tool, form, or methodology that provides an effective means for comparing a subordinate’s actual performance to the standards for his or her job.

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FIGURE 9–2
Sample Graphic
Rating Performance
Rating Form

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Human Resources Management 12e
Gary Dessler

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Figure 9-2 shows one graphic rating scale. A graphic rating scale lists traits (such as “quality and reliability” or “teamwork”) and a range of performance values (from “unsatisfactory” to “outstanding,” or “below expectations” to “role model”) for each trait.

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FIGURE 9–3 One Item from an Appraisal Form Assessing Employee Performance on Specific Job-Related Duties

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Figure 9-3 shows part of an appraisal form for a pizza chef. This form assesses the job’s main sets of job-specific duties, one of which is “Maintain adequate inventory of pizza dough.” Here you would assess how well the employee did in exercising each of these duties.

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FIGURE 9–4 Appraisal Form for Assessing Both Competencies and Specific Objectives

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Some graphic rating forms assess several things. Figure 9-4 (Section I) assesses the employee’s performance relating to both competencies and objectives. The employee and supervisor would fill in the objectives section at the start of the year, and then assess results and set new ones as part of the next appraisal.

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FIGURE 9–4 Appraisal Form for Assessing Both Competencies and Specific Objectives (cont’d)

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Some graphic rating forms assess several things. In Figure 9-4, Section II illustrates the competencies an employee is expected to develop and exhibit such as “identifies and analyzes problems” (Problem Solving), and “maintains harmonious and effective work relationships with co-workers and constituents” (Teamwork).

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FIGURE 9–5 Scale for Alternate Ranking of Appraisee

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Human Resources Management 12e
Gary Dessler

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Ranking employees from best to worst on a trait or traits is another option. Supervisors choosing the alternation ranking method would use a form like that in Figure 9-5 to alternately choose and list employees who are the highest on the characteristic being measured and the ones who are the lowest.

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FIGURE 9–6 Ranking Employees by the Paired Comparison Method

Note: + means “better than.” - means “worse than.” For each chart, add up the number of +’s in each column to get the highest ranked employee.

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Human Resources Management 12e
Gary Dessler

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The paired comparison method helps make the ranking method more precise. For every trait (quantity of work, quality of work, and so on), you pair and compare every subordinate with every other subordinate. In the paired comparison method, you make a chart, as in Figure 9-6, of all possible pairs of employees for each trait.

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TABLE 9–1 Examples of Critical Incidents for Assistant Plant Manager

Continuing Duties	Targets	Critical Incidents
Schedule production for plant	90% utilization of personnel and machinery in plant; orders delivered on time	Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month
Supervise procurement of raw materials and on inventory control	Minimize inventory costs while keeping adequate supplies on hand	Let inventory storage costs rise 15% last month; over-ordered parts “A” and “B” by 20%; under-ordered part “C” by 30%
Supervise machinery maintenance	No shutdowns due to faulty machinery	Instituted new preventative maintenance system for plant; prevented a machine breakdown by discovering faulty part

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Human Resources Management 12e
Gary Dessler

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With the critical incident method, the supervisor keeps a log of positive and negative examples (critical incidents) of a subordinate’s work-related behavior. Every 6 months or so, supervisor and subordinate meet to discuss the latter’s performance, using the incidents as examples.

In Table 9-1, one of the assistant plant manager’s continuing duties was to supervise procurement and to minimize inventory costs. The critical incident log shows that the assistant plant manager let inventory storage costs rise 15%; this provides an example of what performance she must improve in the future.

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FIGURE 9–7
Appraisal-Coaching
Worksheet

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Human Resources Management 12e
Gary Dessler

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All or part of the written appraisal may be in narrative form as shown in Figure 9-7. The supervisor’s narrative assessment aids the employee in understanding where his or her performance was good or bad, and how to improve that performance.

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Behaviorally Anchored Rating Scale (BARS)

Developing a BARS

Write critical incidents

Develop performance dimensions

Reallocate incidents

Scale the incidents

Develop a final instrument

Advantages of BARS

A more accurate gauge

Clearer standards

Feedback

Independent dimensions

Consistency

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Human Resources Management 12e
Gary Dessler

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A behaviorally anchored rating scale (BARS) is an appraisal tool that anchors a numerical rating scale with specific examples of good or poor performance. Its proponents say it provides better, more equitable appraisals than do the other appraisal tools. It takes more time to develop a BARS, but the tool has several advantages.

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FIGURE 9–8
Example of a Behaviorally
Anchored Rating Scale for the Dimension
Salesmanship Skills

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Figure 9-8 presents an example of a section of a final BARS instrument that lists the critical incidents that serve as behavioral anchors on the performance scale for the dimension Salesmanship Skills.

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Management by Objectives (MBO)

A comprehensive and formal organizationwide goal-setting and appraisal program requiring:

Setting of organization’s goals

Setting of departmental goals

Discussion of departmental goals

Defining expected results (setting individual goals)

Conducting periodic performance reviews

Providing performance feedback

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Human Resources Management 12e
Gary Dessler

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Employers use management by objectives (MBO) for one of two things. Many use it as the primary appraisal method. Others use it to supplement to a graphic rating or other appraisal method. MBO generally refers to the comprehensive and formal organizationwide goal-setting and appraisal program.

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Using MBO

Setting unclear objective

Conflict with subordinates over objectives

Potential Problems with MBO

Time-consuming appraisal process

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Human Resources Management 12e
Gary Dessler

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In using MBO, it is best to keep the guidelines for goal setting (SMART, specific, and so on) in mind. Setting objectives with the subordinate sometimes turns into a tug-of-war, with the supervisor pushing for higher quotas and the subordinate pushing for lower ones.

The more that is known about the job and the person’s ability, the more confident a supervisor can be about setting standards.

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Computerized and Web-Based
Performance Appraisal Systems

Allow managers to keep notes on subordinates.
Notes can be merged with employee ratings.
Software generates written text to support appraisals.
Allows for employee self-monitoring and self-evaluation.
Electronic Performance Monitoring (EPM) Systems

Use computer network technology to allow managers access to their employees’ computers and telephones.

Managers can monitor the employees’ rate, accuracy, and time spent working online.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Employers increasingly use computerized or Web-based performance appraisal systems that enable them to keep computerized notes on subordinates during the year. The notes can then be merged with ratings of employees on several performance traits. The software then generates written text to support each part of the appraisal. Most appraisal software combines several of the basic methods such as graphic ratings plus critical incidents or BARS.

Electronic performance monitoring (EPM) systems use computer network technology to allow managers access to their employees’ computers and telephones. They allow managers to monitor the employees’ rate, accuracy, and time spent working online.

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FIGURE 9–9
Online Performance
Appraisal Tool

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Many employers today make use of online appraisals for evaluating employee performance. Figure 9-9 shows an online service’s offerings of a graphic rating scale that is supported with specific behavioral competency expectations. These expectations pinpoint what raters should look for.

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Dealing with Performance Appraisal Problems

Unclear standards

Leniency or strictness

Halo
effect

Potential Rating Scale Appraisal Problems

Central tendency

Bias

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Human Resources Management 12e
Gary Dessler

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Graphic-type rating scales in particular are susceptible to several problems: unclear standards, halo effect, central tendency, leniency or strictness, and bias.

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TABLE 9–2 A Graphic Rating Scale with Unclear Standards

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Table 9-2 illustrates the unclear standards problem. This graphic rating scale seems objective. However, it would probably result in unfair appraisals, because the traits and degrees of merit are ambiguous.

The best way to fix this problem is to include descriptive phrases that define or illustrate each trait.

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Guidelines for Effective Appraisals

Know the problems

Get agreement on a plan

Use the
right tool

How to Avoid
Appraisal Problems

Keep a
diary

Be
fair

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Managers can do these five things to help ensure that they fairly conduct effective appraisals.

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TABLE 9–3 Important Advantages and Disadvantages of Appraisal Tools

Tool	Advantages	Disadvantages
Graphic rating scale	Simple to use; provides a quantitative rating for each employee.	Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems.
BARS	Provides behavioral “anchors.” BARS is very accurate.	Difficult to develop.
Alternation ranking	Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales.	Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent.
Forced distribution method	End up with a predetermined number or % of people in each group.	Employees’ appraisal results depend on your choice of cutoff points.
Critical incident method	Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis.	Difficult to rate or rank employees relative to one another.
MBO	Tied to jointly agreed-upon performance objectives.	Time-consuming.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Use the right appraisal tool—or combination of tools. Each has its own pros and cons. For example, the ranking method avoids central tendency but can cause bad feelings when employees’ performances are in fact all “high.” Table 9-3 summarizes each tool’s pros and cons.

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Choosing the Right Appraisal Tool

Accessibility

Accuracy

Ease-of-use

Employee acceptance

Criteria for Choosing an Appraisal Tool

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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In practice, employers choose an appraisal tool based on several criteria. Accessibility and ease-of-use are probably first. Employers (and supervisors) prefer to avoid the push-back from employees who resist certain appraisal methods. For other employers, accuracy is a great concern.

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FIGURE 9–10 Selected Best Practices for Administering Fair Performance Appraisals

Base the performance review on duties and standards from a job analysis.
Try to base the performance review on observable job behaviors or objective performance data.
Make it clear ahead of time what your performance expectations are.
Use a standardized performance review procedure for all employees.
Make sure whoever conducts the reviews has frequent opportunities to observe the employee’s job performance.
Either use multiple raters or have the rater’s supervisor evaluate the appraisal results.
Include an appeals mechanism.
Document the appraisal review process and results.
Discuss the appraisal results with the employee.
Let the employees know ahead of time how you’re going to conduct the review and use the results.
Let the employee provide input regarding your assessment of him or her.
Indicate what the employee needs to do to improve.
Thoroughly train the supervisors who will be doing the appraisals.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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One study found that a number of best practices, such as “have an appeal mechanism,” distinguish fair appraisals. Figure 9-10 summarizes these.

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FIGURE 9–11 Guidelines for a Legally Defensible Appraisal

Preferably, conduct a job analysis to establish performance criteria and standards.
Communicate performance standards to employees and to those rating them, in writing.
When using graphic rating scales, avoid undefined abstract trait names (such as “loyalty” or “honesty”).
Use subjective narratives as only one component of the appraisal.
Train supervisors to use the rating instrument properly.
Allow appraisers substantial daily contact with the employees they’re evaluating.
Using a single overall rating of performance is usually not acceptable to the courts.
When possible, have more than one appraiser, and conduct all such appraisals independently.
One appraiser should never have absolute authority to determine a personnel action.
Give employees the opportunity to review and make comments, and have a formal appeals process.
Document everything: Without exception, courts condemn informal performance evaluation practices that eschew documentation.
Where appropriate, provide corrective guidance to assist poor performers in improving.

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Human Resources Management 12e
Gary Dessler

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Figure 9-11 lists guidelines for developing a legally defensible appraisal process.

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Who Should Do the Appraising?

Self-rating

Subordinates

360-degree feedback

Potential Appraisers

Immediate supervisor

Peers

Rating
committee

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Human Resources Management 12e
Gary Dessler

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Traditionally, the employee’s direct supervisor appraises his or her performance. However, other options are available and used.

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The Appraisal Interview

Satisfactory—Promotable

Satisfactory—Not Promotable

Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable

Types of Appraisal Interviews

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Human Resources Management 12e
Gary Dessler

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As a supervisor, you will face four types of appraisal interviews, each with its unique objectives.

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FIGURE 9–12 Sample Employee Development Plan

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Figure 9-12 presents a form that can be used when the person’s performance is unsatisfactory but correctable and the interview objective is to lay out an action plan for correcting the unsatisfactory performance.

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Appraisal Interview Guidelines

Talk in terms of objective work data

Get
agreement

Don’t get personal

Encourage the person to talk

Guidelines for Conducting
an Interview

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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These are four main things to keep mind when actually conducting the interview.

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FIGURE 9–13
Checklist During
Appraisal Interview

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Human Resources Management 12e
Gary Dessler

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Figure 9-13 provides a checklist to help managers cover all the appraisal interview bases.

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Handling Defensive Responses

Recognize your own limitations.

Never attack a person’s defenses.

How to Handle a Defensive Subordinate

Recognize that defensive behavior is normal.

Postpone action.

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Human Resources Management 12e
Gary Dessler

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Defenses are a familiar aspect of our lives. When a supervisor tells someone his or her performance is poor, the first reaction is often denial. Denial is a defense mechanism. By denying the fault, the person avoids having to question his or her own competence. Others react with anger and aggression. This helps them let off steam and postpones confronting the immediate problem.

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How to Deliver Criticism

How to Criticize a Subordinate

Criticize in private, and do it constructively.

Do it in a manner that lets the person maintain his or her dignity and sense of worth.

Give daily feedback so that the review has no surprises.

Never say the person is “always” wrong.

Criticism should be objective and free of biases.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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When you must criticize, do so in a manner that lets the person maintain his or her dignity—in private, and constructively.

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Formal Written Warnings

Purposes of a Written Warning

To shake your employee out of bad habits.

To help you defend your rating, both to your own boss and (if needed) to the courts.

A Written Warning Should:

Identify standards by which employee is judged.

Make clear that employee was aware of the standard.

Specify deficiencies relative to the standard.

Indicate employee’s prior opportunity for correction.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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An employee’s performance may be so weak that it requires a formal written warning.

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Performance Management

Performance Management

Is the continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organization’s goals.

How Performance Management Differs From Performance Appraisal

A continuous process for continuous improvement

A strong linkage of individual and team goals to strategic goals

A constant reevaluation and modification of work processes

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Performance management is the continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organization’s goals.

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Basic Building Blocks of
Performance Management

Direction sharing

Goal
alignment

Ongoing performance monitoring

Rewards, recognition, and compensation

Coaching and development support

Ongoing
feedback

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Performance management’s basic building blocks or “DNA” are:

Direction sharing means communicating the company’s higher-level goals (including its vision, mission, and strategy) throughout the company and then translating these into doable departmental, team, and individual goals.

Goal alignment means having a process that enables any manager to see the link between an employee’s goals and those of his or her department and company.

Ongoing performance monitoring usually includes using computer-based systems that measure and then e-mail progress and exception reports based on the person’s progress toward meeting his or her performance goals.

Ongoing feedback includes both face-to-face and computer-based feedback regarding progress toward goals.

Coaching and developmental support should be an integral part of the feedback process.

Rewards, recognition, and compensation all play a role in providing the consequences needed to keep the employee’s goal-directed performance on track.

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Why Performance Management?

Total Quality Management

Resolution of Appraisal Issues

Strategic Goal Alignment

The Performance Management Approach

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Employers are moving to performance management for three main reasons—total quality, appraisal issues, and strategic planning.

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Using Information Technology to
Support Performance Management

Assign financial and nonfinancial goals to each team’s activities along the strategy map chain of activities leading up to the company’s overall strategic goals.
Inform all employees of their goals.
Use IT-supported tools like scorecard software and digital dashboards to continuously monitor and assess each team’s and employee’s performance.
Take corrective action at once.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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This slide sums up how IT-supported performance management process supports performance management.

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FIGURE 9–14 Performance Management Report

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Information technology does enable management to automate performance management. Figure 9-14 presents an example of an employee’s online performance management report.

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K E Y T E R M S

performance appraisal

graphic rating scale

alternation ranking method

paired comparison method

forced distribution method

critical incident method

behaviorally anchored rating scale (BARS)

electronic performance monitoring (EPM)

unclear standards

halo effect

central tendency

strictness/leniency

bias

appraisal interview

performance management

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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