HRMN 400 - Performance Management - Due Tuesday 2/16

HRMN 400 – Week 6 Citations

(Heathfield, 2019)

(Bacal, n.d.)

(Heathfield, 4 Common Problems With Performance Appraisals, 2020)

(Williams)

(Heathfield, The Advantages and Disadvantages of Merit Pay, 2020)

(Petersen, 2019)

(HR Basics: Performance & Rewards, 2011)

(How to do Effective Performance Appraisals, 2008)

(Heathfield, Performance Management Process Checklist, 2019)

(Heathfield, Why Employee Performance Appraisal Does Not Work, 2019)

(Module 13: Designing a High-Performance Work System, 2012)

(Appraising Employee Performance)

Bibliography Appraising Employee Performance. (n.d.). Retrieved February 15, 2021, from University of

Maryland Global Campus: https://learn.umgc.edu/d2l/le/content/543604/viewContent/20431470/View

Bacal, R. (n.d.). Performance Enhancement. Retrieved February 14, 2021, from A Performance Management Bias And Error Glossary: http://performance- appraisals.org/Bacalsappraisalarticles/articles/bias.htm

Heathfield, S. M. (2019, November 25). Performance Management Process Checklist. Retrieved February 15, 2021, from Balance Careers: https://www.thebalancecareers.com/performance-management-process-checklist- 1918852

Heathfield, S. M. (2019, November 17). The 5 Goals of Employee Performance Evaluation. Retrieved February 14, 2021, from Balance Careers: https://www.thebalancecareers.com/employee-performance-evaluation-goals-1918866

Heathfield, S. M. (2019, October 19). Why Employee Performance Appraisal Does Not Work. Retrieved February 15, 2021, from Balance Careers: https://www.thebalancecareers.com/performance-appraisals-dont-work-1918846

Heathfield, S. M. (2020, May 8). 4 Common Problems With Performance Appraisals. Retrieved February 14, 2021, from Balance Careers: https://www.thebalancecareers.com/performance-appraisal-problems-1918857

Heathfield, S. M. (2020, April 30). The Advantages and Disadvantages of Merit Pay. Retrieved February 15, 2021, from Balance Careers: https://www.thebalancecareers.com/the- advantages-and-disadvantages-of-merit-pay-1919083

How to do Effective Performance Appraisals (2008). [Motion Picture]. YouTube. Retrieved February 14, 2021, from https://www.youtube.com/watch?v=E34Zt1cEpFA&feature=youtu.be

HR Basics: Performance & Rewards (2011). [Motion Picture]. YouTube. Retrieved February 14, 2021, from https://www.youtube.com/watch?v=ALZVggBDODY&feature=youtu.be

Module 13: Designing a High-Performance Work System. (2012). In Principles of Management. Lumen Learning. Retrieved February 15, 2021, from https://courses.lumenlearning.com/principlesmanagement/chapter/16-6-designing-a-high- performance-work-system/

Petersen, L. (2019, March 5). Advantages & Disadvantages of Pay-for-Performance Policies. Retrieved February 15, 2021, from Chron: https://smallbusiness.chron.com/advantages- disadvantages-payforperformance-policies-44264.html

Williams, L. (n.d.). Module 15: Performance Appraisals. In Introduction to Business. Lumen Learning. Retrieved February 15, 2021, from https://courses.lumenlearning.com/wmintrobusiness/chapter/reading-performance- appraisals/

The 5 Goals of Employee Performance Evaluation • • • BY SUSAN M. HEATHFIELD Updated November 17, 2019

Are you interested in why organizations do employee performance evaluations? It's both an evaluative process and a communication tool. Done traditionally, employee performance evaluation is universally disliked by supervisors, managers, and employees.

The managers hate employee reviews because they don't like to sit in judgment about an employee's work. They know that if the performance evaluation is less than stellar, they risk alienating the employee. At the same time, employees hate performance evaluations because they dislike being judged. They tend to take suggestions for performance improvement personally and negatively.

Performance management, on the other hand, provides the advantages organizations seek in doing performance evaluation. But, performance management, participated effectively and with the appropriate mindset, accomplishes the same goals, and more. Performance management also supplies additional advantages to both the manager and the employee.

The question on the table now is why organizations would want to ask employees to participate in either employee performance evaluation or a performance management system. Good reasons exist for advocating the basic concept of performance evaluation. There are few fans of the traditional process.

Where Employee Performance Evaluation Fits

In some form, most organizations have an overall plan for business success. The employee performance evaluation process, including goal setting, performance measurement, regular performance feedback, self-evaluation, employee recognition, and documentation of employee progress, ensures this success.

The process, done with care and understanding, helps employees see how their jobs and expected contributions fit within the bigger picture of their organization.

The more effective evaluation processes accomplish these goals and have additional benefits. Documented performance evaluations are communication tools that ensure the supervisor and their reporting staff members are clear about the requirements of each employee’s job.

The evaluation also communicates the desired outcomes or outputs needed for each employee’s job and defines how they will be measured.

Goals of Employee Performance Evaluation

These are the five goals of an effective employee evaluation process.

1. The employee and the supervisor are clear about the employee’s goals, required outcomes or outputs, and how the success of the contributions will be assessed. Your goal in employee evaluation is to motivate a high level of quality and quantity in the work that the employee produces.

2. The goals of the best employee performance evaluations also include employee development and organizational improvement. The employee performance evaluation helps employees accomplish both personal development and organizational goals. The act of writing down the goals takes the employee one step closer to accomplishing them.

Since goals, deliverables, and measurements are negotiated in an effective employee performance evaluation, the employee and the supervisor are committed to achieving

them. The written personal development goals are a commitment from the organization to assist the employee to grow in their career.

3. Employee performance evaluation provides legal, ethical, and visible evidence that employees were actively involved in understanding the requirements of their jobs and their performance. The accompanying goal setting, performance feedback, and documentation ensure that employees understand their required outputs. The goal of employee performance evaluation is to create accurate appraisal documentation to protect both the employee and the employer.

In the event that an employee is not succeeding or improving their job performance, the performance evaluation documentation can be used to develop a Performance Improvement Plan (PIP).

This plan provides more detailed goals with more frequent feedback to an employee who is struggling to perform. The goal of a PIP is the improvement of the employee's performance, but non-performance can lead to disciplinary action up to and including employment termination.

4. In many organizations, numeric rankings are used to compare an employee’s performance with the performance of other employees. Numeric ratings are frequent components of these systems, too.

No matter how fair and non-discriminatory these ratings are made to appear through the endless establishment of criteria for rating, and they boil down to the manager’s opinion of an employee’s performance. This is why numeric components in an employee performance evaluation process are not recommended.

5. The employee performance evaluation provides evidence of non-discriminatory promotion, pay, and recognition processes. This is an important consideration in training managers to perform consistent, regular, non-discriminatory employee performance evaluations. You want to ensure equitable measurement of an employee's contribution to the accomplishment of work,

The documentation of success and failure to achieve goals is a critical component of the employee performance evaluation process.

While employee performance evaluation systems take many forms from organization to organization, these are the components that organizations are most likely to include. Some are more effective than others.

But the goals for the employee performance evaluation system, or the appraisal process, or the performance management process are similar. The differences appear in the approach and the details. And, that can make all of the difference in how the performance evaluation system is perceived by and carried out by employees.

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A Performance Management Bias And Error Glossary by Robert Bacal

Robert Bacal is a noted author, keynote speaker, and management consultant. His most recent books include Performance Management - A Briefcase Book, and The Complete Idiot's Guide To Dealing With Difficult Employees. The Work911 Supersite contains many more free articles and tips on a number of workplace topics. Access it at work911.com .

Performance appraisals are always sticky for everyone. While managers make an effort to be as objective as possible, there are always concerns about specific performance appraisals, and their accuracy. If you are going to evaluate your staff, then it is wise to be aware of factors that may affect your assessments. In this short article we outline a few factors you should be aware of, so that you can examine your own assessment processes to ensure that they are as free from bias as possible.

Halo Effect

The halo effect is the tendency to rate someone high or low in all categories because he or she is high or low in one or two areas. Results in appraisals that do not help develop employees, because they are two general or inaccurate as to specifics. Evaluating someone lower is sometimes also called the "devil effect".

Standards of Evaluation

If you are using categories such as fair, good, excellent, etc, be aware that the meanings of these words will differ from person to person. In any event, the use of these categories is not recommended because they do not provide sufficient information to help employees develop.

Central Tendency

The habit of assessing almost everyone as average. A person applying this bias will tend not to rate anyone very high or very low.

Recency Bias

Tendency to assess people based on most recent behaviour and ignoring behaviour that is "older".

Leniency Bias

Tendency to rate higher than is warranted, usually accompanied by some rationalization as to why this is appropriate.

Opportunity Bias

Ignoring the notion that opportunity (factors beyond the control of the employee) may either restrict or facilitate performance, and assigning credit or blame to the employee when the true cause of the performance was opportunity.

False Attribution Errors

We have a tendency to attribute success or failure to individual effort and ability (at least in North America). So when someone does well, we give them credit, and when someone does less well, we suggest it's somehow their fault. While there is some truth in this, the reality is that performance is a function of both the individual and the system he or she works in. Often we misattribute success and failure and assume they are both under the complete control of the employee. If we do, we will never improve performance.

4 Common Problems With Performance Appraisals Where Do Managers Go Wrong With Performance Appraisal? • • • Table of Contents

• Performance Appraisals Are Annual • Performance Appraisal As a Lecture • Appraisals and Employee Development • Performance Appraisals and Pay

BY SUSAN M. HEATHFIELD Updated May 08, 2020

Managers go wrong with performance appraisals in so many ways, that it’s difficult to identify all of them. Some of the problems have to do with the overall system of performance appraisal, and other problems are the result of the one-on-one meeting that is held for the appraisal interaction.

The systemic problems are rarely under the control of one manager. They are created by the people who have developed the performance appraisal system that the managers are asked to use, usually the senior leadership team and Human Resources staff.

Here are four of the big problems managers and employees experience with performance appraisals. If you are clear on the problems, you have an opportunity to fix the problems.

Performance Appraisals Are Annual

Start with the fact that performance appraisals are usually annual. Employees need feedback and goal planning much more frequently than annually. Managers may need to participate in the annual performance appraisal plan, but they have the power to provide regular feedback in addition to the annual performance appraisal.

Employees need weekly, even daily, performance feedback. This feedback keeps them focused on their most important goals. It also provides them with developmental coaching to help them increase their ability to contribute. The feedback also recognizes them for their contributions.

Employees need and respond best to clear expectations from their manager. Feedback and goal-setting annually just doesn't cut it in the modern work environment. In this environment, goals are constantly changing. Work is under constant evaluation for relevance, importance, and contribution.

Customer needs change with such frequency that only the nimble respond in a timely manner. It is what performance feedback needs to do—respond nimbly and with serious responsiveness in a timely manner.

Performance Appraisal As a Lecture

Managers, who don't know any better, make performance appraisals into a one-way lecture about how the employee did well this year and how the employee can improve. In one example from a small manufacturing company, employees reported to HR that they thought that the performance development planning meeting was supposed to be a conversation.

Their manager was using 55 of the 60 minutes to lecture his reporting staff members about their performance—both good and bad. The employees' feedback was relegated to less than five minutes. This is not the point of a performance appraisal discussion—a two-way discussion is critical so employees feel heard out and listened to.

Additionally, once a manager tells an employee about problems with their work or a failure in their performance, employees tend not to hear anything else the manager has to say that is positive about their performance.

So, the feedback sandwich in which managers praise an employee, then give the employee negative feedback that is followed, once again, by positive feedback is an ineffective approach to providing needed feedback.

So, it’s a combination problem. The best performance appraisals are a two-way discussion and focus on the employee assessing his or her own performance and setting his or her own goals for improvement.

Performance Appraisal and Employee Development

Performance appraisals rarely focus on developing an employee’s skills and abilities. They do not provide commitments of time and resources from the organization about how they will encourage employees to develop their skills in areas of interest to the employee.

The purpose of performance evaluation is to provide developmental feedback that will help the employee continue to grow in their skills and ability to contribute to the organization. It is the manager's opportunity to hold a clear exchange about what the organization expects and most wants and needs from the employee. What a lost opportunity if a manager uses the meeting in any other way.

Performance Appraisals and Pay

In a fourth way that performance appraisals often go astray, employers connect performance appraisals with the amount of pay raise an employee will receive. When the appraisal becomes a deciding factor in decisions about employee raises, it loses its ability to help employees learn and grow.

You will train employees to hide and cover-up problems. They will set their manager up to be blindsided by problems or an issue in the future. They will bring only positives to the appraisal meeting if they are a normal employee.

Don’t ever expect an honest discussion about improving an employee's performance if the outcome of the discussion will affect the employee’s income. Doesn't this make perfect sense? You know it does, so why go there? It should be one component of your salary setting system.

Let your employees know that you will base raises on a wide range of factors—and tell them what the factors are in your company annually. Employees have short memories, and you need to remind them every year about how you will make your decisions about merit increases.

If your company has a company-wide approach—and many companies do these days—even better. You will have support and backup as all employees will receive the same message. Your job will be to reinforce the message during the performance appraisal meeting.

Connecting the appraisal to an employee's opportunity for a salary increase negates the most important component of the process—the goal of helping the employee grow and develop as a result of the feedback and discussion at the performance appraisal meeting.

The Bottom Line

If you can influence these four big problems in performance appraisal, you will go a long way toward having a useful, developmental system in which the employee's voice plays a prominent role. It is the right way to approach performance appraisal.

Reading: Performance Appraisals

The Purpose of Performance Appraisals

A performance appraisal (PA) or performance evaluation is a systematic and periodic process that assesses an individual employee’s job performance and productivity, in relation to certain pre-established criteria and organizational objectives. Other aspects of individual employees are considered as well, such as organizational citizenship behavior, accomplishments, potential for future improvement, strengths, and weaknesses. A PA is typically conducted annually. However, the frequency of an evaluation, and policies concerning them, varies widely from workplace to workplace. Sometimes an evaluation will be given to a new employee when a probationary period ends, after which they may be conducted on a regular basis (such as every year). Usually, the employee’s supervisor (and frequently, a more senior manager) is responsible for evaluating the employee, and he or she does so by scheduling a private conference to discuss the evaluation. The interview functions as a way of providing feedback to employees, counseling and developing employees, and conveying and discussing compensation, job status, or disciplinary decisions.

Historically, performance appraisals have been used by companies for a range of purposes, including salary recommendations, promotion and layoff decisions, and

training recommendations.[1] In general, “performance elements tell employees what they have to do, and standards tell them how well they have to do it.”[2] This broad definition, however, can allow for appraisals to be ineffective, even detrimental, to employee performance. “Second only to firing an employee, managers cite performance appraisal as the task they dislike the most,” and employees generally have a similar feeling.[3] One key item that is often forgotten during the appraisal process (by managers and employees alike) is that the appraisal is for improvement, not blame or harsh criticism.[4]

Developing an Appropriate Appraisal Process

One significant problem in creating an appraisal process is that no single performance appraisal method will be perfect for every organization.[5] Establishing an appropriate process involves significant planning and analysis in order to provide quality feedback to the employee. The most crucial task in the process is determining proper job dimensions that can be used to evaluate the employee against accepted standards that affect the performance of the team, business unit, or company.[6] Peter Drucker developed a method termed “Management by Objectives,” or MBO, in order to address the need for specifying such job dimensions. Drucker suggests that objectives for any employee can be validated if they pass the following SMART test:[7]

• Specific • Measurable • Achievable • Realistic • Time-related

The process of an evaluation typically includes one or more of the following:

• An assessment of how well the employee is doing. Sometimes this includes a scale rating indicating strengths and weaknesses in key areas (e.g., ability to follow instructions, complete work on time, and work with others effectively). It’s also common for the supervisor and manager to discuss and determine the key areas.

• Employee goals with a deadline. Sometimes the employee may voluntarily offer a goal, while at other times it will be set by his or her boss. A significantly underperforming employee may be given a performance improvement plan, which details specific goals that must be met to keep the job.

• Feedback from coworkers and supervisors. The employee may also have the chance to share feelings, concerns, and suggestions about the workplace.

• Details about workplace standing, promotions, and pay raises. Sometimes an employee who has performed very well since the last review period may get an increase in pay or be promoted to a more prestigious position.

Methods of Performance Appraisal

Numerous methods exist for gauging an employee’s performance, and each has strengths and weaknesses depending on the environment. The following outlines some of the more commonly used methods, as well as some recently developed ones that can be useful for various feedback situations:

• Graphic rating scales: This method involves assigning some form of rating system to pertinent traits. Ratings can be numerical ranges (1–5), descriptive categories (below average, average, above average), or scales between desirable and undesirable traits (poor ↔ excellent). This method can be simple to set up and easy to follow but is often criticized for being too subjective, leaving the evaluator to define broad traits such “leadership ability” or “conformance with standards.”[8]

• Behavioral methods: A broad category encompassing several methods with similar attributes. These methods identify to what extent an employee displays certain behaviors, such as asking a customer to identify the usefulness of a sales representative’s recommendation. While extremely useful for jobs where behavior is critical to success, identifying behaviors and standards for employees can often be very time-consuming for an organization.[9]

• 2+2: A relative newcomer in performance appraisal methodology, the 2+2 feedback system demonstrates how appraisals can be used primarily for improvement purposes. By offering employees two compliments and two suggestions for improvement focused around high-priority areas, creators Douglas and Dwight Allen suggest that organizations can become “more pleasant, more dynamic, and more productive.”[10] If the goal is employee improvement, this system can provide significant benefits; however, if the goals are compensation changes and rankings, the system provides little benefit.

Appraisal methodologies depend greatly on the type of work being done; an assembly worker will require a very different appraisal system from a business consultant. Significant planning will be required to develop appropriate methods for each business unit in an organization in order to obtain maximum performance towards the appraisal goals.

1. Kulik, 2004 ↵ 2. United States Department of the Interior, 2004 ↵ 3. Heathfield, Performance Appraisals Don't Work ↵ 4. Bacal, 1999 ↵ 5. Kulik, 2004 ↵ 6. Fukami, Performance Appraisal, 2007 ↵ 7. Management by Objectives—SMART, 2007 ↵ 8. Kulik, 2004 ↵

9. Kulik, 2004 ↵ 10. Formula 2+2, 2004 ↵

LICENSES AND ATTRIBUTIONS CC LICENSED CONTENT, ORIGINAL

• Revision and adaptation. Authored by: Linda Williams and Lumen Learning. License: CC BY-SA: Attribution-ShareAlike

CC LICENSED CONTENT, SHARED PREVIOUSLY • Performance Review. Authored by: Samuel Mann. Located

at: https://www.flickr.com/photos/21218849@N03/8024702520/. License: CC BY: Attribution

• Business Fundamentals. Authored by: Donald J McCubbrey. Located at: https://dl.dropboxusercontent.com/u/31779972/BusinessFundamentals.pdf. Lice nse: CC BY: Attribution

• Developing Employees from Boundless Business. Provided by: Boundless. Located at: https://www.boundless.com/business/textbooks/boundless-business- textbook/human-resource-management-12/developing-employees-81/. License: CC BY-SA: Attribution-ShareAlike

The Advantages and Disadvantages of Merit Pay

• • • BY SUSAN M. HEATHFIELD Updated April 30, 2020

Merit pay is an approach to compensation that rewards higher performing employees with additional pay, sometimes called incentive pay. It is a tool that employers can use to make sure that their best-performing employees feel as if they are adequately compensated for their contributions.

Merit pay has advantages and disadvantages for both employees and employers over a traditional pay system that puts the money in base pay. Before implementing a merit pay system, it's a good idea to review the advantages and disadvantages of this approach to your employees' compensation.

Advantages of a Merit Pay System

A merit system is most applicable when tdetailed data available to measure the performance of employees. Consider how that data can push employees to achieve more, padding their own paychecks, as well as the company's bottom line.

• Communicates company objectives: Merit pay sends a powerful message about how you want to see employees perform and what you want to see them contribute. It confirms what you most value from employees. Merit pay also provides a vehicle for an employer to recognize individual performance on a one- time basis. This is useful for rewarding employees who may have participated in a one-time project.

• Let's employees know where they stand: Making the range of the available merit pay public allows employees to see where their increase falls in the merit

pay ranges established by your company pay plan. It can be a good way to reward the employees that you most want to keep. When employees receive less than the top increase, supervisors have an opportunity to describe and discuss exactly how the employees will need to improve their performance to qualify for the top merit increase during the next cycle of raises.

• Aids in employee retention: Merit pay can help an employer differentiate between the performance of high and low performing employees and reward the performance of the higher performers. This can aid in retention because no employer wants to lose the organization's best performers.

Disadvantages and Challenges

Some businesses are not conducive to measuring employee contributions so clearly and definitively, making it difficult to establish an effective means for merit pay. Consider whether or not you might be trying to force such a system into an office where it won't work.

• Concerns about favoritism: In many offices, the value of any particular employee is subjective and ultimately determined by a supervisor. Without clear measurables, others easily could dispute the outcomes when merit pay is determined. Even in offices where there are measurables, outcomes can be challenged. For example, some might argue that the salesperson with the best sales had an advantage because he had the best sales territory.

• Uses time and resources better spent elsewhere: The amount of time and energy that organizations invest in an attempt to make performance measurable for merit pay, including developing competencies, measurements, baselines for performance, and so forth, is better spent on delivering service for customers. Organizations have generated documents with several hundred pages that lay out what merit means in various jobs. Often, the benefits just aren't worth all that time and effort.

• Communication troubles: Given the limitations of metrics, the ability of a supervisor to communicate to each employee the value of his or her contribution,

and what superior performance entails that makes it worthy of merit pay consideration, is an ongoing challenge. Some supervisors communicate better than others, and this means the effectiveness of merit pay sometimes can vary wildly from one department to the next based on the communications skills of supervisors.

2/11/2021 Advantages & Disadvantages of Pay-for-Performance Policies

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Advantages & Disadvantages of Pay-for- Performance Policies Small Business | Human Resources | Policies By Lainie Petersen Updated March 05, 2019

Choosing a compensation policy is one of the most crucial decisions a business owner can make. In recent years, some employers have moved toward a pay-for-performance model, which provides financial rewards for employees who meet and exceed performance standards. Over time, analysts have observed both advantages and drawbacks to this method of determining employee pay.

What are Pay-for-Performance Policies? Employees usually expect to receive regular wage increases even if their job role. hasn't changed. Many companies offer an automatic annual salary increase around the time of a performance

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review. Some businesses, however, are no longer providing raises to employees just for showing up for work. Instead, a worker can expect an increase only if his performance meets or exceed his employer's expectations.

Pay-for-performance compensation models vary, but typically present workers with guidelines as to what kind of increase they can expect for varying levels of performance. For example, an employer may provide no increase for workers with poor performance evaluations; but those who receive a satisfactory, above average or excellent review could expect corresponding increases; and those who have excellent reviews would receive the highest raises.

Advantages of Pay-for-Performance Many companies have adopted this compensation system, because they believe in its benefits, which include:

Worker motivation: The reasons why an employee remains in his or her job are often complex. Many individuals derive significant satisfaction from work that they find meaningful. However, workers are also significantly, if not primarily, motivated by financial concerns. If a worker knows that meeting performance objectives will result in a compensation increase, they may be inclined to work harder and improve their skills.

Retaining top talent: You can expect that your top talent will be approached by other employers. If you want to keep exceptional employees, you must offer them a competitive compensation package. When your best employees know that they will be rewarded for their efforts, they are more likely to stay with your company.

Disadvantages of Pay-For-Performance Not everyone is enamored with pay-for-performance compensation increases, however. Some analysts are skeptical that it is an effective way of motivating employees and retaining good workers. The primary disadvantages cited are:

Performance measurement is often subjective: The work of some employees can be easily quantified and measured. For example, a salesperson may be asked to meet specific sales numbers for the year. However, many workers, particularly those in administrative roles, perform vital functions, but their work isn't defined by achieving specific goals. For these employees, a pay-for-performance plan could prove frustrating, in large part because their evaluations are more

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subjective. A personality conflict with a supervisor could, in some cases, result in lower compensation.

Performance reviews are falling out of favor: The pay-for-performance model often hinges on the results of an employee's annual performance review. However, many employers are finding such reviews ineffective, and are abandoning them in favor of encouraging managers to provide feedback to employees throughout the year.

More Things to Consider Before instituting a pay-for-performance system, review your human resources policies and ask your attorney for guidance. Workers who are not successful in pay-for-performance reviews may perceive the system as unfair. This could potentially lead to the employee taking legal action against your company for discrimination. An experienced attorney can help you minimize the risk of a lawsuit and other penalties.

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REFERENCES RESOURCES WRITER BIO

R E L A T E D A R T I C L E S

How to Handle Employees Asking for Excessive Raises

Paying Bonuses Instead of Salary Increases

What Constitutes Giving a Raise to an Employee?

Typical Percentages for Raises for Outstanding Employees

What Are the Benefits of 360 Degree Feedback?

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Psychology of Employee Evaluations By Neil Kokemuller

Employee evaluations are a motivational tool used by managers to assess the performance of an employee in his job role. While the intent of the evaluation is to help the employee understand his strengths and areas of improvement, some employers misuse them or inaccurately communicate them to employees.

Motivational Intent A primary psychological objective of an employee evaluation is motivation. You can motivate an employee in two basic ways with an effective appraisal of her work. By confirming her areas of strong performance and setting higher level goals, you reinforce positive and productive work. When you offer correction and direction in areas of weakness or poorer performance, you can motivate her toward improvement. Employees should generally know where they stand at any given time. However, a formal evaluation process helps solidify the quality of their work in core areas.

Misconceptions

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Employees often have misconceptions about the goals of evaluations. Some simply view them as a point at which the hiring manager affirms or degrades performance. A common assumption is that a good evaluation means a pay raise or bonus. Employees may have this feeling because employers mistakenly promote this approach. While some employers do perform largely superficial, periodic evaluations to deliver a small raise and appease an employee, this is not an effective use of an employee evaluation. If an employee deserves a raise, he shouldn't need to wait until an evaluation. The employer should quickly reinforce high level performance when he observes it so the employee connects the increased pay to the results he produces. If the employee feels under appreciated, he may look for another job before evaluation time.

Supervisor Mistakes Supervisors make a lot of common mistakes that negatively affect the psychological benefits of an evaluation. Some supervisors are too lenient on employees while others are too strict. This can cause the employee to have a false sense of security or low morale from too much scrutiny. The halo effect is another common mistake. This is where the supervisor simply gives a good employee high scores across the board instead of honestly assessing him on each criteria. The recency effect suggests supervisors place more emphasis on the employee's recent work rather than looking at the whole body of performance. In some instances, supervisors simply misinterpret performance strengths and weaknesses, which gives the employee a misguided view of his work.

Contemporary Psychology Views on the psychology of evaluations have changed in the early 21st century. Detractors of traditional performance reviews note that managers often avoid regular, ongoing communication with employees and surprise them at an evaluation. A good evaluation shouldn't have overly positive or negative surprises. Employees should receive spot praise and correction as needed. Some studies show employee evaluations are ineffective or even reduce motivation in many instances. In his Psychology Today article "Time For CEOs To Scrap Employee Performance Reviews," Ray B. Williams indicates some studies show as much as 90 percent of reviews are ineffective at best. A more constant, mentoring or coaching style of leadership is one recommended approach for feedback to replace evaluations.

REFERENCES WRITER BIO

R E L A T E D A R T I C L E S

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Top-Down Performance Appraisal Method

What Makes a Poor Employee Evaluation?

How Might Performance Evaluation Methods Be Perceived as Discriminatory?

Positives & Negatives of Informal Assessments

Performance Reviews & Bell Curves

Performance Management Process Checklist A Step-by-Step Checklist

• • • BY SUSAN M. HEATHFIELD Updated November 25, 2019

Performance appraisals, performance reviews, appraisal forms, whatever you want to call them, let's call them gone. As a stand-alone, annual assault, a performance appraisal is universally disliked and avoided.

After all, how many people in your organization want to hear that they were less than perfect last year? How many managers want to face the arguments and diminished morale that can result from the performance appraisal process?

How many supervisors feel that their time is well-spent professionally to document and provide proof to support their feedback—all year long? Plus, the most important outputs for the performance appraisal, from each person's job, may not be defined or measurable in your current work system. Make the appraisal system one step harder to manage and tie the employee's salary increase to their numeric rating.

If the true goal of the performance appraisal is employee development and organizational improvement, consider moving to a performance management system. Place the focus on what you really want to create in your organization—employee performance management and employee performance development.

As part of that system, you will want to use this checklist to guide your participation in the performance management and development process. You can also use this checklist to help you in a more traditional performance appraisal process. The checklist provides the steps you need to succeed in any performance management system.

If you follow this checklist, you will offer a performance management and development system that will significantly improve the appraisal process that you currently manage. Staff will feel better about participating, discussing their contributions, and taking a look at ways to improve their performance. The performance management system may even positively affect performance—and that's your goal. Right?

Preparation and Planning for Performance Management

Much work is invested, on the front end, to improve a traditional employee appraisal process. In fact, managers can feel as if the new process is too time-consuming.

Once the foundation of developmental goals is in place, however, time to administer the system decreases a lot. Each of these steps is taken with the participation and cooperation of the employee, for the best results.

Performance Management and Development in the General Work System

• Define the purpose of the job, job duties, and responsibilities. • Define performance goals with measurable outcomes. • Define the priority of each job responsibility and goal. • Define performance standards for key components of the job. • Hold interim discussions and provide feedback about employee performance,

preferably daily, summarized and discussed, at least, quarterly. (Provide positive and constructive feedback.)

• Maintain a record of performance through critical incident reports. (Jot notes about contributions or problems throughout the quarter, in an employee file. Please focus on both the positive and negative aspects of the employee's performance)

• Provide the opportunity for broader feedback. Use a 360-degree performance feedback system that incorporates feedback from the employee's peers, customers, and people who may report to them.

• Develop and administer a coaching and improvement plan if the employee is not meeting expectations.

Immediate Preparation for the Performance Development Planning Meeting

• Schedule the Performance Development Planning (PDP) meeting and define pre-work with the staff member to develop the performance development plan (PDP).

• The staff member reviews personal performance, documents self-assessment comments and gathers needed documentation, including 360-degree feedback results, when available.

• The supervisor prepares for the PDP meeting by collecting data including work records, reports, and input from others familiar with the staff person’s work.

• Both examine how the employee is performing against all criteria, and think about areas for potential development.

• Develop a plan for the PDP meeting which includes answers to all of the questions on the performance development tool with examples, documentation and so on.

The Performance Development Process (PDP) Meeting

• Establish a comfortable, private setting and rapport with the staff person. • Discuss and agree upon the objective of the meeting, to create a performance

development plan. • The staff member discusses the achievements and progress he has

accomplished during the quarter. • The staff member identifies ways in which he would like to further develop his

professional performance, including training, assignments, new challenges and so on.

• The supervisor discusses performance for the quarter and suggests ways in which the staff member might further develop his performance.

• Add the supervisor's thoughts to the employee's selected areas of development and improvement.

• Discuss areas of agreement and disagreement, and reach consensus. • Examine job responsibilities for the coming quarter and in general. • Agree upon standards for performance for the key job responsibilities. • Set goals for the quarter. • Discuss how the goals support the accomplishment of the organization's

business plan, the department's objectives and so on. • Agree upon a measurement for each goal. • Assuming performance is satisfactory, establish a development plan with the

staff person, that helps him grow professionally in ways important to him. • If performance is less than satisfactory, develop a written performance

improvement plan, and schedule more frequent feedback meetings. Remind the employee of the consequences connected with continued poor performance.

• The supervisor and employee discuss employee feedback and constructive suggestions for the supervisor and the department.

• Discuss anything else the supervisor or employee would like to discuss, hopefully, maintaining the positive and constructive environment established thus far, during the meeting.

• Mutually sign the performance development tool to indicate the discussion has taken place.

• End the meeting in a positive and supportive manner. The supervisor expresses confidence that the employee can accomplish the plan and that the supervisor is available for support and assistance.

• Set a time-frame for a formal follow-up, generally quarterly.

Following the Performance Development Process Meeting

• If a performance improvement plan was necessary, follow up at the designated times.

• Follow up with performance feedback and discussions regularly throughout the quarter. (An employee should never be surprised about the content of feedback at the performance development meeting.)

• The supervisor needs to keep commitments relative to the agreed-upon development plan, including time needed away from the job, payment for courses, agreed-upon work assignments and so on.

• The supervisor needs to act upon the feedback from departmental members and let staff members know what has changed, based on their feedback.

• Forward appropriate documentation to the Human Resources office and retain a copy of the plan for easy access and referral.

Why Employee Performance Appraisal Does Not Work The Traditional Performance Appraisal Process Is Demeaning and Hurtful • • • BY SUSAN M. HEATHFIELD Updated October 10, 2019

Managers cite employee performance appraisal as the task they dislike the most, second only to firing an employee. This dislike is understandable given that the process of performance appraisal—as traditionally practiced—is fundamentally flawed. The process is hurtful and demeaning, and both managers and employees avoid these conversations.

In fact, according to Chris Westfall, author or publisher of eight books about management:

Poor communication—and even avoiding communicating altogether—is a serious problem in

organizations. A 2016 Harris Poll reveals that a stunning 69% of managers aren’t comfortable

talking to employees for any reason at all. Worse still, one in five business leaders feels uneasy

delivering the company line or even recognizing employee achievements.

Traditional performance appraisal is incompatible with the mission-oriented, participative work environments favored by forward-thinking organizations today. It is an old-fashioned, paternalistic, top-down, autocratic mode of management that treats employees as possessions of the company.

The Traditional Performance Appraisal Process

In the conventional performance appraisal or review process, the manager annually writes their opinions on the performance of a reporting staff member on a document supplied by the HR department. In some organizations, the staff member is asked to fill out a self-review to share with the supervisor.

Most of the time, the appraisal reflects what the manager can remember about the employee. Memory is usually of only the most recent events. Almost always, the appraisal is based on opinions. Real performance measurement takes time and follow- up to do it well.

The documents in use in many organizations also ask the supervisor to make judgments based on concepts and words such as excellent performance, exhibits enthusiasm, and achievement-oriented.

Many managers are uncomfortable in the role of judge. So uncomfortable, in fact, that performance appraisals are often months overdue. The HR professional who manages the appraisal system finds their most important roles are to develop the form and maintain an employee official file, notify supervisors of due dates, and then remind them if the review is long overdue.

Despite the fact that annual raises are often tied to the performance evaluation, managers avoid doing them as long as possible. This results in an unmotivated employee who feels their manager doesn't care about them enough to facilitate their annual raise.

Why Employee Performance Appraisal Is Painful

The manager may be uncomfortable in the judgment seat. They know they may have to justify their opinions with specific examples when the staff member asks.

They may lack skill in providing feedback and often provoke a defensive response from the employee, who may justifiably feel they are under attack. Consequently, managers avoid giving honest feedback which defeats the purpose of the performance appraisal.

In turn, the staff member whose performance is under review often becomes defensive. Whenever their performance is rated as less than the best, or less than the level at which they personally perceive their contribution, the manager is viewed as punitive.

Disagreements Create Greater Conflict

Disagreement about contribution and performance ratings can create a conflict-ridden situation that festers for months. Most managers avoid conflict that will undermine workplace harmony. In today's team-oriented work environment, it is also difficult to ask people who work as colleagues, and sometimes even friends, to take on the role of judge and defendant.

Further compromising the situation, with salary increases frequently tied to the numerical rating or ranking, the manager knows they are limiting the staff member's increase if they rate their performance less than outstanding. No wonder managers waffle.

Building a Better System

If the employee appraisal approach taken is the traditional one it is harmful to performance development, damages workplace trust, undermines workplace harmony, and fails to encourage personal best performance.

Furthermore, it underutilizes the talents of HR professionals and managers and forever limits their ability to contribute to true performance improvement within your organization.

A performance management system starts with how a position is defined and ends when you have determined why an excellent employee left your organization for another opportunity.

Within such a system, feedback to each staff member occurs regularly. Individual performance objectives are measurable and based on prioritized goals that support the accomplishment of the overall goals of the total organization. The vibrancy and

performance of your organization are ensured because you focus on developmental plans and opportunities for each staff member.

Performance Feedback

In a performance management system, feedback remains integral to a successful practice. The feedback, however, is a discussion. Both the employee and their manager have an equivalent opportunity to bring information to the dialogue.

Feedback is often obtained from peers, direct reporting staff, and customers to enhance mutual understanding of an individual’s contribution and developmental needs— commonly known as 360-degree feedback.

The developmental plan establishes the organization’s commitment to helping each person continue to expand their knowledge and skills. This is the foundation upon which a continuously improving organization builds.

The HR Challenge

Leading the adoption and implementation of a performance management system is a wonderful opportunity for the HR professional. It challenges your creativity, improves your ability to influence, allows you to foster real change in your organization, and it sure beats the heck out of nagging.

Designing a High-Performance Work System

Learning Objectives

1. Define a high-performance work system. 2. Describe the role of technology in HR. 3. Describe the use of HR systems to improve organizational performance. 4. Describe succession planning and its value.

Now it is your turn to design a high-performance work system (HPWS). HPWS is a set of management practices that attempt to create an environment within an organization where the employee has greater involvement and responsibility. Designing a HPWS involves putting all the HR pieces together. A HPWS is all about determining what jobs a company needs done, designing the jobs, identifying and attracting the type of employee needed to fill the job, and then evaluating employee performance and compensating them appropriately so that they stay with the company.

e-HRM

At the same time, technology is changing the way HR is done. The electronic human resource management (e-HRM) business solution is based on the idea that information technologies, including the Web, can be designed for human resources professionals and executive managers who need support to manage the workforce, monitor changes, and gather the information needed in decision making. At the same time, e-HRM can enable all employees to participate in the process and keep track of relevant information. For instance, your place of work provides you with a Web site where you can login; get past and current pay information, including tax forms (i.e., 1099, W-2, and so on); manage investments related to your 401(k); or opt for certain medical record- keeping services.

More generally, for example, many administrative tasks are being done online, including:

• providing and describing insurance and other benefit options • enrolling employees for those benefits • enrolling employees in training programs • administering employee surveys to gauge their satisfaction

Many of these tasks are being done by employees themselves, which is referred to as employee self-service. With all the information available online, employees can access it themselves when they need it.

Part of an effective HR strategy is using technology to reduce the manual work performance by HR employees. Simple or repetitive tasks can be performed self-service through e-HRM systems that provide employees with information and let them perform their own updates. Typical HR services that can be formed in an e-HRM system include:

• Answer basic compensation questions. • Look up employee benefits information. • Process candidate recruitment expenses. • Receive and scan resumes into recruiting software. • Enroll employees in training programs. • Maintain training catalog. • Administer tuition reimbursement. • Update personnel files.

Organizations that have invested in e-HRM systems have found that they free up HR professionals to spend more time on the strategic aspects of their job. These strategic roles include employee development, training, and succession planning.

The Value of High-Performance Work Systems

Employees who are highly involved in conceiving, designing, and implementing workplace processes are more engaged and perform better. For example, a study analyzing 132 U.S. manufacturing firms found that companies using HPWSs had significantly higher labor productivity than their competitors. The key finding was that when employees have the power to make decisions related to their performance, can access information about company costs and revenues, and have the necessary knowledge, training, and development to do their jobs—and are rewarded for their efforts—they are more productive.

For example, Mark Youndt and his colleagues demonstrated that productivity rates were significantly higher in manufacturing plants where the HRM strategy focused on enhancing human capital. Delery and Doty found a positive relationship between firm financial performance and a system of HRM practices. Huselid, Jackson, and Schuler found that increased HRM effectiveness corresponded to an increase in sales per employee, cash flow, and company market value.

HPWS can be used globally to good result. For example, Fey and colleagues studied 101 foreign-based firms operating in Russia and found significant linkages between HRM practices, such as incentive-based compensation, job security, employee training, and decentralized decision making, and subjective measures of firm performance.

Improving Organizational Performance

Organizations that want to improve their performance can use a combination of HR systems to get these improvements. For example, performance measurement systems help underperforming companies improve performance. The utility company Arizona Public Service used a performance measurement system to rebound from dismal financial results. The company developed 17 “critical success indicators,” which it measures regularly and benchmarks against the best companies in each category. Of the 17, nine were identified as “major critical success indicators.” They are:

• cost to produce kilowatt hour • customer satisfaction • fossil plants availability • operations and maintenance expenditures • construction expenditures • ranking as corporate citizen in Arizona • safety all-injury incident rate • nuclear performance • shareholder value return on assets

Each department sets measurable goals in line with these indicators, and a gainsharing plan rewards employees for meeting the indicators.

In addition, companies can use reward schemes to improve performance. Better- performing firms tend to invest in more sophisticated HRM practices, which further enhances organizational performance. Currently, about 20% of firms link employee compensation to the firm’s earnings. They use reward schemes such as employee stock ownership plans, gainsharing, and profit sharing. This trend is increasing.

Researcher Michel Magnan wanted to find out: Is the performance of an organization with a profit-sharing plan better than other firms? And, does adoption of a profit-sharing plan lead to improvement in an organization’s performance?

The reasons profit-sharing plans would improve organizational performance go back to employee motivation theory. A profit-sharing plan will likely encourage employees to monitor one another’s behavior because “loafers” would erode the rewards for everyone. Moreover, profit sharing should lead to greater information sharing, which increases the productivity and flexibility of the firm.

Magnan studied 294 Canadian credit unions in the same region (controlling for regional and sector-specific economic effects). Of the firms studied, 83 had profit sharing plans that paid the bonus in full at the end of the year. This meant that employees felt the effect of the organizational performance reward immediately, so it had a stronger

motivational effect than a plan that put profits into a retirement account, where the benefit would be delayed (and essentially hidden) until retirement.

Magnan’s results showed that firms with profit-sharing plans had better performance on most facets of organizational performance. They had better performance on asset growth, market capitalization, operating costs, losses on loans, and return on assets than firms without profit-sharing plans. The improved performance was especially driven by activities where employee involvement had a quick, predictable effect on firm performance, such as giving loans or controlling costs.

Another interesting finding was that when firms adopted a profit-sharing plan, their organizational performance went up. Profit-sharing plans appear to be a good turnaround tool because the firms that showed the greatest improvement were those that had not been performing well before the profit-sharing plan. Even firms that had good performance before adopting a profit-sharing plan had better performance after the profit-sharing plan.

Succession Planning

Succession planning is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. In a recent survey, HR executives and non-HR executives were asked to name their top human capital challenge. Nearly one-third of both executive groups cited succession planning, but less than 20% of companies with a succession plan addressed nonmanagement positions. Slightly more than 40% of firms didn’t have a plan in place.

Looking across organizations succession planning takes a number of forms (including no form at all). An absence of succession planning should be a red flag, since the competitive advantage of a growing percentage of firms is predicated on their stock of human capital and ability to manage such capital in the future. One of the overarching themes of becoming better at succession is that effective organizations become much better at developing and promoting talent from within. The figure “Levels of Succession Planning” summarizes the different levels that firms can work toward.

Levels of Succession Planning

• Level 1: No planning at all. • Level 2: Simple replacement plan. Typically the organization has only considered

what it will do if key individuals leave or become debilitated. • Level 3: The company extends the replacement plan approach to consider lower-

level positions, even including middle managers. • Level 4: The company goes beyond the replacement plan approach to identify the

competencies it will need in the future. Most often, this approach is managed along with a promote-from-within initiative.

• Level 5: In addition to promoting from within, the organization develops the capability to identify and recruit top talent externally. However, the primary source of successors should be from within, unless there are key gaps where the organization does not have key capabilities.

Dow Chemical exemplifies some best practices for succession planning:

• Dow has a comprehensive plan that addresses all levels within the organization, not just executive levels.

• CEO reviews the plan, signaling its importance. • Managers regularly identify critical roles in the company and the competencies

needed for success in those roles. • Dow uses a nine-box grid for succession planning, plotting employees along the

two dimensions of potential and performance. • High potential employees are recommended for training and development, such

as Dow Academy or an MBA.

Interpublic Group, a communications and advertising agency, established a formal review process in 2005 in which the CEOs of each Interpublic business would talk with the CEO about the leaders in their organization. The discussions span the globe because half of the company’s employees work outside the United States. A key part of the discussions is to then meet with the individual employees to tell them about the opportunities available to them. “In the past, what I saw happen was that an employee would want to leave and then all of a sudden they hear about all of the career opportunities available to them,” he says. “Now I want to make sure those discussions are happening before anyone talks about leaving,” said Timothy Sompolski, executive vice president and chief human resources officer at Interpublic Group.

The principles of strategic human resource management and high-performance work systems apply to nonprofit enterprises as well as for-profit companies, and the benefits of good HR practices are just as rewarding. When it comes to succession planning, nonprofits face a particularly difficult challenge of attracting workers to a field known for low pay and long hours. Often, the people attracted to the enterprise are drawn by the cause rather than by their own aspirations for promotion. Thus, identifying and training employees for leadership positions is even more important. What’s more, the talent shortage for nonprofits will be even more acute: A study by the Meyer Foundation and CompassPoint Nonprofit Service found that 75% of nonprofit executive directors plan to leave their jobs by 2011.

Key Takeaway

A high-performance work system unites the social and technical systems (people and technology) and aligns them with company strategy. It ensures that all the interrelated parts of HR are aligned with one another and with company goals. Technology and

structure supports employees in their ability to apply their knowledge and skills to executing company strategy. HR decisions, such as the type of compensation method chosen, improve performance for organizations and enterprises of all types.

Exercises

1. What are some ways in which HR can improve organizational performance? 2. What is the most important aspect of high performance work systems? Name

three benefits of high performance work systems. 3. How does e-HRM help a company? 4. If you were designing your company’s succession planning program, what

guidelines would you suggest?

LICENSES AND ATTRIBUTIONS CC LICENSED CONTENT, SHARED PREVIOUSLY

• Management Principles. Authored by: Anonymous. Provided by: Anonymous. Located at: http://2012books.lardbucket.org/books/management-principles- v1.1/. License: CC BY-NC-SA: Attribution-NonCommercial-ShareAlike

Appraising Employee Performance

One of the most stressful times of the year at work for many employees is when they have their

annual appraisal. Appraisals are also a very stressful time for many managers. If appraisals are

done properly, they should not be a stressful time for anyone. Making appraisals effective and

relaxed involves constant, day-to-day effort.

Too many organizations and managers see appraisals as a one-shot, once-a-year effort. Effective

appraisals involve a constant management presence so that the managers are aware of what the

employees are doing and the employees are aware of what the managers expect. It seems to be

common sense that if we want employees to produce more, we should let them know what they

are doing right and what they can improve. If managers are constantly present, they can be

providing constant consultation for the employees rather than giving criticism and praise only

once a year.

Appraisals may be ineffective for a number of theoretical reasons:

• Appraisals are often based on the assumption that the employee has had adequate and proper training. It may be unfair for the organization to criticize the individual if the

organization has not provided that training.

• The quest for good appraisals, especially if those appraisals are associated with raises or promotions, can become a political quest by employees. In this case, the employee who

is rewarded is not always the employee who performs best; it may be the employee who

knows how to work the organizational politics best.

• Some of the performance of positions in organizations is dependent on the performance of other individuals. This may lead to an individual being criticized, or praised, for things

over which the individual has no control.

• Appraisals emphasize the contributions of individuals over the performance of the organization or team. This can lead to individual actions that make that individual look

good at the cost of overall productivity.

In reality, employees need feedback to perform at their best. Broadly interpreted, appraisals

provide that feedback. Among managers and employees, however, the word appraisal has come

to mean the more formal aspects of that feedback. One of the reasons for this is the need to

keep records that satisfy legal needs.

Legal Considerations with Appraisals

Appraisals are formal documents that go into an employee's record. This makes them important

documents whenever there is a question as to the employee's performance.

Many managers give good appraisals to avoid conflict with employees, especially if they believe

that a particular employee would create conflict if he or she were to receive a poor appraisal. It

is a common occurrence in organizations for an employee to receive good appraisals but then

have to be disciplined for poor performance. If the employee contests that discipline, the

organization is in a very difficult legal position because the formal appraisals do not support the

discipline.

Appraisals are also important documents when dealing with EEO considerations. It is important

that all managers who are doing appraisals receive training in EEO and diversity issues and are

aware of all EEO laws and regulations. Legal issues with EEO are more likely to be an issue if

there is an overall trend for any of the protected statuses to have lower, or higher, appraisal

scores than the organization's nonprotected-status employees.

To be legally sound, appraisals must:

• be objective

• be uniformly applied

• be job-related

• be specific to the individual

• be specific as to the behaviors being assessed

• be done by a supervisor who is familiar with the employee's performance

• be communicated to the employee

• give the employee access to the appraisals

• provide for employee comments on the appraisal form

• have a defined appeal process

Ways to Measure Performance

A number of ways have been developed to measure performance and communicate the results of

that measurement to the employee.

One of the most common performance appraisal measurement methods uses categories. Using

the graphic rating scale, the supervisor places the employee's performance level on a scale

that is often based on a 1-to-5 or a 1-to-7 continuum. Different tasks or performance

expectations are listed, and the supervisor evaluates the employee on how they "rate" on each

task or expectation. Another category rating method is the checklist, in which the supervisor

checks the statements in a list that apply to the employee. These methods are popular because

they are quick and easy for the supervisor, and they require less training of the rater than other

methods.

Other methods compare the performance of employees. The ranking method ranks all of the

employees from highest to lowest, either on specific job functions or on overall performance. The

forced distribution method usually uses a bell-shaped curve to make sure that only a few

employees are rated at the highest and lowest levels, with most employees being rated

somewhere in the middle. The paired-comparisons method is similar to a tournament ranking

in sports. Individuals are paired against each other, with the better-performing individual being

compared with another better-performing individual until a determination of the best-performing

individual(s) is (are) obtained.

Managers are required to write an evaluation of the individual performance in the essay

method. While the essay method can be more effective in communicating strengths and

weaknesses of the individual's performance to the individual, essays are not easily quantified and

so are less useful in comparing employees in the organization or in proving that legal

requirements have been met. The critical-incident method requires raters to write a

statement when something favorable or unfavorable happens with the employee's performance.

The accumulated statements can be used in an overall appraisal of the employee's performance.

Behaviorally based methods usually involve the rater either writing observations of an employee's specific behaviors in defined areas or the rater rating how the employee performed

on different dimensions of the job as defined by behavioral statements. Behaviorally based

appraisals provide insights to an employee's performance but are difficult to develop and

validate. There may be legal problems in using behaviorally based appraisals if those appraisals

do not have validated anchors that are job-related.

Management by objectives (MBO) is designed to be a method of managing employees but

may be used effectively as an appraisal method. In MBO, the supervisor and the employee set

specific and measurable objectives for the employee to achieve. The objectives should be related

to the overall organizational goals and the employee's function in that organization. Because the

goals are specific and measurable, they provide a benchmark to see if the employee is

performing as was agreed upon by the employee and his or her supervisor. The most difficult

part of MBO is in the original setting of the objectives. MBO may also be difficult to implement for

employees who have goals that are difficult to measure.

Potential Rating Errors

One of the major problems in organizations is that the organizational culture affects how ratings

are viewed. In the leniency effect, the appraisal process may be seen as having a potential for

conflict between the supervisor and the employee. In many organizations this leads to the

supervisor giving everyone very high ratings to avoid conflict. This means that the appraisal is

not very effective because it does not give an honest rating of the employee's performance.

In some organizations the opposite occurs, causing a severity effect. The managers want to

give employees a reason to improve and build a paper trail in case an employee must be

disciplined, so they tend to give everyone low ratings. A related concept is the central

tendency effect, in which the rater tends to rate employees toward the middle of the rating

scale to avoid any extremes. When central tendency occurs, everyone in the organization tends

to be rated as average, even if they have performed superbly or poorly.

Other rater problems are the recency effect and the primacy effect, in which the most recent

performance or the first performance observed has too high a weight in the rater's appraisal of

the employee. The halo effect and the horns effect occur when a rater lets an employee's

good or bad performance on just one aspect of the job affect the overall rating they receive on

their appraisal.

The most damaging rater errors occur when raters allow bias to creep into their ratings of

employees. This bias is often unintentional, and raters are often unaware of their bias. The bias

can be expressed in terms of stereotyping individuals who are members of a protected status

as fitting an impression that the rater has of people who are members of that protected status.

This bias may show up in ways such as, for example, the rater seeing women as not being good

at decision-making, or Vietnam veterans as being mentally unstable. A bias may also show up

when a rater subconsciously rates people higher if they look and act like the rater. It can also

occur if an organization pushes a supervisor to have employees who look and act a certain way

or "fit" the organization's image. There are many cultural and organizational biases that raters

may have to be aware of so they can be sure they are not basing their employee appraisals on

these biases.

One of the best ways to protect against potential problems with employee appraisals is to have

well-defined and job-related elements that a rater can use for the appraisals. Another good

strategy is to have well-trained raters.

Formal performance appraisals are important for legal and organizational reasons. The most effective way to do appraisals is to have informal communications between managers and

employees on a regular basis. If the frequent informal appraisals are effective and are conducted

by well-trained managers, the formal and legal aspects of an appraisal system will easily follow.