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CHAPTER 10

Performance Management and Appraisal

Learning Objectives

Identify why performance management is necessary

Distinguish among three types of performance information

Explain the differences between strategic, administrative, and developmental uses of performance appraisal

Learning Objectives (continued)

Describe the advantages and disadvantages of using various sources of performance rating

Discuss the differences between rating, ranking, and goal-setting methods of appraisal

Identify several errors often committed by raters

Performance Management

Ongoing series of activities designed to align and improve individual performance to drive organizational results

Key part of performance management is performance appraisal because it helps employees improve their job performance

Performance appraisal: Process of determining how well employees do their jobs relative to a standard and communicating that information to them

Effective Performance Management System

Should do the following:

Clarify organizational expectations

Document performance for personnel records

Identify areas of success and needed development

Provide performance feedback to employees

Figure 10-1: Performance Management Linkage

Global Cultural Differences in Performance Management

In some cultures:

Rating employees and giving direct feedback is uncommon

Younger subordinates do not collaborate with their managers in discussing performance appraisals

Criticism from superiors is viewed as negative rather than as useful feedback

Components of a Performance-Focused Culture

Clear expectations, goals, and deadlines

Detailed appraisal of employee performance

Clear feedback on performance

Manager and employee training as needed

Consequences for performance

Identifying and Measuring Employee Performance

Common employee performance measures

Quality of output

Quantity of output/productivity

Timeliness of output/meeting deadlines

Punctuality and attendance

Efficiency of work completed

Effectiveness of work completed

Job duties: Important elements in a given job

Weights: Used to show the relative importance of different duties in a job

Types of Performance Information

Trait-based information

Identifies a character trait of the employee

May or may not be job related

Less useful information than the other methods

Examples: Attitude, teamwork, initiative, creativity, values, and dispositions

Behavior-based information

Focuses on specific behaviors that lead to job success

Types of Performance Information (continued)

Examples: Customer satisfaction, verbal persuasion, timeliness of response, citizenship/ethics, and effective communication

Results-based information

Considers employee accomplishments

Works well for jobs in which measurement is easy and obvious

More useful information than the other methods

Examples: Sales volume, cost reduction, units produced, and improved quality

Performance Standards

Define the expected levels of employee performance

Should be realistic, measurable, and clearly understood

Benefit both organizations and employees

Ensure that everyone involved knows the performance expectations

Example Performance Standards for a Waitperson

Performance level: Superior

Demonstrated Ability

Visits table quickly after guests are seated

Takes order exactly when guests are ready

Serves drinks and food immediately after items are prepared

Clears table and presents check immediately after meal is complete

Example Performance Standards for a Waitperson (continued 1)

Performance level: Acceptable

Demonstrated Ability

Visits table in a reasonable time after guests are seated

Takes order in a timely manner

Serves drinks and food after items are prepared

Clears table and presents check after meal is complete

Example Performance Standards for a Waitperson (continued 2)

Performance level: Needs improvement

Demonstrated Ability

Visits table when there is time to do so

Takes order when ready

Serves drinks and food after other duties are completed

Clears tables and presents check after servicing other tables

Performance Appraisals

Assess an employee’s performance

Provide a platform for feedback

Highlight and address work-related issues

Help improve job performance

Provide justification for many personnel actions such as promotions, pay raises, or terminations

Uses of Performance Appraisals

Strategic use of appraisals

Looks within the organization (dashboard perspective) to provide consistency between individual and organization performance

Administrative use of appraisals

Based on a backward-looking (rearview mirror) perspective

Developmental uses of appraisals

Based on a forward-looking (windshield) perspective

Performance Appraisals and Ethics

Performance appraisals may or may not focus on the ethics associated with how employees perform their jobs

Tying ethics to performance appraisals is one way to emphasize it

Codes of conduct can provide useful company guidelines on ethical behavior

Training can teach important workplace ethical values

Communication can help promote an ethical culture

Decisions about the Performance Appraisal Process

Identifying the appraisal responsibilities of the H R unit and of the operating managers

H R unit designs an organization’s performance appraisal system and collects and analyzes all ratings to ensure that the process does not result in adverse impact

Managers then use the appraisal system to evaluate employees

Selecting the type of appraisal system to use

Informal appraisals: Conducted by supervisors whenever necessary

Decisions about the Performance Appraisal Process (continued)

Systematic appraisal: Occurs when

The communication between manager and employee is more formal

A system is in place to report managerial observations and assessment of employee performance

Establishing the timing of appraisals

Most companies require managers to conduct appraisals once or twice a year, most often annually

Determining who will provide evaluation input

Possible Performance Rating Situations

Supervisors rating their employees

Based on the assumption that the immediate supervisor is the person most qualified to evaluate an employee’s performance realistically and fairly

Employees rating their superiors

Helps identify competent managers

Helps make a manager more responsive to employees

Contributes to career development efforts for managers by identifying areas for growth

Possible Performance Rating Situations (continued 1)

Team members rating each other

Useful when supervisors don’t have the opportunity to observe each employee working, but work group members do

Employees rating themselves

Helps employees think about their strengths and weaknesses and set goals for improvement

Outside sources rating employees

Involves the people outside the immediate work group participating in performance reviews

Possible Performance Rating Situations (continued 2)

Combining multiple sources (360-degree rating)

Person is appraised by:

Manager

Coworkers or peers

Subordinates

Self

Customers

Uses of 360-Degree Feedback

Developmental use

Helps evaluate conflict resolution skills, decision-making abilities, team effectiveness, communication skills, managerial styles, and technical capabilities

Effectiveness depends on the accountability of the individuals who have been assessed

Administrative use

Results can be used for compensation, promotion, termination, and other administrative decisions

Graphic Rating Scale

Allows the rater to mark an employee’s performance on a continuum indicating low to high levels of a particular characteristic

Helps appraise three aspects of performance

Descriptive categories, such as quantity of work, attendance, and dependability

Job duties, taken from the job description

Behavioral dimensions, such as decision making, employee development, and communication effectiveness

Graphic Rating Scale (continued)

How well employees meet established standards is expressed numerically (5, 4, 3, 2, and 1) or verbally (outstanding, meets standards, and below standards)

Concerns

Evaluation criteria may not be representative of job performance elements

Reduces employees’ confidence in evaluation fairness and leads to more legal issues for firms

Traits or factors are often grouped, and the rater is given only one box to check

Sample Terms for Defining Standards

Outstanding: The person is so successful at this job criterion that special note should be made, and performance ranks in the top 10%

Exceeds Expectations: Performance is better than average for the unit, given the common standards and unit results

Meets Expectations: Performance is at or above the minimum standards

This level is what one would expect from most experienced, competent employees

Sample Terms for Defining Standards (continued)

Below Expectations: Performance is slightly below the minimum standards

Potential to improve within a reasonable time frame is evident

Unsatisfactory: Performance is well below standard

Whether the person can improve to meet the minimum standards is questionable

Graphic Rating Scale (continued 1)

Behavioral rating scales

Designed to assess individual actions instead of personal attributes and characteristics

Behaviorally anchored rating scale (B A R S)

Specific examples of job behaviors are anchored or measured against a scale of performance levels

Figure 10-11: Behaviorally Anchored Rating Scale for Customer Service Skills

Comparative Methods

Ranking: Employees are listed from highest to lowest based on their performance levels and relative contributions

Drawbacks

Magnitude of the performance differences between employees is not clearly indicated

Ranking task becomes unwieldy if the group of employees to be ranked is large

Ranking means that someone must be last, which ignores the possibility that the last-ranked individual in one group might be equal to the top-ranked employee in a different group

Comparative Methods (continued)

Forced distribution: Ratings of employees’ performance levels are distributed along a bell-shaped curve

Forces managers to identify high, average, and low performers, with a limited percentage permitted to earn each ranking level

Figure 10-12: Forced Distribution on a Bell-Shaped Curve

Narrative Methods

Critical incident: Manager keeps a written record of both favorable and unfavorable employee actions during the entire rating period

Essay: Manager writes a short essay describing each employee’s performance during the rating period

Allows the rater more flexibility than other methods do, sometimes too much

Appraisers often combine the essay with other methods

Management by Objectives (M B O)

Specific performance appraisal method that highlights the performance goals that an individual and manager identify together

Stages

Job review and agreement

Development of performance standards

Setting of objectives

Frequent performance discussions

Combinations of Methods

No single appraisal method is best for all situations

Performance measurement system that uses a combination of methods may be sensible

Managers can work with H R staff to choose and mix methods to realize advantages of each approach

Different categories of employees might require different combinations of methods

Topics to Be Covered in Appraisal Training for Managers

Appraisal process and timing

Performance criteria and job standards that should be considered

How to avoid common rating errors

How to communicate positive and negative feedback

When and how to discuss training and development goals

Conducting and discussing the compensation review

Types of Rater Errors

Varying standards

Recency and primacy effects

Central tendency, leniency, and strictness errors

Rater bias

Halo and horns effects

Contrast error

Similar-to-me/different-from-me errors

Sampling error

Appraisal Discussion

Manager should clearly communicate how an employee’s positive contributions have helped the organization perform well

Discussing poor performance

Managers can use questions and discussion points that enable employees to identify their own deficiencies and develop useful plans for progress

Feedback can inspire employees to improve their performance when delivered effectively

Clarity, conflicts, confidence, and conviction can inspire employees

Appraisal Discussion Hints for Appraisers

What appraisers should do:

Prepare before interview

Focus on objective performance

Be specific about ratings and feedback

Develop a future improvement plan

Reinforce employee successes

Appraisal Discussion Hints for Appraisers (continued)

What appraisers should not do:

Talk too much

Berate or lecture the employee

Focus entirely on negative job performance

Think that the employee always has to agree

Compare the employee with others

Appraisal Discussion (continued)

Reactions of managers and employees

Managers:

Might have negative perceptions about the process

May experience internal conflict arising from being a judge on one hand and a coach and a counselor on the other

Might be tempted to make the employee’s ratings positive and avoid unpleasantness

Employees may see the process as a threat and feel that the only way for them to get a higher rating is for someone else to receive a low rating

Effective Performance Management Systems

Should be:

Beneficial as a development tool

Useful as an administrative tool

Legal and job related

Viewed as generally fair by employees

Effective in documenting employee performance

Clear about who are high, average, and low performers

H U M A N R E S O U R C E

MANAGEMENT

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