Assigment For Researcher_D

1. What steps can I, as a manager, take to make the performance management process more relevant and acceptable to those who will be affected by it?

2. How can we best fit our approach to performance management with the strategic direction of our department and business?

3. Should managers and nonmanagers be appraised from multiple perspectives—for example, by those above, by those below, by co-equals, and by customers?

4. What strategy should we use to train raters at all levels in the mechanics of performance management and in the art of giving feedback?

5. What would an effective performance management process look like?

Sources: Lawler, E. E., III. (2003). Reward practices and performance management system effectiveness. Organizational Dynamics, 32 (4), 396-404; Boyle, M. (2001, May 28). Performance reviews: Perilous curves ahead, Fortune, pp. 187-188; Welch, J., with Byrne, J. A. (2001, Sept. 17). Jack and the people factory, Fortune, pp. 75-86; Grote, D. (2002, Nov./Dec.). Forced ranking: Behind the scenes. Across the Board, pp. 40-45.

In companies across the country, from General Electric to Hewlett-Packard, forced ranking systems (also known as forced distributions or “rank and yank”)—in which all employees are ranked against one another and grades are distributed along some sort of bell-shaped curve—are creating a firestorm of controversy. In recent years employees have filed class-action lawsuits against Microsoft and Conoco as well as Ford, claiming that the companies discriminate in assigning grades. In each case a different group of disaffected employees brought the charges: older workers at Ford, African Americans and women at Microsoft, U.S. citizens at Conoco. When the American Association of Retired Persons (AARP) sued Goodyear for age discrimination, the company immediately abandoned its forced-ranking system.

Here's how some companies assign grades. General Electric divides employees into top (20 percent), middle (70 percent), and bottom (10 percent) categories. Hewlett-Packard uses a 1:5 scale, with 15 percent of employees getting a 5 (the top grade) and 5 percent getting a 1. The percentage of employees getting 2, 3, and 4 varies. Finally, Microsoft ranks employees from 1 to 5. Most fall between 2.5 and 4.5. Such systems have been around for decades, but thanks to a slowing economy and an increased focus on pay for performance, a quarter of theFortune 500 (by one estimate), have instituted such forced rankings or gotten tougher with their existing systems. For example, at Hewlett-Packard a full 5 percent of its workforce now receive HP's lowest grade, rather than the fuzzy 0 to 5 percent of years past.

Of course, one reason that employees are up in arms about forced rankings is that they suspect—often correctly—that the rankings are a way for companies to rationalize firings more easily. Evidence indicates that doing that actually reduces the effectiveness of a performance management system. In fact, former General Electric CEO Jack Welch noted an important caution against implementing a forced distribution into any company:

I wouldn't want to inject a vitality curve [i.e., a forced distribution] cold-turkey into an organization without a performance culture already in place. Differentiation is hard stuff. Our curve works because we spent over a decade with candor and openness at every level.

In the conclusion to this case we will examine some of the arguments for and against the use of forced rankings, and explain the dilemma they pose, but in the meantime, what do you think?

1. Do you support the use of forced rankings or not?

2. If the criteria used to determine an employee's rank are more qualitative than quantitative, does this undermine the forced-ranking system?

3. Suppose all of the members of a team are superstars. Can forced ranking deal with that situation?

The chapter-opening vignette reveals just how complex performance management can be, because it includes both developmental (feedback) and administrative (pay, promotions) issues, as well as both technical aspects (design of an appraisal system) and interpersonal aspects (appraisal interviews). This chapter's objective is to present a balanced view of the performance management process, considering both its technical and its interpersonal aspects. Let's begin by examining the nature of this process.

Consider the following situations:

· The athlete searching for a coach who really understands her.

· The student waiting to see his guidance counselor at school.

· The worker who has just begun working for a new boss.

· A self-managing work team and a supervisor about to meet to discuss objectives for the next quarter.

What do these situations all have in common? The need to manage performance effectively—either at the level of the individual or of the work team. Think of performance management as a kind of compass; one that indicates a person's actual direction as well as a person's desired direction. Like a compass, the job of the manager (or athletic coach or school guidance counselor) is to indicate where that person is now, and to help focus attention and effort on the desired direction.

Unfortunately, the concept of performance management means something very specific, and much too narrow, to many managers. They tend to equate it with performance appraisal—an exercise they typically do once a year to identify and discuss job-relevant strengths and weaknesses of individuals or work teams. This is a mistake! Would it surprise you to learn that in a recent international survey of 8,000 employees and managers fully one-third of employees reported that their manager provided little or no assistance in improving their performance and that they had never had a formal discussion with their manager regarding their overall performance? Conversely, more than 90 percent said that they would welcome the opportunity to have a real dialog about their performance and to discuss their potential for progress. Senior executives in the same survey said that having such an open and honest dialogue is one of the most difficult things they are required to do. Perhaps that is why so many of them fail to do it.2

Obviously if performance management were easy to do, more firms would do it. One of the reasons it is difficult to execute well throughout an entire organization is that performance management demands daily, not annual, attention from every manager. It is part of a continuous process of improvement over time. Does it really require daily attention? Think of it this way. Why is the weekend tennis player (“the player”) willing to pay handsomely for private lessons? So that he or she can have a professional who understands and can demonstrate what good performance looks like, observe the player's performance, make an appraisal of it, and then provide real-time feedback to build sound habits and eliminate unsound ones. Subsequent lessons stay focused on the overall objective (e.g., a smooth, accurate serve), while recalling information about performance that builds on the foundation of earlier lessons. That's managing for maximum performance.

So what is the role of performance appraisal in the overall performance management process? Performance appraisal is a necessary, but far from sufficient, part of performance management. Managers who are committed to moving from a performance appraisal orientation to one of performance management tell us that the first step is probably the hardest, for it involves a break with tradition. Typically, appraisal is done annually, or in some firms, quarterly. Performance management requires willingness and a commitment to focus on improving performance at the level of the individual or team every day. A compass provides instantaneous, real-time information that describes the difference between one's current and desired course. To practice sound performance management, managers must do the same thing—provide timely feedback about performance, while constantly focusing everyone's attention on the ultimate objective (e.g., world-class customer service).

At a general level, the broad process of performance management requires that you do three things well:

1. Define performance.

2. Facilitate performance.

3. Encourage performance.

Let's explore each of these ideas briefly.

A manager who defines performance ensures that individual employees or teams know what is expected of them, and that they stay focused on effective performance.4 How does the manager do this? By paying careful attention to three key elements: goals, measures, and assessment.

The mere presence of goals is not sufficient. Managers must also be able to measure the extent to which goals have been accomplished. Goals such as “make the company successful” are too vague to be useful. Measures such as the number of defective parts produced per million or the average time to respond to a customer's inquiry are much more tangible.

In defining performance, the third requirement is assessment. Here is where performance appraisal comes in. Regular assessment of progress toward goals focuses the attention and efforts of an employee or a team. If a manager takes the time to identify measurable goals, but then fails to assess progress toward them, he's asking for trouble. To define performance properly, therefore, you must do three things well: set goals, decide how to measure accomplishment, and provide regular assessments of progress. Doing so will leave no doubt in the minds of your people what is expected of them, how it will be measured, and where they stand at any given point in time. There should be no surprises in the performance management process—and regular appraisals help ensure that there won't be.

Managers who are committed to managing for maximum performance recognize that one of their major responsibilities is to eliminate roadblocks to successful performance.9 Another is to provide adequate resources to get a job done right and on time, and a third is to pay careful attention to selecting employees, all of which are part of performance facilitation.

What are some examples of obstacles that can inhibit maximum performance? Consider just a few: outdated or poorly maintained equipment, delays in receiving supplies, inefficient design of work spaces, and ineffective work methods. Employees are well aware of these, and they are only too willing to identify them—if managers will only ask for their input. Then it's the manager's job to eliminate these obstacles.

Having eliminated roadblocks to successful performance, the next step is to provide adequate resources—capital resources, material resources, or human resources. After all, if employees lack the tools to reach the challenging goals they have set, they will become frustrated and disenchanted. Indeed, one observer has gone so far as to say “It's immoral not to give people tools to meet tough goals.”10 Conversely, employees really appreciate it when their employer provides everything they need to perform well. Not surprisingly, they usually do perform well under those circumstances.

The last area of management responsibility in a coordinated approach to performance management is performance encouragement. To encourage performance, especially repeated good performance, it's important to do three more things well: (1) provide a sufficient amount of rewards that employees really value, (2) in a timely, (3) fair manner.

Don't bother offering rewards that nobody cares about, like a gift certificate to see a fortune teller. On the contrary, begin by asking your people what's most important to them—for example, pay, benefits, free time, merchandise, or special privileges. Then consider tailoring your awards program so that employees or teams can choose from a menu of similarly valued options.

Next, provide rewards in a timely manner, soon after major accomplishments. For example, North American Tool & Die Inc., a metal-stamping plant in San Leandro, California, provides monthly cash awards for creativity. In one instance, an employee earned $500 for installing an oil-recycling machine. The company uses large amounts of oil in 55-gallon drums to lubricate its giant metalstamping machinery. One employee purchased a $900 oil-recycling machine to filter the dirty oil so that it could be reused. The machine paid for itself in one month, and the company avoided potential toxic waste problems associated with disposal of the dirty oil. The employee received the reward within two weeks after the recycling machine began to operate. This is important: If there is an excessive delay between effective performance and receipt of the reward, then the reward loses its potential to motivate subsequent high performance.

Finally, provide rewards in a manner that employees consider fair. Fairness is a subjective concept, but it can be enhanced by adhering to four important practices:12

1. Voice—collect employee input through surveys or interviews.

2. Consistency—ensure that all employees are treated consistently when seeking input and communicating about the process for administering rewards.

3. Relevance—as noted earlier, include rewards that employees really care about.

4. Communication—explain clearly the rules and logic of the rewards process.

Not surprisingly, employees often behave very responsibly when they are asked in advance for their opinions about what is fair. Indeed, it only seems fair to ask them!

In summary, managing for maximum performance requires that you do three things well: define performance, facilitate performance, and encourage performance. Like a compass, the role of the manager is to provide orientation, direction, and feedback. These ideas are shown graphically in Figure 9-1.

As we have seen, performance appraisal plays an important part in the overall process of performance management. Hence it is important that we examine it in some detail. Performance appraisal has many facets. It is an exercise in observation and judgment, it is a feedback process, and it is an organizational intervention. It is a measurement process as well as an intensely emotional process. Above all, it is an inexact, human process. Not surprisingly, therefore, it is judged effective in less than 10 percent of the organizations that use it.14 In view of such widespread dissatisfaction, why do appraisals continue to be used? What purposes do they serve?

1. Appraisals provide legal and formal organizational justification for employment decisions to promote outstanding performers; to weed out marginal or low performers; to train, transfer, or discipline others; to justify merit increases (or no increases); and as one basis for reducing the size of the workforce. In short, appraisal serves as a key input for administering a formal organizational reward and punishment system.

2. Appraisals are used as criteria in test validation. That is, test results are correlated with appraisal results to evaluate the hypothesis that test scores predict job performance.15 However, if appraisals are not done carefully, or if considerations other than performance influence appraisal results, the appraisals cannot be used legitimately for any purpose.

3. Appraisals provide feedback to employees and thereby serve as vehicles for personal and career development.

4. Appraisals can help to identify developmental needs of employees and also to establish objectives for training programs.

5. Appraisals can help diagnose organizational problems by identifying training needs and the personal characteristics to consider in hiring, and they also provide a basis for distinguishing between effective and ineffective performers. Appraisal therefore represents the beginning of a process, rather than an end product.16 These ideas are shown graphically in Figure 9-2.

Despite their shortcomings, appraisals continue to be used widely, especially as a basis for tying pay to performance.17 To attempt to avoid these shortcomings by doing away with appraisals is no solution, for whenever people interact in organized settings, appraisals will be made—formally or informally. The real challenge, then, is to identify appraisal techniques and practices that (1) are most likely to achieve a particular objective and (2) are least vulnerable to the obstacles listed above. Let us begin by considering some of the fundamental requirements that determine whether a performance appraisal system will succeed or fail.

Performance appraisal actually encompasses two distinct processes: observation and judgment. Managers must observe performance, certainly a representative sample of an employee's performance, if they are to be competent to judge its effectiveness.18 Yet some managers assign performance ratings on the basis of small (and perhaps unrepresentative) samples of their subordinates' work. Others assign ratings based only on the subordinate's most recent work. Is this ethical? And further, is it ethical to assign performance ratings (either good or bad) that differ from what a manager knows a subordinate deserves?

Legally and scientifically, the key requirements of any appraisal system are relevance, sensitivity, and reliability. In the context of ongoing operations, the key requirements are acceptability and practicality.19 Let's consider each of these.

Relevance implies that there are clear links between the performance standards for a particular job and organizational objectives and between the critical job elements identified through a job analysis and the dimensions to be rated on an appraisal form. In short, relevance is determined by answering the question “What really makes the difference between success and failure on a particular job, and according to whom?” The answer to the latter question is simple: the customer. Customers may be internal (e.g., your immediate boss, workers in another department) or external (those who buy your company's products or services). In all cases, it is important to pay attention to the things that the customer believes are important (e.g., on-time delivery, zero defects, information to solve business problems).

Performance standards translate job requirements into levels of acceptable or unacceptable employee behavior. They play a critical role in the job analysis—performance appraisal linkage, as Figure 9-3 indicates. Job analysis identifies what is to be done. Performance standards specify how well work is to be done.

Relevance also implies the periodic maintenance and updating of job analyses, performance standards, and appraisal systems. Should the system be challenged in court, relevance will be a fundamental consideration in the arguments presented by both sides.

Sensitivity implies that a performance appraisal system is capable of distinguishing effective from ineffective performers. If it is not, and the best employees are rated no differently from the worst employees, then the appraisal system cannot be used for any administrative purpose, it certainly will not help employees to develop, and it will undermine the motivation of both supervisors (“pointless paperwork”) and subordinates.

A major concern here is the purpose of the rating. One study found that raters process identical sets of performance appraisal information differently, depending on whether a merit pay raise, a recommendation for further development, or the retention of a probationary employee is involved.20 These results highlight the conflict between appraisals made for administrative purposes and those made for employee development. Appraisal systems designed for administrative purposes demand performance information about differences between individuals, while systems designed to promote employee growth demand information about differences within individuals. The two different types of information are not interchangeable in terms of purposes, and that is why performance management systems designed to meet both purposes are more complex and costly.

A third requirement of sound appraisal systems is reliability. In this context it refers to consistency of judgment. For any given employee, appraisals made by raters working independently of one another should agree closely. In practice, ratings made by supervisors tend to be more reliable than those made by peers.21 Certainly raters with different perspectives (e.g., supervisors, peers, subordinates) may see the same individual's job performance very differently.22 To provide reliable data, each rater must have an adequate opportunity to observe what the employee has done and the conditions under which he or she has done it; otherwise, unreliability may be confused with unfamiliarity.

Note that throughout this discussion there has been no mention of the validity or accuracy of appraisal judgments. This is because we really do not know what “truth” is in performance appraisal. However, by making appraisal systems relevant, sensitive, and reliable—by satisfying the scientific and legal requirements for workable appraisal systems—we can assume that the resulting judgments are valid as well.

Smart managers enlist the active support and cooperation of subordinates or teams by making explicit exactly what aspects of job performance they will be evaluated on. As we have seen, performance definition is the first step in performance management. Only after managers and subordinates or team members define performance clearly can we hope for the kind of acceptability and commitment that is so sorely needed in performance appraisal.

Practicality implies that appraisal instruments are easy for managers and employees to understand and use. Those that are not, or that impose inordinate time demands on all parties, simply are not practical, and managers will resist using them. As we have seen, managers need as much encouragement and organizational support as possible if thoughtful performance management is to take place.

In a broader context, we are concerned with developing employment decision systems. From this perspective, relevance, sensitivity, and reliability are simply technical components of a system designed to make decisions about employees. As we have seen, just as much attention needs to be paid to ensuring the acceptability and practicality of appraisal systems. These are the five basic requirements of performance appraisal systems, and none of them can be ignored. However, because some degree of error is inevitable in all employment decisions, the crucial question to be answered in regard to each appraisal system is whether its use results in less human, social, and organizational cost than is currently paid for these errors. The answers to that question can result only in a wiser, fuller use of talent.

LEGALITIES: PERFORMANCE APPRAISAL

There is a rich body of case law on performance appraisal, and multiple reviews of it reached similar conclusions.25 To avoid legal difficulties, consider taking the following steps:

1. Conduct a job analysis to determine the characteristics necessary for successful job performance.

2. Incorporate these characteristics into a rating instrument. This may be done by tying rating instruments to specific job behaviors (e.g., BARS, see page 342), but the courts routinely accept less sophisticated approaches, such as simple graphic rating scales. Regardless of the method used, provide written standards to all raters.

4. Establish a system to detect potentially discriminatory effects or abuses of the appraisal process.

5. Include formal appeal mechanisms, coupled with higher-level review of appraisals.

6. Document the appraisals and the reason for any termination decisions. This information may prove decisive in court. Credibility is enhanced by documented appraisal ratings that describe specific examples of poor performance based on personal knowledge.26

7. Provide some form of performance counseling or corrective guidance to assist poor performers.

Here is a good example of step 6. In Stone v. Xerox, the organization had a fairly elaborate procedure for assisting poor performers.27 Stone was employed as a sales representative and in fewer than six months had been given several written reprimands concerning customer complaints about his selling methods and failure to develop adequate written selling proposals. As a result, he was placed on a one-month performance improvement program designed to correct these deficiencies. This program was extended 30 days at Stone's request. When his performance still did not improve, he was placed on probation and told that failure to improve substantially would result in termination. Stone's performance continued to be substandard, and he was discharged at the end of the probationary period. When he sued Xerox, he lost.

Certainly, the type of evidence required to defend performance ratings is linked to the purposes for which the ratings are made. For example, if appraisal of past performance is to be used as a predictor of future performance (i.e., promotions), evidence must show (1) that the ratings of past performance are, in fact, valid and (2) that the ratings of past performance are statistically related to future performance in another job.28 At the very least, this latter step should include job analysis results indicating the extent to which the requirements of the lower- and higher-level jobs overlap. Finally, to assess adverse impact, organizations should keep accurate records of who is eligible for and interested in promotion. These two factors, eligibility and interest, define the applicant group.

In summary, it is not difficult to offer prescriptions for scientifically sound, court-proof appraisal systems, but as we have seen, implementing them requires diligent attention by organizations plus a commitment to making them work. In developing a performance appraisal system, the most basic requirement is to determine what you want the system to accomplish. This requires a strategy for the management of performance.

Managers, therefore, have choices. They can emphasize short-or long-term objectives in the performance management process, or some combination of the two. Short-term objectives emphasize such things as bottom-line results for the current quarter. Long-term objectives emphasize such things as increasing market share and securing repeat business from customers. To be most useful, however, the strategic management of performance must be linked to the strategies an organization (or strategic business unit) uses to gain competitive advantage—for example, innovation, speed, quality enhancement, or cost control.30

Some appraisal systems that are popular in the United States, such as management by objectives (MBO), are less popular in other parts of the world, such as Japan and France. MBO focuses primarily on results, rather than on how the results were accomplished. Typically it has a short-term focus, although this need not always be the case.

In Japan, greater emphasis is placed on the psychological and behavioral sides of performance appraisal than on objective outcomes. Thus, an employee will be rated in terms of the effort he or she puts into a job; on integrity, loyalty, and cooperative spirit; and on how well he or she serves the customer. Short-term results tend to be much less important than long-term personal development, the establishment and maintenance of long-term relationships with customers (i.e., behaviors), and increasing market share.31

Once managers decide what they want the appraisal system to accomplish their next question is “What's the best method of performance appraisal, which technique should I use?” As in so many other areas of HR management, there is no simple answer. The following section considers some alternative methods, along with their strengths and weaknesses. Because readers of this book are more likely to be users of appraisal systems than developers of them, the following will focus most on describing and illustrating them. For more detailed information, consult the references at the end of the chapter.

Many regard rating methods or formats as the central issue in performance appraisal; this, however, is not the case.32 Broader issues must also be considered—such as trust in the appraisal system; the attitudes of managers and employees; the purpose, frequency, and source of appraisal data; and rater training. Viewed in this light, rating formats play only a supporting role in the overall appraisal process.

Evidence indicates that ratings (i.e., judgments about performance) are not strongly related to results.33 Why? Ratings depend heavily on the mental processes of the rater. Because these processes are complex, there may be errors of judgment in the ratings. Conversely, results depend heavily on conditions that may be outside the control of the individual worker, such as the availability of supplies or the contributions of others. Thus, most measures of results provide only partial coverage of the overall domain of job performance. With these considerations in mind, let's examine the behavior-and results-oriented systems more fully.

The simplest type of absolute rating system is the narrative essay, in which a rater describes, in writing, an employee's strengths, weaknesses, and potential, together with suggestions for improvement. This approach assumes that a candid statement from a rater who is knowledgeable about an employee's performance is just as valid as more formal and more complicated rating methods.

If essays are done well, they can provide detailed feedback to subordinates regarding their performance. On the other hand, comparisons across individuals, groups, or departments are almost impossible since different essays touch on different aspects of each subordinate's performance. This makes it difficult to use essay information for employment decisions because subordinates are not compared objectively and ranked relative to one another. Methods that compare employees to one another are more useful for this purpose.

Simple ranking requires only that a rater order all employees from highest to lowest, from “best” employee to “worst” employee.Alternation ranking requires that a rater initially list all employees on a sheet of paper. From this list he or she first chooses the best employee (No. 1), then the worst employee (No. n), then the second best (No. 2), then the second worst (No. n − 1), and so forth, alternating from the top to the bottom of the list until all employees have been ranked.

Use of paired comparisons is a more systematic method for comparing employees to one another. Here each employee is compared with every other employee, usually in terms of an overall category such as “present value to the organization.” The number of pairs of ratees to be compared may be calculated from the formula [n(n − 1)]/2. Hence if 10 individuals were being compared, [10(9)]/2 or 45 comparisons would be required. The rater's task is simply to choose the “better” of each pair, and each employee's rank is determined by counting the number of times she or he was rated superior. As you can see, the number of comparisons becomes quite large as the number of employees increases. On the other hand, ranking methods that compare employees to one another are useful for generating initial rankings for purposes of employment decisions.

Forced distribution does eliminate clustering almost all employees at the top of the distribution (rater leniency), at the bottom of the distribution (rater severity), or in the middle (central tendency). However, it can foster a great deal of employee resentment if an entire group of employees as a group is either superior or substandard. It is most useful when a large number of employees must be rated and there is more than one rater. Who tends to be most lenient? One study found that individuals who score high in agreeableness (trustful, sympathetic, cooperative, and polite) tend to be most lenient, while those who score high in conscientiousness (strive for excellence, high performance standards, set difficult goals) tend to be least lenient.34

Here the rater is provided with a series of statements that describe job-related behavior. His or her task is simply to “check” which of the statements, or the extent to which each statement, describes the employee. In this approach raters are not so much evaluators as reporters whose task is to describe job behavior. Moreover, descriptive ratings are likely to be more reliable than evaluative (good—bad) ratings,35 and they reduce the cognitive demands placed on raters.36 One such method, the Likert method of summed ratings, presents a declarative statement (e.g., “She or he follows up on customer complaints”) followed by several response categories, such as “always,” “very often,” “fairly often,” “occasionally,” and “never.” The rater checks the response category that he or she thinks describes the employee best. Each category is weighted, for example, from 5 (“always”) to 1 (“never”) if the statement describes desirable behavior. To derive an overall numerical rating (or score) for each employee, the weights of the responses that were checked for each item are summed. Figure 9-5 shows a portion of a summed rating scale for appraising teacher performance.

Mr. Wang encouraged the customer to try our latest word-processing package by having the customer sit down at the computer and write a letter. The finished product was full of typographical and spelling errors, each of which was highlighted for the customer when Mr. Wang applied a “spelling checker” to the written material. As a result, Mr. Wang sold the customer the word-processing program plus a typing tutor.

Such anecdotes force attention onto the ways in which situations determine job behavior and also on ways of doing the job successfully that may be unique to the person described. Hence they can provide the basis for training programs. Critical incidents also lend themselves nicely to appraisal interviews because supervisors can focus on actual job behaviors rather than on vaguely defined traits. They are judging performance, not personality. On the other hand, supervisors may find that recording incidents for their subordinates on a daily or even a weekly basis is burdensome. Moreover, incidents alone do not permit comparisons across individuals or departments. Graphic rating scales may overcome this problem.

Many organizations use graphic rating scales.37Figure 9-6 shows a portion of one such scale. Many different forms of graphic rating scales exist. In terms of the amount of structure provided, the scales differ in three ways:

1. The degree to which the meaning of the response categories is defined (in Figure 9-6, what does “conditional” mean?).

2. The degree to which the individual who is interpreting the ratings (e.g., a higher-level reviewing official) can tell clearly what response was intended.

3. The degree to which the performance dimensions are defined for the rater (in Figure 9-5, what does “dependability” mean?).

A variation of the simple graphic rating scale is behaviorally anchored rating scales (BARS). Their major advantage is that they define the dimensions to be rated in behavioral terms and use critical incidents to describe various levels of performance. BARS therefore provide a common frame of reference for raters. An example of the job knowledge portion of a BARS for police patrol officers is shown in Figure 9-7. BARS require considerable effort to develop,39 yet there is little research evidence to support the superiority of BARS over other types of rating systems.40 Nevertheless, the participative process required to develop them provides information that is useful for other organizational purposes, such as communicating clearly to employees exactly what “good performance” means in the context of their jobs.

A well-known process of managing that relies on goal-setting to establish objectives for the organization as a whole, for each department, for each manager within each department, and for each employee, management by objectives (MBO) is not a measure of employee behavior. Rather, it is a measure of each employee's contribution to the success of the organization.41

The Air Force Research Laboratory, which employs 3,200 scientists and engineers, applies a slightly different twist to traditional MBO. It assumes that all staff members are performing well, and it evaluates them on the contribution their particular jobs make to the mission of the organization. The lab encourages the scientists and engineers to take on as much responsibility as they can handle. Naturally they gravitate to the toughest jobs they can perform competently, and their pay is based on the value of those jobs to the lab.43

To some, MBO is a complete system of planning and control and a complete philosophy of management.44 In theory, MBO promotes success in each employee because, as each employee succeeds, so do that employee's manager, the department, and the organization. But this is true only to the extent that the individual, departmental, and organizational goals are compatible.45Very few applications of MBO have actually adopted a formal cascading process to ensure such a linkage. An effective MBO system takes from three to five years to implement, and because relatively few firms are willing to make that kind of commitment, it is not surprising that MBO systems often fail.46

Work planning and review is similar to MBO; however, it places greater emphasis on the periodic review of work plans by both supervisor and subordinate in order to identify goals attained, problems encountered, and the need for training.47 This approach has long been used by Corning Inc. Table 9-1 presents a summary of the appraisal methods we have just discussed.

An extensive review of the research literature that relates the various rating methods to indicators of performance appraisal effectiveness found no clear “winner.”48 However, the researchers were able to provide several “if … then” propositions and general statements based on their study, including the following:

· If the objective is to compare employees across raters for important employment decisions (e.g., promotion, merit pay), don't use MBO or work planning and review. They are not based on a standardized rating scheme for all employees.

· If you use a BARS, also make diary-keeping a part of the process. This will improve the accuracy of the ratings, and it also will help supervisors distinguish between effective and ineffective employees.

· If objective performance data are available, MBO is the best strategy to use. Work planning and review is not as effective as MBO under these circumstances.

· In general, appraisal methods that are best in a broad, organizational sense—BARS and MBO—are the most difficult to use and maintain. Recognize, however, that no rating method is foolproof.

· Methods that focus on describing, rather than evaluating, behavior (e.g., BARS, summed rating scales) produce results that are the most interpretable across raters. They help remove the effects of individual differences in raters.49

· No rating method has been an unqualified success when used as a basis for merit pay or promotional decisions.

· When certain statistical corrections are made, the correlations between scores on alternative rating formats are very high. Hence all the formats measure essentially the same thing.

Which techniques are most popular? A recent survey of performance management systems and practices in 278 organizations (two-thirds of which were multinational enterprises) from 15 different countries revealed three important findings:

1. Managers rely on a balance of subjective (66 percent) and objective (71 percent) data in performance reviews.

2. Over the past five years forced rankings have become more common (34 percent of organizations use them), but few managers find them to be effective.

3. Only 20 percent of organizations use online or software-based performance management systems, but another third plan to introduce them.50

The most fundamental requirement for any rater is that he or she has an adequate opportunity to observe the ratee's job performance over a reasonable period of time (e.g., six months). This suggests several possible raters.

The Immediate Supervisor.

Peers.

In some jobs, such as outside sales, the immediate supervisor may observe a subordinate's actual job performance only rarely (and indirectly, through written reports). In other environments, such as self-managed work teams, there is no “supervisor.” Sometimes objective indicators, such as number of units sold, can provide useful performance-related information, but in other circumstances the judgment of peers is even better. Peers can provide a perspective on performance that is different from that of immediate supervisors. Thus, a member of a cross-functional team may be in a better position to rate another team member than that team member's immediate supervisor. However, to reduce potential friendship bias while simultaneously increasing the feedback value of the information provided, it is important to specify exactly what the peers are to evaluate54—for example, “the quality of her help on technical problems.”

Another approach is to require input from a number of colleagues. Thus, at Harley-Davidson, salaried workers have five colleagues critique their work. They are “accountability partners.”55 Evidence from a recent study that used peer appraisals to provide developmental feedback found that features such as prompting appraisers for both negative and positive feedback, pooling feedback from multiple appraisers, and face-to-face discussions increased the reliability, validity, and user acceptance of the feedback. Such feedback had an immediate, positive impact on perceptions of open communication, motivation to perform well, the viability of the group, and member relationships. In addition, the beneficial effects of the feedback last longest if the feedback is conducted before the group is engaged in executing a project, yet not so far in advance that the project is not yet a priority.56

Subordinates.

Appraisal by subordinates can be a useful input to the immediate supervisor's development,57 and the ratings are of significantly higher quality when used for that purpose.58 Subordinates know firsthand the extent to which the supervisor actually delegates, how well he or she communicates, the type of leadership style he or she is most comfortable with, and the extent to which he or she plans and organizes. However, ratings by subordinates tend to have less impact on supervisors with more cynical attitudes toward organizational change than those who are less cynical, perhaps because those who are more cynical are less likely to take action based on the upward feedback they receive.59

Longitudinal research shows that managers who met with their direct reports to discuss their upward feedback improved more than other managers. Further, managers improved more in years when they discussed the previous year's feedback with their direct reports than in years when they did not. This is important because it demonstrates that what managers do with upward feedback is related to its benefits.60

Self-Appraisal.

There are several arguments to recommend wider use of self-appraisals. The opportunity to participate in the performance appraisal process, particularly if appraisal is combined with goal setting, improves the ratee's motivation and reduces her or his defensiveness during the appraisal interview.63 On the other hand, self-appraisals tend to be more lenient, less variable, more biased, and to show less agreement with the judgments of others.64 In terms of performance, effectiveness is highest under two conditions: when ratings from both self- and others are high, or when self-ratings are substantially lower than ratings from others (severe underestimation). Effectiveness is lowest for overestimators when self-ratings are moderate and subordinate ratings are low.65 Because U.S. employees tend to give themselves higher marks than their supervisors do (conflicting findings have been found with mainland Chinese and Taiwanese employees),66 self-appraisals are probably more appropriate for counseling and development than for employment decisions.

Customers are often able to rate important aspects of the performance of employees in front-line customer contact positions.

Customers Served.

Computers.

As noted earlier, employees spend a lot of time unsupervised by their bosses. Now technology has made continuous supervision possible—and very real for millions of workers. What sort of technology? Computer software that monitors employee performance.

COMPANY EXAMPLE: THIRD NATIONAL BANK AND AMERICAN EXPRESS

To proponents, it is a great new application of technology to improve productivity. To critics, it represents the ultimate intrusion of Big Brother in the workplace. For several million workers today, being monitored on the job by a computer is a fact of life.68

Computers measure quantifiable tasks performed by secretaries, factory and postal workers, and grocery and airline reservation sales agents. For example, major airlines regularly monitor the time reservation sales agents spend on each call. Until now, lower-level jobs have been affected most directly by computer monitoring. But as software becomes more sophisticated, even engineers, accountants, and doctors are expected to face electronic scrutiny.

Critics feel that overzealous employers will get carried away with information gathering and overstep the boundary between work performance and privacy. Moreover, being watched every second can be stressful, thereby stifling worker creativity, initiative, and morale.

Using Computers to Monitor Job Performance

Not everyone views monitoring as a modern-day version of Modern Times, the Charlie Chaplin movie in which the hapless hero was tyrannized by automation. At the Third National Bank of Nashville, for example, encoding clerks can earn up to 25 percent more than their base pay if their output is high—and they like that system.

To be sure, monitoring itself is neither good nor bad; how managers use it determines its acceptance in the workplace. Practices such as giving employees access to data collected on them, establishing procedures for challenging erroneous records, and training supervisors to base actions and decisions on actual observation of employees, not just on computer-generated records, can alleviate the fears of employees.69 At American Express, for example, monitored employees are given feedback about their performance every two weeks.

Managers who impose monitoring standards without asking employees what is reasonable may be surprised at the responses of employees. Tactics can include workstation operators who pound the space bar or hold down the underlining bar while chatting, and telephone operators who hang up on customers with complicated problems. The lesson, perhaps, is that even the most sophisticated technology can be thwarted by human beings who feel they are being pushed beyond acceptable limits.70

A recent survey revealed that about one-third of U.S. organizations now use input from managers, subordinates, peers, and customers to provide a perspective on performance from all angles (360 degrees) and that many more intend to do so in the future.75 Outside of the United States, however, this percentage falls to about 20 percent.76 There are at least four reasons such an approach is valuable: 77

1. It includes observations from different perspectives, and perhaps includes different aspects of performance that capture the complexities of an individual's performance in multiple roles.

2. Feedback from multiple sources may reinforce feedback from the boss, thereby making it harder to discount the viewpoint of that single person.

3. Discrepancies between self-ratings and those received from others may create an awareness of a person's needs for development, and motivate individuals to improve their performance in order to reduce or eliminate such discrepancies.

4. At least some senior managers believe that if they can improve leadership among their organization's leaders, ultimately that will benefit the bottom line.

Suppose that in designing a 360-degree feedback program for the purpose of providing feedback for development you were asked which of the following five factors would have the greatest influence on performance ratings. The five factors are the ratee's general level of performance, the ratee's performance on specific dimensions of performance, the rater's personal biases, the rater's perspective (self, subordinate, peer, or boss), and random error. Results from two large data sets of managers who received developmental ratings on three performance dimensions from seven raters (two bosses, two peers, two subordinates, and self) found the following:80

1. The rater's overall biases had the strongest influence on performance ratings for all combinations of rater perspective and performance dimensions. For peer and subordinate ratings and for self-ratings, the effect of overall bias was stronger than all other factors combined.

2. Ratings from bosses captured more of the ratee's actual job performance, and contained less personal bias, than did ratings from any other perspective. Although true or actual performance levels were unknown, this finding does suggest that the validity of ratings from bosses was higher than that from other perspectives.

3. The ratee's actual performance accounted for only about 20 to 25 percent of the variability in performance ratings when averaged across dimensions, perspectives, and instruments.

4. Both bosses and subordinates assessed different aspects of ratee performance from their unique perspectives. While peer ratings did contain considerable amounts of performance variability, they did not capture anything unique to that perspective.

To overcome these potential problems, decision-makers need to be aware of the personal biases of raters and attempt to control their effects. To do this, consider taking the following steps:81

· Make sure appraisal has a single, clear purpose—development. Tell employees if ratings are being used for decision making.

· Train all raters to understand the overall process as well as in how to complete forms and avoid common rating errors. UPS, for example, explains the 360-degree feedback process and discusses how data will be used. Recognize, however, that no amount of training is going to be of any help if the organizational climate is politically charged and trust is low.82

· Seek a variety of types of information about performance, possibly including objective measures or ratings made by multiple individuals, and make raters accountable to upper-level review. It is not necessary to have all raters evaluate the employee in all areas.

· Help employees interpret and react to the ratings, perhaps with the help of a personal coach, include goal setting, and implement the 360-degree process regularly, so that the employee can track improvements over time.

· Continue to use multi-rater systems, and take the time to evaluate their effectiveness.83

Careful attention to these action steps is an integral component of performance management. Another important consideration is the timing and frequency of performance appraisal.

Traditionally, formal appraisal is done once, or at best twice, a year. Research, however, has indicated that once or twice a year is far too infrequent.85 Unless he or she keeps a diary, considerable difficulties face a rater who is asked to remember what several employees did over the previous 6 or 12 months. This is why firms such as Western Digital, Southern California Gas, and Fluor add frequent, informal “progress” reviews between the annual ones.86

Research indicates that if a rater is asked to assess an employee's performance over a 6- to 12-month period, biased ratings may result, especially if information has been stored in the rater's memory according to irrelevant, over-simplistic, or otherwise faulty categories.87 Unfortunately, faulty categorization seems to be the rule more often than the exception.

For example, consider the impact of prior expectations on ratings.88 Supervisors of tellers at a large West Coast bank provided predictions about the future job performance of their new tellers. Six months later they rated the job performance of each teller. The result? Inconsistencies between prior expectations and later performance clearly affected the judgments of the raters. Thus, when a teller's actual performance disappointed or exceeded a supervisor's prior expectations about that performance, ratings were lower than warranted by actual performance. The lesson to be learned is that it is unwise to assume that raters are faulty, but motivationally neutral, observers of on-the-job behavior.

More and more companies are realizing that once-a-year reviews don't work very well. Many now require managers to review employees formally at least twice a year and talk with them informally even more often about how they are doing. At Sibson & Company, a management consulting concern, employees get formal reviews every six months or at the end of each project.89Such an approach has merit because the appraisals are likely to provide more accurate inputs to employment decisions, and they have the additional advantage of sending clear messages to employees about where they stand. There should be no “surprises” in appraisals, and one way to ensure this is to do them frequently. A study of 437 companies by Hewitt Associates may provide some incentive to do so. Companies with year-round performance management systems (as opposed to once-a-year performance appraisal systems or no systems) outperformed competitors without such systems on every financial and productivity measure used in the study, including profits, cash flow, and stock market performance.90

The assessment of team performance does not imply that individual contributions should be ignored. On the contrary, if individual performance is not assessed and recognized, social loafing may occur.94 Even worse, when other team members see there is a “free rider,” they are likely to withdraw their effort in support of team performance.95 Assessing team performance, therefore, should be seen as complementary to the assessment and recognition of (1) individual performance (as we have discussed so far), and (2) individuals' behaviors and skills that contribute to team performance (e.g., self-management, communication, decision making, collaboration).96

Not all teams are created equal, however. Different types of teams require different emphasis on performance measurement at the individual and team levels. Depending on the complexity of the task (from routine to nonroutine) and membership configuration (from static to dynamic), we can identify three different types of teams:97

· Work or service teams. Intact teams engaged on routine tasks (e.g., manufacturing or service tasks).

· Project teams. Teams assembled for a specific purpose and expected to disband once their task is completed; their tasks are outside the core production or service of the organization and therefore less routine than those of work or service teams.

· Network teams. Teams that include membership not constrained by time or space and membership is not limited by organizational boundaries (i.e., they are typically geographically dispersed and stay in touch via telecommunications technology). Their work is extremely nonroutine.

Table 9-2 shows a summary of recommended measurement methods for each of the three types of teams.

Source: Scott, S. G., & Einstein, W. O. (2001). Strategic performance appraisal in team-based organizations: One size does not fit all. Academy of Management Executive, 15, 111. Reprinted by permission of the Academy of Management Executive.

For example, regarding project teams, end-of-project outcome measures may not benefit the team's development because the team is likely to disband once the project is over. Instead, measurements taken during the project can be implemented so that corrective action can be taken if necessary before the project is over. This is what Hewlett-Packard uses with its product development teams.98

Regardless of whether performance is measured at the individual level, or at the individual and team levels, raters are likely to make intentional or unintentional mistakes in assigning performance scores.99 The good news, however, is that raters can be trained to minimize such biases. We address this topic next.

It is one thing to institute a performance management system with a home-country manager on an international assignment. It is quite another to do so with a local manager or local employees whose customs and culture differ from one's own. Western expatriate managers are often surprised to learn that their management practices have unintended consequences when applied in non-Western cultures. To illustrate such differences, consider the results of a study of Taiwanese and U.S. business students that examined preferences for various performance appraisal practices.100

Compared with Americans, Taiwanese students indicated the following:

· Less support for performance appraisal as practiced in Western cultures.

· More focus on group rather than individual performance.

· Greater willingness to consider nonperformance factors (e.g., off-the-job behaviors, age) as criteria in appraisal.

· Less willingness to attribute performance levels to the skills and efforts of particular individuals.

· Less open and direct relations between supervisor and subordinate.

· An expectation of closer supervisory styles.

These results suggest that U.S. managers will need to modify the performance appraisal process that is familiar to them when working with Taiwanese subordinates in order to make it more consistent with Taiwanese values and culture. Such a process recognizes the importance of groups as well as individuals in the organization and honors the criteria of cooperation, loyalty, and attitudes toward superiors, as well as individual goal accomplishment.101

The use of ratings assumes that the human observer is reasonably objective and accurate. As we have seen, raters' memories are quite fallible, and raters subscribe to their own sets of likes, dislikes, and expectations about people, expectations that may or may not be valid.102 These biases produce rating errors, or deviations between the “true” rating an employee deserves and the actual rating assigned.103 We discussed some of the most common types of rating errors previously: leniency, severity, and central tendency. Three other types are halo, contrast, and recency errors.

2. Contrast error results when a rater compares several employees to one another rather than to an objective standard of performance.107 If, say, the first two workers are unsatisfactory while the third is average, the third worker may well be rated outstanding because in contrast to the first two, her or his “average” level of job performance is magnified. Likewise, “average” performance could be downgraded unfairly if the first few workers are outstanding. In both cases, the “average” worker receives a biased rating.

3. Recency error results when a rater assigns his or her ratings on the basis of the employee's most recent performance. It is most likely to occur when appraisals are done only after long periods. Here is how one manager described the dilemma of the recency error: “Many of us have trouble rating for the entire year. If one of my people has a stellar three months prior to the review … [I] don't want to do anything that impedes that person's momentum and progress.”108 Of course, if the subordinate's performance peaks three months prior to appraisal every year, that suggests a different problem!

Recent survey data indicate that training for managers (55 percent) and nonmanagers (28 percent) has doubled in the past 10 years but that fewer than 40 percent of firms hold managers accountable for the effectiveness of the performance management system.109 Implementing a performance management system without training all parties in how to use it as designed is a waste of time and money. Training managers but then not holding them accountable for implementing what they have been trained on is just as bad. What can be done? Begin by identifying some key topics to address with respect to performance-management training. These include the following:110

· Philosophy and uses of the system.

· Description of the rating process.

· Roles and responsibilities of employees and managers.

· How to define performance, and to set expectations and goals.

· How to provide accurate assessments of performance, minimizing rating errors and rating inflation.

· The importance of ongoing, constructive feedback in behavioral terms.

· How to give feedback in a manner that minimizes defensiveness and maintains the self-esteem of the receiver.

· How to react to and act on feedback in a constructive manner.

· How to seek feedback from others effectively.

· How to identify and address needs for training and development.

1. Participants are told that they will evaluate the performance of three ratees on three separate performance dimensions.

2. They are given rating scales and instructed to read them as the trainer reads the dimension definitions and scale anchors aloud.

3. The trainer then discusses ratee behaviors that illustrate different performance levels for each scale. The goal is to create a common performance theory (frame of reference) among raters such that they will agree on the appropriate performance dimension and effectiveness level for different behaviors.

4. Participants are shown a videotape of a practice vignette and are asked to evaluate the manager using the scales provided.

5. Ratings are then written on a blackboard and discussed by the group of participants. The trainer seeks to identify which behaviors participants used to decide on their assigned ratings, and to clarify any discrepancies among the ratings.

6. The trainer provides feedback to participants, explaining why the ratee should receive a certain rating (target score) on a given dimension.

FOR training provides trainees with a “theory of performance” that allows them to understand the various performance dimensions, how to match these performance dimensions to rate behaviors, how to judge the effectiveness of various ratee behaviors, and how to integrate their judgments into an overall rating of performance.115 Rater training is clearly worth the effort, and research indicates that the kind of approach advocated here is especially effective in improving the meaningfulness and usefulness of the performance management process.116

IMPACT OF PERFORMANCE MANAGEMENT ON PRODUCTIVITY, QUALITY OF WORK LIFE, AND THE BOTTOM LINE

Performance management is fundamentally a feedback process, and research indicates that feedback may result in increases in performance varying from 10 to 30 percent.117 Feedback is a fairly inexpensive way to improve productivity, but, to work effectively, feedback programs require sustained commitment. The challenge for managers, then, is to provide feedback regularly to all their employees.

From an employee's perspective, lack of regular feedback about performance detracts from his or her quality of work life. Most people want to improve their performance on the job, to receive constructive suggestions regarding areas they need to work on, and to be commended for things that they do well. The cost of failure to provide such feedback may result in the loss of key professional employees, the continued poor performance of employees who are not meeting performance standards, and a loss of commitment by all employees. In sum, the myth that employees know how they are doing without adequate feedback from management can be an expensive fantasy.118

Second, for more than 30 years we have known that when managers use a problem-solving approach, subordinates express a stronger motivation to improve performance than when other approaches are used.121 Yet evidence indicates that most organizations still use a “tell-and-sell” approach in which a manager completes an appraisal independently, shows it to the subordinate, justifies the rating, discusses what must be done to improve performance, and then asks for the subordinate's reaction and sign-off on the appraisal.122 Are the negative reactions of subordinates really that surprising?

If organizations really are serious about fostering improved job performance as a result of performance feedback interviews, the kinds of activities shown in Table 9-3 are essential before, during, and after the interview. Let's briefly examine each of these important activities.

Communicate Frequently.

Research strongly supports this view. Thus, one study found that communication of performance feedback in an interview is most effective when the subordinate already has relatively accurate perceptions of her or his performance before the session.124

Get Training in Performance Feedback and Appraisal Interviewing.

As we noted earlier, train raters to observe behavior more accurately and fairly. Focus on managerial characteristics that are difficult to rate and on characteristics that people think are easy to rate but which generally result in disagreements. Such factors include risk taking and development of subordinates.125 Use a problem-solving, rather than a “tell-and-sell,” approach, as noted earlier.

Encourage Subordinates to Prepare.

Research conducted across a variety of organizations has yielded consistent results. Subordinates who spend more time prior to performance feedback interviews analyzing their job responsibilities and duties, problems they encounter on the job, and the quality of their performance are more likely to be satisfied with the performance management process, more likely to be motivated to improve their performance, and more likely actually to improve.126

Encourage Participation.

A perception of ownership—a feeling by the subordinate that his or her ideas are genuinely welcomed by the manager—is related strongly to subordinates' satisfaction with the appraisal interview, the appraisal system, motivation to improve performance, and the perceived fairness of the system.127 Participation provides an opportunity for employee voice in performance appraisal. It encourages the belief that the interview was a fair process, that it was a constructive activity, that some current job problems were cleared up, and that future goals were set.128

Judge Performance, Not Personality.

In addition to the potential legal liability of dwelling on personality rather than on job performance, supervisors are far less likely to change a subordinate's personality than they are his or her job performance. Maintain the problem-solving, job-related focus established earlier because evidence indicates that supervisory support enhances employees' motivation to improve.129Conversely, an emphasis on the employee as a person or his or her self-concept, as opposed to the task and task performance only, is likely to lead to lower levels of future performance.130

Be Specific, and Be an Active Listener.

1. Take the time to listen—hold all phone calls and do not allow interruptions.

2. Communicate verbally and nonverbally (e.g., by maintaining eye contact) that you genuinely want to help.

3. As the subordinate begins to tell his or her side of the story, do not interrupt and do not argue.

4. Watch for verbal as well as nonverbal cues regarding the subordinate's agreement or disagreement with your message.

5. Summarize what was said and what was agreed to.

Specific feedback and active listening are essential to subordinates' perceptions of the fairness and accuracy of the process.132

Avoid Destructive Criticism.

Destructive criticism is general in nature, is frequently delivered in a biting, sarcastic tone, and often attributes poor performance to internal causes (e.g., lack of motivation or ability). It leads to three predictable consequences:

1. It produces negative feelings among recipients and can initiate or intensify conflict.

2. It reduces the preference of individuals for handling future disagreements with the giver of the feedback in a conciliatory manner (e.g., compromise, collaboration).

3. It has negative effects on self-set goals and on feelings of self-confidence.133

Needless to say, this is one type of communication to avoid.

Set Mutually Agreeable Goals.

How does goal setting work to improve performance? Studies demonstrate that goals direct attention to the specific performance in question, that they mobilize effort to accomplish higher levels of performance, and that they foster persistence for higher levels of performance.134 The practical implications of this work are clear: Set specific, challenging goals, because this clarifies for the subordinate precisely what is expected and leads to high levels of performance. We cannot change the past, but interviews that include goal setting and specific feedback can affect future job performance.

Continue to Communicate, and Assess Progress toward Goals Regularly.

Periodic tracking of progress toward goals has three advantages:

1. It helps keep behavior on target.

2. It provides a better understanding of the reasons behind a given level of performance.

3. It enhances the subordinate's commitment to perform effectively.

All of this helps to improve supervisor/subordinate work relationships. Improving supervisor/subordinate work relationships, in turn, has positive effects on performance.135

Throughout this chapter we have emphasized the difficulty of implementing and sustaining performance management systems. A basic issue for every manager is “What's in it for me?” If organizations are serious about improving the performance management process, top management must consider the following policy changes:

· Make “quality of performance feedback to subordinates” and “development of subordinates” integral parts of every manager's job description.

· Tie rewards to effective performance in these areas.

· Recognize that performance management and appraisal is a dialogue involving people and data; both political and interpersonal issues are involved. No appraisal method is perfect, but with management commitment and employee “buy-in,” performance management can be a very useful and powerful tool.

Make Organizational Rewards Contingent on Performance.

Research results are clear cut on this point. If subordinates see a link between appraisal results and employment decisions regarding issues such as merit pay and promotion, they are more likely to prepare for performance feedback interviews, to participate actively in them, and to be satisfied with the overall performance management system.136 Furthermore, managers who base employment decisions on the results of appraisals are likely to overcome their subordinates' negative perceptions of the appraisal process.

Human Resource Management in Action: Conclusion

Here's the dilemma: Forced distributions do differentiate employees from one another, and they eliminate rater leniency, but evidence indicates that they tend to be associated with lower effectiveness of performance management systems, particularly when appraisal results are tied to termination. Proponents of forced rankings argue that they facilitate budgeting and guard against spineless managers who are too afraid to jettison poor performers. Forced rankings, the thinking goes, force managers to be honest with workers about how they are doing.

Critics say they compel managers to penalize a good but not great employee who is part of a superstar team. Conversely, a mediocre employee on a struggling unit can come out looking great. Most companies guard against this problem by refraining from rigidly applying the distribution to smaller teams—but this means the spread has to be made up somewhere else. The result: Different managers spend hours haggling with one another to meet the overall distribution requirements. According to one middle manager at Microsoft, this horse-trading process can be frustrating and time consuming. While the company says it does not require managers to assign a certain percentage of employees to each level, the middle manager says there is unspoken pressure to do so.

So is this spate of new forced-ranking systems an anomaly or a taste of things to come? One employment lawyer predicts a lot of litigation surrounding this issue. Managers had better get ready.

Performance management requires willingness and a commitment to focus on improving performance at the level of the individual or team every day. Like a compass, an ongoing performance management system provides instantaneous, real-time information that describes the difference between the current and the desired course. To practice sound performance management, managers must do the same thing—provide timely feedback about performance, while constantly focusing everyone's attention on the ultimate objective (e.g., world-class customer service).

At a general level, the broad process of performance management requires that you do three things well: define performance (through goals, measures, and assessments), facilitate performance (by identifying obstacles to good performance and providing resources to accomplish objectives) and encourage performance (by providing timely rewards that people care about in a sufficient amount, and fairly).

Performance appraisal (the systematic description of the job-relevant strengths and weaknesses of an individual or a team), is a necessary, but not sufficient, part of the performance management process. It serves two major purposes in organizations: (1) to improve the job performance of employees and (2) to provide information to employees and managers for use in making decisions. In practice, many performance appraisal systems fail because they do not satisfy one or more of the following requirements: relevance, sensitivity, reliability, acceptability, and practicality. The failure is frequently accompanied by legal challenge to the system based on its adverse impact against one or more protected groups.

Performance management and appraisal may be done at the level of the individual or the team. Because different types of teams exist, such as work or service teams, project teams, and network teams, different appraisal methods are most appropriate for each team type (see Table 9-2). Recognize, however, that rater judgments are subject to various types of biases: leniency; severity; central tendency; and halo, contrast, and recency effects. To improve the reliability and validity of ratings, use frame-of-reference training to help raters observe behavior more accurately. To improve the value of performance feedback interviews, communicate frequently with subordinates; encourage them to prepare and to participate in the process; judge performance, not personality; be specific; avoid destructive criticism; set goals; assess progress toward goals regularly; and make rewards contingent on performance.

· performance management

· performance appraisal

· performance facilitation

· performance encouragement

· relevance

· performance standards

· sensitivity

· reliability

· acceptability

· practicality

· applicant group

· behavior-oriented rating methods

· relative rating systems

· absolute rating systems

· results-oriented rating methods

· narrative essay

· simple ranking

· alternation ranking

· paired comparisons

· forced distribution

· leniency

· severity

· central tendency

· Likert method of summed ratings

· critical incidents

· graphic rating scales

· behaviorally anchored rating scales (BARS)

· management by objectives (MBO)

· cascading process

· work planning and review

· 360-degree feedback

· halo error

· contrast error

· recency error

· frame-of-reference training

· active listening

· destructive criticism

Peak Power, a medium-size hydroelectric power plant near Seattle, Washington, has been having difficulty with its performance appraisal system. The plant's present appraisal system has been in existence for about 10 years and was designed by the head of administrative operations, a clerk who had been promoted into the position without any professional training in human resource management. Presently, all operating employees are evaluated once a year by their supervisors, using the following form:

PEAK POWER PERFORMANCE APPRAISAL FORM

General Instructions: Complete the following form either by typing your responses or printing them in ink, and then make three copies. After the employee's performance has been evaluated by the supervisor and reviewed by higher-level supervision, the employee will be informed of his or her performance rating and will sign all copies of the form indicating that he or she has been so informed. The employee's signature does not necessarily indicate that he or she agrees with the ratings given. Send one completed form to the human resources office, and allow the employee to keep a copy for his or her files. The other copy is the supervisor's.

Complete the form by marking an “X” in the appropriate locations below.

“Excellent” is worth 5 points, “Above average” is worth 4 points, “Average” is worth 3 points, “Below average” is worth 2 points, and “Poor” is worth 1 point. Determine the employee's overall evaluation by summing the appropriate number of points from each of the six dimension scores above, and place the total here _______.

Supervisor's signature____________________________

Employee's signature _____________________________

Reviewed by ___________________________________________

Recent problems in other areas of HR management at the plant and the fear of potential lawsuits led Peak's president to consider hiring an experienced HR professional to upgrade all HR systems. You are being interviewed for the job, and have just been presented with the preceding information.

Questions

1. The president asks you for your general evaluation of this appraisal system. What is your response?

2. The president asks you for some suggestions for ways in which the present system can be improved. What would you say?

3. If you should be selected for this position, outline some steps you would take to ensure that a new performance management system will be accepted by its users.

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