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Performance appraisal

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This solution set will assist you in sifting through the mess and understanding the basics of performance appraisal, recognizing the various formal methods that are out there and determining what ...

This solution set will assist you in sifting through the mess and understanding the basics of performance appraisal, recognizing the various formal methods that are out there and determining what components you need to build a performance appraisal program that meets the goals of your organization.

The information in this report will provide:

•The benefits and challenges of performance appraisal methods, when to draw from them and how to overcome the limitations of rater biases.
•Advice on the contested use of forced ranking and 360-degree feedback.
•Short term activities that will get you started on effective performance appraisal practices.
Use this knowledge to prepare yourself in order to create an effective performance appraisal program.

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Performance appraisal Performance appraisal Presentation Transcript

  • Develop a Solid Understanding of Performance Appraisal
  • Introduction Info-Tech Research Group Most organizations have cobbled together a performance appraisal (PA) program over time and aren’t experiencing the success they should be due to a lack of understanding, rater biases, and unclear goals. Info-Tech recommends combining formal methods to create a unique program that fits the needs of your organization. Use this research to get a handle on what effective performance appraisals can and should deliver . This solid understanding will help you build an effective (or remodel an ineffective) performance appraisal program by drawing components from several formal methods. This research is designed for:
    • Human Resources professionals
    • Line-of-business managers
    • Anyone who applies or designs performance appraisal tools
    This research will give you:
    • The benefits and challenges of performance appraisal methods, and how to overcome limitations.
    • Advice on the contested use of 360-degree feedback and forced ranking.
    • Next steps towards creating an effective performance appraisal program.
  • Executive Summary
      • Most organizations have a performance appraisal (PA) program that has evolved over time and is likely not meeting the needs of employees and managers.
      • Many competing PA theories and practices exist making development of an effective program difficult. However, done well, a strong PA program reinforces organizational culture and helps employees achieve high levels of performance.
      • An effective PA program can improve key business measures such as Return on Assets, Return on Equity, profit margins and earnings.
      • Every strong PA program has three elements: performance tracking, informal feedback, and formal appraisal.
      • Build on these three elements to customize your program to your organization’s goals and values:
          • Informal coaching is the single most significant factor in easing retention and developing talent.
          • Forced ranking and forced distribution are techniques that work well in competitive environments. Avoid them in team-based departments.
          • 360-degree evaluations help to improve people management abilities. Stay away from using them for manager compensation or disciplinary  purposes.
    Info-Tech Research Group
  • Info-Tech Research Group Find your Fit PA Methods To Rank or Not to Rank? When and How to Use 360 Feedback Understand PA Benefits The Current State of Performance Appraisals PA Challenges Next Steps Summary of Recommendations Get Ready to Build
  • Info-Tech Research Group Understand PA Benefits The Current State of Performance Appraisals PA Challenges Effect on the Bottom Line Benefits for: Executives, Managers, Employees and HR
  • Effective performance appraisal programs positively impact the bottom line through the effective management of talent 0 Organizations that set goals for employees and monitor progress towards these goals significantly outperform organizations that do not have this type of performance-enhancing culture. 49% Return on Assets 27% Return on Equity 22% Profit Margins 15% Earnings Source: Hackett Group , through T he Society for Human Resource Management (SHRM). Including performance appraisal processes in management systems result in significant financial gains. Info-Tech Research Group You can’t manage what you can’t measure – evaluations of employees will help you manage intangible assets. VP of HR, Public Utility “ ” Measuring employee performance has become more and more important as intangible assets , such as key knowledge, skills, and services, are increasingly driving organizational value.
  • When done well, performance appraisals also provide significant benefits to executives, managers, employees, and HR Info-Tech Research Group Executives Managers Employees Human Resources
    • Improve employee performance.
    • Measure departmental performance.
    • Highlight top performers.
    • Improve employee morale and work quality.
    • Catch performance issues early.
    • Make well-informed decisions.
    • Enable the achievement of departmental objectives.
    • Satisfy employee’s desire to know how they are performing.
    • Connect employees to organizational objectives.
    • Clarify performance expectations.
    • Increase engagement.
    • Reduce turnover and absenteeism.
    • Provide a written record of performance.
    • Identify training needs at a departmental level.
    • Prepare for the future.
    • Better organizational performance and increased revenue.
    • Apparent opportunities for training and improvement.
    • Identification of future leaders.
    • Reduced turnover and absenteeism within a department.
    • Manager awareness of progress.
    • Develop a department through training, promotion, bonuses and terminations.
    • Opportunities to improve performance are identified.
    • There is a desire to achieve goals.
    • Established sense of fairness and clarity when performance is appraised.
    • Increased productivity.
    • Focus on internal employee development as opposed to constant recruitment.
    • Defend promotion and termination decisions.
    • Deliver training.
    • Succession planning.
    Benefits Impact on Organization
  • Info-Tech Research Group Understand PA Benefits The Current State of Performance Appraisals PA Challenges Definition: Performance Appraisal Opposing Opinions What Makes a Solid Program
  • Performance appraisal is a key component of effective performance management programs P This research report focuses specifically on performance appraisal . Other aspects of performance management will be covered in future reports. Info-Tech Research Group Performance management encompasses all activities related to increasing employee effectiveness, productivity, performance and engagement. This can include things like: Planning Evaluating Rewarding Monitoring Developing A key aspect of performance management is the performance appraisal process. Performance appraisals are used to measure and analyze an employee’s work performance and inform actions that should be taken to enhance, maintain, or improve it. Source: U.S. Office of Personnel Management
  • Find compromise in the middle: while no performance appraisal program is perfect, effective ones are achievable Info-Tech Research Group Formal performance evaluations are unnecessary and also often actively harmful to motivation and happiness at work. - Director, Small manufacturing firm “ ” Employee performance feedback is very important as it contributes directly to the success of the employee. - Manager, Large property management firm “ ” Haters
    • Think performance appraisals will:
    • Take too much time.
    • Be an artificial process with no real benefits.
    • Be counterproductive.
    • Likely backfire.
    • Hinder creativity, innovation, and positive risk taking.
    Lovers
    • Think performance appraisals will:
    • Solve all performance issues.
    • Increase employee satisfaction.
    • Foster good relationships between Line-of-Business managers and subordinates.
    • Encourage, motivate, and develop employees.
    • Achieve financial improvements
    Middle Ground Most opinions fall between the extremes of love and hate when it comes to performance appraisals.
  • Extreme opinions are counter-productive because of the need for collaboration to build a successful PA program Info-Tech Research Group
    • Next Steps
    • Look for areas of improvement within the current PA program you use, and be aware of its limitations.
    • Communicate with Line-of-Business managers that are not currently on-board.
    • Be realistic about the issues that a PA can help with, and identify ones that it cannot.
    • Next Steps
    • Be open to the benefits of performance appraisals when they are done well.
    • Talk to your employees to understand their professional development needs.
    • Reach out to peers who administer effective performance appraisals and look for tips to make yours work.
    For more on how to bring the lovers and haters together to build key stakeholder relationships, see the Info-Tech Solution Set, “ Navigate the IT Stakeholder Landscape .” No matter where you stand, understand how performance appraisals can enhance your organization and make you a better leader. Collaborate with peers and come to a consensus on what your organization's PA program should be. A common opinion will strengthen buy-in. Lovers Haters
  • Effective PA programs identify goals that drive the need to evaluate employees and make decisions about their employment
    • Promotion
    • Reward
    • Salary increases
    • Layoffs
    • Cutbacks
    • Professional development (identify skills to build)
    • Choose components of several PA methods that achieve organizational goals
    • Not about the components themselves, but about the outcomes they will enable
    • Clarify expectations
    • Maintain/improve performance
    • Increase effectiveness, productivity and engagement
    • Help employee develop as a professional
    Info-Tech Research Group A solid performance appraisal program will look different for every organization because they should be designed to enable unique goals and outcomes. Info-Tech Insight: Solid Performance Appraisals Organizational Goals Employment Decisions Drive the need to do PAs Decisions are based on goals PAs inform decisions
  • Every solid PA program needs a method of tracking progress and a mix of formal and informal feedback Info-Tech Research Group
    • Build on the foundation
    • Tracking method: a living document or file that houses all the information about an employee’s performance.
    • Informal feedback: interactions with employees that generate short feedback sessions that do not result in a score.
    • Formal appraisal: deliberately scheduled evaluation sessions where goals, performance and development is discussed and scored.
    • These three elements are needed to support the components that will make up the remainder of the PA program.
    Tracking Method Formal Appraisal Informal Feedback Unique mix of PA methods
  • Add the components of formal PA methods to the foundation to design a solid performance appraisal program Info-Tech Research Group Tracking Method Formal Appraisal Informal Feedback Components of formal methods: Graphic Rating Scale Behaviorally Anchored Rating Scale (BARS) Critical Incident Mixed Standard Rating Scale Management by Objectives (MBO) Foundation:
  • Every solid PA program compares employees, evaluates on traits, behaviors, and goals using numbers and examples Info-Tech Research Group
    • Employees can be compared to a general standard
    • using a scale.
    • Employees can be compared to each other.
    Comparison Options:
    • Traits.
    • Behaviors.
    • Performance characteristics/goals.
    Evaluates On:
    • Numerical scales.
    • Contextual examples.
    • Or a combination of both.
    Evaluates With:
    • Formal Appraisals.
      • A score is delivered.
    • Informal Feedback.
      • Ongoing coaching.
    Communicate With: Or a combination of these. Or both.
  • Info-Tech Research Group Understand PA Benefits The Current State of Performance Appraisals PA Challenges Description of Five Challenges
  • Within the mess of theories and opinions, there are five main challenges to effective performance appraisals Info-Tech Research Group Look for this symbol as you learn about PA challenges.
    • More information:
    • Tips on how to avoid these challenges is included in subsequent slides.
    • Additional supporting resources can be found in the appendix.
    Providing inaccurate assessments that are based on prior biases or judgments. Using appraisals ineffectively due to a lack of clarity around the purpose of PA in the organization. Failing to communicate clear performance goals and expectations to employees. Getting buy-in from managers who see the PA process as unnecessary paperwork. Mitigating the Performance Paradox , which shows that PA systems need to continually change as the majority of employees eventually learn how to surpass existing standards.
  • The results of appraisal are muddied by external influences and are rarely an accurate representation of true performance Performance Appraisal Result Info-Tech Research Group Rater influences (biases, judgments) Context (organizational culture, goals, strategy) Biases cannot be avoided; we are only human. The person doing the evaluation is not a passive observer who can provide an objective rating. The rater has biases and goals around the person they are appraising which are shaped by organizational context. Appraisals are never objective. The cultural norms, goals and strategy of an organization can influence how honest and accurate performance appraisal results will be. Strong ideals held by senior management may influence how and when employees are promoted or terminated. Performance appraisals are not all about actual performance. Actual performance Actual performance is only part of the appraisal result. The appraisal is infused with the opinions of the rater and the values of the organization.
  • Develop an awareness of four types of bias that can infiltrate even the most well-intentioned performance appraisal Recency Effect Info-Tech Research Group Tip to Overcome Tip to Overcome Tip to Overcome Tip to Overcome Having an awareness of this type of bias is the most effective step toward overcoming it. Ranking employees from best to worst (even as a private exercise) can help managers differentiate between employees. Awareness of this bias is an important step towards overcoming it. Engaging in ongoing coaching and having employees send regular e-mail updates can serve to remind managers what employees are up to.
  • Avoid bias in the performance appraisal process through awareness, training, and accountability Despite the prevalence of bias in the performance appraisal process, there are three ways for managers to evaluate employees more accurately. Info-Tech Research Group
  • Set clear goals for the PA process and effectively communicate performance expectations to avoid disgruntled employees Info-Tech Research Group
    • Set Clear Goals
    • Be detailed and realistic . Record in writing the purpose of performance appraisals in the organization. Otherwise, performance appraisals will get the reputation of being useless paperwork.
    • Match the type of performance appraisal that is being used to the goal of the performance appraisal process.
    • For example, if performance appraisal is going to be used to inform promotion and salary decisions, employees will most likely need to be given a numerical score and ranked against each other.
    • For more information on when to draw from the various methods of performance appraisal, see subsequent slides.
    • Communicate Expectations
    • When clear goals and expectations are not communicated, the entire performance appraisal process suffers. Line-of-Business managers will perceive performance appraisal as being a waste of their time, and employees will be upset when they receive low scores on expectations that they didn’t know they were supposed to meet.
    • HR and Line-of-Business managers must work together to set clear goals and performance expectations for employees.
    • These expectations should then be communicated regularly to employees through training, reminder e-mails, and even posts on bulletin boards.
  • Line-of-Business managers can perceive the PA process as an administrative burden , which can result in a failure to complete performance appraisals on time, if at all. Info-Tech Research Group Get manager buy-in by communicating the value of performance appraisal, encouraging involvement, and enforcing accountability Problem Solution Communicate Value Get Managers Involved Enforce Accountability Keep it Simple
    • There is a perception that the diligent measurement of employees is not necessary. If, for example, every employee is given equal salary increases regardless of the appraisal.
    • Often managers are given a performance appraisal template to use that they have had no part in creating. They feel no ownership in the process and are discouraged from using the form, especially if it is not customizable to their departmental requirements.
    • If performance appraisals are never checked, measured or recognized, there is little motivation to do a good job completing them.
    • A pile of redundant or complicated forms is a daunting tasks for already-busy managers. Streamline the process and reduce the “administrivia.”
  • Deal with the Performance Paradox by keeping the evaluation process as simple as possible
    • Keep it simple. The more simple the performance appraisal process is, the easier it will be to modify as needed. It can be difficult to change a complex scoring system, and many managers will not be motivated to do so, which renders the performance appraisal process meaningless.
    • Don’t publicly force rank all the time. If most (or all) employees are performing at a high level, avoid trying to rank them into high, average, and below average categories. Placing employees who are actually performing well into a “below average” category and publishing it will result in employees feeling that they are being unfairly evaluated. Instead, force rank to maintain the awareness of employee progress but keep this information between managers.
    • There is more information on when forced ranking is appropriate in subsequent slides.
    The Performance Paradox* describes the need to revise existing standards continuously, as employees will continue to surpass them. Info-Tech Research Group This cycle is difficult to avoid; however, there are two ways to make it as painless as possible: * Source: Jone L. Pearce, Organizational Behavior/Real Research for Real Managers, 2009
  • Info-Tech Research Group Find your Fit PA Methods To Rank or Not to Rank? When and How to Use 360 Feedback Understand PA Benefits The Current State of Performance Appraisals PA Challenges Next Steps Summary of Recommendations Get Ready to Build
  • Info-Tech Research Group Find your Fit PA Methods To Rank or Not to Rank? When and How to Use 360 Feedback Overall Summary of Methods Details, Pros, Cons, Suggestions for use of each method Case Synopsis: Info-Tech Research Group Informal Coaching
  • Understand common PA methods to determine which combination is best for your organization’s needs Info-Tech Research Group * Detailed descriptions of methods on subsequent slides. Formal Methods* Graphic Rating Scale Mixed Standard Rating Scale BARS Critical Incident Management by Objectives Numeric Example Driven Measures Traits Measures Goals Measures Behaviors Can be Combined Fully meets objectives Partly meets objectives
  • The graphic rating scale method gives employees a numerical score on job-relevant traits and/or behaviors Info-Tech Research Group Definition
    • One of the most popular forms of PA.
    • Lists desirable traits and managers rate employees on each trait.
    • Scale typically involves scores that range from unsatisfactory to outstanding.
    • Individual scores are aggregated into an overall performance score.
    • Traditionally used for assessing traits (e.g. reliable, hardworking), but is now commonly used to assess job-related behaviors and duties.
  • Graphic rating scales: easy to develop, but are light in detail and the results are not easy to explain Info-Tech Research Group Pros Cons
    • Easy to develop.
    • Easy to use.
    • Provides a numerical rating for each employee.
    • Easy to customize based on different job descriptions.
    When to draw from it
    • When used to assess traits, graphic rating scales focus on personal characteristics rather than job-related behaviors.
    • Can be subjective and ambiguous without an explanation of the score and, therefore, less legally defensible.
    • Can be subject to rater bias.
    • If there is not a lot of time to create a performance appraisal program.
    • If a quick and informal approach is required for easy start-up.
    • If numerical ratings are needed to rank or score employees to inform salary, promotion, or termination decisions.
  • Behaviorally anchored rating scales allow managers to rate employee performance based on detailed descriptions Info-Tech Research Group Definition (BARS)
    • Disaggregates a job into key tasks.
    • Identifies a range of ineffective to excellent behaviors that can be displayed by employees. performing each task.
    • Employees are rated on
    • each performance
    • dimension on a behavioral
    • scale ranging from
    • ineffective to
    • excellent performance.
    • Allows for a total profile
    • of job performance to
    • be created for each
    • employee, which covers
    • various dimensions of
    • work.
    • Greater validity is
    • ensured when jobholders
    • are involved in identifying
    • tasks and behaviors.
  • BARS: provides in-depth descriptions of employee performance, but is time consuming to develop Info-Tech Research Group Pros Cons
    • Evaluation criteria are clearly defined in behavioral terms .
    • Criteria are based on feedback from employees which improves acceptance levels from managers and employees.
    • Gives concrete examples of work that will improve performance.
    • Are legally defensible due to the detailed descriptions of behavior.
    • Usually well accepted by employees.
    When to draw from it
    • Can be time-consuming to develop.
    • Hard to keep the information current as job expectations can change over time.
    • Does not necessarily give more accurate ratings than graphic rating scales that incorporate good behavioral descriptions.
    • Does not provide a numerical score, which makes comparisons difficult.
    • If clearly outlined job descriptions exist that can be turned into concrete behavioral anchors.
    • If there is time to develop specific behavioral descriptions that outline different levels of performance.
    • If a numerical score is not important and the appraisal will be used for ongoing feedback and coaching.
    • If job expectations don’t tend to change frequently.
  • The critical incident method requires that managers keep a log of job-relevant behaviors to create performance appraisals Info-Tech Research Group Definition
    • Manager keeps an ongoing log of events that represent outstanding or poor behavior.
    • At the end of the rating period, the recorded critical incidents are used to evaluate performance.
    • Often used to supplement another method such as graphic rating scale.
      • For example, if an employee is rated as failing to meet expectations, specific examples can be given as to why performance was unsatisfactory .
  • Critical incident: provides detailed examples of employee behavior, but should not be used in isolation Info-Tech Research Group Pros Cons
    • Provides concrete examples to explain performance appraisal.
    • Avoids recency bias as it forces managers to compile an ongoing log of events, as opposed to focusing solely on the most recent behavior.
    When to draw from it
    • Negative incidents may be more noticeable than positive incidents.
    • May result in very close supervision which is difficult for some employees.
    • The recording of incidents may be seen as a chore by the manager, and if creating the log is forgotten the recency bias will be apparent.
    • It is difficult to compare employees to each other because no numerical score is given.
    • Use this approach to supplement other approaches (combine with graphic rating scale to make a numerical score more concrete).
    • If managers have time to regularly log events.
    • This approach can be used on its own if the manager’s primary focus is to give ongoing feedback and coaching as opposed to giving a numerical score.
    • It should not be used to compare employees for salary decisions.
  • Checklists and observation scales: can also be used to incorporate behavioral examples into the performance appraisal Info-Tech Research Group Behavioral Checklist
    • Predefined behaviors are listed and checked off as an employee demonstrates the behavior.
    Behavioral Observation Scale
    • Focus on descriptions of behavior and results.
    • Use absolute standards.
    • May meet with less resistance from employees.
    • A lot of time and money must be invested to construct the checklist because they will be different for each role.
    Pros Cons
    • Identifies key tasks and evaluates how frequently an employee exhibits the behavior required for high performance.
    • Gives employees a numerical score that is tied to the frequency of the specific job-related behaviors.
    • Frequency does not always equate to successful (or unsuccessful) job performance.
    Pros Cons
  • Mixed standard rating scales require managers to rate employees as equal to, above, or below performance standards Info-Tech Research Group Definition
    • Contain statements representing good, average and poor performance for each dimension the employee is being evaluated on.
    • The evaluator indicates
    • whether an employee
    • fits the statement (=),
    • is better than the
    • statement (+) or is
    • worse than the
    • statement (-).
    • The statements are
    • randomly mixed in an
    • attempt to make it
    • less obvious which
    • reflect good or bad
    • performance.
    • There are many
    • algorithms that exist to
    • create numeric scores
    • for each dimension.
  • Mixed standard rating scales: reduce bias, but make it difficult to give constructive feedback Info-Tech Research Group Pros Cons
    • Uses specific behavioral examples to identify good, average and poor performance.
    • Keeps raters relatively blind to which behaviors are reflective of which level of performance, which helps to minimize potential biases.
    When to draw from it
    • The fact that the rater is unaware of which items reflect which levels of performance makes it difficult for the rater to give constructive feedback.
    • For example, if an employee asks why he/she received a low score on a particular dimension, the rater may not be able to tell them why.
    • If it is very important that raters are blind to which behaviors represent which levels of performance.
    • If there is time to create good, average, and poor behavioral statements for each dimension on which the employee is being evaluated.
  • Management by objectives (MBO): links organizational goals to employee performance targets Info-Tech Research Group Definition (MBO)
    • Sets organization-wide goals, and links these to employee specific goals.
    • Managers periodically discuss employee progress towards departmental goals, as well as how the employee is contributing to organization-wide goals.
    • This process aims to serve as a basis for:
        • Greater efficiency through systematic procedures.
        • Greater employee motivation and commitment through participation in the planning process.
        • Planning for results instead of planning just for work.
      • Specific objectives being determined jointly by managers and employees and end results attributed to rewards.
      • Arranged in order of importance.
      • Expressed quantitatively where possible.
      • Realistic.
      • Consistent with policy.
      • Compatible with one another.
    Use the Info-Tech, “ Annual Performance Review: Management by Objectives ” template
    • The objectives must meet five criteria. They must be:
  • Management by objectives makes employees feel connected to organizational objectives, but is high maintenance Info-Tech Research Group Pros Cons
    • Provides clear goals for employees to work towards and objective standards upon which to evaluate employees.
    • Helps employees feel they are part of meeting organization-wide goals.
    When to draw from it
    • Time consuming and fairly rigid – it can take several hours per employee per year to set objectives, measure progress, and give feedback.
    • Can result in a push-pull situation where the manager keeps trying to set higher goals while the employee wants expectations to be lower.
    • If the organization is relatively mature and has clear organization-wide goals that can be linked to departmental activities.
    • If there is time to set employee goals, and continually measure goals and provide feedback.
  • Info-Tech Research Group As can be seen, the performance appraisal space is a mess of opinions, formats, methods, and techniques
  • Come to terms with the performance appraisal mess – there is no clear solution, but a big opportunity for customization 0 Info-Tech Research Group
    • The performance appraisal world is full of tactics, opinions, theories and best practices.
    • The truth is, a successful performance appraisal program is a combination of these tactics and theories, with components specifically chosen to fit the needs of your organization.
    • An Info-Tech study concluded that s uccess can be achieved by creating a custom performance appraisal program placing a focus on numeric scoring.
    • Graphic rating scale is the only formal method that uses numerical scores exclusively, but opportunity is left on the table if there are no examples or descriptions attached to the evaluation.
    Source: Info-Tech Research Group N = 123 Most organizations use an exclusively numeric appraisal system and those who do see the most success with their program. Customize to achieve organizational goals High Medium Low Exclusively Numeric Score Numeric & Example Driven Exclusively Example Driven Success Number of Organizations Success Level Number of Organizations who use each Method
  • No organization’s performance appraisal program should look identical to another because each organization has unique goals Info-Tech Research Group Individual templates and processes are organic in nature and combine components of several formal methods. Putting a formal name to the program is like putting a square peg in a round hole. Desired outcomes of performance appraisal program Organizational policies and objectives Your performance appraisal program MBO Graphic Rating Select components of formal methods
  • To rectify this dilemma, you should combine multiple approaches to develop a program that fits your needs Info-Tech Research Group
    • 63% of organizations surveyed by Info-Tech draw from several methods to create an approach that best fits their environment and goals.
    • For example: a graphic rating scale can be combined with behavioral examples of each of the traits being measured and include a section for comments.
    Graphic Rating Scale + Behaviorally Anchored Rating Scale + Critical Incident Use the Info-Tech templates for “Annual Performance Review” [ Staff ], [ Management ])
  • A combined approach allows for organization-specific appraisals, but must be carefully integrated before implementation Info-Tech Research Group Pros Cons
    • Provides a quantifiable evaluation of each employee, which allows comparative ranking if desired.
    • The behavioral definitions and comments provide specific examples of good versus poor performance.
    • Employees have concrete objectives to work towards.
    When to draw from it
    • It can a big commitment of time and effort from many individuals to find the ‘perfect’ combination of traits and behavioral examples that suit each job.
    • If there are detailed job descriptions that can be used to create behavioral definitions and critical incidents/examples.
    • If there is time to create a customized performance appraisal form for each department.
    • If there is a need for a numerical score for ranking, salary, termination, and promotion decisions.
  • Info-Tech’s project-based approach to research allows for frequent feedback that contributes to an overall score 0 Info-Tech Research Group Situation Action Result: Info-Tech implemented a performance appraisal program that combines two methods: management by objectives, and a unique weighting system. Appraisals are completed every 6 weeks, in conjunction with Info-Tech’s project cycle. Specific examples of exemplary behavior is described, and a rating is given for each area. Sections of the template are then summed and weighted accordingly, and an overall score is calculated. A section devoted to professional development is also attached to each section. The new performance appraisal program is a success for Info-Tech. Employees are now fully aware of their scores and the calculations are laid out clearly. The level of transparency has increased employee engagement; all scores have examples and reasoning behind them which is apparent to employees. The frequency of the appraisals has enabled employees to improve and develop very quickly, as structured feedback is provided every project cycle. The proof is in: employee survey results indicate that employees are engaged, satisfied and motivated. Until late 2009, the Info-Tech Research department received performance appraisals based on the number and quality of research notes that each analyst produced. Appraisals were delivered twice per year. 2010 marked the transformation of how information was delivered to Info-Tech’s clients – single notes were bundled into ‘solution-sets’ and distributed as a complete package. This change rendered the old performance appraisal program useless. Profile: Info-Tech Research Group Industry: Professional Services Employees: 120 Headquarters: London, Ontario Website: www.infotech.com
  • In addition to formal appraisals, provide informal coaching on an ongoing basis to keep communication channels open Info-Tech Research Group Performance appraisal isn’t just about doing formal quarterly or yearly evaluations. Managers should be meeting informally with employees on a regular basis to provide feedback and address issues. Helps managers provide relatively immediate feedback to employees, as opposed to employees having to wait for a formal review to hear how they are doing. Helps managers correct performance problems before formal evaluations. Helps reduce surprises at formal quarterly/annual reviews. In reality, employees should be able to predict their annual review score. Surprises at formal review time should be avoided. Forces managers to stay up to date with an employee’s regular activities, which can prevent managers from relying only on their most recent impression of the employee when creating annual performance appraisals. The benefits of informal coaching Informal coaching on a regular basis is required to keep employees performing at peak levels. - Manager, large publishing firm “ ”
  • Provide informal feedback bi-weekly – it strikes the perfect balance of “frequent enough, but not overwhelming” % Why such a drop in success rates? Info-Tech Research Group -13% Bi-Weekly Weekly Daily Monthly Quarterly Semi-Annually Yearly Source: Info-Tech Research Group N = 123
    • Managers who provide daily informal feedback have significantly more successful PA programs than those who provide weekly content. This is due to:
    • Providing immediate feedback on coachable moments.
    • Employees can correct a negative action on the spot.
    • The event is very fresh in the minds of the employee and manager, and therefore the feedback has more impact.
    Success rates drop further when feedback is provided less than monthly. After a month or more has passed and an employee has not received any informal feedback, the coachable moments have come and gone. Any feedback given at this stage will not resonate with employees as the event in question will be vague in their minds.
    • There is little difference in the success of PA programs if informal feedback occurs weekly, bi-weekly or monthly. Reasons for this include:
    • Coachable moments are relatively fresh in the minds of employees and managers.
    • The frequency of feedback does not overwhelm employees but occurs frequently enough to allow employees to correct behavior.
    Success Level
  • Greater use of informal coaching translates into less effort required to retain and develop talent 0
    • Responsibility for training completion needs to be reflected in the employee, trainer/mentor, and supervisor performance evaluations. Apply the following training techniques:
    • Mentoring and coaching.
    • On-the-job training (cross-training, etc.)
    • Pairing experts and novices on projects.
    • Stretch assignments.
    • Knowledge capture and transfer.
    • Relationship transfer protocols.
    • External training and certification.
    • Skills-building incentives.
    • Ongoing, timely feedback.
    Info-Tech Research Group Extent of Informal Feedback Usage 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Source: Info-Tech Research Group N = 112 The effort required to retain and develop staff drops as more informal feedback is used. Level of Effort Ensure that all employees receive constant feedback and appreciation so that they know at any given time what they do well and what to improve. - Director, Small manufacturing firm “ ”
  • Keep coaching informal by providing regular feedback on daily tasks while keeping long term goals in mind Info-Tech Research Group
    • Meet with employees informally at least biweekly.
    • To avoid administrative burden and save time, ask employees to check your calendar for availability and set up a biweekly invitation for their one-on-one coaching sessions.
    • Provide specific feedback on day to day tasks, then briefly relate this feedback to high level goals.
    • Don’t spend too much time having lengthy discussions about high level objectives, as this information is best covered in more depth at the employee’s formal review.
    71% of organizations do not do informal reviews as frequently as they should because it requires time and effort for already time-stretched managers. This lack of ongoing coaching can result in a negative impact on the organization’s bottom line due to higher levels of attrition, resulting from a less engaged workforce. Info-Tech Insight:
  • Info-Tech Research Group Find your Fit PA Methods To Rank or Not to Rank? When and How to Use 360 Feedback Definitions: Forced Ranking and Forced Distribution Case Synopsis: General Electric Levels of Privacy
  • Forced ranking and forced distribution involve comparing and ordering employees into predefined categories Info-Tech Research Group Forced Distribution Forced Ranking Forced ranking assigns a numerical score to each employee and lists them from the highest performer to the lowest performer. This system places pre-determined percentages of employees into performance categories. For example: 20% excellent performers, 70% average performers and 10% low performers.
    • These systems describe what can be done with performance appraisal scores after they have been determined.
    • A numerical rating is required so employees can be ranked against each other.
    • By definition, not everyone can be a top performer, even if the majority of employees are performing well.
    Concepts to Consider
    • Combining ranking and distribution is an effective way to create an ordered list of employees with the added benefit of segregating them into categories.
    • This approach is effective for managers to evaluate their work force and for employees to understand where their performance has placed them, be it in numerical order from best to worst or in categories.
    A Hybrid Approach
  • Forced ranking has its place among successful organizations, but must be done with an awareness of organizational dynamics Info-Tech Research Group There is merit in forced ranking, but it has to be done in an intelligent way. - Vice President, Professional Services “ ”
    • Forced ranking keeps managers diligent and critical when appraising employees – not everyone can be given an average score.
    • A ranking system is useful for making salary, promotion, bonus, and termination decisions.
    Do the following to force rank intelligently: 1 Rank based on objective measures to motivate bottom performers. 2 If you are force ranking when all employees are performing at above-average levels, be prepared for some star performers to leave. 4 Keep ranks private when they are being used for salary, promotion, bonus, or termination decisions. 3 Be sure forced ranking fits with the departmental culture and anticipate that some employees may be uneasy about being ranked.
  • Forced ranking is acceptable when employees compete on an individual basis, but not when they work in teams Info-Tech Research Group I agree – Forced ranking forces managers to be diligent and critical when evaluating employees and lets employees know where they stand. - Manager, Mid-sized educational firm “ ” There is good evidence that this methodology works well in organizations that have a culture of individual competition. - Vice President, Medical/Diagnostic laboratory “ ” Numerical scoring is a good evaluation tool to establish any training needs. - Manager, Small educational firm “ ” [Forced ranking does not work] for a team environment where mixed teams have to cooperate intensely. - CEO, Mid-sized manufacturing firm “ ” I don’t believe in ranking employees by numerical score. It is not important that an individual is a ‘top’ performer, only that they are doing the best they can and improving. - Team lead, large water transportation firm “ ” [Forced ranking] needs to be balanced with understanding of strengths and weaknesses and that the diversity of the team as a whole is most important. - Supervisor, Mid-sized warehousing firm “ ” Forced Ranking works: Forced Ranking hurts:
  • GE’s “Rank-and-Yank” system is good for differentiating employees, but can be troublesome for HR 0 Info-Tech Research Group Situation Action Result: GE implemented forced ranking to identify their superstars (top 20%), vital workers (70%), and weakest links (10%). The ranking systematically eliminated the below average performers who are represented by the bottom 10% of the ranking if improvement was not made. GE has made forced ranking a part of their performance-based culture and uses it to continuously assess employees. Employees accept the program and are motivated to increase their rank through professional development. However, some organizations, such as Ford Motor Co., have extinguished forced ranking systems because of discrimination charges and lawsuits. Employees who are graded low often think this conclusion was drawn unfairly and may respond defensively. Jack Welch, former CEO and Chairman of General Electric, revolutionized the performance management program at GE by introducing the concept of forced ranking. He had the vision of a large company with the agility of a lean organization and a high-performing staff. This meant he had to recognize his superstars and show the weakest links the door. Superstars 20% Vital Performers 70% Weakest Links 10% Profile: General Electric Industry: diversified infrastructure, finance and media 2009 Earnings: $11.2 billion Employees: 300,000 Headquarters: Fairfield, Connecticut Website: www.ge.com
  • Public ranking is appropriate when the measures are objective and the culture supports it Info-Tech Research Group
      • The scores and ranks for all employees are publicly available to everyone.
    • Pros:
    • Encourages friendly competition.
    • Recognizes top performers.
    • Sets standards for other employees.
    • Cons:
    • Can embarrass bottom performers.
    • Can demoralize employees who did not rank at the top.
    • Friendly competition can turn unfriendly.
    a
      • The scores and ranks are shared between employees and their manager.
    • Pros:
    • Avoids the cons of public ranking.
    • Employees know where they stand.
    • Improvement objectives can bet set.
    • Cons:
    • The ranking may not be a true reflection of performance (this is true in all levels of privacy).
    b
      • The scores and ranks are only shared among the management team.
    • Pros:
    • Employees are unaware that a ranking is being applied.
    • Avoids a defensive reaction from employees.
    • Cons:
    • Employees don’t know where they stand or measure up against others.
    • Reward decisions are not transparent.
    c
    • The level of privacy that is appropriate for your organization depends on:
    • The level of objectivity in performance appraisals.
      • Sales figures are easy to rank and defend, while the quality of an article is more subjective.
    • The type of employee being ranked.
      • Over-achievers are often discouraged when publicly ranked as the ranking is not always a true reflection of performance.
    What is an appropriate level of privacy?
  • Info-Tech Research Group Find your Fit PA Methods To Rank or Not to Rank? When and How to Use 360 Feedback Definition: 360-degree Feedback Pros, Cons, Use Tips for 360-degree Feedback
  • Get data from “all around” an employee to identify skill gaps Info-Tech Research Group 360-degree Feedback is also known as Multi-Source, Multi-Rater (MSMR) Feedback 360-degree feedback is best used to assess training and development needs and to provide competence-related information for succession planning. It is also sometimes inappropriately used to inform promotion or pay decisions. Watch Info-Tech’s Video: “ 360-Degree Feedback .” Internal Customers Supervisors Peers Subordinates External Clients Self 360 Feedback
  • 360-degree feedback gives a well rounded view of employee performance, but is not appropriate to inform all decisions Info-Tech Research Group Pros Cons
    • Provides a well-rounded view of each employee, as opposed to relying only on one manager’s perspective.
    • Useful for managers who cannot be involved in employee’s daily activities.
    • Can enhance an employee’s perception of fairness.
    • Research shows that when 360-degree feedback is used for development purposes, it can bring positive changes in employee behavior that tend to be immediate and dramatic.
    • Can be time consuming to collect and interpret data from multiple sources for each employee.
    • Employees submitting feedback may be reluctant to provide constructive criticism, particularly when they have to provide feedback to those who outrank them or they are being used to inform promotion or disciplinary decisions..
    • Multiple sources do not necessarily yield better feedback. Individual employees have their own biases and judgments, and may sometimes confuse individual issues with organizational problems.
    Use:
    • In departments where employees work in teams, and managers are not heavily involved in daily activities.
    • If professional development is a priority and managers have enough time to engage in professional development activities with employees.
    • In between formal appraisal sessions and after project completions.
  • Get honest and accurate 360 feedback by using it appropriately, ensuring anonymity, and giving clear performance expectations Info-Tech Research Group 1 2 3 4 5 360-degree feedback should not be used to inform pay decisions. If employees know that their feedback will be used to influence salary, they will be less likely to provide honest and constructive criticism. 360-degree feedback should be used to inform professional development by identifying performance strengths, gaps, and training/coaching needs. Employees should be made aware that their feedback will be used only as a development tool, not as an evaluative component of the appraisal process. Keep the feedback anonymous to obtain more honest feedback. Allowing an impartial department such as HR to administer the process, as opposed to Line-of-Business managers, can also help employees feel more comfortable providing honest feedback. Give raters a description of the key competencies expected of the person they are rating. Having these in mind will tailor feedback to employee objectives. Train raters on the different types of rater bias that can exist when evaluating other employees. Making them aware biases exist if often enough to fix the problem.
  • Info-Tech Research Group Find your Fit PA Methods To Rank or Not to Rank? When and How to Use 360 Feedback Understand PA Benefits The Current State of Performance Appraisals PA Challenges Next Steps Summary of Recommendations Get Ready to Build
  • Performance Appraisals in general Methods of Performance Appraisal Informal Coaching Forced Ranking and Forced Distribution 360-Degree Feedback Info-Tech Research Group Next Steps Summary of Recommendations Get Ready to Build
  • Performance appraisals should be used effectively to increase engagement, productivity, and positively impact the bottom line Info-Tech Research Group
    • A solid performance appraisal program has three things:
      • A method for tracking progress towards goals and performance.
      • Informal feedback that occurs at least monthly.
      • Formal feedback that occurs no more than quarterly.
    • Employees who are effectively appraised feel more engaged with their managers and therefore have higher productivity.
    • Including performance appraisals in a management system can result in gains to the organization’s bottom line:
      • 49% increase in return on assets.
      • 27% increase in return on equity.
      • 22% increase in profit margins.
      • 15% increase in earnings.
    In summary:
  • The formal methods of performance appraisal should be dissected and used in a way that fits an organization’s goals Formal Methods Info-Tech Research Group Graphic Rating Scale Mixed Standard Rating Scale BARS Critical Incident Management by Objectives Appropriate for use when: The organization requires a quick and easy solution that results in a numerical rating. The organization places importance on behavioral examples, and clear job descriptions allow for a description of detailed behavioral objectives. Numerical scores are not necessary and managers are diligent with recording both positive and negative events. Detailed descriptions of excellent, average, and poor behavior would be easy to develop, and the organization places importance on avoiding bias. The organization has clear goals that are appropriately delegated to departments, and actionable objectives that are clearly described. In summary:
  • The more informal coaching that is provided, the less effort it takes to retain and develop employees Info-Tech Research Group
    • Organizations experience benefit when informal coaching occurs daily, weekly, bi-weekly or monthly. A sharp decline in success rates occur if feedback is provided less than monthly.
    • Do informal coaching/feedback sessions bi-weekly: this is a manageable number of sessions that won’t overwhelm the employee or manager.
    • Organizations who only provide informal coaching are causing more damage than organizations who don’t provide it at all.
    • Informal coaching is not time consuming, but it does require that the manager pay attention to the daily successes and areas for improvement of their employees.
    • Feedback on a specific moment should be delivered immediately after the moment takes place.
    In summary:
  • Forced ranking should be used to enhance friendly competition, but not when all employees are star performers Info-Tech Research Group
    • Force rank when the culture permits it:
      • If employees compete individually.
      • If criteria to be measured is subjective.
      • If employees perform at various levels (average, vital and star).
    • A hybrid approach of forced ranking and forced distribution is a great way to identify star performers, assign bonuses, or determine layoffs.
    • Force ranking can be used at any time if an appropriate level of privacy is applied:
      • Full disclosure of rank if the criteria is objective and there are not teams.
      • Discussion of rank between manager and employee if areas for improvement are identified.
      • Keep rank between managers if bonuses, salaries or dismissals are determined by rank.
    In summary:
  • 360-degree feedback should be used when employees work in teams but should not influence monetary decisions Info-Tech Research Group
    • 360-degree feedback involves gathering evaluations from those who work closely with an employee.
    • This is a great method for managers to create a holistic view of an employees performance, especially if monitoring daily activities is not possible.
    • When 360-degree feedback is used for development purposes, employees respond in drastic and positive ways.
    • 360-degree feedback should never inform salary, promotion or disciplinary decisions. Attaching the evaluations to these decisions will garner dishonest and inaccurate feedback.
    In summary:
  • Five Short Term Activities Prepare for the Next Step: building an effective performance appraisal program Info-Tech Research Group Next Steps Summary of Recommendations Get Ready to Build
  • Using the research included in this report, identify any goals not being met by the current program and figure out what’s missing Info-Tech Research Group 1
    • Gather the pieces of your PA program:
    • Templates
    • Forms
    • Processes
    • Principles
    • Example appraisals
    • Anything you use or is used by other departments.
    2 Identify what formal methods you are currently using. This will help you to understand the program in its entirety, and orient you in the mess of PA research. 3 Ask yourself what goals your firm is attempting to achieve with the current PA program. Ask: are these goals being achieved with the current program? 4
    • If the goals are currently being met:
    • Identify any gaps in the process from your employee’s perspective.
    • Ask: are their needs being met?
    5
    • If the goals are not currently being met:
    • Highlight the gaps and identify what pieces are missing.
    • Read the next research report on building an effective program.
    Complete these five steps to prepare yourself for building an effective PA program.
  • You’ve got the knowledge, now put it into practice
    • Engage in ongoing, informal feedback.
    • Make appraisals a two-way communication process, where the person being rated can give their opinions.
    • Provide behavioral examples when discussing strengths and weaknesses.
    • If an employee is doing very well, don’t rush through what they are doing well to focus on small problem areas.
    • Don’t hand the employee a completed form for them to sign at a formal review session, or they will see the discussion as a sham as the appraisal was already completed before the conversation started. Submit written documentation after the session (within 1 week), and include
    • highlights from the appraisal session.
    • Give a balanced view, covering positive and negative aspects of performance.
    • Discuss not more than two limitations in an appraisal session.
    • Use a 4-point scale instead of a scale with a mid-point
    • to avoid scoring everyone as “average.”
    • Weight scores to customize any PA template.
    • End the discussion with an action plan.
    Info-Tech Research Group With an understanding of performance appraisal and its opportunities and challenges, you are now ready to begin assembling an effective performance appraisal program or re-assessing your current program. Here are a few tips to get you started:
  • Summary Info-Tech Research Group
    • Performance appraisals are a fact of life for most managers and HR departments. Instead of thinking of them as an administrative burden, understand the benefits of an effective performance appraisal program and how to get the most out of them with the least amount of effort:
      • Schedule formal appraisals where a score is delivered no more than quarterly.
      • Provide informal feedback and coaching on an ongoing and regular basis to reduce the amount of work needed to prepare for the formal appraisal session, and the level of effort required to retain and develop talent.
      • Design the performance appraisal program to fit the goals of the organization. Customize at will, but build on the foundation of a method of tracking performance, informal feedback and formal appraisals.
      • Use force ranking when appropriate and do so intelligently. Failure in this area can cause your top talent to leave and retain your bottom performers.
      • Generate insight into employee performance with 360-degree feedback.
  • Appendix I: List of Resources
    • The following resources were used to compile the information shown in this research report. They appear in this Appendix in alphabetical order. Many sources were used for information gathering purposes only.
    • Coens, Jenkins . Aboloshing Performance Appraisals: Why They Backfire and What to Do Instead, Pages 1 – 30, Berrett-Koehler Publishers, 2009
    • Casico, Aguinis. Applied Psychology in Human Resource Management , Sixth Edition, Pages 82 – 121, Pearson Prentice Hall, Upper Saddle River, New Jersey, 2005
    • Grote, Dick. Forced Ranking: Making Performance Management Work , Harvard Business School 2005
    • Sasse, Hazels. Forced Ranking: A Review. ,Encyclopedia Britannica ,2008
    • Johnson, Gail. Forced Ranking:The Good, the Bad, and the Ugly, Nielsen Business Media Inc. All Business, A D&B Company , 2004
    • Anderson, Ones, Sinangil, Viswesvaran. Handbook of Industrial, Work & Organizational Psychology, Volume 1, Pages 127 – 144, SAGE Publications London, England 2001
    • Lussier, Robert N. Human Relations in Organizations, Fifth Edition, Pages 8 – 21, McGraw-Hill Irwin, New York, New York 2002
    Info-Tech Research Group
  • Appendix I: List of Resources continued Info-Tech Research Group
    • Dessler, Cole, Goodman, Sutherland. Management of Human Resources, Second Canadian Edition, Pages 203 – 219, Pearson Prentice Hall, Toronto, Ontario, 2007
    • Pearce, Jone L. Organizational Behavior Real Research for Real Managers, Melvin & Leigh Publishers, Irvine, California 2009
    • Donaldson, Charlotte A. Performance Management: Forced Ranking, San Diego State University, 2008
    • Schiemann, William A. Reinventing Talent Management , The Metrus Group Inc. New Jersey & Canada ,2009
    • The Struggle to Manage Performance, Bloomberg L.P, 2006
    • Murphy, Cleveland. Understanding Performance Appraisal , Pages 3, 15 - 30, 88 - 106, 215 – 265, SAGE Publications Thousand Oaks, California ,1995
    • Alsever, Jennifer. What Is Forced Ranking?, CBS Interactive Inc, 2010
  • Appendix II: Methodology Info-Tech Research Group
    • In May of 2010, Info-Tech engaged in two primary research activities to discover the state of performance appraisal research and opinion, how it is being used and the successes organizations have achieved.
      • In May, Info-Tech conducted six in-depth interviews with HR professionals and business leaders in chief executive roles to learn about performance appraisals.
      • In May, Info-Tech fielded a survey to better understand the degree of engagement between HR and the business. The survey attracted over 80 respondents.
  • Appendix III: Demographic Information 0 Info-Tech Research Group The following graphs describes the details of the responding firms that answered Info-Tech’s survey that was used to create this research report. Financial Services Healthcare Education 4% Trans/Utilities/Comms Primary Industry Government Business Services Wholesale/Retail Manufacturing 3% 1% 12% 13% 15% 21% 17% 15% Industry of Survey Respondents Source: Info-Tech Research Group N=78
  • Appendix III: Demographic Information continued 0 Info-Tech Research Group Number of Full time Employees 501 to 1000 51 to 100 251 to 500 101 to 250 1001 to 2500 1 to 50 14% 9% 10% 12% 5001 + 15% 2501 to 5000 18% 10% 12% Source: Info-Tech Research Group N=78
  • Appendix III: Demographic Information continued 0 Info-Tech Research Group 19% 12% 10% 9% 21% $100 Million to $500 Million $5 Million to $10 Million $0 to $1 Million $1 Million to $5 Million $500 Million to $1 Billion $1Billion + 4% $25 Million to $50 Million $10 Million to $25 Million $50 Million to $100 Million 14% 9% 3% Revenue Source: Info-Tech Research Group N=78
  • Appendix III: Demographic Information continued 0 Info-Tech Research Group 10% 1% 37% 13% 3% VP-Level C-Level Officer 21% Owner/President/CEO Consultant Team Member Manager Director-Level Team Lead/Supervisor 13% 3% Job Title Source: Info-Tech Research Group N=78