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  • 1.  
  • 2. Performance Management Systems Chapter 11
  • 3. Chapter Overview
    • Understanding Performance
    • Performance Appraisal: Definition and Uses
    • Performance Appraisal Methods
    • Potential Errors in Performance Appraisals
    • Overcoming Errors in Performance Appraisals
    • Providing Feedback through the Appraisal Interview
    • Developing Performance Improvement Plans
    • Performance Appraisal and the Law
    • Summary of Learning Objectives
  • 4. Performance Management Systems
    • Performance management systems that are directly tied to an organization’s reward system
      • Provide a powerful incentive for employees to work diligently and creatively toward achieving organizational objectives
    • When properly designed and implemented, performance management systems let employees
      • Know how well they are presently performing
      • Clarify what needs to be done to improve performance
  • 5. Understanding Performance
    • Degree of accomplishment of the tasks that make up an employee’s job
      • Reflects how well an employee is fulfilling requirements of a job
      • Often confused with effort, which refers to energy expended, performance is measured in terms of results
  • 6. Determinants of Performance
    • Job performance is net effect of an employee’s effort as modified by abilities and role (or task) perceptions
      • Performance in a given situation can be viewed as resulting from interrelationships among effort, abilities, and role perceptions
    • Effort – Results from being motivated
      • Refers to amount of energy (physical and/or mental) an individual uses in performing a task
    • Abilities – Are personal characteristics used in performing a job
      • Usually do not fluctuate widely over short periods of time
    • Role (task) perceptions – Refer to direction(s) in which individuals believe they should channel their effort on their jobs
      • Activities and behaviors people believe are necessary in the performance of their jobs define their role perceptions
  • 7. Determinants of Performance
    • To attain an acceptable level of performance, a minimum level of proficiency must exist in each of the performance components
      • Level of proficiency in any one performance component can place an upper boundary on performance
    • If employees put forth tremendous effort and have excellent abilities, but lack a clear understanding of their roles, performance will probably not be good in the eyes of their managers
      • Much work will be produced, but it will be misdirected
  • 8. Determinants of Performance
    • An employee who puts forth a high degree of effort and understands the job but lacks ability probably will rate low on performance
    • An employee who has a good ability and understanding of the role but is lazy and expends little effort
      • Employee’s performance will likely be low
    • An employee can compensate up to a point for a weakness in one area by being above average in one or both of the other areas
  • 9. Environmental Factors as Performance Obstacles
    • Other factors beyond the control of the employee can also stifle performance
      • Such obstacles are sometimes used merely as excuses, they are very real and should be recognized
    • Common potential performance obstacles include
      • Employee’s lack of time or conflicting demands upon it
      • Inadequate work facilities and equipment
      • Restrictive policies that affect the job
      • Lack of cooperation from others
      • Type of supervision
      • Temperature, lighting, noise, machine or equipment pacing
      • Shifts
      • Even luck
  • 10. Environmental Factors as Performance Obstacles
    • Environmental factors should be viewed not as direct determinants of individual performance but as modifying the effects of effort, ability, and direction
      • Poor ventilation or worn-out equipment may well affect the effort an individual expends
      • Unclear policies or poor supervision can also produce misdirected effort
      • A lack of training can result in underutilized abilities
    • One of management’s greatest responsibilities is to provide
      • Employees with adequate working conditions
      • A supportive environment to eliminate or minimize performance obstacles
  • 11. Responsibilities of the Human Resource Department in Performance Management
    • Responsibilities of the human resource department are
      • Design the performance management system and select the methods and forms to be used for appraising employees
      • Train managers in conducting performance appraisals
      • Maintain a reporting system to ensure that appraisals are conducted on a timely basis
      • Maintain performance appraisal records for individual employees
    • Responsibilities of managers in performance appraisals are to
      • Evaluate the performance of employees
      • Complete the forms used in appraising employees and return them to the human resource department
      • Review appraisals with employees
      • Establish a plan for improvement with employees
  • 12. Performance Appraisal: Definition And Uses
    • Process of evaluating and communicating to an employee how he or she is performing the job and establishing a plan for improvement
    • When properly conducted
      • They let employees know how well they are performing
      • Influence their future level of effort and task direction
    • Effort should be enhanced if good performance is positively reinforced
    • Task perception of the employee should be clarified through establishing a plan for improvement
    • Common uses of performance appraisals is for making administrative decisions relating to promotions, firings, layoffs, and merit pay increases
      • An employee’s present job performance is often the most significant consideration for determining whether to promote the person
  • 13. Performance Appraisal: Definition And Uses
    • Performance appraisal information can
      • Provide needed input for determining both individual and organizational training and development needs
    • These data can then be used to help determine the organization’s overall training and development needs
      • For individual employees, completed performance appraisal should include a plan outlining specific training and development needs
    • Performance appraisals can also be used to encourage performance improvement
      • Used as a means of communicating to employees how they are doing
      • Suggesting needed changes in behavior, attitude, skills, or knowledge
  • 14. Performance Appraisal: Definition And Uses
    • Feedback clarifies for employees manager’s job expectations
      • Feedback must be followed by coaching and training
    • Information from performance appraisals can be used as
      • Input to validation of selection procedures
      • Input to human resource planning
    • How often to conduct performance appraisals
      • No real consensus on how frequently performance appraisals should be done
      • In general, as often as necessary to let employees know
        • What kind of job they are doing
        • If performance is not satisfactory, measures that must be taken for improvement
      • It is recommended that informal performance appraisals be conducted two or three times a year in addition to an annual formal performance appraisal
  • 15. Performance Appraisal Methods
    • Whatever method of performance appraisal an organization uses, it must be job related
      • Prior to selecting a performance appraisal method, an organization must conduct job analyses and develop job descriptions
    • Methods of performance appraisals include
      • Management by objectives (MBO)
      • Multi-rater assessment (or 360-degree feedback)
      • Graphic rating scale
      • Behaviorally anchored rating scale (BARS)
      • Critical-incident appraisal
      • Essay appraisal
      • Checklist
      • Forced-choice rating
      • Ranking methods
      • Work standards approach
  • 16. Management by Objectives (MBO)
    • More commonly used with professional and managerial employees
    • Consists of
      • Establishing clear and precisely defined statements of objectives for the work to be done by an employee
      • Establishing an action plan indicating how these objectives are to be achieved
      • Allowing employee to implement the action plan
      • Measuring objective achievement
      • Taking corrective action when necessary
      • Establishing new objectives for the future
    • Other names for MBO include management by results, performance management, results management, and work planning and review program
  • 17. Management by Objectives (MBO)
    • For this system to be successful, several requirements must be met
      • Objectives should be quantifiable and measurable
        • Objectives whose attainment cannot be measured or at least verified should be avoided where possible
      • Objectives should also be challenging yet achievable, and they should be expressed in writing and in clear, concise, unambiguous language
      • Employees participate in objective-setting process
        • Employee’s active participation is also essential in developing the action plan
      • Objectives and action plan must serve as a basis for regular discussions between manager and employee concerning employee’s performance
        • Provide an opportunity for manager and employee to discuss progress and modify objectives when necessary
  • 18. Examples of How to Improve Work Objects 11-
  • 19. Typical Areas of Supervisory Objectives 11-
  • 20. Multi-Rater Assessment (or 360-Degree Feedback)
    • Managers, peers, customers, suppliers, or colleagues are asked to complete questionnaires on the employee being assessed
    • Person assessed also completes a questionnaire
    • Questionnaires are generally lengthy. Typical questions are:
      • “Are you crisp, clear, and articulate? Abrasive? Spreading yourself too thin?”
    • Human resources department provides results to the employee, who in turn gets to see how his or her opinion differs from those of the group doing the assessment
  • 21. Graphic Rating Scale
    • Requires rater to indicate on a scale where the employee rates on factors such as
      • Quantity of work
      • Dependability
      • Job knowledge
      • Cooperativeness
    • Rating scales include both numerical ranges and written descriptions
    • Potential weakness
      • Evaluators are unlikely to interpret written descriptions in the same manner due to differences in background, experience, and personality
      • Choice of rating categories
        • It is possible to choose categories that have little relationship to job performance
        • Omit categories that have a significant influence on job performance
  • 22. Sample Items on a Graphic Rating Scale 11-
  • 23. Behaviorally Anchored Rating Scale (BARS)
    • Determines an employee’s level of performance based on whether or not certain specifically described job behaviors are present
      • Focus of BARS is not on performance outcomes but on functional behaviors demonstrated on the job
      • Assumption is that these functional behaviors will result in effective job performance
    • Job dimensions – Means broad categories of duties and responsibilities that make up a job
      • Each job is likely to have several job dimensions, and separate scales must be developed for each
    • Scale values – Define specific categories of performance
    • Anchors – Specific written statements of actual behaviors that, when exhibited on the job, indicate the level of performance on the scale opposite that particular anchor
  • 24. Behaviorally Anchored Rating Scale (BARS)
    • Rating performance using a BARS requires
      • Rater to read list of anchors on each scale to find the group of anchors that best describe the employee’s job behavior during the period being reviewed
      • Scale value opposite the group of anchors is then checked. Process is followed for all the identified dimensions of the job
      • Total evaluation combines the scale values checked for all job dimensions
    • BARSs are normally developed following these steps:
      • Managers and job incumbents identify relevant job dimensions for the job
      • Managers and job incumbents write behavioral anchors for each job dimension
        • As many anchors as possible should be written for each dimension
      • Managers and job incumbents reach consensus concerning scale values to be used and grouping of anchor statements for each scale value
  • 25. Behaviorally Anchored Rating Scale (BARS)
    • Advantages
      • BARSs are developed through active participation of both managers and job incumbents
      • Anchors are developed from observations and experiences of employees who actually perform the job
        • Increases the likelihood that the method will be accepted
      • BARSs can be used to provide specific feedback concerning an employee’s job performance
    • Drawbacks
      • Takes considerable time and commitment to develop
      • Separate forms must be developed for different jobs
    • From a technical point of view, BARS is a graphic rating scale that was developed to help overcome errors in performance appraisals
  • 26. Example of a Behaviorally Anchored Rating Scale 11-
  • 27. Critical-Incident Appraisal
    • Rater keeps a written record of incidents that illustrate both positive and negative employee behaviors
      • Rater then uses these incidents as a basis for evaluating the employee’s performance
      • Incidents recorded should involve job behaviors illustrating both satisfactory and unsatisfactory performance of employee being rated
    • Drawback
      • Rater is required to jot down incidents regularly, which can be burdensome and time-consuming
      • Definition of a critical incident is unclear and may be interpreted differently by different people
      • Method may lead to friction between manager and employees when employees believe manager is keeping a “book” on them
  • 28. Essay Appraisal
    • Rater prepares a written statement describing an individual’s strengths, weaknesses, and past performance
      • Requires that evaluation describe an employee’s performance in written narrative form
      • Instructions are often provided as to the topics to be covered
    • Typical essay appraisal question might be
      • “ Describe, in your own words, this employee’s performance, including quantity and quality of work, job knowledge, and ability to get along with other employees.”
      • “ What are the employee’s strengths and weaknesses?”
    • Drawback
      • Their length and content can vary considerably, depending on rater
      • Essay appraisals are difficult to compare
      • Writing skill of appraiser can also affect appraisal
    • It is possible to use a critical incident method to support essay methods however
  • 29. Checklist
    • Rater answers with a yes-or-no a series of questions about the behavior of the employee
    • Checklist can also assign varying weights to each question
    • Normally, human resource department keeps the scoring key for the checklist method
      • Evaluator is generally not aware of weights associated with each question
    • Drawbacks
      • Raters can see positive or negative connotation of each question, which introduces bias
      • It is time-consuming to assemble questions for each job category
      • Separate listing of questions must be developed for each job category
      • Checklist questions can have different meanings for different raters
  • 30. Sample Checklist Questions 11-
  • 31. Forced-Choice Rating
    • Requires rater to rank a set of statements describing how an employee carries out the duties and responsibilities of the job
      • Statements are normally weighted
      • Rater generally does not know the weights
    • After rater ranks all the forced-choice statements, human resource department applies weights and computes a score
    • Attempts to eliminate evaluator bias by forcing rater to rank statements that are seemingly indistinguishable or unrelated
    • Drawbacks
      • Been reported to irritate raters, who feel they are not being trusted
      • Results of forced-choice appraisal can be difficult to communicate to employees
  • 32. Sample Set of Forced-Choice Statements 11-
  • 33. Ranking Methods
    • Performance of an employee is ranked relative to the performance of others
    • Three of the more commonly used ranking methods are
      • Alternation
      • Paired comparison
      • Forced distribution
  • 34. Alternation Ranking
    • Lists names of employees to be rated on the left side of a sheet of paper
    • Rater chooses most valuable employee on the list, crosses that name off the left-hand list, and puts it at the top of the column on the right-hand side of the paper
    • Appraiser then selects and crosses off name of least valuable employee from left-hand column and moves it to bottom of right-hand column
    • Rater repeats this process for all names on the left-hand side of the paper
    • Resulting list of names in right-hand column gives a ranking of employees from most to least valuable
  • 35. Paired Comparison Ranking
    • Best illustrated with an example
      • Suppose a rater is to evaluate six employees; their names are listed on the left side of a sheet of paper
      • Evaluator then compares first employee with second employee on a chosen performance criterion, such as quantity of work
      • If he or she believes the first employee has produced more work than second employee, a check mark is placed by the first employee’s name
      • Rater then compares the first employee to the third, fourth, fifth, and sixth employee on the same performance criterion, placing a check mark by the name of employee who produced most work in each paired comparison
  • 36. Paired Comparison Ranking
    • Process is repeated until each employee has been compared to every other employee on all of the chosen performance criteria
      • Employee with most check marks is considered to be best performer
      • Employee with fewest check marks is lowest performer
    • Drawback
      • It becomes unwieldy when comparing more than five or six employees
  • 37. Force Distribution
    • Requires rater to compare performance of employees and place a certain percentage of employees at various performance levels
      • Assumes performance level in a group of employees will be distributed according to a bell-shaped, or “normal,” curve
    • Drawback
      • In small groups of employees, a bell-shaped distribution of performance may not be applicable
        • Even where distribution may approximate a normal curve, it is probably not a perfect curve
        • This means some employees probably will not be rated accurately
    • Ranking methods differ dramatically from other methods in that one employee’s performance evaluation is a function of performance of other employees in the job
    • Civil Service Reform Act does not permit use of ranking methods for federal employees
  • 38. Forced-Distribution Curve 11-
  • 39. Work Standards
    • Involves setting a standard or an expected level of output and then comparing each employee’s level to the standard
      • Most frequently used for production employees and is a form of goal setting for these employees
    • Work standards should reflect average output of a typical employee
      • Attempt to define a fair day’s output
    • Advantage
      • Performance review is based on highly objective factors
      • To be effective, affected employees must view standards as being fair
    • Drawback
      • Lack of comparability of standards for different job categories
  • 40. Frequently Used Methods for Setting Work Standards 11-
  • 41. Potential Errors In Performance Appraisals
    • Leniency
      • Occurs when a manager’s ratings are grouped at the positive end instead of being spread throughout the performance scale
    • Central tendency
      • Tendency of a manager to rate most employees’ performance near the middle of the performance scale
    • Recency
      • Tendency of a manager to evaluate employees on work performed most recently, usually one or two months prior to evaluation
    • These errors make it difficult to compare ratings from different raters
  • 42. Potential Errors In Performance Appraisals
    • Halo effect
      • Occurs when a rater allows a single prominent characteristic of an employee to influence his or her judgment on each separate item in the performance appraisal
      • Results in employee receiving approximately same rating on every item
    • Personal preferences, prejudices, and biases can also cause errors in performance appraisals
      • Managers with biases or prejudices tend to look for employee behaviors that conform to their biases
      • Appearance, social status, dress, race, and sex have influenced many performance appraisals
    • Managers have also allowed first impressions to influence later judgments of an employee
      • People tend to retain these impressions even when faced with contradictory evidence
  • 43. Overcoming Errors In Performance Appraisals
    • One approach to overcoming errors is to make refinements in the design of appraisal methods
      • One could say that forced-distribution method of performance appraisal attempts to overcome errors of leniency and central tendency
      • Behaviorally anchored rating scales are designed to reduce halo, leniency, and central tendency errors as they provide managers with specific examples of performance against which to evaluate
    • It does not appear likely that refining appraisal instruments will totally overcome errors in performance appraisals
      • Since refined instruments frequently do not overcome all the obstacles
  • 44. Overcoming Errors In Performance Appraisals
    • Another approach to overcoming errors is to improve the skills of raters
      • Suggestions on specific training to be given to evaluators, although vague, normally emphasize that evaluators should be trained to observe behavior more accurately and judge it more fairly
    • More research is needed before a definitive set of topics for rater training can be established
    • At a minimum, raters should receive training in
      • Performance appraisal method(s) used by company
      • Importance of rater’s role in total appraisal process
      • Use of performance appraisal information
      • Communication skills necessary to provide feedback to employee
  • 45. Providing Feedback Through the Appraisal Interview
    • Unless feedback interview is properly conducted, it can and does result in an unpleasant experience for both manager and employee
    • To prepare for it, the manager should answer the following questions:
      • What results should the interview achieve?
      • What good contributions is the employee making?
      • Is the employee working up to his or her potential?
      • Is the employee clear about the manager’s performance expectations?
      • What training does the employee need to improve?
      • What strengths does the employee have that can be built on or improved?
  • 46. Providing Feedback Through the Appraisal Interview
    • In addition, the manager should remember several basic guidelines in conducting the interview:
      • Manager must know the employee’s job description
      • Evaluation must be based on employee’s performance and not on his or her personality
      • Manager must be positive and build on the employee’s strengths
      • Manager must be candid and specific
      • Manager must listen to the employee as well as presenting her or his own views
      • Manager must elicit employee feedback on how to improve performance
  • 47. Factors Influencing Success or Failure of Appraisal Interviews
    • More the employees are allowed to participate in the appraisal process, the more
      • Satisfied they will be with the appraisal interview
      • Satisfied they will be with the manager
      • Likely they will be to accept and meet performance improvement objectives
    • More a manager uses positive motivational techniques, the more satisfied the employee is likely to be with appraisal interview and with manager
    • Manager and employee mutually setting specific performance improvement objectives results in better performance than when managers use a general discussion or criticism
  • 48. Factors Influencing Success or Failure of Appraisal Interviews
    • Discussing and solving problems hampering employee’s current job performance improve employee’s performance
    • More the thought and preparation that both manager and employee devote before the appraisal interview, greater the benefits of the interview
    • More the employee perceives that performance appraisal results are tied to organizational rewards, the more beneficial the interview will be
  • 49. Developing Performance Improvement Plans
    • Step of including a performance improvement plan in a completed performance appraisal is often ignored
    • Managers must recognize that an employee’s development is a continuous cycle of
      • Setting performance goals
      • Providing training necessary to achieve goals
      • Assessing performance related to accomplishing goals
      • Setting new, higher goals
  • 50. Developing Performance Improvement Plans
    • Performance improvement plan consists of the following components:
      • Where are we now?
        • Answered in the performance appraisal process
      • Where do we want to be?
        • Requires evaluator and person being evaluated to mutually agree on areas that can and should be improved
      • How does the employee get from where he or she is now to where he or she wants to be?
        • Critical to performance improvement plan
        • Manager and employee must agree upon specific steps to be taken
        • May include training employee to improve his or her performance
        • May include how evaluator will help employee achieve performance goals
  • 51. Performance Appraisal and the Law
    • Title VII of the Civil Rights Act permits use of a bona fide performance appraisal system
    • Generally not considered to be bona fide when their application results in adverse effects on minorities, women, or older employees
    • Number of court cases have ruled that performance appraisal systems used by organizations were discriminatory and not job related
      • Brito et al. v. Zia Company
      • Mistretta v. Sandia Corporation
      • Chamberlain v. Bissel, Inc.
      • Price Waterhouse v. Hopkins
  • 52. Performance Appraisal and the Law
    • Some suggestions that have been offered for making performance appraisal systems more legally acceptable include
      • Deriving the content of the appraisal system from job analyses
      • Emphasizing work behaviors rather than personal traits
      • Ensuring that the results of appraisals are communicated to employees
      • Ensuring that employees are allowed to give feedback during the appraisal interview
      • Training managers in how to conduct proper evaluations
      • Ensuring that appraisals are written, documented, and retained
      • Ensuring that personnel decisions are consistent with the performance appraisals
  • 53. Summary of Learning Objectives
    • Define performance
    • Define performance appraisal
    • Explain management by objectives
    • Describe multi-rater assessment
    • Describe the graphic rating scale
    • Explain critical-incident appraisal
    • Describe essay appraisal
    • Describe the checklist method of performance appraisal
    • Explain the forced-choice method of performance appraisal
    • Describe the work standards approach to performance appraisal
    • Define leniency, central tendency, recency, and the halo effect