Mondy hrm13 inppt08 ppt
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Human Resources Management
![Human Resource Management
13th
Edition
Chapter 8
Performance Management
and Appraisal
8-1Copyright © [2014] Pearson Education](https://image.slidesharecdn.com/mondyhrm13inppt08ppt-150216192944-conversion-gate02/85/Mondy-hrm13-inppt08-ppt-1-320.jpg)
![Learning Objectives
• Describe employee engagement, define performance
management, and describe the importance of performance
management.
• Define performance appraisal and identify the uses of
performance appraisal.
• Discuss the performance appraisal environmental factors,
describe the performance appraisal process, and discuss
whether or not a case can be made for getting rid of
performance appraisals.
• Identify the various performance criteria (standards) that can
be established.
• Identify who may be responsible for performance appraisal
and explain the performance period.
8-2Copyright © [2014] Pearson Education](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Mondy hrm13 inppt08 ppt
- 1. Human Resource Management 13th Edition Chapter 8 Performance Management and Appraisal 8-1Copyright © [2014] Pearson Education
- 2. Learning Objectives • Describe employee engagement, define performance management, and describe the importance of performance management. • Define performance appraisal and identify the uses of performance appraisal. • Discuss the performance appraisal environmental factors, describe the performance appraisal process, and discuss whether or not a case can be made for getting rid of performance appraisals. • Identify the various performance criteria (standards) that can be established. • Identify who may be responsible for performance appraisal and explain the performance period. 8-2Copyright © [2014] Pearson Education
- 3. Learning Objectives (Cont.) • Identify the various performance appraisal methods. • List the problems that have been associated with performance appraisal. • Explain the characteristics of an effective appraisal system. • Describe the legal implications of performance appraisal. • Explain how the appraisal interview should be conducted and discuss how performance appraisal is affected by a country’s culture. 8-3Copyright © [2014] Pearson Education
- 4. HRM in Action: Employee Engagement for a Committed Workforce • Level of commitment workers make to their employer • Seen in their willingness to stay at the firm and to go beyond call of duty • Found in employees’ minds, hearts, and hands 8-4Copyright © [2014] Pearson Education
- 5. Performance Management (PM) • Goal-oriented process ensuring processes are in place to maximize productivity at employee, team and organizational levels • Close relationship between incentives and performance. • Dynamic, ongoing, continuous process • Each part of the system is integrated and linked for continuous organizational effectiveness 8-5Copyright © [2014] Pearson Education
- 6. Performance Appraisal Defined • Formal system of review and evaluation of individual or team task performance • Often negative, disliked activity that seems to elude mastery 8-6Copyright © [2014] Pearson Education
- 7. Uses of Performance Appraisal • Human resource planning • Recruitment and Selection • Training and development • Career planning and development • Compensation programs • Internal Employee Relations • Assessment of Employee Potential 8-78-7Copyright © [2014] Pearson Education
- 8. Performance Appraisal Environmental Factors • External: – Legislation requiring nondiscriminatory appraisal systems – Labor unions • Factors within internal environment, such as corporate culture 8-8Copyright © [2014] Pearson Education
- 9. Trends & Innovations: Can a Case Be Made for Getting Rid of Traditional Performance Appraisal? • Managers do not like administering performance appraisal and employees do not like receiving them • Failures lies in lack of ownership by line managers and employees • At times developed for wrong reasons • May be a better way 8-9Copyright © [2014] Pearson Education
- 10. Performance Appraisal Process External Environment Internal Environment 8-10 Identify Specific Performance Appraisal Goals Establish Performance Criteria (Standards) and Communicate Them To Employees Examine Work Performed Appraise the Results Discuss Appraisal with Employee Copyright © [2014] Pearson Education
- 11. Establish Performance Criteria (Standards) • Traits • Behaviors • Competencies • Goal achievement • Improvement potential 8-11Copyright © [2014] Pearson Education
- 12. Traits • Employee traits such as attitude, appearance, and initiative are basis for some evaluations • May be unrelated to job performance or be difficult to define • Certain traits may relate to job performance 8-12Copyright © [2014] Pearson Education
- 13. Caution on Traits: Wade v. Mississippi Cooperative Extension Service In performance appraisal system, general characteristics such as “leadership, public acceptance, attitude toward people, appearance and grooming, personal conduct, outlook on life, ethical habits, resourcefulness, capacity for growth, mental alertness, loyalty to organization are susceptible to partiality and to the personal taste, whim, or fancy of the evaluator as well as patently subjective in form and obviously susceptible to completely subjective treatment by those conducting the appraisals” 8-13Copyright © [2014] Pearson Education
- 14. Behaviors • Organizations may evaluate employee’s task-related behavior or competencies • Examples are leadership style, developing others, teamwork and cooperation, or customer service orientation • If certain behaviors result in desired outcomes, there is merit in using them in evaluation process 8-14Copyright © [2014] Pearson Education
- 15. Competencies • Broad range of knowledge, skills, traits, and behaviors • May be technical in nature, business oriented, or related to interpersonal skills • Should be those that are closely associated with job success 8-15Copyright © [2014] Pearson Education
- 16. Goal Achievement • Use if organizations consider ends more important than means • Should be within control of individual or team • Should be those results that lead to firm’s success 8-16Copyright © [2014] Pearson Education
- 17. Improvement Potential • Many criteria used focus on past • Cannot change past • Should emphasize future 8-178-17Copyright © [2014] Pearson Education
- 18. Responsibility for Appraisal • Immediate supervisor • Subordinates • Peers and team members • Self-appraisal • Customer appraisal 8-18Copyright © [2014] Pearson Education
- 19. Immediate Supervisor • Traditionally most common choice • Usually in excellent position to observe employee’s job performance • Has responsibility for managing particular unit 8-19Copyright © [2014] Pearson Education
- 20. Subordinates • Our culture has viewed evaluation by subordinates negatively. • Some firms find that evaluation of managers by subordinates is both feasible and needed. • Issues: – Could be seen as a popularity contest – Possible reprisal against employees 8-20Copyright © [2014] Pearson Education
- 21. Peers and Team Members • Work closely with evaluated employee and probably have undistorted perspective on typical performance • Problems include reluctance of some people who work closely together, especially on teams, to criticize each other 8-21Copyright © [2014] Pearson Education
- 22. Self-Appraisal • If employees understand their objectives and the criteria used for evaluation, they are in a good position to appraise own performance • Employee development is self- development • Self-appraisal may make employees more highly motivated 8-22Copyright © [2014] Pearson Education
- 23. Customer Appraisal • Customer behavior determines firm’s degree of success • Demonstrates commitment to customer • Holds employees accountable • Fosters change 8-23Copyright © [2014] Pearson Education
- 24. Performance Appraisal for Telecommuters • Well-defined understanding of job roles and performance measures • Have objective measurements that apply to all employees • Do not to vary the performance standards and metrics for virtual workers from those of office workers 8-24Copyright © [2014] Pearson Education
- 25. The Appraisal Period • Prepared at specific intervals • Usually annually or semiannually • Period may begin with employee’s date of hire • All employees may be evaluated at same time 8-25Copyright © [2014] Pearson Education
- 26. Choosing a Performance Appraisal Method • 360-degree evaluation • Rating scales • Critical incidents • Essay • Work standards • Ranking • Paired comparisons • Forced distribution • Behaviorally anchored rating scales (BARS) • Result-based systems 8-268-26Copyright © [2014] Pearson Education
- 27. 360-Degree Evaluation • Multi-rater evaluation • Input from multiple sources • Focuses on skills needed across organizational boundaries • More objective measure of performance • Process more legally defensible 8-27Copyright © [2014] Pearson Education
- 28. Rating Scales • Rates employees according to defined factors • Judgments are recorded on a scale • Many employees are evaluated quickly 8-28Copyright © [2014] Pearson Education
- 29. Critical Incidents • Written records of highly favorable and unfavorable work actions • Appraisal more likely to cover entire evaluation period • Does not focus on last few weeks or months 8-29Copyright © [2014] Pearson Education
- 30. Essay • Brief narrative describing performance • Tends to focus on extreme behavior • Depends heavily on evaluator's writing ability • Comparing essay evaluations might be difficult 8-30Copyright © [2014] Pearson Education
- 31. Work Standards • Compares performance to predetermined standard • Standards: Normal output of average worker operating at normal pace • Time study and work sampling used • Workers need to know how standards were set 8-31Copyright © [2014] Pearson Education
- 32. Ranking • All employees from group ranked in order of overall performance • Comparison is based on single criterion, such as overall performance 8-32Copyright © [2014] Pearson Education
- 33. Paired Comparison • Variation of ranking method • Compares performance of each employee with every other employee in group 8-33Copyright © [2014] Pearson Education
- 34. Forced Distribution • Rater assigns individual in workgroup to limited number of categories • Assumes all groups of employees have same distribution • Proponents of forced distribution believe: – They facilitate budgeting – They guard against weak managers who are too timid to get rid of poor performers 8-34Copyright © [2014] Pearson Education
- 35. Forced Distribution (cont.) • Require managers to be honest with workers about how they are doing • Also called a rank-and-yank system • Unpopular with many managers • May damage morale and generate mistrust of leadership • Rankings may be way for companies to easily rationalize firings 8-35Copyright © [2014] Pearson Education
- 36. Behaviorally Anchored Rating Scales (BARS) • Combines traditional rating scales and critical incidents methods • Job behaviors derived from critical incidents described more objectively 8-36Copyright © [2014] Pearson Education
- 37. Result-Based Systems • Manager and subordinate agree on objectives for next appraisal • Evaluation based on how well objectives are accomplished • In the past a form of management by objectives (MBO) 8-37Copyright © [2014] Pearson Education
- 38. Problems in Performance Appraisal • Appraiser discomfort • Lack of objectivity • Halo/horn error • Leniency/strictness • Central tendency • Recent behavior bias • Personal bias • Manipulating the evaluation • Employee anxiety 8-38Copyright © [2014] Pearson Education
- 39. Appraiser Discomfort • Performance appraisal process cuts into manager’s time • Experience can be unpleasant when employee has not performed well 8-39Copyright © [2014] Pearson Education
- 40. Lack of Objectivity • Factors such as attitude, appearance, and personality are difficult to measure • Factors may have little to do with employee’s job performance • May place evaluator and company in untenable positions 8-40Copyright © [2014] Pearson Education
- 41. Halo/Horn Error • Halo error: Manager generalizes one positive performance feature or incident to all aspects of employee performance, resulting in higher rating • Horn error: Manager generalizes one negative performance feature or incident to all aspects of employee performance, resulting in lower rating 8-41Copyright © [2014] Pearson Education
- 42. Leniency/Strictness • Leniency: Giving undeserved high ratings • Strictness: Being unduly critical of employee’s work performance • Worst situation is when firm has both lenient and strict managers and does nothing to level inequities 8-42Copyright © [2014] Pearson Education
- 43. Central Tendency • Error occurs when employees are incorrectly rated near average or middle of scale • May be encouraged by some rating scale systems requiring evaluator to justify extremely high or extremely low ratings 8-438-43Copyright © [2014] Pearson Education
- 44. Recent Behavior Bias • Employee’s behavior often improves and productivity rises several days or weeks before scheduled evaluation • Natural for rater to remember recent behavior more clearly than past actions • Necessary to maintain records of performance 8-44Copyright © [2014] Pearson Education
- 45. Personal Bias (Stereotyping) • Managers allow individual differences such as gender, race, or age to affect ratings • Effects of cultural bias, or stereotyping, can influence appraisals • Other factors – Example: Mild-mannered employees may be appraised more harshly, simply because they do not seriously object to appraisal results 8-45Copyright © [2014] Pearson Education
- 46. Manipulating the Evaluation • Sometimes, managers control every aspect of appraisal process and manipulate the system • Example: –A supervisor wants to give pay raise to certain employee, so supervisor may give employee an undeserved high performance evaluation. 8-46Copyright © [2014] Pearson Education
- 47. Employee Anxiety • Evaluation process may create anxiety for appraised employee • Opportunities for promotion, better work assignments, and increased compensation may hinge on results 8-47Copyright © [2014] Pearson Education
- 48. Characteristics of Effective Appraisal System • Job-related criteria • Performance expectations • Standardization • Trained appraisers • Continuous open communication • Performance reviews • Due process 8-48Copyright © [2014] Pearson Education
- 49. Job-Related Criteria • Most basic criterion needed in employee performance appraisals • Uniform Guidelines and court decisions are clear on this point 8-49Copyright © [2014] Pearson Education
- 50. Performance Expectations • Managers and subordinates must agree on performance expectations in advance of appraisal period • If employees clearly understand expectations, they can evaluate own performance and make timely adjustments 8-50Copyright © [2014] Pearson Education
- 51. Standardization Firms should use same evaluation instrument for all employees in same job category who work for same supervisor 8-51Copyright © [2014] Pearson Education
- 52. Trained Appraisers • Seldom receive training on how to conduct effective evaluations • Training should be ongoing • Includes how to rate employees and how to conduct appraisal interviews 8-52Copyright © [2014] Pearson Education
- 53. Continuous Open Communication • Employees need to know how well they are performing • Good appraisal system provides highly desired feedback on continuing basis • Should be few surprises in performance review 8-53Copyright © [2014] Pearson Education
- 54. Conduct Performance Reviews • Special time should be set for formal discussion of employee’s performance • Withholding appraisal results is absurd. • Performance review allows employees to detect any errors or omissions in appraisal • Employee may simply disagree with evaluation and want to challenge it 8-548-54Copyright © [2014] Pearson Education
- 55. Due Process • Provides employees opportunity to appeal appraisal results • Must have procedure for pursuing grievances and having them addressed objectively 8-55Copyright © [2014] Pearson Education
- 56. Legal Implications • Employee lawsuits may result from negative evaluations • Unlikely that any appraisal system will be immune to legal challenge 8-56Copyright © [2014] Pearson Education
- 57. Appraisal Interview • Achilles heel of entire evaluation process • Scheduling interview • Interview structure • Use of praise and criticism • Employee’s role • Concluding interview 8-57Copyright © [2014] Pearson Education
- 58. Scheduling the Interview • Employees typically know when their interview should take place • Anxiety tends to increase if their supervisor delays the meeting 8-58Copyright © [2014] Pearson Education
- 59. Interview Structure • Discuss employee’s performance • Assist employee in setting goals and personal development plans for next appraisal period • Suggesting means for achieving established goals, including support from manager and firm 8-59Copyright © [2014] Pearson Education
- 60. Conducting Separate Interviews • Conduct separate interviews for discussing: 1. Employee performance and development 2. Pay • When pay emerges in interview, it tends to dominate conversation • Performance improvement then takes a back seat 8-60Copyright © [2014] Pearson Education
- 61. Use of Praise and Criticism • Praise is appropriate when warranted • Criticism, even if warranted, is especially difficult to give • “Constructive” criticism is often not perceived that way 8-61Copyright © [2014] Pearson Education
- 62. Employee’s Role • Should go through diary or files and make notes of all projects, regardless of their success • Information should be on appraising manager’s desk well before review 8-62Copyright © [2014] Pearson Education
- 63. Concluding the Interview • Ideally, employees will leave interview with positive feelings about management, company, job, and themselves • Cannot change past behavior; future performance is another matter • Interview should end with specific and mutually agreed-upon plans for employee’s development 8-638-63Copyright © [2014] Pearson Education
- 64. A Global Perspective: Performance Appraisal versus a Country’s Culture • Special problems when translated into different cultural environments • Chinese managers often have different idea about what performance is than do Western managers • Culture also plays significant role in success and failure of performance appraisal systems in the Middle East 8-648-64Copyright © [2014] Pearson Education
- 65. 8-65
Editor's Notes
- Employee engagement refers to the level of commitment workers make to their employer, seen in their willingness to stay at the firm and to go beyond the call of duty. The concept of engagement serves as a reminder that people ultimately drive an organization’s success. Engagement is found in employees’ minds, hearts, and hands. It evolves into the positive culture that exists within the organization. Engaged workers want to come to work every day and do what is needed to get the job done right.
- Performance management is a goal-oriented process used to maximize the productivity of employees, teams, and the overall organization. Whereas performance appraisal occurs at a specific time, performance management is an ongoing process. Each part of the system, such as training, appraisal, and rewards, is integrated and linked for the purpose of improving organizational effectiveness. To encourage this, performance management systems often include incentives so that workers are rewarded for achieving strategic goals.
- Performance appraisal is a formal system of review and evaluation of individual and team performance. Performance appraisals are often a disliked requirement of organizational life. It usually goes without saying that most managers do not like giving performance appraisals and most employees do not like receiving them. However, appraisal is a critical part of performance management because it helps provide feedback, encourage performance improvement, identify training and development needs, and defend personnel decisions. As such, developing an effective performance appraisal system has been, and will continue to be, a high priority for management.
- For many organizations, the primary goal of an appraisal system is to improve individual and organizational performance. There are often other goals, but rarely can one system do everything well without taking a lot of time and effort: In assessing a firm’s human resources, data must be available to identify those who have the potential to be promoted or for any area of internal employee relations. Performance evaluation ratings may be helpful in predicting the performance of job applicants. Performance appraisal should point out an employee’s specific needs for training and development. Career planning is an ongoing process whereby an individual sets career goals and identifies the means to achieve them. On the other hand, career development is a formal approach used by the organization to ensure that people with the proper qualifications and experiences are available when needed. Performance appraisal data is essential in assessing an employee’s strengths and weaknesses and in determining the person’s potential. Performance appraisal results provide a basis for rational decisions regarding pay adjustments. Most managers believe that you should reward outstanding job performance tangibly with pay increases. They believe that the behaviors you reward are the behaviors you get. Performance appraisal data are also used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer. Some organizations attempt to assess an employee’s potential as they appraise his or her job performance.
- External and internal environmental factors can influence the appraisal process. For example, legislation requires that appraisal systems be nondiscriminatory. External and internal environmental factors can influence the appraisal process. For example, legislation requires that appraisal systems be nondiscriminatory. In the case of Mistretta v Sandia Corporation (a subsidiary of Western Electric Company, Inc.), a federal district court judge ruled against the company, stating, “There is sufficient circumstantial evidence to indicate that age bias and age based policies appear throughout the performance rating process to the detriment of the protected age group.” The Albemarle Paper v Moody case also supported validation requirements for performance appraisals, as well as for selection tests. Organizations should avoid using any appraisal method that results in a disproportionately negative impact on a protected group. The labor union is another external factor that might affect a firm’s appraisal process. Unions have traditionally stressed seniority as the basis for promotions and pay increases. They may vigorously oppose the use of a management-designed performance appraisal system used for these purposes. Factors within the internal environment can also affect the performance appraisal process. For instance, a firm’s corporate culture can assist or hinder the process. Today’s dynamic organizations, which increasingly use teams to perform jobs, recognize overall team results as well as individual contributions. A nontrusting culture does not provide the environment needed to encourage high performance by either individuals or teams. In such an atmosphere, the credibility of an appraisal system will suffer regardless of its merits.
- Managers do not like administering performance appraisal and employees do not like receiving them. Historically, the performance appraisal process involved managers telling workers what they wanted them to do, determining the degree to which the task was completed, and rewarding or punishing them based on how well the job was done. Today firms stress employee empowerment and engagement. They also want employees to work in teams to accomplish their duties. Teams, not managers, are often making the decisions which run counter to the tradition appraisal system. There are those who believe that a firm cannot have an empowered and engaged workforce and still use a traditional performance appraisal system.
- The starting point for the performance appraisal process is identifying specific performance goals. The next step is to establish performance criteria and communicate these expectations to employees. At the end of the appraisal period, which is typically anywhere from 3 to 12 months, the supervisor and the employee review work performance against the performance standards. This review helps determine how well employees have done, explores reasons for deficiencies, and develops a plan to correct the problems.
- There is an old adage that says, “What gets measured gets done.” Therefore, management must carefully select performance criteria that pertain to achieving strategic goals. The most common appraisal criteria are traits, behaviors, competencies, goal achievement, and improvement potential.
- Traits are usually thought of as resulting from biology. A personality trait is more ingrained as with a person being introverted or extroverted. Certain employee traits such as appearance and cognitive aptitude may be the basis for some evaluations.
- Organizations need to be cautious when using traits for evaluations, as many of these qualities are subjective and may be either unrelated to job performance or difficult to define. In such cases, inaccurate evaluations may occur and create legal problems for the organization.
- Behaviors are typically viewed as resulting from life experiences. A behavior may have been learned from parents, significant friends or from a certain work environment. A behavior can be changed but traits are usually more established. Often a young person who joins the military will have many behavioral changes take place prior to returning to civilian life. An appropriate behavior to evaluate for a manager might be leadership style. For individuals working in teams, developing others, teamwork and cooperation, or customer service orientation might be appropriate. Desired behaviors may be appropriate as evaluation criteria because if they are recognized and rewarded, employees tend to repeat them. If certain behaviors result in desired outcomes, there is merit in using them in the evaluation process.
- Competencies include a broad range of knowledge, skills, traits, and behaviors that are needed to perform a job successfully. They may be technical in nature, relate to interpersonal skills, or are business-oriented. For example, analytical thinking and achievement orientation might be essential in professional jobs. In leadership jobs, relevant competencies might include developing talent, delegating authority, and people management skills. The competencies selected for evaluation purposes should be those that are closely associated with job success.
- If organizations consider the ends more important than the means, then using only goal achievement as an outcome might be appropriate. The outcomes established should be within the control of the individual or team and should be those results that lead to the firm’s success. At upper levels, the goals might be profit and market share. At lower organizational levels, the outcomes might be meeting the customer’s quality requirements and delivering according to the promised schedule.
- When organizations evaluate their employees’ performance, the focus is often on the past. However, firms should also emphasize the development of behaviors employees need to achieve the firm’s goals. This begins with an accurate assessment of the employee’s improvement potential to ensure effective career planning and development.
- The HR department is usually responsible for coordinating the design and implementation of performance appraisal programs. However, it is essential that line managers are involved from beginning to end. These individuals usually conduct the appraisals; therefore, they should participate in the design of the program if it is to succeed.
- An employee’s immediate supervisor is usually the most logical choice for evaluating performance. The supervisor is usually in an excellent position to observe the employee’s job performance and the performance of a team. On the negative side, individual supervisors may only focus on certain aspects of employee performance, or may manipulate evaluations to justify pay increases and promotions.
- Historically, our culture has viewed the evaluation of managers by subordinates negatively. However, subordinates are in an excellent position to view their superiors’ managerial effectiveness. Advocates believe that this approach leads supervisors to become especially conscious of the work group’s needs and to do a better job of managing. Critics argue that managers may view it as a popularity contest or that employees will be fearful of reprisal.
- A major strength of using peers to appraise performance is that they work closely with the employee and probably have an undistorted perspective on day-to-day performance. Problems with peer evaluations include the reluctance of some people, especially on teams, to criticize each other. On the other hand, if an employee has a conflict with another worker he or she might provide an unfair evaluation. Another problem concerns peers who interact infrequently and therefore lack the information needed to make an accurate assessment.
- If employees understand their objectives and the criteria used for evaluation, they are in a good position to appraise their own performance. Many people know what they do well on the job and what they need to improve. If they have the opportunity, they will criticize their own performance objectively and take action to improve it. If the appraisal system is fair and equitable, self-appraisal can actually lead to more highly motivated employees.
- Customers often determine a firm’s success, so some organizations believe it is important to obtain performance input from them as well. Organizations use this approach because it demonstrates a commitment to the customer, holds employees accountable, and fosters positive change.
- Telecommuting is a work arrangement whereby employees are able to remain otherwise away from the office and perform their work using computers and other electronic devices that connect them with their offices. When conducting performance appraisal for telecommuters, there are some general guidelines to follow to assure that employees who are not in the office are not treated differently. Certainly there should be a well-defined understanding of job roles and performance measures. All telecommuters should have objective measurements that apply to all employees. Employers must take care not to vary the performance standards and metrics for virtual workers who have job duties that are similar to those of office-based counterparts.
- Formal performance evaluations are usually prepared at specific intervals. Although there is nothing magical about the period for formal appraisal reviews, in most organizations they occur either annually or semiannually. Even more significant, however, is the continuous interaction (primarily informal), including coaching and other developmental activities, that continues throughout the appraisal period. Managers should be conditioned to understand that managing performance is a continuous process that is built into their job every day. In the current business climate, firms may want to consider monitoring performance more often. Changes occur so fast that employees need to look at objectives and their own roles throughout the year to see whether changes are in order. Southwest Airlines has asked its managers to have monthly check-ins with staff rather than semiannual ones.
- There are a number of performance appraisal methods available, and the methods used should reflect the intended purpose.
- 360-degree feedback is a popular performance appraisal method that involves gathering input from multiple sources. People all around the employee may provide ratings, including senior managers, the employee himself or herself, supervisors, subordinates, peers, team members, and customers. As many as 90 percent of Fortune 500 companies use some form of 360-degree feedback for employee evaluation or development.
- Rating scales can be used by evaluators to assess employees according to defined factors. The scale typically has 4 to 7 categories, defined by adjectives such as outstanding, meets expectations, or needs improvement. This method is simple and easy to use, which permits quick evaluations of many employees and facilitates comparison of employees’ performances.
- The critical incident method requires keeping written records of highly favorable and unfavorable employee work actions. When a “critical incident” affects the department’s effectiveness significantly, the manager writes it down. These records are then used to evaluate employee performance, and the appraisal is more likely to cover the entire evaluation period than other methods of appraisal may be.
- The essay method entails the manager writing a brief narrative describing the employee’s performance. This method tends to focus on extreme behavior in the employee’s work rather than on routine day-to-day performance. Comparing essay evaluations is usually difficult because no common criteria exist.
- The work standards method is a performance appraisal technique that compares each employee’s performance to a predetermined standard. Firms may apply work standards to virtually all types of jobs, but production jobs generally receive the most attention. An advantage of using this method is that it can be very objective if standards are fair and set in a transparent manner.
- Ranking is when a rater ranks all employees from a group in order of overall performance. Some professionals believe this comparative approach is especially useful when management must make human resource decisions such as promotion or pay increases.
- Paired comparison is a variation of the ranking method in which the performance of each employee is compared with that of every other employee in the group. The employee who receives the greatest number of favorable comparisons receives the highest ranking.
- The forced distribution method requires the rater to assign individuals in a work group to a limited number of categories. The purpose is to keep managers from being excessively lenient and having a disproportionate number of employees in the “superior” category. Forced distribution systems have been around for decades, and firms such as General Electric, Hewlett-Packard, Microsoft, Pepsi, Caterpillar, Goodyear, and Capital One use such systems.
- Although used by some prestigious firms, the forced distribution system appears to be unpopular with many managers. Critics of forced distribution contend that it compels managers to penalize a good, although not a great, employee who is part of a superstar team. Employees are often opposed to forced ranking because they suspect it is a way for companies to justify firings.
- The behaviorally anchored rating scale (or BARS) method combines elements of the traditional rating scales and critical incident methods. A BARS system differs from rating scales because, instead of using terms such as high, medium, and low, it uses behavioral anchors related to the criterion being measured. This clarifies the meaning of each point on the scale and reduces rater bias and error by anchoring the rating with specific behavioral examples based on job analysis information. A drawback is that the behaviors are activity-oriented rather than results-oriented. Also, the method may not be economically feasible because each job category requires its own rating scale. Yet, among the various appraisal techniques, the BARS method is perhaps the most highly defensible in court because it is based on actual observable job behaviors.
- In the past a form of management by objectives (MBO). Although all aspects of an MBO system did not work effectively, there were sections that remain as part of an effective appraisal system. The crucial phase of the MBO process requires that challenging but attainable objectives and standards be established through interaction between superiors and subordinates. Individuals jointly established objectives with their superiors, who then give them some latitude in how to achieve the objectives. Action plans require clear delineation of what specifically is to be accomplished and when it is to be completed. With MBO, performance is evaluated on the basis of progress toward objective attainment. Having specific performance objectives provides management with a basis for comparison. When objectives are agreed on by the manager and the subordinate, self-evaluation and controls become possible. In fact, with MBO, performance appraisal can be a joint effort, based on mutual agreement. With MBO, it is left up to the managers to take corrective action when results are not as planned.
- Many of the problems commonly mentioned about performance appraisal are not inherent in the method, but rather reflect improper implementation. For example, firms may fail to provide adequate rater training or they may use appraisal criteria that are too subjective and are not clearly job related. The following section highlights some of the more common problem areas.
- Conducting performance appraisals is often a frustrating management task. If a performance appraisal system has a faulty design or improper administration, employees will dread receiving appraisals and the managers will despise giving them. In fact, some managers have always loathed the time, paperwork, difficult choices, and discomfort that often accompanies the appraisal process. Effective training will help alleviate some, but probably not all, of this appraiser discomfort.
- A potential weakness of traditional performance appraisal methods is that they lack objectivity. Employee appraisal based primarily on attitude, appearance, and personality are difficult to measure and may have little to do with an employee’s job performance. Although subjectivity will always be present in appraisal, using personal characteristics will always be difficult to defend if they are not clearly job related.
- A halo error occurs when a manager generalizes one positive performance feature or incident to all aspects of employee performance, resulting in a higher rating. For example, Rodney Pirkle, accounting supervisor, placed a high value on neatness, a factor used in the company’s performance appraisal system. As Rodney was evaluating the performance of his senior accounting clerk, Jack Hicks, he noted that Jack was a very neat individual and gave him a high ranking on this factor. Also, consciously or unconsciously, Rodney permitted the high ranking on neatness to carry over to other factors, giving Jack undeserved high ratings on all factors. Of course, if Jack had not been neat, the opposite could have occurred. With the horn error, a manager generalizes a negative performance feature to all aspects of employee performance, resulting in a lower rating.
- Giving undeserved high ratings to an employee is referred to as leniency. This behavior is often motivated by a desire to avoid controversy over the appraisal. When managers know they are evaluating employees for administrative purposes, such as pay increases, they are likely to be more lenient than when evaluating performance to achieve employee development. Being overly critical of an employee’s work performance is referred to as strictness. The worst situation is when a firm has both lenient and strict managers, and therefore is not able to make fair comparisons across employee evaluations.
- Central tendency is an error that occurs when employees are incorrectly rated near the middle of a scale. This practice may be encouraged by some systems that require the evaluator to justify, in writing, any extremely high or low ratings. With such a system, the rater may avoid possible controversy or criticism by giving only average ratings. When a manager gives an underachiever or overachiever an average rating, it undermines the compensation and promotion systems.
- Although his or her actions may not be conscious, an employee’s behavior often improves and productivity tends to rise several days or weeks before an evaluation. It is only natural for a rater to remember recent behavior more clearly than actions from the more distant past. An individual’s performance over the entire period should be considered, and maintaining detailed records of performance helps avoid this problem.
- This pitfall occurs when managers allow individual differences to affect the ratings they give. If there are factors to avoid such as gender, race, or age, not only is this problem detrimental to employee morale, but it is obviously illegal and can result in costly lawsuits. The effects of cultural bias, or stereotyping, can definitely influence appraisals. Managers establish mental pictures of what are considered ideal typical workers, and employees who do not match this picture may be unfairly judged. While all people have biases of some type that can affect the appraisal process, a successful evaluator will manage these biases. Prejudice in appraisal can be based on other factors as well. For example, mild-mannered employees may be appraised more harshly because they do not seriously object to the results. This type of behavior is in sharp contrast to the more outspoken employee, who often confirms the adage: the squeaky wheel gets the grease.
- Managers often control virtually every aspect of the appraisal process and are therefore in a position to manipulate the evaluation. For example, a supervisor may want to give a pay raise to a certain employee and will give the employee an undeserved high performance rating. Or the supervisor may want to get rid of an employee, and may give the individual an undeserved low rating. In either instance, the system is distorted, the performance appraisals are not valid, and the evaluations would not be defensible in court.
- The evaluation process may also create anxiety for the appraised employee. Managers should be aware that this is a serious issue because opportunities for promotion, better work assignments, and increased compensation are at stake for the employee. This could cause not only apprehension, but also lack of full and honest participation.
- The basic purpose of a performance appraisal system is to improve the performance of individuals, teams, and the entire organization. The system may also serve to assist in making administrative decisions concerning pay increases, promotions, or terminations. Although a perfect system does not exist, every system should possess certain characteristics and should honestly inform employees of how they stand with the organization.
- Job-relatedness is the most basic criterion needed in employee performance appraisals. The Uniform Guidelines on Employee Selection Procedures and court decisions are clear on this point: Evaluation criteria should be determined through job analysis. Subjective factors, such as initiative, enthusiasm, loyalty, and cooperation may be important, but should NOT be used unless they can be shown to be job related.
- Managers and subordinates must agree on performance expectations in advance of the appraisal period. How can employees be expected to function effectively if they do not know the standard against which their performance will be measured? If employees clearly understand the expectations, they can evaluate their own performance and make adjustments as they perform their jobs, without having to wait for a formal review.
- Firms should use the same evaluation instrument and procedure for all employees in the same job category. Supervisors should also conduct appraisals covering similar periods for these employees. Having regular feedback sessions, documenting appraisal data, and standardizing the entire process makes it more effective and protects against possible legal action.
- A common deficiency in appraisal systems is that the evaluators seldom receive training on how to conduct effective evaluations. Unless everyone evaluating performance receives training in the art of giving and receiving feedback, the process can lead to uncertainty and conflict. The training should be an ongoing process in order to ensure accuracy and consistency. It should cover how to rate employees and how to conduct appraisal interviews. Instructions should be rather detailed and the importance of making objective and unbiased ratings should be emphasized.
- Most employees have a strong need to know how well they are performing. A good appraisal system provides highly desired feedback on a continuing basis. There should be few surprises in the performance review. However, in one survey, only 45 percent of individuals felt their managers consistently communicated their performance concerns throughout the year. Managers should handle daily performance problems as they occur and not allow them to pile up for six months or a year and then address them during the performance appraisal interview. When something new surfaces during the appraisal interview, the manager probably did not do a good enough job communicating with the employee throughout the appraisal period. Even though the interview presents an excellent opportunity for both parties to exchange ideas, it should never serve as a substitute for the day-to-day communication and coaching required by performance management.
- In addition to the need for continuous communication between managers and their employees, a special time should be set for a formal discussion of an employee’s performance. Since improved performance is a common goal of appraisal systems, withholding appraisal results is absurd. Employees are severely handicapped in their developmental efforts if denied access to this information. A performance review allows them to detect any errors or omissions in the appraisal, or an employee may disagree with the evaluation and want to challenge it. Constant employee performance documentation is vitally important for accurate performance appraisals. Although the task can be tedious and boring for managers, maintaining a continuous record of observed and reported incidents is essential in building a useful appraisal.
- Ensuring due process is vital. If the company does not have a formal grievance procedure, it should develop one to provide employees an opportunity to appeal appraisal results that they consider inaccurate or unfair. They must have a procedure for pursuing their grievances and having them addressed objectively.
- Employee lawsuits may result from negative evaluations. Employees often win these cases, thanks in part to the firm’s own performance appraisal procedures. A review of court cases makes it clear that legally defensible performance appraisal systems should be in place. Perfect systems are not expected, and the law does not preclude supervisory discretion in the process. However, the courts normally require an absence of adverse impact on members of protected classes or validation of the process. It also expects a system that keeps one manager from directing or controlling a subordinate’s career. There should also be a system whereby the appraisal is reviewed and approved by someone or some group in the organization. Another requirement is that the evaluator must have personal knowledge of the employee’s job performance.
- The appraisal interview is often the Achilles heel—or weakest point—of the entire evaluation process. To minimize the possibility of hard feelings, the face-to-face meeting and the written review must have performance improvement, not criticism, as their goal. We will now look at ways to make the appraisal interview more effective in the areas listed here.
- Supervisors usually conduct a formal appraisal interview at the end of an employee’s appraisal period. It should be made clear to the employee as to what the meeting is about. Employees typically know when their interview should take place, and their anxiety tends to increase if their supervisor delays the meeting. Interviews with top performers are often pleasant experiences for all concerned. However, supervisors may be reluctant to meet face-to-face with poor performers. They tend to postpone these anxiety-provoking interviews.
- Supervisors should always let employees know what is on the agenda well before meeting for the appraisal interview. Supervisors may be reluctant to meet face-to-face with poor performers, but these are often the employees who can benefit most from honest feedback and coaching on how to improve. The interview structure should facilitate this sort of open discussion and planning for future development.
- There is tremendous value in separating the discussion on employee performance and development from the discussion about pay. Many managers have learned that as soon as the topic of pay emerges in an interview, it tends to dominate the conversation, with performance improvement taking a back seat. For this reason, it is advisable to defer the discussion on pay until several weeks after the appraisal interview.
- Conducting an appraisal interview requires tact and patience on the part of the evaluator. Praise is appropriate when warranted, but should not be given if it is not deserved. If an employee must eventually be terminated because of poor performance, a manager’s false praise could bring into question the “real” reason for the employee’s termination. Criticism, even when constructive, is almost always difficult to give. Effective managers can help minimize threats to an employee’s self-esteem by criticizing the specific behavior or action, and not the person.
- About two weeks before the review, employees should go through their notes on all the projects on which they have worked during the review period. Providing a summary of how they added value or what they learned on these projects can help managers in developing a more objective and accurate appraisal.
- Ideally, employees will leave the interview with positive feelings about management, the company, the job, and themselves. If the meeting results in a deflated ego, the prospects for improved performance will be bleak. Although you cannot change past behavior, future performance is another matter. The interview should end with specific and mutually agreed-upon plans for the employee’s development. Managers should assure employees who require additional training that it will be forthcoming and that they will have the full support of their supervisor. When management does its part in employee development, it is up to the individual to perform in an acceptable manner.
- Performance appraisal is an area of human resource management that has special problems when translated into different countries cultural environments. The use of performance appraisal in the United States is relatively new compared to many older countries. Here, formal performance appraisal came into systematic use toward the beginning of the 20th century. However, performance appraisal in China has evolved over many centuries. Chinese managers often have a different idea about what performance is than do Western managers, as Chinese companies tend to focus appraisals on different criteria. Chinese managers appear to define performance in terms of personal characteristics, such as loyalty and obedience, rather than outcome measurement. Chinese performance appraisals place great emphasis on moral characteristics. On the other hand, Western performance appraisal seeks to help achieve organizational objectives, and this is best obtained by concentrating on individual outcomes and behaviors that are related to the attainment of those objectives.