3. Overview
Chapter 43 of title 5, United States Code
Four broad categories
Trait systems
Comparison systems
Behavioral systems
Goal-oriented systems
4. The Issue
Limitations of systems
Traits
○ Highly subjective
○ Various interpretations of traits
Comparison
○ Distorted ratings from forced distribution
○ Cumbersome for large groups and various jobs
Behavioral
○ Implementation requires time, effort, and large amount of
data
Goal-Oriented
○ Time-consuming and requires a continuous
communication between employees and supervisors
Designing an effective performance appraisal system
5. Importance
Successful merit pay needs a sound
performance appraisal system
(Martocchio, 2012)
Feedback of current work habits (Boice
& Kleiner, 1997)
Relationship between effort and pay
7. Motivation
Expectancy theory
Behaviors associated with outcomes
Equity theory
Motivation to perform is affected by the
performance of others
9. Considerations
Guidelines:
Determine organization’s objectives
Train raters
○ Seniors to juniors
Conduct frequent appraisals
○ Bi-monthly or quarterly
○ Revision or clarification of objectives
Maintain records
Determine measurement system
Utilize multiple raters
Boice & Kleiner, 1997
10. Anticipations
Employee reactions to feedback
Employee involvement
Goal-oriented systems
Biases
Avoid ambiguous or subjective ratings
11. Possibilities
Training focus
Model, practice, feedback
Shape the culture
Social reinforcers, career advancement, etc.
Systems analysis
Digital data collection and archives
12. Reflections
Effective or easy?
Do not sacrifice quality for quantity or ease
Reinforcement
Schedules of reinforcement, behavior
analytic literature, etc.
13. References
5 U.S. Code § 4302 - Establishment of performance appraisal
systems. (n.d.). Retrieved April 28, 2015, from
https://www.law.cornell.edu/uscode/text/5/4302
Boice, D. F., & Kleiner, B. H. (1997). Designing effective
performance appraisal systems. Work Study, 46(6), 197-
201.
Dipboye, R. L., & De Pontbriand, R. (1981). Correlates of
employee reactions to performance appraisals and
appraisal systems. Journal of Applied psychology, 66(2),
248.
Martocchio, J. (2012). Strategic compensation: A human
resource management approach(7th ed.). Upper Saddle
River, New Jersey: Prentice Hall.
Rainlall, S. (2004). A review of employee motivation theories
and their implications for employee retention within
organizations. The journal of American academy of
business, 9, 21-26.
Editor's Notes
For my presentation, I am going to discuss effective performance appraisal systems.
My main focus is going to be in presenting why performance appraisal systems are important to utilize in business settings, and then to determine how a business should go about designing a performance appraisal system that will accomplish the goals it is meant to accomplish. I am going to give a brief overview of performance appraisal systems, discuss the issue at hand, describe the importance of the issue, outline the correlated ideologies and motivational theories, go into some possible effects of appraisal systems, consider and anticipate certain outcomes, entertain future possibilities, and then conclude with some reflections regarding appraisal systems
Chapter 43 of Title 5, United States Code established the requirement for performance appraisal systems within organizations so that employees may receive periodic feedback on their performance and encouragement to establish performance standards. The Code also declares the use of performance appraisal systems to establish standards of training, rewarding, promoting, retaining, and removing employees. Thus, performance appraisal systems not only serve any functions, but they are also a legal requirement for businesses.
Currently, there are four broad categories of performance appraisal systems: trait systems, comparison systems, behavioral systems, and goal-oriented systems. Companies choose the type of appraisal system that will work best for the business environment in which it will be utilized. For example, comparison systems are often used in companies with a few number of employees who have similar job duties. Although each category offers unique advantages, it is the disadvantages of each that are of concern for my project.
Although trait systems are relatively easy to create and implement, they are generally prone to rater bias and various interpretations of the what behaviors a particular trait should consist of.
Comparison systems are useful in understanding how employees are performing relative to others within their job; however, these systems often have distorted ratings and are only effective with smaller groups of employees who perform similar tasks.
Behavioral systems seem to be one of the best choices for an appraisal system due to their defensibility in court and objectiveness. Unfortunately, the main drawback for behavioral systems are that they can be extremely time-consuming, require a lot of observation and data collection, and produce a large quantity of information that must be analyzed. Goal-oriented systems have similar limitations despite their effective pinpointing ability for performance improvement.
Thus, the main question of my presentation is how can we design an effective performance appraisal system?
How can we utilize the advantages of all of these categories and minimize the disadvantages? Is it possible to have a unified performance appraisal system that will address the current business concerns of time, effort, and money requirements, but also provide us with accurate and informative data on employee performance?
As previously discussed, performance appraisal systems are a legal requirement for companies. In addition to their legal importance, performance appraisal systems are necessary for successful merit pay systems to be developed.
On a very basic level, a performance appraisal system is necessary for an employee to have feedback on how their current work habits are affecting their performance. Poor work habits must be addressed and properly explained by the supervisors, and the only way a supervisor can objectively understand an employee’s present work habits is through an appraisal system. Likewise, an employee should be made aware of how their habits may hinder performance so that they have the opportunity to seek additional training or self-manage their own behavior. (Boice & Kleiner, 1997)
Finally, a performance appraisal system strengthens the direct bond between effort and pay; this link helps to serve the motivations outlined in the expectancy and equity theories which I will discuss later.
One of the guiding ideologies behind merit pay systems and ultimately performance appraisal systems is that improved performance should be rewarded. Thus, employees who work harder should receive associated increases in benefits or bonuses. In an ideal environment, a performance appraisal system would serve to boost the motivation of the employees to apply feedback from the appraisal to improve their skills and receive subsequent rewards.
The expectancy theory most closely aligns with the motivation associated in pay-for-performance ideologies. In his 2004 paper on motivation theories, Ramlall describes the motivation within the expectancy theory to be a product people’s expectations that certain behaviors will produce certain outcomes. Thus, performance appraisal systems should clearly identify what behaviors will produce which outcomes, and then adhere firmly to those declarations. Otherwise, motivation to perform towards those outcomes may be lost.
The equity theory of motivation also plays a role in understanding performance appraisal systems. In order for appraisal systems to be effective, fairness and objectiveness in ratings must be upheld. Under the equity theory, Ramlall suggests that part of the motivation an employee has to perform will be affected by that employee’s perceptions of the rewards others receive for their performance. I for one would not be likely to maintain high performance if I knew that others who were underperforming were getting similar benefits. Even worse, should an appraisal system not control for equality in its design, the company could be vulnerable to lawsuits under the Fair Labor and Standards Act.
What are some of the effects of effective performance appraisal systems? Well, for one, they should generate improved performance of the employees. Greater productivity will improve sales and profits. They also allow for supervisors and decision makers to pinpoint where deficiencies may lie within the performance appraisal system or within their training protocol for a particular job. Pinpointing these deficiencies will allow employers to provide better training, implement more efficient procedures, and accurately define jobs in terms of outcomes and responsibilities.
Additional training opportunities can be provided to employees who are under-performing to reduce the risk of turnover or ineffective performance. Not only will clear objectives and feedback allow an employee to self-monitor his or her own behavior, but an effective performance appraisal system should also ideally serve to boost employee motivation to improve performance.
Overall, an effective performance appraisal system will make the workplace “happier” because productivity will be high, employees will be motivated, and companies will be willing to provide all of the necessary opportunities for employees to proceed.
Boice and Kleiner offer some guidelines for designing an effective performance appraisal systems. The first step is to determine the organization’s goals and then translate those goals into departmental and individual objectives. Within this step the job roles should be specifically stated in terms of responsibilities and how the performance of the department and employee will contribute to broader, organizational goals.
The next guideline is to provide extensive training for the performance raters. The training should begin with the upper management who are involved with the design of the system, and trickle downwards to all those in supervisory positions.
The frequency of the appraisals is also noteworthy. Boice and Kleiner suggest bi-monthly or quarterly appraisals rather than semi-annual or annual ones. The authors assert that frequent appraisals will reduce situations arising from the supervisor or employee having to recall past information, or presenting surprises at the annual review. Frequent reviews also allow for objectives to be clarified and revised as needed.
Records should of course be properly maintained and organized so that accessing critical information is easy.
A measurement system should be determined to accurately rate or quantify performance. Boice and Kleiner suggest avoiding averages as ratings and to clearly define the various levels of performance.
Finally, the last guideline on developing an effective performance appraisal system is to use various information sources and multiple raters to collect the data. Although this last step may be the most effortful, it is no doubt the most important. Multiple raters will drastically reduce the bias problem, provide a comprehensive look at an individual within the workplace, and provide a solid foundation on which the company may make merit pay decisions.
I think that the guidelines previously discussed allow for a solid framework to be established for an effective performance appraisal system. However, there are some possible side effects of performance appraisal systems that must be anticipated prior to implementing a given appraisal design.
First and foremost, I think it is imperative that the company consider how the employees will react to the feedback given at the time of the appraisal. Is there a history of feedback being punishing or aversive? According to Dipboye and Pontbriand, a positive attitude towards appraisal systems is generated when the employees are involved in the appraisals and the appraisals are goal-oriented.
In addition to understanding possible reactions to feedback, the system designers should attempt to plan for any biases that may be encouraged through the design of the system. Keeping the questions and ratings as objective and clear as possible should assist in eliminating biases.
Some possible future extensions for effective performance appraisal systems that I would like to suggest are as follows:
I would place a greater emphasis on training the raters in the performance appraisal process. This training should include elements of modeling, in-situ role playing, and practicing until reaching a mastery criteria. I think if greater focus is placed in the training process, the raters will be less likely to have widely varying interpretations of observations, and they will also be able to pinpoint inefficiencies in the implementation of the appraisal.
I also think that something to consider is what other outcomes might be associated with performance improvement. I think an effective performance appraisal system should also take into account how the culture of the business will be shaped through performance improvement. What social factors should be encouraged for improved employee productivity? Can there be some programmable career advancement opportunities for those employees who exceed performance objectives? I believe that when designing a performance appraisal system, the leaders should try to be flexible to the changing business environment so that they can drive performance towards a positive business culture.
Finally, I think that performance appraisal systems should not just end with the individual’s behavior. They should also be used as vertical assessment tools to see how the company as a whole is doing over time. This will not only reinforce the direct link between employee behavior an company objectives, but will assist decision-makers in determining what future actions need to be taken in order to maintain or improve company health. In order to conduct these systems-level analyses, I think that the collection and retention of data should be as efficient as possible; thus, companies should digitize data sets, prepare graphs that will automatically update when new data is uploaded, and have archives categorized so that access of dated information is simplified.
Some concluding remarks I have regarding appraisal systems are that we should not sacrifice the quality of performance appraisals to satisfy efficiency requirements. Doing so will only disrupt the ability of the system to provide objective and accurate data upon which management can make pay decisions. Thus, I think it is important for every manager to ask themselves if the proposed performance appraisal system seeks to be effective or simply easy to use. In the best case scenario, an effective performance appraisal system should be easy to use; but this is not always possible and effectiveness should not be compromised in pursuit of ease.
I also think it is worth mentioning that performance appraisal systems should consider behavior analytic research regarding reinforcement schedules and trends of behavior under particular schedules. Such information may prove useful to a company who is experiencing persistent performance trends that do not align with the merit pay system.
I hope that you all have learned the importance of performance appraisal systems and come to a new understanding of how to design effective systems that can suit your own business environment.
Thank you!
