2. Outline
2
Performance Measurement
Functions of Performance Appraisal
Criteria for Effective Performance Appraisal
Systems
Types of Performance to Measure
Performance Appraisal Methods
Performance Raters (Evaluators)
Performance Feedback
3. Performance Management
3
Performance appraisal: the measurement and assessment of
an employee’s job performance
Performance management: the integration of performance
appraisal systems with other HRM systems for the purpose
of aligning the employees’ work behaviors and results with
the organization’s goals
Example: link an employee’s pay increase to the employee’s job
performance
To do this, we have to measure the employee’s job performance
Goal: Improve the organization by improving the employees’ work
behaviors and results
4. Performance Management Cycle
Source of figure: Adapted from Fisher, Schoenfeldt, & Shaw (2006), Figure 10.1, p. 421
Development Tool
Administrative Tool
4
5. Functions of Performance
Appraisal
Employee Development Tool
Goal setting: Set performance goals for each
employee
Involve the employee in goal setting
Make the goals specific, concrete, &
measurable
Example goals (some of many) for a retail
store manager:
Sales goal for year = $2 million 5
6. Functions of Performance
Appraisal
Employee Development Tool (more)
Provide feedback to reinforce & sustain
performance
Employees need to know how they are doing
Provide help & advice to improve
performance
Be a coach in addition to being a boss
Assist employees in achieving career
progression goals 6
7. Functions of Performance
Appraisal
Administrative Tool
Link rewards to performance
Examples: pay increases, promotions,
demotions, terminations, disciplinary
actions, etc.
Goal: Create incentives to motivate
employees to increase their performance
Evaluate HRM policies & programs
Example: Evaluate a training program: 7
8. Criteria for Effective
Performance Appraisal Systems
8
1. Validity: are we measuring the right thing?
Are we really measuring job performance?
We want to measure important (“relevant”)
aspects of job performance, in a way that is
free from extraneous or contaminating
influences, and that encompasses the whole
job (i.e., our measures of job performance are
not “deficient”: we aren’t leaving out
i
m porta nt aspects of job performance)
9. Criteria for Effective
Performance Appraisal Systems
9
3. Freedom from bias
It does not illegally discriminate (race, sex, age, etc.)
It is free from rating errors (intentional or unintentional):
Leniency errors
Severity errors
Central tendency errors
Halo errors
4. Practicality
The benefits the organization gets from using it should outweigh
the costs of developing & using it
Utility analysis
It should be relatively easy to use
It should be accepted by managers and employees
10. Types of Performance to
Measure
What aspects of an employee’s job
performance can we measure?
We have 3 basic choices:
Results produced by the employee
Example for a salesperson: Amount of sales
($) in the past month
Behaviors of the employee
Example for a salesperson: Number of sales
calls in the past month 10
11. Types of Performance to
Measure
Results-based (results-oriented): measure the
results produced by the employee
Examples for a retail store manager
(examples of some results for which the store
manager has responsibility and so should be
held accountable):
Sales of the store
Profit per square foot
Inventory shrinkage
Customer satisfaction 11
12. Types of Performance to
Measure
Results-based (more)
Challenges:
Which results are relevant may not be
obvious for all jobs
Some results are not under the employee’s
control
May foster a “results at all costs” mentality
May interfere with teamwork
12
13. Types of Performance to
Measure
13
Behavior-based (behavior-oriented): measure the employee’s
behaviors
Examples for a retail store manager:
Good attendance
Completes management reports correctly & on time
Monitors customers and employees for theft
Coaches employees to welcome customers to the store & offer assistance
within 3 minutes, and to thank customers as they leave
Conducts regular sessions with employees to develop teamwork
Makes sense for many jobs
Use it where how the employee produces results matters
14. Types of Performance to
Measure
14
Behavior-based (more)
Advantage: Makes it easier to provide effective performance
feedback to employees
Examples for a retail store manager:
Feedback with results-oriented performance appraisal: “You didn’t achieve
your sales goal.” (Measured by sales reports)
Feedback with behavior-oriented performance appraisal: “You are allowing
your employees to wait too long before offering help to customers.”
(Measured by observations of a secret shopper)
Challenges:
Difficult to capture the full range of relevant behaviors
Different behaviors can lead to the same results
We may not always care which behaviors were used
15. Types of Performance to
Measure
15
Trait-based (trait-oriented): measure the employee’s personal
characteristics
Examples for a retail store manager:
Ability to make decisions
Loyalty to the company
Communication skills
Level of initiative
This is usually a bad idea for several reasons:
Poor reliability & validity of measures of traits
Weak relationship between traits and job effectiveness
Measurements of traits are more likely to be subject to biases (sexism,
racism, ageism, etc.)
Hard to use traits to provide effective feedback
16. Types of Performance to
Measure
So, in most cases, we want to measure the job
performance of an employee in terms of the
results and behaviors of the employee
Make a list of results & behaviors that are
relevant to the job
Starting point: Use the job description to
identify the essential tasks of the job
Example task statement on job description
for a Retail Store Manager: “Manage
inventory shrinkage.” 16
17. Performance Appraisal Methods
Once we decide which results & behaviors we
want to measure, we next need to decide how
to measure those results & behaviors
We have 3 categories of choices:
Objective measures of performance
Subjective measures of performance
Management By Objectives
17
18. Performance Appraisal Methods
Objective measures: measure an employee’s
job performance in terms of things we can
see and count with no (or minimal) use of
opinion
Production measures: count units produced
by an employee
Sales measures: count the sales ($) of an
employee
Personnel data: count things in the
employee’s personnel file 18
19. Performance Appraisal Methods
19
Objective measures (more):
Performance tests: for an employee, evaluate work samples or
simulations under standardized conditions
Example: for an airline pilot, program a flight simulator with specific flight
conditions to test if the pilot handles it correctly
Business unit performance measures: for managers who are
responsible for a business unit, measure their performance by
measuring the performance of the business unit they lead
Examples:
Market share of the business unit
Profit measures for the business unit: profits & profit rates (return on sales,
return on assets, return on equity)
Stock price
20. Performance Appraisal Methods
20
Subjective measures: measure an employee’s job performance
using human judgment
Ranking: subjectively rank employees from best to worst
Example:
1. Bob
2. Carol
3. Ted
4. Alice
Note carefully that the ranking is in terms of subjective opinion (e.g., who is
your best salesperson overall?), not objective factors (e.g., which salesperson
sold the most?)
Note the ranking requires you to compare one employee to another
Problem: it can be hard to determine the subjective ranking position of
employees who are in the middle (it all blurs together)
21. Performance Appraisal Methods
21
Subjective measures (more)
Paired comparisons: for all possible pairs of
employees, subjectively decide which
employee is better
# of paired comparisons = (N2 − N)/2
Example: N = 4 🡒 (42 − 4)/2 = 6 paired
comparisons:
Bob > Carol; Bob > Ted; Bob > Alice
Carol > Ted; Carol > Alice
22. Performance Appraisal Methods
Subjective measures (more)
Rating scale (graphic rating scale):
subjectively rate the employee’s job
performance on a labeled numeric measuring
scale
Rating scales are perhaps the most
commonly used method of subjectively
evaluating an employee’s job performance
Before we use a rating scale to subjectively 22
23. Performance Appraisal Methods
Rating Scale Examples Rating Scale Examples
Examples of a 5-point scale:
5 = Excellent
4 = Very satisfactory
3 = Satisfactory
2 = Unsatisfactory
1 = Very unsatisfactory
5 = Greatly exceeds standards
4 = Exceeds standards
3 = Meets standards
2 = Below standards
1 = Far below standards
Example of a 7-point scale:
7 = Truly exceptional
6 = Excellent
5 = Very good
4 = Good
3 = Satisfactory
2 = Unsatisfactory
1 = Very unsatisfactory
23
24. Performance Appraisal Methods
Subjective measures (more)
Rating scale (more)
The same rating scale can be used to rate:
Overall job performance, and
Multiple specific aspects of job performance
Some aspects of job performance can be
measured objectively and subjectively
Example: Quality of work
Objective measure: defect rate (percentage of24
25. Performance Appraisal Methods
Subjective measures (more)
Rating scale (more)
Example: MSU Course Evaluation
Form
Note how the same 5-point rating scale
is used to evaluate several different
aspects of the professor’s job
performance:
Course as a whole
Instructor’s contribution to the course
Use of class time
Etc.
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26. More Examples of Rating Scales
Decisions:
Use a graphic or just use
words?
Label all the points on the
scale, or just label some?
Odd or even number of
points on the scale?
Fewer points on the scale,
or more points on the
scale?
Source of figure: Fisher, Schoenfeldt,
& Shaw (2006), Figure 10.6, p. 449
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27. Performance Appraisal Methods
27
Subjective measures (more)
Rating scale (more)
Note that rating scales do not require you to compare one employee to
another — the ratings are absolute, not comparative
Problems:
No limits on leniency, severity, & central tendency errors
Example: a manager rates all of his employees at “5 = Excellent” regardless of
the employees’ actual performances
Possible solution: forced distribution?
The terms used in a rating scale to describe different levels of performance
tend to be short and vague
Example: What does “Excellent” really mean?
Possible solution: BARS?
28. Performance Appraisal Methods
28
Subjective measures (more)
Forced distribution: evaluator must place a
fixed percentage of employees in each
performance category
Example:
10% must be rated 5 = Excellent
25% must be rated 4 = Very satisfactory
45% must be rated 3 = Satisfactory
15% must be rated 2 = Unsatisfactory
29. Performance Appraisal Methods
29
Subjective measures (more)
Behaviorally Anchored Rating Scale (BARS): replace the vague
descriptors in a rating scale with specific examples of performance
Example: Customer assistance
5 = Could be expected to volunteer to help customer and to walk with
customer to location of desired product
4 = Could be expected to walk with customer to location of desired product
when asked for help by customer
3 = Could be expected to tell and point customer to where the desired
product is located when asked for help by customer
2 = Could be expected to shrug shoulders and walk away when asked for
assistance by customer
1 = Could be expected to hide from customers in the employee break-room
30. Performance Appraisal Methods
Subjective measures (more)
BARS (more)
Note that a different scale will be needed for
each aspect of job performance
Advantages:
Job-relevant measures of performance
Involves employees in developing scales
Disadvantages:
More work (time & money) to develop BARS 30
31. Performance Appraisal Methods
Subjective measures (more)
Behavioral Observation Scale (BOS):
evaluators rate the frequency with which an
employee engages in specific behaviors
Example: on a list of possible employee
behaviors, rate how often the employee
engages in each behavior using a rating scale
where:
1 = almost never 5 = almost always 31
32. Performance Appraisal Methods
Management By Objectives (MBO): evaluate
employee job performance in terms of the
extent to which the employee achieved each
of his or her goals during a specified period
of time
Goals can be both objective and subjective
Example goals (some of many) for a retail
store manager:
Objective: Sales goal for year = $2 million 32
33. Performance Appraisal Methods
MBO (more)
Process:
At the beginning of the review period, the
employee and the supervisor meet and they
agree on a set of goals to be achieved by the
employee during the review period
Review period is typically one year, but could
be more often
Apply the goal setting principles:
33
34. Performance Appraisal Methods
MBO (more)
Process (more):
Throughout the review period, progress
toward the goals is monitored
Employee’s supervisor should be providing
coaching to help the employee achieve his or
her goals
At the end of the review period, the
employee and the supervisor meet to 34
35. Performance Raters (Evaluators)
Who should be asked to evaluate the job
performance of an employee?
Performance evaluators need to have:
Opportunity to observe the employee’s job
performance
Ability to translate observations of
performance into an evaluation of
performance
Motivation to do a good job of observing & 35
37. Performance Feedback
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Employees need effective feedback
Allow time & eliminate distractions
Okay to cover both administrative issues
(e.g., pay increase) & developmental issues
(e.g., future goals) in one feedback session
Provide specific feedback
Example:
Don’t say: “You’re always late.”
Do say: “You were more than 5 minutes late
38. Performance Feedback
response 38
Types of feedback sessions:
Tell-and-sell: the supervisor tells the
employee the results of the performance
appraisal and explains the reasons why the
appraisal is correct
Tell-and-listen: the supervisor tells the
employee the results of the performance
appraisal and listens to the employee’s
39. Performance Feedback
39
Types of feedback sessions (more):
Combination of tell-and-sell & problem
solving:
First part of feedback session: tell-and-sell
Focus on the past:
Supervisor tells the employee the results of
the performance appraisal and explains the
reasons why the appraisal is correct
Supervisor tells the employee about any
40. Outline
Performance Measurement
Functions of Performance Appraisal
Criteria for Effective Performance Appraisal
Systems
Types of Performance to Measure
Performance Appraisal Methods
Performance Raters (Evaluators)
Performance Feedback
40
