The document discusses establishing effective performance management systems. It outlines the purposes of performance management as feedback, development, and documentation. It describes difficulties like individual emotions and process barriers. The appraisal process involves establishing standards, measuring performance, comparing to standards, and providing feedback. Methods of appraisal include absolute standards, relative standards, and management by objectives. Factors like biases and distortions are discussed. Creating effective systems involves behavior-based measures, ongoing feedback, multiple raters, selective rating, and appraiser training. International appraisals require consideration of cultural perspectives.

1. Chapter 10
Establishing the Performance Management System
Fundamentals of Human
Resource Management
Eighth Edition
DeCenzo and Robbins

2. Introduction
• Employees generally see performance
evaluations as having a direct effect on
their work lives.
• The performance management
systems need to include:
– decisions about who should evaluate
performance
– what format should be used
– how the results should be utilized

3. Performance Management
Systems
Purposes of a Performance
Management System
– Feedback - let employees know how well
they have done and allow for employee
input.
– Development – identify areas in which
employees have deficiencies or
weaknesses.
– Documentation - to meet legal
requirements.

4. Performance Management
Systems
Difficulties in Performance
Management Systems
– Focus on the individual: Discussions of
performance may elicit strong emotions
and may generate conflicts when
subordinates and supervisors do not
agree.

5. Performance Management
Systems
Difficulties in Performance
Management Systems
– Focus on the process: Company policies
and procedures may present barriers to a
properly functioning appraisal process.
– Additionally, appraisers may be poorly
trained.

6. Performance Management and
EEO
• HRM practices must be bias free,
objective and job-related.
• Valid performance appraisals are
conducted at established intervals and
are done by trained appraisers.

7. The Appraisal Process

8. The Appraisal Process
• Establishment of performance
standards
– Derived from company’s strategic goals.
– Based on job analysis and job description.
• Communication of performance
standards to employee.

9. The Appraisal Process
• Measurement of performance using
information from:
– personal observation
– statistical reports
– oral reports
– written reports
• Comparison of actual performance with
standards.

10. The Appraisal Process
• Discussion of appraisal with employee.
• Identification of corrective action where
necessary.
– Immediate action deals with symptoms.
– Basic corrective action deals with causes.

11. Appraisal Methods
Three approaches:
• Absolute standards
• Relative standards
• Objectives

12. Appraisal Methods
Evaluating absolute standards:
• An employee’s performance is
measured against established
standards.
• Evaluation is independent of any other
employee.

13. Appraisal Methods
Evaluating absolute standards:
– Essay Appraisal: Appraiser writes
narrative describing employee
performance & suggestions.
– Critical Incident Appraisal: Based on key
behavior anecdotes illustrating effective or
ineffective job performance.

14. Appraisal Methods
Evaluating absolute standards:
– Checklist Appraisal: Appraiser checks off
behaviors that apply to the employee.
– Adjective Rating Scale Appraisal:
Appraiser rates employee on a number of
job-related factors.

15. Appraisal Methods
Evaluating absolute standards:
– Forced-Choice Appraisal: Appraisers
choose from sets of statements which
appear to be equally favorable, the
statement which best describes the
employee.

16. Appraisal Methods
Evaluating absolute
standards:
• Behaviorally Anchored
Rating Scales (BARS):
Appraiser rates employee on
factors which are defined by
behavioral descriptions
illustrating various
dimensions along each rating
scale.

17. Appraisal Methods
Relative standards:
• Employees are evaluated by comparing
their performance to the performance of
other employees.

18. Appraisal Methods
Relative standards:
• Group Order Ranking: Employees are
placed in a classification reflecting their
relative performance, such as “top one-
fifth.”

19. Appraisal Methods
Relative standards:
– Individual Ranking: Employees
are ranked from highest to
lowest.
– Paired Comparison:
• Each individual is compared to
every other.
• Final ranking is based on number of
times the individual is preferred
member in a pair.

20. Appraisal Methods
Using Achieved Outcomes to Evaluate
Employees
Management by Objectives (MBO)
– includes mutual objective setting and
evaluation based on the attainment of the
specific objectives

21. Appraisal Methods
Using Achieved Outcomes to Evaluate
Employees
– Common elements in an MBO program
are:
• goal specificity
• participative decision making
• an explicit time period
• performance feedback
– Effectively increases employee
performance and organizational
productivity.

22. Factors that can Distort
Appraisals

23. Factors that can Distort
Appraisals
• Leniency error
– Each evaluator has his/her own value
system.
– Some evaluate high (positive leniency) and
others, low (negative leniency).
• Halo error: Evaluator lets an
assessment of an individual on one trait
influence evaluation on all traits.

24. Factors that can Distort
Appraisals
• Similarity error: Evaluator rates others
in the same way that the evaluator
perceives him or herself.
• Low appraiser motivation: Evaluators
may be reluctant to be accurate if
important rewards for the employee
depend on the results.

25. Factors that can Distort
Appraisals
• Central tendency: The reluctance to use the
extremes of a rating scale and to adequately
distinguish among employees being rated.
• Inflationary pressures: Pressures for
equality and fear of retribution for low ratings
leads to less differentiation among rated
employees.
• Inappropriate substitutes for performance:
Effort, enthusiasm, appearance, etc. are less
relevant for some jobs than others.

26. Factors that can Distort
Appraisals
Attribution Theory
• Evaluations are affected based on
whether someone’s performance is due
to
– internal factors they can control
– external factors which they cannot
• If poor performance is attributed to
internal control, the judgment is harsher
than when it is attributed to external
control.

27. Factors that can Distort
Appraisals
• Impression management:
• If employee positively influences the
relationship with the supervisor, he/she
is likely to receive a higher rating.

28. Creating More Effective Performance
Management Systems
Use Behavior-Based Measures:
• Measures based on specific
descriptions of behavior are more job-
related and elicit more inter-rater
agreement than traits, such as “loyalty”
or “friendliness”.

29. Creating More Effective Performance
Management Systems
Combine Absolute and Relative
Standards:
• Absolute standards tend to be positively
lenient; relative standards suffer when
there is little variability.
• Combining the standards tends to offset
the weaknesses of each.

30. Creating More Effective Performance
Management Systems
Provide Ongoing Feedback:
• Expectations and disappointments
should be shared with employees on a
frequent basis.

31. Creating More Effective Performance
Management Systems
Use Multiple Raters:
• Increasing the number of raters leads to more
reliable and valid ratings.
– Use peer evaluations: Coworkers offer
constructive insights and more specific
evaluations.
– Upward appraisals allow employees to give their
managers feedback.
– 360-Degree appraisals: Supervisors, peers,
employees, team members, customers and others
with relevant information evaluate the employee.

32. Creating More Effective Performance
Management Systems
Rate Selectively
– Appraisers only evaluate in those areas
about which they have sufficient
knowledge.
– Appraisers should be organizationally as
close as possible to the individual being
evaluated.
– More effective raters are asked to do the
appraisals.

33. Creating More Effective Performance
Management Systems
Train Appraisers:
• Untrained appraisers who do poor
appraisals can demoralize employees
and increase legal liabilities.

34. Creating More Effective Performance
Management Systems

35. International Performance
Appraisal
• Who performs the evaluation?
– Different cultural perspectives and
expectations between the parent and local
country may make evaluation difficult.
– Evaluation forms may not be translated
accurately.
– Quantitative measures may be misleading.

36. International Performance
Appraisal
• Evaluation Formats
– May make sense to use different forms for
parent-country nationals and host-country
nationals.
– Performance criteria for a particular
position should be modified to fit the
overseas position and site.
– Include a current expatriate’s insights as
part of the evaluation.