Performance evaluations serve three main purposes: two-way feedback between employees and employers, employee development, and legal documentation. However, performance management systems are imperfect and can focus too much on individuals, leading to strong emotions and conflicts. Several factors can also distort appraisals, such as leniency error, halo effect, and central tendency. To improve systems, organizations should use behavior-based and multiple ratings, provide ongoing feedback, and train appraisers. The evaluation process involves setting standards, measuring performance, discussing reviews, and initiating corrective actions when needed.

1. Chapter 10
Performance Management

2. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 2
Why evaluate?
Who benefits from the evaluation?
What format should be used?
What problems might arise?
Introduction
Øemployees see performance evaluations as
having a direct effect on their work lives
Øquestions regarding the performance
management process:

3. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 3
Performance Management Systems
Performance management systems have
three main purposes:
1. two-way feedback – performance measures
mutually set between employee and employer
2. development – identify areas in which employees
have deficiencies or weaknesses
3. documentation - to meet legal requirements

4. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 4
Performance Management Systems
Performance management systems aren’t perfect.
Ø focus on the individual: discussions of performance may elicit
strong emotions and may generate conflicts when
subordinates and supervisors do not agree
Ø focus on the process: company policies and procedures may
present barriers to a properly functioning appraisal process
Ø appraisers may be poorly trained
For further reading: when HR needs to overhaul its appraisal system:
http://www.nysscpa.org/cpajournal/2008/208/essentials/p64.htm

5. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 5
Performance Management and EEO
Ø EEO laws require performance management
systems to be objective and job-related
Ø ADA: performance management systems must
measure “reasonable” success. See:
http://www.eeoc.gov/facts/performance-conduct.html#perf
Ø valid performance appraisals are conducted at
established intervals
Ø evaluations done by trained appraisers

6. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 6
The Appraisal Process
establish performance standards with employees
compare actual performance with standards
discuss the appraisal with the employee
if necessary, initiate corrective action
measure actual performance
communicate expectations and set goals
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7. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 7
The Appraisal Process
1. establish performance
standards
2. communicate
expectations
Øgoals must be articulated from supervisor to employee
and from employee to supervisor
Øderived from company’s strategic goals
Øbased on job analysis and job description

8. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 8
The Appraisal Process
Ø measurement of performance using information from:
3. measure actual
performance
4. compare performance
with standards
Øexplanation of different levels of performance and their
degree of acceptability against the performance standard
personal observation
statistical reports
oral reports
written reports

9. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 9
The Appraisal Process
Ø immediate action deals with symptoms
Ø basic corrective action deals with causes
5. discuss appraisal
with employee
6. initiate
corrective action
Ø feedback employees receive has strong impact
on self-esteem and subsequent performance

10. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 10
The Appraisal Process
From http://www.businessknowhow.com/manage/performance-appraisal.htm
Five common mistakes managers can make in
giving a performance review:
waiting for the performance appraisal to give feedback
1
overemphasizing recent performances
2
being too positive or negative
3
being critical without being constructive
4
talking not listening
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11. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 11
Appraisal Methods
The Three Appraisal Approaches
no single approach is best; each has its strengths and weaknesses
absolute standards
relative standards
achieved outcomes

12. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 12
Appraisal Methods
Ø employee’s performance is measured against
established standards
Ø evaluation is independent of any other employee
absolute standards

13. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 13
Appraisal Methods
Ø critical incident appraisal: based on key behavior
anecdotes illustrating effective or ineffective job
performance
Ø checklist appraisal: appraiser checks off behaviors
that apply to the employee
Ø graphic rating scale appraisal: appraiser rates
employee on a number of job-related factors; avoids
abstract categories
absolute standards

14. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 14
Appraisal Methods
Ø forced-choice appraisal: appraisers ponder sets of
statements that appear to be equally favorable, then
choose the statement that best describes the employee
Ø behaviorally anchored rating scales (BARS):
appraiser rates employee on factors that are defined
by behavioral descriptions illustrating various
dimensions along each rating scale
absolute standards

15. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 15
Appraisal Methods
Øgroup order ranking: employees are placed in a
classification reflecting their relative performance,
such as “top one-fifth”
Øindividual ranking: employees are ranked from
highest to lowest
Øpaired comparison: each individual is compared to
every other final ranking is based on number of times
the individual is preferred member in a pair
relative standards

16. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 16
Appraisal Methods
Management by Objectives (MBO)
Ø includes mutual objective-setting and evaluation
based on the attainment of the specific objectives
Ø firms overall objectives translate into specific
objectives at the divisional/departmental/ individual
levels
achieved outcomes

17. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 17
Appraisal Methods
achieved outcomes
Ø common elements in an MBO program are:
1. goal specific
2. participative decision making
3 a specific time period
4. performance feedback
Ø effectively increases employee performance
and organizational productivity, especially when
goals are difficult enough to require stretching

18. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 18
Factors That Can Distort Appraisals
distortions
central
tendancy
similarity error
halo error
inappropriate
substitutes
leniency error
inflationary
pressures

19. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 19
Factors That Can Distort Appraisals
Ø leniency error : each evaluator has his/her
own value system; Some evaluate high (positive
leniency) and others, low (negative leniency)
Ø halo error : evaluator lets an assessment of an
individual on one trait influence evaluation on all
traits

20. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 20
Factors That Can Distort Appraisals
Øsimilarity error: evaluator rates others in the
same way that the evaluator perceives him or
herself
Ø low appraiser motivation: evaluators may
be reluctant to be accurate if important rewards
for the employee depend on the results

21. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 21
Factors That Can Distort Appraisals
Ø central tendency: the reluctance to use the
extremes of a rating scale and to adequately
distinguish among employees being rated
Ø inflationary pressures: pressures for equality
and fear of retribution for low ratings leads to less
differentiation among rated employees
Ø inappropriate substitutes for performance:
effort, enthusiasm, appearance, etc., are less
relevant for some jobs than others

22. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 22
Factors That Can Distort Appraisals
Ø internal factors they can control
Ø external factors they cannot control
if poor performance is attributed to internal control, the judgment is
harsher than when it is attributed to external control
attribution theory: evaluations are affected based
on whether someone’s performance is due to:

23. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 23
Factors That Can Distort Appraisals
Øuse behavior-based measures, which are more job-related
and elicit more inter-rater agreement than traits such as
“loyalty” or “friendliness”
Ø combine absolute and relative standards: absolute
standards tend to be positively lenient; relative standards
suffer when there is little variability
Ø provide ongoing feedback: expectations and
disappointments should be shared with employees on a
frequent basis
To create better performance management systems:

24. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 24
Factors That Can Distort Appraisals
To create better performance management systems:
Ø use multiple raters: the more used, the more reliable and
valid the results (peer evaluations, upward and 360-degree
appraisals)
Ø rate selectively: appraisers should evaluate only in areas
about which they have sufficient knowledge, they should be
organizationally close the individual being evaluated, and
should be an effective rater
Ø train appraisers because poor appraisals can demoralize
employees and increase legal liabilities

25. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 25
The Performance Appraisal Meeting
Success
Use behavior-based measures
Combine absolute and relative standards
Provide ongoing feedback
Have multiple raters
Rate selectively
Train appraisers
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26. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 26
Creating More Effective Performance Management Systems
For an effective performance appraisal meeting:
1. prepare/schedule meeting in advance
2. create supportive aura about meeting
3. describe appraisal’s purpose
4. involve employee in appraisal discussion
5. focus on behaviors, not employee
6. cite specific examples
7. give positive and negative feedback
8. ensure employee understood appraisal
9. generate a development plan

27. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 27
International Performance Appraisal
Challenges in evaluating overseas employees:
Ø different cultural perspectives and expectations between
the parent and local country may make evaluation difficult
Ø evaluation forms may not be translated accurately
Ø quantitative measures may be misleading

28. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 10, slide 28
factors that can
distort appraisals
Matching
step in the appraisal process
absolute standards, relative
standards, achieved
outcomes
two-way feedback,
development,
documentation
internal and external control
factors weigh heavily in the
appraisal
absolute standards, relative
standards, achieved
outcomes
three appraisal approaches
communicate expectations
three purposes of performance
management systems
attribution theory
leniency error, halo error,
similarity error, central
tendency, inflationary
pressures, inappropriate
substitutes