This chapter discusses performance assessment and management in organizations. It covers the strategic importance of linking assessment to organizational goals and values. Performance assessment serves developmental functions like goal setting and career planning, as well as administrative functions like determining compensation. The chapter examines criteria for an effective assessment system, such as validity, reliability and freedom from bias. It also explores methods of appraising performance both objectively and subjectively, as well as strategies for improving the assessment process.

1. Chapter Ten
Performance
Assessment and
Management

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Chapter Outline
• The Performance Assessment and Management
Process
• Strategic Importance of Performance Appraisal
• Functions of Performance Appraisal
• Criteria for a Good Assessment System
• Deciding What Types of Performance to Measure
• Methods of Appraising Performance
• Raters of Employee Performance
• Enhancing the Measurement of Employee
Performance
• Feedback of Results: The Performance Appraisal
Interview

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Figure 10.1 Performance Management
Cycle

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Strategic Importance of Performance
Assessment
• Consistency Between Organizational
Strategy and Job Behavior
• Consistency Between Organizational
Values and Job Behavior

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Table 10.1 Multiple Organizational Uses for
Performance Appraisal Information
Source: J.N. Cleveland, K.R. Murphy, and R.E. Williams, “Multiple Uses of Performance Appraisal: Prevalence and Correlates,” Journal of Applied
Psychology, Vol. 74. 1989, pp. 130-135. Copyright © 1989 by the American Psychological Association. Adapted with permission.

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Functions of Performance Assessment
• Performance Assessment as an
Employee Development Tool
– Goal Setting
– Reinforcing and Sustaining Performance
– Improving Performance
– Determining Career Progression Goals
– Determining Training Needs

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Functions of Performance Assessment
(cont’d)
• Performance Assessment as an
Administrative Tool
– Linking Rewards to Performance
– Evaluation of HRM Policies
and Programs
• Summary

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Criteria for a Good Appraisal System
• Validity
• Reliability

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Figure 10.2 The Relationship Between
Relevance, Deficiency, and Contamination

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Criteria for a Good Appraisal System
(cont’d)
• Freedom from Bias
– Legal Issues of Fairness
• Race Differences
• Age Differences
– Freedom from Rating Errors
• Leniency Errors
• Severity Errors
• Central Tendency Errors
• Halo Errors
– Why Do Rating Errors Occur?
• Unintentional Errors
– Cognitive Information Processing (CIP)
– Schemas
• Practicality

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Figure 10.3 How Information
Processing Causes Rating Errors

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Table 10.2 Why Supervisors Inflate and
Deflate Ratings
Source: Based on C.O. Longnecker, H.P. Sims, and D.A. Gioia, “Behind the Mask: The Politics of Employee Appraisal,” Academy of Management
Executive, Vol. 1, 1987, pp. 183-193.

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Deciding What Types of Performance
to Measure
• Trait-Based Appraisals
• Behavior-Based Appraisals
• Results-Based Appraisals

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Methods of Appraising Performance
• Objective Measures
– Production Measures
– Dollar Sales
• Opportunity Bias
– Personnel Data
• Personnel Measures
• Contamination
– Performance Tests
– Business Unit Performance Measures
– Overall Value

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Methods of Appraising Performance
(cont’d)
• Subjective Measures
– Comparative Procedures
• Ranking
– Straight Ranking
– Alternate Ranking
– Paired-Comparison Ranking
• Forced Distribution
• Advantages and Disadvantages of Comparative
Procedures
– Absolute Standards
• Graphic Rating Scales
• Mixed Standard Scales

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Figure 10.6 Examples of Typical
Graphic Rating Scales

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Methods of Appraising Performance
(cont’d)
• Subjective Measures (cont’d)
– Weighted Checklists
• Critical-Incident Technique
• Behaviorally Anchored Rating Scales (BARS)
– Behavioral Observation Scales (BOS)
• Management by Objectives

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Raters of Employee Performance
• Self-Evaluation
• Peer Evaluation
• Subordinate Evaluation
• Customer Evaluation
• 360-Degree Assessment
• Self Managed Teams

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Enhancing the Measurement of
Employee Performance
• Training Evaluators
– Rater Error Training (RET)
– Frame-of-Reference (FOR) Training
– Information-Processing Approaches
• Observation Training
• Decision-Making Training
– Which Training Method is Best?
• Feedback to Evaluators

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Feedback of Results: The
Performance Appraisal Interview
• Types of Feedback Interviews
– Tell and Sell
– Tell and Listen
– Problem Solving
• Problems with the Appraisal Interview
– Disagreement and Defensiveness
– Multiple Purposes
– Impression Management in the Feedback Process

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Feedback of Results: The
Performance Appraisal Interview (cont’d)
• Improving the Performance Appraisal
Interview
– Feedback Specificity
– Subordinate Acceptance
– Setting Clear Goals

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Review
• The Performance Assessment and Management
Process
• Strategic Importance of Performance Assessment
• Functions of Performance Assessment
• Criteria for a Good Appraisal System
• Deciding What Types of Performance to Measure
• Methods of Appraising Performance
• Raters of Employee Performance
• Contemporary Assessment Challenges
• Enhancing the Measurement of Employee
Performance
• Feedback of Results: The Performance
Assessment Interview