This document discusses performance appraisals and management. It defines performance appraisal as the assessment of an employee's effectiveness, usually done regularly through a structured interaction between the employee and supervisor. Performance management aims to align employee work with organizational goals by integrating performance appraisal with other HR systems like linking pay to performance. The document outlines different methods for evaluating employee performance, including individual methods like rating scales, forced choice evaluations, essays, and checklists and multiple rater methods like 360-degree feedback. Effective appraisal systems are job-related, have clear performance expectations and standards, use trained evaluators, and promote continuous communication.

1. PERFORMANCE &
POTENTIAL APPRAISAL

2. “Nurturing
turns potential
into
performance”

3. What is performance appraisal?
 Employee Assessment – the assessment of an
employee's effectiveness, usually as undertaken at
regular intervals
 Performance appraisal may be defined as a
structured formal interaction between a subordinate
and supervisor in which the work performance of
the subordinate is examined and discussed
 with a view to identifying weaknesses and strengths as
well as opportunities for improvement and skills’
development

4. Performance Management
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

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rights reserved.
PerformancePerformance
ManagementManagement
LinkageLinkage

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Difference Between Performance
Management and Performance Appraisals
Performance
Management
 Processes used to identify,
encourage, measure,
evaluate, improve, and
reward employee
performance.
Performance
Appraisal
 The process of evaluating
how well employees perform
their jobs and then
communicating that
information to the
employees.

7. Why Have Performance Appraisal ?
 Performance Appraisal offers several
advantages at the level of the:
 Individual
 Recognition of past effort
 Developmental requirements can be uncovered
 Team
 Alignment of effort with objectives
 Motivation of team members
 Organization
 Development of staff
 Achievement of key objectives
 Best and focused utilization of human resources

8. Objectives
 Compensation decisions
 Promotion decisions
 Training and development programmes
 Feedback to the employee
 Personal growth and development

9. Performance Management Cycle
Source of figure: Adapted from Fisher, Schoenfeldt, & Shaw (2006), Figure 10.1, p. 421
9
Development Tool
Administrative
Tool

10. The Performance Appraisal Process
Establish performance standards
Communicate the standards
Measure actual performance
Compare actual performance with standards and
discuss the appraisal
Take corrective action, if necessary

11. 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
 Traits of the employee
 Example for a salesperson: Friendliness

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Types of Performance InformationTypes of Performance Information

13. 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
 Makes sense for most jobs
 Results matter (usually)

14. 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
 May be difficult to provide effective feedback

15. Types of Performance to Measure
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

16. Types of Performance to Measure
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

17. Types of Performance to Measure
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

18. 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.”
 Translate the tasks into results & behaviors
 Example (continued): Measure the amount of inventory
shrinkage in the store (a result)

19. Characteristics of an Effective
Appraisal System
 Job-related criteria
 Performance expectations
 Standardization
 Trained appraisers
 Continuous open communication
 Performance reviews

20. 360-Degree Feedback
 Performance information is collected from
supervisors, subordinates, peers, and
internal/external customers
 Generally done for development rather than
for pay raises

21. 360-degree Feedback
 Many organizations now use some form of
360-degree feedback program
 Upward and peer feedback can have positive
effects on behavior
 These effects are sustainable over time
 Introducing a 360-degree system into a culture not
prepared for it can have disastrous effects

22. 360-degree Feedback
 Positive features of a 360-degree system:
 Multiple perspectives of a person’s performance
 Raters base evaluations on contact and observation
 Feedback is provided from multiple directions…
above, below, peer
 Anonymous upward feedback, which results in full
participation
 Learning about weaknesses and strengths is
motivational

23. 360-degree Feedback
 Negative features of a 360-degree system:
 Feedback from all sources can be overwhelming
 Rater can hide in a group of raters and provide
harsh evaluations
 Conflicting ratings can be confusing and frustrating
 Providing feedback that is constructive requires a
plan and well-trained raters

24. Selected Evaluation Techniques
 Ways of evaluating employees can generally
be divided into two categories:
 Methods that evaluate employees individually
 Multiple-person evaluations
 In a multiple-person evaluation, the supervisor
directly and intentionally compares the
performance of one employee to that of others

25. Individual Evaluation Methods
 Graphic rating scale
 The rater is presented with a set of traits
 The employee is rated on the traits
 Ratings are assigned points, which are then
computed
 Raters are often asked to explain each rating with a
sentence or two

26. Individual Evaluation Methods
 Forced choice:
 Was developed because graphic rating scales
allowed supervisors to rate everyone high
 The rater must choose from a set of descriptive
statements about employee
 Supervisors check the statements that describe the
employee, or they rank the statements from most to
least descriptive
 Forced choice can be used by superiors, peers,
subordinates, or a combination of these

27. Individual Evaluation Methods
 Essay Evaluation
 The rater is asked to describe the strong and weak
aspects of the employee’s behavior
 It can be used by superiors, peers, or subordinates
 Essay evaluations are flexible; an evaluator can
specifically address the ratee’s skill in any area
 Comparing essays is difficult
 Skilled writers can paint a better picture

28. Individual Evaluation Methods
 Critical Incident Technique
 Raters maintain a log of behavioral incidents that
represent effective and ineffective performance for
each employee
 Two factors determine the success of this technique:
 The supervisor must have enough time to observe
subordinates during the evaluation period
 The supervisor must record incidents as they are
seen
 Logs can help avoid common rating errors and
facilitate discussions about performance improvement

29. Individual Evaluation Methods
 Checklists
 In its simplest form, the checklist is a set of
objectives or descriptive statements
 If the rater believes that the employee possesses a
listed trait, the item is checked
 A rating score equals the number of checks

30. Individual Evaluation Methods
 A variation is the weighted checklist
 Supervisors and HR specialists prepare a list of
descriptive statements about behavior
 Judges who have observed behavior on the job sort
the statements into piles rated from excellent to
poor
 When there is agreement on an item, it is included
in the weighted checklist
 The employee’s evaluation is the sum of the scores
(weights) on the items checked
Checklists and weighted checklists can be used
by superiors, peers, or subordinates

31. Individual Evaluation Methods
 Behaviorally Anchored Rating Scales
 Smith and Kendall developed the behaviorally
anchored rating scale (BARS), or the behavioral
expectation scale (BES)
 The BARS approach uses critical incidents to
anchor statements on a scale
 The rater reads the anchors and places an X at some
point on the scale for the ratee

32. Individual Evaluation Methods
 A BARS usually contains these features:
 Six to 10 performance dimensions identified and
defined by raters and ratees
 The dimensions are anchored with positive and
negative critical incidents
 Each ratee is then rated on the dimensions
 Ratings are fed back using the terms on the form
It takes two to four days to construct a BARS that is
jargon free and closely related to the requirements of the job

33.  Behaviorally Anchored Rating Scale
Uses specific descriptions of actual behaviors to rate various levels of actual
performance

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Behaviorally-Anchored Rating ScaleBehaviorally-Anchored Rating Scale
for Customer Service Skillsfor Customer Service Skills

35. Multiple-Person Evaluation Methods
 Ranking
 A supervisor is asked to rank subordinates in order
on some overall criterion
 It is easier to rank the best and worst employees
than average ones
 Alternative rankings can help with this difficulty
 Pick the top employee first, then the bottom one
 The second best is chosen, then the second worst
 Follow this process until everyone has been ranked

36. Multiple-Person Evaluation Methods
 Paired Comparison
 The supervisor reviews a series of cards; each
contains two subordinates names
 The higher performer in each pair is chosen
 Final ranking is made by counting how many times
a given employee was chosen as the better
performer
 A major limitation is the number of paired
comparisons that must be made
 With only 10 subordinates, a supervisor would have
45 pairs of names

37. Paired Comparison Method

38. Multiple-Person Evaluation Methods
 Forced Distribution
 Employees are rated on a pre-existing distribution
of pre-determined categories
 The predetermined distribution must be followed,
regardless of how well the employees performed
 A supervisor with all exceptional subordinates will
be forced to rate some poorly
 A supervisor with mediocre subordinates must rate
some highly
This technique is similar to grading on a curve

39. Forced Distribution Method
 At Sun Microsystems managers appraise
employees in groups of about 30.
 There is a top 10%, a middle 70%, and a
bottom 10%.
 The bottom 10% can either take a quick exit
package or embark on a 90-day performance
improvement action plan.

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Forced Distribution on a Bell-Shaped CurveForced Distribution on a Bell-Shaped Curve

41. Multiple-Person Evaluation Methods
 An MBO program follows a systematic process:
 Superior/subordinates define tasks and set objectives
 The superior, consulting with subordinates, sets criteria
for assessing objective accomplishment
 Dates to review progress are agreed upon and used
 Superior and subordinates make any required
modifications in the original objectives
 A final evaluation by the superior is made
 The superior meets with the subordinate in a
counseling, encouraging session
 Objectives for the next cycle are set

42. Performance Evaluation Problems
No technique is perfect;
they all have limitations

43. Opposition to Evaluation
 Most employees are wary of performance evaluation
 Subjective bias and favoritism are real problems
 Opponents of formal evaluation argue that:
 They focus too much symptoms of poor performance
rather than finding the underlying causes
 Managers and employees dislike the process
 Raters have trouble deciding performance levels
 Employees who are not placed in the top performance
category experience a reverse motivation effect

44. System Design and Operating Problems
 Performance evaluation systems break down
because they are poorly designed
 If the criteria focus solely on results, or on
personality traits rather than performance, the
evaluation may not be well received
 Some techniques take a long time to carry out or
require extensive written analysis, both of which
managers resist
 Some systems are not fully online

45. Rater Problems
 Even if a system is well designed, problems can arise if
raters are not cooperative and well trained
 Supervisors may not be comfortable “playing God”
 Inadequate training can lead to:
 Problems with standards of evaluation
 Halo effect
 Leniency or harshness
 Central tendency error
 “Recency of events” error
 Contracts effects
 Personal bias (stereotyping, similar to me)

46. Standards of Evaluation
 Problems with evaluation standards arise
because of perceptual differences in the
meaning of words
 Good, adequate, satisfactory, and excellent mean
different things to different evaluators
 If only one rater is used, evaluations can be
distorted
 This arises most often in graphic rating scales
 It may also appear with essays, critical incidents,
and checklists

47. Potential appraisal
The objective of potential appraisal is to identify the
potential of a given employee to occupy higher positions in
the organizational hierarchy and undertake higher
responsibilities. It is required to:
Inform employees about their future prospects
Help the organization chalk out a suitable succession plan
Update training efforts from time to time
Advise employees about what they must do to improve their
career prospects.

48. Problem
Children
Stars
Planned separation Solid citizens
PERFORMANCE
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