Performance appraisals are used to evaluate employee performance in areas such as promotions, training, compensation, and career development. The performance appraisal process involves establishing performance standards, examining work performed, appraising results, and discussing evaluations with employees. However, performance appraisals can be subjective and biased due to factors such as the halo effect, leniency, and recent behavior bias of supervisors. They may also cause anxiety for employees whose opportunities are impacted by the results.

2. Formal system of
periodic review and
evaluation of
individual or team
task performance

3. • Human resource planning: Used in making
decisions such as promotion, demotion,
termination, layoff, and transfer
• Training and development: Points out
employees’ specific needs
• Career planning and development: Assesses
employee’s strengths and weaknesses and
determines employee’s potential
• Compensation programs: Provide basis for
rational decisions regarding pay adjustments

4. Performance Appraisal Process
External Environment
Internal Environment
Establish Performance
Criteria (Standards)
Examine Work Performed
Appraise the Results
Discuss Appraisal with
Employee
Communicate standards to
Employees

5. • A standard is a value or
specific criterion against
which actual
performance can be
compared
• Traits
• Behaviors
• Competencies
• Goal achievement
• Improvement potential

6. Traits
• Employee traits such as attitude,
appearance, and initiative are basis
for some evaluations.
• Certain traits such as adaptability,
judgment, appearance, and attitude
may directly relate to job
performance.

7. Behaviors
• Organizations may evaluate employee’s
task-related behavior.
• Ex: For individuals working in teams,
behaviors like teamwork, cooperation, or
customer service orientation might be
appropriate if they lead to desired
outcomes.
• If certain behaviors result in desired
outcomes, there is merit in using them in
evaluation process.

8. Competencies
• Broad range of knowledge, skills, traits,
and behaviors
• May be technical in nature, business
oriented, or related to interpersonal
skills
• Should be those that are closely
associated with job success
• For example, analytical thinking and
achievement orientation might be
essential in professional jobs.

9. • Use if organizations
consider ends more
important than means
• The outcomes should be
within control of
individual or team
• The outcomes should be
those results that lead to
firm’s success.

10. • Many criteria used
focus on past
• Cannot change past
• Should emphasize
future

11. • Immediate supervisor
• Subordinates
• Peers and team members
• Self-appraisal

12. Immediate Supervisor
• Traditionally most common
choice
• Usually in excellent position
to observe employee’s job
performance
• Has responsibility for
managing particular unit

13. Subordinates
• Our culture has viewed evaluation by
subordinates negatively.
• Some firms find that evaluation of
managers by subordinates is both
feasible and needed.
• Issues:
– Could be seen as a popularity contest
– Possible reprisal against employees

14. Peers and Team Members
• Work closely with evaluated employee and
probably have undistorted perspective on typical
performance
• Problems include reluctance of some people who
work closely together, especially on teams, to
criticize each other.

15. Self-Appraisal
• If employees understand their objectives
and the criteria used for evaluation, they
are in a good position to appraise own
performance.
• Employee development is self-development
• Self-appraisal may make employees more
highly motivated

16. The Appraisal Period
• Prepared at specific
intervals
• Usually annually or
semiannually
• Period may begin with
employee’s date of hire
• All employees may be
evaluated at same time

17. • Rating scales
• Critical incidents
• Essay
• Work standards
• Ranking
• Result-based
systems

18. Rating Scales
• Rates employees
according to defined
factors
• Judgments are
recorded on a scale
• Many employees
are evaluated
quickly

19. • Written records of highly
favorable and
unfavorable work actions
• Appraisal more likely to
cover entire evaluation
period
• Does not focus on last
few weeks or months

20. Essay
• Brief narrative describing
performance
• Tends to focus on extreme
behavior
• Depends heavily on
evaluator's writing ability
• Comparing essay
evaluations might be difficult

21. Work Standards
• Compares performance
to predetermined
standard
• Standards: Normal
output of average worker
operating at normal pace
• Time study and work
sampling used
• Workers need to know
how standards were set

22. Ranking
• All employees from group
ranked in order of overall
performance
• Comparison is based on
single criterion, such as
overall performance

23. Result-Based Systems (MBO)
• Manager and
subordinate agree on
objectives for next
appraisal
• Evaluation based on
how well objectives are
accomplished

24. • Appraiser
discomfort
• Lack of objectivity
• Halo/horn error
• Leniency/strictness
• Central tendency
• Recent behavior
bias
• Personal bias
• Manipulating the
evaluation
• Employee anxiety

25. Appraiser Discomfort
• Performance
appraisal process
cuts into manager’s
time
• Experience can be
unpleasant when
employee has not
performed well

26. Lack of Objectivity
• Factors such as attitude, appearance,
and personality are difficult to
measure
• Factors may have little to do with
employee’s job performance
• May place evaluator and company in
untenable positions

27. Halo/Horn Error
• Halo error: Manager generalizes
one positive performance feature or
incident to all aspects of employee
performance, resulting in higher
rating
• Horn error: Manager generalizes
one negative performance feature
or incident to all aspects of
employee performance, resulting in
lower rating

28. Leniency/Strictness
• Leniency: Giving
undeserved high ratings
• Strictness: Being unduly
critical of employee’s
work performance
• Worst situation is when
firm has both lenient and
strict managers and does
nothing to level inequities.

29. Central Tendency
• Error occurs when employees are
incorrectly rated near average or
middle of scale
• May be encouraged by some rating
scale systems requiring evaluator to
justify extremely high or extremely
low ratings

30. Recent Behavior Bias
• Employee’s behavior often improves
and productivity rises several days or
weeks before scheduled evaluation
• Natural for rater to remember recent
behavior more clearly than past actions
• Necessary to maintain records of
performance

31. Personal Bias (Stereotyping)
• Managers allow individual differences
such as gender, race, or age to affect
ratings.
• Effects of cultural bias, or stereotyping,
can influence appraisals.
• Other factors
– Example: Mild-mannered employees may be
appraised more harshly, simply because they
do not seriously object to appraisal results.

32. Manipulating the Evaluation
• Sometimes, managers control every
aspect of appraisal process and
manipulate the system.
• Example:
–A supervisor wants to give pay raise to
certain employee, so supervisor may
give employee an undeserved high
performance evaluation.

33. Employee Anxiety
• Evaluation process may
create anxiety for
appraised employee
• Opportunities for
promotion, better work
assignments, and
increased
compensation may
hinge on results