The document discusses performance appraisal and management. It defines performance appraisal as evaluating an employee's current or past performance against standards, while performance management is an integrated approach ensuring employee performance supports organizational strategy. It then covers various performance appraisal methods like graphic rating scales, forced distribution, critical incidents, and behavioral anchored rating scales. The rest of the document provides guidance on setting goals, conducting appraisal interviews, delivering feedback, and integrating performance management into a continuous improvement process aligned with organizational goals.

1. Chapter 9
Performance Management and Appraisal

2. Copyright © 2011 Pearson Education 9–2
Performance appraisal
• Evaluating an employee’s current and/or past performance relative to his or her
performance standards.
Performance management
• An integrated approach to ensuring that an employee’s performance supports and
contributes to the organization’s strategic aims
Comparing Performance Appraisal and Performance Management

3. 9–3
Effectively Appraising Performance
1
Appraising performance
Steps in Appraising Performance
Defining the job and performance criteria (work standard)
Providing feedback session
2
3

4. 9–4

5. An Introduction to Appraising Performance
 Why appraise performance?
– First, most employers base pay, promotion, and retention decisions on the employee’s
appraisal
– Appraisals play an integral role in the employer’s performance management process.
– Appraisals help in planning for correcting deficiencies and reinforce things done correctly.
– Appraisals, in identifying employee strengths and weaknesses, are useful for career
planning
– Finally, appraisals enable the supervisor to identify if there is a training need, and the
remedial steps required.

6. Defining the Employee’s Goals and Work Standards
 Managers use one or more of three bases—goals, job dimensions or traits, and behaviors
or competencies—to establish ahead of time what the person’s performance standards will
be.
 First, the manager can assess to what extent the employee is attaining his or her numerical
goals.
 Managers often say that effective goals should be “SMART
 Specific, and clearly state the desired results.
 Measurable in answering “how much.”
 Attainable, and not too tough or too easy.
 Relevant to what’s to be achieved.
 Timely in reflecting deadlines and milestones.
9–6

7. Copyright © 2011 Pearson Education 9–7
Defining the Employee’s Goals and Work Standards
Set
SMART
goals
Assign challenging/
doable goals
Assign specific
goals
Guidelines for Effective
Goal Setting
Assign measurable
goals
Encourage
participation

8. • A second basis upon which to appraise someone is to use a form with basic job
dimensions or traits such as “communication” or “teamwork.”
A third option is to appraise employees based on their mastery of the competencies
(the skills, knowledge, and/or personal behaviors) performing the job requires.
E.g., Skills matrix, this matrix shows the basic skills to be assessed (such as “technical
expertise”), and the minimum level of each skill the job requires (what the minimum skill
level “should be”).
Employees appraised as having the requisite level of each skill are qualified to fill the
position.

9. Who Should Do the Appraising?
9–9
The Supervisor’s Role
 Supervisor is usually in the best position to observe and evaluate the subordinate’s
performance.
 Must be familiar with basic appraisal techniques
 Must understand and avoid problems that can cripple appraisals
 Must know how to conduct appraisals fairly

10. The HR Department’s Role
 Serves a policy-making and advisory role.
 Provides advice and assistance regarding the appraisal tool to use.
 Train supervisors to improve their appraisal skills.
 Monitors the appraisal system effectiveness and compliance with EEO
laws.

11. Who Should Do the Appraising?
9–11
• Peer Appraisals: —appraisals by one’s peers—are therefore increasingly popular. People
often come across differently to their peers than they do to their boss.
• Rating committee usually consists of the employee’s immediate supervisor and three or
four other supervisors. It helps cancel out problems such as bias on the part of individual
raters.
• Self Rating: Some employers obtain employees’ usually in conjunction with supervisors’
ratings.
• Appraisal By Subordinates: Many employers have subordinates rate their managers,
usually for developmental rather than for pay purposes.
• 360-degree Feedback: With 360-degree feedback, the employer collects performance
information all around an employee—from his or her supervisors, subordinates, peers, and
internal or external customers generally for developmental rather than pay purposes

12. 9–12
Performance Appraisal Methods
1
2
3
4
5
Alternation ranking
Graphic rating scale
Paired comparison
Forced distribution
Critical incident
6
7
8
9
10
Behaviorally anchored rating scales (BARS)
Narrative forms
Management by objectives (MBO)
Computerized and Web-based performance
appraisal
Merged methods
Appraisal Methodologies

13. 9–13
Graphic rating scale
– A scale that lists a number of traits and a range of performance for each that is used
to identify the score that best describes an employee’s level of performance for each
trait.
– lists several job dimensions or traits (such as “communication” or “teamwork”) and
a range of performance values (from “below expectations” to “role model” or
“unsatisfactory” to “outstanding”) for each trait.
– Competency- (or skill- or behavior-) based graphic rating scales are another option.
– Simplest and most popular method

14. 9–14
FIGURE 9–2
Sample Graphic
Rating Performance
Rating Form

15. Copyright © 2011 Pearson Education 9–15
FIGURE 9–3 One Item from an Appraisal Form Assessing Employee Performance on Specific Job-Related Duties

16. FIGURE 9–4 Appraisal Form for Assessing Both Competencies and Specific Objectives

17. Copyright © 2011 Pearson Education 9–17
FIGURE 9–4 Appraisal Form for Assessing Both Competencies and Specific Objectives (cont’d)

18. Copyright © 2011 Pearson Education 9–18
Alternation Ranking Method:
 Ranking employees from best to worst on a particularly trait or traits
choosing highest, then lowest, until all are ranked.
 Supervisors choosing the alternation ranking method would use a form
like that in Figure 9-5 to alternately choose and list employees who are
the highest on the characteristic being measured and the ones who are the
lowest.

19. Copyright © 2011 Pearson Education 9–19
FIGURE 9–5 Scale for Alternate Ranking of Appraisee

20. Copyright © 2011 Pearson Education 9–20
Paired Comparison Method
 For every trait (e.g. quantity of work, quality of work, and so on),
managers compare every employee with every other employee.

21. FIGURE 9–6 Ranking Employees by the Paired Comparison Method
Note: + means “better than.” - means “worse than.” For each chart, add up the number of +’s in each column
to get the highest ranked employee.

22. Forced distribution method
 Similar to grading on a curve; predetermined percentages of ratees are placed in
various performance categories.
 Example:
15% high performers
20% high-average performers
30% average performers
20% low-average performers
15% low performers
 Forced distribution’s big advantage is that it prevents supervisors from rating all or most
employees “satisfactory” or “high.”
 It may also increase the risk of discriminatory adverse impact. How?
 It is also called stack ranking where managers rate staff as top, average, or low
performers based on how they compare with coworkers. This rating leads to a bell
curve.
 One survey found that 77% of employers were at least “somewhat satisfied” with forced ranking,
while the remaining 23% were dissatisfied. The biggest complaint: 44%said it damages morale.

23. Critical incident method
Keeping a record of uncommonly good or undesirable examples of an employee’s work-
related behavior and reviewing it with the employee at predetermined times.
The manager prepares lists of statements of very effective and ineffective behavior
of an employee.
These critical incidents or events represent the outstanding or poor behavior of
employees on the job.
The manager maintains logs on each employee, whereby he periodically records
critical incidents of the workers behavior.
At the end of the rating period, these recorded critical incidents are used in the
evaluation of the workers’ performance.
It provides an objective basis for conducting a thorough discussion of an
employee’s performance.
Although this method avoids recency bias, there is a tendency for managers to
focus more on the negative incidents than otherwise.

24. 9–24
TABLE 9–1 Examples of Critical Incidents for Assistant Plant Manager
Continuing Duties Targets Critical Incidents
Schedule production
for plant
90% utilization of personnel and
machinery in plant; orders delivered
on time
Instituted new production scheduling system;
decreased late orders by 10% last month;
increased machine utilization in plant by 20%
last month
Supervise procurement of raw
materials and on inventory
control
Minimize inventory costs while
keeping adequate supplies on hand
Let inventory storage costs rise 15% last
month; over-ordered parts “A” and “B” by 20%;
under-ordered part “C” by 30%
Supervise machinery
maintenance
No shutdowns due
to faulty machinery
Instituted new preventative maintenance
system for plant; prevented a machine
breakdown by discovering faulty part

25. 9–25
FIGURE 9–7
Appraisal-Coaching
Worksheet

26. Copyright © 2011 Pearson Education 9–26
Management by Objectives (MBO)
• A comprehensive and formal organizationwide goal-setting and appraisal
program requiring:
1. Setting of organization’s goals
2. Setting of departmental goals
3. Discussion of departmental goals
4. Defining expected results (setting individual goals)
5. Conducting periodic performance reviews
6. Providing performance feedback

27. 9–27
Using MBO
Setting unclear objective
Conflict with subordinates
over objectives
Potential Problems with MBO
Time-consuming appraisal
process

28. Behaviorally Anchored Rating Scale (BARS)
Advantages of BARS
 A more accurate gauge
 Clearer standards
 Feedback
 Independent dimensions
 Consistency
 A behaviorally anchored rating scale (BARS) is an appraisal tool that anchors a
numerical rating scale with specific examples of good or poor performance.
 using behavior “statements” as a reference point

29. 9–29
FIGURE 9–8
Example of a
Behaviorally
Anchored Rating Scale
for the Dimension
Salesmanship Skills

30. 9–30
Computerized and Web-Based Performance Appraisal Systems
• Allow managers to keep notes on subordinates.
• Notes can be merged with employee ratings.
• Software generates written text to support appraisals.
• Allows for employee self-monitoring and self-evaluation.
• Electronic Performance Monitoring (EPM) Systems
 Use computer network technology to allow managers access to their employees’
computers and telephones.
 Managers can monitor the employees’ rate, accuracy, and time spent working online.

31. Copyright © 2011 Pearson Education 9–31
FIGURE 9–9
Online
Performance
Appraisal Tool

32. 9–32
Dealing with Performance Appraisal Problems
Unclear standards
Leniency or
strictness
Halo
effect
Potential Rating Scale Appraisal
Problems
Central tendency Bias

33. 9–33
Potential Rating Scale Appraisal Problems
 Unclear standards
– An appraisal that is too open to interpretation.
 Halo effect
– Occurs when a supervisor’s rating of a subordinate on one trait biases the rating of
that person on other traits.
 Central tendency
– A tendency to rate all employees the same way, such as rating them all average.
 Leniency or strictness
-Other supervisors tend to rate all .heir subordinates high (or low).
 Recency effects
– The tendency to focus on recant events and forget past experiences.

34. TABLE 9–2 A Graphic Rating Scale with Unclear Standards

35. 9–35
Guidelines for Effective Appraisals
Know the problems
Get agreement on a
plan
Use the
right tool
How to Avoid
Appraisal Problems
Keep a
diary
Be
fair

36. 9–36
TABLE 9–3 Important Advantages and Disadvantages of Appraisal Tools
Tool Advantages Disadvantages
Graphic rating scale Simple to use; provides a quantitative rating for each
employee.
Standards may be unclear; halo effect, central
tendency, leniency, bias can also be problems.
BARS Provides behavioral “anchors.” BARS is very accurate. Difficult to develop.
Alternation ranking Simple to use (but not as simple as graphic rating
scales). Avoids central tendency and other problems of
rating scales.
Can cause disagreements among employees and
may be unfair if all employees are, in fact,
excellent.
Forced distribution method End up with a predetermined number or % of people in
each group.
Employees’ appraisal results depend on your
choice of cutoff points.
Critical incident method Helps specify what is “right” and “wrong” about the
employee’s performance; forces supervisor to evaluate
subordinates on an ongoing basis.
Difficult to rate or rank employees relative to one
another.
MBO Tied to jointly agreed-upon performance objectives. Time-consuming.

37. 9–37
Choosing the Right Appraisal Tool
Accessibility Accuracy
Ease-of-use Employee acceptance
Criteria for Choosing an Appraisal Tool

38. 9–38
FIGURE 9–10 Selected Best Practices for Administering Fair Performance Appraisals
• Base the performance review on duties and standards from a job analysis.
• Base the performance review on observable job behaviors or objective performance data.
• Clear performance expectations.
• Use a standardized performance review procedure for all employees.
• Make sure whoever conducts the reviews has frequent opportunities to observe the employee’s job
performance.
• Either use multiple raters or have the rater’s supervisor evaluate the appraisal results.
• Include an appeals mechanism.
• Discuss the appraisal results with the employee.
• Let the employee provide input regarding your assessment of him or her.
• Indicate what the employee needs to do to improve.
• Thoroughly train the supervisors who will be doing the appraisals.
• Document everything:

39. 9–39
FIGURE 9–11 Guidelines for a Legally Defensible Appraisal
1. Preferably, conduct a job analysis to establish performance criteria and standards.
2. Communicate performance standards to employees and to those rating them, in writing.
3. Use subjective narratives as only one component of the appraisal.
4. Train supervisors
5. Allow appraisers substantial daily contact with the employees they’re evaluating.
6. Use multiple appraiser, a single overall rating of performance is usually not acceptable to the courts.
7. One appraiser should never have absolute authority to determine a personnel action.
8. Give employees the opportunity to review and make comments, and have a formal appeals process.
9. Document everything: Without exception, courts condemn informal performance evaluation practices that eschew
documentation.
10. Where appropriate, provide corrective guidance to assist poor performers in improving.

40. Copyright © 2011 Pearson Education 9–40
Appraisal Interview
 An interview in which the supervisor and subordinate review the appraisal and make plans to remedy
deficiencies and reinforce strengths.
 Supervisors face four types of appraisal situations, each with its unique objectives

41. 9–41
The Appraisal Interview
Satisfactory—Promotable
Satisfactory—Not Promotable
Unsatisfactory—Correctable
Unsatisfactory—Uncorrectable
Types of Appraisal
Interviews

42. 9–42
FIGURE 9–12 Sample Employee Development Plan

43. 9–43
Appraisal Interview Guidelines
Talk in terms of
objective work data
Get
agreement
Don’t get personal
Encourage the person
to talk
Guidelines for Conducting
an Interview

44. 9–44
FIGURE 9–13
Checklist During
Appraisal
Interview

45. 9–45
Handling Defensive Responses
1
Recognize your own limitations.
Never attack a person’s defenses.
How to Handle a Defensive Subordinate
Recognize that defensive behavior is normal.
Postpone action.
2
3
4

46. 9–46
How to Deliver Criticism
1
2
3
4
5
How to Criticize a Subordinate
Criticize in private, and do it constructively.
Do it in a manner that lets the person maintain his or her dignity and sense
of worth.
Give daily feedback so that the review has no surprises.
Never say the person is “always” wrong.
Criticism should be objective and free of biases.

47. 9–47
Formal Written Warnings
• Purposes of a Written Warning
 To shake your employee out of bad habits.
 To help you defend your rating, both to your own boss and (if needed) to the
courts.
• A Written Warning Should:
 Identify standards by which employee is judged.
 Make clear that employee was aware of the standard.
 Specify deficiencies relative to the standard.
 Indicate employee’s prior opportunity for correction.

48. 9–48
Performance Management
• Performance Management
 Is the continuous process of identifying, measuring, and developing the performance
of individuals and teams and aligning their performance with the organization’s
goals.
• How Performance Management Differs From Performance Appraisal
 A continuous process for continuous improvement
 A strong linkage of individual and team goals to strategic goals
 A constant reevaluation and modification of work processes

49. 9–49
Basic Building Blocks of Performance Management
Direction sharing
Goal
alignment
Ongoing performance
monitoring
Rewards, recognition,
and compensation
Coaching and
development support
Ongoing
feedback

50. 9–50
Why Performance Management?
Total Quality Management
Resolution of Appraisal Issues
Strategic Goal Alignment
The Performance
Management Approach

51. 9–51
Using Information Technology to Support Performance Management
• Assign financial and nonfinancial goals to each team’s activities along the strategy
map chain of activities leading up to the company’s overall strategic goals.
• Inform all employees of their goals.
• Use IT-supported tools like scorecard software and digital dashboards to continuously
monitor and assess each team’s and employee’s performance.
• Take corrective action at once.

52. 9–52
FIGURE 9–14 Performance Management Report