Ch 5 -_performance_appraisal

Copyright © 2010 Pearson Education, Inc.
publishing as Prentice Hall
8-1
Human Resource Management
11th
Edition
Chapter 8
PERFORMANCE MANAGEMENT
AND APPRAISAL

8-2
HRM in Action: Productivity and
Emotional Intelligence
• Emotional Intelligence - Ability to recognize and
manage emotions
• Individuals with high EQ - Cope successfully and
proactively with life’s demands and pressures;
build and use rewarding relationships with
others, while not being afraid to make tough
decisions
• Positive relationship between emotionally
intelligent leadership and employee
engagement, client satisfaction, and bottom line

8-3
Performance Management
• Goal-oriented process ensuring
organizational processes are in place to
maximize productivity of employees, teams,
and organization
• Training and performance appraisal play
significant role in process
• Training, appraisal, and rewards-integrated
linked for continuous organizational
effectiveness
• Effort of every worker directed toward
achieving strategic goals

8-4
Performance Management (Cont.)
• PM has not yet achieved its potential
• In survey, 75% said it is possible to develop
accurate measurement of an employee’s
contributions, but only 40% believe their
organization had accomplished that
objective
• Organizations need to integrate company’s
mission statement, vision, and values into
their performance management systems

8-5
Performance Appraisal Defined
• Formal system of review
and evaluation of
individual or team task
performance
• Often negative, disliked
activity that seems to
elude mastery

8-6
Uses of Performance Appraisal
• Human resource planning - Identifies those
who have potential to be promoted
• Recruitment and selection - Helps predict
performance of job applicants
• Training and development - Points out
employee’s specific needs for training and
development
• Career planning and development - Assesses
employee’s strengths and weaknesses and
determines person’s potential

8-7
Uses of Performance Appraisal
(Cont.)
• Compensation programs - Provides basis for
rational decisions regarding pay adjustments
• Internal employee relations - Used in making
decisions such as promotion, demotion,
termination, layoff, and transfer
• Assessment of employee potential - Assesses
employee potential as they appraise their job
performance

8-8
Performance Appraisal Process
External Environment
Internal Environment
Identify Specific
Performance Appraisal
Goals
Establish Performance
Criteria (Standards) and
Communicate Them To
Employees
Examine Work Performed
Appraise the Results
Discuss Appraisal with
Employee

8-9
Responsibility for Appraisal
• Immediate supervisor
• Subordinates
• Peers and team members
• Self-appraisal
• Customer appraisal

8-10
Immediate Supervisor
• Traditionally most common
choice
• Supervisor is usually in
excellent position to
observe employee’s job
performance
• Supervisor has
responsibility for managing
particular unit

8-11
Subordinates
• Our culture has viewed evaluation
by subordinates negatively
• Some firms find evaluation of
managers by subordinates is both
feasible and needed
• Will do better job of managing
• Might be caught up in popularity
contest

8-12
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

8-13
Self-Appraisal
• If employees understand their
objectives and criteria used for
evaluation, they are in good position
to appraise own performance
• Employee development is self-
development
• Employees who appraise own
performance may become more
highly motivated

8-14
Customer Appraisal
• Customer behavior
determines firm’s degree of
success
• Organizations use this
approach because it
demonstrates commitment
to customer, holds
employees accountable,
and fosters change

8-15
Problems in Performance Appraisal
• Appraiser discomfort
• Lack of objectivity
• Halo/horn error
• Leniency/strictness
• Central tendency
• Recent behavior bias
• Personal bias
• Manipulating the evaluation
• Employee anxiety

8-16
Recent Behavior Bias
• Employee’s behavior often improves
and productivity rises several days or
weeks before scheduled evaluation
• Only natural for rater to remember
recent behavior more clearly than
actions from past
• Maintaining records of performance

8-17
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 in writing extremely high or
extremely low ratings

8-18
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

8-19
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 results

8-20
Appraiser Discomfort
• Performance
appraisal process
cuts into manager’s
time
• Experience can be
unpleasant when
employee has not
performed well

8-21
Halo/Horn Error
• Halo error - Occurs when manager
generalizes one positive performance
feature or incident to all aspects of
employee performance, resulting in
higher rating
• Horn error - Evaluation error occurs
when manager generalizes one
negative performance feature or
incident to all aspects of employee
performance, resulting in lower rating

8-22
Lack of Objectivity
• In rating scales method, factors such
as attitude, appearance, and
personality are difficult to measure
• Factors may have little to do with
employee’s job performance
• Employee appraisal based primarily
on personal characteristics may place
evaluator and company in untenable
positions

8-23
Manipulating the Evaluation
• Sometimes, managers control every
aspect of appraisal process and
manipulate system.
• Example: Want to give pay raise to
certain employee. Supervisor may
give employee an undeserved high
performance evaluation.

8-24
Employee Anxiety
• Evaluation process may
create anxiety for
appraised employee
• Opportunities for
promotion, better work
assignments, and
increased compensation
may hinge on results

8-25
Performance Appraisal Methods
•Ranking
•Forced Distribution
•Paired Comparisons
•Graphic Rating Scales
•Critical Incidents
•Behaviorally Anchored
Rating Scales (BARS)

8-26
Ranking
• All employees from group
ranked in order of overall
performance
• Comparison is based on
single criterion, such as
overall performance

Ranking Overall Performance
NO. EMPLOYEE MARKS
1 ALI 90
2 ASMAH 88
3 ABU 85
4 AHMAD 83
5 AISHAH 80
8-27

8-28
Forced Distribution
• Rater assigns individual in workgroup to
limited number of categories similar to
normal distribution
• Assumes all groups of employees have
same distribution
• Proponents of forced distribution believe
they facilitate budgeting and guard against
weak managers who are too timid to get
rid of poor performers

8-29
Forced Distribution (Cont.)
• Require managers to be honest with
workers about how they are doing
• Also called a rank-and-yank system
• Unpopular with many managers
• May damage morale and generate
mistrust of leadership
• Suspect that rankings are way for
companies to rationalize firings more
easily

Unsatisfactorily (10%) Below average (20%) Average (40%0 Above average (20%) Satisfactorily (10%)
Abu Wafi Ani Diana Ahmad
Ayu Yusman Miza Lina
Shima Jane Yasin
Dila
5% very weak 20% Average 50% normal 20% very good 5% excellent
8-30

8-31
Paired Comparison
• Variation of ranking method
• Compares performance of each
employee with every other employee
in group

8-32

8-33
Graphic Rating Scales
• Rates according to
defined factors
• Judgments are
recorded on a scale
• Many employees are
evaluated quickly

Generic Student Attributes
(GSA) / Learning Domain (LD)
Skills / Aspects Excellent Very
Good
Good Fair Unsatisfactory
5 4 3 2 1
Social Skills/
Responsibility
A. Participate as a Team
Member:
Work cooperatively with
others and contribute ideas
and suggestions to the team.
Always participate actively and able to
cooperate with others. Consistently provide
information, contribute suggestions and
ideas to the team.
Sometimes participate in a team ,
usually cooperate with others and
provide information, contribute
suggestions and ideas to the team.
Rarely participate in a team,
rarely cooperate with others
and seldom provide
information, contribute
suggestions and ideas to the
team.
B. Guiding/Coaching Team
Members:
Help others in learning
necessary knowledge and
skills.
Extensive sharing of knowledge and skills
with team members. Always respect and
encourage each other.
Sharing knowledge and skills with
team members. Usually respect and
encourage each other.
Minimum sharing of
knowledge and skills with
team members. Minimum
respect and encourage each
other.
C. Discussion:
Group discussion that involves
exchanging specific resources
or resolving divergent
interest.
Group discussion is frequent and focused. Group discussion is occasional and
relevant.
Group discussion is seldom
and irrelevant.
D. Work with Cultural
Diversity:
Work well with multi-ethnic,
different social or educational
backgrounds.
Work together effectively and harmoniously
with multi-ethnic, different social or
educational backgrounds.
Work together with multi-ethnic,
different social or educational
backgrounds.
Reluctant to work together
with multi- ethnic, different
social or educational
backgrounds.
8-34

No. Employee Name ID No.
Skills / Aspects
TOTALA B C D
1
2
3
4
5
8-35

8-36
Critical Incidents
• 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

Eg. Of critical incidents
• May 5, 2011 – Abu suggested ways to
overcome the problem of students’ weak
performance in communication
• July 8, 2011 – Ali still reluctant to use
English in teaching delivery
8-37

8-38
Behaviorally Anchored Rating
Scales (BARS)
• Combines traditional rating
scales and critical
incidents methods
• Job behaviors derived
from critical incidents
described more objectively

8-39
Performance Appraisal
Environmental Factors
• External:
–Legislation requiring
nondiscriminatory appraisal systems
–Labor unions
• Factors within internal environment,
such as corporate culture

8-40
Legislation Affecting Performance
Appraisal
• Mistretta v Sandia Corporation - Federal
judge ruled against company, stating,
“There is sufficient circumstantial
evidence to indicate that age bias and
age based policies appear throughout
the performance rating process to the
detriment of the protected age group.”

8-41
Legislation Affecting Performance
Appraisal (Cont.)
• Albermarle Paper v Moody –
Supreme Court case supported
validation requirements for
performance appraisals

8-42
Labor Unions and Performance
Appraisal
• Have traditionally stressed seniority as
basis for promotions and pay increases
• May vigorously oppose use of
management-designed performance
appraisal system

8-43
Establish Performance Criteria
(Standards)
• Traits
• Behaviors
• Competencies
• Goal Achievement
• Improvement
Potential

8-44
Traits
• Employee traits such as attitude,
appearance, and initiative are
basis for some evaluations
• May be unrelated to job
performance or difficult to define
• Certain traits may relate to job
performance and, if this
connection is established, using
them may be appropriate

8-45
Caution on Traits: Wade v. Mississippi
Cooperative Extension Service
• In performance appraisal system, general
characteristics such as “leadership, public
acceptance, attitude toward people, appearance
and grooming, personal conduct, outlook on life,
ethical habits, resourcefulness, capacity for
growth, mental alertness, loyalty to organization”
are susceptible to partiality and to the personal
taste, whim, or fancy of the evaluator as well as
patently subjective in form and obviously
susceptible to completely subjective treatment
by those conducting the appraisals.”

8-46
Behaviors
• Organizations may evaluate person’s
task-related behavior or competencies
• Examples: leadership style, developing
others, teamwork and cooperation, or
customer service orientation
• If certain behaviors result in desired
outcomes, there is merit in using them
in evaluation process

8-47
Competencies
• Broad range of knowledge, skills, traits, and
behaviors that may be technical in nature, relate
to interpersonal skills, or be business oriented
• In leadership jobs, relevant competencies might
include developing talent, delegating authority,
and people management skills
• Competencies selected should be those that are
closely associated with job success

8-48
Goal Achievement
• Use if organizations consider
ends more important than
means
• Outcomes established
should be within control of
individual or team
• Should be those results that
lead to firm’s success

8-49
Improvement Potential
• Many of criteria used
focus on past
• Cannot change past
• Should emphasize
future, including
behaviors and outcomes
needed to develop
employee, and achieve
firm’s goals

8-50
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

8-51
The Appraisal Period (Cont.)
• Consider monitoring performance
more often
• 63% of high-growth companies
review performance more than once
a year compared to 22% of low-
growth companies
• In high-tech organizations, speed of
change mandates that performance
period be shorter, perhaps every
three or four months

8-52
Use of Computer Software
• Available in recording
appraisal data
• Reduces required
paperwork

8-53
Reasons for Intentionally Inflating
Ratings
• Believe accurate ratings would damage
subordinate’s motivation and performance
• Improve employee’s eligibility for merit
raises
• Avoid airing department’s “dirty laundry”
• Avoid creating negative permanent record
that might haunt employee in future

8-54
Reasons for Intentionally Inflating
Ratings (Cont.)
• Protect good workers whose performance
suffered because of personal problems
• Reward employees displaying great effort
even when results were relatively low
• Avoid confrontation with hard-to-manage
employees
• Promote a poor or disliked employee up
and out of department

8-55
Reasons for Intentionally Lowering
Ratings
• Scare better performance out of employee
• Punish difficult or rebellious employee
• Encourage problem employee to quit
• Create strong record to justify planned firing
• Minimize amount of merit increase subordinate
receives
• Comply with organizational edict discouraging
managers from giving high ratings

8-56
Characteristics of Effective
Appraisal System
• Job-related criteria
• Performance expectations
• Standardization
• Trained appraisers
• Continuous open communication
• Conduct performance reviews
• Due process

8-57
Job-Related Criteria
• Most basic criterion
needed in employee
performance appraisals
• Uniform Guidelines and
court decisions quite
clear on this point

8-58
Performance Expectations
• Managers and subordinates
must agree on performance
expectations in advance of
appraisal period
• If employees clearly
understand expectations,
they can evaluate own
performance and make
timely adjustments

8-59
Standardization
Firms should use
same evaluation
instrument for all
employees in same
job category who
work for same
supervisor

8-60
Trained Appraisers
• Common deficiency in appraisal
systems – evaluators seldom
receive training on how to conduct
effective evaluations
• Training should be ongoing
• How to rate employees and how to
conduct appraisal interviews

8-61
Continuous Open Communication
• Employees have strong
need to know how well they
are performing
• Good appraisal system
provides highly desired
feedback on continuing basis
• Should be few surprises in
performance review

8-62
Conduct Performance Reviews
• Special time should be set for formal
discussion of employee’s performance
• Withholding appraisal results is absurd
• Performance review allows them to detect
any errors or omissions in appraisal, or
employee may simply disagree with
evaluation and want to challenge it

8-63
Due Process
• Provide employees
opportunity to appeal
appraisal results
• Must have procedure
for pursuing grievances
and having them
addressed objectively

8-64
Legal Implications
• Employers must prepare
for more discrimination
lawsuits and jury trials
related to performance
appraisals
• Unlikely that any appraisal
system will be immune to
legal challenge

8-65
Courts Normally Require
• Either absence of adverse impact on members
of protected classes or validation of process
• System that prevents one manager from
directing or controlling a subordinate’s career
• Appraisal should be reviewed and approved by
someone or some group in organization
• Rater, or raters, must have personal knowledge
of employee’s job performance
• Must use predetermined criteria that limits
manager’s discretion

8-66
Appraisal Interview
• Achilles’ heel of entire evaluation process
• Scheduling interview
• Interview structure
• Use of praise and criticism
• Employees’ role
• Use of software
• Concluding interview

8-67
Interview Structure
• Discuss employee’s performance
• Assist employee in setting goals and
personal development plans for next
appraisal period
• Suggesting means for achieving
established goals, including support
from manager and firm

8-68
Conducting Separate Interviews
• Merit in conducting separate
interviews for discussing (1)
employee performance and
development and (2) pay
• When topic of pay emerges in
interview, it tends to dominate
conversation with performance
improvement taking a back seat

8-69
Use of Praise and Criticism
• Praise is appropriate when
warranted
• Criticism, even if warranted,
is especially difficult to give
• “Constructive” criticism is
often not perceived that way

8-70
Employees’ Role
• Should go through diary or
files and make notes of
every project worked on,
regardless of whether they
were successful or not
• Information should be on
appraising manager’s desk
well before review

8-71
Concluding the Interview
• Ideally, employees will leave interview
with positive feelings about
management, company, job, and
themselves
• Cannot change past behavior; future
performance is another matter
• Should end with specific and mutually
agreed upon plans for employee’s
development

8-72
A Global Perspective: Two
Cultures’ View of Performance
Appraisal
• Special problems when translated into different
cultural environments
• Chinese companies tend to focus appraisals on
different criteria
• Place great emphasis upon moral characteristics
• May tolerate less than optimal performance
because maintaining family control is so
important

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means, electronic, mechanical, photocopying, recording, or otherwise,
without the prior written permission of the publisher. Printed in the
United States of America.

Ch 5 -_performance_appraisal

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