Study Guide Week 11

Module VIII Performance Assessment and Performance Management

Mary Ann T. Sedero

Main Reference:
Snell, Scott and Bohlander, George. Managing Human Resources 16th ed. South-Western
Cengage Learning

I. Performance Management Systems

i. Definition of Performance Management
ii. Definition of Performance Appraisal
iii. Performance appraisal as a tool in performance management
II. Ongoing Performance Feedback
i. Recognize that performance management is a continuous loop of ongoing
performance feedback instead of an annual or biannual event only.
III. Performance Appraisal Programs
i. Purpose of Performance Appraisal
ii. Why performance appraisal programs sometimes fail
IV. Developing an Effective Appraisal Program
i. Performance standards
ii. Who should appraise and employee’s performance?
iii. 360 degree appraisal
iv. Training Appraisers
V. Performance Appraisal Methods
i. Trait Methods
ii. Behavioral Methods
iii. Results Method
VI. Appraisal Interview
I. 3 types of appraisal interviews
II. Conducting the appraisal interview
III. Improving performance

Learning outcomes:
 explain the concept of performance appraisal
 apply necessary skills in conducting performance management of employees
 Explain the sources of appraisal information
 analyze the issues and problems in appraising employees
 Identify feasible interventions

Introduction

This week’s module introduces you to one of the important functions of a supervisor or a
manager in an organization. The function of performance appraisal and performance
management is important in steering human resources towards achievement of
organization’s goals. While also recognizing that performance appraisal is only a part of
the performance management system in an organization
 I. Performance Management Systems

Performance Management is the process of creating a work environment in which people

can perform to the best of their abilities in order to meet a company’s goals. It is an
entire work system that emanates from a company’s goals.

Steps in the Performance Management Process

Step 1: Goals set to align with higher level goals (higher level may mean goals of the
business unit to which the employee is assigned)
Step 2: Behavioral expectations and standards set and then aligned with employee and
organizational goals
Step 3: On-going performance feedback provided during the cycle
Step 4: Performance appraisal by manager
Step 5: Formal review session conducted
Step 6: HR decision-making (e.g., pay adjustment, promotion, etc.

The step is then looped back to Step 1.

The figure below explains this cycle

Now that we know what a performance management system is, we now define performance
appraisal:

Performance appraisal are an important part of performance management systems, are the
result of an annual or biannual process in which a manager evaluates an employee’s
performance relative to the requirements of his or her job and uses the information to
show the person where improvements are needed and why.

A very lengthy definition but keywords are highlighted for you. It is important to note here that
performance appraisal is a tool in performance management system.

II. Ongoing feedback

Remember Step 3 in the Performance Management System?

Feedback is useful when it is immediate and specific to a particular situation. Ongoing feedback
can also be considered as a continuing dialogue between subordinate and manager, leading to
an open flow of communication and ideas. Ultimately, the goal of continuous feedback is to
make both parties - the manager and subordinate - better.

8 key points to address during a feedback session:

1. Give specific examples of desirable and undesirable behaviors
2. Focused feedback on behavior, not the person
3. Frame the feedback in turns of helping the employee be successful
4. Direct the feedback towards behavior the employee can control
5. The feedback should be timely
6. Limit feedback to the amount the employee can process
7. Use active communication skills and confirm the employee is engaged in the conversation
8. Providing employees with feedback on a continual basis also helps them know where they
stand when they receive their formal appraisals

An ongoing performance feedback also helps the employee understand or be informed on

where they stand when they receive their formal appraisals. It eliminates surprises and helps
the employee have a more meaningful conversation with their manager during the formal
appraisal session.

III. Performance Appraisal Programs

Performance appraisal varies across organizations in terms of frequency. For others, it is might
be annual, bi-annual or quarterly event.

It may also happen that a Focal Performance Appraisal is employed where all employees of a
company are reviewed at the same time of year rather than on the anniversary dates they were
hired

So, why are performance appraisal performed? The following outlines the main purpose of
performance appraisal:

1. Administrative purposes
a) Used for entire range of HRM activities - promotions, transfers, lay-offs and pay
decisions.
b) Used for HR planning, determining relative worth of jobs, criteria for recruiting particular
types of employees and validation of selection tests.
c) Document HRM actions that may lead in legal actions.
d) Knowledge of how the performance of employee compares with the goals established
for them.

2. Developmental purposes
a) Appraisal is used for feedback necessary to discuss employee goals and how they
align with the organization.
b) Appraisal is used to build on their strengths, eliminate weaknesses, identify problems
and set new goals for the employee
c) Used to develop training and developmental plans for the employee

The table lists actions under each purpose.

But why do appraisal programs sometimes fail?

1. Employees feel that the appraisal actually improve employee performance

2. Appraisals discourage teamwork as it focuses on individual achievement rather than the team
achievement.
3. Appraisals are useful only for highly effective or highly ineffective employees and leaves
those who are in the middle.
4. Focus on short-term achievements vs long term improvement and learning.

From our main reference, the table below further details other reasons why performance
appraisals fail.
At this point, we have now discussed performance management systems, performance
appraisal as a tool in the performance management system, stressed the need for ongoing
feedback and a look into performance appraisal systems. Now, we look into how organizations
can develop effective appraisal programs

IV. Developing an effective appraisal program

Before developing and effective appraisal program, a performance standard should be set. The
standard should be based on job-related requirements derived from a job analysis and reflected
in an employee’s job description and job specifications.

The following are the elements to be considered when establishing performance standards.

1. Strategic relevance - refers to the extent to which the standards of an appraisal relate to the
strategic objectives of the organization in which they are applied.
Why do standards need to have strategic relevance?
A. Appraisal process also provides the documentation HR managers need to justify various
training expenses in order to close any gaps between employees’ current skills and those
they will need in the future to execute the firm’s strategy
B. Appraisal metrics based on a firm’s strategy are more defensible in court
2. Criterion Deficiency - the extent to which the standards capture the entire range of an
employee’s responsibilities. Criterion deficiency happens when performance standards focus
on a single criterion to the exclusion of other important but less quantifiable performance
dimensions (e.g., sales revenue vs customer service).

3. Criterion contamination - a criteria is contaminated when there are factors outside an

employee’s control that can influence his or her performance (e.g., comparison of production
workers on a new and old machine).

4. Reliability - refers to the stability or consistency of a standard, or the extent to which

individuals tend to maintain a certain level of performance over time. Performance standards
also permit managers to specify and communicate precise information to employees
regarding quality and quantity of output.

See figure below for illustration on the four elements essential for establishing performance
standards

Now that performance standards are set, the next question then is, who should appraise an
employee’s performance?

1. Manager / Supervisor Appraisal - the traditional approach to evaluating an employee’s

performance
2. Self-appraisal - employees are asked to evaluate themselves on a self-appraisal form
3. Subordinate appraisal - give managers feedback on how their subordinates view them. More
appropriate for developmental rather than as administrative tools.
4. Peer appraisal - done by one’s fellow employees, generally on forms that can be complied
into a single profile.
5. Team appraisal - extension of the peer appraisal, based on TQM concept - recognizes team
accomplishment rather than individual performance.
6. Customer appraisal - based on TQM concetps and includes evaluation from both internal
(anyone within the organization) and external (customers, suppliers, etc)
The figure below illustrated the various alternative sources of appraisal.

Currently, more organizations are employing 360-degree feedback where sources of information
to be used for appraisal does not only come from a one or two sources inside the organization.
External customers and their feedback may also be used during an appraisal.

Activity 11.1

1. In evaluating the performance of the following personnel, what sources could be

used by their immediate heads to evaluate performance of their job?
i. HR Manager
ii. Loss Prevention Manager of a Department Store
iii. Customer Service Representative
iv. Plumber

Use Arial font, 11, 1.5 spacing to answer this activity in at least one page of output.

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360-degree Appraisal

360-degree feedback is intended to provide employees with as accurate a view of their

performance as possible by getting input from all angles: supervisors, peers, subordinates,
customers, and the like
Originally, 360-degree appraisal systems are used for developmental (management use and
career development), they are now also used for administrative applications.

360-degree appraisals though are sometimes administratively complex. The next table lists the
pros and cons of a 360-degree appraisal system.

To develop an effective appraisal system, we have discussed establishing a standard,

determined personnel who may administer performance appraisal and as well as alternative
sources of appraisal. We have also talked about use of 360-degree feedback. Essentially, those
who will appraise employees need also to be trained.

Training Appraisers

Training appraisers so that the feedback they gain can be more useful and meaningful is
essential in developing an effective performance appraisal program. Below is an outline on how
to adequately provide skills to appraisers:

1. Establishing an appraisal plan - systematic process that begins with an explanation of the
objectives of the organization’s performance appraisal system; for the appraiser to know
the purpose for which the appraisal will be used; the mechanics of the rating system
(frequency, who will conduct the performance appraisal, and performance standards);
knowledge of the weaknesses and of the appraisal system so that problems may be
avoided.
2. Eliminating Rater Error - elimination of subjective errors made by managers in the rating
process. Below are some appraiser errors committed during an appraisal.
a) Error of central tendency - all employees are rated about average
b) Leniency or strictness error - employees are rated either unusually high or unusually
low
c) Forced distribution - raters are required to place a certain percentage of employees into
various performance categories
d) Recency error - appraisal is based on the employee’s most recent behavior, rather than
on behaviour throughout the whole appraisal period
e) Contrast error - evaluation is biased, either upward or downward because of
comparison with another employee just previously evaluated.
f) Similar-to-me error - appraiser initiates evaluation of an employee because of a mutual
personal connection.
3. Feedback Training - provide a general points to consider for planning and providing feedback
on an ongoing basis and during the appraisal interview.

Below is a summary of what the supervisor should prepare and consider for a performance
appraisal session.
Performance Appraisal Methods

In the future, as an employee, would you prefer to be appraised based on your trait or
characteristics? Based on your behavior affecting performance? Or would you rather be
evaluated based on your results?

Below are some of the methods used in performance appraisal.

1. Trait Methods - designed to measure the extent to which an employee possesses certain
characteristics that are viewed as important for the job and the organization in general.
Pros: easy to develop
Cons: if not designed carefully on the basis of job analysis, can be biased and subjective.
a) Graphic rating scales - a trait approach to performance appraisal whereby each
employee is rated according to a scale of characteristics. The rater indicates the
degree to which the degree to which an employee possesses that trait or characteristic
 Variations in the graphic rating scale:
1. the characteristics or dimensions on which individuals are rated
2. the degree to which the performance dimension is defined for the rater
3. how clearly the points on the scale are defined

b) Mixed-standard scales - a trait approach to performance appraisal similar to other scale

methods but based on comparison with a standard (better than, equal to, or worse
than). These descriptions reflect three levels of performance - superior, average and
inferior.

c) Forced-choice method - requires the rater to choose from statements designed to

distinguish between successful and unsuccessful performance.
Limitations: cost of establishing and maintaining its validity

d) Essay method - requires the rater to compose a statement describing employee

behavior. Included in the statement are employee strengths and weaknesses as well as
recommendations for development. It is combined with other rating methods as it
provides a description on employee performance. The essay method is an excellent
avenue for the rater to point out specific points on the employee’s promotability, special
talents, skills, strengths and weaknesses.
Limitations:
1. Composing an essay that will attempt to cover all necessary information on
employee performance can be time consuming
2. Supervisor’s writing skills and composition style may greatly affect quality of the
performance appraisal

2. Behavioral methods - provides descriptions of behavior along a scale or continuum. The

descriptions enable the rater to identify a point on the scale where the employee
belongs.
a) Critical incident method - an unusual event that denoted superior or inferior employee
performance in some part of the job. The manager observes this critical incidents,
takes notes of the same and keeps a log or diary for each employee throughout the
appraisal period. The manager then refers to the log or diary to substantiate a
satisfactory or unsatisfactory rating in the performance appraisal.

b) Behavioral checklist method - one of the oldest appraisal techniques; the rater checks
the statement on the list that the rater believes are apt to the characteristics exhibited
by the employee

c) Behaviorally Anchored Rating Scale (BARS) - behavioral approach to performance

appraisal that consists of a series of vertical scales, one for each dimension of job
performance.

d) Behavior Observation Scale (BOS) - a behavioral approach to performance appraisal

that measures frequency of observed behavior. This is preferred over BARS or trait
scales due to (1) maintaining objectivity, (2) distinguishing good performers from bad
performers, (3) providing feedback, (4) identifying training needs.

3. Results methods - employees are evaluated through their accomplishments at work.

 Pros: method is empowering and engaging; gives employees responsibility for their
outcomes while giving them liberty to choose methods to accomplish them (but within
bounds set by the organization).
a) Productivity Measures - sales people are evaluated via sales volume or revenue;
production workers are evaluated on the pieces or output produced for a time period
(hourly or daily or on a per shift basis) and defect rate, executives are evaluated on
company profits and growth rate.
Pros: directly links what employees accomplish to results that are beneficial to the
organization.
Cons: (a) results contamination (external factors outside the control of employee), (b)
employee gives more emphasis to short-term results over long-term objectives of the
organization.

b) Management by Objectives (MBO) - rates performance of employee on the basis of

employee achievement of goals set by mutual agreement of employee and manager.
The illustration below gives the step by step plan on this method. The system consists
of a cycle that culminates in setting the organization’s common goals and
objectives and ultimately returns to that step. The system acts as a goal-setting
processwhereby objectives are established for the organization (Step 1), departments
(Step 2), and individual managers and employees (Step 3)

C. The Balanced Scorecard (BSC) - A BSC appraisal takes into account four related
categories: (1) financial, (2) customer, (3) processes, and (4) learning. a BSC
appraisal enables managers to translate broad corporate goals into divisional,
 departmental, and team goals in a cascading way. For the method to be successful,
the following must be ensured:
a) Translate the strategy into a scorecard of clear objectives
b) Attach measures to each objective
c) Cascade scorecards to the front line
d) Provide performance feedback based on measures
e) Empower employees to make performance improvement
f) Reassess the strategy

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An example of the actual forms used for the different performance methods discussed above
may be found in the link below:
http://www.opentextbooks.org.hk/node/32252#fig_d41e7
https://opentextbc.ca/organizationalbehavioropenstax/chapter/techniques-of-performance-
appraisal/

In the end, the question is asked, “What performance appraisal method should an organization
use?
The method for appraisal should be based on the purpose of the appraisal. The list below
highlights the advantages and disadvantages of each method.

Effective appraisal systems should also not be judged on the amount of paperwork - I.e., the
more complex the paperwork the better the performance appraisal is. There are also simple
systems that will work just fine. What is important is that manager and employee will be able to
have an open discussion of performance and use these information for the betterment of the
organization.

Now, we discuss appraisal interviews:

Appraisal Interviews

This section details the importance of appraisal interviews. As a future manager, how might you
be able to have an open discussion with your subordinate?

It is recommended that appraisal interviews be divided into two sessions - one for the
performance review and one for growth plans. This way, the interviewer will be able to give each
session the attention it deserves. It can also improve the communication and cooperation
between interviewer and interviewee, thereby reducing any stress and defensiveness that may
occur.

Moreover, one or two types of appraisal interview may be used by the manager - depending on
the purpose of the appraisal and the behavior of the employee concerned.

Three types
1. Tell-and-sell interviews - The skills required in the tell-and-sell interview include
the ability to persuade an employee to change in a prescribed manner. This may
require the development of new behaviors on the part of the employee and skillful
use of motivational incentives on the part of the appraiser/supervisor
2. Tell-and-Listen Interview - the appraiser/supervisor communicates the strong and weak
points of an employee’s job performance during the first part of the interview. During the
second part of the interview, the employee’s feelings about the appraisal are thoroughly
explored
3. Problem-Solving Interview - Listening, accepting, and responding to feelings are
essential elements of the problem-solving interviewIt seeks to stimulate the growth and
development of an employee by discussing his or her problems, needs, and on-thejob
satisfaction and dissatisfaction

When conducting the appraisal interview, the following guidelines or factors should also be
considered:

1. Ask for a self-assessment - ensures that employee knows what criteria he or she is being
evaluated on. This will also communicate to the employee that they have an input into
the process.

2. Invite participation - the employee is an active participant in the discussion and the
interviewer dedicates 30-35% of the appraisal talking, while actively listening to the
employee.

3. Express appreciation - keep in mind the power of praise as a motivator; avoid use of
“sandwich technique”; if ongoing feedback is employed, the employee more or less
is aware of where he or she stands in the performance appraisal.

4. Minimize criticism - focus on issues that are the most problematic or the most important
to the performance of the job. Criticize in small doses, consider the person, consider
whether the criticism is really necessary, be specific and do not exaggerate, watch
your timing and make improvement your goal. This way, defensiveness may be reduced
or totally avoided.
 5. Change the behavior, not the person - suggest more acceptable ways of performing
(e.g., improve tardiness)

6. Focus on solving problems - avoid the “blame game”

7. Be supportive - “What can I do to help?” is the most useful phrase that a manager can
ask

8. Establish goals - focus on the future, rather than the past’ emphasis on employee
strengths, concentrate on opportunities for growth, drop unproductive tasks, establish
specific action plans on how each goal will be achieved, end the review on a positive way
by highlighting that achievement of organizational goals will ultimately benefit both parties.

9. Follow up day-to-day - conduct informal talks periodically

The goal of a performance review is to identify gaps in employee performance vs the standard
set by the organization. After the gap is identified, the manager can then make plans on how to
improve on this deficiency. This will be discussed in the section below for improving
performance.

Improving performance

Deficiency in employee performance may be categorized into three primary concerns: ability,
motivation and environment.

It is recommended that a diagnosis of poor employee performance focus on this three elements.

Identifying Sources of Ineffective Performance

Performance Diagnosis

In the table below, if an employee’s performance is not up to standards, the cause could be a
skill problem (knowledge, abilities, technical competencies), an effort problem(motivation to get
the job done), and/or some problem in the external conditions of work(poor economic
conditions, worker shortages due to downsizing, difficult sales territories). By comparing
different performance measures, managers can begin to get an idea of the underlying causes of
performance problems

Managing Ineffective Performance

once the source of the performance problem is determined, the manager can then plan the next
course of action to improve employee performance.

What are the alternatives to improve employee performance?

1. Provide training in areas that would improve or add to the knowledge or skills of the employee
needed to perform his or her job effectively
2. Transfer to another job suitable to the skill set or training
3. Transfer to another department
4. Find what motivates the employee in order for him or her to to his or her job effectively

What if ineffective performance persists even with the above courses of action?
The manager might:
1. Transfer the employee to yet another job or department
2. Take disciplinary action
3. Discharge employee from the organization

What are the effects of ineffective performance?

1. Affects the manager
2. Affects the organization as a whole
 3. Affects the employee’s co-workers

New managers need training for handling ineffective performance. Managers need also to be
wary about attributing ineffective performance to the employee’s character (abilities or
motivation) as this will lead to them managing the employee more closely or watching out for
their next mistake. The employee then loses motivation and withdraws.

Assignment 11

On the next page is the assignment guide for this week’s lesson.

Assignment Guide Week 11

Module VIII: Performance Assessment and Management

For this week, we were acquainted with performance management and appraisal. It is expected
that in the future, as managers, supervisor and or an immediate superior, you will have to take
on the inevitable task of appraising subordinates. This assignment will orient you to the (1)
checklist of items / tasks that should be completed before the formal appraisal interview and (2)
write a performance assessment essay for a group of fictional employees with four different
performance scenarios.

For the checklist, feel free to include any item that may not have been included in the list for
your fictional employee. Armed with the checklist, you will assume the role of Bora, as
department manager at a retail store. Scenarios are provided for you, adequate enough to write
a performance review essay.

Please follow guidelines below when submitting your essay:

Font: Arial size 11
Spacing: Double spaced
To be saved and submitted with the following filename: Week11-assignment-MGT121-lastname
Points credit for this assignment: 20 points (5 points each question)
The Performance review essay should include the performance appraisal elements: task
accomplishment, behavior and goal setting for each of the performance scenarios.

Performance Review Interview Checklist

Before you start the interview

Do you know your employee?

_____ Length of service with the organization
_____ Date of last promotion
_____ Experience and educational level
_____ Current projects employee is working on
_____ Career goals

Interview checklist: Do you have?

_____ Employee job description
_____ Attendance records
_____ Salary and job grade information
_____ History of employee’s training
_____ List of training courses available and appropriate for this employee
_____ Previous performance appraisal documents
_____ Completed performance appraisal form
_____ Recent examples of employee’s work (if appropriate)
_____ Examples of work problems you want to discuss (if appropriate)
_____ Other items appropriate to this employee

Are you ready? Have you:

_____ Notified the employee of the interview time? Give the employee at
least one or two weeks’ notice.
_____ Reviewed your ratings with a peer or with HR before the interview?

Performance Review Interviews

Bora is the department manager of H&U retail store. He supervises four employees, and it’s
time for their performance reviews. He has written the documents and scheduled appointments
to sit down to talk with each employee. As it gets closer tointerviewtime, all of them are thinking
about their performance and what they can expect in their interviews. Let’s listen in to what each
is thinking.

Bora and Mary

Mary: Oh, this is so exciting! This is my first job, and I’ve never had a performance
review before. I’m a little nervous, but I’m sure Bora just loves my work! I know
I was late a few times, and I’ve had a little problem with the cash register, but I’m
really trying. I’m just not used to getting up every day and getting to work on time,
and I didn’t know you had to be so detailed—it’s just retail, after all! But whatever.
I’m really friendly with everyone, and I’m having a good time. I wonder if Bora will
let me off a little early on Friday. I know Fridays are busy, but I have big plans for the
weekend. I’ll ask him—I’m sure he’ll understand.
Bora: I’m just not sure things are working out as I had hoped with Mary. She can’t
seem to get to work on time—she was late three days last week and two days the
week before. When I talked to her about it, she got here on time the next day, but
then she disappeared into the ladies’ room to put on her make-up. That’s not being
on time! And what about the mistakes she makes ringing up a sale? It’s not just the
prices that are wrong but the quantities and the item codes, too—now our inventory
is messed up and accounting is on my back. And besides all that, she spends more
time visiting with other employees than she does working. I just don’t think she’s
taking this seriously.

Bora and Jesse

Jesse: September again and another annual performance appraisal. I don’t know
why we bother. We go through the process every year, set some worthless goals, but
nothing ever happens one way or the other. They tell me I’m doing a great job, and
then I get a measly 2½ percent raise. Big deal! Oh well, I’m just putting in my time
until something better comes along.
Bora:Jesse does a good enough job, but he doesn’t show much spark. He just
seems to be going through the motions around here. But with the economy getting
tighter, everyone perks up with a little more income. I think a raise in pay is just the
motivator he needs. It’s 2½ percent this year.

Bora and Antin

Antin: Sometimes, I come to work tired in the mornings after going to school at
night, but Bora’s really helped me by scheduling my shift so I can attend classes.
Another six months, and I’ll have my bachelor’s degree. I’ve been working really
hard, got a wife and three kids to support, and I want to carve out a long-term
career. I like this company; some say there’s no opportunity in retail, but I don’t
agree. I think we’ll always need good managers, and that’s where I want to be. I
hope there are opportunities in this company, but if not, I guess, after I graduate I’ll
be looking around.
Bora: Antin’s a good man. In spite of a heavy class load, he always pulls his weight
and does a good job. I know when he graduates, he’s hoping for a promotion, and
I’m not sure if that will be available. I’ve got to come up with something to keep
him on the team. He’s exactly the employee we want for the long haul.

Bora and Willie

Willie: I really like working here. After I retired from the plant a few years back, I
found out retirement is pretty boring. Now, I get up early again, grab a cup of coffee
and come to work raring to go. Not bad for an old guy! It really helped taking that
computer class at the senior center. Sure, I’m not a young techie, but I can hold my
own, and I think Bora is pleased with my work. I’d like to keep working and stay
here for a long time to come.
Bora: I don’t know what I’m going to do with Willie. He’s been here a couple of
years now—management hired him when they thought it would be good PR to hire
older workers. I don’t know how old he is and I can’t ask him, but I’d guess he’s
at least 140! He’s so slow, and he thinks he has computer skills, but that’s a laugh.
He can’t enter anything on the cash register without making mistakes. Maybe a
computer class would help, but is it really worthwhile to train older workers? You
know what they say about old dogs learning new tricks. I just don’t think it’s a good
idea—he’ll probably quit soon anyway.