What is Performance Appraisal?

Background
According to a Gallup poll, less than 15% of
employees found their organization’s
Performance Appraisal performance appraisal system useful
Accurately assessing performance for different
Chapter 5 jobs can be challenging

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What is Performance Appraisal? Dual Nature of PA in Organizations Main Purposes of PA

Performance Appraisal (PA): measurement of employee PA can be thought of as: 1. Developmental Reasons: conducted to develop
performance based on pre-established criteria, and – Cognitive process future performance
communication of this information to the employee – Social-relational process
Cognitive Process:
2. Administrative Reasons: make decisions based
PA is a specific and subjective method for performance on past performance
measurement—often conducted by employee’s – Observe performance as it occurs
supervisor – Store information about performance to memory 3. Research Purposes: evaluate training
– Recall information when time to assess performance
PA is one component of a performance management
effectiveness or validate selection tool
system, which represents an on-going process of Social-Relational Process:
– PA occurs within context of existing rater-ratee relation 4. Legal Reasons: defense for organization faced
observing behavior, providing feedback, and setting goals with employment discrimination claim
– Raters have goals beyond rating ratee objectively

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Characteristics of an Design & Measurement Design & Measurement

Effective PA System Considerations Considerations
• Strategic Fit: align PA with organization’s strategy Decisions made when designing PA system:
• Content Validity: PA should cover job domain, and be – How should performance be defined?
neither contaminated nor deficient
– Should the PA focus on each employee’s
• Accuracy: degree to which the PA reflects the true level performance one at a time or ask raters to
of employee’s performance
compare ratees to each other?
• User Reactions: perceived fairness and usefulness of – What type of rating scale should be used?
the PA by ratees
– Who should be the rater?
• Practicality: ease of use and practicality of the PA

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 What Should Be Measured? What Should Be Measured? What Should Be Measured?
Trait Appraisals: focus on measuring
employee KSAOs—for example:
Behavior Appraisals: measure the frequency with which Outcome Appraisals: focus on quantitative metrics—for example:
– Reliability specific observable work behaviors occur—for example: – Sales figures
– Honesty – Frequency with which employee greets customers in friendly – Number of units produced
– Punctuality manner – Level of absenteeism
– Friendliness
– Frequency with which employee addresses each customer with Less subject to many rating errors and perceived as fair when tied to
Potential problems: their name at register
– Focus on the person rather than most important elements of job
performance
– Focus on factors that are intrinsic to the While behavior appraisals provide more specific feedback and Potential problems:
person and harder to change point out specific behaviors, there are potential problems: – Tend to be less under employee control
– Tend to increase common rating biases
and errors due to vagueness of traits – Time-consuming to develop – May not cover all aspects of job
– Specific behaviors can result in assumption that there exists only – Can create ethical dilemmas, as they may incentivize or motivate
one way to be a high performer problematic behavior

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Absolute & Relative Rating Scales Absolute: Graphic Rating Scale Absolute: BARS
Demonstrates knowledge of assigned work. Dimension: Knowledge of
Anchor Example Behaviors & Point values
Absolute Appraisals Relative Appraisals A) Above expectations Results
B) Meets expectations
compare performance compare performance 5
5-This instructor learns every student’s name and something

to pre-established VS. of focal ratee to other

C) Below expectations
Overall performance of the employee
Very High Performance personal about them early in the term, and always uses this
information to draw students into class conversations.
4.1-This instructor learns many student names and something
criteria ratees’ performance Exceptional
Highly
Successful Inconsistent Unsatisfactory
High Performance 4 personal about most of them, and often uses this information to
draw students into class conversations.
Successful
• Graphic rating scale • Straight ranking 3-This instructor learns some student names and something
•
•
Behaviorally anchored rating scale (BARS)
Behavioral observation scale
• Forced distribution
Neither High Nor Low
Performance 3 personal about some students, and sometimes uses this
information to draw students into class conversations.
• Essay appraisal form Expresses ideas clearly

What are the strengths and Outstanding Good

Needs Not
Poor Performance 2 2.3-This instructor learns a few student names and infrequently
uses this information to draw students into class conversations.
Improvement Applicable
limitations of these two Very Poor Performance 1 1.2-This instructor learns no student names and uses no
personal information to draw students into class conversations.
types of ratings scales?
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Absolute: BOS Absolute: Essay Appraisal Form Relative: Straight Ranking

Behavior observation scale (BOS) for a lecturer Takes the form of an essay, which is beneficial when the Rater ranks employees from strongest to weakest in terms of
primary purpose is to provide feedback to employees performance
Question Never Seldom Sometimes Usually Always
Course content follows the Rater types in short answers to a small number of questions Becomes increasingly more difficult as the number of
syllabus. employees to be rated increases
Class begins and ends on time. Can be combined with a brief numerical scale if the
Course content evolves to organization is interested in using the form to distribute Method assumes that the performance difference between
incorporate relevant news items of rewards as well those ranked 1 and 2 is equal to the difference between
the day they occur. employees ranked 5 and 6, for example—which is not often
Instructor invites student These forms, however, are not intended to make comparisons the case
participation. across employees, and the quality of the appraisal will depend
on the observations and essay writing skills of the rater Can be useful for decision-making purposes because it forces
raters to differentiate between and identify top performers

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 Relative: Forced Distribution Who Should Rate? Who Should Rate?

?
Rater places employees into different categories, such as Sources of ratings:
excellent, average, needs improvement
– Managers
Raters must differentiate so that only a specific
percentage of employees can be placed in each category – Peer appraisals
Makes raters differentiate among employees, which can – Customers
be advantageous in some types of decision making – Subordinates
Approach criticized because it can de-incentivize – Self-appraisal
teamwork and differentiate between performance when – 360-degree appraisal
there is not meaningful difference

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Rating Source: Managers Rating Source: Peer Appraisals Rating Source: Customers
Typical person who collects and delivers Peers can observe ratee on different occasions For employees who perform customer service,
performance feedback to the employee customers can be a relevant source of performance
Peer appraisals provide valid and relevant information
Manager’s opportunity to observe can be limited, information that is not necessarily captured by
especially when the manager and employee work in
manager ratings (Conway et al., 2001) Downsides:
different locations
– Can be cumbersome to collect customer satisfaction
Being rated by someone who rarely observes the Can be time-consuming to collect and administer, as information

ratee can be perceived as unfair well as difficult to maintain confidentiality – Customers are not required to justify their ratings and are
typically anonymous, and are thus susceptible to various biases

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Rating Source: Subordinates Rating Source: Self-Appraisal Rating Source: 360-Degree Appraisal
Can illuminate the strengths and limitations of Self-appraisal is used to ensure that ratees have Form of multi-source feedback in which a ratee is
ratee’s leadership performance input into the process rated by multiple sources at different levels
Feedback from subordinates can be used to coach Incorporates multiple viewpoints and perspectives
and train managers Can be useful for a manager to look at a self-
of ratee performance
appraisal because it can remind him/her of key
Downsides:
– Challenging to collect because employees may be fearful that
accomplishments of the employee Downsides:
their ratings could be identifiable and damage their relation – Self-other rating discrepancies associated with more
with the manager Downside: Those who have an inflated sense of negative reactions toward appraisal feedback
– Can be biased by how much the subordinates personally like the
manager their performance are least receptive to feedback – Administratively cumbersome
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 Conducting the Conducting the Observation and Recording of
Performance Appraisal Performance Appraisal Performance
Stages of performance appraisal: Observation should be the basis for the rating
1. Observation and recording of performance given to the employee
2. Feedback and coaching throughout the year Rater should adequately sample behavior over
3. When conducting the performance appraisal, time
use the designated form to rate the employee
4. Communicate the performance rating to the
Electronic performance monitoring system can
employee in a meeting
facilitate the observing and recording of
performance

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Feedback and Coaching Rating of the Employee:

Range Restriction Errors
Throughout the Year Errors & Biases
As the rater is observing performance, feedback Leniency Error: giving all employees a very high
should be provided in a timely fashion, along with • Range restriction errors
rating
coaching
• Contrast error
Coaching: training and development of a person to Strictness (Severity): giving all employees very
achieve professional goals • Halo effect low ratings
Regular one-on-one meetings can provide • Similarity & liking Central Tendency Error: giving all employees
opportunities for managers and employees to mid-range ratings
discuss performance and set goals • Recency error
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Contrast Error Contrast Error Halo Effect

Even when using absolute ratings, managers Rater’s overall impression of a ratee may drive
naturally compare employees to each other the entire assessment of the employee,
regardless of what questions are being asked
One employee’s performance may appear
higher or lower than it actually is due to its Very problematic if the performance appraisal
contrast with other employees within the work form consisted of specific and independent
group performance dimensions that are not
Which employee designated by the red
circle will be rated higher? necessarily correlated with each other
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 Techniques to Minimize the Effects of
Similarity & Liking Recency Error
Appraisal Errors
Employees who are viewed as more similar to Positive and negative events that occur just • Training
the manager end up developing a higher quality before an assessment may have undue influence • Calibration meetings
relationship with the manager on the rating
• Diary keeping
When the managers have a high quality This is especially problematic when performance • Using objective appraisals
relationship with an employee, he/she rates the appraisals are only conducted annually or semi- • Using multiple raters
performance of that employee at high levels annually • Using forced distribution
regardless of objective performance metrics • Increasing accountability
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Conducting the Performance

Technology and I-O Legal Issues
Appraisal Meeting
1. Before the meeting: Technology to support seeking feedback and To the extent performance appraisals are used to make
– Ensure a positive feedback context in which the rater and
ratee have had an ongoing relationship
receiving feedback from supervisors. employment decisions, they are covered by the
– Rater should prepare for the meeting by gathering needed Example: 15Five’s system for employees to Uniform Guidelines
documents and ratings, as well as scheduling a private meeting
space quickly share their goals and for managers to A legally defensible performance appraisal should be
2. During the meeting: provide feedback. based on a job analysis, provide written instructions to
– Allow the ratee to contribute to discussion and limit the
number of topics to be discussed Makes more frequent feedback possible, raters, and use performance appraisal methods based
– Use the sandwich technique for delivering feedback
especially in situations of remote work. on observable behaviors
– Develop an action plan that describes goals for the future and
what the rater and ratee will do to improve the ratee’s
effectiveness
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Current Workplace Issues:

Global Implications Abandoning performance appraisals? Current Research Issues
The performance appraisal has Western origins and thus • More research is needed on employee
• Performance appraisals have limited
assumes: performance monitoring for effects such as
– Performance is under control of employee
usefulness as feedback tools since they are
only once per year and may damage employee fatigue and alienation
– Managers are interested in and are capable of influencing
an employee’s performance relationships. • Rather than focusing on employee deficits, a
– Egalitarian relationship where employees can engage in focus on employee strengths (positive
two-way communication with managers • May have low reliability
But… psychology)
These assumptions are typically most acceptable in
individualistic, egalitarian, and future-oriented cultures • For providing pay and rewards
such as the U.S., Australia, and Denmark
• Documenting employee performance
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