ST.

LOUISE DE MARILLAC COLLEGE OF SORSOGON

Talisay St., Sorsogon City

Graduate School

Master in Business Administration

ADVANCE HUMAN RESOURCE DEVELOPMENT MANAGEMENT

CHAPTER 6
PERFORMANCE REVIEW AND
APPRAISAL

Prepared by:

ANNE PATRICE D. DOCOG

ALENA ROSE L. JERAO
PERFORMANCE REVIEW AND APPRAISAL
A WRITTEN REPORT IN ADVANCED HUMAN RESOURCE
DEVELOPMENT MANAGEMENT (AHRDM)

CONTENTS:

Definition

Performance

Performance review or evaluation

Performance management

Performance Appraisal

Why measure performance?

How Should Employees Prepare for Performance Reviews?

What Should You NOT Say in a Performance Review?
How to build a great employee performance review?
Early approaches to performance appraisal

Common flaws identified with performance review system design.

Objectives of performance appraisal

Advantages of performance appraisal

Performance criteria

Indicators or matrix that can help measure employee performance.

Who should evaluate performance?

Process of evaluation

Sources of data in appraisal

Performance appraisal methods

Individual Evaluation Methods

Seven tips for creating a World-class Appraisal System

Performance Appraisal Problems and Solutions

Feedback or Appraisal Interview

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PERFORMANCE
• Is measured in terms of result.

• May be defined as the accomplishment of an employee or manager’s assigned duties and

outcomes produced on a specified job function or activity during a special time period.

PERFORMANCE REVIEW
• Or Performance Evaluation

• Refers to a systematic description and review of an individual’s job performance.

• An HRM activity where the individual worker’s efficiency is observed and appraised during
a given period on the basis of a systematic uniform performance standard.

• Helps in identifying, collecting, sharing, and using information about the performance of
people at work.

• A formal assessment in which a manager evaluates an employee’s work performance,

identifies strengths and weaknesses, offers feedback, and sets goals for future performance.

PERFORMANCE MANAGEMENT
• An ongoing communication process, undertaken in partnership between an employee and
his/her immediate supervisor

• The major contribution of performance management is its focus on achieving results –

useful products and services for customers inside and outside the organization.

• Redirects efforts away from business toward effectiveness.

• involves establishing clear expectations and understanding about the following:

• The essential job functions to the employee is expected to do

• How the employee’s job contributes to the goals of the organization

• What “doing the job well” means in concrete terms

• How the employee and the supervisor will work together to sustain, improve, or build
on existing employee performance

• How job performance will be measured

• Identifying barriers to performance and removing them

• Refers to the total system of gathering information, the review and feedback to the
individual , and storing information to improve organization effectiveness
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PERFORMANCE APPRAISAL
• the systematic evaluation of the performance of employees and to understand the abilities
of a person for further growth and development.

WHY MEASURE PERFORMANCE?

1. Managers cannot manage and define what is expected and gives feedback and recognition without
defining the basis or performance measures.

2. On the part of the employee, he/she cannot improve on what he/she is supposed to do without the
necessary data before and after to see if performance is actually improving.

3. Creating high performance requires a definition of clear goals.

4. Pay for performance requires matrix.

HOW SHOULD EMPLOYEES PREPARE FOR PERFORMANCE

REVIEWS?

Regardless of whether a performance review is formal or casual, employees should be encouraged

to prepare for it. Here are a few suggestions to offer employees that will help the review be
successful for both parties:

• Prepare notes. Encourage employees to make notes before each performance review. They
should document topics they want to discuss, strengths, weaknesses, and goals.
• Brainstorm examples. Employees should be able to share concrete examples of how they have
met goals set at the last review and how they have improved overall.
• Self-evaluate. Employees should practice self-evaluation by giving themselves a mock
performance review. They should identify new strengths, weaknesses, accomplishments, and
goals.
• Come with questions. Employees should have a safe environment to ask questions in
performance reviews. Preparing questions ahead of time can help ensure everything that needs
to be asked is asked.

WHAT SHOULD YOU NOT SAY IN A PERFORMANCE REVIEW?

When giving a performance review, it is expected that the employee and manager both take it seriously.
However, since management is giving the review and has the authority to substantially affect the employee’s
career, a lot of the responsibility for keeping things civil and productive falls on them. Here are a few topics
and comments for managers specially to avoid in order to help maintain a positive environment.
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• Criticism without an example: Giving an example and providing ideas for improvement can help an
employee better their performance rather than leave them feeling defensive.
• Comparisons: This is not a space to rank employees or pit them against each other. Focus only on the
performance of the employee you are evaluating.
• False praise: While you should look for something positive to say in every performance review, giving false
praise will only mislead an employee into thinking they are doing better than they are and rob them of the
opportunity for improvement.
• Speculation: Sharing rumors about the company or raising hopes for a raise or promotion that may not
be possible causes unnecessary speculation and sometimes disappointment.
• Repetitive commentary: Some important things bear repeating, but if you find you are giving the same
advice and same praise in every performance review, try changing things up. Maybe the message is not
getting through in the way you are currently sharing it and needs further discussion. If both managers and
employees keep notes of what is talked about in performance reviews, you can build off of advice and
goals from each meeting rather than rehash the same thing over and over again.
• “Always” and “never”: There is an exception to every rule. Ultimatums and blanket statements are rarely
accurate and can make people feel defensive.
• “I wish I had more time”: Performance reviews should be a priority for managers and employees. They
help make sure everyone’s personal goals are aligned with the company’s goals and give valuable insights
on ways the employee and the manager can improve. When performance reviews are put first, the entire
company can benefit.

HOW TO BUILD A GREAT EMPLOYEE PERFORMANCE REVIEW

• It fits your management style
• It is achievable
• It is fair
• It promotes the right conversations
• It is rewarding

EARLY APPROACHES TO PERFORMANCE APPRAISAL

1. Focusing on the employees’ past performance – this is more on management of results.

2. Focusing on the employees’ development – results become the driving force for management
development.

COMMON FLAWS IDENTIFIED WITH PERFORMANCE REVIEW SYSTEM

DESIGN
1. Organizations limit performance review to make employees accountable for past endeavor. This
takes the view that making people accountable for poor performance will automatically generate
improvement.

2. Tying performance review to employee salary review. This is trying to reinforce the power of
management to decide who are those entitled to receive increases, showing who is boss, with the
use of stick and carrot.
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OBJECTIVES OF PERFORMANCE APPRAISAL
1. It provides information upon which promotion, transfer, demotion, layoff, discharge and salary
decisions can be made.

2. It provide an opportunity for the supervisor and his/her subordinates to review and identify their
strengths and weaknesses or work-related behavior.

3. It forms the basis in identifying the training needs of employees as well as evaluating the success of
training, thus, development initiatives are not based on opinions but rather on results.

4. It helps in the firm’s career planning process because it provides a good opportunity to review a
person’s career plans in light of his/her exhibited strengths and weaknesses.

5. It allows easy monitoring and supervision.

6. It helps evaluate the individual’s share relative to the team’s contribution in achieving the
organization’s goal.

7. It provides information to evaluate effectiveness of selection and placement decisions.

ADVANTAGES OF PERFORMANCE APPRAISAL

1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programs for efficient employees. In this regards, inefficient workers can be dismissed or
demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for
employees. Merit rating is possible through performance appraisal. Performance Appraisal
tries to give worth to a performance. Compensation packages which includes bonus, high
salary rates, extra benefits, allowances and pre-requisites are dependent on performance
appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programs It helps to analyze strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It also
helps in framing future development programs.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity
and importance of the selection procedure. The supervisors come to know the validity and
thereby the strengths and weaknesses of selection procedure. Future changes in selection
methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and
employers is important. Through performance appraisal, communication can be sought for
in the following ways:
a. Through performance appraisal, the employers can understand and accept skills of
subordinates.
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 b. The subordinates can also understand and create a trust and confidence in superiors.
c. It also helps in maintaining cordial and congenial labor management relationship.
d. It develops the spirit of work and boosts the morale of employees.

All the above factors ensure effective communication.

6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating

performance of employees, a person’s efficiency can be determined if the targets are
achieved. This very well motivates a person for better job and helps him to improve his
performance in the future.

PERFORMANCE CRITERIA
• Three criteria suggested to be included in the construction of performance evaluation:

1. RELEVANCE – relevant performance dimensions are determined by the duties and

responsibilities contained in the job description.

2. RELIABILITY – produced consistent and repeatable evaluation.

3. FREEDOM FROM CONTAMINATION – should measure each employee’s performance

without being contaminated by factors that an employee cannot control such as economic
conditions, material shortage, or poor equipment.

INDICATORS OR MATRIX THAT CAN HELP MEASURE EMPLOYEE

PERFORMANCE
1. QUANTITY

• The number of units produce, processed, or sold is a good objective indicator of

performance.

2. QUALITY

• The percentage of output that must be redone or is rejected is one indicator of quality.

3. TIMELINESS

• How fast work is performed; it might be the number os units produced per hour.

4. COST-EFFECTIVENESS

• The cost of work performed should be used as a measure of performance only if employee
has some degree of control over cost.

5. ABSENTEEISM/TARDINESS

• An employee is obviously not performing when he/she is not at work.

6. CREATIVITY
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 • Supervisors and employees should keep track of creative work examples and attempt to
quantify them.

7. ADHERENCE TO POLICY

• Merely a boundary on creativity. Deviation from policy indicate an employee whose

performance goals are not well-aligned with those of the company.

8. GOSSIPING AND OTHER PERSONAL HABITS

• The specific behaviors should be defined, and goals should be set for reducing their
frequency.

9. PERSONAL APPEARANCE/CLOTHING

• Examples of inappropriate appearance and grooming should be spelled out, their effects
upon the employee’s performance and that of others explained, and corrective actions
defined.

WHO SHOULD EVALUATE PERFORMANCE?

1. MANAGER/SUPERVISOR APPRAISAL

• They are in the best position to observe employees, and they should have a better
understanding of the job being performed.

2. SELF-APPRAISAL

• The employee appraises his/her own performance, in many cases comparing the self-
appraisal to management’s review. Often, self-appraisal can highlight discrepancies
between what the employee and management think are important performance factors and
provide mutual feedback for meaningful adjustment of expectations.

3. SUBORDINATE APPRAISAL

• Provides unique information because subordinates know better than anyone else whether
leadership is good or bad. It makes workplace democratic and responsive to human needs
and it increases the flow of communication as well.

4. PEER APPRAISAL

• Often effective at focusing an employee’s attention on undesirable behaviors and motivating

change. This method often places greater emphasis on team performance and team
rewards.

5. CUSTOMER/SUPPLIER

• This kind of appraisal would be more relevant for service-oriented companies such as
banks, where the inputs provided by external customers can be useful; fro staffing.

6. TEAM APPRAISAL

• This approach assumes that the team’s objectives and each member’s expected
contribution have been clearly defined.

7. ASSESSMENT CENTER
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 • The employee is appraised by professional assessors who may evaluate simulated or actual
work activities. Objectivity is one advantage of assessment centers, which produce reviews
that are not clouded by personal relationships with employees.

8. 360-DEGREEE OR FULL CIRCLE APPRAISAL

• The employee’s performance is appraised by everyone with whom he/she interacts,

including managers, peers, customers, and member of other departments. This is the most
comprehensive and expensive way to measure performance, and it is generally reserved for
key employees.

GOAL SETTING
PERFROMANCE STANDARD SETTING

INFORMATION DISSEMINATION

ACTUAL PERFROMANCE MESUAREMENT

FEEDBACK EVALUATION RESULTS

REWARDING EXEMPLARY PERFORMANCE

CORRECTING SUBSTANDARD PERFORMANCE

Process Involved in Performance Evaluation

SOURCES OF DATA IN APPRAISAL

1. PRODUCTION DATA
• Evaluate the degree of dependable task accomplishment by measuring quantity and quality
of performance. These are considered the best measures of performance because they are
directly observable and they can be counted.
• Examples: number of units produced per hour peso volume of sales, profit, return on
investment
2. PERSONNEL DATA
• Type of information found in an individual’s personnel files. Except for critical incidents,
these data are directly observable and can be reliably measured.
• Examples: absenteeism, tardiness, training program completed and critical incidents
3. JUDGMENT OF OTHERS
• Many of the spontaneous and innovative behaviors that are important to organizational
effectiveness can only be assessed by the judgment of others and ought to be obtained in
every evaluation.

PERFROMANCE APPRAISAL METHODS

MULTIPLE PERSON EVALUATION METHODS

1. RANKING METHOD
• Ranking the employee from the most efficient to the least capable on each trait or quality to
be used in judging the employee’s performance or just simply ranking the employee from
best to worst.
• Ranking system has also the potential to cause unwanted side effects. Because ranking
method compares colleagues in a very real sense, it pushes people to compete with each
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 other. It can encourage people to work harder to come out on top but it can also encourage
people to passively interfere with the work of others.

2. PAIRED COMPARISON METHOD

• Consists of asking an evaluator to consider only two individuals at one time and to decide
who is better. Then another pair of names is presented to the evaluator for another
evaluation. An employee’s position in the final ranking is determined by the number of times
that employee is chosen over the other employees. With large number of subordinates, this
can be very tedious. A supervisor with 20 employees to evaluate will have to process 190
comparisons.

3. FORCED DISTRIBUTION
• Ranks employees through forced distribution.
• The rater is asked to rate employees in some fixed distribution of categories such as
superiors, above average, average, below average and poor. It assumes that the relative
percentages would be approximately 10%, 20%, 40%, 20% and 10% respectively.
• This system is based on social science statistics of the normal curve, which presents a bell-
shaped graph where one end of the scale represents the best job performance and the
other end represents the worst performance.
• Top-ranked employees are considered “high-potential” employees and are often targeted
for a more rapid career and leadership development programs.
• Those ranked at the bottom are denied of, bonuses and pay increases. They may be given
a probationary period to improve their performance.

INDIVIDUAL EVALUATION METHOD

1. CRITICAL INCIDENT METHOD

• A method in which the manager writes down positive and negative performance behavior of
employees throughout the performance period.
• Requires recording of events that represents either effective or ineffective performance for
each employee being rated.
• An incident is critical when it illustrates what the employee has done or failed to do.
• Recorded critical incidents are used in the evaluation of the workers’ performance. These
can help avoid many common rating errors and help facilitate discussions about how an
employee’s performance can be improved.
• Drawback:
i. the rater is required to jot down incidents regularly which can be burdensome and
time consuming
ii. negative incidents may be more noticeable than positive incidents.

2. CHECKLIST AND WEIGHTED CHECKLIST METHOD

• Checklist is a set of objectives or descriptive statements.
• This method describes a performance appraisal method where the rater, familiar with the
jobs being evaluated, prepares a large list of descriptive statements about effective and
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 ineffective behavior on jobs. The employee’s evaluation is the sum of the scores (weights)
on the items checked.
• Drawback:
i. it is time consuming to prepare the questions or checklist for each job category
ii. Checklist questions can have different meanings for different raters.

3. GRAPHIC RATING SCALE

• The oldest and the most widely used method for performance appraisal.
• The scales may specify 5 points, so a factor such as job knowledge might be rated from 1
(poorly informed about work duties) to 5 (has complete mastery of all phases of the job).
• The rater is presented with a set of traits and asked to rate employees on each of the
characteristics listed.
• Main advantage = the method allows quantitative comparison.
• This method perm,its commenting on the employee’s unique characteristics.
• More effective when specific examples of employee behavior are cited, along with objective
facts supported by any quantitative information.
• Drawback:
i. Time consuming when describing all of the individual’s characteristics
ii. May be unfair since the quality may depend upon the writing skills of the rater
iii. A busy rater may write the essay hurriedly without properly assessing the actual
performance of the ratee.

4. BEHAVIORALLY ANCHORED RATING SCALES (BARS)

• Used to describe a performance rating that is focused on specific behaviors or sets as
indicators of effective or ineffective performance.
• A combination of the rating scale and critical incident techniques of employee performance
evaluation.
• Evaluates observable behavior rather than subjective perceptions but it requires a lot of time
and effort to develop the scales.
• Designed to assess specific behavior required to successfully perform a job.
• The assumption is that functions behavior will result in effective job performance.

5. MANAGEMENT BY OBJECTIVE (MBO)

• A process in which managers and their subordinates set objectives for the employee to
achieve within a specific rating period.
• Focuses attention on what must be accomplished (goals) rather than how it is
accomplished (methods). reward is given based on the result or output.
• Allows easy linking of individual objectives to work unit objectives.
• Reduces the likelihood of disagreement during appraisal meetings if standards and targets
were written well during the performance planning process and considering employees
were involved in the preparation and identification of targeted outcomes.
• To be effective, it must be SMART - the objective must be Specific, Measurable, Attainable,
Result-oriented and Time-bound.

6. MULTI - RATER ASSESSMENT OR THE 360-DEGREE PERFROMANCE FEEDBACK

• The 360-degree feedback is a system or process in which employees receive confidential,
anonymous feedback from people who work around them, their immediate superior, peers,
customers, or suppliers.
• The strength of this method lies on the facts that more people are involved in the evaluation
instead of just relying on the supervisor, hence, bias is prevented.
• Possible advantages of this method:
i. Provides evaluation from different stakeholders which may help reduce performance
appraisal errors and biases
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 ii. Increases employee and possibly customer involvement
iii. Increases management responsiveness to employee concerns
iv. Its statistical record provides good documentation for possible legal action.

SEVEN TIPS FOR CREATING A WORLD-CLASS APPRASAIAL SYSTEM

1. Design the form first
2. Build your company’s values into your form
3. Assure ongoing communication during development
4. Train all appraisers
5. Orient all appraisers
6. Use the results
7. Monitor and revise the program

PERFORMANCE APPRAISAL PROBLEMS AND SOLUTIONS

1. HALO EFFECT
⚫ The Problem: a manager or supervisor allows a general favorable impression of an
employee to influence his/her judgement on each separate factor in the performance appraisal
process. An unfriendly employee will often be rated unsatisfactorily for all traits rather than just
for the trait pertaining to interpersonal relation.
⚫ The Solution: the rater should consider each factor independently of all other factors, rather
than rating the employee at the same level on all (or most) factors in an appraisal. Being aware
of this problem is a major step toward avoiding it.
2. RECENCY EFFECT
⚫ The Problem: recent events tend to have an unusually strong influence on performance
evaluation. Outstanding contribution or untimely mistake just prior to a performance review
colors the manager’s perception of the employee’s performance for the entire appraisal period.
⚫ The Solution: an alert manager compensates for lack of perspective by careful
documentation and to make refinements in the design of the appraisal method, as well as
improving the skills of the raters.
3. PREVIOUS PERFORMANCE BIAS
⚫ The Problem: the employee who has performed well in the distant past is assumed to be
acceptable in the recent past also. Previous good work tends to carry over into the new period
being appraised.
⚫ The Solution: once again, observation and documentation of the employee’s performance
will give an accurate account of the performance period under scrutiny.
4. LENIENCY/HARSHNESS/STRICTNESS ERROR
⚫ The Problem: some managers tend to give mostly favorable ratings while others tend to
evaluate the same performance levels unfavorably. This error is usually committed when
managers feel uncomfortable about communicating negative feedback or do not want to hurt
the employee’s feelings.
⚫ The Solution: understanding the constructive purposes of performance appraisal and
acquiring effective skills in giving negative feedback should reduce the tendency to commit this
error. Raters can assess their own harsh and lenient rating tendencies by examining or
distributing ratings forcing a normal distribution to avoid this error.
5. CENTRAL TENDENCY
⚫ The Problem: central tendency occurs when a manager rates all employees as average by
choosing the middle rating. The central tendency closes the door to an employee’s growth and
improvement on a job, because no strengths or weaknesses are identified.
⚫ The Solution: Ranking employees can avoid this error because all employees must be
ranked and, thus, cannot all be rated average.
6. CARELESSNESS
⚫ The Problem: managers make quick guesses based on first impressions of an employee’s
performance.
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⚫ The Solution: Managers commit significant time observing staff members and forming
 judgments based on their observations. Major decisions are often based on performance
rating, and ill-considered ratings will contribute unreliable malformation and detract from the
organization’s goals.
7. BIAS
⚫ The Problem: individual differences among ratees in terms of characteristics like age, race,
sex and religious and political affiliations. Evaluation are dependent on the rater’s personal
preferences, prejudices, and biases. The rater who has a biased or prejudiced attitude toward
certain groups of people looks for behavior in these groups that confirms his/her prejudices.
⚫ The Solution: when rating employees, the manager must consider the same relevant
behaviors for all employees supervised. Individual differences and other nonperformance
factors should not affect performance appraisal ratings. Careful observation, description, and
documentation of actual performance on an ongoing basis reduce the tendency for bias by
emphasizing job performance over a period of time.

FEEDBACK OR APPRAISAL INTERVIEW

◆ This is an interview in which supervisor and subordinates review the appraisal and make plans
to remedy deficiencies and reinforce strengths. It provides an opportunity to identify the
subordinate’s feelings more thoroughly and thus improve communication between supervisor
and the employee.
◆ Annual discussions of performance should include:
⚫ Review of overall progress;
⚫ Discussion of problems that were encountered;
⚫ Discussion of sources of ineffective performance;
⚫ Agreement about how performance can be improved;
⚫ Discussions on how current performance fits with long-range career goals; and
⚫ Specific action plans for the coming year and how to reach short and long-term
objectives.
REFERENCES:

⚫ D. Turacano, “How am I doing?” HR Magazine (1992)

⚫ Robert Bacal, Performance Management (McGraw-Hill, 1999)
⚫ “9 Common Errors in PErformance Appraisals” eHow money, http://www.ehow.com//list_6499538_9-
common-errors-performance-appraisals.html
⚫ David Hakala, 16 Ways to Measure Performance (February 19, 2008),
http://www.hrworld.com/features/16-ways-measure-performacne-021908/
⚫ 360-Degree or Full-Circle Appraisal, http://www.scribd.com/doc/58392116/15/Degreee-or-Full-Circle-
Appraisal
⚫ Alternative Performance Reviews, http://www.toolpack.com/perforamnce.html
⚫ Performance Appraisal Methods (March 2010),
http://www.humanresources.hrvinet.com/performance-appraisal-methods/
⚫ Zigon Performance Group (2007), www.zigonperf.com
⚫ Adapted from Managing the Staff of the Local Church by David R. POllock, Alston-Kline, INc., 2003, p.
19-24
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