08 – Evaluating Employee Performance

PY108 | IOPSY | 2023 - 2024

Main Reference: Aamodľ Addiľional References: Dessler and Muchinsky Compiled by: Kyra Alexandra U. Ramirez, RPm

to choose which of them is most typical of the

employee
OUTLINE
○ Excellent for determining compensation but
1. Purpose of Employee Evaluation
2. Environmental and terrible for training purposes
Cultural Limitations ● 360-Degree Feedback: method that
3. Determining the Evaluators garners input from various sources about
4. Selecting Appraisal Methods performance
5. Train Raters ○ also called multi-source or multi-
6. Observing Performance
rater feedback
7. Performance Evaluation
○ Excellent source for improving
8. Communicating Appraisal
Results employee performance but is not
9. Employee Termination appropriate for determining salary
10. Legality and Fairness increases

Uses and Goals for Performance Appraisal

● Providing employee feedback and training
○ Performance Appraisal Review:
meeting between a supervisor and a
subordinate for the purpose of discussing
performance appraisal results
○ Scheduled semiannually
● Determining salary increases
○ The difference in compensation between two
individuals within the same job is a function
of both tenure and job performance
○ It must provide a fair basis on which to
determine an employee’s salary
increase
● Making promotion decisions
● Making termination decisions
● Conducting personnel research

ENVIRONMENTAL AND CULTURAL

LIMITATIONS

STEP 2: IDENTIFY ENVIRONMENTAL AND

CULTURAL LIMITATIONS

● Could be overwork, stress, financial limitations

● The results of the evaluation may not be
taken seriously if not identified

DETERMINING THE EVALUATORS

PURPOSE OF EMPLOYEE EVALUATION a supervisor is given several behaviors and is

forced

STEP 1: DETERMINE THE REASON

FOR EVALUATING EMPLOYEE
PERFORMANCE

● First step is to determine the reason why

the organization wants to evaluate
employee performance
● Various performance appraisal techniques are
appropriate for some purposes but not for
others
● Forced-Choice Rating Scale: method in which

1 | @studywithky
 STEP 3: DETERMINE WHO WILL EVALUATE
PERFORMANCE

● Supervisors: most common type of

performance appraisal (supervisor rating)
● Peers: often see the actual behavior as they
work directly with the employee
○ Reliable only when the peers are similar
and well acquainted to the employees
being rated
○ Employees tend to react worse to
negative feedback from peers than
experts
● Subordinates: also called upward feedback

2 | @studywithky
 ○ Difficult because of the fear of backlash if that are needed
they unfavorable rate their supervisor
○ Correlate highly with upper-management
ratings of supervisors’ performance
● Customers: provide feedback on employee
performance by filling complaints or
complimenting the manager about one of her
employees
○ Secret Shoppers: current customers who
have been enlisted by a company to
periodically evaluate the service their
receive
● Self-Appraisal: allowing an employee to
evaluate her own behavior and performance
○ Suffer from leniency and correlate
moderately to actual performance
○ Most accurate when the self-appraisal will
not be used for such administrative purposes
as raises or promotions
○ Accurate when employees understand the
performance appraisal system and when
employees believe that an objective record
of their performance is available with which
supervisor can compare the self-appraisal

SELECTING APPRAISAL METHODS

STEP 4: SELECT THE BEST APPRAISAL

METHODS TO ACCOMPLISH YOUR
GOALS

Criteria – ways of describing employee success

Decision 1: Focus of the Appraisal Dimensions

● Trait-focused Performance Dimensions:
concentrates on such employee attributes
such as dependability, honesty, and courtesy
○ Provides poor feedback and thus will not
result in employee development and growth
● Competency-Focused Performance
Dimensions: concentrates on
employee’s knowledge, skills, and
abilities
● Task-Focused Performance
Dimensions: organized by the similarity
of tasks that are performed
○ Supervisor are concentrating on tasks that
occur together and can thus visualize an
employee’s performance, it is often easier
to evaluate performance than with other
dimensions
○ More difficult to offer suggestions for how
to correct the deficiency if an employee
scores low on a dimension
● Goal-Focused Performance Dimensions:
organize the appraisal based on the goals to
be accomplished by the employee
○ Easier to understand why certain
behaviors are expected
● Contextual Performance: the effort an
employee makes to get along with peers,
improve the organization, and perform tasks
3 | @studywithky
 but are not necessarily an official part of the
employee’s job description
○ Also tend to be similar across jobs,
whereas the dimensions involved in task
performance differ across jobs

Decision 2: Should Dimensions be Weighted?

● Makes good philosophical sense, as some
dimensions might be more important to
an organization than others
● Reduce racial and other biases
● Administratively easier to compute and to
explain to employees

Decision 3: Use of Employee Comparisons,

Objective Measures, or Ratings
● Employee Comparisons
○ Rank Order: employees are ranked in
order by their judged performance for each
relevant dimensions
■ Easily used when there is few
employees to rank
○ Paired Comparisons: involves comparing
each possible pair of employees and
choosing which one of each pair is the
better employee
■ The time necessary to male all of
the comparisons becomes
prohibitive
○ Forced Distribution: predetermined
percentage of employees are placed in
each of the five categories
■ Also called “rank and yank”
■ Much easier but one must assume
that employee performance is
normally distributed
■ Ex. certain percentages of
employees who are poor, average,
and excellent
○ They do not provide information about
how well an employee is actually doing
● Objective Measures or Hard Criteria
○ Quantity of Work: obtained by
simply counting the number of
relevant job behaviors that take
place
■ Often misleading

4 | @studywithky
 ○ Quality of Work: usually measured in
terms of errors (defined as deviations from TRAINING THE RATERS
a standard)
■ Can be even work quality higher than STEP 5: TRAIN RATERS
the standard
○ Attendance: can be separated into three Frame-of-Referencing – rater is provided with
distinct criteria: absenteeism, tardiness, job-related information, a chance to practice
and tenure ratings, examples of ratings made by experts, and
○ Safety: employees who follow safety rules the rationale behind the expert ratings
and who have no occupational accidents do ● Raters who receive frame-of-reference training
not cost an organization as much money as make fewer rating errors and recall more
those who break rules, equipment, and training information that do untrained raters or
possibly their own bodies raters receiving information
● Ratings of Performance: how well the ● Provides raters with job-related information,
employee performed on each dimensions practice in rating, and examples of ratings
○ Graphic Rating Scale: most common made by experts as well as the rationale
rating scale behind those expert ratings
■ Ease of construction and use but ● Goal is to communicate the organization’s
susceptible to rating errors as halo definition of effective performance and to then
and leniency get rates to consider only relevant employee
○ Behavioral Checklist: consists of a list behaviors when making performance evaluations
of behaviors, expectations, or results for ● The better that employees understand the
each dimensions performance appraisal system, the greater is
■ Used to force the supervisor to their satisfaction with the system
concentrate on the relevant
behaviors that fall under a dimension
OBSERVING PERFORMANCE
■ Constructed by taking the task
statements from a detailed job
description and converting them into STEP 6: OBSERVE AND DOCUMENT
behavioral performance statements PERFORMANCE
representing the level at which the
behavior is expected to be ● Observe employee behavior and document
performed critical incidents (examples of excellent and
■ Behavior-focused system increases the poor employee performance)
amount of specific feedback that can ● Usually written in critical incident log
be given to each employee ● Documentation forces the supervisor to focus
■ Result-focused statements concentrate on employee behaviors
on what an employee accomplished as ● Helps supervisors recall the behaviors (first
a result of what she did impressions, recent behaviors, unusual or
■ Contamination: employee can do extreme behaviors, behavior consistent with
everything asked of her by an the supervisor’s opinion)
organization and still not get the ● Provides examples to use when
desired results due to factors outside reviewing performance ratings with
her control employees
○ Comparison with other employees: ● Helps an organization defend against legal
comparing the employee’s level or actions taken against it by employee who
performance with that of other was terminated or denied a raise or
employees promotion
■ Reduce such problems as overly ● Employee Performance Record: more
lenient or overly strict ratings formal method for using critical incidents in
■ Potentially forces a supervisor to rate evaluating performance developed by
employees who are performing well Flanagan and Burns (1955)
as being worse than other employees
○ Frequency of Desired Behaviors
PERFORMANCE EVALUATION
○ Extent to which organizational
expectations are met: allows high levels
of feedback and can be applied to most STEP 7: EVALUATE PERFORMANCE
types of employee behavior
○ Feedback from behavior-based methods is Obtaining and Reviewing Objective Data: when
easier to give and to use to provide combined with critical-incident logs, provide a solid
suggestion for improvement basis on which to rate an employee

5 | @studywithky
Reading Critical-Incident Logs: reduce errors of behavior;
primacy, recency, and attention to unusual
information
Completing the Rating Form: must be careful to
make common rating errors
● Distribution Errors: involves distribution
of ratings on a rating scale
○ Made when rater uses only one part of
a rating scale
○ Leniency Error: certain raters tend to rate
every employee at the upper end of the
scale regardless of the actual performance
of the employee
○ Central Tendency Errors: supervisor
rating every employee in the middle of
the scale
○ Strictness Error: rates every employee at
the low end of the scale
● Halo Errors: occurs when a rater allows either
a single attribute or an overall impression of an
individual to affect the ratings that she makes
on each relevant job dimensions
○ Statistically determined by correlating the
ratings for each dimension with those for
the other dimensions
○ If they are highly correlated, halo
error occurred
○ They can be reduced by having
supervisors rate each trait at separate
times
● Proximity Errors: occur when a rating made
on one dimensions affects the rating made on
the dimension that immediately follows it on
the rating scale
○ Only the dimension physically located
nearest a particular dimension on the rating
scale are affected
● Contrast Errors: the performance rating
one person receives can be influenced by
the performance of a previously evaluated
person
○ Error Assimilation: when the supervisor
reads the previous evaluations as excellent
but the employee has been showing poor
performance and still give the employee
excellent rating
● Low Reliability Across Raters: two people
rating the same employee seldom agree with
each other
○ Raters often commit rating errors
○ Raters often have different standards
and ideas about the ideal employee
○ Two different raters may actually see
very different behaviors by the same
employee
● Sampling Problems
○ Recency Effect: recent behaviors have
given more weight in the performance
behavior than behaviors occurred during
the first few months
○ Infrequent Observation: supervisors do
not have the opportunity to observe a
representative sample of employee
6 | @studywithky
 due to busy work and employees act
differently around their supervisor
● Cognitive Processing of Observed
Behavior
○ Observation of Behavior: just because an
employee’s behavior is observed does not
guarantee that it will properly remembered
or recalled during appraisal review
■ Raters recall those behavior that are
consistent with their general
impression of an employee and the
greater the time interval between the
actual behavior and the performance
rating, the greater the probability that
rating errors will occur
■ More accurate immediately after
the behaviors occur
○ Emotional State: the amount of stress
under which a supervisor operates also
affects her performance ratings
○ Bias: raters who like the employees being
rated may be more lenient and less
accurate in their ratings
■ The rater’s feelings (affect) towards
an employee may interfere with the
cognitive processing of actual
performance information

COMMUNICATING APPRAISAL RESULTS

STEP 8: COMMUNICATE APPRAISAL
RESULTS TO EMPLOYEES

Prior Interview
● Allocate time to prepare (at least for an hour
for both prep and interview proper)
● Schedule the interview in a neutral place and
it should be scheduled at least once every six
months for most employees and more often
for new employees
● When preparing for the interview, the
supervisor should review the rating she has
assigned to the employee and the reasons for
those ratings; employee should rate her own
performance

During Interview
● Begin with some small talk until the jitters
go away
● Once established, the supervisor
should communicate the following
○ Role of performance appraisal
○ How the performance appraisal
was conducted
○ How the evaluation process
was accomplished
○ Expectation that the appraisal interview
will be interview
○ Goal of understanding and
improving performance
● Employee who are actively involved in the
interview are more satisfied with the
results

7 | @studywithky
● Positive feedback should be given first, ● After the meeting, a supervisor should review the
then negative, then positive again facts and be honest to the other employees
● Discuss the reasons an employee’s performance about what happened
is not considered as perfect
● Fundamental Attribution Error: attribute
others’ failure or poor performance to personal
rather situational factors
● Goals must be mutually set for the future
performance and behavior, and both
supervisor and employee should understand
how these goals will be met

EMPLOYEE TERMINATION

STEP 9: TERMINATE EMPLOYEES

Employment-at-Will Doctrine – allows employers

freedom to fire an employee without a reason
● Limitations: State Law, Provisions of Federal
Law or state law, Public Policy/Interest,
Contracts, Implied Contracts, Covenant of Good
Faith and fair dealing

LEGALITY AND FAIRNESS

STEP 10: MONITOR THE LEGALITY

AND FAIRNESS OF THE APPRAISAL
SYSTEM
Legal Reasons for Terminating Employees
● Probationary Period: period to prove
that employees can perform well; failure to
meet criteria for regularization may result
to termination
● Violation of Company rules
○ Rule against a particular behavior
must actually exist
○ Company must prove that the
employee knew the rule
○ Ability of the employer to prove that
an employee actually violated the rule
○ The extent to which the rule has been
equally enforced
○ Extent to which the punishment fits the
crime
● Inability to Perform
● Reduction in Force (Layoff)

Termination Process
● Prior to the meeting of termination, one must
ensure that the legal process has been
followed
● Then determine how much the organization
wants to offer the employee (references,
severance pay, outplacement assistance)
● Schedule at an appropriate place and time
● During the meeting, the supervisor should get to
the point about terminating, state the reasons
for the decision, express gratitude and offer
assistance

8 | @studywithky