PERFORMANCE

APPRAISAL

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 Performance Appraisal Programs

• Performance Appraisal
– A process, typically performed annually by a
supervisor for a subordinate, designed to help
employees understand their roles, objectives,
expectations, and performance success.
• Performance management
– The process of creating a work environment in
which people can perform to the best of their
abilities.

8-2
 Performance Management
• Performance management is the process through
which managers ensure that employees’ activities
and outputs contribute to the organization’s goals.
• Organizations establish performance management
systems to meet three broad purposes:
– Strategic purpose: Strategic purpose means effective performance
management helps the organization achieve its business objectives.
– Administrative purpose: refers to the ways in which organizations use
the system to provide information for day-to-day decisions about
salary, benefits, and recognition programs.
– Developmental purpose: serves as a basis for developing
employees’ knowledge and skills.
• Performance measures should fit with the
organization’s strategy by supporting its goals and
culture. 8-3
 HR—Meeting Management
Challenges (Matthis, dkk)
Effective performance management
system focuses on identifying,
measuring, and dealing with employee
performance

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service or otherwise on a password-protected website for classroom use.
 HR—Meeting Management
Challenges (Matthis, dkk)
Key aspects of performance
management include:
Why organizational strategies are linked to a
performance management system
Establishing a legally defensible and
effective performance appraisal system
How to address performance problems and
concerns with individuals

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service or otherwise on a password-protected website for classroom use.
 Performance Management versus
Performance Appraisal
Performance management Performance appraisal

Processes used to identify, Process of evaluating how

measure, evaluate, and well employees perform
reward employee their jobs and then
performance communicating that
information to the
employees

Matthis dkk

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service or otherwise on a password-protected website for classroom use.
 The Nature of Performance
Management
Provide performance
Make clear what the
information to
organization expects
employees

Effective
performance
management
system

Identify areas of Document

success and needed performance for
development personnel records

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service or otherwise on a password-protected website for classroom use.
 Figure 6.1 - Performance Management
Linkage

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service or otherwise on a password-protected website for classroom use.
 Stages of the
Performance Management Process

From Job Analysis

8-9
 Giving Performance Feedback

• Scheduling Performance Feedback

– Performance feedback should be a regular, expected
management activity.
– Annual feedback is not enough.
– Employees should receive feedback so often that they
know what the manager will say during their annual
performance review.
• Preparing for a Feedback Session
– Managers should be prepared for each formal feedback
session.
8-10
 Effective Performance
Management Criteria
• Fit with strategy —A performance management system
should aim at achieving employee behavior and attitudes that
support the organization’s strategy, goals, and culture.
• Validity — is the extent to which a measurement tool actually
measures what it is intended to measure.
• Reliability — describes the consistency of the results that the
performance measure will deliver.
• Acceptability —Whether or not a measure is valid and
reliable, it must meet the practical standard of being
acceptable to the people who use it.
• Specific feedback —A performance measure should
specifically tell employees what is expected of them and how
they can meet those expectations.
8-11
 Figure 8.2 - Purposes of a Performance
Evaluation

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 Figure 8.3 - Reasons of Why
Performance Evaluations Can Fail

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 Developing an Effective Performance
Management System
Primary responsibility - Overseeing and coordinating
its performance management system
Employees are to accept and be satisfied with a
performance management system when they have the
chance to participate in its development
Experienced employees are asked to help identify
important job behaviors
Helps ensure that the system takes into account the
tasks that need to be done in an organization

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 Performance Standards
Based on job-related requirements derived from a job
analysis and reflected in an employee’s job description
and job specifications
Realistic and specific performance standards that are
measurable and written down communicate precise
information to employees

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 Performance Standards Characteristics
Strategic relevance

• Individual standards directly relate to strategic goals

Criterion deficiency

• Standards capture all of an individual’s contributions

Criterion contamination

• Performance capability is not reduced by external factors

Reliability

• Standards are quantifiable, measurable, and stable

• Calibration: Process whereby managers meet to discuss the performance of individual
employees to ensure their employee appraisals are in line with one another

Fairness and acceptability

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 Figure 8.4 - Establishing Performance
Standards

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Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Legal Guidelines for Evaluations
Performance ratings must be job-related
Employees must be given a written copy of their job
standards in advance of evaluations
Managers who conduct the evaluation must be able to
observe the behavior they are rating
Do not allow performance problems to continue
unchecked
Supervisors must be trained to use the evaluation
form correctly

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 Legal Guidelines for Evaluations
Firm’s HR department should review the evaluations
to see if minority groups are being adversely impacted
Evaluations should be discussed openly with
employees and counseling offered to help poor
performers
Appeals procedure should be established to enable
employees to express disagreement with the
evaluation

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 Types of Performance Evaluation
Manager and/or supervisor evaluation: Conducted
by an employee’s manager and reviewed by a manager
one level higher
Self-evaluations: Conducted by the employee being
evaluated, on an evaluation form completed by the
employee prior to the evaluation meeting
Subordinate evaluations: Conducted by an
employee of a superior, which is appropriate for
developmental than for administrative purposes

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 Types of Performance Evaluation
Peer evaluations: Conducted by one’s fellow
employees, on forms compiled into a single profile for
use in the evaluation meeting
Team evaluations: Recognizes team accomplishment
rather than individual performance
Customer evaluations: Conducted by a firm’s
external and internal customers

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 360-Degree Evaluations
Conducted by different people who interact with the
employee on forms compiled into a single profile for
use in the evaluation meeting
Companies should consider the following safeguards
Assure anonymity
Make respondents accountable
Prevent gaming of the system
Use statistical procedures
Identify and quantify biases
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 Figure 8.6 - Pros and Cons of 360-
Degree Evaluation

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 Training Appraisers
Improves the performance evaluation process
Establishing an evaluation plan
Provide an explanation of the performance evaluation
system’s objectives

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 Training Appraisers
Explain the mechanics of the rating system
 How managers should keep performance records and review
them
 How frequently the evaluations are to be conducted
 Who will conduct them
 What are the standards of performance
 How to go about preparing for evaluations
Alert raters to the weaknesses and problems of appraisal
systems so that they can be avoided

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 Performance Appraisal and Other HRM Functions

Performance
Performanceappraisal
appraisaljudges
judges Quality
Qualityof
ofapplicants
applicants
effectiveness of recruitment
effectiveness of recruitment Recruitment
Recruitment determines
determinesfeasible
feasible
efforts
efforts performance
performancestandards
standards

Selection
Selectionshould
shouldproduce
produce
Performance
Performanceappraisal
appraisal Selection
Selection workers
workers best ableto
best able tomeet
meet
validates
validates selectionfunction
selection function job requirements
job requirements

Training
Trainingand
anddevelopment
development
Performance
Performanceappraisal
appraisal Training
Trainingand
and aids
aids achievementof
achievement of
determines
determines trainingneeds
training needs Development
Development performance standards
performance standards

Performance
Performanceappraisal
appraisalisisaa Compensation
Compensation Compensation
Compensationcancanaffect
affect
factor
factorin
indetermining
determiningpay
pay Management appraisal of performance
appraisal of performance
Management

Appraisal
Appraisalstandards
standardsand
and
Performance
Performanceappraisal
appraisaljustifies
justifies Labour
Labour methods
methods may be subjectto
may be subject to
personnel
personnelactions
actions Relations
Relations negotiation
negotiation

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 Managerial Issues Concerning Appraisals

1. There is little face-to-face discussion between the

manager and the employee being appraised.
2. The relationship between the employee’s job
description and the criteria on the appraisal form
isn’t clear.
3. Managers feel that little or no benefit will be
derived from the time and energy spent in the
process, or they are concerned only with bad
performances.
4. Managers dislike the face-to-face confrontation
of appraisal interviews.

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 Managerial Issues Concerning Appraisals
(cont’d)
5. Managers are not sufficiently adept at rating
employees or providing them with appraisal
feedback.
6. The judgmental role of appraisal conflicts with
the helping role of developing employees.
7. The appraisal is just a once-a-year event, and
there is little follow-up afterward.

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 Sources of Performance Appraisal

• Manager and/or Supervisor

– Appraisal done by an employee’s manager and reviewed
by a manager one level higher.
• Self-Appraisal
– Appraisal done by the employee being evaluated,
generally on an appraisal form completed by the
employee prior to the performance interview.
• Subordinate Appraisal
– Appraisal of a superior by an employee, which is more
appropriate for developmental than for administrative
purposes.

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 Sources of Performance Appraisal

• Peer Appraisal
– Appraisal by fellow employees, compiled into a
single profile for use in an interview conducted by
the employee’s manager.
– Why peer appraisals are used more often:
1. Peer ratings are simply a popularity contest.
2. Managers are reluctant to give up control over
the appraisal process.
3. Those receiving low ratings might retaliate
against their peers.
4. Peers rely on stereotypes in ratings.

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 Sources of Performance Appraisal

• Team Appraisal
– Based on TQM concepts, that recognizes team
accomplishment rather than individual performance.
• Customer Appraisal
– A performance appraisal that, like team appraisal, is
based on TQM concepts and seeks evaluation from both
external and internal customers.

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 360-Degree Performance Appraisal
System Integrity Safeguards

Assure anonymity
Make respondents accountable
Prevent “gaming” of the system.
Use statistical procedures
Identify and quantify biases

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 Basic Approaches to
Performance Management

8-34
 Measuring Performance:
Making Comparisons
Forced Paired
Simple Ranking
Distribution Comparison
• Requires • Assigns a certain • Compares each
managers to percentage of employee with
rank employees employees to each other
in their group each category in employee to
from the highest a set of establish
performer to categories. rankings.
the poorest • Eg. Exceptional
performer. 5%, Exceeds
standard 25%,
etc

8-35
 Measuring Performance:
Rating Individuals - Attributes
Graphic Rating Scale Mixed-Standard Scale

• Lists traits and provides a • Uses several statements

rating scale for each trait. describing each trait to
• The employer uses the scale produce a final score for
to indicate the extent to that trait.
which an employee displays
each trait.

8-36
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 Measuring Performance:
Rating Individuals - Behaviors
Behaviorally Anchored
Critical-Incident Method Rating Scale (BARS)
• Based on managers’ records • Rates behavior in terms of a
of specific examples of the scale showing specific
employee acting in ways that
statements of behavior that
are either effective or
ineffective. describe different levels of
performance.
• Employees receive feedback
about what they do well and
what they do poorly and how
they are helping the
organization achieve its
goals.

8-39
 Measuring Performance:
Rating Individuals – Behaviors (continued)
Behavioral Observation Scale Organizational Behavior
(BOS) Modification (OBM)
• A variation of a BARS which • A plan for managing the
uses all behaviors necessary behavior of employees
for effective performance to through a formal system of
rate performance at a task. feedback and
• A BOS also asks the reinforcement.
manager to rate the
frequency with which the
employee has exhibited the
behavior during the rating
period.

8-40
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Organizational behavior modification (OBM) is a plan for
managing the behavior of employees through a formal system of
feedback and reinforcement. Specific OBM techniques vary, but
most have four components:
1. Define a set of key behaviors necessary for job performance.
2. Use a measurement system to assess whether the employee
exhibits the key behaviors.
3. Inform employees of the key behaviors, perhaps in terms of
goals for how often to exhibit the behaviors.
4. Provide feedback and reinforcement based on employees’
behavior.

8-43
 Measuring Performance:
Measuring Results

• Management by Objectives (MBO): people at

each level of the organization set goals in a
process that flows from top to bottom, so that
all levels are contributing to the organization’s
overall goals.
• These goals become the standards for
evaluating each employee’s performance.

8-44
An MBO system has three components:
1. Goals are specific, difficult, and objective. The goals listed in the
second column
of Table 8.2 provide two examples for a bank.
2. Managers and their employees work together to set the goals.
3. The manager gives objective feedback through the rating period
to monitor progress toward the goals. The two right-hand columns
in Table 8.2 are examples of feedback given after one year.

8-45
 Types of Performance Measurement
Rating Errors
• Contrast errors: the rater compares an
individual, not against an objective standard,
but against other employees.
• Distributional errors: the rater tends to use
only one part of a rating scale.
– Leniency: the reviewer rates everyone near the top
– Strictness: the rater favors lower rankings
– Central tendency: the rater puts everyone near the
middle of the scale

8-46
 Types of Performance Measurement
Rating Errors
• Raters often let their opinion of one quality color their
opinion of others. For example, someone who speaks well
might be seen as helpful or talented in other areas, simply
because of the overall good impression created by this one
quality. Or someone who is occasionally tardy might be seen
as lacking in motivation.
• When the bias is in a favorable direction, this is called the halo
error.
• When it involves negative ratings, it is called the horns error.
• Halo error can mistakenly tell employees they don’t need to
improve in any area, while horns error can cause employees
to feel frustrated and defensive.
8-47
 Political Behavior in Performance
Appraisals
• Distorting a performance evaluation to
advance one’s personal goals
• A technique to minimize appraisal politics is a
calibration meeting:
– Meeting at which managers discuss employee
performance ratings and provide evidence
supporting their ratings with the goal of
eliminating the influence of rating errors

8-48
Improving Performance

8-49
 Training Performance Appraisers

Common
Common rater-related
rater-related errors
errors

Error
Errorof
ofcentral
central tendency
tendency

Leniency
Leniencyor
or strictness
strictnesserrors
errors

Similar-to-me
Similar-to-meerrors
errors

Recency
Recencyerrors
errors

Contrast
Contrast and
and halo
halo errors
errors

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 Rater Errors

• Error of Central Tendency

– A rating error in which all employees are rated
about average.
• Leniency or Strictness Error
– A rating error in which the appraiser tends to give
all employees either unusually high or unusually
low ratings.
• Recency Error
– A rating error in which appraisal is based largely
on an employee’s most recent behaviour rather
than on behaviour throughout the appraisal
period.
8-51
 Rater Errors

• Contrast Error
– A rating error in which an employee’s
evaluation is biased either upward or
downward because of comparison with
another employee just previously evaluated.
• Similar-to-Me Error
– An error in which an appraiser inflates the
evaluation of an employee because of a
mutual personal connection.

8-52
 Rater Errors: Training and Feedback

• Rating Error Training

– Observe other managers making errors
– Actively participate in discovering their own
errors
– Practice job-related tasks to reduce the errors
they tend to make
• Feedback Skills Training
– Communicating effectively
– Diagnosing the root causes of performance
problems
– Setting goals and objectives 8-53
 Performance Appraisal Methods

Graphic
GraphicRating
Rating
Scale
Scale

Mixed
MixedStandard
Standard
Scale
Scale
Trait
Trait
Methods
Methods
Forced-Choice
Forced-Choice

Essay
Essay

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 Trait Methods

• Graphic Rating-Scale Method

– A trait approach to performance appraisal
whereby each employee is rated according to
a scale of individual characteristics.
• Mixed-Standard Scale Method
– An approach to performance appraisal similar
to other scale methods but based on
comparison with (better than, equal to, or
worse than) a standard.

8-55
 Graphic Rating Scale with Provision for Comments

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 Example of a Mixed-Standard Scale

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 Trait Methods

• Forced-Choice Method
– Requires the rater to choose from statements
designed to distinguish between successful
and unsuccessful performance.
– 1. ______ a) Works hard _____ b) Works quickly
– 2. ______ a) Shows initiative _____ b) Is responsive to customers
– 3. ______ a) Produces poor quality _____ b) Lacks good work habits

• Essay Method
– Requires the rater to compose a statement
describing employee behaviour.

8-58
 Behavioral Methods

Critical
CriticalIncident
Incident

Behavioural
BehaviouralChecklist
Checklist
Behavioural
Behavioural
Methods
Methods Behaviourally
BehaviourallyAnchored
Anchored
Rating
RatingScale
Scale(BARS)
(BARS)

Behaviour
BehaviourObservation
Observation
Scale
Scale(BOS)
(BOS)

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 Behavioural Methods

• Critical Incident Method

– Critical incident
• An unusual event that denotes superior or
inferior employee performance in some part of
the job
– The manager keeps a log or diary for each
employee throughout the appraisal period and
notes specific critical incidents related to how well
they perform.
• Behavioral Checklist Method
– The rater checks statements on a list that the
rater believes are characteristic of the employee’s
performance or behaviour.
8-60
 Behavioral Methods

• Behaviourally Anchored Rating Scale (BARS)

– Consists of a series of vertical scales, one for
each dimension of job performance; typically
developed by a committee that includes both
subordinates and managers.
• Behaviour Observation Scale (BOS)
– A performance appraisal that measures the
frequency of observed behaviour (critical
incidents).
– Preferred over BARS for maintaining objectivity,
distinguishing good performers from poor
performers, providing feedback, and identifying
training needs.
8-61
 Example of a BARS for Municipal Fire Companies
FIREFIGHTING STRATEGY: Knowledge of Fire Characteristics.
[EDITOR USE HRM 4 FROM CDN 5TH FOR CORRECT SPELLING]

Source: Adapted from Landy, Jacobs, and Associates. Reprinted with permission.
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McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-63
 Results Methods

• Productivity Measures
– Appraisals based on quantitative measures (e.g.,
sales volume) that directly link what employees
accomplish to results beneficial to the
organization.
• Criterion contamination
• Focus on short-term results
• Management by Objectives (MBO)
– A philosophy of management that rates
performance on the basis of employee
achievement of goals set by mutual agreement of
employee and manager.
8-64
 The Balanced
Scorecard

Source: Robert Kaplan and David Norton,

“Strategic Learning and the Balanced
Scorecard,” Strategy & Leadership 24, no. 5
(September/October 1996): 18–24.

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 The Balanced Scorecard
• The appraisal focuses on four related categories
– Financial, customer, processes, and learning
• Ensuring the method’s success
 Translate strategy into a scorecard of clear
objectives.
 Attach measures to each objective.
 Cascade scorecards to the front line.
 Provide performance feedback based on
measures.
 Empower employees to make performance
improvements.
 Reassess strategy. 8-66
 Figure 8.8 - Summary of Evaluation
Methods

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 Appraisal Interviews

Types
Types of
ofAppraisal
Appraisal Interviews
Interviews

Tell
Tell and
and Sell
Sell -- persuasion
persuasion

Tell
Tell and
and Listen
Listen -- nondirective
nondirective

Problem
Problem Solving
Solving -- focusing
focusingthe
the
interview
interview on
on problem
problem resolution
resolution
and
and employee
employeedevelopment
development

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 Appraisal Interview Guidelines

Invite Participation Ask for a Self-Assessment

Change Behaviour Problem Solving Focus

Minimize Criticism Express Appreciation

Establish Goals Be Supportive

Follow Up Day by Day

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 Tips for Using Criticism Constructively
Consider whether it is necessary
Consider the person’s ability to handle it
Be specific and do not exaggerate
Watch your timing
Make improvement on your goal

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Source: Scott Snell, Cornell University.
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 Figure 8.10 - Performance Diagnosis

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 Managing Ineffective Performance
Courses of action
Provide training to increase skills and abilities
Transfer employee to another job or department
Attention of actions to motivate employee
Corrective measures needed to improve employee’s
performance
Cautions
Actions taken must be objective and fair
Do not treat underperformer differently, setting the
employee up to fail

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 Focus on Changing the Behavior, Not the
Person
Supervisor has to separate the employee from the
behavior
Way to communicate this to employees is to suggest
more acceptable ways of performing
When required action is taken, it should be done:
Legally
Fairly
With an understanding of the feelings of the individual
involved

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