Performance Appraisal

Chapter 5
 Performance Management
Performance Management is a continuous process of
identifying, measuring and developing the performance of
individuals and teams and aligning performance with the
strategic goals of the organization.’
Its five elements are agreement, measurement, feedback,
positive reinforcement and dialogue.
When employees fail in their jobs, part of the organization also
fails.
Performance Management aims to eliminate or at least
significantly reduce organizational failure.
‘Performance Management is the key process through which
work gets done.
•
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 Performance Management
It’s how organizations communicate expectations and drive
behavior to achieve important goals;
it’s also about how organizations identify ineffective
performers for development programs or other personnel
actions.’
This was followed by performance appraisal and management
by objectives.
But it is said that the first known use of merit rating took
place during the Wei dynasty (ad 221–265) when the
emperor employed an ‘imperial rater’ whose task it was to
evaluate the performance of officials.

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 Performance Management
Today, the term Performance Management as an overall
description of a process of performance planning and review
conducted by managers and individuals has largely replaced
the term performance appraisal.
The performance appraisal has often been relegated to a
description of the performance assessment and rating aspect
of Performance Management.
the impact of Performance Management on performance and
reward,
a description of a special type of Performance Management:
360-degree feedback, or multisource assessment,.

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 Performance Management

• when assessing and rewarding the performance of

individuals a number of factors have to be
considered including both
• outputs (results) and
• inputs (behavior).
• Any attempt to manage performance should also
bear in mind that it is a complicated notion.

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 Performance Management
• performance is the outcome of three determinants:
1 knowledge about facts and things (termed
declarative knowledge);
2 knowledge about how things are done and the skills
to do them (termed procedural knowledge and
skills);
3 motivation
• to act,
• to expend effort and
• to persist (termed motivation).
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 Underpinning Theories
1. Goal theory: highlights four mechanisms that connect goals to
performance outcomes:
1. they direct attention to priorities;
2. they stimulate effort;
3. they challenge people to bring their knowledge and skills to
bear to increase their chances of success; and
4. the more challenging the goal, the more people will draw on
their full repertoire of skills.
This theory supports the emphasis in Performance Management
on setting and agreeing objectives against which
performance can be measured and managed.

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 Underpinning Theories

2. Control theory: focuses attention on feedback as a

means of shaping behavior.
As people receive feedback on their behavior they
appreciate the discrepancy between what they are
doing and what they are expected to do and take
corrective action to overcome the discrepancy.
Feedback is recognized as a crucial part of
Performance Management processes.

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 Underpinning Theories

3. Social cognitive theory was developed by Bandura

(1986).
It is based on his central concept of self efficacy.
This suggests that what people believe they can or
cannot do powerfully impacts on their performance.
Developing and strengthening positive self-belief in
employees is therefore an important Performance
Management objective.

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 Aims of Performance Management
Performance Management is a means of getting better
results by providing the means for individuals to perform well
within an agreed framework of planned goals, standards and
competency requirements.
It involves developing a shared understanding about what is
to be achieved and how it is to be achieved.
The aim is to develop the capacity of people to meet and
exceed expectations and to achieve their full potential to the
benefit of themselves and the organization.
A further aim is to clarify how individuals are expected to
contribute to the achievement

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 Purpose of Performance Management
• Performance Management system has a fourfold purpose:
1 Strategic communication – convey to people what doing a
good job means and entails.
2 Relationship building – create stronger work relationships by
bringing managers and those they manage together regularly
to review performance achievements.
3 Employee development – provide performance feedback as a
basis for the joint analysis of strengths, weaknesses and areas
for improvement and an agreement on a personal
development plan and learning contract.
4 Employee evaluation – assess the performance of employees
(performance appraisal) as a basis for making decisions on
job reassignment, promotion or performance-related reward.
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 process of Performance Management

Planning Support Review Discussion Follow up

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 Objectives of PM

Creating supportive environment-culture

Establishing standards and criteria
Ensure implementation of plans &strategies
Provide feed back to employees
Promote development of people
Improve Career development
Improve communication & relationships
Establish a framework-play & performance

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 Guidelines- performance Standards

Describe those behaviors & results=minimum

acceptable performance
Clear language- specific behaviors & actions
Specific terms-measureable features
Describe the character tics of performance
Accomplishment of company objectives

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 Performance Support

Provide the necessary resources

Be available -guidance, support coaching
Regular meetings &discussions
Continuous feedback on performance
Opportunities-job enrichment &challenge
Give Authority to employees- decisions

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 Performance Support…

Make notes-successes & problems

Encourage innovative thinking &creativity
Training & Development opportunities
Reward performance- recognition
Task corrective action-deviations form performance
standard

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 Performance review
Bias, prejudice &stereotyping
Trait assessment
Hallo effect
Leniency
Strictness
Central tendency
Errors of logic’ Similarity
Contrast
Political considerations

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 Performance Discussion

State the purpose of the discussion

Get the employee talking
Focus on specific issues
Give feedback on performance
Set mutual specific goals
Close the discussion

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 USES OF PERFORMANCE APPRAISAL

 Staffing process deficiencies

• Compensation adjustment
 Information inaccuracies
• Performance improvement  Job-design errors
• Placement decisions  Equal employment
• Training and development opportunity
needs  External challenges
• Career planing and  Feedback to human resources
development

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 Elements of performance appraisal system
Employee Performance Employee
performance appraisal feedback

Performance
Performance
measure
measure

Performance
Performance
standards
standards

HR Employee
decision records
 Performance standard
• Performance standard serve as benchmark against
which performance is measured
• It should be:
– Related to the desired result of each job
– Written report of the standards
– Employee should be advised of those standards
before the evaluation occurs

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 Performance measures

Direct observe
Indirect observe

 Objective performance measures

 Subjective performance measures

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 Performance Measures

Types of Relative degree of

performance accuracy
measure Direct Indirect

Objective Very high High

Subjective Low Very low

 Performance appraisal challenges

Legal constraint

Legally defensible appraisal procedures

Legally defensible appraisal content

Legally defensible documentation of appraisal

results

Legally defensible raters

Rater biases
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 PROBLEMS IN PERFORMANCE APPRAISAL

• The halo effect

The error of central tendency
Leniency and strictness bias
Cross-culture biases
Personal prejudice
• The recency effect

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TYPES OF PERFORMANCE APPRAISAL

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 1. Past-Oriented Appraisal
Based on past performance to evaluate individual
job performance
Pros

Dealing with performance that has already occurred,

the performance can be measured
Give feed back to improve performance
Cons
Past performance can not be changed

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 Past-Oriented Appraisal…

1.Rating scales 6.Behaviorally anchored

2.Checklists rating scale
3.Forced choice method 7.Field review method
4.Critical incident 8.Performance tests and
method observations
5.Accomplishment 9.Comparative evaluation
method approaches

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 1.Rating Scales
Rater provides a subjective evaluation of an individual
performance along a scale from low to high
Advantage
Give numerical values to allow an average score to be
computed & compared
Inexpensive to develop, administer & apply for large number
of employees
Disadvantage
Exposed to subjective evaluation
If specific performance criteria are hard to identify, the
criteria may rely on irrelevant personality traits that dilute
the meaning of the evaluation
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 2.Checklists & Weighted Checklists
Requires the rater to select words or statements that describe
the employee’s performance & characteristics
Weighted checklists allow the rating to be quantified, total
scores can be determined
Advantage
Economic, easy to administer & can be standardized
If the list contain enough items, it may provides an accurate
picture of employee performance.
Disadvantage
Easy to be biased (especially the halo effect)

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 3.Critical Incident Method
Requires the rater to record the statements that describe
extremely good or bad behaviors related to job performance
including a brief explanations of what happened
Advantage
Useful for giving employee job-related feedback
Reduce the recency bias in the case raters record incident
throughout the rating period
Main drawbacks
• Supervisors often do not record incidents as it occurs
• Feeling that extreme negative incident happens lately make
supervisors unwilling to forgive employee’s mistakes
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 4.Behaviorally Anchored Rating Scales
Are a family of evaluation approaches that identify and
evaluate relevant job-related behaviors
Two most popular approaches are
 Behavioral Expectation Scales
 Behavioral Observation Scales
Based on description of good and bad performance, job
behaviors will be classified into major categories of job
performance
The method reflects the employee’s performance

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 4.Behavioral Observation Scales
• Use of specific behaviors as benchmarks
• Require rater to report the frequency of those
behaviors
Advantage
• Better to provide specific feed back
• Minimize personality disputes
• More accurate and more legally defensible
Disadvantage
• Limited number of performance
• Complex to develop & administer
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 5.Comparative Evaluation Approaches
• Collection of different methods that compare one
person’s performance with performance of
coworkers
1. Ranking method
2. Forced distributions
3. Point allocation method
4. Paired comparison

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 6.Forced Distributions
Rater sorts employees into different classifications
(usually proportions in its category)
Advantage
Overcome biases of central tendency, leniency, and
strictness errors
Disadvantage
May cause employees to resent

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 7.Paired Comparison

Compare each employee with all the other

employees in the same group who are being rated
Overall performance is usually the basis for
comparison
There is halo effect and recency bias
It overcomes biases of central tendency, leniency,
and strictness errors.

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 8.Future-Oriented Appraisals
Focuses on future performance by evaluating
employee’s potential or setting future goals.

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 What are the common approaches ?
a. Self - Appraisals
b. Management by Objectives
c. Psychological Appraisals
d. Assessment Centers

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 a) Self - Appraisals

Employees evaluate themselves

Reduce defensive behaviors. Serve for setting future
goals
Require employee’s high involvement in and
commitment to the improvement process
Applicable to both past - or future oriented appraisals

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Example: Bechtel Construction & Engineering Company

“Employees write down their understanding of the

job, complete the worksheet by filling in the
portions that relate to job accomplishments,
performance difficulties, and suggestions for
improvement“.

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 b) Management by Objectives (MbO)
Objectively measurable goals agreed upon by the
employees and managers
Advantages:
Biases reduced
Motivation for achievement
Employees able to adjust their efforts
More relevant training and development efforts
• In practice, it has difficulties
– Too ambitious or narrow goals
– One-side goals (imposed by supervisors)

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Example: Xerox’s Reprographic Business Group

“Objectives are set between the managers and the

employees annually...At the end of the year, a
written appraisal evaluates performance against the
objectives”

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 d) Assessment Centers
“Composite ratings” that rely on:
In-depth interviews
Psychological tests
Personal background histories
Rating by attendees, peers
Leaderless group discussions
Rating by managers, psychologists
Simulated work exercises

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 d) Assessment Centers

• Benefits that it brings are:

- Good prediction of on-the-job performance
- Assist HR planning and other HR decisions
- Reserved for potential managers, who will be
able to take on more responsibilities

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Implications of the Appraisal Process

Training Raters and Evaluators

Evaluation Interviews

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 Training Raters and Evaluators

Why training ?
Widespread understanding and support of managers
Knowledge of the system
Purpose of the system
• How to train?
- One - day training workshops
- Appraisal form reviewing
- Video presentation
- Role playing
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For consistency and understanding of evaluation:

82% organizations provided raters and evaluators

with written instructions
60% organizations provided raters and evaluators
with training

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 Evaluation Interviews

To give employees essential feedback about past

performance or future potential
What to prepare ?
- a review of previous appraisals
- identify specific behaviors to be reinforced
- a plan or approach to provide feedback

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 what are the main approaches ?

tell-and-sell: persuade employees to perform better

tell-and-listen: listen to the employees and counsel
them how to perform better
problem- solving: identify employees’ problem, try
to remove it

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 Hint !
For more effective review session try to:
1. Emphasize positive aspects of employee performance
2. Tell each employee that the evaluation session is to
improve performance, not to discipline
3. Conduct the performance review session in private
with minimum interruptions
4. Review performance formally at least annually and
more frequently for new employees or those who are
performing poorly
5. Make criticisms specific, not general and vague

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 Hint !
For more effective review session try to:
6. Focus criticisms on performance, not personality
characteristics
7. Stay calm and do not argue with the person being
evaluated

8. Identify specific actions the employee can take to

improve performance
9. Emphasize the evaluator’s willingness to assist the
employee’s efforts and to improve performance
10. End the evaluation sessions by stressing the positive
aspects of the employee’s performance
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 Summary
It serves as “quality control check”
Setting performance standards
Choosing effective appraisal technique
Training evaluators and raters
Providing feedback to the employees
Weighted rating scales are susceptible to rater
biases.
Trying to make the instrument work in all cultures
and at different levels in the organization
The comparison across these different boundaries
are inappropriate.
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 Summary
 Warn people of traditional biases that are likely to
creep into the evaluation process.
 Mainly:
• halo-effect
• error of central tendency
• error of strictness
• Performance appraisals give the HR department
feedback on how employees are performing.
• This feedback alerts HR to how well the
employment, T & D activities match the
organization’s strategic needs.

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 Summary
If standards are properly set it also gives each manager an
opportunity to align employees’ performance with the
organization’s strategic needs and plans.
The various biases should be reviewed and discussed.
Managers should be encouraged to justify their evaluations
based on employees’ actual performance.
specific guidelines for conducting the interview itself,
regardless of the approach selected:
– Emphasize positive aspects
– Make criticisms specific, on performance not personality
– Identify specific actions for improvement
– Offer your support

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 Summary

• Performance appraisals provide feedback on the

entire range of HR activities:
• poor performance
• problems in the way the HR department
– meets external challenges
– collects job analysis information
– handles staffing
– provides orientation, T & D

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Thank you

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