Performance Management and Appraisal 9 Chapter 9-1

Performance Performance Management and Management and AppraisalAppraisal

9

Chapter 9-1

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1.1. Define performance management and discuss how it Define performance management and discuss how it differs from performance appraisal.differs from performance appraisal.

2.2. Describe the appraisal process.Describe the appraisal process.

3.3. Set effective performance appraisal standards.Set effective performance appraisal standards.

4.4. Develop, evaluate, and administer at least four Develop, evaluate, and administer at least four performance appraisal tools.performance appraisal tools.

5.5. Explain and illustrate the problems to avoid in Explain and illustrate the problems to avoid in appraising performance.appraising performance.

6.6. Discuss the pros and cons of using different raters to Discuss the pros and cons of using different raters to appraise a person’s performance.appraise a person’s performance.

7.7. Perform an effective appraisal interview.Perform an effective appraisal interview.

LEARNING OUTCOMESLEARNING OUTCOMES

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Basic Concepts in Basic Concepts in PerformancePerformance

Management and AppraisalManagement and AppraisalPerformance

Appraisal

• Setting work standards,

• Assessing performance,

• Providing feedback to employees to motivate, correct, and continue their performance.

Performance Management

An integrated approach to

ensuring that an employee’s

performance supports and

contributes to the organization’s strategic aims.

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FIGURE 9–1Online FacultyEvaluation Form

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Many employers still base pay, etc. Many employers still base pay, etc. oon employee n employee appraisalsappraisals

Appraisals play an integral role in the employer's Appraisals play an integral role in the employer's performance management process performance management process

The appraisal lets the boss and subordinate develop The appraisal lets the boss and subordinate develop a plan for correcting any deficiencies, and reinforce a plan for correcting any deficiencies, and reinforce those things the employee does correctly those things the employee does correctly

They serve a useful career planning purposeThey serve a useful career planning purpose

Appraisals play a role in identifying training and Appraisals play a role in identifying training and development needsdevelopment needs

Why Appraise Why Appraise Performance? Performance?

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Performance management Performance management is a uniquely goal-is a uniquely goal-

oriented and continuous way to appraise and oriented and continuous way to appraise and

manage employees’ performance. It is the manage employees’ performance. It is the

continuous process of identifying, measuring, continuous process of identifying, measuring,

and developing the performance of individuals and developing the performance of individuals

and teams and aligning their performance with and teams and aligning their performance with

the organizations’ goals.the organizations’ goals.

Performance Performance ManagementManagement

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Defining the Employee’s Defining the Employee’s Goals and Work StandardsGoals and Work Standards

Set SMART goals

Assign challenging/ doable goals

Assign specific

goals

Guidelines for Effective Goal Setting

Assign measurable

goals

Encourage participatio

n

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Setting SMART GoalsSetting SMART Goals

• SSpecific, and clearly state the desired results.pecific, and clearly state the desired results.

• MMeasurable in answering “how much.”easurable in answering “how much.”

• AAttainable, and not too tough or too easy.ttainable, and not too tough or too easy.

• RRelevant to what’s to be achieved.elevant to what’s to be achieved.

• TTimely in reflecting deadlines and milestones.imely in reflecting deadlines and milestones.

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Guidelines for Effective Goal SettingGuidelines for Effective Goal Setting

• Assign Specific GoalsAssign Specific Goals Employees with specific goals usually perform betterEmployees with specific goals usually perform better

• Assign Measurable GoalsAssign Measurable Goals Express goals in quantitative terms and include target dates or Express goals in quantitative terms and include target dates or

deadlinesdeadlines

• Assign Challenging but Doable GoalsAssign Challenging but Doable Goals Goals should be challenging, but not so difficult that they Goals should be challenging, but not so difficult that they

appear impossible or unrealisticappear impossible or unrealistic

• Encourage ParticipationEncourage Participation Participatively set goals do tend to be set higherParticipatively set goals do tend to be set higher

Employee’s Goals and Performance Employee’s Goals and Performance StandardsStandards

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• Basing appraisal Basing appraisal standards on required standards on required competenciescompetencies

• The role of job The role of job descriptionsdescriptions

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 9–11

Who Should Do the Appraising?Who Should Do the Appraising?

Self-rating

Subordinates

360-degree feedback

Potential Appraisers

Immediate supervisor

Peers

Rating committee

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Performance Appraisal MethodsPerformance Appraisal Methods

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2

3

4

5

Alternation ranking

Graphic rating scale

Paired comparison

Forced distribution

Critical incident

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7

8

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Behaviorally anchored rating scales (BARS)

Narrative forms

Management by objectives (MBO)

Computerized and Web-based performance appraisal

Merged methods

Appraisal Methodologies

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Graphic Rating Scale MethodGraphic Rating Scale Method:: A scale is used to list a number of traits and a range of A scale is used to list a number of traits and a range of performance for each, then the employee is rated by performance for each, then the employee is rated by identifying the score that best describes his/her identifying the score that best describes his/her performance level for each trait. performance level for each trait.

Managers must decide which job performance aspects to Managers must decide which job performance aspects to measure. Some options include generic dimensions, measure. Some options include generic dimensions, actual job duties, or behaviorally recognizable actual job duties, or behaviorally recognizable competencies.competencies.


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FIGURE 9–3Sample Graphic Rating Performance Rating Form

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FIGURE 9–3 One Item from an Appraisal Form Assessing Employee Performance on Specific Job-Related Duties

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Alternation Ranking MethodAlternation Ranking Method is where employees are is where employees are ranked from best to worst on a particular trait, choosing ranked from best to worst on a particular trait, choosing highest, then lowest, until all are ranked. highest, then lowest, until all are ranked.

Since it is usually easier to distinguish between the worst Since it is usually easier to distinguish between the worst and best employees, an alternation ranking method is and best employees, an alternation ranking method is most popular. most popular.

First, list all subordinates to be rated, and then cross out First, list all subordinates to be rated, and then cross out the name of any not known well enough to rank. the name of any not known well enough to rank.


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FIGURE 9–6 Scale for Alternate Ranking of Appraisee

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Paired Comparison MethodPaired Comparison Method helps make the ranking helps make the ranking

method more precise. method more precise.

For every trait (quantity of work, quality of work, and so For every trait (quantity of work, quality of work, and so

on), you pair and compare every subordinate with every on), you pair and compare every subordinate with every

other subordinate. other subordinate.


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FIGURE 9–7 Ranking Employees by the Paired Comparison Method

Note: + means “better than.” - means “worse than.” For each chart, add up the number of +’s in each column to get the highest ranked employee.

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Forced Distribution MethodForced Distribution Method is similar to grading on a curve. is similar to grading on a curve.

With this method, you place predetermined percentages of With this method, you place predetermined percentages of rates into several performance categories. The proportion in rates into several performance categories. The proportion in each category need to be symmetrical. each category need to be symmetrical.

One practical, if low-tech, way to do this is to write each One practical, if low-tech, way to do this is to write each employee’s name on a separate index card. Then, for each employee’s name on a separate index card. Then, for each trait (quality of work, creativity, and so on), place the trait (quality of work, creativity, and so on), place the employee’s card in the appropriate performance category.employee’s card in the appropriate performance category.


Role Model ModerateRole Model Moderate Below ExpectationsBelow Expectations

10 % 20 % 40 % 20 % 10 %10 % 20 % 40 % 20 % 10 %

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Critical Incident MethodCritical Incident Method is where a supervisor keeps a is where a supervisor keeps a record of positive and negative examples (critical incidents) of record of positive and negative examples (critical incidents) of a subordinate’s work-related behavior. Every 6 months or so, a subordinate’s work-related behavior. Every 6 months or so, supervisor and subordinate meet to discuss the latter’s supervisor and subordinate meet to discuss the latter’s performance, using the incidents as examples.performance, using the incidents as examples.

AdvantagesAdvantages

It provides examples of good and poor performance the It provides examples of good and poor performance the supervisor can use to explain the person’s rating. supervisor can use to explain the person’s rating.

It makes the supervisor think about the subordinate’s It makes the supervisor think about the subordinate’s appraisal all during the yearappraisal all during the year..

The list provides examples of what specifically the The list provides examples of what specifically the subordinate can do to eliminate deficiencies. subordinate can do to eliminate deficiencies.


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TABLE 9–1 Examples of Critical Incidents for Assistant Plant Manager

Continuing Duties Targets Critical Incidents

Schedule productionfor plant

90% utilization of personnel and machinery in plant; orders delivered on time

Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month

Supervise procurement of raw materials and on inventory control

Minimize inventory costs while keeping adequate supplies on hand

Let inventory storage costs rise 15% last month; over-ordered parts “A” and “B” by 20%; under-ordered part “C” by 30%

Supervise machinery maintenance

No shutdowns due to faulty machinery

Instituted new preventative maintenance system for plant; prevented a machine breakdown by discovering faulty part

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Narrative FormsNarrative Forms involve rating the employee’s performance involve rating the employee’s performance

for each performance factor, for each performance factor,

Writing down examples and an improvement plan, Writing down examples and an improvement plan,

Aiding the employee in understanding where his/her Aiding the employee in understanding where his/her

performance was good or bad, performance was good or bad,

Summarizing by focusing on problem solving.Summarizing by focusing on problem solving.


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FIGURE 9–8Appraisal-Coaching Worksheet

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Behaviorally Anchored Rating Scale Behaviorally Anchored Rating Scale (BARS)(BARS)Developing a BARSDeveloping a BARS

1.1. Write critical incidentsWrite critical incidents

2.2. Develop performance Develop performance dimensionsdimensions

3.3. Reallocate incidentsReallocate incidents

4.4. Scale the incidentsScale the incidents

5.5. Develop a final Develop a final instrumentinstrument

Advantages of BARSAdvantages of BARS A more accurate gaugeA more accurate gauge

Clearer standardsClearer standards

FeedbackFeedback

Independent dimensionsIndependent dimensions

ConsistencyConsistency

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FIGURE 9–9Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skills

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Management by Objectives (MBO)Management by Objectives (MBO)

• A comprehensive and formal organizationwide A comprehensive and formal organizationwide goal-setting and appraisal program requiring:goal-setting and appraisal program requiring:

1.1. Setting of organization’s goalsSetting of organization’s goals

2.2. Setting of departmental goalsSetting of departmental goals

3.3. Discussion of departmental goalsDiscussion of departmental goals

4.4. Defining expected results (setting individual goals)Defining expected results (setting individual goals)

5.5. Conducting periodic performance reviewsConducting periodic performance reviews

6.6. Providing performance feedbackProviding performance feedback

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Using MBOUsing MBO

Setting unclear objective

Conflict with subordinates

over objectives

Potential Problems with MBO

Time-consuming appraisal process

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Computerized and Web-Based Computerized and Web-Based Performance Appraisal SystemsPerformance Appraisal Systems

• Allow managers to keep notes on subordinates.Allow managers to keep notes on subordinates.• Notes can be merged with employee ratings.Notes can be merged with employee ratings.• Software generates written text to support appraisals.Software generates written text to support appraisals.• Allows for employee self-monitoring and self-evaluation.Allows for employee self-monitoring and self-evaluation.

• Electronic Performance Monitoring (EPM) SystemsElectronic Performance Monitoring (EPM) Systems Use computer network technology to allow managers access to Use computer network technology to allow managers access to

their employees’ computers and telephones.their employees’ computers and telephones. Managers can monitor the employees’ rate, accuracy, and time Managers can monitor the employees’ rate, accuracy, and time

spent working online.spent working online.

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Dealing with Dealing with Performance Appraisal Performance Appraisal

ProblemsProblems

Unclear standards

Leniency or strictness

Halo effect

Potential Rating Scale Appraisal Problems

Central tendency

Bias

Recency effects

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Unclear StandardsUnclear Standards

This graphic rating scale seems objective. However, it This graphic rating scale seems objective. However, it would probably result in unfair appraisals, because the would probably result in unfair appraisals, because the traits and degrees of merit are ambiguous. traits and degrees of merit are ambiguous.

For example, different supervisors would probably define For example, different supervisors would probably define “good” performance, “fair” performance, and so on “good” performance, “fair” performance, and so on differently. differently.

The same is true of traits such as “quality of work” or The same is true of traits such as “quality of work” or “creativity”.“creativity”.

Potential Rating Scale Appraisal ProblemsPotential Rating Scale Appraisal Problems

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TABLE 9–2 A Graphic Rating Scale with Unclear Standards

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Halo EffectHalo Effect

Experts define halo effect as “the influence of a rater’s Experts define halo effect as “the influence of a rater’s general impression on ratings of specific ratee qualities. general impression on ratings of specific ratee qualities.

For example, supervisors often rate unfriendly employees For example, supervisors often rate unfriendly employees lower on all traits, rather than just for the trait “gets along lower on all traits, rather than just for the trait “gets along well with others”. Being aware of this problem is a big step well with others”. Being aware of this problem is a big step toward avoiding it. toward avoiding it.


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Central TendencyCentral Tendency

Where supervisors stick to the middle of the rating scales, Where supervisors stick to the middle of the rating scales, thus rating everyone average. thus rating everyone average.

For example, if the rating scale ranges from 1 to 7, they For example, if the rating scale ranges from 1 to 7, they tend to avoid the highs (6 and 7) and lows (1 and 2) and tend to avoid the highs (6 and 7) and lows (1 and 2) and rate most of their people between 3 and 5. Central rate most of their people between 3 and 5. Central tendency basically means rating all employees’ average.tendency basically means rating all employees’ average.

Doing so distorts the evaluations, making them less useful Doing so distorts the evaluations, making them less useful for promotion, salary, or counseling purposes. for promotion, salary, or counseling purposes.


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Leniency or StrictnessLeniency or Strictness: : Supervisors have the tendency to rate everyone either high Supervisors have the tendency to rate everyone either high or low, just as some instructors are notoriously high or low or low, just as some instructors are notoriously high or low graders. This strictness/leniency problem is especially graders. This strictness/leniency problem is especially severe with graphic rating scale. On the other hand, severe with graphic rating scale. On the other hand, ranking forces supervisors to distinguish between high and ranking forces supervisors to distinguish between high and low performers.low performers.

Recency EffectsRecency Effects::This involves letting what the employee has done recently This involves letting what the employee has done recently blind the manager to the employee’s performance over the blind the manager to the employee’s performance over the rest of the year.rest of the year.

BiasBias:: The tendency to allow individual differences such as age, The tendency to allow individual differences such as age, race, and sex to affect the appraisal ratings employees race, and sex to affect the appraisal ratings employees receive, is a problem.receive, is a problem.


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Guidelines for Effective AppraisalsGuidelines for Effective Appraisals

Know the problems

Get agreement on a plan

Use the right tool

How to Avoid Appraisal Problems

Keep a diary

Be fair

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TABLE 9–3 Important Advantages and Disadvantages of Appraisal Tools

Tool Advantages Disadvantages

Graphic rating scale Simple to use; provides a quantitative rating for each employee.

Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems.

BARS Provides behavioral “anchors.” BARS is very accurate.

Difficult to develop.

Alternation ranking Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales.

Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent.

Forced distribution method

End up with a predetermined number or % of people in each group.

Employees’ appraisal results depend on your choice of cutoff points.

Critical incident method

Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis.

Difficult to rate or rank employees relative to one another.

MBO Tied to jointly agreed-upon performance objectives.

Time-consuming.

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Choosing the Right Appraisal ToolChoosing the Right Appraisal Tool

Accessibility AccuracyEase-of-useEmployee

acceptance

Criteria for Choosing an Appraisal Tool

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The Appraisal InterviewThe Appraisal Interview

Satisfactory—Promotable

Satisfactory—Not Promotable

Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable

Types of Appraisal Interviews

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Appraisal Interview GuidelinesAppraisal Interview Guidelines

Talk in terms of objective work data

Get agreement

Don’t get personal

Encourage the person to

talk

Guidelines for Conducting an Interview

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FIGURE 9–14Checklist During Appraisal Interview

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Handling Defensive ResponsesHandling Defensive Responses

1

Recognize your own limitations.

Never attack a person’s defenses.

How to Handle a Defensive Subordinate

Recognize that defensive behavior is normal.

Postpone action.

2

3

4

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How to Deliver CriticismHow to Deliver Criticism

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2

3

4

5

How to Criticize a Subordinate

Criticize in private, and do it constructively.

Do it in a manner that lets the person maintain his or her dignity and sense of worth.

Give daily feedback so that the review has no surprises.

Never say the person is “always” wrong.

Criticism should be objective and free of biases.

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Formal Written WarningsFormal Written Warnings• Purposes of a Written WarningPurposes of a Written Warning

To shake your employee out of bad habits.To shake your employee out of bad habits.

To help you defend your rating, both to your own boss and (if To help you defend your rating, both to your own boss and (if needed) to the courts.needed) to the courts.

• A Written Warning Should:A Written Warning Should: Identify standards by which employee is judged.Identify standards by which employee is judged.

Make clear that employee was aware of the standard.Make clear that employee was aware of the standard.

Specify deficiencies relative to the standard.Specify deficiencies relative to the standard.

Indicate employee’s prior opportunity for correction.Indicate employee’s prior opportunity for correction.

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Performance ManagementPerformance Management• Performance ManagementPerformance Management

Is the continuous process of identifying, measuring, and Is the continuous process of identifying, measuring, and developing the performance of individuals and teams and developing the performance of individuals and teams and aligning their performance with the organization’s goals.aligning their performance with the organization’s goals.

• How Performance Management How Performance Management DiffersDiffers FromFrom PerformancePerformance Appraisal Appraisal

A continuous process for continuous improvementA continuous process for continuous improvement

A strong linkage of individual and team goals to strategic goalsA strong linkage of individual and team goals to strategic goals

A constant reevaluation and modification of work processesA constant reevaluation and modification of work processes

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Basic Building Blocks of Basic Building Blocks of Performance ManagementPerformance Management

Direction sharing

Goal alignment

Ongoing performance monitoring

Rewards, recognition, and compensation

Coaching and development

support

Ongoingfeedback

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Using Information Technology toUsing Information Technology toSupport Performance ManagementSupport Performance Management

• Assign financial and nonfinancial goals to each team’s Assign financial and nonfinancial goals to each team’s activities along the strategy map chain of activities activities along the strategy map chain of activities leading up to the company’s overall strategic goals.leading up to the company’s overall strategic goals.

• Inform all employees of their goals.Inform all employees of their goals.

• Use IT-supported tools like scorecard software and Use IT-supported tools like scorecard software and digital dashboards to continuously monitor and assess digital dashboards to continuously monitor and assess each team’s and employee’s performance.each team’s and employee’s performance.

• Take corrective action at once.Take corrective action at once.

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K E Y T E R M S

performance appraisal

graphic rating scale

alternation ranking method

paired comparison method

forced distribution method

critical incident method

behaviorally anchored rating scale (BARS)

electronic performance monitoring (EPM)

unclear standards

halo effect

central tendency

strictness/leniency

bias

appraisal interview

performance management

Documents

Performance Management and Appraisal 9 Chapter 9-1