Human Resource Management Chapter 8 PERFORMANCE MANAGEMENT AND APPRAISAL

2008 by Prentice Hall

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Performance Management
Goal-oriented process directed toward ensuring organizational processes are in place to maximize productivity of employees, teams, and organization Training and performance appraisal play significant role in process With PM, training, appraisal, and rewards, is integrated for the purpose of continuous organizational effectiveness
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Performance Appraisal Defined

Formal system of review and evaluation of individual or team performance Often negative, disliked activity that seems to elude mastery
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Uses of Performance Appraisal

Human resource planning - Data must be available to identify those who have the potential to be promoted Recruitment and selection - May be helpful in predicting the performance of job applicants Training and development - Point out an employees specific needs for training and development Career planning and development - Essential in assessing an employees strengths and weaknesses and in determining the persons potential
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Uses of Performance Appraisal (Cont.)

Compensation programs - Provide a basis for rational decisions regarding pay adjustments Internal employee relations - Used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer Assessment of employee potential - Some organizations attempt to assess employee potential as they appraise their job performance
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Performance Appraisal Process

External Environment Internal Environment

Identify Specific Performance Appraisal Goals

Establish Performance Criteria (Standards) and Communicate Them To Employees Examine Work Performed Appraise the Results Discuss Appraisal with Employee
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Establish Performance Criteria (Standards)

Traits Behaviors Competencies Goal Achievement Improvement Potential
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Traits
Certain employee traits such as attitude, appearance, and initiative are the basis for some evaluations May be either unrelated to job performance or difficult to define Certain traits may relate to job performance and, if this connection is established, using them may be appropriate
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Behaviors
Organizations may evaluate person according to behavior or competencies Examples: leadership style, developing others, teamwork and cooperation, or customer service orientation If certain behaviors result in desired outcomes, there is merit in using them in the evaluation process
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Competencies
Broad range of knowledge, skills, traits and behaviors that may be technical in nature, relate to interpersonal skills. In leadership jobs, relevant competencies might include developing talent, delegating authority and people management skills Competencies selected should be those that are closely associated with job success

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Goal Achievement
It is used if organizations consider ends more important than means Individual or team should control outcomes Those results that lead to firms success

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Improvement Potential
Many of criteria used focus on the past Cannot change past Firms should emphasize future, including behaviors and outcomes needed to develop the employee and to achieve firms goals

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Performance Appraisal Methods

360-Degree Evaluation Rating Scales Critical Incidents Essay Work Standards Ranking Paired Comparisons Forced Distribution Behaviorally Anchored Rating Scales (BARS) Result-Based Systems

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360-Degree Valuation
Multi-rater evaluation Input from multiple levels within firm and external sources Focuses on skills needed across organizational boundaries More objective measure of performance Process more legally defensible
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Rating Scales
Rates according to defined factors Judgments are recorded on a scale Many employees are evaluated quickly
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Critical Incidents
Written records of highly favorable and unfavorable work actions Appraisal more likely to cover entire evaluation period Does not focus on last few weeks or months

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Essay
Brief narrative describing performance Tends to focus on extreme behavior Depends heavily on evaluator's writing ability Comparing essay evaluations might be difficult

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Work Standards
Compares performance to predetermined standard Standards - Normal output of average worker operating at normal pace Time study and work sampling used Workers need to know how standards were set
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Ranking
All employees from group ranked in order of overall performance Comparison is based on single criterion, such as overall performance

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Paired Comparison
Variation of ranking method Compares performance of each employee with every other employee in the group

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Forced Distribution
Rater assigns individual in work group to limited number of categories similar to normal distribution Assumes all groups of employees have same distribution

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Behaviorally Anchored Rating Scales (BARS)

Combines traditional rating scales and critical incidents methods Job behaviors derived from critical incidents described more objectively
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Result-Based Systems
Manager and subordinate agree on objectives for next appraisal Evaluation based on how well objectives accomplished
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Problems in Performance Appraisal

Appraiser discomfort
Lack of objectivity Halo/horn error Leniency/strictness Central tendency Recent behavior bias Personal bias Manipulating the evaluation Employee anxiety
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Appraiser Discomfort
Performance appraisal process cuts into managers time Experience can be unpleasant when employee has not performed well
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Lack of Objectivity
In rating scales method, commonly used factors such as attitude, appearance, and personality are difficult to measure Factors may have little to do with employees job performance Employee appraisal based primarily on personal characteristics may place evaluator and company in untenable positions
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Halo/Horn Error
Halo error - Occurs when manager generalizes one positive performance feature or incident to all aspects of employee performance resulting in higher rating Horn error - Evaluation error occurs when manager generalizes one negative performance feature or incident to all aspects of employee performance resulting in lower rating
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Leniency/Strictness
Leniency - Giving undeserved high ratings Strictness - Being unduly critical of employees work performance Worst situation is when firm has both lenient and strict managers and does nothing to level inequities
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Central Tendency
Error occurs when employees are incorrectly rated near average or middle of scale May be encouraged by some rating scale systems requiring evaluator to justify in writing extremely high or extremely low ratings

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Recent Behavior Bias

Employees behavior often improves and productivity tends to rise several days or weeks before scheduled evaluation Only natural for rater to remember recent behavior more clearly than actions from more distant past Maintaining records of performance

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Personal Bias (Stereotyping)

Managers allow individual differences such as gender, race or age to affect ratings they give Effects of cultural bias, or stereotyping, can influence appraisals Other factors Example: mild-mannered employees may be appraised more harshly simply because they do not seriously object to results
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Manipulating the Evaluation

Sometimes, managers control virtually every aspect of appraisal process and are in position to manipulate system Example: Want to give pay raise to certain employee. Supervisor may give employee a undeserved high performance evaluation

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Employee Anxiety
Evaluation process may create anxiety for appraised employee Opportunities for promotion, better work assignments, and increased compensation may hinge on results
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Characteristics of Effective Appraisal System

Job-related criteria Performance expectations Standardization Trained appraisers Continuous open communication Conduct performance reviews Due process
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Job-Related Criteria
Criteria should be directly related to the job

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Performance Expectations
Employees should know in advance what is expected from them

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Standardization
Firms should use same evaluation instrument for all employees in same job category who work for same supervisor
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Trained Appraisers
Appraiser should be continually trained

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Continuous Open Communication

Good appraisal system provides highly desired feedback on continuing basis

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Conduct Performance Reviews

Special time should be set for formal discussion of employees performance

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Due Process
Provide employees opportunity to appeal appraisal results Must have procedure for criticism and having them addressed objectively

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