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PART THREE TRAINING AND HR DEVELOPMENT

C H A P T E R T E i g h t

Performance Management and

Appraisal Today
8
Lecture Outline
I. Basic Concepts in Performance Appraisal
A. Why Appraise Performance?
B. Steps in Performance Appraisal
C. Defining the Employee's Performance Standards
D. Who Should Do the Appraising?
II. Traditional Appraisal Methods In Brief: This chapter gives an
A. Graphic Rating Scale Method overview of the performance
B. Alternation Ranking Method appraisal process and the
C. Paired Comparison Method different tools and methods
D. Forced Distribution Method
available. The main topics
E. Critical Incident Method
F. Behaviorally Anchored Rating Scales covered include the performance
G. Appraisal Forms in Practice management process, appraisal
H. The Management by Objectives Method methods, appraisal performance
I. Computerized and Online Performance Appraisals problems and solutions, and the
J. Virtual Appraisal Games appraisal interview.
K. Electronic Performance Monitoring
L. Talent Management and Differential Employee Appraisal
M. Conversation Days
Interesting Issues: Despite lots
III. How to Deal with Rater Error Problems and the of attention, money, and effort,
Appraisal Interview performance appraisals remain
A. Clarify Standards an area with which few managers
B. Avoid Halo Effect Ratings or employees are satisfied. The
C. Avoid the Middle following questions may be
D. Don’t Be Lenient or Strict
worth discussing. Do we have a
E. Diversity Counts
F. Know Your Employment Law
good enough system yet? Is there
G. How to Conduct the Appraisal Interview an intrinsic problem with
IV. Employee Engagement Guide for Managers: Use performance appraisals? Is it just
the Appraisal Interview to Build Engagement human nature to dislike them?
V. Performance Management Today
A. Total Quality Management and Performance Appraisal
B. What Is Performance Management?
C. HR and Social Media
D. The Manager’s Role in Performance Management

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ANNOTATED OUTLINE

I. Basic Concepts in Performance Management and Appraisal

A. Why Appraise Performance? Many employers still base pay, promotions,

assignments and the like on employee appraisals. Appraisals play an
integral role in the employer's performance management process. The
appraisal lets the supervisor and subordinate develop a plan for
correcting any deficiencies, and reinforce those things the employee
does correctly. Appraisals serve a useful career planning purpose.
Finally, appraisals play an important role in identifying training and
development needs.

B. Steps in Performance Appraisal  Stripped to its essentials,

performance appraisal always involves the three-step performance
appraisal process: (1) setting work standards, (2) assessing the
employee’s actual performance relative to those standards which
involves some rating form, and (3) providing feedback to the employee
with the aim of helping him or her to eliminate performance deficiencies
or to continue to perform above par.

C. Defining the Employee's Performance Standards  Managers use

goals, job dimensions or traits, and competencies—or some combination
of these—to establish performance standards. These allow managers to
assess to what extent the employee is attaining his or her numerical
goals. Effective goals are S.M.A.R.T: specific, measurable, attainable,
relevant, and timely. Job dimensions permit evaluation of non-numerical
goals. Setting goals for competencies allows the manager to appraise
the employee’s skills, knowledge, and behaviors.

D. Who Should Do the Appraising?  The immediate supervisor is usually

in the best position to observe and evaluate the subordinate’s
performance, and typically is responsible for that person’s performance.

1. Peer Appraisals  Becoming more popular with firms using self-

managing teams.

2. Rating Committees  Consist of multiple raters, typically the

employee’s immediate supervisor and three or four other
supervisors.

3. Self-Ratings  Tend to be higher than supervisor or peer ratings.

4. Appraisal by Subordinates  Also known as upward feedback,

subordinates anonymously rate their supervisor’s performance.

5. 360-Degree Feedback  Ratings are collected from the employee’s

supervisors, subordinates, peers, and internal or external customers.
This method is the subject of considerable debate. One study found
significant correlation between 360-degree ratings and conventional
ratings. Firms should carefully assess potential costs, carefully train
those giving feedback, and not rely solely on 360-degree feedback.

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6. Social Media and HR  “Crowd” appraisals is an approach to use

social-media to let everyone in the company appraise each other. It
supplements traditional appraisals.

II. Traditional Appraisal Methods

A. Graphic Rating Scale Method  It is the simplest and most popular

performance appraisal technique. A scale is used to list a number of
traits and a range of performance for each, and then the employee is
rated by identifying the score that best describes his/her performance
level for each trait. (See example in Figure 8.2.) Managers must decide
which job performance aspects to measure. Some options include
generic dimensions, actual job duties, or behaviorally recognizable
competencies.

B. Alternation Ranking Method  Employees are ranked from best to worst

on a particular trait, choosing highest, then lowest, until all are ranked.
Figure 8.5 shows an example of this method.

C. Paired Comparison Method  It involves ranking employees by making

a chart of all possible pairs of employees for each trait and indicating
which one is the better employee of the pair. Figure 8.6 shows an
example of the paired comparison method.

D. Forced Distribution Method  Predetermined percentages of rates are

placed in various performance categories, which is similar to grading on
a curve. This method makes the best and worst stand out. But some
balk at forced distribution appraisal. Inequities can arise for example
when a high performing team must cut their “worst” employee who is a
better performer than employees in a different department.

E. Critical Incident Method  In this approach, a supervisor keeps a record

of uncommonly good and/or undesirable examples of an employee’s
work-related behavior, and reviews the record with the employee at
predetermined times. The challenge for the supervisor is to make the
time to record the incidents as soon as possible.

F. Behaviorally Anchored Rating Scales (BARS)  This method combines

the benefits of narratives, critical incidents, and quantified scales by
anchoring a scale with specific behavioral examples of good or poor
performance.

G. Appraisal Forms in Practice  The most effective appraisal forms often

merge several approaches.

H. The Management by Objectives Method (MBO)  The manager sets

specific measurable goals with each employee and then periodically
discusses the employee’s progress toward these goals. The process
consists of six steps: 1) set the organization's goals; 2) set departmental
goals; 3) discuss departmental goals; 4) define expected results; 5)
conduct performance reviews; and 6) provide feedback.

İ. Computerized and Online Performance Appraisal  This method

generally enables managers to rate employees on a series of

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performance traits, and then generate written text to support each part of
the appraisal.

J. Virtual Appraisal Games  Allows employees to evaluate and award

each other through a virtual game. Employees can give real-time
feedback to each other including virtual gifts and points.

K. Electronic Performance Monitoring  These systems use computer

network technology to allow managers access to their employees’
computers and telephones.

L. Talent Management and Differential Employee Appraisal  Some talent

management experts suggest that company resources should be
directed to the company’s mission-critical employees, those who are
critical to achieving the company’s strategic goals.

M. Conversation Days  The emphasis in these manager–employee

conversations is on areas for improvement and growth, and on setting
stretch goals that align with the employee’s career interests. There are
no explicit performance ratings.

III. How to Deal with Rater Error Problems and the Appraisal Interview

It can be difficult to rate performance for several reasons. For employees,

much depends on a good rating, including career progress, or being able to
obtain a raise. There are also technical problems that can affect the fairness
of the process.

A. Clarify Standards  Ambiguous traits and degrees of merit can result in

an unfair appraisal.

B. Avoid Halo Effect Ratings  The influence of a rater’s general

impression on ratings of specific qualities can be a problem.

C. Avoid the Middle  The central tendency problem can occur when
supervisors stick to the middle of the rating scales, thus rating everyone
average.

D. Don’t be Lenient or Strict  Supervisors have the tendency to rate

everyone either high or low.

E. Diversity Counts  The concept refers to the tendency to allow

individual differences such as age, race, and sex affect employees’
appraisal ratings.

F. Know Your Employment Law  Inadequate appraisal systems tend to

be at the root of illegal discriminatory actions.

G. How to Conduct the Appraisal Interview  The supervisor and

subordinate review the appraisal and make plans to remedy deficiencies
and reinforce strengths. During the interview: 1) Talk in terms of
objective work data, 2) Don’t get personal, 3) Encourage the person to
talk, and 4) Don’t tiptoe around.

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1. How to Handle a Defensive Subordinate  Recognize the behavior

is normal and never attack a person’s defenses. Postpone the
action and recognize your own limitations.

2. How to Criticize a Subordinate  Do so in a way that allows the

person to maintain his or her dignity.

3. How to Ensure the Interview Leads to Improved Performance  The

main aim is to get them to improve their performance. Must provide
the tools and the support the person needs to improve.

4. How to Handle a Formal Written Warning  There are times when

an employee’s performance is so poor that a formal written warning
is required.

IV. Employee Engagement Guide for Managers: Use the Appraisal

Interview to Build Engagement

A. Research shows that managers can use the appraisal interview to

improve their employees’ level of engagement. Managers should take
the opportunity to show how an employee’s effort contributes to the
company’s success. They should use the interview to emphasize the
meaningfulness of what the employee does. Managers should be
supportive, and use the interview to make sure the employee has what
he or she needs to do a good job. Managers should focus on strengths
and use the opportunity to show employees that the manager listens to
his or her ideas.

V. Performance Management Today

A. Total Quality Management and Performance Appraisal  Total Quality

Management (TQM) programs are organization-wide programs that
integrate all functions and processes of the business such that all
aspects of the business including design, planning, production,
distribution, and field service are aimed at maximizing customer
satisfaction through continuous improvements.

B. What is Performance Management?  Performance management is

continuous, not just once a year, it is goal-directed, and it is continuously
re-evaluating and modifying the way people accomplish their work.

C. HR and Social Media  IT allows management to monitor and correct

deficiencies in real-time. Such performance management involves
assigning financial and nonfinancial goals, informing employees of their
goals, using an IT system to monitor and assess performance, and
taking corrective action.

D. The Manager’s Role in Performance Management  Managers must

have the right philosophy and behaviors to support performance
management. This includes an aim for continuous improvement, and
linking employee goals to company goals.

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KEY TERMS

Performance appraisal Any procedure that involves (1) setting work standards; (2)
assessing the employee’s actual performance relative to
the standards; and (3) providing feedback to the employee
with the aim of motivating that person to eliminate
performance deficiencies or to continue the performance
above par.

360-degree feedback The employer collects performance information all around

an employee—from his or her supervisors, subordinates,
peers, and internal or external customers.

Graphic rating scale The graphic rating scale is a performance appraisal tool
that lists several job dimensions and a range of
performance values for each. The supervisor rates each
subordinate by circling or checking the score that best
describes the subordinate’s performance for each trait or
dimension.

Performance management The continuous process of identifying, measuring, and

developing the performance of individuals and teams and
aligning their performance with the organization’s goals.

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