Chapter 9
Performance Management and Appraisal
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The Performance Appraisal Process
• Performance appraisal means evaluating an employee’s current and/or past performance
relative to his or her performance standards.
• 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 (this often
involves some rating form);
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.
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Why Appraise Performance?
• First, most employers base pay, promotion, and retention decisions on the employee’s
appraisal.
• Appraisals play a central role in the employer’s performance management process.
• The appraisal lets the manager and subordinate develop a plan for correcting any
deficiencies, and to reinforce the subordinate’s strengths.
• Appraisals provide an opportunity to review the employee’s career plans in light of his or
her exhibited strengths and weaknesses.
• Finally, appraisals enable the supervisor to identify if there is a training need, and the
remedial steps required.
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Who Should Do The Appraising?
• Appraisals by the immediate supervisor are still the heart of most appraisal processes.
• Getting a supervisor’s appraisal is relatively straightforward and makes sense.
• The supervisor is usually in the best position to observe and evaluate the subordinate’s
performance, and is responsible for that person’s performance.
• The human resources department serves an advisory role.
• Generally, they provide the advice on what appraisal tool to use, but leaves final decisions
on procedures to line managers.
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Who Should Do The Appraising?
• The human resource team should also train supervisors to improve their appraisal skills.
• However, relying only on supervisors’ appraisals isn’t advisable.
• For example, an employee’s supervisor may not appreciate how customers and colleagues
see the employee’s performance.
• There is also always some danger of bias for or against the employee.
• If so, managers have several options.
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Who Should Do The Appraising?
• PEER APPRAISALS
• People often come across differently to their peers than they do to their boss.
• One’s peers see aspects of the person that the boss may never see, so peers’ opinions can be useful
developmentally.
• Knowing your colleagues will appraise you can also change behavior.
• One study involved undergraduates placed into self-managing work groups.
• The researchers found that instituting peer appraisals had “an immediate positive impact on [improving]
perception of open communication, task motivation, social loafing, group viability, cohesion, and
satisfaction.
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Who Should Do The Appraising?
• SELF RATINGS
• Some employers obtain employees’ self-ratings, usually in conjunction with supervisors’ ratings.
• The basic problem is that employees usually rate themselves higher than do their supervisors or peers.
• In one study, when asked to rate their own job performances, 40% of employees in jobs of all types placed
themselves in the top 10%, and virtually all remaining employees rated themselves at least in the top 50%.
• In another study, subjects’ self-ratings correlated negatively with their subsequent performance in an
assessment center—the higher they appraised themselves, the worse they did in the center.
• In contrast, an average of the person’s supervisor, peer, and subordinate ratings predicted the subjects’
assessment center performance.
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Who Should Do The Appraising?
• APPRAISAL BY SUBORDINATES
• Many employers have subordinates rate their managers, usually for developmental rather
than for pay purposes.
• Anonymity affects the feedback.
• Managers who receive feedback from subordinates who identify themselves view the
upward feedback process more positively.
• However, subordinates who identify themselves tend to give inflated ratings.
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Who Should Do The Appraising?
• 360 DEGREE FEEDBACK
• With 360-degree feedback, the employer collects performance information all around an
employee—from his or her supervisors, subordinates, peers, and internal or external
customers.
• Supervisor Feedback: Focuses on performance, goal achievement, and alignment with
company strategy.
• Peer Feedback: Highlights teamwork, communication, reliability, and collaboration skills.
• Direct Report Feedback: Evaluates leadership style, delegation, empathy, and
management capability.
• Self-Evaluation: Allows the employee to compare their own self-perception against how
others see them.
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Techniques for Appraising Performance
• GRAPHIC RATING SCALE METHOD
• A scale that lists a number of traits and a range of performance for each.
• The employee is then rated by identifying the score that best describes his or her level of
performance for each trait.
• Lists key traits and behaviors relevant to a role—like quality of work, communication,
punctuality, teamwork, or initiative. Managers use the list to rate employees using a
numerical or descriptive scale.
• The scale itself is usually shown as a line or bar, with clear labels along the way—such as
numbers (1 to 5) or short phrases (“Exceeds expectations,” “Meets expectations,” “Needs
improvement”).
• This format makes it easy to visualize how someone is performing in each area and gives
a structured way to evaluate performance across the board.
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Techniques for Appraising Performance
• ALTERNATION RANKING METHOD
• Ranking employees from best to worst on a trait or traits is another option.
• Since it is usually easier to distinguish between the worst and best employees, an alternation ranking method
is most popular.
• Imagine a manager needs to rank a team of 6 Management Trainees (MTOs): John, Sarah, Mike, Lisa,
David, and Emma.
• Step 1: Create a List: The manager lists all 6 employees on a sheet of paper.
• Step 2: Choose the Best: The manager selects the top performer from the list (Sarah), puts her at the #1
slot, and crosses her name off the list.
• Step 3: Choose the Worst: From the remaining 5 names, the manager selects the lowest performer
(David), puts him at the #6 slot, and crosses his name off.
• Step 4: Alternate: From the remaining 4 names, the manager selects the next best (Lisa for slot #2) and the
next worst (Mike for slot #5). The manager continues this alternating pattern until all names are placed.
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Techniques for Appraising Performance
• PAIRED COMPARISON METHOD
• Ranking employees by making a chart of all possible pairs of the employees for each trait
and indicating which is the better employee of the pair.
• Think of the paired comparison method like a sports tournament where every single
employee plays a head-to-head match against every other employee.
• Instead of trying to rank the whole team at once, you just look at two people at a time and
ask:
• "Who is better, Employee A or Employee B?"
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Techniques for Appraising Performance
• FORCED DISTRIBUTION METHOD
• Similar to grading on a curve; predetermined percentages of ratees are placed in various
performance categories.
• At Lending Tree, the top 15% ratees are “1’s,” the middle 75% are “2’s,” and the bottom
• 10% are “3’s” and the “first to go.”
• GE used top 20%, middle 70%, and bottom 10% for its managers, and most of the bottom
10% lost their jobs.
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Techniques for Appraising Performance
• FORCED DISTRIBUTION METHOD
Imagine you manage a team of 10 employees and must use a forced distribution layout using a
standard 20-70-10 percentage split.
Here is how you would distribute your team:
1. Calculate the Quotas
• Top 20% (High Performers): 2 employees
• Middle 70% (Average Performers): 7 employees
• Bottom 10% (Low Performers): 1 employee
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Techniques for Appraising Performance
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Techniques for Appraising Performance
• CRITICAL INCIDENT METHOD
• Keeping a record of uncommonly good or undesirable examples of an employee’s work-
related behavior and reviewing it with the employee at predetermined times.
• The supervisor keeps a log of positive and negative examples (critical incidents) of a
subordinate’s work-related behaviors.
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Techniques for Appraising Performance
• CRITICAL INCIDENT METHOD
• Imagine you are managing an MTO (Management Trainee) named Alex. Instead of just
giving Alex a vague score at the end of the year, you write down specific incidents in their
file:
• The Good Incident (Positive): "On March 14, a major system glitch crashed our client
portal. Alex stayed late, calmly coordinated with the IT team, and personally called the
top 5 clients to update them. This saved the client accounts."
• The Bad Incident (Negative): "On May 22, Alex missed a project deadline because they
forgot to check the team calendar. When confronted, Alex blamed the design team instead
of taking responsibility."
• At the end of the year, you look at all the recorded incidents to write an accurate, fact-
based review.
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Rater Error Problems
• HALO EFFECT
– The problem that occurs when a supervisor’s rating of a subordinate on one trait
biases the rating of that person on other traits.
• CENTRAL TENDENCY
– A tendency to rate all employees the same way, such as rating them all average.
• LENIENCY/STRICTNESS
– The problem that occurs when a supervisor has a tendency to rate all subordinates
either high or low.
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Rater Error Problems
• RECENCY EFFECT
– The problem that occurs letting what the employee has done recently blind you to
what his or her performance has been over the year.
• BIAS
– The tendency to allow individual differences such as age, race, and gender to affect
the appraisal ratings employees receive.
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Appraisal Interview
• An interview in which the supervisor and subordinate review the appraisal
and make plans to remedy deficiencies and reinforce strengths.
• Supervisors face four types of appraisal situations:
– Satisfactory—Promotable is the easiest interview: The person’s
performance is satisfactory and promotion looms. Your objective is to
develop specific development plans.
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Appraisal Interview
o Satisfactory—Not promotable is for employees whose performance is satisfactory but for
whom promotion is not possible.
o The objective here is to maintain satisfactory performance.
o The best option is usually to find incentives that are important to the person and sufficient
to maintain performance.
o These might include extra time off, a small bonus, or recognition.
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Appraisal Interview
o When the person’s performance is unsatisfactory but correctable, the interview objective
is to lay out an action/development plan for correcting the unsatisfactory performance.
o Finally, the interview where the employee is unsatisfactory and the situation is
uncorrectable may be particularly tense.
o Dismissal is often the preferred option.
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How to Conduct Appraisal Interview
• Before interview, review the person’s job description, compare performance to the
standards, and review any previous appraisals.
• Give the employee at least a week’s notice to review his or her work.
• Set a time for the interview.
• Interviews with lower-level personnel like clerical workers should take less than an hour.
• Interviews with management employees often take 1 or 2 hours.
• Conduct the interview privately with no interruptions.
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How to Conduct Appraisal Interview
1. Talk in terms of objective work data. Use examples such as absences, tardiness, and
productivity.
2. Don’t get personal. Don’t say, “You’re too slow producing those reports.”
– Instead, compare the person’s performance to a standard. (“These reports should
normally be done within 10 days.”) Similarly, don’t compare the person’s
performance to that of other people. (“He’s quicker than you are.”)
3. Encourage the person to talk. Stop and listen to what the person is saying; ask open-
ended questions (such as, “What do you think we can do to improve the situation?”).
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How to Conduct Appraisal Interview
4. Get agreement.
– Make sure the person leaves knowing specifically what he or she is doing right and
doing wrong and with agreement on how things will be improved, and has an action
plan with targets and dates.
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