Chapter 10

Performance Management
Basic Concepts in Performance Management
and Appraisal

Comparing
Performance Appraisal
and
Performance Management

Performance Appraisal: Performance Management:

Setting work standards, Performance management has to do with
assessing actual performance, and creating an organizational system that is fair,
providing feedback to employees effective, and widely understood by all.
to motivate, correct, revise, and An integrated approach to ensuring that
continue their performance. an employee’s performance supports and
contributes to the organization’s strategic
aims by establishing a valid and reliable
process connecting the employees to it.. 2
 Performance Management Systems
 Conveys to employees how well they have performed on
established goals (feedback)
 Areas in which an employee has a deficiency or an area
that simply could do better if some effort was exerted to
enhance performance (development)
 Deals with legal aspects of employee performance
(documentation)
Effective appraisals begin before the actual appraisal, with the manager
defining the employee’s job and performance criteria. Defining the job means
making sure that you and your subordinate agree on his or her duties and job
standards and on the appraisal method you will use.
Performance Management Systems
 Through timely, accurate feedback, and development
organizations can better serve employees’ needs.
 In doing so, organizations are in a better position to show
the effort-performance linkage.
 If feedback, development, and documentation are to
function effectively, appraisers must have a performance
system that is appropriate for their needs (a system that
facilitates giving feedback and development information to
their employees, and one that allows for employee input).
 Difficulties in Performance Management
Systems
 Focus on the individual

 Whenever performance individuals are conducted, organizations

run into the issue of having people seeing eye-to-eye on the

evaluation. Negative emotions come into play that needs to be
dealt with.

 Focus on the process

 Whenever performance evaluations are conducted, there is a

particular structure that must be followed. This structure exists to

facilitate the documentation process that often allows for some
sort of quantifiable evaluation.
To summarize the purpose of performance appraisal :

Why Appraise Performance?

1 Is the basis for pay and promotion decisions

2 Plays an integral role in performance management

Helps in correcting deficiencies and reinforcing good

3
performance

4 Is useful in career planning

6
The Appraisal Process
 It begins with the establishment of performance standards in
accordance with the organization’s strategic goals.
 Strategic goals evolve from the organization’s strategic
direction, job analysis, and job description.
• Basing appraisal standards on required competencies.
Competencies are often arranged according to the basic technical,
motor, intellectual, and other skills needed to be successful in a job. In
addition, the minimum level of each skill needed should be specified.
• The role of job descriptions: Ideally, what to appraise and how to
appraise it will be obvious from the job description. For the criteria to
appraise, the job description should list the job’s duties or tasks,
including how critical each is to the job and how often it’s performed.
 The Appraisal Process
1) Establish performance standards with employees.
Performance standards should be clear and objective enough to be understood and measured.
2) Mutually set measurable goals. (S- specific, M- measurable, A- attainable, R- relevant, T- timely)
Once performance measures are established, it is necessary to communicate these expectations, it
should not be part of the employees’ job to guess what is expected of them.
3) Measurement of actual performance.
To determine what actual performance is, it is necessary to acquire information about it.
Organizations are concerned with how they measure and what they measure (traits, behaviors,
results, personal & technical side). Four sources regarding how to measure actual performance
(personal observation, statistical reports, oral reports, and written reports)
4) Compare actual performance with standards.
Deviations are noted between standard performance and actual performance.

5) Discuss the appraisal with the employee.

6) If necessary, initiate corrective action.
Either immediate (deals with symptoms) or basic (deals with causes)
Setting Goals
 SMART Goals:

- Specific, and clearly state the desired results

- Measurable in answering “how much”

- Attainable, and not too tough or too easy

- Relevant to what’s to be achieved

- Timely in reflecting deadlines and milestones

❖ Encourage participation- employees should always

have the opportunity to have meaningful input into the
goals they are to achieve
9
 Who Should Do the Appraising?

1. Peer Appraisals
2. supervisor
3. Rating Committees
4. Self Ratings
5. Appraisal by Subordinate
6. 360-Degree Feedback- means that the
employer collects performance information from
all around the employee: Supervisors, peers,
customers, self-ratings; Results are mixed

9-10 Copyright © 2017 Pearson Education, Ltd.

Appraisal Methods
 Absolute standards
 The essay appraisal
 The critical incident appraisal
 The checklist appraisal
 The adjective- graphic rating scale appraisal
 The forced choice appraisal
 The behaviorally anchored rating scaled

 Relative standards
 Group order ranking/ forced distribution
 Individual ranking
 Paired comparison
 Objectives
 MBOs
Absolute Standards
The Essay Appraisal
In the absolute standards appraisal methods, employees are compared
to a standard, and their evaluation is independent of any other
employee in a work group.
The essay appraisal is the simplest method since the appraiser writes a
narrative description describing an employee’s strengths, weaknesses,
past performance, potential, and suggestions for improvement.
Its strength:
Simple
Provides specific information
Its weaknesses:
Unstructured
Vary widely in length and content
Difficult to compare individuals across the organization
Provides only qualitative data
Absolute Standards
The Critical Incident Appraisal
 It focuses the rater’s attention on the those critical/key behaviors that

make the difference between doing a job effectively and doing it

ineffectively.
 The appraiser writes down situations describing what the employee

did that was especially effective or ineffective.

 Its strengths:

 Specific behaviors documented

Its weaknesses:

 Appraisers required to regularly write these incidents down; time

consuming
 Difficult to compare individuals across the organization
Absolute Standards
The Checklist Appraisal
 The evaluator uses a list of behavioral descriptions and checks off

those behaviors that apply to the employee.

 Checklist is then evaluated by HRM staff, and not appraiser

completing the checklist.

 Its strengths:

 Reduces bias since the evaluators and scorer are different

 Its weaknesses:

 Costly

 Inefficient if a large number of job categories exist

Absolute Standards
The Forced Choice Appraisal
 It is a special type of checklist where the rater must choose

between 2 or more statements.

 The appraiser’s job is to identify which statement is most

descriptive of the individual being evaluated without knowing

which statement is favorable or unfavorable.
 Its strengths:

 Reduce bias and distortion

 Its weaknesses:

 Appraisers dislike being forced to make distinctions between

similar sounding statements

Absolute Standards
The Adjective / Graphic Rating Scale Appraisal
 Rating scales can be used to assess factors such as quantity

and quality of work in terms of specific behavioral terms.

 The appraiser goes down the list of factors and notes the
point along the scale that best describes the employee.
 Its strengths:

 Less time consuming

 Quantitative analysis useful in comparisons

Graphic rating scale
appraisal
• Perhaps the most commonly used method of performance
evaluation is the graphic rating scale. Graphic rating scale
appraisal: appraiser rates employee on a number of job-related
factors; avoids abstract categories

A graphic rating scale lists a series of traits that the company

considers to be valuable for effective performance, the most common
being the quantity and quality of work- and the rater rates the
employee along a scale depending upon how well the employee has
exhibited the trait. They allow employers to make quantitative
comparisons between the scores achieved by different employees.
Absolute Standards
The Behaviorally Anchored Rating Scaled
 These scales combine major elements from the critical
incident and adjective rating scale approaches.
 The appraiser rates the employees based on items along a

continuum, but the points are examples of actual behavior

on the given job rather than general descriptions.
 Its strengths:

 The use of specific behaviors, derived for each job,

should produce relatively error-free and reliable ratings.
Relative Standards
Group Order Ranking/ forced distribution
 In the relative standards individuals are compared against
other individuals.
Forced distribution – predetermined percentages

 Group order ranking requires the evaluator to place

employees into a particular classification, such as top 20%
 forced distribution method is like the bell shape

 Its weaknesses:
 Obvious when the number of employees being
compared is small.
 Best of the worst scenario and stiff competition
Relative Standards
Individual Ranking
 It requires the evaluator merely to list the employees in
order form highest to lowest.
 It assumes that the difference between the 1st and 2nd
employee is the same as that between the 21st and 22nd
Relative Standards
Paired Comparison
 It is calculated by taking the total (N(N-1)/2)
comparisons.
A score is obtained for each employee by simply
counting the number of pairs in which the individual is the
preferred member.
Objectives
 Employees are evaluated on how well they accomplished
a specific set of objectives that have been determined to be
critical in the successful completion of their job.
 MBOs is a process that converts organizational objectives
into individual objectives.
 It consists of:

 Goal setting

 Action planning

 Self-control

 Periodic reviews
management by objectives (MBO) usually refers to a multistep companywide
goal-setting and appraisal program. MBO requires the manager to set specific
measurable, organizationally relevant goals with each employee, and then periodically
discuss the latter’s progress toward these goals. The steps are:
1. Set the organization’s goals. Establish a company-wide plan for next year and set
goals.
2. Set departmental goals. Department heads and their superiors jointly set goals
for their departments.
3. Discuss departmental goals. Department heads discuss the department’s goals
with their subordinates and ask them to develop their own individual goals.
They should ask, “How could each employee help the department attain its
goals?”
4. Define expected results (set individual goals). Department heads and their subordinates
set short-term performance targets for each employee.
5. Conduct performance reviews. After a period, department heads compare each
employee’s actual and expected results.
6. Provide feedback. Department heads hold periodic performance review meetings
with subordinates. Here they discuss the subordinates’ performance and make
any plans for rectifying or continuing the person’s performance.
Formal MBO programs require numerous time-consuming meetings,
Factors that Can Distort Appraisals
 Leniency error

 Halo error

 Similarity error

 Low appraiser motivation

 Central tendency

 Inflationary pressures
 Inappropriate substitutes for performance

 Attribution theory
If standards are unclear, ambiguous traits and degrees of merit
may be differently interpreted and can result in an unfair appraisal. The
solution is to include descriptive phrases that define or illustrate each
trait and degree
The influence of a rater’s general impression on ratings of specific
qualities is known as the halo effect. For example, supervisors often
rate unfriendly employees lower on all traits. To avoid this problem,
managers should be aware of it & be trained to avoid it.

Central tendency occurs when supervisors stick to the middle of

the rating scales, thus rating everyone average. For example if the
rating scale ranges from 1-7 the tend to avoid the highs (6and7). And
lows(1and2) and rate most of people between (3and5). Doing so distort
the evaluations making them less useful for promotion and salaries.
Ranking employees instead of using graphic rating scale can reduce this
problem because ranking means you can’t rate them all average

Chapter 9-25 Copyright © 2013 Pearson

Education
Leniency or strictness occurs if supervisors have a tendency to
rate everyone either high or low. This problem is especially happening with
graphic rating scales.
We can use ranking method to distinguish between high and low
performance.
Also employer can enforce a distribution that say 10% of the people
should be rated “excellent” 20%”good and so on however, it is not fair
when all employees are superior)

Recency effects involve letting what the employee has done

recently blind the manager to the employee’s performance over the
entire year. The main solution is to accumulate critical incidents all year
long

Bias is a tendency to allow personal relations between supervisors and

employees, and individual differences such as age, race, and sex affect
employee appraisal ratings. Therefore using multiple raters can solve this
problems.
Chapter 9-26 Copyright © 2013 Pearson
Education
 Types of Appraisal Interview

Satisfactory—Promotable

Satisfactory—Not Promotable
Types of Appraisal
Interviews Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable

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publishing as Prentice Hall
Guidelines for Effective Appraisals
Dealing with appraisal problems

Guidelines for
effective appraisals

Get
Know the Use the Keep a Be
agreement on
problems right tool diary fair
a plan

9–28
Satisfactory-promotable: the person’s performance is satisfactory and
there is a promotion a head. In this case, The supervisor discuss the
person’s career plans.
Satisfactory-not promotable: the person’s performance is
satisfactory, but the promotion is not possible. The objective here is to
maintain satisfactory, so the best option is to find incentives to
maintain performance.
Unsatisfactory but correctable. The objective here is to lay out an
action plan for correcting the unsatisfactory performance.
If the performance is unsatisfactory and uncorrectable the interview
is skipped

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publishing as Prentice Hall
Creating More Effective Performance
Management Systems
 Use behavior-based measures
 Combine absolute and relative standards

 Provide ongoing feedback

 Have multiple raters

 Use peer evaluations

 360 degree feedback appraisals

Effectively Evaluating Employees
 Prepare for, and schedule, the appraisal in advance

 Create a supportive environment to put employees at ease

 Describe the purpose of the appraisal to employees

 Involve the employee in the appraisal discussion, including a self-

evaluation

 Focus discussion on work behaviors, not on the employees

 Support your evaluation with specific examples

 Give both positive and negative feedback

 Ensure employees understand what was discussed in the appraisal

 Generate a development plan

 Guidelines for Conducting
an Interview

Talk in terms of
Don’t get Encourage the Get
objective work
personal person to talk agreement
data

Such as absences,
productivity, quality Try to compare Listen and ask Make sure the person
person’s performance open questions know his weak points and
to standards put plan with him
9–32

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

 How to Deliver Criticism
How to Criticize a Subordinate

1 Do it in a manner that lets the person maintain his

dignity and sense of worth.
2
Criticize in private, and do it constructively by
providing examples
3 Give daily feedback so that the review has no surprises.

4 Never say the person is “always” wrong.

Criticism should be objective and free of
5
biases.

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publishing as Prentice Hall