9-1
Chapter 9
Performance Management
9-2
Performance Management
The
Theprocess
processbybywhich
whichexecutives,
executives,managers,
managers,
and
andsupervisors
supervisorswork
worktotoalign
alignemployee
employee
performance
performance with
withthe
the firm’s
firm’s goals
goals
An effective performance management process
Hasaaprecise
Has precise Uses
Uses Provides
Provides
definitionof
definition of measure-
measure- feedbackto
feedback to
excellent
excellent mentsof
ments of
employees
employees
performance
performance performance
performance
9-3
Performance Evaluation
Employee
evaluation
Performance Employee
review appraisal
Also called…
Personnel Performance
rating appraisal
Merit rating
9-4
Evaluation Systems
Thinking about how well
Informal System
employees are doing
Affected by political and
interpersonal processes
Set up by the organization to
Formal System
regularly and systematically
evaluate employee performance
9-5
The Case for Formal Evaluation
Purposesof
Purposes of aaWell-Designed
Well-DesignedFormal
Formal
EvaluationSystem
Evaluation System
HR/Employment
HR/Employment
Development
Development Motivation
Motivation Planning
Planning
Legal
Legal HRM research
research
Communication
Communication compliance HRM
compliance
9-6
The Case for Formal Evaluation
Employees
Employeesshould
shouldconsider
considerevaluations
evaluations
meaningful,
meaningful,helpful,
helpful,fair,
fair,and
andhonest
honest
This
Thisisisdifficult
difficulttotoattain
attaindue
dueto…
to…
Unfairness
Unfairness
Negative
Negativepractices
practices
AAshort-term
short-termfocus
focus
9-7
Format of Evaluation
Establish performance standards for each position and the
Step 1
criteria for evaluation (job analysis)
Establish performance evaluation policies on when to rate,
Step 2
how often to rate, and who should rate
Step 3 Have raters gather data on employees’ performance
Have raters (and employees in some systems) evaluate
Step 4
employees’ performance
Step 5 Discuss the evaluation with the employee
Step 6 Make decisions and file the evaluation
9-8
Establish Criteria
The dimensions of performance upon which an
employee is evaluated are called the criteria of
evaluation
Examples: quality, quantity, and cost of work
A major problem with many evaluation systems
They require supervisors to make person
evaluations rather than performance evaluations
9-9
Establish Criteria
Effective criterion Reliability
should possess these
characteristics Relevance
Sensitivity
Practicality
Multiple criteria are
necessary to measure Evaluate both activities
performance completely and results
9-10
Who Evaluates, When, and How Often
Most organizations evaluate on an annual basis
Performance evaluations are often scheduled for
arbitrary dates, such as the date of hire
Alternatively, all employees may be evaluated on
or near a single calendar date
It is better to schedule evaluations after task cycles
If no task cycle, set goals that allow
a beginning and an end
9-11
Who Should Evaluate the Employee?
Immediate
Immediate Committeeof
Committee of
supervisor
supervisor severalsupervisors
several supervisors
Employee’s
Employee’s Someoneoutside
Someone outside
Employee’speers
Employee’s peers
subordinates
subordinates thework
the workarea
area
Combinationof
Combination of
Self-evaluation
Self-evaluation approaches
approaches
9-12
360-degree Feedback
Many organizations now use some form of
360-degree feedback program
Upward and peer feedback
These effects are sustainable
can have positive effects on
over time
behavior
Almost 90 percent of
Introducing a 360-degree
companies using 360-degree
system into a culture not
programs use the information
prepared for it can have
to decide on pay increases and
disastrous effects
promotions
9-13
360-degree Feedback
Learning
Learningof
of
Multiple
Multiple weaknesses
weaknesses&&
perspectives
perspectives strengths
Positive
Positive strengthsisis
features motivational
motivational
features
Evaluations
Evaluations
basedon
oncontact
contact Anonymous
Anonymous
based upward
&&observation
observation upwardfeedback
feedback
Feedbackfrom
Feedback from
above,below,
above, below,
peer
peer
9-14
360-degree Feedback
Feedback
Feedbackfromfrom Providingconstructive
Providing constructive
all
allsources
sourcescan
can feedbackrequires
feedback requiresaaplan
plan
be
beoverwhelming
overwhelming &&well-trained
well-trainedraters
raters
Negative
Negative
features
features
Ratercan
Rater canhide
hide Conflicting
Conflicting
inaagroup
in groupand
and ratings
ratingscan
canbebe
provideharsh
provide harsh confusing
confusingand and
evaluations
evaluations frustrating
frustrating
9-15
Selected Evaluation Techniques
Ways of evaluating employees can be divided
into two categories
Methods that evaluate employees individually
Multiple-person evaluations
In a multiple-person evaluation
The supervisor directly and intentionally
compares the performance of one employee
to that of others
9-16
Individual Evaluation Methods
Graphic Rating Scale
The rater is presented with a set of traits
The employee is rated on the traits
Ratings are assigned points,
which are then computed
Raters are often asked to explain each
rating with a sentence or two
9-17
Individual Evaluation Methods
Two modifications make the graphic
rating scale more effective
Operational and
A mixed
benchmark
standard scale
statements are
gives the rater
added to
three statements
describe
describing each
different levels of
trait
performance
9-18
Individual Evaluation Methods
Forced Choice
Developed because graphic rating scales
allowed supervisors to rate everyone high
The rater must choose from a set of
descriptive statements about the employee
Supervisors check the statements that describe the
employee, or rank them from most to least descriptive
Can be used by superiors, peers, subordinates,
or a combination of these
9-19
Individual Evaluation Methods
Essay Evaluation
Rater describes the strong
Can be used by superiors,
and weak aspects of
peers, or subordinates
employee’s behavior
Flexible; an evaluator can Comparing essays is
specifically address the difficult; skilled writers can
ratee’s skill in any area paint a better picture
9-20
Individual Evaluation Methods
Critical Incident Technique
Raters maintain a log of behavioral incidents that
represent effective and ineffective performance
Factors that determine the success of this
technique
Supervisor must have enough time to observe
subordinates during the evaluation period
Incidents must be recorded as they are seen
Logs help avoid common rating errors and
facilitate discussions about performance
9-21
Individual Evaluation Methods
A set of objectives or descriptive statements
Checklist
Checklist
If the rater believes that the employee possesses a
listed trait, the item is checked
A rating score equals the number of checks
Weighted
Weighted A list of descriptive statements about behavior
checklist
checklist Judges who have observed behavior on the job
sort the statements into piles, rated from
excellent to poor
When there is agreement on an item, it is included
in the weighted checklist
The employee’s evaluation is the sum of the scores
(weights) on the items checked
9-22
Individual Evaluation Methods
Behaviorally Anchored Rating Scales
The rater reads
Uses critical
the anchors and
Developed by incidents to place
places an X at
Smith and 6-10 anchor
some point on
Kendall statements
the scale for the
on a scale
ratee
9-23
Individual Evaluation Methods
Behaviorally
Anchored
Rating
Scale
9-24
Individual Evaluation Methods
Developed by Latham and associates
Behavioral
Observation Like BARS, BOS uses critical incidents
Scales (BOS)
Instead of noting which behaviors occurred,
the rater identifies how they occurred
The hope was that BARS and BOS
would yield more objective ratings
than other scale formats
Most researchers find that the format of the
rating scale has little effect on the quality
of a performance appraisal system
9-25
Individual Evaluation Methods
Sample BOS Items
9-26
Multiple-Person Evaluation Methods
A supervisor ranks subordinates in
order on some overall criterion
Ranking It’s easier to rank the best and worst
employees than average ones
Pick the top employee first,
then the bottom one
Alternative
rankings can The second best is chosen,
then the second worst
help with this
difficulty Follow this process until
everyone has been ranked
9-27
Multiple-Person Evaluation Methods
Paired Comparison
The supervisor reviews a series of cards;
each contains two subordinates names
The higher performer in each pair is chosen
Final ranking is made by counting how many times
a given employee was chosen as the better performer
A major limitation is the number of paired
comparisons that must be made
10 subordinates = 45 pairs of names
9-28
Multiple-Person Evaluation Methods
Forced Distribution
Employees are rated on a pre-existing distribution
of pre-determined categories
The predetermined distribution must be followed,
regardless of how well the employees performed
A supervisor with all exceptional subordinates
will be forced to rate some poorly
A supervisor with mediocre subordinates must
rate some highly
9-29
Multiple-Person Evaluation Methods
Point allocation technique (PAT)
A variation of forced distribution
Each rater is given a number of points per
employee
The points must then be allocated on a
criterion basis
The total number of points cannot exceed the
number of points per employee times the
number of employees evaluated
9-30
Multiple-Person Evaluation Methods
Management
Management by
byObjectives
Objectives(MBO)
(MBO)
The MBO approach emerged from the beliefs
of McGregor, Drucker, and Odiorne
With MBO, managers and subordinates plan,
organize, control, communicate, and debate
The subordinate has a course to follow
and a target to shoot for
9-31
Multiple-Person Evaluation Methods
An MBO program is a systematic process
Superior/subordinates define tasks and set objectives
The superior, consulting with subordinates,
sets criteria for assessing objective accomplishment
Dates to review progress are agreed upon and used
Superior and subordinates make any required
modifications in the original objectives
A final evaluation by the superior is made
The superior meets with the subordinate
in a counseling, encouraging session
Objectives for the next cycle are set
9-32
Multiple-Person Evaluation Methods
ForMBO and other performance
management programs to work
Both the manager
and subordinate must
be actively involved
in objective formulation
They must also agree on
what measures will be
used to evaluate success
and failure
9-33
Multiple-Person Evaluation Methods
A central feature of MBO is discussion about subordinates’
performance, centered on results
Many find MBO programs too results-oriented
and insufficiently process-oriented
Deming argues
The manager and
that MBO places
employee must Managers must be
too much
work cooperatively coaches and
emphasis on
to improve the counselors, not
detecting
underlying basis judges
problems, too little
for productivity
on preventing them
9-34
Multiple-Person Evaluation Methods
Any employee’s performance is affected by
His/her ability and motivation
The production system that is
in place
Consider using an appraisal
system in which someone’s merit
is not tied exclusively to whether
goals were met
9-35
Multiple-Person Evaluation Methods
Pitfallsand
Pitfalls andProblems
Problemswith
withMBO
MBO
IfIftoo
toomany
many Forcedinto
Forced intojobs
jobs
Toomuch
Too much
objectivesare
objectives areset,
set, wheresetting
where setting
paperwork
paperwork
confusionoccurs
confusion occurs objectivesisishard
objectives hard
Rewardsmay
Rewards maynot
not Toomuch
Too muchemphasis
emphasis
betied
be tiedto
toresults
results onthe
on theshort
shortterm
term
Usedas
Used asaarigid
rigid
Superiorsare
Superiors arenot
not Originalobjectives
objectives controldevice
devicethat
that
trainedininthe
theMBO
MBO Original control
trained arenever
are nevermodified
modified intimidatesrather
intimidates rather
process
process thanmotivates
motivates
than
9-36
Which Technique to Use
Commonly used Graphic rating scale, essay method,
techniques checklists
Used by 10 to 13%
of firms Ranking, paired comparison
Forced choice, critical incident,
Use by 5% of firms
BARS, BOS, field review, MBO
9-37
Which Technique to Use
Techniques
Techniquesare
are
MBO
MBOisismost
mostlikely
likely No
Notechnique
techniqueisis
sometimes
sometimesgood,
good,
to
tobe
beused
usedfor…
for… perfect
perfect
sometimes
sometimespoor
poor
Problem lies with
how techniques
Managerial,
are used, and
professional, and They all have
by whom
technical limitations
The rater is more
employees
critical than the
technique
9-38
Opposition to Evaluation
Most employees are wary of evaluations
Bias and favoritism are real problems
Opponents of formal evaluation argue that…
It focuses on symptoms of poor performance rather
than finding the underlying causes
Managers and employees dislike the process
Raters have trouble deciding performance levels
Employees who are not rated “top performers” suffer
reverse motivation
9-39
System Design and Operating Problems
Performance evaluation systems break down
because they are poorly designed
If criteria focus Some
solely on results techniques take
or personality a long time to
Some systems
traits, rather than carry out or
are not fully
performance, the require extensive
online
evaluation may written analysis,
not be well both of which
received managers resist
9-40
Rater Problems
Problems with
standards of Halo effect
evaluation
Leniency or
Personal bias Inadequate
Inadequate harshness
rater
rater
training
training
Central
Contrast effects tendency error
Recency of
events error
9-41
Standards of Evaluation
Problems with evaluation standards arise because
of perceptual differences in the meaning of words
Good, adequate, satisfactory, and excellent mean
different things to different evaluators
Ifonly one rater is used, evaluations can be
distorted
This arises most often in graphic rating scales
It may also appear with essays, critical incidents,
and checklists
9-42
The Halo Effect
Occurs when rater assigns values on the
basis of an overall impression of the ratee
Halo Can be positive or negative
Halo Error
Error
True halo occurs when high or low ratings
are justified by the ratee’s performance
Hard to eliminate when it does occur
Not
Not as
as common
common
as
as once
once To reduce the possibility, evaluate all
believed
believed subordinates on one dimension before
proceeding to the next
9-43
Leniency or Harshness Error
Raters can assess
Being objective is their tendencies by
hard for everyone examining their
ratings
Consequently, Asking raters to
leniency or distribute ratings
harshness errors can force a normal
may occur distribution
9-44
Central Tendency Error
A central tendency error occurs when a
rater avoids using high or low ratings
This “average” rating fails to discriminate
between subordinates
It offers little information for making
HRM decisions
9-45
Recency-of-Events Error
Raters forget more about past behavior than
current behavior
Many are evaluated more on the results of the past
several weeks than the past six months
Some employees are well aware of this difficulty
They are sure to be visible and noticed in positive
ways for several weeks in advance of a review
Thisproblem can be mitigated by using critical
incident, MBO, or irregularly scheduled
evaluations
9-46
Contrast Effects
AAsupervisor
supervisorlets
letsone
oneemployee’s
employee’sperformance
performance
influence
influencethe
the ratings
ratingsgiven
givento
tosomeone
someoneelse
else
Also occurs when a supervisor unknowingly
compares an employee’s present
performance with their past performance
Poor performers could be rated “above
average” if they improve, even if the
improvement only brings performance
up to “average”
9-47
Personal Bias Error
A personal bias rating error is related to a personal
bias held by the supervisor
Sex discrimination
Playing “favorites”
“Similar to me” ratings
Personal liking
Effect is usually small if there is enough
performance-related info on which to base ratings
9-48
Eliminating Rater Errors
Behavior-based rating scales were created to help
eliminate the kinds of ratings errors just described
Such scales didn’t demonstrate consistent
superiority over other rating formats
Researchers are now concentrated
on the rating process
More effort is now placed on helping
raters accurately observe, recall, and report behavior
9-49
Rater Training
The most Eliminate common rating errors
popular training
programs Improve observation and recording skills
True, even if program is short and
Programs inexpensive
dealing with
errors are Focus on observation and recording
effective skills offers more improvement than
focusing on errors
Training will not Raters must be motivated to use the system
solve all and be allowed to observe subordinate
problems performance
9-50
Avoiding Problems with Employees
For an evaluation system to work well,
employees must
Understand it
Feel that it is fair
Believe it is used correctly
The system should be
As simple as possible
Implemented in a way that fully informs
employees about how it will be used
9-51
Avoiding Problems with Employees
To foster understanding about the system
Allow employees to participate Provide training in
in its development performance evaluation
methods
Self-evaluation can be a useful addition to an evaluation system
Facilitates performance evaluation
discussions with a supervisor
If raters are incompetent or unfair, employees may resist,
sabotage, or ignore the rating system
9-52
The Feedback Interview
An effective performance interview involves
two-way communication
Evaluation should be a continuing process
Supervisors should hold evaluation interviews
in order to
Discuss the appraisal
Set objectives for the upcoming appraisal period
Theemployee’s development or salary
should not be discussed during this interview
9-53
Suggestions for Effective Interviews
Preparefor
Prepare forthe
the Putemployee
Put employeeat
at
meeting
meeting ease
ease
Splitthe
Split thebudgeted
budgeted
Presentfacts,
Present facts,not
not
timewith
time withthe
the Bespecific
Be specific
opinions
opinions
employee
employee
Discuss
Discuss Includepositive
Include positive
performance,
performance, not not
comments
comments
personal criticisms
personal criticisms
Don’toverwhelm
Don’t overwhelm Encourageratee
ratee
ratee with Encourage Focuson
Focus onthe
thefuture
future
ratee with involvement
involvement
information
information
9-54
The Feedback Interview
With good interviewing skills, many problems related to
discussing performance can be overcome
Speak clearly
Listen carefully
Gather and analyze information thoroughly
Negotiate the amount and use of resources
A poor feedback interview is due to…
Poor preparation
Miscalculation about the purpose of the session
Failure of rater and ratee to understand each other
9-55
The Feedback Interview
Sometimes there is no choice but to give
negative feedback
Make criticism part of the larger topic:
ways to improve future performance
The goal of the feedback interview is to
Recognize/encourage superior performance
Sustain acceptable behaviors
Change the behavior of ratees whose
performance is sub-standards