Performance Management and Appraisal

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LO1: Performance Appraisal and
Performance Management

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Performance Appraisal: Definition
• Performance appraisal can be defined as the
process of evaluating an employees current
and/or past performance relative to his/her
performance standards.

• In order for performance appraisal to be

effective, the employee and manager must first
define the job (agree on its duties and
responsibilities) and performance standard.

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Performance Appraisal Process
• Performance appraisal has a 3 step process:

1. Setting work standard (benchmark)

2. Assessing the employees actual performance
relative to those standards using different tools
3. Providing feedback to the employees with the aim
of helping him/her to eliminate performance
deficiencies or to improve performance level.

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Why appraise performance?
• Employee performance appraisal is needed for
five reasons:

⮚ It influences employees base pay, promotion, bonus and

retention decision.
⮚ It plays a central role in the performance management process.
⮚ Performance appraisal enables the supervisor and subordinate
to develop a plan for correcting any performance deficiencies.
⮚ It plays a crucial role in the overall career planning of an
employee by shedding light on the strengths and weaknesses
of the employee.
⮚ It helps supervisors identify the training and development need
of employees.

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Q) How often is performance appraisal of an employee
done within an organization?

Option A: Semi annually and/or annually

Option B: Continuously

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Performance Management: Definition
• Performance Management is the continuous
process of identifying, measuring and
developing the performance of individuals and
teams and aligning their performance with the
company’s goals.

• So, two distinguishing features of performance

management are:
⮚ Continuous feedback
⮚ Strategically related performance criteria/work
standard

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 Performance Management Vs Performance Appraisal

Comparing
Performance Appraisal
and
Performance Management

Performance Appraisal: Performance Management:

Setting work standards, assessing An integrated approach to
performance, and providing ensuring that an employee’s
feedback to employees to motivate, performance supports and
correct, and continue their contributes to the organization’s
performance. strategic aims.

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LO2: Basic Concepts about performance
appraisal

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Concept 1: Defining the Employee’s Goals and
Work/performance Standards
The first step of the performance appraisal process was to establish work standards
or performance goals for the employees. An effective goal should be SMART.

Guidelines for
Effective Goal Setting

Assign
Assign Assign
Challenging Encourage
Specific Measurable
but Doable Participation
Goals Goals
Goals

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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.

⮚ The performance standard/goal could be a numerical

goal, a competency (Job knowledge, skill) or a job
dimension (communication, teamwork etc.)

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Concept 2: Who Should Do the Appraising?

Immediate
Self-Rating
Supervisor

Peers
Potential Subordinates
Appraisers

Rating 360-Degree
Committee Feedback

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Concept 2: Who should do the appraising?
• Supervisors
⮚ Usually do the actual
appraising as they are in the
best position to observe
employee performance.
⮚ Must be familiar with basic
appraisal techniques.
⮚ Must understand and avoid
problems that can cripple
appraisals.
⮚ Must know how to conduct
appraisals fairly.
⮚ They are supported by the HR
department of the firm.

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Who should do the appraisal? (cont’d)
• The HR Department
⮚ Serves a policy-making and advisory role.
⮚ Provides advice and assistance to line managers
regarding the appraisal tool to use.
⮚ Trains supervisors to improve their appraisal skills.
⮚ Monitors the appraisal system effectiveness and
compliance with EEO laws.

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Who should do the appraisal? (cont’d)
• Peers
⮚ Peer appraisal can be effective as peers see/know about certain
aspects of the employees that supervisors don’t have access to.
⮚ Peer appraisal improves workplace behavior and teamwork.

• Rating committee
⮚ A committee is formed with the employee’s immediate supervisor and
3-4 other supervisors.
⮚ Such committee based rating removes the probability of bias/partialism
that is present in individual ratings.
⮚ Might provide diversified views and opinions about the employees.

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Who should do the appraisal? (cont’d)
• Self Ratings
⮚ Empowers employees to rate themselves.
⮚ However, it has been seen that employees have tendency to be over-
optimistic while rating him/herself specially compared to ratings
provided by peers and supervisors.
⮚ A study showed there is negative correlation between employees self
ratings and their subsequent performance in assessment centers.
• Appraisal by subordinates
⮚ This is mainly done when the appraisal will serve developmental
performance and not pay purpose.
⮚ The effectiveness of this type of appraisal depends on the anonymity
of the appraiser.
⮚ It has been seen that employees who received subordinate ratings
demonstrated improved performance afterwards.

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Who should do the appraisal? (cont’d)
• 360 degree feedback:
⮚ Appraisal/feedback is collected from employees, supervisors,
peers, subordinates.
⮚ These individual ratings are then combined and synthesized to
generate a performance appraisal report for the employee. This
synthesis is often conducted using IT.

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Concept 3: Soft Appraisals
• Soft Appraisals occur when supervisors try to sugarcoat
a harsh appraisal by using “soft”/lenient words but in the
process make the performance appraisal inaccurate.

• Motivations for Soft Appraisals

⮚ The fear of having to hire and train someone new.
⮚ The unpleasant reaction of the appraisee.
⮚ An appraisal process that’s not conducive to candor.
• Hazards of Soft Appraisals
⮚ Employee loses the chance to improve before being forced to change
jobs.
⮚ Lawsuits arising from dismissals involving inaccurate performance
appraisals.

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LO3: Performance appraisal tools &
Techniques

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Performance Appraisal Methods

Appraisal Methodologies

1 Graphic Rating Scale Method 6 Narrative Forms

Behaviorally Anchored Rating

2 Alternation Ranking Method 7
Scales (BARS)
Management by Objectives
3 Paired Comparison Method 8
(MBO)
Computerized and Web-Based
4 Forced Distribution Method 9
Performance Appraisal
1
5 Critical Incident Method Merged Methods
0

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Graphic Rating scale

In this tool, the management

prepares a list of
traits/performance dimensions
(Communication skill, org.
know how, team work,
achieving business results) on
which it intends to evaluate the
employees performance.
Similarly, a range of
performance values
(unsatisfactory, average,
satisfactory, excellent) is
developed.

The supervisor than rates the

subordinate on each
performance dimension using
the values.

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Alteration Ranking Method

In this tool,
employer/supervisor ranks
the employees on a
particular trait from best to
worst.

It is usually done in a
sequential alternate
manner (i.e best and worst,
second best and second
worst, third best and third
worst)

This is done until all the

employees have been
ranked.

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FIGURE 9–7 Ranking Employees by the Paired Comparison Method

Here, for every trait the

supervisor “pairs” and
compared every employee
with another employee.

+ means “better than.” –

means “worse than.” For
each chart, add up the
number of +’s in each
column to get the highest-
ranked employee

Note:.

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Forced Distribution method
• This is similar to grading on a curve (normal
probability distribution).

• In this method, supervisor places

predetermined percentages of employees into
several performance categories.

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Critical Incidents Method: Example of a Plant Manager

In this method, supervisor keeps a log of positive and negative work related
behavior (critical incidents) of an employee. Every 6 month’s or so, the supervisor
meets with the employee to discuss work performance and behavior and uses the
critical incidents as an example.

Continuing
Duties Targets Critical Incidents

Schedule 90% utilization of Instituted new production

production for personnel and scheduling system; decreased
plant machinery in plant; late orders by 10% last month;
orders delivered on increased machine utilization in
time plant by 20% last month

Supervise No shutdowns due Instituted new preventative

machinery to faulty machinery maintenance system for plant;
maintenance prevented a machine
breakdown by discovering faulty
part.

However, Forgot scheduling

appointment with maintenance
team resulting in temporary 9–25
Narrative Forms
All or part of the written appraisal may be in
narrative form. Here the person s supervisor
assesses the employee s past performance
and
required areas of improvement. The
supervisor s narrative assessment aids helps
the
employee understand where his or her
performance was good or bad, and how to
improve that performance.

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Behaviorally Anchored Rating Scale (BARS)
A behaviourally anchored rating scale (BARS) is
an appraisal tool that anchors a numerical rating
scale with specific illustrative examples of good
or poor performance.
Developing a BARS Advantages of BARS
1. Generate critical ⮚ A more accurate
incidents gauge
2. Develop performance ⮚ Clearer standards
dimensions ⮚ Feedback
3. Reallocate incidents ⮚ Independent
4. Scale the incidents dimensions
5. Develop a final ⮚ Consistency
instrument
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FIGURE 9–9
Example of a
Behaviorally
Anchored Rating
Scale for the
Dimension
Salesmanship
Skills

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Management by Objectives (MBO)
• A comprehensive and formal organizationwide
goal-setting and appraisal program requiring:
1. Setting of organization’s goals.
2. Setting of departmental goals.
3. Discussion of departmental goals.
4. Defining expected results (setting individual
goals).
5. Conducting periodic performance reviews.
6. Providing performance feedback.

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 Using MBO

Setting unclear Time-consuming

objectives appraisal process

Problems with
MBO

Conflict with
subordinates over
objectives

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 Assignment: Advantages and
Disadvantages of the appraisal methods.

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LO4: Performance appraisal Problems and
how to deal with them

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 Appraising Performance:
Problems and Solutions

Potential Rating
Scale Appraisal
Problems

Unclear Halo Central Leniency or

Bias
Standards Effect Tendency Strictness

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 A Graphic Rating Scale with Unclear Standards

Excellent Good Fair Poor

Quality of work

Quantity of work

Creativity

Integrity

what exactly is meant by “good,” “quantity of work,” and so forth?

The standard is unclear and this could lead to unfair appraisals.
To overcome this problem, appraises should include descriptions for each standard.

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Performance appraisal problems
• Halo Effect: Appraisers tendency to unfavorably appraise an employee on
all performance dimension just because the employee is poor in one of the
performance dimensions. This is because of appraisers tendency to make
first impression judgment.

• Central Tendency: A bias situation where the appraiser tends to rate an

employee “average” on all/most of the performance dimensions.

• Leniency/Strictness: The tendency to rate employees as either too high

(liberally) or too low (conservatively) instead of being fair and
marking/rating on the basis of merit.

• Recency effect: Rating an employee on the basis of his/her most recent

performance and ignoring their other past performances.

• Bias: Appraisers personality, judgment, intuition etc. cloud his/her ability to

appraise an employee fairly. Similarly, appraiser might be prejudicial to
certain gender, race, ethnicity, religion etc.

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 Appraising Performance:
Problems and Solutions (cont’d)

How to Avoid
Appraisal Problems

Agree on the
Know Use the Ensure performance Keep
Problems Right Tool Fairness improvement a Diary
plan

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LO5: Managing Appraisal Interviews

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 The Appraisal Interview
This is an interview where the appraiser and the subordinate (who has been appraised) sit
together to discuss and review the appraisal. The objective of this interview is to develop
a plan for improving any deficiencies or weaknesses that have been recognized through
the appraisal or to strengthen/reinforce any positive aspect of the subordinate.

Satisfactory—Promotable

Satisfactory—Not Promotable
Types of
Appraisal
Interviews Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable

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Types of Appraisal Interview

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 The Appraisal Interview (cont’d)

Guidelines for
Conducting an Interview

Get
Talk in terms Encourage
Don’t get Agreement
of objective the person to
personal. on action
work data. talk.
plan

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 The Appraisal Interview (cont’d)

How to Handle a Defensive Subordinate

1 Recognize that defensive behavior is normal.

2 Never attack a person’s defenses.

3 Postpone action.

4 Recognize your own limitations.

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 The Appraisal Interview (cont’d)

How to Ensure Improved Performance

1
Don’t make the subordinate feel threatened
during the interview.
Give the subordinate the opportunity to present
2
his or her ideas and feelings.
Give daily feedback so that the review has no
3
surprises.
4 Never say the person is “always” wrong.

5 Criticism should be objective and free of biases.

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LO6: Performance Management:Insights

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Main differences between Performance
Appraisal and Performance management

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Elements of Performance Management

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Thank You ☺

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