PART THREE TRAINING AND DEVELOPMENT
CHAPTER / T Nine
Performance Management and Appraisal / 9
Lecture Outline
Strategic Overview
Basic Concepts in Performance and Appraisal Management
Comparing Performance Appraisal and Performance Management
Why Performance Management?
Defining the Employee's Goals and Work Efforts
An Introduction to Appraising Performance
Why Appraise Performance?
Realistic Appraisals
The Supervisor's Role
Steps in Appraising Performance
Graphic Rating Scale Method
Alternation Ranking Method
Paired Comparison Method
Critical Incident Method
Narrative Forms
Behaviorally Anchored Rating Scales
Management by Objectives (MBO)
Computerized and Web-Based Performance Appraisal
Merging the Methods
Appraising Performance: Problems and Solutions
Potential Rating Scale Appraisal Problems
How to Avoid Appraisal Problems
Who Should do the Appraising?
The Appraisal Interview
Types of Interviews
How to Conduct the Appraisal Interview
Appraisals in Practice
Creating the Total Performance Management Process
Improving Productivity Through HRIS
/ In Brief: This chapter gives an overview of the performance appraisal process and the different tools and methods available. The main topics covered include the performance management process, appraisal methods, appraisal performance problems and solutions, and the appraisal interview.
Interesting Issues: Despite lots of attention, money and effort, performance appraisals remain an area with which few managers or employees are satisfied. The following questions may be worth discussing. Is it just that we don't have a good enough system yet, is there an intrinsic problem with performance appraisals, or is it just human nature to dislike them?
ANNOTATED OUTLINE
  1. Basic Concepts in Performance Appraisal and Performance Management

A.Comparing Performance Appraisal and Performance Management –
Performance appraisal is part of a total integrated process of performance
management, which consolidates goal setting, performance appraisal, and
development into a single, common system, the aim of which is to ensure that the employee's performance is supporting the company's strategic aims. Figure 9-2 illustrates the components of an effective performance management process

  1. Why Performance Management? – Performance management's emphasis on the integrated nature of goal setting, appraisal and development reflect Total Quality Management concepts. Second, it reflects what many studies have shown that traditional performance appraisals are useless and counter-productive. Third, it is a process that recognizes that every employee’s efforts must focus on helping the company to achieve its strategic goals.
  1. Defining the Employee's Goals and Work Standards – At the heart of performance management is the idea that employees effort should be goal directed, which involves clarifying expectations and quantifying them by setting measurable standards for each objective. Some guidelines for effective goal setting are: 1. assign specific goals; 2. assign measurable goals; 3. assign challenging but doable goals; and 4. encourage participation.

 / NOTES / Educational Materials to Use
  1. An Introduction to Appraising Performance
  1. Why Appraise Performance – For several reasons; 1) they play an integral role in the employer's performance management process; 2) the appraisal lets the boss and subordinate develop a plan for correcting any deficiencies, and reinforce those things he does correctly; 3) they serve a useful career planning purpose; and 4) it plays a part in salary decisions.
  1. Realistic Appraisals - It is important that a manager be candid when a subordinate is underperforming.
  1. The Supervisor's Role – Supervisors must be familiar with basic appraisal techniques, understand and avoid problems that can cripple appraisals, and know how to conduct appraisals fairly. The HR Department serves in a policy-making and advisory role.
  1. Steps in Appraising Performance – 1) define the job; 2) appraise performance; and 3) provide feedback.

The New Workplace: Performance Appraisals and Joint Venture Collaboration – A recent research project indicated that performance appraisals that are properly designed can encourage employees to collaborate and share information

  1. Graphic Rating Scale Method – isthe simplest and most popular performance appraisal technique.A scale is used to list a number of traits and a range of performance for each, then the employee is rated by identifying the score that best describes his/her performance level for each trait. (See example, Figure 9-3) Managers must decide which job performance aspects to measure. Some options include generic dimensions, actual job duties, or behaviorally recognizable competencies..

F.Alternation Ranking Method – is where employees are ranked from best to worst on a particular trait, choosing highest, then lowest, until all are ranked. Figure 9-6 shows an example of this method.

G. Paired Comparison Method – involves ranking employees by making a chart of all possible pairs of employees for each trait and indicating which is the better employee of the pair. Figure 9-7 shows an example of the paired comparison method.

H. Forced Distribution Method – is where predetermined percentages ofrates are placed in various performance categories; similar to grading on a curve.

I.Critical Incident Method – is where a supervisor keeps a record of uncommonly good and/or undesirable examples of an employee’s work-related behavior, and reviewing it with the employee at predetermined times.

J.Narrative Forms – involve rating the employee’s performance for each performance factor, writing down examples and an improvement plan, aiding the employee in understanding where his/her performance was good or bad, and summarizing by focusing on problem solving.

K. Behaviorally Anchored Rating Scales (BARS) – combines the benefits of narratives, critical incidents, and quantified scales, by anchoring a scale with specific behavioral examples of good or poor performance. The five steps in developing a BARS are: 1) generate critical incidents; 2) develop performance dimensions; 3) reallocate incidents; 4) scale the incidents; and 5) develop final instrument. The advantages of BARS include a more accurate gauge; clearer standards; feedback; independent dimensions; and consistency.

L. Management by Objectives (MBO) – requires the manager to set specific measurable goals with each employee and then periodically discuss his/her 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) performance reviews; and 6) provide feedback.

M.Computerized and Web-Based Performance Appraisal – generally enables managers to keep notes on subordinates during the year, to rate employees on a series of performance traits, and then generate written text to support each part of the appraisal. About 1/3 of employers use online performance management tools for at least some employees.

N. Merging the Methods – Most firms’ tools include combining several methods. Anchoring a scale, as in Figure 9-3, improves reliability and validity of the appraisal scale.

 / NOTES / Educational Materials to Use
  1. Appraising Performance: Problems and Solutions

It can be difficult to rate performance for several reasons. 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.Potential Rating Scale Appraisal Problems – unclear standards; halo effect; central tendency; leniency or strictness; and bias.

1.Unclear Standards – Ambiguous traits and degrees of merit can result in an unfair appraisal.

2.Halo Effect – the influence of a rater’s general impression on ratings of specific qualities, can be a problem

3.Central Tendency – where supervisors stick to the middle of the rating scales, thus rating everyone average.

4.Leniency or Strictness – supervisors have the tendency to rate everyone either high or low.

5.Bias – the tendency to allow individual differences such as age, race, and sex to affect the appraisal ratings employees receive, is a problem.

a. Research Insight –Bias can influence the way a person appraises another person. In one study, for example, the identical employee was rated differently if pregnant. Figure 9-10 lists other sample rating errors.

B. How to Avoid Appraisal Problems – Appraisal problems can be minimized by learning and understanding the potential problems and solutions, using the right appraisal tool, training supervisors to reduce rating errors, controlling outside influences, and keeping a diary of an employee’s performance over the year..

Know Your Employment Law: Appraising Performance – It has been found that inadequate appraisal systems tend to be at the root of illegal discriminatory actions. In addition to being done legally, appraisals should be done ethically and honestly. This discussion box provides guidelines for developing a legally defensible appraisal process.

C.Who Should Do the Appraising?

1.The Immediate Supervisor – is usually in the best position to observe and evaluate the subordinate’s performance, and is responsible for that person’s performance.

2.Peer Appraisals – becoming more popular with firms using self-managing teams.

3.Rating Committees – consist of multiple raters, typically the employee’s immediate supervisor and three or four other supervisors.

4.Self-Ratings – tend to be higher than supervisor or peer ratings.

5.Appraisal by Subordinates – or upward feedback, is where subordinates anonymously rate their supervisor’s performance.

Research Insight – One study shows that upward feedback is very effective in improving supervisors’ behaviors.

6.360-Degree Feedback – where 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.

 / NOTES / Educational Materials to Use

IV.The Appraisal Interview is an interview in which the supervisor and subordinate review the appraisal and make plans to remedy deficiencies and reinforce strengths.

A. Types of Appraisal Interviews – 1) Satisfactory – Promotable This is the easiest interview, with the objective to make development plans; 2) Satisfactory – Not PromotableThis type of interview has the objective of maintaining performance when promotion is not possible; and 3) Unsatisfactory – Correctable with the objective to plan correction via the development of an action plan.

B. How to Conduct the Interview – Prepare for the Interview by assembling the data, preparing the employee, and choosing the time and place. Be direct and specific, using objective examples; don’t get personal; encourage the person to talk; and don’t tiptoe around.

1.How to Ensure the Interview Leads to Improved Performance – Clear-up job-related problems and set improvement goals and a schedule for achieving them.

2.How to Handle a Defensive Subordinate – Recognize that defensive behavior is normal; never attack a person’s defenses; postpone action; and recognize your own limitations.

3.How to Criticize a Subordinate – When required, criticize in a manner that lets the person maintain his/her dignity and sense of worth, in private, and constructively.

4.How to Handle a Formal Written Warning – Written warnings should identify the standards by which the employee is judged, make it clear that the employee was aware of the standard, specify any violation of the standard, and show that the employee had an opportunity to correct the behavior.

C.Appraisals in Practice – Research shows that performance appraisals are required for most employees. Various types of appraisal formats are used, but most include reviews and feedback.

IV.Creating The Total Performance Management Process

In this section several examples are provided of how a small firm, a large firm, and the Hotel Paris created a total performance management process

A. Improving Productivity through HRIS: TRW’s New Performance Management System – In this example of how a large firm implemented a performance management system, TRW moved from a paper based performance appraisal system to an online system, through which most TRW employees and supervisors could input and review their data electronically. Figures 9-12 and 9-13 show the information required for this web-based system.

 / NOTES / Educational Materials to Use

KEY TERMS

performance appraisalEvaluating an employee’s current and/or past performance relative to his or her performance standards.

performance managementManaging all elements of the organizational process that affect how well employees perform.

graphic rating scaleA 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 performance for each trait.

alternation rankingRanking employees from best to worst on a particular

methodtrait, choosing highest, then lowest, until all are ranked.

paired comparisonRanking employees by making a chart of all possible pairs of the

methodemployees for each trait and indicating which is the better employee of the pair.

forced distributionSimilar to grading on a curve; predetermined percentages

methodof rates are placed in various performance categories.

critical incident methodKeeping a record of uncommonly good or undesirable examples of an employee's work-related behavior and reviewing it with the employee at predetermined times.

behaviorally anchoredAn appraisal method that aims at combining the benefits

rating scale (BARS) of narrative andquantified ratings by anchoring a quantified scale with specific narrative examples of good and poor performance.

management by Involves setting specific measurable goals with each employee

objectives(MBO)and then periodically reviewing the progress made.

electronic performance Having supervisors electronically monitor the amount of

monitoring (EPM)computerized data an employee is processing per day, and thereby his or her performance.

unclear standardsAn appraisal scale that is too open to interpretation.

halo effectIn performance appraisal, 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 tendencyA tendency to rate all employees the same way, such as rating them all average.

strictness / leniencyThe problem that occurs when a supervisor has a tendency to rate all subordinates either high or low.

biasThe tendency to allow individual differences such as age, race, and sex to affect the appraisal rates these employees receive.

appraisal interviewsAn interview in which the supervisor and subordinate review the appraisal and make plans to remedy deficiencies and reinforce strengths.

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