Performance Appraisal

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Outline
Performance Measurement

Functions of Performance Appraisal

Types of Performance to Measure

Performance Appraisal Methods

Performance Raters Performance Feedback

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Performance Management
Goal: Improve the effectiveness & efficiency of the organization by:
Aligning the employees work behaviors & results with the organizations goals Improving the employees work behaviors & results

On-going, integrative process

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Performance Management Cycle

Source of figure: Fisher, Schoenfeldt, & Shaw (2003), Figure 11.1

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Functions of Performance Appraisal

Employee Development Tool Set goals
Involve employee Measurable Challenging but realistic, difficult but achievable Empower employee to achieve goals

Provide feedback to reinforce and sustain

performance Provide help and advice to improve performance

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Functions of Performance Appraisal

Employee Development Tool (contd.) Assist employee in achieving career progression goals Determine training needs Administrative Tool Link rewards to performance
Pay increases, promotions, demotions, dismissals, disciplinary actions

Evaluate HRM policies and programs Example: before-after study (pretest-posttest design)
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Types of Performance to Measure

Results-based (results-oriented): measure

the results produced by the employee

Examples for a retail store manager: Sales of the store Profit per square foot Inventory shrinkage Customer satisfaction

Makes sense for many jobs Use it where results matter

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Types of Performance to Measure

Results-based (contd.): Challenges:
Which results are relevant may not be obvious for all jobs Some results are not under the employees control May foster results at all costs mentality May interfere with teamwork May be difficult to provide effective feedback

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Types of Performance to Measure

Behavior-based (behavior-oriented):

measure the employees behaviors

Examples for a retail store manager: Good teamwork Welcome & thank customers Good attendance Monitor customers & employees for theft

Makes sense for many jobs Use it where how the employee produces results matters
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Types of Performance to Measure

Behavior-based (contd.): Makes it easier to provide detailed feedback
Examples for a retail store manager:
Results: You didnt achieve your sales goal. Behavior: You are allowing your employees to wait too long before offering help to customers.

Challenges: Difficult to capture the full range of relevant behaviors Different behaviors can lead to the same results do we always care which behaviors were used?
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Types of Performance to Measure

Trait-based (trait-oriented): measure the

employees abilities and other personal characteristics

Examples for a retail store manager: Pleasant personality Effective communicator Usually a bad idea: Poor reliability & validity Weak linkages with job effectiveness Measurement subject to biases (racism, ) Difficult to provide effective feedback
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Performance Appraisal Methods

Objective Measures: measure performance

in terms of things we can see and count

Production measures: count units produced Sales measures: count sales Personnel data: count things in the employees

personnel file, such as:

Number of times late to work Number of times absent Number of disciplinary actions taken
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Performance Appraisal Methods

Objective Measures (contd.) Performance tests: evaluate a sample of the employees work Business unit performance measures:
Examples:
Stock price Market share Profit measures: profits, return on sales, return on assets, return on equity

Use for managers with business unit responsibility

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Performance Appraisal Methods

Subjective measures: measure performance

using human judgment

Ranking: subjectively rank employees from

best to worst
Example:
1. Bob 2. Carol 3. Ted 4. Alice

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Performance Appraisal Methods

Subjective measures (contd.) Paired Comparisons: in all possible pairs of employees, subjectively rate which employee is better
# of paired comparisons = (N2 N)/2 Example: N = 4 6 paired comparisons:
Bob > Carol; Bob > Ted; Bob > Alice Carol > Ted; Carol > Alice Ted > Alice

Example: N = 12 66 paired comparisons

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Performance Appraisal Methods

Subjective measures (contd.) Rating scale (graphic rating scale): subjectively rate the employees performance on a labeled numeric measuring scale
Rate overall job performance as well as specific aspects of job performance Example:
5 = Excellent 4 = Very satisfactory 3 = Satisfactory 2 = Unsatisfactory 1 = Very unsatisfactory
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Examples of Rating Scales

Use a graphic or just

use words? Label all the points in the scale, or just label the endpoints of the scale? Odd or even number of points in the scale? Fewer points in the scale, or more points in the scale?

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Performance Appraisal Methods

Subjective measures (contd.) Forced distribution: evaluator must place a fixed percentage of employees in each performance category
Example:
10% must be rated 5 = Excellent 20% must be rated 4 = Very satisfactory 50% must be rated 3 = Satisfactory 15% must be rated 2 = Unsatisfactory 5% must be rated 1 = Very unsatisfactory

But what if the distribution being forced doesnt fit?

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Performance Appraisal Methods

Subjective measures (contd.) Behaviorally Anchored Rating Scale (BARS): replace the vague descriptors in a traditional rating scale with specific examples of performance
Example: Customer assistance
5 = Could be expected to volunteer to help customer and to walk with customer to desired product location 4 = Could be expected to walk with customer to desired product location when asked for help by customer 3 = Could be expected to tell and point customer to where the desired product is located 2 = Could be expected to shrug shoulders and walk away when asked for assistance by customer 1 = Could be expected to hide from customers in the employee break-room
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Performance Appraisal Methods

Subjective measures (contd.) BARS (contd.)
A different scale will be needed for each aspect of performance Advantages:
Job-relevant measures of performance Involves employees in developing scales

Disadvantages:
More work to develop BARS (time & money) Employees may not consistently fit into one of the BARS categories (solution to this problem is BOS)

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Performance Appraisal Methods

Subjective measures (contd.) Behavioral Observation Scales (BOS): evaluators rate the frequency with which an employee engages in specific behaviors
Example: on a list of possible employee behaviors, rate how often the employee engages in each behavior using a rating scale where:
1 = almost never 5 = almost always

Weighted checklist: from a list of possible

employee behaviors, check off the ones that apply to the employee
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Performance Appraisal Methods

Management By Objectives (MBO): At the beginning of the review period, meet with employee and agree on goals for the employee to achieve by the end of the period
Involve employee in setting goals Measurable goals Challenging but realistic, difficult but achievable

At the end of the review period, meet with

employee and, for each goal, determine if the goal has been achieved
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Performance Raters
Who should we ask to rate an employees

job performance?

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Performance Raters
Options for performance raters: Supervisors Self-evaluation Peers (co-workers) Subordinates Customers 360-Degrees

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 360 degree feedback, also known as

'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees performance comes from all the sources that come in contact with the employee on his job.

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 With the increase in the number of raters from one to five

(commonly), it become difficult to separate, calculate and eliminate personal biasness and differences. It is often time consuming and difficult to analyze the information gathered. The results can be manipulated by the employees towards their desired ratings with the help of the raters. The 360 degree appraisal mechanism can have a adversely effect the motivation and the performance of the employees.

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 360 degree feedback as a process

requires commitment of top management and the HR, resources(time, financial resources etc), planned implementation and follow up.

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Rater Biases
The halo effect The error of central tendency The leniency and strictness biases Personal prejudice

The recency effect

 360 degree feedback can be adversely

affected by the customers perception of the organisation and their incomplete knowledge about the process and the clarity of the process.

Often, the process suffers because of the lack of knowledge on the part of the participants or the raters.
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Performance Feedback
Employees need good feedback

Allow time & eliminate distractions

Types of feedback sessions: Tell-and-sell Tell-and-listen Problem-solving Mixture of tell-and-sell and problem-solving

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Performance Feedback
Doesnt hurt to cover both administrative

(e.g., pay increase) and developmental (e.g., future goals) issues in one feedback session Provide specific feedback
Dont say: Youre always late. Do say: You were more than 5 minutes late on

25 separate occasions in the last 3 months. This is unacceptable. We need to develop (1) a specific goal concerning prompt attendance, and (2) an action plan that you will follow to achieve the goal.
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