Performance Appraisal Programs
Chapter 8 – Appraising and Improving Performance
Performance Appraisal Programs -
Performance appraisal: A process performed annually (sometimes biannually or quarterly) by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success.
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Performance management: The process of creating a work environment in which people can perform to the best of their abilities.
Purpose of Performance Appraisal -
It might seem performance appraisals are used for a rather narrow purpose – to evaluate who is doing a good job or not. But it is far more than that. The use of performance appraisals can be classified as Administrative or Developmental.
Administrative Purposes: Used as a basis for compensation decisions (pay-for-performance) Promotions, transfers, and layoff decisions Determining the relative worth of jobs under a job evaluation program Performance appraisal also provides “paper trail” for documenting HRM actions that can result in legal actions. Recognize the success of the entire HR program depends on knowing how the performance of employees compares with the goals established for them. Developmental Purposes: From the stand point of individual development, appraisal provides the feedback essential for discussing an employee’s strengths and weaknesses as well as improving his or her performance. Used to develop training and developmental plans for employees Not used to judge employee’s current stand point but to improve overall.
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Reasons why sometimes performance appraisals yield disappointing results: 1. Lack of managerial support 2. Little face-to-face discussion between manager and employee being appraised 3. The appraisal is annually and there is little follow up afterwards 4. Unclear performance standards 5. Time consuming with forms and paper-work
Developing an Effective Appraisal Program -
HR department’s responsibility for overseeing and coordinating a firms appraisal program. However managers also help establish the objectives Before any appraisal is conducted, the standards by which performance is to be evaluated should be clearly defined and communicated to employee. These standards should be based on job-related requirements derived from job analysis.
Performance Standards -
There are 4 basic considerations in establishing performance standards: Strategic relevance, criterion deficiency, criterion contamination, and reliability.
Strategic Relevance: Refers to the extent to which the standards of an appraisal relate to the strategic objectives of the organization in which they are applied. Criterion efficiency: The extent to which the standards capture the entire range of an employee’s responsibilities. When a performance standard focuses on a single criterion to the exclusion of other important ones, then the appraisal system is said to suffer from criterion deficiency. Criterion Contamination: There are factors outside an employee’s control that can influence his or her performance. A comparison of performance of production workers should not be contaminated by the fact that some work with newer machines than others do. A comparison of the performance of travelling salespeople should not be contaminated by the fact that territories differ in sales potential. Reliability: Refers to the stability or consistency of a standard OR the extent to which individuals tend to maintain a certain level of performance over time. Reliability can be measured by correlating two sets of rating. Calibration: Managers meet to discuss the performance of individual employees to ensure their appraisals are in line with one another. The managers begin by rating those employees whose performance rating are especially good or especially poor.
Legal Guidelines for Performance Appraisals -
Ratings must be job related with performance standards developed through a job analysis Employees much be given a written copy of their job standards in advance of their appraisal. Managers who conduct the appraisal must be able to observe the behaviour they are rating. This implies having measurable standards which could be compared later.
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Supervisors should be trained to use the appraisal form correctly. The appraisal should be discussed openly with employees to help poor performers improve their work An appeals procedure should be established for employee disagreements
Who Should Appraise Performance? Manager/Supervisor Appraisal: The traditional approach to evaluating employees performance. Most instances, supervisors are in the best position to perform this function. Often conducted by a manager and supervisor (one level higher) to reduce biased evaluations. Self-Appraisal: Beneficial when managers seek to increase an employee’s involvement in the review process. Best for developmental purposes not administrative purposes. Subordinate Appraisal: Have been used by both large and small firms to give managers feedback on how their subordinates view them. Should be submitted anonymously and combined across several individual raters Peer Appraisal: Provides information that differes to some degree from ratings by a superior. More accurate and valid information than appraisals by managers Drawbacks: its simpily a popularity contest, managers are reluctant to give up control, low rating receivers might retaliate, and peers reply on stereotypes in ratings. Team Appraisal: Extension of the peer appraisal; driven by TQM conerns Customer Appraisal: Also driven by TQM conerns, firms use internal and external customers as a source of performance appraisals.
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360 Degree Appraisal: combining rating from all sources listed above. Pros: System is more comprehensive, Higher quality information, Compliments TQM, may lessen bias Cons: Complexity is high, conflicting opinions, system requires training, employees might collude or “game” the system.
Rater Error -Appraisal training should focus on eliminating the subjective errors made by managers. -
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Halo error: common with respect to rating scale, especially those that do not include carefully developed descriptions of the employee behaviours being rated Horn error: Occurs when a manager focuses on one negative aspect about an employee and generalizes it into an overall poor appraisal rating.
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Error of central tendency: All ratings are about average. Rater is reluctant to give either extremely high or low ratings. Leniency or strictness error: Give employees either one extreme or the other.
-
Recency error: based largely on the employees most recent behaviour rather than overall.
-
Contrast error: An employee’s evaluation is biased either upward or downward because of comparison with another employee just previously evaluated.
-
Similar-to-me error: Appraiser inflates the evaluation of an employee because of a mutual personal connection
Performance Appraisal Methods -
Performance appraisal methods can be broadly classified as measuring: 1. Traits – popular despite their inherent subjectivity 2. Behaviours – action-orientated information thus best for development 3. Results – focuses on the measurable contribution
Traits Method -
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Trait approaches to performance appraisal are designed to measure the extent to which an employee possesses certain characteristics However, if not designed carefully on the basis of job analysis, it can be notoriously biased and subjective Graphic Rating Scales: A trait approach to performance appraisal whereby each employee is rated accordingly to a scale of characteristics. Mixed-Standard Scales: modification of the basic rating scale method. Rather than a single trait scale, the rater is given three specific descriptions of each trait which reflect three levels of performance: superior, average, and inferior. They are then sequenced to form the mixed-standard scale. Forced-Choice Method: requires the rater to choose from statements, often in pairs, that appear successful or unsuccessful performance. Essay Method: requires rater to compose a statement describing employee behaviour.
Behavioural Methods -
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Behavioural methods have been developed to specifically describe which actions should, or should not, be exhibited on the job. Critical Incident Method: occurs when employee behaviour results in unusual success or unusual failure in some part of the job. How an employee deals with this can be used for appraisal. Behavioural Checklist Method: one of the oldest appraisal technique where the rater checks statements on a list that the rater believes are characteristics of the employee’s performance or behaviour. Behaviourally Anchored Rating Scale (BARS): Consists of a series of five to ten vertical scales, one for each important dimension of job performance. The critical incidents are placed along the scale and are assigned point values by experts. Behaviour Observation Scale (BOS): Similar to BARS as they both are based on critical incidents. However, rather than asking evaluator to choose a point, a BOS is designed to measure how frequently each of the behaviours has been observed. (BOS = observer/ others = judge)
Results Method -
Rather looking at the traits or behaviour of employees, many firms evaluate the accomplishments. Less subjectivity and bias Productivity measures: salespeople are evaluated by their sales volume. Cons: Criterion contamination and criterion deficiency may occur. Management by Objectives (MBO): Employee’s set their objectives (sales goal) through consultation with their superiors and then evaluator uses these objectives as a basis for evaluation.
Performance Appraisal Programs -
Performance appraisal: A process performed annually (sometimes biannually or quarterly) by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success.
-
Performance management: The process of creating a work environment in which people can perform to the best of their abilities.
Purpose of Performance Appraisal -
It might seem performance appraisals are used for a rather narrow purpose – to evaluate who is doing a good job or not. But it is far more than that. The use of performance appraisals can be classified as Administrative or Developmental.
Administrative Purposes: Used as a basis for compensation decisions (pay-for-performance) Promotions, transfers, and layoff decisions Determining the relative worth of jobs under a job evaluation program Performance appraisal also provides “paper trail” for documenting HRM actions that can result in legal actions. Recognize the success of the entire HR program depends on knowing how the performance of employees compares with the goals established for them. Developmental Purposes: From the stand point of individual development, appraisal provides the feedback essential for discussing an employee’s strengths and weaknesses as well as improving his or her performance. Used to develop training and developmental plans for employees Not used to judge employee’s current stand point but to improve overall.
-
Reasons why sometimes performance appraisals yield disappointing results: 1. Lack of managerial support 2. Little face-to-face discussion between manager and employee being appraised 3. The appraisal is annually and there is little follow up afterwards 4. Unclear performance standards 5. Time consuming with forms and paper-work
Developing an Effective Appraisal Program -
HR department’s responsibility for overseeing and coordinating a firms appraisal program. However managers also help establish the objectives Before any appraisal is conducted, the standards by which performance is to be evaluated should be clearly defined and communicated to employee. These standards should be based on job-related requirements derived from job analysis.
Performance Standards -
There are 4 basic considerations in establishing performance standards: Strategic relevance, criterion deficiency, criterion contamination, and reliability.
Strategic Relevance: Refers to the extent to which the standards of an appraisal relate to the strategic objectives of the organization in which they are applied. Criterion efficiency: The extent to which the standards capture the entire range of an employee’s responsibilities. When a performance standard focuses on a single criterion to the exclusion of other important ones, then the appraisal system is said to suffer from criterion deficiency. Criterion Contamination: There are factors outside an employee’s control that can influence his or her performance. A comparison of performance of production workers should not be contaminated by the fact that some work with newer machines than others do. A comparison of the performance of travelling salespeople should not be contaminated by the fact that territories differ in sales potential. Reliability: Refers to the stability or consistency of a standard OR the extent to which individuals tend to maintain a certain level of performance over time. Reliability can be measured by correlating two sets of rating. Calibration: Managers meet to discuss the performance of individual employees to ensure their appraisals are in line with one another. The managers begin by rating those employees whose performance rating are especially good or especially poor.
Legal Guidelines for Performance Appraisals -
Ratings must be job related with performance standards developed through a job analysis Employees much be given a written copy of their job standards in advance of their appraisal. Managers who conduct the appraisal must be able to observe the behaviour they are rating. This implies having measurable standards which could be compared later.
-
Supervisors should be trained to use the appraisal form correctly. The appraisal should be discussed openly with employees to help poor performers improve their work An appeals procedure should be established for employee disagreements
Who Should Appraise Performance? Manager/Supervisor Appraisal: The traditional approach to evaluating employees performance. Most instances, supervisors are in the best position to perform this function. Often conducted by a manager and supervisor (one level higher) to reduce biased evaluations. Self-Appraisal: Beneficial when managers seek to increase an employee’s involvement in the review process. Best for developmental purposes not administrative purposes. Subordinate Appraisal: Have been used by both large and small firms to give managers feedback on how their subordinates view them. Should be submitted anonymously and combined across several individual raters Peer Appraisal: Provides information that differes to some degree from ratings by a superior. More accurate and valid information than appraisals by managers Drawbacks: its simpily a popularity contest, managers are reluctant to give up control, low rating receivers might retaliate, and peers reply on stereotypes in ratings. Team Appraisal: Extension of the peer appraisal; driven by TQM conerns Customer Appraisal: Also driven by TQM conerns, firms use internal and external customers as a source of performance appraisals.
-
360 Degree Appraisal: combining rating from all sources listed above. Pros: System is more comprehensive, Higher quality information, Compliments TQM, may lessen bias Cons: Complexity is high, conflicting opinions, system requires training, employees might collude or “game” the system.
Rater Error -Appraisal training should focus on eliminating the subjective errors made by managers. -
-
Halo error: common with respect to rating scale, especially those that do not include carefully developed descriptions of the employee behaviours being rated Horn error: Occurs when a manager focuses on one negative aspect about an employee and generalizes it into an overall poor appraisal rating.
-
Error of central tendency: All ratings are about average. Rater is reluctant to give either extremely high or low ratings. Leniency or strictness error: Give employees either one extreme or the other.
-
Recency error: based largely on the employees most recent behaviour rather than overall.
-
Contrast error: An employee’s evaluation is biased either upward or downward because of comparison with another employee just previously evaluated.
-
Similar-to-me error: Appraiser inflates the evaluation of an employee because of a mutual personal connection
Performance Appraisal Methods -
Performance appraisal methods can be broadly classified as measuring: 1. Traits – popular despite their inherent subjectivity 2. Behaviours – action-orientated information thus best for development 3. Results – focuses on the measurable contribution
Traits Method -
-
Trait approaches to performance appraisal are designed to measure the extent to which an employee possesses certain characteristics However, if not designed carefully on the basis of job analysis, it can be notoriously biased and subjective Graphic Rating Scales: A trait approach to performance appraisal whereby each employee is rated accordingly to a scale of characteristics. Mixed-Standard Scales: modification of the basic rating scale method. Rather than a single trait scale, the rater is given three specific descriptions of each trait which reflect three levels of performance: superior, average, and inferior. They are then sequenced to form the mixed-standard scale. Forced-Choice Method: requires the rater to choose from statements, often in pairs, that appear successful or unsuccessful performance. Essay Method: requires rater to compose a statement describing employee behaviour.
Behavioural Methods -
-
-
Behavioural methods have been developed to specifically describe which actions should, or should not, be exhibited on the job. Critical Incident Method: occurs when employee behaviour results in unusual success or unusual failure in some part of the job. How an employee deals with this can be used for appraisal. Behavioural Checklist Method: one of the oldest appraisal technique where the rater checks statements on a list that the rater believes are characteristics of the employee’s performance or behaviour. Behaviourally Anchored Rating Scale (BARS): Consists of a series of five to ten vertical scales, one for each important dimension of job performance. The critical incidents are placed along the scale and are assigned point values by experts. Behaviour Observation Scale (BOS): Similar to BARS as they both are based on critical incidents. However, rather than asking evaluator to choose a point, a BOS is designed to measure how frequently each of the behaviours has been observed. (BOS = observer/ others = judge)
Results Method -
Rather looking at the traits or behaviour of employees, many firms evaluate the accomplishments. Less subjectivity and bias Productivity measures: salespeople are evaluated by their sales volume. Cons: Criterion contamination and criterion deficiency may occur. Management by Objectives (MBO): Employee’s set their objectives (sales goal) through consultation with their superiors and then evaluator uses these objectives as a basis for evaluation.
