Performance appraisal (or evaluation) is the HRM activity used to determine the extent on which the employees are performing

the job effectively. Performance appraisal can be either • Informal, when supervisors think about how well the employees are doing and • Formal, when there is a system set up by the organization to regularly and systematically evaluate employee performance. In the following we are referring to formal performance appraisal. Why using performance appraisal? • Developmental purposes: it helps to clarify the necessity and the effectiveness of the training programs; • Reward purposes: helps in determining who should receive rewards and who should be laid off; • Motivational purposes: stimulates effort to perform better; • Legal compliance: it provides legally defensible reason for making promotion, transfer, reward and discharge decisions; • Human resource and employee planning purposes: it serves as a valuable input to skills inventories and human resource planning; • Compensation: helps to identify what to pay and what will serve as an equitable monetary package; • Communication purposes: the rater and ratee get to know each other through communication; • HRM research purposes: it can be used to validate selection tools, such as a testing program. The 6 steps in performing evaluations 1. Establish performance standards for each position and the criteria for evaluation In setting objectives to be followed by the employee to be evaluated, the following principles are to be met (SMART objectives): • Specific • Measurable • Achievable (occasionally Agreed between line manager and employee) • Results orientated • Time framed (with a set date for completion) 2. Establish performance evaluation policies on when to rate, how often to rate and who should rate When to rate. Usually, all employees are rated on / near the same date in a company. How often to rate. In many companies there is one evaluation in a year. However, more and more organizations shift to quarterly evaluations; this is convenient especially in fast moving organizations, because a more frequent up-date of the objectives is possible. Who should rate. There are several possibilities, such as • Rating by a committee of several superiors, • Rating by the employee’s peers (co-workers), • Rating by the employee’s subordinates,

The method was developed by Smith and Kendall. In this case the rater is presented with a set of traits and is asked to rate the employee on each of them. Behaviorally Anchored Rating Scales (BARS). analysis of data and records. A3. The method was further developed by giving weights (from excellent to poor) to several objectives. Like BARS. The method was developed to substitute graphic rating scales. each with 5 to 6 critical incident anchors (both positive and negative). Critical incident technique. A rating score from the checklist equals the number of checks. but the most used evaluation is the appraisal by the superior. If the rater believes that the employee possesses a trait listed. good. less tense and more satisfied than in case using other methods. The BARS approach relies on the use of critical incidents to serve as anchor statements on a scale. A 2. if not. EVALUATION TECHNIQUES A. as it seems that they become more committed. but this method needs more time to use than the other techniques. Employees prefer the using of this method instead of others. A 4. developed by Latham and associates. A BARS rating form usually contains 6 to 10 specifically defined performance dimensions. Sometimes a combination of the above mentioned possibilities is also used. Graphic rating scale is the oldest and still most used method of evaluation. Usually. this method is used in combination with other methods. The major difference is that the rater should give under BOS how often the ratee has been observed engaged in the specific behaviors identified in the BOS. The data they gather are influenced by the criteria used for evaluation and by the technique used for evaluation. the rater checks the item. A 6. in which the rater is asked to describe the strong and weak aspects of the employee’s behavior. Forced choice is the technique when the rater must choose from a set of descriptive statements about an employee. Essay evaluation. the BOS uses the critical incident technique to identify a series of behaviors that cover the domain of the job. • Self-evaluation. The advantage of this method is that the results are less subjective. as graphic rating scales permits to evaluate all the employees high. A checklist is a set of objectives or descriptive statements. and discussion with the employee. Have raters gather data on employee performance The raters collect information by observation. The ratings can be numeric (from 1 to 5 for example) or alphabetic (such as outstanding. Checklists and Weighted Checklists.• Rating by someone outside the immediate work situation (seldom used). Individual evaluation methods are those techniques when the standards of performance are defined individually. Behavioral Observation Scales. satisfactory. fair and unsatisfactory). A 7. A 5. the rater leaves it blank. 3. A 1. . without references to other person(s). a method according to which the rater maintains a log of behavioral incidents that represent either effective or ineffective performance for each employee being rated.

20% in high average and 10% in high. used in case there are several subordinates to be ranked. . which arises due to the perceptual differences in the meaning of the words used to evaluate employees. Some teachers are easy “As”. It is viewed as a philosophy of managerial practice. B. • Central tendency error – the tendency of the raters to assign average ratings for all the dimensions. Paired comparison. Ranking – the case when the superior is asked to rank the subordinates based on some overall criterion. Rater problems. Most employees are wary of performance evaluation.B. C. and results are indexed based on this number. the subordinate is provided with a course to follow and a target to shoot for while performing the job. the technique used is cumbersome. such as: • Problems with the standards of evaluation. the design is blamed and the evaluation is worth nothing. communicate and debate. such as 10% in low. Forced distribution is the method similar to grading on a curve. 4. If the criteria for evaluation are poor. The major problem is not with the techniques. others never give excellent qualifications. general impression of the ratee. Opposition to evaluation. Which evaluation technique to use? An exact answer can not be given. 20% on low average. control. The rater chooses the better performing subordinate. By setting objectives through participation or by assignment from a superior. POTENTIAL PROBLEMS WHEN CONDUCTING PERFORMANCE EVALUATIONS A. • Leniency or harshness error. • Recency of events error – raters forget more about past behavior than current behavior. The most common fear is that of rater subjectivity. Each employee is paired with every person to be compared with. 40% in average. Have raters (and employees in some systems) evaluate employees’ performance Management by objectives MBO is more than just an evaluation program and process. System design and operating problems. but how they are used and by whom? The responsibility of the rater and the seriousness of the rater are much more critical than which method to choose. The rater is asked to rate the employees in some fixed distribution of categories. a method by which managers and subordinates plan. B 3. organize. Some raters see everything good (lenient raters). other see everything bad (harsh raters). • The Halo Effect occurs when a rater assigns ratings on several dimensions of performance based on an overall. B 2. Multiple person evaluation techniques are those methods when the performance of one employee is directly and intentionally compared with the performance of other employee. B 1. or the system is more form than substance. The number of times that a person is chosen as the better employee is tallied.

However. also can contribute to better evaluation. this is in some cases only theory. Employee problems with performance evaluations. The self evaluations can be a good method in achieving this aim. At the individual evaluation techniques the performance of an employee is requested to be rated independently of the performance of other employees. 5. or at least reduced. if the performance of an average colleague is evaluated after the evaluation of an outstanding employee. The recent observations show that trainings for raters in order to develop their ability to observe. For example. Others consider that the using of new methods. There are three generally used approaches to these interview situations: tell and sell. Make decisions and file the evaluation . the average employee can get low ratings. however. In order to avoid this perception.• Contrast effects. • Personal bias error. it should be presented how difficult is the evaluation of employees. can be eliminated. The tendency to rate the preferred employees higher and those not preferred lower. The performance evaluation discussions should include • Review of overall progress • Discussions of problems that were encountered • Agreement about potential performance improvement possibilities • Discussion how current performance is in line with long term carrier goals • Specific action plans for the coming year 6. tell and listen and problem solving – the using of which depends mainly on the experience level of the employee. D. The rater errors. recall and report subordinate behavior lead to improvement of employee evaluations. such as BARS. Discuss the evaluation with the employee The supervisor should hold an evaluation interview with each subordinate in order to discuss his or her appraisal and to set objectives for the upcoming evaluation period. Experts advise that the employee development and salary action discussions should not occur in the same interview. The most common problem is that employees may feel that the evaluations are unfair.

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