Analytics In Performance Evaluation

Author 1: Dr. G. Radha Kiranmayi, Associate Professor, ICBM School of Business

Excellence, Plot No. 2A, Ishwar’s Abode, Upperpalli, Hyderabad -500 048. Mobile No:

9550944141, Official Contact: 040-48506834, Email Id: rkiranmayi@icbm.ac.in

Author 2:Mrs. J. Mounika Reddy, Assisstant Professor, CBIT-School of Management

Studies, Chaitanya Bharathi Institute Of Technology, Gandipet , Hyderabad-500 075.Mobile

No:9032949143, Email Id: mounikareddy_sms@cbit.ac.in

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 Analytical Approaches to Performance Evaluation

Abstract:

Today almost all the top-performing organizations in the world tend to apply
analytics. Analytics empowers managers with better decision making capabilities in the areas
where human interference can effect judgements and use of data can lead to better outcomes.

The measurement of employee performance being one of the most critical area in the
field of human resource management suffers bias in the performance judgements of the
employees. Hence a more sophisticated and robust tool of measurement needs to be
established.

This paper attempts to suggest few simple yet robust analytical approaches that HR
practitioners could utilize for reducing the bias caused due to human interference in
performance evaluations.

Key Words: HR Analytics, Human Resource Management, Employee Performance,

Employee Performance Evaluation, Bias in Performance Evaluation.

Introduction:

The success of organization depends on employee performance. Employee

performance is generally stated as the accomplishments made and outcomes achieved by the
personnel at work (Gomez-Mejia, Balkin, & Cardy, 2005). Thus measuring the performance
to both evaluate the accomplishments and also control the discrepancies are vital for the
organizational wellbeing and success.

But, in the real scenario, evaluating performance has been a source of dissatisfaction
for most of the practitioners (R. L. Cardy, 2015; R. L. Cardy & Munjal, 2016). HR Managers
and workforces alike have frustrations with the evaluation system (R. L. Cardy, 2015).
Performance evaluations are prone to bias due to subjectivity in the judgements made by the
appraisers in the process of evaluation. (R. L. Cardy & Munjal, 2016).

Thus, developing a robust and healthy performance evaluation mechanism is not only
necessary but also vital for organizational success. Emergence of new technologies like
analytics have opened up new doors in this area. Using existing data for analyzing employee
performance and applying statistical techniques to make decisions is called performance
analytics. Performance analytics not only helps in limiting the impreciseness of performance

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evaluation mechanisms but also equips HR managers to make evidence based decisions
(Marler & Boudreau, 2017).

However, HR managers are still behind other functional area managers in embracing
analytics (Lawler III, Levenson, & Boudreau, 2004). One of the reasons for such delay is the
lack of understanding of HR managers on analytical concepts and lack of awareness of HR
practices to the analytic teams (Lawler III et al., 2004). There is an immense need for the HR
practitioners to understand the importance of addressing the HR issues and make better
decisions by adapting to the changing environment.

This article tries highlights few analytical concepts that could be used in developing
better performance evaluation system in the organizations.

Literature Review:

The organizations these days have acknowledged their employees as the most prized
possessions. The employees are no longer associated with costs and problems but are treated
as most valued resources. However, owing to cut throat competition and cognizant workforce
retaining the skilled personnel has become the most critical challenge to the organizations
these days (Griffeth & Hom, 2001; Murphy & Cleveland, 1991).

Employees today demand admiration, accountability and reward (Anshu Sharma,

2017) from organizations for offering their skills and services. A competent employee who is
treated well develops commitment and loyalty towards organization (Curtis & Wright, 2001).
Thus understanding the employee performance is a critical task for the organizations.

In practice, the value of an employee is assessed through performance evaluation

(Arberry, 2015). Performance evaluation is considered as the heart of performance
management (R. L. B. Cardy, 2014).

Performance evaluation is a formal and productive procedure to measure an

employee’s work and results based on their job responsibilities. It is used to gauge the
amount of value added by an employee in terms of increased business revenue, in comparison
to industry standards and overall employee return on investment (ROI) (Griffeth & Hom,
2001; Ittner & Larcker, 1998).

Performance evaluations grade the employees on the basis of which, they are either
promoted or suitable distribution of salary raise is offered or they are sent for an appropriate

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training or they might be even punished or be terminated from the employment (Anshu
Sharma, 2017). Thus, performance evaluation is the most critical area in the field of human
resource management for identifying and retaining competent employees in the organizations
(Anshu Sharma, 2017; Lowe, Levitt, & Wilson, 2008).

Healthy performance evaluation methods enhances trust (Mayer & Davis, 1999),
enable goal achievement (Cleveland, Murphy, & Williams, 1989), develop employee
satisfaction (Boswell & Boudreau, 2000) and cultivate stronger organizational culture
(Cleveland et al., 1989).

Although enormous research exists in the area of performance measurement, it still

remains the area of interests by researchers and practitioners alike (Anshu Sharma, 2017;
Ittner & Larcker, 1998). Bias in performance reviews play an important role in their
inquisitiveness (Arberry, 2015). Bias can ensue in performance appraisals due to human
interference in evaluation (Anshu Sharma, 2017) or due to inadequate information about the
employee (Tavis, 2016). Therefore a more better, robust and accurate way of measurement is
sought by the practitioners that can benefit the organizations and employees equally (John &
Eeckhout, 2018).

Innovative technologies, such as analytics have opened up new boundaries for the
managers today (Angrave, Charlwood, Kirkpatrick, Lawrence, & Stuart, 2016; Marler &
Boudreau, 2017). HR managers can adapt to these techniques to develop robust and bias free
appraisal systems that assesses employee (Anshu Sharma, 2017).

Analytical approaches like regression to mean, deducing an adequate sample and

sample impartiality can substantially reduce the bias in performance evaluations and
therefore enable in creating a robust mechanism to measure performance.

Approaches used to Reduce Bias in Performance Evaluation:

Regression to the Mean:

Regression to the Mean or RTM is a phenomenon of getting closer to the mean from
the repeated observations on a particular subject by reducing the random error caused due to
bias in observations (Barnett, Van Der Pols, & Dobson, 2004). It is an analytical technique
used for data that is repetitive in nature (Barnett et al., 2004; Bland & Altman, 1994). This
concept can be applied in various fields of work where data on a particular subject can be
measured on a repetitive basis (Bland & Altman, 1994; Harrison & Bazerman, 1995).

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 Performance evaluation is periodic measurement of employee performance in the
organizations. Therefore as the nature of performance data is periodic, RTM could be applied
in performance evaluation.

Regression to the mean reduces the random error caused due to bias in observations
(Barnett et al., 2004), thus application of this technique can substantially reduce the bias
(error) in performance measurements.

In this technique, the data of an individual employee is collected over considerably

long period of time and the mean values of the data are calculated. As the mean values are
calculated from huge data set, the extremities in the data caused generally caused due to bias
can be neutralized minimizing the bias in the evaluation (Massey & Thaler, 2013).

Deducing Sample Size:

The size of the sample is the utmost significant factor considered in any analytical
study. The inferences made about a population are generated from the ability of the sample to
represent the population (Krejcie & Morgan, 1970). Also, the crux of the central limit
theorem states that the average of sample means will represent the population mean when the
sample size is considerably large (Ferguson, 2017). Moreover the precision of the
measurement depends on the quality and size of the sample selected. (Israel, 1992b).

But then again, in practice the size of the sample is usually determined based on the
cost, time, or convenience of collecting the data. This laxity in data collection leads to
erroneous outcomes (Israel, 1992a, 1992b; Krejcie & Morgan, 1970).

Performance evaluation is a process of measuring employee performance from the

data collected about the employee. Generally, in organizations performance data is collected
from the supervisors of the employee (Chrymko, 1991) or from the client, peer group,
subordinates of the employee (Maurer, Raju, & Collins, 1998) or from the employee himself
at the end of appraisal period (Roberts, 2003).

As the data is collected from limited sources and in limited intervals, the data could
lead to erroneous results (bias). This can be addressed by collecting ample employee
information from all the sources possible. The data from log sheets, attendance reports, leave
records, records of man-hours, additional efforts taken for the organization, client satisfaction
records, awards and recognitions etc. This data can be collected throughout the performance

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period and could be used during performance measurement. Multiple sources and continuous
track of information diminishes the biases in performance evaluation process.

Sample Impartiality:

The analytical concept of sample impartiality or independence enunciates the

importance of data to be independent of any pre conceived notions or viewpoints that can
influence the judgement of the assessor.

The concept of sample impartiality or independence suggests that when a particular

matter is discussed amongst the group, the decision of the group would be influenced by one
or few dominating viewpoints in the group and thus the decisions made would be partial
leading to erroneous decisions. To avoid such situations, the data from each source has to be
free of any influence or bias. The opinions of the group from which data is collected must be
must be uncorrelated to each other (Galton, 1907).

This notion has been applied and proven to be correct in many areas of research
where a sample was collected to deduce certain inferences about the population (Bassamboo,
Cui, & Moreno, 2015; Lorenz, Rauhut, Schweitzer, & Helbing, 2011; Mannes, Larrick, &
Soll, 2012; Marbach et al., 2012; Solomon, 2006; Welinder, Branson, Perona, & Belongie,
2010).

Thus concept of sample impartiality or independence can also be applied in

performance evaluation (Bassamboo et al., 2015). The performance evaluation decisions are
often based on the data collected from the stakeholders associated with the employee at work
(R. L. B. Cardy, 2014). Thus care must be taken that no individual opinion would influence
the final appraisal of the employee. Moreover all the impartial and uncorrelated opinions
must be collected and used for making the final performance judgements. Thus the appraiser
has to develop proper measures to collect unbiased and impartial information about the
employee during the performance evaluation.

Conclusion

The measurement of employee performance is the most critical area in the field of human
resource management. A robust employee performance evaluation system improves
employee confidence (Mayer & Davis, 1999), ensures employee job performance (Boswell &
Boudreau, 2000) and develops resilient organizational culture (Cleveland et al., 1989). Thus

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developing robust and accurate mechanisms to measure performance is an essential for
healthy existence of the organization.

However, despite rigorous efforts of practitioners and academicians over the years to
bring in a better and reliable system, the incidence of bias is still a major problem in
performance evaluations.

Nevertheless, the emergence of new technologies like analytics in the field of

management have brought in several modifications in the traditional ways. Today, managers
are able to make better decisions that can be buoyed by substantial evidence developed from
the data available with the organization . Analytics has been found to be very worthwhile in
the areas where the human interferences cloud the judgements made and there is a high scope
of bias in final outcomes (Marler & Boudreau, 2017; Sharma & Bhatnagar, 2017). Analytics
in these areas uses the data available with the organizations to make decisions and reduces
the human element in decision making (Van Den Heuvel & Bondarouk, 2016).

As performance evaluation decisions has always been subjected to human interference,

analytics in this area could help the managers to reduce the bias in the performance
judgements of its employees.

The approaches like RTM, deducing the sample size and sample impartiality or
independence are time tested in various domains and can thus be applied in performance
measurement also. This techniques are simple and can be applied by the HR managers with
no much technical expertise and costs involved and yet developing a reliable performance
measurement system.

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