Performance Management System

Comparing Performance Appraisal

and Performance Management
• Performance appraisal
– Evaluating an employee’s current and/or
past performance relative to his or her
performance standards.
• Performance management
– A process that 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.
Performance Management

The performance management

systems need to include:
– decisions about who should
evaluate performance
– what format should be used
– how the results should be utilized
 The Components of an Effective
Performance Management Process

• Direction sharing
• Role clarification
• Goal alignment
• Developmental goal setting
• Ongoing performance monitoring
 The Components of an Effective
Performance Management Process

• Ongoing feedback
• Coaching and support
• Performance assessment (appraisal)
• Rewards, recognition, and
compensation
• Workflow and process control and
return
Why Performance Management?

Total Quality

The
Performance
Appraisal Issues
Management
Approach
Strategic Focus
 Performance Management
Systems
Purposes of a Performance Management
System
– Feedback - let employees know how well they
have done and allow for employee input.
– Development – identify areas in which
employees have deficiencies or weaknesses.
– Documentation - to meet legal requirements.
 Performance Management
Systems

Difficulties in Performance Management

Systems
– Focus on the individual: Discussions of
performance may elicit strong emotions and
may generate conflicts when subordinates and
supervisors do not agree.
 Performance Management
Systems

Difficulties in Performance Management

Systems
– Focus on the process: Company
policies and procedures may present
barriers to a properly functioning
appraisal process.
– Additionally, appraisers may be poorly
trained.
 Performance Management and
EEO

• HRM practices must be bias free,

objective and job-related.
• Valid performance appraisals are
conducted at established intervals and are
done by trained appraisers.
 Performance appraisal

• Performance appraisal means

evaluating an employee’s current or
past performance relative to the
person's performance standards.
Appraisal involves-
– Setting work standards.
– Assessing the employee’s actual
performance relative to these standard
and
– Providing feedback to the employee.
 Performance appraisal

• Performance appraisal is the process of

evaluating the behavior of employees in
the workplace, normally including both
the quantitative and qualitative aspects of
job performance
 Performance Appraisal Roles
• Supervisors
– Usually do the actual appraising.
– Must be familiar with basic appraisal
techniques.
– Must understand and avoid problems that can
cripple appraisals.
– Must know how to conduct appraisals fairly.
Performance Appraisal Roles
• HR department
– Serves a policy-making and advisory role.
– Provides advice and assistance regarding the
appraisal tool to use.
– Prepares forms and procedures and insists
that all departments use them.
– Responsible for training supervisors to improve
their appraisal skills.
– Responsible for monitoring the system to
ensure that appraisal formats and criteria
comply with EEO laws and are up to date.
 Appraising
Performance
• Why appraise performance?
– Appraisals play an integral role in the
employer’s performance management process.
– Appraisals help in planning for correcting
deficiencies and reinforce things done correctly.
– Appraisals, in identifying employee strengths
and weaknesses, are useful for career planning
– Appraisals affect the employer’s salary raise
decisions.
 Defining the Employee’s
Goals and Work Standards

Guidelines for
Effective Goal Setting

Assign
Assign Assign
Challenging Encourage
Specific Measurable
but Doable Participation
Goals Goals
Goals
Who Should Do the Appraising?
• The immediate supervisor
• Peers
• Rating committees
• Self-ratings
• Subordinates
• 360-Degree feedback
Who Should Do the Appraising?

Immediate Self-Rating
Supervisor

Peers
Potential Subordinates
Appraisers

Rating 360-Degree
Committee Feedback
The Appraisal Process
 The Appraisal Process
• Establishment of performance standards
– Derived from company’s strategic goals.
– Based on job analysis and job description.
• Communication of performance standards
to employee.
 The Appraisal Process
• Measurement of performance using
information from:
– personal observation
– statistical reports
– oral reports
– written reports
• Comparison of actual performance with
standards.
 The Appraisal Process
• Discussion of appraisal with employee.
• Identification of corrective action where
necessary.
– Immediate action deals with symptoms.
– Basic corrective action deals with causes.
The Appraisal Interview

Satisfactory—Promotable

Satisfactory—Not Promotable
Types of
Appraisal
Interviews Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable
 The Appraisal Interview

Guidelines for
Conducting an Interview

Talk in terms Encourage

Don’t get Don’t tiptoe
of objective the person to
personal. around.
work data. talk.
 Designing the Appraisal Tool
• What to measure?
– Work output (quality and quantity)
– Personal competencies
– Goal (objective) achievement
• How to measure?
– Graphic rating scales
– Alternation ranking method
– MBO
 Appraisal Methods
Three approaches:
• Absolute standards
• Relative standards
• Objectives
 Appraisal Methods
Evaluating absolute standards:
• An employee’s performance is measured
against established standards.
• Evaluation is independent of any other
employee.
 Appraisal Methods
Evaluating absolute standards:
– Essay Appraisal: Appraiser writes narrative
describing employee performance &
suggestions.
– Critical Incident Appraisal: Based on key
behavior anecdotes illustrating effective or
ineffective job performance.
 Appraisal Methods

• Critical Incident method: Keeping a

record of uncommonly good or
undesirable examples of an
employee’s work related behavior and
reviewing it with the employee at
predetermined times.
Examples of Critical Incidents for
an Assistant Plant Manager
 Appraisal Methods
Evaluating absolute standards:
– Checklist Appraisal: Appraiser checks off
behaviors that apply to the employee.
– Graphic Rating Scale Appraisal: Appraiser
rates employee on a number of job-related
factors.
 Appraisal Methods
• Graphic rating scale
– A scale that lists a number of traits and a
range of performance for each that is used to
identify the score that best describes an
employee’s level of performance for each trait.
Graphic Rating Scale with Space
for Comments

9–33
 Appraisal Methods
• Alternation ranking method
– Ranking employees from best to worst
on a particular trait, choosing highest,
then lowest, until all are ranked.
Alternation Ranking Scale
 Appraisal Methods

Evaluating absolute standards:

– Forced-Choice Appraisal: Appraisers
choose from sets of statements which appear
to be equally favorable, the statement which
best describes the employee.
 Appraisal Methods
• Forced distribution method
– Similar to grading on a curve; predetermined
percentages of rates are placed in various
performance categories.
– Example:
• 15% high performers
• 20% high-average performers
• 30% average performers
• 20% low-average performers
• 15% low performers
 Appraisal Methods
Evaluating absolute standards:
• Behaviorally Anchored Rating
Scales (BARS): Appraiser
rates employee on factors
which are defined by behavioral
descriptions illustrating various
dimensions along each rating
scale.
 Appraisal Methods
Relative standards:
• Employees are evaluated by comparing
their performance to the performance of
other employees.
 Appraisal Methods
Relative standards:
• Group Order Ranking: Employees are
placed in a classification reflecting their
relative performance, such as “top
one-fifth.”
 Appraisal Methods
Relative standards:
– Individual Ranking: Employees
are ranked from highest to lowest.
– Paired Comparison:
• Each individual is compared to every
other.
• Final ranking is based on number of
times the individual is preferred
member in a pair.
 Appraisal Methods
• Paired comparison method
– Ranking employees by making a chart
of all possible pairs of the employees
for each trait and indicating which is the
better employee of the pair.
Ranking Employees by the
Paired Comparison Method

Note: + means “better than.” − means “worse than.” For each chart, add up the
number of 1’s in each column to get the highest-ranked employee.
 Appraisal Methods

Using Achieved Outcomes to Evaluate

Employees
Management by Objectives (MBO)
– includes mutual objective setting and
evaluation based on the attainment of the
specific objectives
 Appraisal Methods

Using Achieved Outcomes to Evaluate

Employees
– Common elements in an MBO program are:
• goal specificity
• participative decision making
• an explicit time period
• performance feedback
– Effectively increases employee performance
and organizational productivity.
 Management by Objectives
• Involves setting specific measurable
goals with each employee and then
periodically reviewing the progress made.
1. Set the organization’s goals.
2. Set departmental goals.
3. Discuss departmental goals.
4. Define expected results (set individual
goals).
5. Performance reviews.
6. Provide feedback.
 Using MBO

Time-consuming appraisal
Setting unclear objectives
process

Problems with MBO

Conflict with subordinates

over objectives
Advantages and Disadvantages of
Appraisal Tools
 Appraising Performance:
Problems and Solutions
Potential Rating
Scale Appraisal
Problems

Unclear Halo Central Leniency or

Bias
Standards Effect Tendency Strictness
Factors that can Distort Appraisals
Factors that can Distort Appraisals

• Leniency error
– Each evaluator has his/her own value system.
– Some evaluate high (positive leniency) and
others, low (negative leniency).
• Halo error: Evaluator lets an assessment
of an individual on one trait influence
evaluation on all traits.
Factors that can Distort Appraisals

• Similarity error: Evaluator rates others in

the same way that the evaluator perceives
him or herself.
• Low appraiser motivation: Evaluators
may be reluctant to be accurate if
important rewards for the employee
depend on the results.
Factors that can Distort Appraisals

• Central tendency: The reluctance to

use the extremes of a rating scale and to
adequately distinguish among employees
being rated.
• Inappropriate substitutes for
performance: Effort, enthusiasm,
appearance, etc. are less relevant for
some jobs than others.
Factors that can Distort Appraisals
Attribution Theory
• Evaluations are affected based on
whether someone’s performance is due
to
– internal factors they can control
– external factors which they cannot
• If poor performance is attributed to
internal control, the judgment is harsher
than when it is attributed to external
control.
Factors that can Distort Appraisals
• Impression management:
• If employee positively influences the
relationship with the supervisor, he/she is
likely to receive a higher rating.
 Appraising Performance:
Problems and Solutions

How to Avoid
Appraisal Problems

Control
Know Use the Train Keep
Outside
Problems Right Tool Supervisors a Diary
Influences
 How to Avoid Appraisal
Problems?
• Learn and understand the potential
problems, and the solutions for each.
• Use the right appraisal tool. Each tool has
its own pros and cons.
• Train supervisors to reduce rating errors
such as halo, leniency, and central
tendency.
• Have raters compile positive and negative
critical incidents as 9–57
they occur.
 Suggestions for Improved
Performance Appraisals
Use Behavior-Based Measures:
• Measures based on specific
descriptions of behavior are more
job-related and elicit more inter-rater
agreement than traits, such as “loyalty”
or “friendliness”.
 Suggestions for Improved
Performance Appraisals
Combine Absolute and Relative
Standards:
• Absolute standards tend to be positively
lenient; relative standards suffer when
there is little variability.
• Combining the standards tends to offset
the weaknesses of each.
 Suggestions for Improved
Performance Appraisals
Provide Ongoing Feedback:
• Expectations and disappointments should
be shared with employees on a frequent
basis.
 Suggestions for Improved
Performance Appraisals
Use Multiple Raters:
• Increasing the number of raters leads to more
reliable and valid ratings.
– Use peer evaluations: Coworkers offer
constructive insights and more specific
evaluations.
– Upward appraisals allow employees to give
their managers feedback.
– 360-Degree appraisals: Supervisors, peers,
employees, team members, customers and
others with relevant information evaluate the
employee.
 Suggestions for Improved
Performance Appraisals
Rate Selectively
– Appraisers only evaluate in those areas about
which they have sufficient knowledge.
– Appraisers should be organizationally as close
as possible to the individual being evaluated.
– More effective raters are asked to do the
appraisals.
 Suggestions for Improved
Performance Appraisals
Train Appraisers:
• Untrained appraisers who do poor
appraisals can demoralize employees and
increase legal liabilities.
Suggestions for Improved
Performance Appraisals
 International Performance
Appraisal
• Who performs the evaluation?
– Different cultural perspectives and
expectations between the parent and local
country may make evaluation difficult.
– Evaluation forms may not be translated
accurately.
– Quantitative measures may be misleading.
 International Performance
Appraisal
• Evaluation Formats
– May make sense to use different forms for
parent-country nationals and host-country
nationals.
– Performance criteria for a particular position
should be modified to fit the overseas position
and site.
– Include a current expatriate’s insights as part
of the evaluation.