HRM Ch07 Performance Appraisal

Chapter 05
Performance
Appraisal:
Definition
Purposes
Difficulties
Methods
Human
Resource
Management
Performance Appraisal
Definition
o Performance appraisal means evaluating an employee’s current and/or

past performance relative to his or her performance standards.
― This process requires knowing what activities and outputs are desired,
observing whether they occur, and providing feedback to help employees
meet expectations.
― In the course of providing feedback, managers and employees may
identify performance problems and establish ways to resolve those
problems.
o Performance Management
― The process through which managers ensure that employees’ activities
and outputs contribute to the organization’s goals.
M. Moinul Haque, Premier University HRM 2

Purposes
o Feedback
― It allows employees to know how well they have performed over the
established goals.
― It also allows employees to know what pay raise they would receive.
― Without two-way feedback about an employee’s effort and its effect on
performance, we run the risk of motivation of employee to decrease.
o Development
― Identify areas in which employees have deficiencies or weaknesses.
― Suppose, a professor demonstrates extensive knowledge in his field &
conveys this knowledge to students in an adequate way.
― Although this individual’s performance may be satisfactory, his or her
peers may indicate that some improvements like exposure to different
teaching methods, such as bringing more experiential exercises, real
world applications, internet applications, case analysis, etc. into the
classroom .
Purposes
o Documentation
― To meet legal requirements.
― Suppose, a supervisor has decided to terminate an employee. Although
the supervisor cites performance matters as reason for discharge, a review
of this employee’s recent performance appraisals indicates that
performance was evaluated as satisfactory for the past two review
periods.
― Accordingly, unless this employee’s performance is significantly
decreased, personnel records do not support the supervisor’s decision.
This critique by HRM is absolutely critical to ensure that employees are
fairly treated and that the organization is protected.

Difficulties
o Focus on the individual

― Appraising individuals is probably one of the more difficult aspects of a
supervisor’s job – as emotions are involved.
― Discussions of performance may elicit strong emotions and may generate
conflicts when subordinates and supervisors do not agree.
― Employee may perceive outstanding performance, supervisor may rate
as good. Although the boss recognizes the work as good it is not
outstanding.
― Emotions need to be dealt properly. Otherwise, conflict may arise, ill
feeling may arise.
Difficulties
o Focus on the Process
― A particular structure should be followed. This structure will help to
facilitate documentation which in turn will help for quantifiable
evaluation.
― HRM policies can dictate performance outcomes. Company policies and
procedures may present barriers to a properly functioning appraisal
process.
― Budget says each managers salary can be increased by 3%;
― If one enjoys 6% for outstanding performance, other shall enjoy less than
3% to average the increase.
― Negative rather than positive work behaviors may be followed which
may lead to a tendency to search for problems which can lead to an
emotional encounter.
― How and What to measure? How to deal with employees in the
evaluation process.
― Appraisers may be poorly trained: How to evaluate employee
performance. Lack of training may result in judgmental error or biases.
Process
o Establish of Performance Standards with Employees

— Performance standards should be clear and objective enough to be
understood and measured.
— ‘A full day work’ or ‘a good job’ is not properly defined.
— Manager cannot communicate if not properly defined… performance
appraisal becomes difficult.
— Derived from company’s strategic goals.
— Based on job analysis and job description.
Process
o Communication of Performance Standards to Employee

— Once performance standards are set, these expectations should be
communicated, employees should not guess what is expected.
— Vague performance standards are problematic.
— Problems increases when standards are set in isolation and without
employees’ inputs.
— Communication should be two way: information transfers from boss to
subordinate is not communication.
— Determine what actual performance is, what information is needed for it.

Process
o Measurement of Actual Performance

— Collect Information from –
— What to measure and how to measure.
— Wrong criteria may cause serious and dysfunctional result.
— What is measured will dictate where employees should excel
— Sources:
— Personal observation
— Statistical reports
— Oral reports
— Written reports
— Each has its own strengths and weaknesses
— A combination of them increases number of inputs & reliability.
Process
o Comparison of Actual Performance with Standards.

— This step note deviation from standard performance to expected
performance.
— One of the most challenging tasks appraisers is to present an accurate
assessment to the employee.
o Discussion of Appraisal with Employee

— Challenge is to present accurate assessment to employee
— Evaluation of another employee’s performance is also important as it is
used as reference for equity.
— Impression or perception will effect employee’s self-esteem and
subsequent performance.

Process
o Identification of Corrective Action Where Necessary

— Immediate action deals with symptoms: corrects problems now and get
back on the track.
— Basic corrective action deals with causes:
— More deep correction: how and why performance deviated.
Methods
o Making Comparisons
― The performance appraisal method may require the rater to compare one
individual’s performance with that of others. This method involves some
form of ranking, in which some employees are best, some are average,
and others are worst.
o Rating Individuals
— Performance measurement can look at each employee’s performance
relative to a uniform set of standards.
— The measurement may evaluate employees in terms of attributes
(characteristics or traits) believed desirable.
— The measurements may identify whether employees have behaved in
desirable ways, such as closing sales or completing assignments.
— For both approaches, the performance management system must identify
the desired attributes or behaviors, then provide a form on which the
manager can rate the employee in terms of those attributes or behaviors.

Methods: Making Comparisons
o Simple Ranking & Alternation Ranking Method

— Simple ranking requires mangers to rank employees in their group from
the highest performer to the poorest performer.
— A variation of Simple Ranking is Alternation Ranking.
— The manager works from a list of employees.
— First, the manger decides which employee is best and crosses that
person’s name off the list.
— From the remaining names, the manger selects the worst employee
and crosses off that name.
— The process continues with the manger selecting the second best,
second, worst, third best, third worst, and so on, until all the emplyees
have been ranked.
— The major downside of ranking involves validity – to state a
performance measure as broadly as best or worst doesn’t define what
exactly is goods or bad about the person’s contribution to the firm.
o Alternation Ranking Method

o Paired Comparison Method

— With the paired comparison method, every subordinate to be rated is
paired with and compared to every other subordinate on each trait.
— For example, suppose there are five employees to be rated. With this
method, a chart shows all possible pairs of employees for each trait.
— Then for each trait, the supervisor indicates (with a plus or minus) who is
the better employee of the pair. Next, the number of times an employee is
rated better is added up.
— In the Figure (next slide) employee Maria ranked highest (has the most
plus marks) for “quality of work,” and Art ranked highest for “creativity.”
o Paired Comparison Method

o Forced Distribution Method

— This type of performance measurement assigns a certain percentage of
employees to each category in a set of categories. For example, the
organization might establish the following percentages and categories:
— Exceptional—5 percent
— Exceeds standards—25 percent
— Room for improvement—10 percent
— Not acceptable—5 percent
— The manager completing the performance appraisal would rate 5 percent
of his or her employees as exceptional, 25 percent as exceeding standards,
and so on.
— A forced distribution approach works best if the members of a group
really do vary this much in terms of their performance.
o Forced Distribution Method

— It overcomes the temptation to rate everyone high in order to avoid
conflict.
— Research simulating some features of forced rankings found that they
improved performance when combined with goals and rewards,
especially in the first few years, when the system eliminated the poorest
performers.
— However, a manager who does very well at selecting, motivating, and
training employees will have a group of high performers.
— This manager would have difficulty assigning employees to the bottom
categories.
— In that situation, saying that some employees require improvement or are
“not acceptable” not only will be inaccurate, but will hurt morale.

Methods: Rating Individuals
o Graphic Rating Scale Method

— A graphic rating scale lists a number of traits and a range of performance
for each. A typical scale lists traits (such as teamwork) and a range of
performance standards (Below Expectations, Meets Expectations, and
Role Model) for each trait.
— The supervisor rates each subordinate by circling or checking the score
that best describes the subordinate’s performance for each trait, and then
totals the scores for all traits.


o Critical Incident Appraisal

 Based on critical or key behaviors that make the difference between
doing a job effectively or doing it ineffectively.
 Not trait-based appraisal rather behavior-based appraisal.
 Judge performance rather than personalities.
 It shows employees which behaviors are desirable and which need
improvement.
 An employee may be aggressive, imaginative, or relaxed but that say
nothing about his performance.
 Drawbacks:
 Appraisers must regularly write these incidents down, and doing this
on a daily or weekly basis for all employees. It is time consuming and
burdensome for supervisors.
 Critical incidents suffer from the same comparison problem found in
essays – that do not lend themselves easily to quantification.

o Checklist Appraisal
 Appraiser checks off behaviors that apply to the employee.
 Gives ‘yes’ or ‘no’ to each question.
Yes No
Are supervisor’s order is usually followed? ___ ___
Does the individual approach client quickly? ___ ___
Does the individual lose his temper in public? ___ ___
Does the individual volunteer to help others? ___ ___
 Appraiser records, but evaluation is done by HR Stuff. This reduces bias.

 An HRM analyst scores the checklist, often weighting the factors in
relationship to their importance in that specific job.
o Adjective Rating Scale Appraisal

 Appraiser rates employee on a number of job-related factors.
 Some factors like:
 Quality of Work is the accuracy, skill, and completeness of work.
 Quantity of Work is the volume of work done in a normal workday.
 Job Knowledge is information pertinent to the job that an individual
should have for satisfactory job satisfaction.
 Dependability is following directions and company politics without
supervision.

o Adjective Rating Scale Appraisal

Performance Rating:
Quality of work - Skill, Accuracy & Completeness
□ Consistently unsatisfactory
Job Knowledge
□ Occasionally unsatisfactory
□ Consistently satisfactory
□ Sometimes superior
□ Consistently superior
Quantity of Work - Volume
Dependability
o Forced Choice Appraisal

 Appraiser must choose between two or more statements. Each statement
may be favorable or unfavorable.
 The appraiser’s job is to identify which statement is most descriptive of
the individual being evaluated.
 Example
 An instructor may be chosen between:
(a) keeps up with the schedule identified in the syllabus,
(b) lectures with confidence
(c) keeps interest and attention in the class
(d) demonstrates how concepts are practically applied
(e) allows students opportunity to learn concepts on their own.
 The right answer is unknown to the rater.
 Individual with higher score is better performers.

o Behaviorally Anchored Rating Scales (BARS)

 The BARS method is intended to define performance dimensions
specifically, using statements of behavior that describe different levels of
performance.
 Example:
 The statement at the top (rating 7) describes the highest level of preparing for
duty.
 The statement at the bottom describes behavior associated with poor
performance.
 These statements are based on data about past performance. The organization
gathers many critical incidents representing effective and ineffective
performance, then classifies them from most to least effective. When experts
about the job agree the statements clearly represent levels of performance, they
are used as anchors to guide the rater.
Behaviorally Anchored
Rating Scales (BARS)
Although BARS can improve

interrater reliability, this method
can bias the manager’s memory.
The statements used as anchors
can help managers remember
similar behaviors, at the expense
of other critical incidents.

o Management by Objectives (MBO)

 Management by objectives (MBO) is a system in which people at each
level of the organization set goals in a process that flows from top to
bottom, so employees at all levels are contributing to the organization’s
overall goals.
 These goals become the standards for evaluating each employee’s
performance. An MBO system has three components:
1. Goals are specific, difficult, and objective.
2. Managers and their employees work together to set the goals.
3. The manager gives objective feedback through the rating period to
monitor progress toward the goals.
o Management by Objectives (MBO)
 MBO can have a very positive effect on an organization’s performance. In

70 studies of MBO’s performance, 68 showed that productivity improved.
 The productivity gains tended to be greatest when top management was
highly committed to MBO. Also, because staff members are involved in
setting goals, it is likely that MBO systems effectively link individual
employees’ performance with the organization’s over-all goals.
Factors that can distort Performance Appraisal
 We assumed until now that appraiser is free from personal biases,

prejudices and idiosyncrasies.
 But it will be naïve to think that every evaluator will be impartial and also
use standardize the criteria upon which their employees will be
appraised.
o Leniency error
 Each evaluator has his/her own value system that acts as a standard
against which appraisals are made.
 Relative to the true or actual performance an individual exhibits, Some
evaluate high (positive leniency and performance is overstated) and
others, low (negative leniency and performance is understated).
 If same person evaluates everyone then this can be ignored as same error
applies for everyone.
o Halo error:
 Evaluator lets an assessment of an individual on one trait influence
evaluation on all traits.
 Here, one is rated either extremely high or extremely low on all factors
based on a rating of one or two factors.
 Example: A teacher in classroom may be treated as outstanding in all
criteria when he is in real case appreciative of a few things he does in the
classroom.
 Reverse wording of question may be a solution.

o Similarity error:
 Evaluator rates others in the same way that the evaluator perceives him or
herself.
 Evaluator projects self-perceptions onto others.
 If evaluator is aggressive, he will look for it in appraise.
o Low appraiser motivation:

 Evaluators may be reluctant to be accurate if important rewards for the
employee depend on the results.
 If appraisal results in promotion, pay raise, etc.\
o Central tendency:
 The reluctance to use the extremes of a rating scale and to adequately
distinguish among employees being rated.
 Reluctance to use outstanding or unacceptable.
o Inflammatory Pressures :
 Pressures for equality and fear of retribution for low ratings leads to less
differentiation among rated employees.
 An employee have got 88 out of 100 and have expected to be promoted
but have not because average is 92.
o Inappropriate substitutes for performance:

 Effort, enthusiasm, appearance, etc. are less relevant for some jobs than
others.
 It is often more difficult to agree on what is a good job and more difficult
to define what criteria determine performance.

o Attribution Theory
 Evaluations are affected based on whether someone’s performance is due
to
 internal factors they can control, or
 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.
Creating More Effective Performance Management Systems
o Use Behavior-Based Measures:

 Measures based on specific descriptions of behavior are more job-related
and elicit more inter-rater agreement than traits.
 Loyalty, initiative, courage, reliability, and self-expression are
intuitively desirable but higher rating should not be based on them.
Employees who rate high on them may be poor performer.
 Confusion about trait:
 What is loyalty?
 When an employee is reliable?
 Two evaluator may consider same thing differently.

o 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.
 Student receive absolute grade – A, B, C, D or E
 Next student receives relative mark to show how he is ranked in the
class.
 Two student have got Grade B. But one ranked 4th out of 33 and
another 17th out of 22. Clearly the later got inflated grade.
 Provide Ongoing Feedback

 Sometimes – the best surprise is not surprise.
 Expectations and disappointments should be shared with employees on a
frequent basis.

o Use Multiple Raters:
 Increasing the number of raters leads to more reliable and valid ratings.
Out of 10 supervisors, one rates poor. May be one supervisor identified a
weakness like training need.
 Use peer evaluations: Coworkers offer constructive insights and
more specific evaluations.
 supervisor cannot watch every moment,
 may be he leaves most part of work for others,
 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.
o 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.
o Train Appraisers:
 Untrained appraisers who do poor appraisals can demoralize
employees and increase legal liabilities.


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Chapter 05

o Performance appraisal means evaluating an employee’s current and/or

M. Moinul Haque, Premier University HRM 2

M. Moinul Haque, Premier University HRM 4

o Focus on the individual

M. Moinul Haque, Premier University HRM 5

o Establish of Performance Standards with Employees

M. Moinul Haque, Premier University HRM 7

o Communication of Performance Standards to Employee

M. Moinul Haque, Premier University HRM 8

o Measurement of Actual Performance

M. Moinul Haque, Premier University HRM 9

o Comparison of Actual Performance with Standards.

o Discussion of Appraisal with Employee

M. Moinul Haque, Premier University HRM 10

o Identification of Corrective Action Where Necessary

M. Moinul Haque, Premier University HRM 11

M. Moinul Haque, Premier University HRM 12

o Simple Ranking & Alternation Ranking Method

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o Alternation Ranking Method

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o Paired Comparison Method

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o Paired Comparison Method

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o Forced Distribution Method

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o Forced Distribution Method

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o Graphic Rating Scale Method

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o Graphic Rating Scale Method

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o Graphic Rating Scale Method

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o Graphic Rating Scale Method

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o Graphic Rating Scale Method

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o Critical Incident Appraisal

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 Appraiser records, but evaluation is done by HR Stuff. This reduces bias.

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o Adjective Rating Scale Appraisal

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o Adjective Rating Scale Appraisal

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o Forced Choice Appraisal

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o Behaviorally Anchored Rating Scales (BARS)

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Although BARS can improve

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o Management by Objectives (MBO)

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o Management by Objectives (MBO)

 MBO can have a very positive effect on an organization’s performance. In

 We assumed until now that appraiser is free from personal biases,

M. Moinul Haque, Premier University HRM 33

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o Low appraiser motivation:

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o Inappropriate substitutes for performance: