Chapter 8: Performance Management and Appraisal Today

I. Basic Concepts in Performance Management and Appraisal

A. Purpose of Appraise Performance

Many employers still base pay, promotions, assignments and the like on
employee appraisals. Appraisals play an integral role in the employer's
performance management process. The appraisal lets the supervisor and
subordinate develop a plan for correcting any deficiencies, and reinforce
those things the employee does correctly. Appraisals serve a useful career
planning purpose. Finally, appraisals play an important role in identifying
training and development needs.

B. Steps in Performance Appraisal - Stripped to its essentials, performance

appraisal always involves the three-step performance appraisal process:

(1) setting work standards,

(2) assessing the employee’s actual performance relative to those standards

which involves some rating form

(3) providing feedback to the employee with the aim of helping him or her to
eliminate performance deficiencies or to continue to perform above par.

II. Traditional Appraisal Methods

1) Graphic Rating Scale Method - It is the simplest and most popular performance
appraisal technique. A scale is used to list a number of traits and a range of performance
for each, and then the employee is rated by identifying the score that best describes
his/her performance level for each trait. (See example in Figure 8.2.) Managers must
decide which job performance aspects to measure. Some options include generic
dimensions, actual job duties, or behaviorally recognizable competencies.

2) Alternation Ranking Method - Employees are ranked from best to worst on a particular
trait, choosing highest, then lowest, until all are ranked. Figure 8.5 shows an example of
this method.

3) Forced Distribution Method - Predetermined percentages of rates are placed in

various performance categories, which is similar to grading on a curve. This method
makes the best and worst stand out. But some balk at forced distribution appraisal.
Inequities can arise for example when a high performing team must cut their “worst”
employee who is a better performer than employees in a different department.

4) Critical Incident Method - In this approach, a supervisor keeps a record of

uncommonly good and/or undesirable examples of an employee’s work-related behavior,
and reviews the record with the employee at predetermined times. The challenge for the
supervisor is to make the time to record the incidents as soon as possible.

5) Behaviorally Anchored Rating Scales (BARS) - This method combines the benefits of
narratives, critical incidents, and quantified scales by anchoring a scale with specific
behavioral examples of good or poor performance.

6) The Management by Objectives Method (MBO) - The manager sets specific

measurable goals with each employee and then periodically discusses the employee’s
progress toward these goals. The process consists of six steps:
1) set the organization's goals; 2) set departmental goals; 3) discuss departmental goals;
4) define expected results; 5) conduct performance reviews; and 6) provide feedback.
7) Paired Comparison Method - It involves ranking employees by making a chart of all
possible pairs of employees for each trait and indicating which one is the better employee
of the pair. Figure 8.6 shows an example of the paired comparison method.

8) Appraisal Forms in Practice - The most effective appraisal forms often merge several
approaches.

9) Computerized and Online Performance Appraisal ⎯ This method generally enables

managers to rate employees on a series of performance traits, and then generate written
text to support each part of the appraisal.

10) Virtual Appraisal Games ⎯ Allows employees to evaluate and award each other
through a virtual game. Employees can give real-time feedback to each other including
virtual gifts and points.

11) Electronic Performance Monitoring ⎯ These systems use computer network

technology to allow managers access to their employees’ computers and telephones.

12) Talent Management and Differential Employee Appraisal ⎯ Some talent management
experts suggest that company resources should be directed to the company’s mission-
critical employees, those who are critical to achieving the company’s strategic goals.

13) Conversation Days ⎯ The emphasis in these manager–employee conversations is on

areas for improvement and growth, and on setting stretch goals that align with the
employee’s career interests. There are no explicit performance ratings.

III. How to Deal with Rater Error Problems and the Appraisal Interview

It can be difficult to rate performance for several reasons. For employees, much
depends on a good rating, including career progress, or being able to obtain a
raise. There are also technical problems that can affect the fairness of the
process.

A. Clarify Standards - Ambiguous traits and degrees of merit can result in an

unfair appraisal.

B. Avoid Halo Effect Ratings - The influence of a rater’s general impression on

ratings of specific qualities can be a problem.

C. Avoid the Middle - The central tendency problem can occur when
supervisors stick to the middle of the rating scales, thus rating everyone
average.

D. Don’t be Lenient or Strict - Supervisors have the tendency to rate everyone

either high or low.

Avoid Bias

E. Diversity Counts - The concept refers to the tendency to allow individual

differences such as age, race, and sex affect employees’ appraisal ratings.
Tutorial 8
8-1. Explain performance appraisal and discuss the main reasons for conducting
such
appraisals.
8-2. Describe the three steps in a performance appraisal cycle.
8-3. An immediate superior is usually the only one who appraises employees. What
issues may
arise when using this approach?
8-4. What is 360-degree feedback performance appraisal? Discuss the benefits and
difficulties
of using the 360-degree feedback performance appraisal approach in organizations.
8-5. Explain the appraisal tools commonly used in organizations to appraise
employee
performance.
8-6. Describe Forced Distribution Method of performance appraisal and discuss the
advantages and drawbacks of this method.
8-7. Discuss measures that organizations can take to make sure that its performance
appraisal
exercise is fair and productive.
8-8. Discuss how the appraisal interview can be used to build employee
engagement.