University of the Philippines Diliman Extension Program in Pampanga

Introduction to Industrial-Organization Psychology

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PERFORMANCE EVALUATION
Report Notes Submitted as one of the Requirements in Applied Psychology 182 WFU

Prepared by:
GACURAY, Crenz Ainah cggacuray@up.edu.ph
GARCIA, Ciela Marie cdgarcia1@up.edu.ph
LOPEZ, Mary Niña Jane mglopez9@up.edu.ph

III - BA Applied Psychology

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CONCEPTS DESCRIPTION/DEFINITION

DEFINITION OF TERMS

1. Definition of terms Performance Management

● The whole process or the complete process of guiding, steering, and improving
performance within an organization
○ Performance management is a tool that helps managers monitor and evaluate
employees' work.
○ The goal of performance management is to create an environment where
people can perform to the best of their abilities and in alignment with the
organization's overall goals.
Performance Evaluation
● It 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 compared to industry standards and
overall employee return on investment (ROI).
○ Assessing how well the ship (or team) is doing
○ Assessing the overall effectiveness of a system, process, or team
Performance Appraisal?
● The specific event where individual performance within a particular period of time is
formally discussed, assessed, and documented
● Evaluating an employee’s current and/ot pasr performance relative to his or her
performance standards.
Performance Review?
● The broader meeting or discussion about overall performance of the

The Relation of the following:

Performance Management and Performance Evaluation
● Performance management is a holistic process that includes performance evaluation
as a crucial component. Evaluation contributes to the ongoing management cycle by
providing data for decision-making and improvement
Performance Evaluation and Performance Appraisal
● Performance evaluation is the broader term, encompassing the specific event of
performance appraisal. Appraisal is a key element within the evaluation process,
offering a detailed examination of individual employee performance.
Performance Appraisal and Performance Review
● Performance appraisal is part of the broader performance review. The appraisal
provides specific feedback on individual performance, while the review encompasses
a wider discussion about overall organizational performance.

The Differences of the following:

Performance Management and Performance Evaluation
● Performance management is a continuous and comprehensive process involving goal
setting, feedback, and development. Performance evaluation is a specific point in this
process where performance is assessed, but it doesn't capture the entire management
cycle.
Performance Evaluation and Performance Appraisal
● Performance evaluation is the overall assessment of performance, which may involve
various methods and tools. Performance appraisal is a specific event within evaluation,
focusing on individual employee performance through formal discussions and
March 2024
University of the Philippines Diliman Extension Program in Pampanga
Introduction to Industrial-Organization Psychology
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documentation.
Performance Appraisal and Performance Review
● Performance appraisal is a detailed assessment of individual performance, often
conducted annually. Performance review is a broader meeting that includes
discussions on overall organizational performance, strategic alignment, and decisions
related to the collective workforce.

PERFORMANCE MANAGEMENT

2. Performance The importance of Performance Management

Management ● Keeping employees engaged
● Retaining talent
● Developing leaders from within
The Purpose and Goals of Performance Management
● Five Main Objectives:
1. Develop clear role definitions, expectations and goals
2. Increase employee engagement
3. Develop managerial leadership and coaching skills
4. Boost productivity through improved performance
5. Develop a performance reward program that incentivizes accomplishment

The Benefits of Performance Management

1. Clear roles and standards simplify hiring.
● Having well-defined roles and performance standards makes hiring an easier
process
2. Well-defined roles make training easier.
● Those well-defined roles and standards make training easier
3. Consistent goal-setting ensures adaptability to market changes.
● Consistent development and revisiting of goals ensure that the organization
keeps up with changing market forces easily, and reacts quickly as a
whole, regardless of the size of the organization.
4. Clear expectations set employees up for success.
● Clear expectations and roles set employees up for achieving goals from the
start, providing a springboard to success.
5. Company investment boosts employee retention.
● Employees who feel that their company is invested in their success stay with
their companies, increasing employee retention.
6. Regular feedback increases engagement.
● Consistent feedback and coaching from managers lead directly to increased
engagement from employees while developing the ability to provide good
coaching and feedback leads to more skilled managers.
7. Upskilling creates a talent pipeline.
● As employees become more skilled, they can move up through the company,
creating a leadership pipeline.
8. Clear goals and upskilling enhance productivity.
● Productivity will increase thanks to increased engagement, clear goals and
upskilling of employees.
9. Proper rewards maintain long-term employee motivation.
● Employees remain incentivized to perform long-term, as they are properly
rewarded for their hard work.

RESPONSIBILITIES OF RATER

3. Responsibilities of Determine who will evaluate performance

the Rater/Evaluator ● 360-degree feedback
- Manager’s role ○ A performance appraisal system in which feedback is obtained from multiple
sources such as supervisors, subordinates, and peers.
○ Pros and Cons
● Multiple-source feedback
○ A performance appraisal strategy in which an employee receives feedback
from sources (e.g., clients, subordinates, peers) other than just his or her
supervisor.

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University of the Philippines Diliman Extension Program in Pampanga
Introduction to Industrial-Organization Psychology
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Roles of managers
● Top Managers
○ The top managers play a lead in the entire process by setting trends for the
lower rung and acting as role models for the employees
● Line Managers
○ the front line management play a very crucial role in implementing and
enacting the HR policies
● Role of Employees
○ They play an active part in formulating performance agreements along with
their line managers and participate in 360 degree assessment schemes.
● Role of HR
○ HRM strategies for managing the employee performance by considering part
time work, outsourcing and temporary workers.

RESPONSIBILITIES OF EMPLOYEE

4. Responsibilities of Employee
the Employee ● a worker hired by an employer to do a specific job.

Roles of Employees
● Assist and support company managers and executives
● Collaborate with other employees to complete projects
● Aid an organization in developing a product or providing a service
● Participate in training and professional development opportunities
● Establish and work toward strategic goals and targets

Responsibilities of Employees
● Fulfilling the responsibilities and duties outlined in the job description
● Achieving performance standards
● Working efficiently to reduce the use of time and resources
● Promoting a positive work ethic and environment
● Completing special requests from management

CRITERIA FOR RATING PERFORMANCE

5. Criteria for rating Rating of Performance

performance ● The most commonly used option in evaluating performance is to have supervisors rate
- Performance how well the employee performed on each dimension. Though there are many
Measure
variations of how these rating scales can be created, the two most common are the
graphic rating scale and the behavioral checklist.

Developing Performance Measures

● Effective performance evaluation systems use performance measures that are valid,
have clear standards, and are specific.

● Reliable
○ Refers to how well a measure yields consistent results over time and across
raters
● Standards
○ Clarifying the level of expected performance, or performance standards
○ Managers can use a number of standards
○ Must be clear and reflect the entire performance spectrum
○ Can not be so high that they are unattainable.
● Evaluations
○ Most effective when the standards are associated with high levels of
specificity.
● Validity
○ Focuses on the extent to which the performance standards reflect the actual
tasks, duties, and responsibilities employees are responsible for in their jobs,
specificity refers to the clarity of those performance standards.
● Specificity
March 2024
University of the Philippines Diliman Extension Program in Pampanga
Introduction to Industrial-Organization Psychology
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○ Greater specificity affords firms two benefits
■ Greater levels of specificity help employees understand how different
aspects of their job should be performed
● Deficient
○ When important aspects of an individual’s performance are not measured
● Contaminated
○ When it captures information that is irrelevant to an individual’s job
performance

Popular ways of Evaluating Employees

● Self-Evaluations
● Graphic Ratings
● Simple Checklists
● Expectations
● Peer Evaluations

PERFORMANCE APPRAISAL METHODS

6. Common
performance
appraisal methods Performance Appraisal Methods
used ● Methods for evaluating employees’ job performance based on established job expectations.

Common
Performance Description Advantages Disadvantages
Appraisal
Methods

Employees’ Inexpensive to develop Subjectivity

Graphic Rating performance is rated on
Scale an interval or ratio Easily understood by Difficult to use in making
scale. employees and compensation and
managers promotion decisions

The rater describes an

employee’s Subjectivity
performance. Easily provides
Essay Appraisal feedback on the positive Writing ability of rater
It includes the abilities of an employee affects validity
employee’s strengths
and weaknesses based Time-consuming
on work performance.

The rater answers yes

or no to a set of
questions that can
measure the
employee’s behavior,
traits, or both. Measurable traits can Does not allow for
Checklist Scale point out specific detailed answers or
Another variation of this behavioral expectations explanations (unless
scale is when raters combined with another
mark the criteria that method)
the employee fulfills,
and leave the ones that
the employee does not
fulfill blank.

The rater records

employee behavior
Critical Incident observed on the job and Give specific examples Tendency to report
Appraisal rates the employee negative incidents
based on the recorded
data.

The employee’s output

or productivity is
evaluated based on a

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University of the Philippines Diliman Extension Program in Pampanga
Introduction to Industrial-Organization Psychology
___________________________________________________________________________________________________________

specified set of required

performance outcomes.

Commonly used in
Work Standards output or results-based Ability to measure Does not allow for
Approach work where clear and specific components of deviations
measurable outcomes the job
are needed (i.e., in
sales and
manufacturing where
achieving a quota is
required).

Create a
The workers in a certain
high-performance work
department are ranked
culture Possible Bias
from the most to the
Ranking Method
least valuable. This
(Stack Ranking) Validity depends on the Negatively affect
system is a way of
amount of interaction teamwork
comparing workers’
between employees and
performance
manager

Involves the
development of SMART
goals and assessing
the extent to which
these goals can be
achieved by an
employee.

Follows the idea that Open communication

Management by workers are more Can only work for some
Objectives (MBO) motivated and effective Employee may have type of job titles
in their jobs when they more “buy-in”
have guidance and
receive feedback about
their progress.

Needs cooperation
between the supervisor
and the worker to set
goals, track progress,
and assess outcomes.

Focus on desired
Uses a rating scale with behaviors
Behaviorally corresponding Time-consuming to
Anchored Rating descriptions to Specificity develop
Scale (BARS) determine what is good
or poor work Clear outline of desired
performance. behavior

RATING ERRORS

7. Rating errors Distribution Error

committed ● The rater uses only a certain part of the rating scale when evaluating employee performance.
It includes:
● Leniency Error
○ The rater consistently gives all employees inflated ratings, regardless of actual
performance level.
○ Example: On a five-point scale, the supervisor rates everyone a 4 or 5.

● Central tendency Error

○ The rater consistently rates the employees' average ratings, regardless of actual
performance level.
○ Example: On a five-point scale, the supervisor rates everyone a 3.
● Strictness Error
○ The rater consistently gives all employees low-performance evaluation ratings,

March 2024
University of the Philippines Diliman Extension Program in Pampanga
Introduction to Industrial-Organization Psychology
___________________________________________________________________________________________________________
regardless of actual performance level.
○ Example: On a five-point scale, the supervisor rates everyone a 1 or 2.
● Halo Error
○ It occurs when the rater’s overall ratings of an employee’s work are based on one
feature or an overall impression of that employee rather than on the relevant aspects of
their job.
○ Examples: Generalizing Skills, Attractiveness Bias, Emphasizing Positive Traits, Status
● Proximity Error
○ It occurs when the rater’s assessment of an employee’s performance or personality on one
dimension influences their assessment of the next dimension on the rating scale.
○ Example: When a supervisor gives an employee a rating of 5 on the first dimension, they will
likely give the same rating on the second dimension because it is physically located near the
first dimension.
● Contrast Error
○ It occurs when the performance of other employees influences how an employee is rated.
Instead of individually rating employees based on an objective standard, the employees are
being compared with one another.
○ Negative Contrast Effect: An inclination to score the employee lower than is accurate
when the others do well
○ Positive Contrast Effect: An inclination to give the employee a higher rating than is
accurate when the others are performing poorly.
● Recency Error
○ It occurs when the rater evaluates the performance of an employee based on recent
behavior rather than overall work behavior.
○ This penalizes employees who did a good job most of the time but tailed off at the end, and it
favors employees who only worked hard right before the evaluation period.
● Infrequent observation of behavior Error
○ Based on the idea that supervisors lack sufficient time to observe employees’ work
performance and behavior, and employees perform differently in the presence or absence of
their supervisors.
○ In this type of error, because supervisors base their ratings on the completed work, they
may assume that everyone has done their job and cooperated accordingly.

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