Chapter 11:

Performance Appraisal
Paul L. Schumann, Ph.D.

2004 by Paul L. Schumann. All rights reserved.

11-1

Outline
Performance Measurement
Functions of Performance Appraisal
Types of Performance to Measure
Performance Appraisal Methods
Performance Raters
Performance Feedback

11-2

Performance Management
Goal:
Improve the effectiveness & efficiency of the

organization by:
Aligning the employees work behaviors & results
with the organizations goals
Improving the employees work behaviors & results

On-going, integrative process

11-3

Performance Management Cycle

Source of figure: Fisher, Schoenfeldt, & Shaw (2003), Figure 11.1

11-4

Functions of Performance Appraisal

Employee Development Tool
Set goals
Involve employee
Measurable
Challenging but realistic, difficult but achievable
Empower employee to achieve goals
Provide feedback to reinforce and sustain

performance
Provide help and advice to improve
performance
11-5

Functions of Performance Appraisal

Employee Development Tool (contd.)
Assist employee in achieving career

progression goals
Determine training needs

Administrative Tool
Link rewards to performance
Pay increases, promotions, demotions, dismissals,
disciplinary actions
Evaluate HRM policies and programs
Example: before-after study (pretest-posttest design)
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Types of Performance to Measure

Results-based (results-oriented): measure

the results produced by the employee

Examples for a retail store manager:
Sales of the store
Profit per square foot
Inventory shrinkage
Customer satisfaction
Makes sense for many jobs
Use it where results matter
11-7

Types of Performance to Measure

Results-based (contd.):
Challenges:
Which results are relevant may not be obvious for
all jobs
Some results are not under the employees control
May foster results at all costs mentality
May interfere with teamwork
May be difficult to provide effective feedback

11-8

Types of Performance to Measure

Behavior-based (behavior-oriented):

measure the employees behaviors

Examples for a retail store manager:
Good teamwork
Welcome & thank customers
Good attendance
Monitor customers & employees for theft
Makes sense for many jobs
Use it where how the employee produces results
matters
11-9

Types of Performance to Measure

Behavior-based (contd.):
Makes it easier to provide detailed feedback
Examples for a retail store manager:
Results: You didnt achieve your sales goal.
Behavior: You are allowing your employees to wait too
long before offering help to customers.

Challenges:
Difficult to capture the full range of relevant
behaviors
Different behaviors can lead to the same results
do we always care which behaviors were used?
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Types of Performance to Measure

Trait-based (trait-oriented): measure the

employees abilities and other personal

characteristics
Examples for a retail store manager:
Pleasant personality
Effective communicator
Usually a bad idea:

Poor reliability & validity

Weak linkages with job effectiveness
Measurement subject to biases (racism, sexism)
Difficult to provide effective feedback
11-11

Performance Appraisal Methods

Objective Measures: measure performance

in terms of things we can see and count

Production measures: count units produced
Sales measures: count sales
Personnel data: count things in the employees

personnel file, such as:

Number of times late to work

Number of times absent
Number of disciplinary actions taken
11-12

Performance Appraisal Methods

Objective Measures (contd.)
Performance tests: evaluate a sample of the

employees work
Business unit performance measures:
Examples:

Stock price
Market share
Profit measures: profits, return on sales, return on assets,
return on equity

Use for managers with business unit responsibility

11-13

Performance Appraisal Methods

Subjective measures: measure performance

using human judgment

Ranking: subjectively rank employees from

best to worst
Example:
1. Bob
2. Carol
3. Ted
4. Alice

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Performance Appraisal Methods

Subjective measures (contd.)
Paired Comparisons: in all possible pairs of

employees, subjectively rate which employee is

better
# of paired comparisons = (N2 N)/2
Example: N = 4 6 paired comparisons:

Bob > Carol; Bob > Ted; Bob > Alice

Carol > Ted; Carol > Alice
Ted > Alice

Example: N = 12 66 paired comparisons

11-15

Outline
Performance Measurement
Functions of Performance Appraisal
Types of Performance to Measure
Performance Appraisal Methods
Performance Raters
Performance Feedback

11-16

Performance Appraisal Methods

Subjective measures (contd.)
Rating scale (graphic rating scale): subjectively

rate the employees performance on a labeled

numeric measuring scale
Rate overall job performance as well as specific
aspects of job performance
Example:
5 = Excellent
4 = Very satisfactory
3 = Satisfactory
2 = Unsatisfactory
1 = Very unsatisfactory
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Examples of Rating Scales

Use a graphic or just

use words?
Label all the points in
the scale, or just label
the endpoints of the
scale?
Odd or even number
of points in the scale?
Fewer points in the
scale, or more points
in the scale?
Source of figure: Fisher, Schoenfeldt, &
Shaw (2003), Figure 11.7
11-18

Performance Appraisal Methods

Subjective measures (contd.)
Forced distribution: evaluator must place a

fixed percentage of employees in each

performance category
Example:
10% must be rated 5 = Excellent
20% must be rated 4 = Very satisfactory
50% must be rated 3 = Satisfactory
15% must be rated 2 = Unsatisfactory
5% must be rated 1 = Very unsatisfactory

But what if the distribution being forced doesnt fit?

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Performance Appraisal Methods

Subjective measures (contd.)
Behaviorally Anchored Rating Scale (BARS): replace
the vague descriptors in a traditional rating scale with
specific examples of performance
Example: Customer assistance
5 = Could be expected to volunteer to help customer and to walk
with customer to desired product location
4 = Could be expected to walk with customer to desired product
location when asked for help by customer
3 = Could be expected to tell and point customer to where the
desired product is located
2 = Could be expected to shrug shoulders and walk away when
asked for assistance by customer
1 = Could be expected to hide from customers in the employee
break-room
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Performance Appraisal Methods

Subjective measures (contd.)
BARS (contd.)
A different scale will be needed for each aspect of
performance
Advantages:
Job-relevant measures of performance
Involves employees in developing scales

Disadvantages:
More work to develop BARS (time & money)
Employees may not consistently fit into one of the BARS
categories (solution to this problem is BOS)

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Performance Appraisal Methods

Subjective measures (contd.)
Behavioral Observation Scales (BOS):

evaluators rate the frequency with which an

employee engages in specific behaviors
Example: on a list of possible employee behaviors,
rate how often the employee engages in each
behavior using a rating scale where:
1 = almost never 5 = almost always

Weighted checklist: from a list of possible

employee behaviors, check off the ones that

apply to the employee
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Performance Appraisal Methods

Management By Objectives (MBO):
At the beginning of the review period, meet

with employee and agree on goals for the

employee to achieve by the end of the period
Involve employee in setting goals
Measurable goals
Challenging but realistic, difficult but achievable

At the end of the review period, meet with

employee and, for each goal, determine if the

goal has been achieved
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Performance Raters
Who should we ask to rate an employees

job performance? Need:

Opportunity to observe the employees

performance
Ability to translate observations of employees
performance into a rating
Motivation to do a good job of observing and
rating

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Performance Raters
Options for performance raters:
Supervisors
Self-evaluation
Peers (co-workers)
Subordinates
Customers
360-Degrees

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Performance Feedback
Employees need good feedback
Allow time & eliminate distractions
Types of feedback sessions:
Tell-and-sell
Tell-and-listen
Problem-solving
Mixture of tell-and-sell and problem-solving

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Performance Feedback

Doesnt hurt to cover both administrative

(e.g., pay increase) and developmental (e.g.,

future goals) issues in one feedback session
Provide specific feedback
Dont say: Youre always late.
Do say: You were more than 5 minutes late on

25 separate occasions in the last 3 months. This

is unacceptable. We need to develop (1) a
specific goal concerning prompt attendance,
and (2) an action plan that you will follow to
achieve the goal.
11-27

Outline
Performance Measurement
Functions of Performance Appraisal
Types of Performance to Measure
Performance Appraisal Methods
Performance Raters
Performance Feedback

11-28