MGT340

HUMAN
RESOURCE
MANAGEMENT

CHAPTER 4
PERFORMANCE
APPRAISAL
COURSE OBJECTIVE

Identify the main components in a performance management system.

Explain the benefits of having an effective performance appraisal system.
Examine the factors to consider when designing an appraisal system.
Problems in performance appraisal
Parties involved in performance appraisal
Method for performance appraisal
Appraisal Interview
WHAT IS PERFORMANCE
MANAGEMENT SYSTEM?

Performance management system is a mean to

ensure that every employee works in a manner
which is aligned with organizational goals and
which ensures that the employee reaches his
maximum potential on the job.
Employee performance management system must
take into account:
• Recruitment of workers
• Training
• Compensation and reward systems
WHY ORGANIZATION NEED PERFORMANCE APPRAISAL?

Result or information useful for:

• Recruiting new workers - Managers understand better the skills of their workers.
Thus, this information will be updated in Job description and job specification,
and this will help in new workers recruitment.
• Training and development - Each employee strengths and weaknesses will be
analyzed, and areas of specialization should match with individual strengths. It is
also essential in designing training, future developments and career programs.
• Compensation and reward systems - The employees’ pay is measured and
compared with organizations targets and plans.
FACTORS INFLUENCING EMPLOYEE’S PERFORMANCE

Employee’s
Performance

Employee’s Employee’s
Work environment
knowledge & skill motivation
Mgt style, remuneration Tools and machinery
Training provided
package provided
COMPONENTS OF PERFORMANCE MANAGEMENT SYSTEM

Objective setting Implementation of Performance review

work and monitoring

• The output that Coaching and • Decide on training

management expects monitoring : maybe required
employees to • Employer need to • Take remedial action
achieve coach and monitor • reward
• Need to be employees’
communicated to the performance while
employees they handling the
• Related to quantity task given, give
and quality of work feedback regularly
required – depend • Observing work
on job operation
description/project/a • Filmed by cctv/voice
ssignment given recorder
• Inspecting the
quality of work
Sample of
Appraisal
Template
BENEFITS OF A
PERFORMANCE
APPRAISAL
SYSTEM

• Encourages quality performance

by rewarding those who do well.
• Improves current performance by
giving workers feedback.
• Assists in identifying training
needs.
• Provides documentation if
disciplinary proceedings are
needed.
• Provides a channel of
communication between
managers and their subordinates.
EFFECTIVE
APPRAISAL SYSTEMS

• Are integrated into a performance

management system.
• Receive top management support.
• Are customized to the needs of the
organization.
• Are acceptable and understandable.
• Are reliable and unbiased as far as
possible.
 Recency effect
• Most recent performance and ignore earlier work which may
better/worse than work carried out closer to appraisal time.

Halo effect
POTENTIAL • Manager/supervisor rates highly someone they like such as
BIAS/ similar background and lifestyle (similar college and country).

PROBLEMS IN Central tendency

• When appraiser rates all his subordinates as being average on
PERFORMAN all criteria being evaluated.
CE Prejudice and stereotyping
APPRAISAL • Prejudiced and stereotyped based on racial, age, religious,
gender/age.

Fatigue
• It requires manager to appraise all of his subordinates that may
blur his judgement.
PARTIES INVOLVED
IN PERFORMANCE
APPRAISAL

The employee’s The employee’s

manager co workers

The
employe
e

The employee’s
Customer/client subordinates
 PARTIES INVOLVED IN PERFORMANCE
APPRAISAL
The Manager
• Managers / supervisors play a central role in the appraisal process, and should
always be included as one of the main appraisers.
• In essence, managers and supervisors have two roles in performance appraisal:
1. “Judge”: assessing performance
2. “Coach”: providing constructive feedback and identifying areas for
improvement.

The Employee
• Employee may be asked to carry out self-evaluation. Some employees would be
objective to rate themselves and some of them may overrate their own performance,
while some of them may to shy to appraise themselves accurately.
 PARTIES INVOLVED IN PERFORMANCE
APPRAISAL
Subordinates
• Subordinates are a valuable source of information regarding particular aspects of a
supervisor or leader’s performance such as communication, team-building or
delegation.
• Subordinates can provide feedback to help managers / supervisors develop their
skills in these areas.
• The focus should be on aspects of managerial performance that subordinates are
able to comment upon. This source of appraisal may only be appropriate in larger
organisations where there are sufficient subordinates.
 PARTIES INVOLVED IN PERFORMANCE
APPRAISAL
Colleagues/Co-wokers
• Co-workers can provide valuable feedback on performance, particularly where
teamwork occurs. Co-workers are often aware of different aspects of a worker’s
performance that managers /supervisors may not have the opportunity to observe.
In addition, as there is usually more than one
• Co-worker who rates a worker’s performance, their evaluations tend to be more
reliable.
• Co-worker evaluations, however, may be biased towards those individuals most well-
liked in an organisation (i.e., friendship bias).
• Furthermore, co-worker appraisals may have a negative impact on teamwork and
cooperation if workers are competing with one another for organisational incentives
and rewards.
 PARTIES INVOLVED IN PERFORMANCE
APPRAISAL
Other parties
• The other parties include customers.
• Customers can also evaluate the performance of the employees who interacts with
them. This evaluation is the best because it is objective.
• Feedback from the customer is crucial as they are the one who always interact with
the employees.
• Organisations use customer appraisals to improve the strengths and remove the
weaknesses of their employees.
PERFORMANC
E APPRAISAL
METHODS
1. Comparative methods
2. Trait rating scales
3. Essay technique
4. Forced distribution
system
PERFORMANCE
APPRAISAL METHODS
1. Comparative methods
-It requires the appraiser to compare his
subordinates. Manager/supervisor
rank/list the subordinates from best
down to the weakest performer.
-It is simplest method to use, suitable
for the supervisor has only a few
subordinates.
2. Trait rating scales
• It is the most popular appraisal method used today.
• Employer must choose the key factors contributed to the
successful of the job: -
• Job-related factors : quantity of work, quality of
work, attendance and punctuality
• Personality and behaviour factors: cooperation with
others, initiative, adaptability and patience.
• To help appraisers, some companies provide descriptions
of acceptable and unacceptable behaviour.
3. Essay technique
• Manager/supervisor may be asked to write down
answers to certain open-ended questions about
performance of their subordinates.
• This requires effort of manager/supervisor to find
the right words to describe the subordinates.
• It is not a popular appraisal technique. It is time-
consuming because manager/supervisor needs to
write specific comments rather than general phrases
which are not helpful to the employee and are
unlikely to lead to improved performance.
4. Forced distribution system
• The forced distribution method is similar to
grading on a curve. In this method the
manager would distribute the rates of the
subordinates according to a normal bell-
shaped curve. The manager would place a
certain percentage of employees at each
performance level where he would place
predetermined percentages of rates into
several performance categories. For example,
a company puts 20% for top performers, 60%
for middle and 20% for the weakest performers.
 The Appraisal Interview

• The manager and his subordinate must sit together to review the
subordinate's past performance, set goals for next time period and
discuss how the manager can help the subordinate overcome any
problems he is facing in his work.
• Purpose: to give feedback to the employee on his strength and
weaknesses
• Manager need to be trained to handle employee's emotion during the
interview session

IMPLEMENTATIO Counselling Employees with Problems

N OF AN • managers need to offer a range of services to employees in order to
APPRAISAL promote productivity. Helping employees perform satisfactorily may
require a combination of non-directive counselling, advice giving,
SYSTEM information giving, teaching and coaching

After Appraisal Interview/Discussion

• appropriate follow-up action must be taken. If the subordinate has

performed very well, he should be rewarded. Most medium-to large-
sized companies tie bonuses and increment to performance.
• On the other hand, employee’s that have performance below standard,
the manager, after discussing the issue with him/her, will decide
whether the workers need more training or retraining and make the
necessary arrangements.
• Development the performance
management systems is to ensure
each, and every worker performs
to the best of his ability
• An appropriate appraisal method
must be used to ensure the
system is fair and perceived as fair
by the employees being appraised
• After each formal appraisal, an
action plan is needed to establish
new objectives for the employee
as well as any remedial training or
other action needed.