Fundamentals of Human

Resource Management

Establishing the Performance Management System

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Introduction
• Performance appraisal is the process of evaluating the
behavior of employee in the work place, normally including
both quantitative and qualitative aspects of job performance.

• Objectives of performance appraisal:

– Promotion decision- managers can use the tools to take
promotion decisions of the employees
– Training and development program- it tells the employee
what skill they need to develop to become more efficient in
the job.
– Compensation decision- it can serve as a basis for pay
increase.
– Feed back- It enables the employee to know how well they
are doing the job.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Performance Management
Systems
Who will appraise?
• Supervisors- They include supervisors of the employees, other
supervisors having knowledge about the work and departmental
managers.
• Peers- It includes how well the employees behave with their
colleagues and the relationship with them.
• Self appraisal- The best technique is to apprise one’s own
performance.
• Consultants- Consultants are hired and they observe the
employee at work as an appraisal technique. It is suitable when
employees or employers do not trust the supervisory, peers’ and
or self appraisal technique.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 The Appraisal Process

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 The Appraisal Process
• Establishment of performance
standards
– Derived from company’s strategic goals.
– Based on job analysis and job description.
• Communication of performance
standards to employee.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 The Appraisal Process
• Measurement of performance using
information from:
– personal observation
– statistical reports
– oral reports
– written reports
• Comparison of actual performance with
standards.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 The Appraisal Process
• Discussion of appraisal with employee.
• Identification of corrective action where
necessary.
– Immediate action deals with symptoms.
– Basic corrective action deals with causes.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Three approaches:
• Absolute standards
• Relative standards
• Objectives

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Evaluating absolute standards:
• An employee’s performance is
measured against established
standards.
• Evaluation is independent of any other
employee.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Evaluating absolute standards:
– Essay Appraisal: Appraiser writes narrative describing
employee performance & suggestions. Here the rater is
asked to express the strong as well as the weak points of
the employees behavior. Here the rater usually elaborates
the following points of the employee
• Employees’ job knowledge
• Employees knowledge about the companies policies,
programs and objectives
• Employees relationship with co workers and supervisors
• Employees attitudes and perceptions about the job
• Employees controlling ability
It is a non quantitative technique of appraisal

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
• Critical incident technique- Here the
managers prepares statement of very
effective and ineffective behavior of
employee e.g.,
the sales clerk patiently attended to the
customers’ complaint on Dec 6. He was
polite, prompt and enthusiastic in
solving the customers’ complaint.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Evaluating absolute standards:
– Checklist Appraisal: A check list usually represents a set of
descriptive statements about the employees and his/her behavior.
– Please circle the answer you feel is most relevant to you:
– 1. My boss asks me politely to do things, gives me reasons why, and
invites my suggestions.
(1) (2) (3) (4) (5)
– 2. I am encouraged to learn skills outside of my immediate area of
responsibility.
(1) (2) (3) (4) (5)
– 3. I am given credit and praise when I do good work or put in extra effort.
(1) (2) (3) (4) (5)
– 4. People leaving the company are given an 'exit interview' to hear their
views on the organisation.
(1) (2) (3) (4) (5)

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Graphic rating
scale- Here a
printed form is
used to Traits Unsatisfactory Fair Satisfactory Good Outstanding

evaluate the Academic

Performance
performance of
an employee.
A variety of          

traits may be Intellectual

Potential
used in this
type of rating
device.          
Creativity &
Originality

         
Motivation for
Graduate
Study

         

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Relative standards:
• Employees are evaluated by comparing
their performance to the performance of
other employees.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Relative standards:
• Group Order Ranking: It requires the
evaluator to place employees in to a
particular classification such as “top ten
percent”

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Relative standards:
– Individual Ranking: Employees
are ranked from highest to
lowest. In this process only one
employee can be rated the best.
– Paired Comparison:
• Each individual is compared to
every other.
• Final ranking is based on number of
times the individual is preferred
member in a pair.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
 Appraisal Methods
Using Achieved Outcomes to Evaluate
Employees
Management by Objectives (MBO)
– includes mutual objective setting and
evaluation based on the attainment of the
specific objectives. It is a method by which
managers and subordinates plan,
organize, control, communicate and
debate.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Appraisal Methods
Using Achieved Outcomes to Evaluate
Employees
– Common elements in an MBO program
are:
• goal specificity
• participative decision making
• an explicit time period
• performance feedback
– Effectively increases employee
performance and organizational
productivity.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals
• Leniency error
– Each evaluator has his/her own value
system.
– Some evaluate high (positive leniency) and
others, low (negative leniency).
– When evaluator is positively lenient, an
individual’s performance becomes
overstated and vice versa.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals
• Halo error: Evaluator lets an
assessment of an individual on one trait
influence evaluation on all traits.
• It is a tendency to rate high or low on all
factors due to the impression of high or
low rating on some specific factors.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals
• Similarity error: Evaluator rates others
in the same way that the evaluator
perceives him or herself. For example,
the evaluator who perceives himself or
herself as aggressive may evaluate
others by looking for aggressiveness.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals
• Low appraiser motivation: Evaluators
may be reluctant to be accurate if
important rewards for the employee
depend on the results.
• For example, if the evaluator knows that
a poor appraisal would significantly hurt
the employees future specially salary
increase or promotion, the evaluator
may be reluctant to give a realistic
appraisal.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
 Factors that can Distort
Appraisals
• Central tendency: Rater who are prone to
the central tendency errors are those who
continually rate all employees as average.

• Inflationary pressures: Under the pressure

of circumstances, rater may go on giving
higher grades to all employees.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals
Attribution Theory
According to this theory, employees
evaluations are directly affected by a
supervisor’s perception of who is
believed to be in control of the
employees’ performance – the employer
or the manager.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

 Factors that can Distort
Appraisals
• Impression management:
• If employee positively influences the
relationship with the supervisor, he/she
is likely to receive a higher rating.

Fundamentals of Human Resource Management 8e, DeCenzo and Robbins