Performance Management

and
Performance Appraisal
Chapter 9
 Basic Concepts in Appraisal

Performance appraisal
Evaluating an employee’s current and/or past performance
relative to his or her performance standards.
 Why Performance Appraisal?
• Appraisals affect the employer’s salary raise and promotion
decisions.
• Appraisals help in planning for correcting deficiencies and
reinforce things done correctly.
• Appraisals, in identifying employee strengths and
weaknesses, are useful for career planning.
• Appraisals play an integral role in the employer’s
performance management process.
 How to Appraise
Performance?
Performance appraisal always involves:
1. Setting work standard (e.g. producing 10 contracts per
week)
2. Assessing/appraising employees’ actual performance
relative to standards
3. Providing feedback to the employees on the
performance
Defining Work Standards and Work Efforts

2 Choices
Use generic criteria (e.g. quality of work, teamwork,
communication)
Use a specific standard or duty (e.g. produce 10 new
contracts per week, add 100 new customers next year)
SMART goals are:
Specific: clearly state the desired results.
Measurable: try to express the goals in numbers
Attainable/ Achievable: Assign challenging but doable goals.
Relevant: Goals should be aligned with actual jobs.
Timely: in reflecting deadlines and milestones.
 Assessing Performance
Ask two basic questions-

1. What to measure?

- Look into the standards

- Example, quality of work, quantity of work, effectiveness
teamwork, communication and know-how

2. How to measure?

- Look into the appraisal methods

 Appraisal Methods
Graphic Rating Scale Method
- It is the simplest and most popular method
- It lists traits (e.g. quality of work, quantity of work,
efficiency, teamwork, communication, leadership) and
a range of performance values (from “unsatisfactory”
to “outstanding” or “below expectations” to “role
model”) for each trait.
Graphic Rating Scale
Graphic Rating Scale (cont.)
 Graphic Scale Rating: for Specific Dimensions

Position: Chef
Duty: Maintain adequate Rating
Inventory of pizza dough
Description:
Each round pizza dough must Needs improvement Satisfactory
Excellent
be between 12 and 14 ounces
Each, kneaded at least 2
Minutes before being placed
in the temperature and humidity
cooler, And kept there for at
least 5 hours prior to use.
Alteration Ranking Method
This method involves ranking employees from best to
worst on traits

Since it is easier to distinguish between the worst and

best employees, an alteration method is quite popular

For the trait you are measuring, list all the employees
you want to rank

On a form, indicate the employees who is the highest

on the characteristics being measured and the one who
is the lowest
Alternation Ranking Scale
Paired Comparison Method
Paired comparison method
It helps make the ranking method more accurate
Ranking employees by making a chart of all possible
pairs of the employees for each trait and indicating
which is the better employee of the pair.
 Paired Comparison Method (cont.)

Note: + means “better than.” − means “worse than.” For each chart, add up the number
of 1’s in each column to get the highest-ranked employee.
Performance Appraisal Methods (cont.)

Forced distribution method

Similar to grading on a curve;
predetermined percentages of ratees are placed in
various performance categories
Example:
Top 20% (high performers)
Middle 70% (average performers)
Bottom 10% (low performers)
Performance Appraisal Methods (cont.)

Sun Microsystems force-ranks its 43,000 employees.

Managers appraise employees in groups of 30
Those of bottom 10% of each group get 90 days
to improve
If they are still in the bottom 10%, they can resign
and take dismissal pay
Some prefer to resign and some stay
Those who stay must perform and if they fail, the
firm fires them without dismissal
We are done with part one! More methods will be covered
next week.

Thank you!
 Critical Incident Method
With this method, an appraiser involves keeping the
record of positive and negative examples or incidents
of subordinates’ work-related performance

Ideally, every 6 months the appraiser and subordinate

meet to discuss the latter’s performance, using the
incidents as example
Examples of Critical Incidents for
an Assistant Plant Manager
 Pros and Cons of Critical
Incident Method
Pros
Compiling incidents will provide the good and bad examples of
performance
It makes the supervisor think think about the subordinates’ appraisal
all during the year
The examples show the subordinates what can de done to remove
performance deficiencies

Cons
No use of numerical rating
It is not possible to compare between employees due to lack of
numerical rating
It is not possible to take salary decision as well
 Performance Appraisal
Methods (cont’d)
Behaviorally anchored rating scale (BARS)
An appraisal method that anchors a numerical rating scale
with specific narrative examples of good and poor
performance.

Developing a BARS:
1. Generate critical incidents
2. Develop performance dimensions
3. Reallocate incidents/ verify the findings
4. Scale the incidents
5. Develop a final instrument
 Example
3 researchers developed a BAR for grocery checkout
clerks. They collected many critical incidents, and
then grouped them into eight performance dimensions
such as
1. Salesmanship skills 2. Conscientiousness
3. Skills in Human Relations 4. Skill in Operation of
Register 5. Skill in Bagging 6. Organizational Ability
of Check-stand Work 7. Skill in Monetary
Transactions
8. Observational Ability
 Performance Appraisal
Methods (cont’d)
Advantages of using a BARS
A more accurate measurement
Clearer standards
Feedback
Independent dimensions
Consistency
Management by Objectives
(MBO)
Involves setting specific measurable goals with each
employee and then periodically reviewing the
progress made.
1. Set the organization’s goals.
2. Set departmental goals.
3. Discuss departmental goals.
4. Define expected results (set individual goals).
5. Performance reviews.
6. Provide feedback.
Computerized and Web-Based
Performance Appraisal
Performance appraisal software programs
Keep notes on subordinates during the year.
Electronically rate employees on a series of performance
traits.
Generate written text to support each part of the appraisal.
 Potential Rating Scale
Appraisal Problems
Unclear standards
An appraisal that is too open to interpretation

Note: For example, what exactly is meant by “good,”

“quantity of work,” and so forth?
Clearly Defining the
Standards
 Potential Rating Scale
Appraisal Problems (cont.)
Halo effect
Occurs when a supervisor’s rating of a subordinate on
one trait biases the rating of that person on other traits

Central tendency
A tendency to rate all employees the same way, such as
rating them all average
Potential Rating Scale Appraisal
Problems (cont’d)
Strictness/leniency
The problem that occurs when a supervisor has a tendency
to rate all subordinates either high or low.

Bias
The tendency to allow individual differences such as age,
race, and sex to affect the appraisal ratings employees
receive.
 How to Avoid Appraisal
Problems
Learn and understand the potential problems, and the
solutions for each.
Use the right appraisal tool and consider the pros and
cons of individual tools
Train supervisors to reduce rating errors such as halo,
leniency, and central tendency
Have raters compile positive and negative critical
incidents as they occur (keep a diary)
Every appraisal you give as a supervisor should be fair
Advantages and Disadvantages of Appraisal Tools
 Who Should Do the
Appraising?
The immediate supervisor

Peers

Rating committees

Self-ratings

Subordinates
 Feedback System
360-degree feedback
- Ratings are collected “all around” an employee
- A multi-source rating system in which an employee
receives feedback peers, bosses or supervisors,
subordinates, peers and internal and external customers

540-degree feedback
- 540-degree includes more raters or sources of feedback
- Employees receive feedback from peers, subordinates,
bosses, customers and, also from suppliers and
distributors
Performance Management
Performance management is the continuous process
of identifying, measuring and developing performance
of individuals and teams and aligning their
performance with the organization’s goals
 Performance Management
Versus Performance Appraisal
Performance Appraisal
Performance appraisal involves
reviewing the performance of the
employees once or twice a year
Performance appraisal only involves
measuring or evaluating the
performance
Performance appraisal evaluate the
performance but doesn’t take the
corrective action
Performance Management
Performance management means
continuous, daily or weekly
interactions and feedback to ensure
continuous improvement
Performance management is always
goal directed. The performance
reviews always involve comparing
the employee’s or team’s
performance against goals
Performance management
continuously reevaluate the
performance and take the corrective
actions
 Basic Building Blocks of
Performance Management
Direction Sharing
- Communicating the company’s higher levels goals
(including its vision, mission and strategy)
- Translate the goals into achievable department, team and
individual goals
Goal alignment
- It means having a process establishing a process that
enable the managers to see the link between an
employee’s goals and his organizational and departmental
goals
 Basic Building Blocks of
Performance Management
Ongoing feedback
- It means face-to-face or computerized feedback regarding
progress toward goal
Coaching and development support
- It should be an integral part of the feedback system
Reward, recognition and compensation
- Reward and compensate those who play a role in
providing the consequences needed to keep the
employee’s goal-directed performance on track
 Key Terms Used throughout
the Session
performance appraisal management by objectives
(MBO)
performance management
electronic performance
graphic rating scale
monitoring (EPM)
alternation ranking method
unclear standards
paired comparison method
halo effect
forced distribution method
central tendency
critical incident method
strictness/leniency
behaviorally anchored rating
bias
scale (BARS)
appraisal interview
Thank You!