PERFORMANCE AND

COMPENSATION MANAGEMENT
(PERFORMANCE APPRAISAL)
Outline
 Introduction of Performance Appraisal
🞑 Definition and Purpose
🞑 When?
🞑 Performance appraisal steps/process
 Performance Interview and Feedback
🞑 Definition
🞑 Importance Performance Interview
 Performance Appraisal Methods
🞑 Appraisal Form
🞑 Traditional Methods vs Modern Methods
🞑 Type of appraisal Methods
 Type of Appraiser
🞑 Supervisors, Peers, Subordinates, Self, Customers, Clients and Group
 Appraiser Error
🞑 Judgmental Errors
🞑 Rater Training Program
🞑 Poor Appraisal Forms
🞑 Ineffective Organizational Policies and Practices
INTRODUCTION
 Other Terms
Performance appraisal has been synonymous with
 performance review,

 performance evaluation,

 performance assessment,

 performance measurement,

 employee evaluation,

 personnel review,

 staff assessment, and

 service rating

(Aggarwal & Thakur, 2013)

 Definition of Performance Appraisal

The observation and assessment of the employee performance against job-

related standards determined by the organization over a certain period (Eichel
& Bender, 1984).

The process of evaluating on employee’s job performance that helpful to,

and often even essential to, accomplishing important goals of all
organization (Kondrasuk, 2012)

Performance appraisals involves the similar idea of developing social and

performance norms, monitoring the actions of employees in relation to the
norms, assigning responsibility for the actions, and then ultimately providing
rewards or punishment based on performance towards those norms (Milliman,
Nason, Zhu, & Cieri, 2002)
Definition of Performance Appraisal

Performance appraisal provides an annual review and evaluation

of an individual's job performance (Eastern Illinois University,
2009)

Performance appraisal is the process of determining how well

employees do their jobs compared with a set of standards and
communicating that information to those employees (Chukwuba,
2011)

Performance appraisal is the evaluation of employee’s

performance based on the standard and give feedback about the
assessment .
 Purpose of Performance
Appraisal
Walsh and Fisher (2005); Faseeh (2013):
(1) To provide feedback about strengths and weaknesses;
(2)To distinguish between individuals to allocate rewards;
(3)To evaluate and maintain the human resource systems of the
organization; and
(4)To create a paper trail of documentation (Murphy &
Cleveland, 1995)

Chattopadhayay and Ghosh (2012),

•It provides a justification for human resource decision such as
rewards, career planning, transfers, training, counseling, mentoring
, termination, etc.
Milliman, Nason, Zhu, and Cieri
(2002)
 When Performance Appraisal?

• Many organization usually make an evaluation of the

Annually employees’ performance in the end of the year.

• annual employee performance reviews appear to be the
standard in most American organizations.

• A semi-annual one for the employee to discuss with his manager any
needed remedial steps for his performance on an unofficial basis.
Semiannually While the second one, would be an official one held at the end of the
year for the employee to receive his appraisal results and know about
the salary increase or promotion. E.g: Japan

• According to the Chartered Institute of Personnel and

Development (CIPD), UK, 87% of employers use some form
Others of individual annual appraisals, 27% do them twice a year
and 10% more often than that. Some use them when projects
come to an end.
Six Formal Meetings

Classical
System Self-
performance
Inauguration appraisal
review

Objective Development Merit/salary

setting plan review

(Aguinis, 2009)
 Example Performance Appraisal
Step

1. Establish performance 2. Establish performance

3. Have raters gather data
standards for each evaluation policies on
on employees’
position and criteria for when to rate, how often to
performance.
evaluation. rate, and who should rate.

4. Have raters (and

6. Make decisions and file 5. Discuss the evaluation employees in some
evaluation. with the employees. systems) evaluate
employees’
performance.

(Kumari, 2012)
Example Performance Appraisal
Step

Step l: The
Initial Step II: The Mid- Step III: The Final
(Performance) Point Review Review Session
Planning
• provide • to review and
Session feedback to rate the
• Meeting the employee performance of
individually to during the each employee
described primary during the
expectation performance entire
period performance
rating period.

(West Virginia Division of

Personnel Handbook, 2005)
PERFORMANCE
INTERVIEW
AND
Definition of Performance Interview
Recurrent strategic interviews between a
superior in an organization and an employee that
focus on employee performance and
development (Asmuß, 2008)

The interview constitutes a discussion session between an employee and his or her
supervisor with respect to the employee’s results during the period of evaluation,
focusing especially on employee progress, aims, and needs at work (Anne Linnaa,
Elovainio, Bos, Kivimäki, & Penttia, 2012)

The performance appraisal interview is defined as

the formal process of evaluating employee
performance (Keeping and Levy 2000)

A potentially important part of any organization’s

performance appraisal system that function in
several ways such as providing feedback
(Cederblom, 1982)
A formal meetings for the specific purpose of
discussing the various aspect of

performance and the performance

management system (Aguinis, 2009)
Function of Performance
Interview
 Two main purpose:  Allow employees to
🞑 Counseling and improve their
development performance by
🞑 Evaluation and identifying
discussion performance problem
 About employees’ and solution for
performance overcoming them.
 Helps to build good
relationship
(Cederblom,
1982) (Aguinis, 2009)
Importance of Performance
Interview
Instant
feedback
(Asmuß,
2008)

Human Coaching
resource (Cederblom
plan , 1982)
Feedbacks in
Pepsi- Cola
International

Development Accountability
feedback based
(Cederblom, performance
1982) appraisals
Explanation of Feedback
Staff members should not receive any surprise
feedback because informal, continuous discussion
and feedback between staff and manager throughout
the year prevents surprises (Boice & Kleiner, 1997).
PERFORMANCE APPRAISAL
METHODS
 Traditional vs New Approach

Traditional Approach New Approach

Traditional Approach
New Approach
 This method is based on
 Performance appraisal is
studying the personal
qualities of the employees. used for developmental
It may include and motivational purposes
knowledge, initiative, loyalt in the organizations
y, leadership and judgment (Gürbüz & Dikmenli,
(Aggarwal & 2007).
Thakur, 2013).
(Nili, Ardakani &
Shekarchizadeh, 2012)
Methods and Form

SHRM Curriculum Guidebook (2010)

Critical Incident Method

 Keeping a record of uncommonly good or

undesirable examples of an employee's work
related behavior and reviewing it with the
employee at predetermined times.
Management by Objectives
(MBO)

 Employees are evaluated how well they

accomplished a specific set of objectives that
have been determined to critical in the successful
completion of the job.
Narrative Essay

Evaluator writes an explanation about

employee’s strength and weakness
points, previous performance, positional and
suggestion for his (her) improvement at the end
of evaluation time.
Rating Scale

Behaviorally • BARS combines elements from critical

Anchored incident and graphic rating scale
approaches. The supervisor rates
Rating Scale employees’ according to items on a
numerical scale.
(BARS)

• A scale that lists a number of traits and a

range of performance for each, the
Graphic employee is then rated by identifying the
score that best describes his or her
Rating Scale performance for each trait.
Comparative Methods
 Comparative methods
of performance
appraisal seek to
identify one worker’s
standing to others.
 Ranking, paired
comparison, and
forced distribution
 Comparative Methods
Ranking Method Forced
Ranking Distribution
Paired
- employees from Comparison - This method
best to worst on a forces a set
- Each person is
particular trait, percentage of all
directly compared
choosing person being
with every other
highest, then evaluated into
person being rated.
lowest, until all pre-determined
ranked (Aggarwal performance
& Thakur, 2013) categories.
Appraisal Form
 Information on performance is collected by using
forms, which can be filled out in paper or
electronically (Aguinis, 2009)

 Example appraisal form

Components in Appraisal Form
 Basic employee information
 Accountabilities, objectives and standard
 Competencies and indicators
 Major achievements and contributions
 Developmental achievements
 Developmental needs, plans, and goals
 Stakeholder input
 Employees comments
 Signature
(Aguinis, 2009)
360 Degree
 is known by a variety of names, including
multisource assessment, 360-degree feedback,
multirater assessment, and three- dimensional
or full-circle appraisal.
 It relies on the input of an employee's superior,
colleagues, subordinates, sometimes customers,
suppliers and/or spouses.
 The information collected and feedback is
provided in full circular fashion top down and
back to top.
TYPE OF APPRAISER
 • Supervisor:
Supervisors • Best position to evaluate performance in relation to
strategic organization goals

• Peer:
• Must know the level of performance of the employee
Peers being evaluated.
• May be useful when the task of the work unit require
frequent working contact among peers

• For developmental aspects of performance evaluation

• Subordinates are a valuable source of information regarding

Subordinates particular aspects of a supervisor or leader’s performance

such as communication, team building or delegation.
• For example Exxon and universities
 • Self appraisal
• To be used for developmental aspects.
Self • Self evaluation have often been met with skepticism by
organizations because the self interest of the employee.

• Customers

Customers • Useful for jobs that require a high degree of

interaction with public or with particular job-
related individuals.

• Clients may also offer a different perspective on a employee’s

performance, particularly for jobs that require a high degree of interaction
with people. For example, client appraisals can be a valuable source of
feedback regarding the quality of service provision (e.g. the quality of
interaction, degree of professionalism).

• Group
APPRAISER ERROR
Appraiser Error
 Appraisal error affect the objectivity of the
appraisal negatively (Boachie-Mensah &
Seidu, 2012).
 The problems that affect the validity and
dependability of the Performance appraisal
systems (Kumari, 2012)
Component of Appraisal Error
(Kumari, 2012)
• People commit mistake due to biasness and inadequate
training while evaluating people and their performance.
Judgment Error • These errors are also called as Rater Errors.

• The rating scale may be quite vague and unclear.

• Problems with evaluation standards
Poor Appraisal • The rating form may ignore important aspects of job
Forms performance.
• The forms may be too long and complex.

Ineffective
Organizational • Very often the sincere appraisal report put in by a rater is
Policies and not suitably rewarded
Practices
Ratings Error

Unintentionally Intentional
 Similar to me  Leniency
 Contrast
 Halo  Severity
 Primacy  Central tendency
 Recency
 Negatively
 First impression
 Spillover
 Stereotype
 Attribution

(Aguinis, 2009)
Rater Training Programs
 The overall objective of providing raters with tools
that will allow them to implement the performance
management system effectively and effectively
(Aguinis, 2009).
 To improve managers’ ability to conduct effective
performance appraisals with dealing errors to
eliminate it from ratings (Inancevich & Konopaske,
2013).
 The example of training such as Rater Error
Training, Frame of Reference Training
(FOR), Behavioral Observation Training, and Self-
Leadership Training.
A Study in polytechnic in Takoradi, Ghana
(Boachie-Mensah & Seidu, 2012)

Effect from
Recommendation
Appraisal Error

The most common

errors: similarity Precise definitions of the
and the halo effect job-related behaviours
biases being rated are required.

Irregular and The superior to routinely document employee

inadequate accomplishments and failures throughout the whole
feedback appraisal period.

Performance standards must be

A negative
clearly defined
perception that the
employees
Formal training programmes
Support from Previous Study
 In a study of Telecom Industry in Navi Mumbai
Region
 the most common appraisal errors in the
system are the similarity (similar-to-me)
effect and the halo effect.
Deming (1982/2000)
Deming was a recognized guru in the
quality movement and famous for
his critique of performance ratings,
identifying them as one of
management’s deadly diseases in the
PA:
 It nourishes short-term performance,
annihilates long- term planning,
builds fear, demolishes team-work,
nourishes rivalry and politics. It
leaves people bitter, crushed,
bruised, battered, desolate,
despondent, dejected, feeling
inferior, some even depressed, unfit
for work for weeks after receipt of
rating, unable to comprehend why
they are inferior. (p. 102)
Conclusion

Organizations can benefit a lot from
performance appraisal by seeing it as crucial
part of management responsibility.
 Employee will be motivated and inspired with
positive and constructive feedback from
performance appraisal.
 Effective performance appraisal should
eliminate appraisal error.
THANK YOU..