Performance Evaluation and Management

McGraw-Hill/Irwin Human Resource Management, 10/e

© 2007 The McGraw-Hill Companies, Inc. All rights reserved.



management is: The process by which executives, managers, and supervisors work to align employee performance with the firm’s goals effective performance management process:


a precise definition of excellent performance Uses measurements of performance Provides feedback to employees



for improving a performance management program: Eliminate “HR-speak” Set appropriate goals Make the difficult decisions Develop a performance culture




firm’s strategy must be aligned with employees’ competencies and performance to achieve: Profitability Growth Effectiveness Valuation



all measures are easy to develop Measurement of tangible outcomes (television sets) can be done with precision Intangible outcomes (teaching) are difficult to measure


evaluation determines the extent to which an employee performs work efficiently



terms for performance evaluation:


review Personnel rating Merit rating Performance appraisal Employee appraisal Employee evaluation



organizations have two evaluation systems: formal and informal Thinking about how well employees are doing is an informal system A formal system is set up by the organization to regularly and systematically evaluate employee performance and interpersonal processes influence the informal system Employees who are liked better have an advantage



The Case for Formal Evaluation

of a well-designed formal evaluation

system: Development Motivation Human resource and employment planning Communication Legal compliance HRM research


The Case for Formal Evaluation

should consider an evaluation meaningful, helpful, fair, and honest This is difficult to attain because of a number of factors, including: Unfairness Negative practices A short-term focus


Performance Evaluation and the Law

Guidelines on Employment Selection Procedures: Issued by the EEOC in 1978 to explain how to comply with federal employment legislation More attention was devoted to selection than to performance evaluation, so requirements for appraisal systems are less clearly defined


Performance Evaluation and the Law

performance evaluation procedures rely on supervisors’ judgments Once work-related behavior has been judged, the supervisors’ ratings are used as input for human resource decisions These decisions affect promotions, pay, transfers, and so on These subjective judgments can introduce bias into the system


Performance Evaluation and the Law

have focused on management’s responsibility to develop and use a performance evaluation system in a legally defensible way In Brito v. Zia Company, the company’s performance evaluation instrument was invalid because it did not relate to important elements in the jobs for which employees were being evaluated Other performance evaluation lawsuits have dealt with sex, race, and age discrimination in terminations, promotions, and layoffs


Performance Evaluation and the Law

challenge to the validity of a performance evaluation system is less of an issue than a challenge to a selection system Legally, the way the system was developed and whether it was applied consistently are more important than validity In age discrimination cases, the type of decision being challenged determines how much proof a company must produce


Performance Evaluation and the Law

for a legally defensible appraisal

system: Procedures must not differ because of race, sex, national origin, religion, or age Use objective, non-rated, uncontaminated data A formal system of review or appeal should be available for disagreement over appraisals Use more than one independent evaluator Use a formal, standardized system for evaluation Avoid ratings on traits, such as dependability, drive, aptitude, and attitude


Performance Evaluation and the Law

data should be empirically validated Communicate specific performance standards Provide raters with written instructions Evaluate employees on specific work dimensions rather than an overall or global measure Require behavioral documentation for extreme ratings Allow employees to review their appraisals


Format of Evaluation

ability to provide accurate, reliable performance data is enhanced if a systematic process is followed: Step 1: Establish performance standards for each position and the criteria for evaluation (job analysis) Step 2: Establish performance evaluation policies on when to rate, how often to rate, and who should rate Step 3: Have raters gather data on employees’ performance


Format of Evaluation

4: Have raters (and employees in some systems) evaluate employees’ performance Step 5: Discuss the evaluation with the employee Step 6: Make decisions and file the evaluation


Establish Criteria

dimensions of performance upon which an employee is evaluated are called the criteria of evaluation Examples: quality, quantity, and cost of work major problem with many evaluation systems: They require supervisors to make person evaluations rather than performance evaluations



Establish Criteria

effective criterion should possess the following characteristics: Reliability Relevance Sensitivity Practicality criteria are necessary to measure performance completely One must evaluate both activities and results Management must weigh these criteria



Who Evaluates, When, and How Often

the U.S., most organizations evaluate on an annual basis Performance evaluations are often scheduled for arbitrary dates, such as the date of hire Alternatively, all employees may be evaluated on or near a single calendar date makes more sense to schedule the evaluation after a task cycle For those without a task cycle based on dates, goals should be established that allow a beginning and end The evaluation can be at the end of the task cycle



Who Should Evaluate the Employee?

immediate supervisor conducts most appraisals Other options: Rating by a committee of several supervisors Rating by the employee’s peers (co-workers) Rating by the employee’s subordinates Rating by someone outside the immediate work situation Self-evaluation Rating by a combination of approaches


360-degree Feedback

organizations now use some form of 360-degree feedback program Upward and peer feedback can have positive effects on behavior These effects are sustainable over time Almost 90 percent of companies using 360-degree programs use the information for such decisions as pay increases and promotions Introducing a 360-degree system into a culture not prepared for it can have disastrous effects


360-degree Feedback

features of a 360-degree system: Multiple perspectives of a person’s performance Raters base evaluations on contact and observation Feedback is provided from multiple directions… above, below, peer Anonymous upward feedback, which results in full participation Learning about weaknesses and strengths is motivational


360-degree Feedback

features of a 360-degree system: Feedback from all sources can be overwhelming Rater can hide in a group of raters and provide harsh evaluations Conflicting ratings can be confusing and frustrating Providing feedback that is constructive requires a plan and well-trained raters


Selected Evaluation Techniques

of evaluating employees can generally be divided into two categories: Methods that evaluate employees individually Multiple-person evaluations In a multiple-person evaluation, the supervisor directly and intentionally compares the performance of one employee to that of others


Individual Evaluation Methods

rating scale The rater is presented with a set of traits The employee is rated on the traits Ratings are assigned points, which are then computed Raters are often asked to explain each rating with a sentence or two


Individual Evaluation Methods

modifications make the scale more effective: A mixed standard scale gives the rater three statements describing each trait Operational and benchmark statements are added to describe different levels of performance


Individual Evaluation Methods

choice: Was developed because graphic rating scales allowed supervisors to rate everyone high The rater must choose from a set of descriptive statements about employee Supervisors check the statements that describe the employee, or they rank the statements from most to least descriptive Forced choice can be used by superiors, peers, subordinates, or a combination of these


Individual Evaluation Methods

Evaluation The rater is asked to describe the strong and weak aspects of the employee’s behavior It can be used by superiors, peers, or subordinates Essay evaluations are flexible; an evaluator can specifically address the ratee’s skill in any area Comparing essays is difficult Skilled writers can paint a better picture


Individual Evaluation Methods

Incident Technique Raters maintain a log of behavioral incidents that represent effective and ineffective performance for each employee Two factors determine the success of this technique: The supervisor must have enough time to observe subordinates during the evaluation period The supervisor must record incidents as they are seen Logs can help avoid common rating errors and facilitate discussions about performance improvement


Individual Evaluation Methods
Checklists In

its simplest form, the checklist is a set of objectives or descriptive statements If the rater believes that the employee possesses a listed trait, the item is checked A rating score equals the number of checks


Individual Evaluation Methods

variation is the weighted checklist Supervisors and HR specialists prepare a list of descriptive statements about behavior Judges who have observed behavior on the job sort the statements into piles rated from excellent to poor When there is agreement on an item, it is included in the weighted checklist The employee’s evaluation is the sum of the scores (weights) on the items checked
Checklists and weighted checklists can be used by superiors, peers, or subordinates


Individual Evaluation Methods

Anchored Rating Scales Smith and Kendall developed the behaviorally anchored rating scale (BARS), or the behavioral expectation scale (BES) The BARS approach uses critical incidents to anchor statements on a scale The rater reads the anchors and places an X at some point on the scale for the ratee


Individual Evaluation Methods

BARS usually contains these features: Six to 10 performance dimensions identified and defined by raters and ratees The dimensions are anchored with positive and negative critical incidents Each ratee is then rated on the dimensions Ratings are fed back using the terms on the form

It takes two to four days to construct a BARS that is jargon free and closely related to the requirements of the job


Individual Evaluation Methods

Observation Scales (BOS) Developed by Latham and associates Like BARS, the BOS uses critical incidents Instead of identifying which behaviors occurred, the rater identifies how they occurred The hope was that BARS and BOS would yield more objective ratings than other scale formats Most researchers find that the format of the rating scale has little effect on the quality of a performance appraisal system


Individual Evaluation Methods

BOS Items Insert Exhibit 9-9 here


Multiple-Person Evaluation Methods
Ranking A

supervisor is asked to rank subordinates in order on some overall criterion It is easier to rank the best and worst employees than average ones Alternative rankings can help with this difficulty Pick the top employee first, then the bottom one The second best is chosen, then the second worst Follow this process until everyone has been ranked


Multiple-Person Evaluation Methods

Comparison The supervisor reviews a series of cards; each contains two subordinates names The higher performer in each pair is chosen Final ranking is made by counting how many times a given employee was chosen as the better performer A major limitation is the number of paired comparisons that must be made With only 10 subordinates, a supervisor would have 45 pairs of names


Multiple-Person Evaluation Methods

Distribution Employees are rated on a pre-existing distribution of pre-determined categories The predetermined distribution must be followed, regardless of how well the employees performed A supervisor with all exceptional subordinates will be forced to rate some poorly A supervisor with mediocre subordinates must rate some highly
This technique is similar to grading on a curve


Multiple-Person Evaluation Methods

allocation technique (PAT) A variation of forced distribution Each rater is given a number of points per employee The points must then be allocated on a criterion basis The total number of points cannot exceed the number of points per employee times the number of employees evaluated


Multiple-Person Evaluation Methods

by Objectives (MBO) The MBO approach emerged from the beliefs of McGregor, Drucker, and Odiorne With MBO, managers and subordinates plan, organize, control, communicate, and debate The subordinate has a course to follow and a target to shoot for


Multiple-Person Evaluation Methods

MBO program follows a systematic process: Superior/subordinates define tasks and set objectives The superior, consulting with subordinates, sets criteria for assessing objective accomplishment Dates to review progress are agreed upon and used Superior and subordinates make any required modifications in the original objectives A final evaluation by the superior is made The superior meets with the subordinate in a counseling, encouraging session Objectives for the next cycle are set


Multiple-Person Evaluation Methods


MBO and other performance management programs to work: Both the manager and subordinate must be actively involved in objective formulation They must also agree on what measures will be used to evaluate success and failure


Multiple-Person Evaluation Methods

central feature of MBO is discussion about subordinates’ performance, centered on results Many now find MBO programs too results-oriented and insufficiently process-oriented Deming argues that MBO places too much emphasis on detecting problems, too little on preventing them The manager and employee must work cooperatively to improve the underlying basis for productivity To do so, managers must be coaches and counselors, not judges


Multiple-Person Evaluation Methods

employee’s performance is affected by: His/her ability and motivation The production system that is in place consider an appraisal system in which someone’s merit is not tied exclusively to whether goals were met



Multiple-Person Evaluation Methods

and problems with MBO: If too many objectives are set, confusion occurs Too much paperwork In some situations MBO is It is forced into jobs where setting very effective; in objectives is difficult others it is costly and disruptive Rewards may not be tied to results There may be too much emphasis on the short term Superiors are not trained in the MBO process Original objectives are never modified It is used as a rigid control device that intimidates rather than motivates


Which Technique to Use

most commonly used evaluation techniques: The graphic rating scale The essay method Checklists by about 5 percent of firms: Forced choice, critical incident, BARS, BOS, field review, MBO by 10 to 13 percent of firms: Ranking, paired comparison




Which Technique to Use

is most likely to be used for: Managerial, professional, and technical employees technique is sometimes good and sometimes


poor The problem lies with how the techniques are used, and by whom The rater is more critical than the technique


Performance Evaluation Problems

No technique is perfect; they all have limitations


Opposition to Evaluation

employees are wary of performance evaluation Subjective bias and favoritism are real problems of formal evaluation argue that: They focus too much symptoms of poor performance rather than finding the underlying causes Managers and employees dislike the process Raters have trouble deciding performance levels Employees who are not placed in the top performance category experience a reverse motivation effect



System Design and Operating Problems

evaluation systems break down because they are poorly designed If the criteria focus solely on results, or on personality traits rather than performance, the evaluation may not be well received Some techniques take a long time to carry out or require extensive written analysis, both of which managers resist Some systems are not fully online


Rater Problems

if a system is well designed, problems can arise if raters are not cooperative and well trained Supervisors may not be comfortable “playing God” training can lead to: Problems with standards of evaluation Halo effect Leniency or harshness Central tendency error “Recency of events” error Contracts effects Personal bias (stereotyping, similar to me)



Standards of Evaluation

with evaluation standards arise because of perceptual differences in the meaning of words Good, adequate, satisfactory, and excellent mean different things to different evaluators only one rater is used, evaluations can be distorted This arises most often in graphic rating scales It may also appear with essays, critical incidents, and checklists



The Halo Effect

error occurs when a rater assigns values on the basis of an overall impression of the ratee Halo error can be positive or negative The ratings represent an error only if not justified True halo occurs when uniformly high or low ratings are justified by the ratee’s performance errors are not as common as once believed When they do occur, they are hard to eliminate To reduce the possibility, evaluate all subordinates on one dimension before proceeding to the next



Leniency or Harshness Error

objective is difficult for everyone Consequently, leniency or harshness errors may occur


can assess their tendencies by examining their ratings Asking raters to distribute ratings can force a normal distribution


Central Tendency Error

central tendency error occurs when a rater avoids using high or low ratings This “average” rating fails to discriminate between subordinates It offers little information for making HRM decisions regarding: Compensation Promotion Training What should be fed back to ratees


“Recency of Events” Error

forget more about past behavior than current behavior Many persons are evaluated more on the results of the past several weeks than the past six months employees are well aware of this difficulty They are sure to be visible and noticed in positive ways for several weeks in advance of a review



problem can be mitigated by using critical incident, MBO, or irregularly scheduled evaluations


Contrast Effects

contrast effect error occurs when a supervisor lets another employee’s performance influence the ratings given to someone else Contrast effects also occur when a supervisor unknowingly compares an employee’s present performance with their past performance Poor performers could get rated “above average” if they improve, even if the improvement only brings performance up to “average”


Personal Bias Error

personal bias rating error is related to a personal bias held by the supervisor Some can be conscious, such as sex discrimination Or, a supervisor could “play favorites” Other biases may be more subtle, such as giving a higher rating because the ratee is similar to the rater Personal liking can also affect ratings and feedback effect is usually small if there is sufficient performance-related information on which to base ratings



Eliminating Rater Errors

rating scales were created to help eliminate the kinds of ratings errors just described Such scales didn’t demonstrate consistent superiority over other rating formats Researchers now concentrated on the rating process More effort is now placed on helping raters accurately observe, recall, and report behavior


Rater Training

two most popular training programs are designed to: Eliminate common rating errors Improve supervisor observation and recording skills dealing with errors are effective, even if short and relatively inexpensive Focusing on observation and recording skills offers greater improvement than simply focusing on errors alone will not solve all problems Raters must be motivated to use the system and be allowed to observe subordinate performance




Avoiding Problems with Employees

an evaluation system to work well, employees must: Understand it Feel that it is fair Believe it is used correctly system should be: As simple as possible Implemented in a way that fully informs employees about how it will be used



Avoiding Problems with Employees

foster understanding about the system: Allow employees to participate in its development Provide training in performance evaluation methods


can be a useful addition to an evaluation system This facilitates performance evaluation discussions with a supervisor raters are incompetent or unfair, employees may resist, sabotage, or ignore the rating system



The Feedback Interview

effective performance interview involves two-way communication Evaluation should be a continuing process should hold evaluation interviews in order to: Discuss the appraisal Set objectives for the upcoming appraisal period



employee’s development or salary should not be discussed during this interview


The Feedback Interview

for effective interviews: Prepare for the meeting Put the employee at ease Split the budgeted time with the employee Present facts, not opinions Be specific Discuss performance, not personal criticisms Include positive comments Don’t overwhelm the ratee with information Encourage the ratee’s involvement Focus on the future


The Feedback Interview

good interviewing skills, many problems related to discussing performance can be overcome Speak clearly Listen carefully Gather and analyze information thoroughly Negotiate the amount and use of resources poor feedback interview is due to: Poor preparation Miscalculation about the purpose of the session Failure of the rater and ratee to understand each other



The Feedback Interview

there is no choice but to give negative

feedback It is easier to accept criticism if the discussion is part of the larger topic: ways to improve future performance

goal of the feedback interview is to: Recognize and encourage superior performance Sustain acceptable behaviors Change the behavior of ratees whose performance is not meeting organizational standards

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