Performance Management and Appraisal 9 Performance Management and Appraisal This chapter gives an overview of the performance appraisal process and the different tools and methods available. The main topics covered include the performance management process, appraisal methods, appraisal performance problems and solutions, and the appraisal interview. Despite lots of attention, money, and effort, performance appraisals remain an area with which few managers or employees are satisfied. The following questions are worth considering with respect to why some managers and employees are dissatisfied. Is it just that we don't have a good enough system yet? Is there an intrinsic problem with performance appraisals? Is it just human nature to dislike them?    Copyright © 2013 Pearson Education

Learning Objectives Define performance management and discuss how it differs from performance appraisal. Describe the appraisal process. Set effective performance appraisal standards. At the conclusion of this chapter, you will be able to: Define performance management and discuss how it differs from performance appraisal. Describe the appraisal process. Set effective performance appraisal standards. Copyright © 2013 Pearson Education

Learning Objectives Develop, evaluate, and administer at least four performance appraisal tools. Explain and illustrate the problems to avoid in appraising performance. Discuss the pros and cons of using different raters to appraise a person’s performance. Perform an effective appraisal interview. At the conclusion of this chapter, you will be able to: Develop, evaluate, and administer at least four performance appraisal tools. Explain and illustrate the problems to avoid in appraising performance. Copyright © 2013 Pearson Education

Define performance management and discuss how it differs from performance appraisal. Performance management has to do with creating an organizational system that is fair, effective, and widely understood by all. The goal of the system is to support the strategic aims of the firm by establishing a valid and reliable process connecting the employees to it. Performance appraisal involves : setting work standards, assessing actual performance relative to those standards, and providing feedback to the employee. Copyright © 2013 Pearson Education

Performance Appraisal Performance Appraisal = Evaluating a employee’s current and/or past performance relative to his or her performance standards. Copyright © 2013 Pearson Education

3-Step Performance Appraisal Process Set work standards Assess the employee actual performance relative to those standards Provide feedback to employee with the aim of helping to eliminate performance deficiencies. Appraising performance is important for several reasons. Many employers still base pay and promotions on employee appraisals. Appraisals play an integral role in the employer's performance management process. The appraisal lets the boss and subordinate develop a plan for correcting any deficiencies while reinforcing those things the employee does correctly.Appraisals are a useful career planning tool. Finally, appraisals play a role in identifying training and development needs.    Aligning the employee’s efforts with the job’s standards should be a continuous process. When you see a performance problem, the time to take action is immediately. Similarly, when someone does something well, the best reinforcement comes immediately, not six months later. Performance management includes continuously adjusting how an organization and its team members do things. Team members who need coaching and training receive it, and procedures that need changing are changed. Copyright © 2013 Pearson Education

Why appraise Performance? Human Resources Management 12e Gary Dessler Why appraise Performance? Because: 1 2 Is basis for pay and promotion decisions. 3 Plays an integral role in performance management. 4 Helps in correcting deficiencies and reinforcing good performance. Appraisals have several purposes that relate both to the appraised employee and the organization. Is useful in career planning. Point No. 5? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Management The continuous process of identifying, measuring and developing the performance of individuals and teams and aligning their performance with the organization’s goals. Copyright © 2013 Pearson Education

Performance Appraisal vs. Performance Management Continuous feedback Strategically related performance criteria Copyright © 2013 Pearson Education

Review Pay and promotions Planning Career planning Training and development Ongoing feedback Teamwork and change Employers frequently use (end employees have come to expect) their pay and promotions are determined by their appraisals. Improvement and career development planning also originates with an effective appraisal system. In addition, training and development activities are based on the appraisal system. Finally, providing continuous feedback and making improvements to how employees and employers do things contributes to organizational success. Copyright © 2013 Pearson Education

Set effective performance appraisal standards. Most employees need and expect to know ahead of time on what basis their employerwill appraise them. Let’s discuss how you can make this happen. Copyright © 2013 Pearson Education

Defining the Employee’s Goals and Work Standards Human Resources Management 12e Gary Dessler Defining the Employee’s Goals and Work Standards Set SMART goals Assign challenging/ doable goals Assign specific goals Guidelines for Effective Goal Setting Assign measurable goals Encourage participation Managers should appraise employees based on previously assigned criteria (goals and standards) that they are expected to achieve, such as “add 10 new customers next year.” At the heart of performance management is the idea that employees’ efforts should be goal directed. Such a process involves clarifying expectations and quantifying them by setting measurable standards for each objective. Goals should be: specific measurable challenging but attainable relevant and timely   Finally, employees should always have the opportunity to have meaningful input into the goals they are to achieve. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Employee’s Goals and Performance Standards Basing appraisal standards on required competencies The role of job descriptions Competencies are often arranged according to the basic technical, motor, intellectual, and other skills needed to be successful in a job. In addition, the minimum level of each skill needed should be specified. Ideally, what to appraise and how to appraiseit will be obvious from the job description. For the criteria to appraise, the jobdescription should list the job’s duties or tasks, including how critical each is to thejob and how often it’s performed. Copyright © 2013 Pearson Education

Who Should Do the Appraising? Peer appraisals Rating committees Self-ratings Appraisal by subordinates 360-degree feedback Who should do the appraising? The immediate supervisor is usually in the best position to observe and evaluate the subordinate’s performance. He or she also is typically responsible for that person’s performance. Peer appraisals are becoming more popular with firms using self-managing teams. Rating committees consist of multiple raters, typically the employee’s immediate supervisor and three or four other supervisors. Self-ratings tend to be higher than supervisor or peer ratings although input from the subordinate is always to be encouraged. Appraisal by subordinates is also known as upward feedback. In this instance, subordinates anonymously rate their supervisor’s performance. 360-degree feedback has become more widely used. Ratings are collected from the employee’s supervisors, subordinates, peers, and occasionally, internal or external customers. The best advice is that firms should carefully assess costs, train those giving feedback thoroughly, and not rely solely on 360-degree feedback. Copyright © 2013 Pearson Education

Performance Appraisal Methods Human Resources Management 12e Gary Dessler Performance Appraisal Methods Appraisal Methodologies 1 6 3 2 8 Graphic rating scale 7 Narrative forms 4 9 Alternation ranking Behaviorally anchored rating scales (BARS) 5 10 Paired comparison Management by objectives (MBO) Forced distribution Computerized and Web-based performance appraisal Appraising performance requires choosing an appraisal tool, form, or methodology that provides an effective means for comparing a subordinate’s actual perfo The Alternation Ranking Method ranks employees from best to worst on a specific trait, choosing highest, then lowest, until all are ranked. The Paired Comparison Method involves ranking employees by making a chart of all possible pairs of employees for each trait. The manager then indicates which one is the better employee of the pair. Forced Distribution Method – Predetermined percentages of employee ratings are placed in various performance categories, similar to grading on a curve. Critical Incident Method – A supervisor keeps a record of uncommonly good and/or undesirable examples of an employee’s work-related behavior. The supervisor then reviews the record with the employee at predetermined times. The Narrative Forms method involves rating the employee’s performance for each performance factor needed on the job. Written examples and an improvement plan is provided. The process then aidsthe employee in understanding where his/her performance was good or bad focusing on problem solving. Behaviorally Anchored Rating Scales (BARS) is amethod that combines the benefits of narratives, critical incidents, and quantified scales. It does so by anchoring a scale with specific behavioral examples of good or poor performance. The advantages of BARS include accuracy, clearer standards, feedback, independent dimensions, and consistency. rmance to the standards for his or her job. Mixed Standard Scales are similar to BARS but generally list just three behavioral examples or standards for each of the threeperformance dimensions. Management by Objectives (MBO) – The manager sets specific measurable goals with each employee and then periodically discusses the employee’s progress toward them. The process consists of six steps: set organizational goals set departmental goals discuss define expected results conduct performance reviews provide feedback A computerized and web-based performance appraisal approachgenerally enables managers to keep notes on subordinates during the year. It allows employee ratings on a series of performance traits, and then generates text to support each part of the appraisal. Electronic Performance Monitoring use computer network technology to allow managers access to their employees’ computers and telephones. Note, however, the most effective appraisal forms often merge several approaches Critical incident Merged methods Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Techniques for Appraising Performance Graphic rating scale method What to rate? The graphic rating scale method isthe simplest and most popular performance appraisal technique. First, a scale is used to list a number of traits and a range of performance for each. Then the employee is rated by identifying the score that best describes his/her performance level for each trait. Managers must decide which job performance aspects to measure. Such aspects include generic dimensions, actual job duties, or behaviorally recognizable competencies. Copyright © 2013 Pearson Education

Human Resources Management 12e Gary Dessler FIGURE 9–2 Sample Graphic Rating Performance Rating Form Figure 9-2 shows one graphic rating scale. A graphic rating scale lists traits (such as “quality and reliability” or “teamwork”) and a range of performance values (from “unsatisfactory” to “outstanding,” or “below expectations” to “role model”) for each trait. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler TABLE 9–3 Important Advantages and Disadvantages of Appraisal Tools Tool Advantages Disadvantages Graphic rating scale Simple to use; provides a quantitative rating for each employee. Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems. BARS Provides behavioral “anchors.” BARS is very accurate. Difficult to develop. Alternation ranking Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales. Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent. Forced distribution method End up with a predetermined number or % of people in each group. Employees’ appraisal results depend on your choice of cutoff points. Critical incident method Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis. Difficult to rate or rank employees relative to one another. MBO Tied to jointly agreed-upon performance objectives. Time-consuming. Use the right appraisal tool—or combination of tools. Each has its own pros and cons. For example, the ranking method avoids central tendency but can cause bad feelings when employees’ performances are in fact all “high.” Table 9-3 summarizes each tool’s pros and cons. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Explain and illustrate the problems to avoid in appraising performance. As we said, few things managers do are fraught with more peril than appraisingsubordinates’ performance.We now turn to appraisal problems and how to solvethem, and to several other appraisal issues. Copyright © 2013 Pearson Education

Dealing with Performance Appraisal Problems Human Resources Management 12e Gary Dessler Dealing with Performance Appraisal Problems Unclear standards Leniency or strictness Halo effect Potential Rating Scale Appraisal Problems Central tendency Bias Graphic-type rating scales in particular are susceptible to several problems: unclear standards, halo effect, central tendency, leniency or strictness, and bias. If standards are unclear, ambiguous traits and degrees of merit can result in an unfair appraisal. The influence of a rater’s general impression on ratings of specific qualities is known as the halo effect.   Central tendency occurs when supervisors stick to the middle of the rating scales, thus rating everyone average. Leniency or strictness occurs if supervisors have atendency to rate everyone either high or low. Recency effectsinvolve letting what the employee has done recently blind the manager to the employee’s performance over the entire year. Bias is a tendency to allow individual differences such as age, race, and sex affect employee appraisal ratings. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Unclear Standards Eg. The use of graphic-type rating scale. May result in unfair appraisals due to traits and degree of merits are ambiguous. How to solve? – include descriptive phrases. Copyright © 2013 Pearson Education

Human Resources Management 12e Gary Dessler TABLE 9–2 A Graphic Rating Scale with Unclear Standards Table 9-2 illustrates the unclear standards problem. This graphic rating scale seems objective. However, it would probably result in unfair appraisals, because the traits and degrees of merit are ambiguous. The best way to fix this problem is to include descriptive phrases that define or illustrate each trait. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Halo Effect It is the problem that occurs when a supervisor’s rating of a subordinate on one trait biases the rating of that person on other traits. Eg. SV often rate unfriendly employees lower on all traits. Copyright © 2013 Pearson Education

Central Tendency A tendency to rate all employees the same way, such as rating them all average. It will distort evaluation and less useful for promotion, salary or counselling purposes. To solve – use ranking scheme rather than using graphic rating scales Copyright © 2013 Pearson Education

Leniency or Strictness The problem that occurs when a SV has a tendency to rate all subordinates either high or low. It is severe with graphic rating scales. How to solve? Copyright © 2013 Pearson Education

Recency Effects Letting the employee has done recently blind you to what his or her performance has been over the year. To solve – To accumulate critical incidents all year long. Copyright © 2013 Pearson Education

Bias The tendency to allow individual differences such as age, race and sex to affect the appraisal ratings employees receive. Copyright © 2013 Pearson Education

cons of using different Discuss the pros and cons of using different raters to appraise a person’s performance. It’s probably safe to say that problems like the ones we just discussed can make an appraisal worse than noappraisal at all. Do five things to have effective appraisals. Copyright © 2013 Pearson Education

Guidelines for Effective Appraisals Know the problems Use the right tool Keep a diary Get agreement on a plan Ensure fairness Appraisals and the law Appraisals can be more effective by following these five guidelines:  know the problem use the right appraisal tool keep a diary get agreement on a plan be fair The courts have found that inadequate appraisal systems tend to be at the root of illegal discriminatory actions. In addition to being done legally, appraisals should be handled ethically and honestly. Copyright © 2013 Pearson Education

Perform an effective appraisal interview. To perform an effective appraisal interview, the supervisor and subordinate review the appraisal and make plans to remedy deficiencies and reinforce strengths. Copyright © 2013 Pearson Education

Managing the Appraisal Interview Types of appraisal interviews How to conduct the appraisal interview Objective data Don’t get personal Encouragement Agreement Supervisors face four types of appraisalinterviews, each with its unique objectives: Satisfactory – PromotableThis is the easiest interview, the objective is to make development plans. Satisfactory – Not Promotable This type of interview has the objective of maintaining performance when promotion is not possible. Unsatisfactory – Correctable This has the objective to plan correction via the development and successful implementation of an action plan. Prepare for the interview by assembling the data, preparing the employee, and choosing the time and place. Be direct and specific, using objective examples. Don’t get personal. Encourage the person to talk. Plan on reaching agreement. Copyright © 2013 Pearson Education

The Appraisal Interview Human Resources Management 12e Gary Dessler The Appraisal Interview Satisfactory—Promotable Satisfactory—Not Promotable Unsatisfactory—Correctable Unsatisfactory—Uncorrectable Types of Appraisal Interviews As a supervisor, you will face four types of appraisal interviews, each with its unique objectives. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Managing the Appraisal Interview Handling a defensive subordinate Criticizing a subordinate The formal written warning Realistic appraisals Recognize that defensive behavior is normal. Never attack or belittle a person’s defenses; they are legitimate to him or her. Postpone action as appropriate and recognize your own limitations. When required, criticize in a private and constructive manner that lets the person maintain his/her dignity and sense of worth. Written warnings should identify the standards by which the employee is judged, make it clear that the employee was aware of the standard. Then specify any violation of the standard, and show that the employee had an opportunity to correct the behavior. You may place this in his or her permanent personnel file. If circumstances warrant, you may remove the warning after a specified amount of time, say 90 days or longer. Be realistic and honest when giving an appraisal. It is important that a manager be candid when a subordinate is underperforming. Focus on specifics and allow opportunities to improve. Copyright © 2013 Pearson Education

Handling Defensive Responses Human Resources Management 12e Gary Dessler Handling Defensive Responses How to Handle a Defensive Subordinate 1 2 Recognize that defensive behavior is normal. 3 Never attack a person’s defenses. 4 Postpone action. Defenses are a familiar aspect of our lives. When a supervisor tells someone his or her performance is poor, the first reaction is often denial. Denial is a defense mechanism. By denying the fault, the person avoids having to question his or her own competence. Others react with anger and aggression. This helps them let off steam and postpones confronting the immediate problem. Recognize your own limitations. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

How to Deliver Criticism Human Resources Management 12e Gary Dessler How to Deliver Criticism How to Criticize a Subordinate 1 3 2 Do it in a manner that lets the person maintain his or her dignity and sense of worth. 4 Criticize in private, and do it constructively. 5 Give daily feedback so that the review has no surprises. When you must criticize, do so in a manner that lets the person maintain his or her dignity—in private, and constructively. Never say the person is “always” wrong. Criticism should be objective and free of biases. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Formal Written Warnings Human Resources Management 12e Gary Dessler Formal Written Warnings Purposes of a Written Warning To shake your employee out of bad habits. To help you defend your rating, both to your own boss and (if needed) to the courts. A Written Warning Should: Identify standards by which employee is judged. Make clear that employee was aware of the standard. Specify deficiencies relative to the standard. Indicate employee’s prior opportunity for correction. An employee’s performance may be so weak that it requires a formal written warning. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Management Performance management vs. appraisals Information technology Talent management Appraisal and active management Segmenting employees Three concepts distinguish performance management from performance appraisal: performance management is continuous it is goal-directed it is continuously re-evaluating and modifying the way people accomplish their work Using information technology to support performance management allows management to monitor and correct deficiencies in real time. The process involves: assigning financial and nonfinancial goals informing employees of their goals using an IT system to monitor and assess performance and taking corrective action Talent management requires actively managing decisions affecting employees and making certain they have input and a clear understanding of expectations. The traditional practice of allocating pay raises, development opportunities, and other scarce resources across the board does not make for a competitive, successful firm. Today, employers must focus their attention and resources on their company’s mission-critical employees essential to the firm’s strategic needs. Segmenting employees is a way to emphasize successful management of high potential employees. It may include such activities as identifying top performers and assessing them for promotability, time-frame, and leadership potential. You also may limit the “high potential group in whom the company invests heavily to no more than 10% to 20% of managerial and professional staff.” One company appoints “career stewards” to meet regularly with “emerging leaders.” In all situations, the goal is to focus effort and extra resources by investing in a firm’s future leaders. Copyright © 2013 Pearson Education

Performance Management Summary Direction sharing Goal alignment Ongoing performance monitoring Ongoing feedback Coaching and developmental Recognition and rewards We can summarize performance management’s six basic elements as follows: Direction sharing means communicating the company’s goals throughout thecompany. Then translating these into doable departmental, team, and individualgoals. Goal alignment means having a method that enables managers and employeesto see the link between the employees’ goals and those of their department andcompany. Ongoing performance monitoring usually includes using computerized systemsthat measure and then e-mail progress and exception reports. The reports are based on theperson’s progress toward meeting his or her performance goals. Ongoing feedback includes both face-to-face and computerized feedback regardingprogress toward goals. Coaching and developmental support should be an integral part of the feedbackprocess. 6. Recognition and rewards provide the consequences needed to keep the employee’sgoal-directed performance on track. Copyright © 2013 Pearson Education

Review Type of interviews Defensiveness Criticism Warnings Realism Performance management vs. appraisals Talent management For this final learning objective, we have focused our energy on the types of appraisal interviews and how to conduct effective interviews. Using objective data, not getting personal, providing encouragement and obtaining agreement are key ingredients. We also discussed subordinate defensiveness, handling criticism, using written warnings, and remaining realistic in the process. Finally, we covered some of the differences between management and appraisals and using information technology as an aid to effective appraisals. Managing talent actively and segmenting employees also provided guidelines for the future. Copyright © 2013 Pearson Education