Performance Appraisals Chapter 11

Nature of Performance Appraisals You can’t manage what you don’t understand You don’t understand what you don’t measure What gets measured is what gets done What gets measured is what gets rewarded What gets rewarded is what gets repeated

The Role of Performance Appraisals in Compensation Decisions Employees often frustrated about the appraisal process Appraisals are too subjective Possibility of unfair treatment by a supervisor Experts argue that rather than throwing out the entire performance appraisal process, total-quality-management principles should be applied to improving it Recognize part of performance influenced more by work environment and systems than by ee behaviors

Exhibit 11.1: Common Errors in the Appraisal Process

Exhibit 11.2: Ratings of Managers

Strategies to Better Understand and Measure Job Performance Clearly define job performance Recognize definition of performance and its components is expanding Improve appraisal formats Select the right raters Understand way raters process information and mistakes that may be made Train raters to improve rating skills

Categories of Appraisal Formats Ranking - Rater compares employees against each other Categories Rating - Rater evaluates employees on some absolute standard (measured on a continuum scale) Essay - Rater answers open-ended questions in essay form describing employee performance

Ranking Formats Straight ranking Alternation ranking Paired-comparison ranking See Ex. 11.3

Rating Formats Two common elements Raters evaluate employees on some absolute standard Each standard is measured on a scale -performance variation is described along a continuum

Rating Formats (cont.) Types of descriptors Adjectives Behaviors Standard rating scale (Ex. 11.4) Behaviors Behaviorally anchored rating scales (Ex. 11.5) Outcomes Management by objectives (Ex. 11.7, 11.8)

Exhibit 11.9: Usage of Performance Evaluation Formats

Exhibit 11.10: An Evaluation of Performance Appraisal Formats

Training Raters to Rate More Accurately Rater-error training Goal is to reduce psychometric errors by familiarizing raters with their existence Performance-dimension training Exposes supervisors to performance dimensions used Performance-standard training Provides raters with a standard or frame of reference for making appraisal

Ways to Improve Rater Training Straightforward lecturing to ratees is ineffective Individualized or small group discussions more effective When sessions are combined with extensive practice and feedback, rating accuracy improves Longer training programs are generally more successful than shorter programs Performance-dimension and performance-standard training more effective than rater-error training Success results from efforts to reduce halo errors and improve accuracy

Putting it All Together: The Performance Appraisal Process Need a sound basis for establishing performance appraisal dimensions and scales associated with each dimension Need to involve employees in every stage of developing performance dimensions and building scales Need to ensure raters are trained in use of appraisal system and that all employees understand how system operates

Putting it All Together: The Performance Appraisal Process (cont.) Need to ensure raters are motivated to rate accurately Raters should maintain a diary of employee performance Raters should attempt a performance diagnosis to determine if performance problems exist

Exhibit 11.11: Tips on Appraising Employee Performance

Exhibit 11.11: Tips on Appraising Employee Performance (con’t)

EEO and Performance Evaluation Key Issues: Establishing a Performance Appraisal System 1 Provide specific written instructions on how to complete appraisal 2 Incorporate clear criteria for evaluating performance - Performance dimensions should be written, objective, and clear 3 Provide a rational foundation for personnel decisions via adequately developed job descriptions 4 Require supervisors to provide feedback about appraisal results to employees 5 Incorporate a review of performance ratings by higher level supervisors 6 Consistent treatment across raters, regardless of race, color, religion, sex, and national origin should be evident

Tying Pay to Subjectively Appraised Performance How do we get employees to view raises as a reward for performance? Central issue involving merit pay

Pay Increase Guidelines with Low Motivational Impact Provide equal increases to all employees regardless of performance General increase Cost-of-living adjustments Pay increases based on a preset progression pattern based on seniority

Requirements to Link Pay to Performance Define performance Behaviors Competencies Traits Specify a continuum describing different levels from low to high on performance measure Decide how much of a merit increase is given for different levels of performance

Exhibit 11.12: Performance-based Guidelines

Designing Merit Guidelines Four Questions . . . 1 What should the poorest performer be paid as an increase? 2 How much should average performers be paid as an increase? 3 How much should top performers be paid? 4 What should be the size of the percentage increase differential between different levels of performance?

Exhibit 11.14: Merit Pay Grid

Promotional Increases as a Pay-for-Performance Tool Promotion should be accompanied by a salary increase - 8 to 12% Characteristics of promotional pay increases Size of increment is approximately double a normal merit increase Represent a reward to employees for commitment and exemplary performance