© 2001 by Prentice Hall & Prof Anne Tsui 7-1 October 15, 2002 Appraising and Managing employee Performance

© 2001 by Prentice Hall & Prof Anne Tsui 7-2 Learning objectives  Explain the purposes and uses of performance appraisal  Identify what defines good performance – dimensions of behavior and outcomes of performance  Discuss the ways to measure employee performance – absolute vs relative, behavior vs outcome data  Manage the bias on performance appraisals – political reasons, rating errors, and liking.  Analyze the causes of performance problems.  Discuss how to conduct an effective performance evaluation session

© 2001 by Prentice Hall & Prof Anne Tsui 7-3 Performance Appraisal - purposes 1.Developmental – to help employees to improve performance 2.Administrative – to help manager in decisions on rewards, promotions and job assignments Manager is coach in one case and judge in the other case. Both purposes are important.

© 2001 by Prentice Hall & Prof Anne Tsui 7-4 Uses of Performance Appraisal to Employers  Employee good performance can make a difference to achieving company performance goals.  Appraisal provides a rational basis for constructing a bonus or merit system.  Appraisal dimensions and standards can help to implement strategic goals and clarify performance expectations.  Providing individual feedback is part of the performance management process.  Despite the main focus on the individual, appraisal criteria can include teamwork and the teams can be the focus of the appraisal.  Documentation of performance appraisal and feedback may be needed for legal defense.

© 2001 by Prentice Hall & Prof Anne Tsui 7-5 Uses of Performance Appraisal to Employees  Performance feedback is needed and desired.  Improvement in performance requires assessment.  Fairness required that differences in performance levels across workers be measured and have an effect on outcomes.  Assessment and recognition of performance levels can motivate workers to improve their performance.

© 2001 by Prentice Hall & Prof Anne Tsui 7-6 Defining Employee Performance Identifying performance dimensions -relate to the job content -focus on work behavior -identify outcomes affected Identifying performance outcomes -those that the employee can effect -those that are measurable and observable Define desired standards to be achieved by employees In both behavior and outcome dimensions

© 2001 by Prentice Hall & Prof Anne Tsui 7-7 Types and Examples of Performance Dimensions  Traits – relatively permanent employee characteristics e.g., decisiveness, reliability, energy, loyalty  Behaviors – changeable attributes e.g., attendance, communication, cooperation, adaptability  Outcomes – results achieved by employee or groups of employees e.g., sales volume, number produced, quality indicators, profitability, new product sale as % total sales

© 2001 by Prentice Hall & Prof Anne Tsui 7-8 Performance outcomes at different levels  Individual level – can be achieved by employee alone – responsibility of individual employees  Group level – can be achieved by the team working together and by individuals working in it – responsibility of supervisors and managers  Organization level – can be achieved by groups working together, by teams and individuals – responsibility of senior level managers and executives Question: Is it ethical for managers to be responsible for organization level outcomes when such outcomes are not entirely under the control of these managers?

© 2001 by Prentice Hall & Prof Anne Tsui 7-9 Measuring Employee Performance  Type of judgment - Relative or absolute  Focus of the measure - Trait, behavior, or outcome

© 2001 by Prentice Hall & Prof Anne Tsui 7-10 Relative and Absolute Judgment An appraisal format that asks supervisors to compare an employee's performance to the performance of other employees doing the same job. Relative Judgment An appraisal format that asks supervisors to make judgments about an employee’s performance based solely on performance standards. Absolute Judgment

© 2001 by Prentice Hall & Prof Anne Tsui 7-11 Rankings and Performance Levels Across Work Teams – a relative judgment ActualRanked Work 10 (High) (Low) Ranked Work Marcos (1) Uma (2) Joyce (3) Bill (4) Richard (5) Jill (1) Tom (2) Sue (3) Greg (4) Ken (5) Frank (1) Julien (2) Lisa (3) Jolie (4) Steve (5)

© 2001 by Prentice Hall & Prof Anne Tsui 7-12 Trait Appraisal, Behavioral Appraisal, and Outcome Appraisal – An absolute judgment An appraisal tool that asks a supervisor to make judgments about worker characteristics that tend to be consistent and enduring. An appraisal tool that asks managers to assess a worker’s behaviors. An appraisal tool that asks managers to assess the results achieved by workers. Trait Appraisal Behavioral Appraisal Outcome Appraisal

© 2001 by Prentice Hall & Prof Anne Tsui 7-13 Evaluation of Measurement Formats Absolute Relative Trait Behavior Outcome Appraisal Format Administrative Use Developmental Use Legal Defensibility -- Very Poor- Poor + Good ++ Very good 0 Unclear or mixed

© 2001 by Prentice Hall & Prof Anne Tsui 7-14 Biases in Performance Measurement  Rating errors and rater bias  The influence of liking  Organizational politics  Whether to focus on the individual or the group  Legal issues – liable for biases that negatively affect employees – the appraisal is a “test” – validity is expected

© 2001 by Prentice Hall & Prof Anne Tsui 7-15 Causes of Performance Problems  Consider all three factors: ability, motivation, and situation  Beware of “actor/observer bias”  Seek input from multiple observers (peers, subordinates, customers, 360)  Use a problem-solving approach  Focus on behavior, not person  Attend to the problem when it occurs

© 2001 by Prentice Hall & Prof Anne Tsui 7-16 Situational (System) Factors that may cause Performance Problems Poor coordination of work activities among workers. Inadequate information or instructions needed to perform a job. Low-quality materials. Lack of necessary equipment. Insufficient raw materials, parts, or supplies. Inadequate financial resources. Poor supervision. Uncooperative coworkers. Insufficient time to produce the quantity or quality of work required. A poor work environment (for example, cold, hot, noisy, frequent interruptions.) Equipment breakdown.

© 2001 by Prentice Hall & Prof Anne Tsui 7-17 Conducting the performance appraisal discussion  Keep a diary of positive and negative behavior or outcomes  Solicit employee input before judgment  Focus on behavior and problem  Start with positive, discuss problems, end with constructive development plan  Good communication skills (see Fig. 7.9, p.242)  Frequent, timely and informal feedback is better than delayed formal session an annual basis.

© 2001 by Prentice Hall & Prof Anne Tsui 7-18 Performance Evaluation Form – a sample The Computime “Confidential Employee Evaluation” form (click here to see actual form)click here to see actual form Part I – 10 dimensions a.Rate each dimension on a scale of 1 to 5 b.Identify strength of employee c.Identify weakness of employee Part II – Development a.Areas for development and training b.List future job goals Part III – Agreement a.Signatures b.Employee Comments The Computime “Confidential Employee Evaluation” form (click here to see actual form)click here to see actual form Part I – 10 dimensions a.Rate each dimension on a scale of 1 to 5 b.Identify strength of employee c.Identify weakness of employee Part II – Development a.Areas for development and training b.List future job goals Part III – Agreement a.Signatures b.Employee Comments

© 2001 by Prentice Hall & Prof Anne Tsui 7-19 The Computime Performance Evaluation Form  What is type of measurement used? u Relative versus absolute  What is the focus of measurement? u Trait, behavior, outcomes  What is the purposes and uses? u Development versus administrative u To employer versus to employee  As best as you can determine from this form, what can be improved on this form and the performance measurement and evaluation system in general?

© 2001 by Prentice Hall & Prof Anne Tsui 7-20 Designing a Peer Assessment Form for your team 1.Discuss and agree on the purpose of such a form for your team 2.Identify performance dimensions for an effective team member (consider both behavior and outcomes) 3.Design a rating scale for the dimensions 4.Discuss and agree on an assessment and feedback process

© 2001 by Prentice Hall & Prof Anne Tsui 7-21 Thinking Questions on Assessing and Managing Performance  How can we ensure a fair performance appraisal for employees doing similar work but reporting to different supervisors? (concept of comparability)  In today’s economy, most companies are not making money. How can performance evaluation be fair when we cannot reward employees who are great contributors?  Why are most supervisors reluctant to conduct the performance evaluation session? What can be done to help supervisors do a good job in performance assessment?