Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Performance Management and Appraisal 7

7-2 The Definition of Performance  Work Performance - The record of outcomes produced on specified job functions or activities during a specified time period.  Use performance data for:  management and compensation  staffing  training  research and program evaluation

7-3 The Legally Sound Performance Appraisal  What are the most common federal laws relating to performance appraisal legal issues.  Title VII of the Civil Rights Act  Use of “disparate impact” theory of discrimination when performance scores are used in personnel decisions (e.g., promotions, downsizing)  Age Discrimination in Employment Act “Disparate impact” theory can be used in ADEA cases too.  Equal Pay Act of 1963  Americans with Disabilities Act of 1990  Family and Medical Leave Act

7-4 The Major Issues to Consider in Performance Management  Frequency and timing of formal appraisals.  Rating/date collection medium.  Training programs.  Method of feedback.

7-5 The Design of an Appraisal System  Who should have input on performance appraisal design?  immediate supervisors  human resource professionals  internal customers  external customers  What points should be considered?  measurement content  measurement process  evaluation administrator (who should rate performance?)  level of performance to rate  administrative characteristics

7-6 Designing an Appraisal System: Organizational Connections and Outcomes  Consider the organization’s objectives and strategic plan, then choose outcomes:  Quality  Quantity  Timeliness  Cost-effectiveness  Need for supervision  Interpersonal impact  Outcomes should be defined and evaluated by customers (internal or external).

7-7 Designing an Appraisal System: The Measurement Process  Comparing among ratees, aka comparing ratees to each other.  paired comparisons - rater compares all possible pairs of ratees on overall job performance.  straight ranking - rater ranks employees on overall job performance from best to worst.  forced distribution - rater is forced to place ratees in categories (best, moderate, worst), with a limited number allowed in each category.  Comparisons among performance-level anchors - rater is given several pairs of similar behavioral statements about performance and asked to choose one statement within each pair that best describes the ratee.

7-8 Designing an Appraisal System: The Measurement Process Influencing Others Poor Below Average Average Above Average Excellent  Comparisons to performance-level anchors.  graphic rating scales - use adjectives or numbers (or both) as anchors to rate someone on a specific competency. For example:  Behaviorally anchored rating scales (BARS) - graphic ratings scales with specific behavioral descriptions as anchors instead of adjectives. For example: Presented ideas or proposals without stating any benefits. Explained benefits of ideas or recommendations Clearly positioned ideas to address others’ concerns and goals. Influencing Others

7-9 Designing an Appraisal System: The Measurement Process  Comparisons to performance-level anchors (cont):  Performance Distribution Assessment (PDA) - how often a person has the opportunity to perform a behavior is taken into consideration.  Incorporates measurement of situational constraints  management by objectives (MBO) - specific attainable goals are jointly determined by the manager and worker at the beginning of some time period (e.g., beginning of the financial quarter), and then revisited at the end of the time period. Effective when precise definitions of objectives are used  ratings of relative frequency – customer determines levels of performance and then rates how frequently levels were achieved relative to all the opportunity to achieve at that level.

7-10 Control of Rating Errors  MAJOR RATING ERRORS:  leniency/severity - all employees are rated at the high end (leniency) or low end (severity) across all performance categories Primary reason why companies have turned to forced distribution.  halo/horns effect - rater allows high (halo) or low (horns) ratings on one performance category to influence others.  central tendency - the tendency to rate all or most employees towards the center of the scale (e.g. average) regardless of their level of performance.  actor-observer bias- tendency of observers to underestimate external factors and for actors to overestimate those same factors.

7-11 Control of Rating Errors  Other rating errors:  representativeness - making judgments about someone based on their similarity to others  availability - mistaking how easily something may be recalled from memory for actual frequency of occurrence  anchoring - the tendency to insufficiently alter a judgment from an initial judgment  potent error in multi-rater systems where inflated self-ratings erroneously affect supervisor’s ratings.  Problem when self-ratings are used  Rater Training.  frame-of-reference training  improves rater accuracy, controls  unintentional errors, little impact on intentional bias.

7-12 Some Possible Situational Constraints on Performance  Absenteeism or turnover of key personnel.  Inadequate clerical support.  Shortages of supplies and/or raw materials.  Excessive restrictions on operating expenses.  Inability to hire needed staff.  Inadequate performance of subordinates.  Inadequate performance of managers.  Inefficient organizational structure.  Excessive \reporting requirements.  Changes in administrative policies, procedures, and/or regulations.  Pressures from coworkers to limit an individuals performance.

7-13 Defining the Raters and Ratees  Define who the rater and ratee are.  Who is the rater?  single individual - a supervisor  multirater or 360 systems - ratings from supervisors, self, peers, subordinates, customers  360- degree is beneficial for greater accuracy, fewer biases, perceptions of fairness, and fewer/better legal issues  360 appraisal is a “High Performance Work System” characteristic  Who is the ratee?  single individual - an employee or supervisee  group or business unit  benchmarking - comparing ratings to outside standards, such as industry standards or government standards  group and individual - rate the group on performance, the individual for development

7-14 Providing Feedback  Feedback gives the ratee information about themselves and where they stand in their work performance. Should include:  praise for special assignments  the ratee’s own assessment of their performance  employee career aspirations  action plans for future goals, employee development, and expectations