Performance Appraisal Basics MANA 4328 Dr. Jeanne Michalski

Why Conduct Performance Appraisals?

Performance Ethic  High-performing companies place a premium on setting demanding standards and measuring performance against those tough-minded goals. Specifically, they:  Have a mission  Have challenging goals and clear accountability  Are excellent at performance feedback  Apply consequences, both positive and negative, to individual performance (McKinsey & Company, 1999)

Developing an Appraisal System SETTING EXPECTATIONS TYPE OF APPRAISAL ADMINISTRATION PERFORMANCE AND PAY

Performance Management Cycle  Planning Performance for the Upcoming Period  Coaching Performance and Giving Feedback Throughout the Period  Rating Performance for the Just Completed Period

Legal Issues Appraisal systems are more defensible if they:

Challenges for Performance Measurement Rater errors and bias  Halo  Contrast effects  Range restriction / Central tendency  The influence of liking/similar to me Rater errors can be addressed by training

Appraisal Forms  “Least important element of the appraisal process”  Appraisal forms most often contain various styles  Approaches to Appraisal Forms  Trait  Behavior  Results / Outcomes  Global / Essay

Trait-Based Appraisals  Characteristics that are enduring and general  e.g. “Leadership” “Communication” “Decisiveness”  Competency models vs. Trait-based appraisal  Are the characteristics really related to performance?  Potential Problems  Focus on person rather than performance  May be ambiguous or arbitrary  Poor feedback and goal setting  Poor reliability and validity

Behavior-Based Appraisal  Focus on specific behaviors with examples 1. Behavioral Frequency / Observation Scale (BOS) 2. Behaviorally Anchored Rating Scales (BARS)  Positives  More valid and reliable  Acceptable to employees  Better for development and improvement

Developing Behavioral Scales 1.Identify critical incidents and behaviors 2.Sort similar behaviors into dimensions 3.Validate sorting 4.Collect data on relationship between behavior and performance 5.Assign a rating scale 6.Validate the scale

Behaviors for Students

Behavior-Based Appraisal Potential Problems  Difficult and expensive to develop  Needs to match jobs closely to be effective  Behaviors may be hard to develop and interpret  Emphasizes behaviors (at the expense of others?)  Focuses on behavior rather than results  May be no more reliable and valid than simple scale Process of developing the rating system is more important than the system itself.

Results-Based Appraisal Uses future results as performance targets Challenge is setting goals and measures  Can the goals be quantified?  Unique goals for every individual Appraisal forms tend to be very simple Still need a rating scale

Admissions Counselor Job Function: Recruit at high schools in the southern Texas region Standards: Make 2 visits per semester to each of the 7 high schools in your area. Prepare follow up packets to be sent to all students contacted during those visits. Send monthly update to the students indicating forms/ items still to complete. On 5 point scale what rating do you give when Standard is met?

Results-Based Appraisal “Management by Objectives” or MBO  Linking individual goals with business strategy  Organizational goals flow down to depts. and employees  Focus on planning, action items, and interim reviews  Objectives negotiated and agreed upon by employees

Results-Based Appraisal Focus on results compared to specific behaviors  Should be clear and unambiguous  Requires alignment of expectations  May promote gaming of the system  Beware of results at any cost and excessive results orientation  Time consuming and needs constant updating

The Balanced Scorecard  The appraisal focuses on four related categories  Financial, customer, processes, and learning  Ensuring the method’s success:  Translate strategy into a scorecard of clear objectives.  Attach measures to each objective.  Cascade scorecards to the front line.  Provide performance feedback based on measures.  Empower employees to make performance improvements.  Reassess strategy.

How to Judge Appraisal Types  Leads to desired behaviors  Minimizes negative behaviors  Reliability and validity  Perceived fairness (rater and employee)  Performance improvement and employee development  Flexibility and administrative cost

Comparison of Appraisal Forms Ease of Use Employee Development Legal Defensibility Traits HighLow Behaviors MediumHigh Outcomes LowMedium Do organizations use one type only?

Key Questions to Consider When Receiving Feedback  Do I understand it?  Is it accurate/valid?  Is it important?  Do I want to change? At its heart feedback is only information. How you choose to think and feel about the feedback will determine the value you gain from it.

Possible Reactions To Feedback DENIAL ANGER / FLIGHT WITHDRAWAL ACCEPTANCE ANALYSIS ACTION PLANNING

360 Degree Feedback  Evaluation method that incorporates feedback from the:  worker,  his/her peers,  supervisors,  direct reports, and  customers.  Results of these confidential surveys are tabulated and shared with the worker.  Interpretation of the results, trends and themes are discussed as part of the feedback.

360 Degree Feedback Worker SupervisorPeersCustomers Direct Reports

360 Successful in Organizations When:  Organizational climate fosters individual growth  Proper framing of feedback method by management  Assurance that feedback will be kept confidential  Development of feedback tool based on organizational goals and values  Feedback tool includes area for comments  Brief workers, evaluators and supervisors about purpose, uses of data and methods of survey prior to distribution of tool  Train workers in appropriate methods to give and receive feedback  Support feedback with back-up services or customized coaching

360 Degree Feedback Errors  Feedback tied to merit pay or promotions  Comments traced to individuals causing resentment between workers  Feedback not linked to organizational goals or values  Use of the feedback tool as a stand alone without follow-up  Poor implementation of 360-degree tool negatively affects motivation  Excessive number of surveys are required of each worker with few tangible results provided to individuals