1. Copyright © 2014 Pearson Education Chapter 8 Performance Management and Appraisal 8-1 Copyright © 2014 Pearson Education University of Bahrain College of Business Administration MGT 430 Human Resource Management Global Edition Dr. Mahnmood AsadMGT430

2. Copyright © 2014 Pearson Education Learning Objectives Describe employee engagement, define performance management, and describe the importance of performance management. Define performance appraisal and identify the uses of performance appraisal. Discuss the performance appraisal environmental factors, describe the performance appraisal process, and discuss whether or not a case can be made for getting rid of performance appraisals. Identify the various performance criteria (standards) that can be established. Identify who may be responsible for performance appraisal and explain the performance period. 8-2 Dr. Mahnmood AsadMGT430

3. Copyright © 2014 Pearson Education Learning Objectives (Cont.) Identify the various performance appraisal methods. List the problems that have been associated with performance appraisal. Explain the characteristics of an effective appraisal system. Describe the legal implications of performance appraisal. Explain how the appraisal interview should be conducted and discuss how performance appraisal is affected by a country’s culture. 8-3 Dr. Mahnmood AsadMGT430

4. Copyright © 2014 Pearson Education HRM in Action: Employee Engagement for a Committed Workforce Level of commitment workers make to their employer Seen in their willingness to stay at the firm and to go beyond call of duty Found in employees’ minds, hearts, and hands 8-4 Dr. Mahnmood AsadMGT430

5. Copyright © 2014 Pearson Education Performance Management (PM) Goal-oriented process ensuring processes are in place to maximize productivity at employee, team and organizational levels Close relationship between incentives and performance. Dynamic, ongoing, continuous process Each part of the system is integrated and linked for continuous organizational effectiveness 8-5 Dr. Mahnmood AsadMGT430

6. Copyright © 2014 Pearson Education Performance Appraisal Defined Formal system of review and evaluation of individual or team task performance Often negative, disliked activity that seems to elude mastery 8-6

7. Copyright © 2014 Pearson Education Uses of Performance Appraisal Human resource planning Recruitment and selection Training and development Career planning and development Compensation programs Internal employee relations Assessment of employee potential 8-7 Dr. Mahnmood AsadMGT430

8. Copyright © 2014 Pearson Education Performance Appraisal Environmental Factors External: – Legislation requiring nondiscriminatory appraisal systems – Labor unions Factors within internal environment, such as corporate culture 8-8

9. Copyright © 2014 Pearson Education Trends & Innovations: Can a Case Be Made for Getting Rid of Traditional Performance Appraisal? Managers do not like administering performance appraisal and employees do not like receiving them Failures lies in lack of ownership by line managers and employees At times developed for wrong reasons May be a better way 8-9 Dr. Mahnmood AsadMGT430

10. Copyright © 2014 Pearson Education Performance Appraisal Process External Environment Internal Environment 8-10 Identify Specific Performance Appraisal Goals Establish Performance Criteria (Standards) and Communicate Them To Employees Examine Work Performed Appraise the Results Discuss Appraisal with Employee Dr. Mahnmood AsadMGT430

11. Copyright © 2014 Pearson Education Establish Performance Criteria (Standards) Traits Behaviors Competencies Goal achievement Improvement potential 8-11

12. Copyright © 2014 Pearson Education Traits Employee traits such as attitude, appearance, and initiative are basis for some evaluations May be unrelated to job performance or be difficult to define Certain traits may relate to job performance 8-12 Dr. Mahnmood AsadMGT430

13. Copyright © 2014 Pearson Education Caution on Traits: Wade v. Mississippi Cooperative Extension Service In performance appraisal system, general characteristics such as “leadership, public acceptance, attitude toward people, appearance and grooming, personal conduct, outlook on life, ethical habits, resourcefulness, capacity for growth, mental alertness, loyalty to organization are susceptible to partiality and to the personal taste, whim, or fancy of the evaluator as well as patently subjective in form and obviously susceptible to completely subjective treatment by those conducting the appraisals” 8-13 Dr. Mahnmood AsadMGT430

14. Copyright © 2014 Pearson Education Behaviors Organizations may evaluate employee’s task- related behavior or competencies Examples are leadership style, developing others, teamwork and cooperation, or customer service orientation If certain behaviors result in desired outcomes, there is merit in using them in evaluation process 8-14 Dr. Mahnmood AsadMGT430

15. Copyright © 2014 Pearson Education Competencies Broad range of knowledge, skills, traits, and behaviors May be technical in nature, business oriented, or related to interpersonal skills Should be those that are closely associated with job success 8-15 Dr. Mahnmood AsadMGT430

16. Copyright © 2014 Pearson Education Goal Achievement Use if organizations consider ends more important than means Should be within control of individual or team Should be those results that lead to firm’s success 8-16 Dr. Mahnmood AsadMGT430

17. Copyright © 2014 Pearson Education Improvement Potential Many criteria used focus on past Cannot change past Should emphasize future 8-17 Dr. Mahnmood AsadMGT430

18. Copyright © 2014 Pearson Education Responsibility for Appraisal Immediate supervisor Subordinates Peers and team members Self-appraisal Customer appraisal 8-18 Dr. Mahnmood AsadMGT430

19. Copyright © 2014 Pearson Education Immediate Supervisor Traditionally most common choice Usually in excellent position to observe employee’s job performance Has responsibility for managing particular unit 8-19 Dr. Mahnmood AsadMGT430

20. Copyright © 2014 Pearson Education Subordinates Our culture has viewed evaluation by subordinates negatively. Some firms find that evaluation of managers by subordinates is both feasible and needed. Issues: – Could be seen as a popularity contest – Possible reprisal against employees 8-20 Dr. Mahnmood AsadMGT430

21. Copyright © 2014 Pearson Education Peers and Team Members Work closely with evaluated employee and probably have undistorted perspective on typical performance Problems include reluctance of some people who work closely together, especially on teams, to criticize each other 8-21 Dr. Mahnmood AsadMGT430

22. Copyright © 2014 Pearson Education Self-Appraisal If employees understand their objectives and the criteria used for evaluation, they are in a good position to appraise own performance Employee development is self-development Self-appraisal may make employees more highly motivated 8-22 Dr. Mahnmood AsadMGT430

23. Copyright © 2014 Pearson Education Customer Appraisal Customer behavior determines firm’s degree of success Demonstrates commitment to customer Holds employees accountable Fosters change 8-23 Dr. Mahnmood AsadMGT430

24. Copyright © 2014 Pearson Education Performance Appraisal for Telecommuters Well-defined understanding of job roles and performance measures Have objective measurements that apply to all employees Do not to vary the performance standards and metrics for virtual workers from those of office workers 8-24 Dr. Mahnmood AsadMGT430

25. Copyright © 2014 Pearson Education The Appraisal Period Prepared at specific intervals Usually annually or semiannually Period may begin with employee’s date of hire All employees may be evaluated at same time 8-25 Dr. Mahnmood AsadMGT430

26. Copyright © 2014 Pearson Education Choosing a Performance Appraisal Method 360-degree evaluation Rating scales Critical incidents Essay Work standards Ranking Paired comparisons Forced distribution Behaviorally anchored rating scales (BARS) Result-based systems 8-26 Dr. Mahnmood AsadMGT430

27. Copyright © 2014 Pearson Education 360-Degree Evaluation Multi-rater evaluation Input from multiple sources Focuses on skills needed across organizational boundaries More objective measure of performance Process more legally defensible 8-27 Dr. Mahnmood AsadMGT430

28. Copyright © 2014 Pearson Education Rating Scales Rates employees according to defined factors Judgments are recorded on a scale Many employees are evaluated quickly 8-28 Dr. Mahnmood AsadMGT430

29. Copyright © 2014 Pearson Education Critical Incidents Written records of highly favorable and unfavorable work actions Appraisal more likely to cover entire evaluation period Does not focus on last few weeks or months 8-29 Dr. Mahnmood AsadMGT430

30. Copyright © 2014 Pearson Education Essay Brief narrative describing performance Tends to focus on extreme behavior Depends heavily on evaluator's writing ability Comparing essay evaluations might be difficult 8-30 Dr. Mahnmood AsadMGT430

31. Copyright © 2014 Pearson Education Work Standards Compares performance to predetermined standard Standards: Normal output of average worker operating at normal pace Time study and work sampling used Workers need to know how standards were set 8-31

32. Copyright © 2014 Pearson Education Ranking All employees from group ranked in order of overall performance Comparison is based on single criterion, such as overall performance 8-32 Dr. Mahnmood AsadMGT430

33. Copyright © 2014 Pearson Education Paired Comparison Variation of ranking method Compares performance of each employee with every other employee in group 8-33 Dr. Mahnmood AsadMGT430

34. Copyright © 2014 Pearson Education Forced Distribution Rater assigns individual in workgroup to limited number of categories Assumes all groups of employees have same distribution Proponents of forced distribution believe: – They facilitate budgeting – They guard against weak managers who are too timid to get rid of poor performers 8-34 Dr. Mahnmood AsadMGT430

35. Copyright © 2014 Pearson Education Forced Distribution (cont.) Require managers to be honest with workers about how they are doing Also called a rank-and-yank system Unpopular with many managers May damage morale and generate mistrust of leadership Rankings may be way for companies to easily rationalize firings 8-35 Dr. Mahnmood AsadMGT430

36. Copyright © 2014 Pearson Education Behaviorally Anchored Rating Scales (BARS) Combines traditional rating scales and critical incidents methods Job behaviors derived from critical incidents described more objectively 8-36

37. Copyright © 2014 Pearson Education Result-Based Systems Manager and subordinate agree on objectives for next appraisal Evaluation based on how well objectives are accomplished In the past a form of management by objectives (MBO) 8-37

38. Copyright © 2014 Pearson Education Problems in Performance Appraisal Appraiser discomfort Lack of objectivity Halo/horn error Leniency/strictness Central tendency Recent behavior bias Personal bias Manipulating the evaluation Employee anxiety 8-38 Dr. Mahnmood AsadMGT430

39. Copyright © 2014 Pearson Education Appraiser Discomfort Performance appraisal process cuts into manager’s time Experience can be unpleasant when employee has not performed well 8-39

40. Copyright © 2014 Pearson Education Lack of Objectivity Factors such as attitude, appearance, and personality are difficult to measure Factors may have little to do with employee’s job performance May place evaluator and company in untenable positions 8-40 Dr. Mahnmood AsadMGT430

41. Copyright © 2014 Pearson Education Halo/Horn Error Halo error: Manager generalizes one positive performance feature or incident to all aspects of employee performance, resulting in higher rating Horn error: Manager generalizes one negative performance feature or incident to all aspects of employee performance, resulting in lower rating 8-41 Dr. Mahnmood AsadMGT430

42. Copyright © 2014 Pearson Education Leniency/Strictness Leniency: Giving undeserved high ratings Strictness: Being unduly critical of employee’s work performance Worst situation is when firm has both lenient and strict managers and does nothing to level inequities 8-42

43. Copyright © 2014 Pearson Education Central Tendency Error occurs when employees are incorrectly rated near average or middle of scale May be encouraged by some rating scale systems requiring evaluator to justify extremely high or extremely low ratings 8-43 Dr. Mahnmood AsadMGT430

44. Copyright © 2014 Pearson Education Recent Behavior Bias Employee’s behavior often improves and productivity rises several days or weeks before scheduled evaluation Natural for rater to remember recent behavior more clearly than past actions Necessary to maintain records of performance 8-44 Dr. Mahnmood AsadMGT430

45. Copyright © 2014 Pearson Education Personal Bias (Stereotyping) Managers allow individual differences such as gender, race, or age to affect ratings Effects of cultural bias, or stereotyping, can influence appraisals Other factors – Example: Mild-mannered employees may be appraised more harshly, simply because they do not seriously object to appraisal results 8-45 Dr. Mahnmood AsadMGT430

46. Copyright © 2014 Pearson Education Manipulating the Evaluation Sometimes, managers control every aspect of appraisal process and manipulate the system Example: – A supervisor wants to give pay raise to certain employee, so supervisor may give employee an undeserved high performance evaluation. 8-46 Dr. Mahnmood AsadMGT430

47. Copyright © 2014 Pearson Education Employee Anxiety Evaluation process may create anxiety for appraised employee Opportunities for promotion, better work assignments, and increased compensation may hinge on results 8-47

48. Copyright © 2014 Pearson Education Characteristics of Effective Appraisal System Job-related criteria Performance expectations Standardization Trained appraisers Continuous open communication Performance reviews Due process 8-48 Dr. Mahnmood AsadMGT430

49. Copyright © 2014 Pearson Education Job-Related Criteria Most basic criterion needed in employee performance appraisals Uniform Guidelines and court decisions are clear on this point 8-49 Dr. Mahnmood AsadMGT430

50. Copyright © 2014 Pearson Education Performance Expectations Managers and subordinates must agree on performance expectations in advance of appraisal period If employees clearly understand expectations, they can evaluate own performance and make timely adjustments 8-50 Dr. Mahnmood AsadMGT430

51. Copyright © 2014 Pearson Education Standardization Firms should use same evaluation instrument for all employees in same job category who work for same supervisor 8-51

52. Copyright © 2014 Pearson Education Trained Appraisers Seldom receive training on how to conduct effective evaluations Training should be ongoing Includes how to rate employees and how to conduct appraisal interviews 8-52 Dr. Mahnmood AsadMGT430

53. Copyright © 2014 Pearson Education Continuous Open Communication Employees need to know how well they are performing Good appraisal system provides highly desired feedback on continuing basis Should be few surprises in performance review 8-53 Dr. Mahnmood AsadMGT430

54. Copyright © 2014 Pearson Education Conduct Performance Reviews Special time should be set for formal discussion of employee’s performance Withholding appraisal results is absurd. Performance review allows employees to detect any errors or omissions in appraisal Employee may simply disagree with evaluation and want to challenge it 8-54 Dr. Mahnmood AsadMGT430

55. Copyright © 2014 Pearson Education Due Process Provides employees opportunity to appeal appraisal results Must have procedure for pursuing grievances and having them addressed objectively 8-55

56. Copyright © 2014 Pearson Education Legal Implications Employee lawsuits may result from negative evaluations Unlikely that any appraisal system will be immune to legal challenge 8-56

57. Copyright © 2014 Pearson Education Appraisal Interview Achilles heel of entire evaluation process Scheduling interview Interview structure Use of praise and criticism Employee’s role Concluding interview 8-57 Dr. Mahnmood AsadMGT430

58. Copyright © 2014 Pearson Education Scheduling the Interview Employees typically know when their interview should take place Anxiety tends to increase if their supervisor delays the meeting 8-58 Dr. Mahnmood AsadMGT430

59. Copyright © 2014 Pearson Education Interview Structure Discuss employee’s performance Assist employee in setting goals and personal development plans for next appraisal period Suggesting means for achieving established goals, including support from manager and firm 8-59 Dr. Mahnmood AsadMGT430

60. Copyright © 2014 Pearson Education Conducting Separate Interviews Conduct separate interviews for discussing: 1.Employee performance and development 2.Pay When pay emerges in interview, it tends to dominate conversation Performance improvement then takes a back seat 8-60

61. Copyright © 2014 Pearson Education Use of Praise and Criticism Praise is appropriate when warranted Criticism, even if warranted, is especially difficult to give “Constructive” criticism is often not perceived that way 8-61 Dr. Mahnmood AsadMGT430

62. Copyright © 2014 Pearson Education Employee’s Role Should go through diary or files and make notes of all projects, regardless of their success Information should be on appraising manager’s desk well before review 8-62

63. Copyright © 2014 Pearson Education Concluding the Interview Ideally, employees will leave interview with positive feelings about management, company, job, and themselves Cannot change past behavior; future performance is another matter Interview should end with specific and mutually agreed-upon plans for employee’s development 8-63 Dr. Mahnmood AsadMGT430

64. Copyright © 2014 Pearson Education A Global Perspective: Performance Appraisal versus a Country’s Culture Special problems when translated into different cultural environments Chinese managers often have different idea about what performance is than do Western managers Culture also plays significant role in success and failure of performance appraisal systems in the Middle East 8-64 Dr. Mahnmood AsadMGT430