1. Performance Management and Appraisal9
Performance Management and Appraisal
This chapter gives an overview of the performance appraisal process and the different tools and methods available. The main topics covered include the performance management process, appraisal methods, appraisal performance problems and solutions, and the appraisal interview.
Despite lots of attention, money, and effort, performance appraisals remain an area with which few managers or employees are satisfied.
The following questions are worth considering with respect to why some managers and employees are dissatisfied.
Is it just that we don't have a good enough system yet?
Is there an intrinsic problem with performance appraisals?
Is it just human nature to dislike them? 
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2. Learning Objectives
Define performance management and discuss how it differs from performance appraisal.
Describe the appraisal process.
Set effective performance appraisal standards.
At the conclusion of this chapter, you will be able to:
Define performance management and discuss how it differs from performance appraisal.
Describe the appraisal process.
Set effective performance appraisal standards.
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3. Learning Objectives
Develop, evaluate, and administer at least four performance appraisal tools.
Explain and illustrate the problems to avoid in appraising performance.
Discuss the pros and cons of using different raters to appraise a person’s performance.
Perform an effective appraisal interview.
At the conclusion of this chapter, you will be able to:
Develop, evaluate, and administer at least four performance appraisal tools.
Explain and illustrate the problems to avoid in appraising performance.
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4. Define performance management and discuss how it
differs from performance appraisal.
Performance management has to do with creating an organizational system that is fair, effective, and widely understood by all. The goal of the system is to support the strategic aims of the firm by establishing a valid and reliable process connecting the employees to it.
Performance appraisal involves :
setting work standards,
assessing actual performance relative to those standards, and
providing feedback to the employee.
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5. Performance Appraisal
Performance Appraisal = Evaluating a employee’s current and/or past performance relative to his or her performance standards.
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6. 3-Step Performance Appraisal Process
Set work standards
Assess the employee actual performance relative to those standards
Provide feedback to employee with the aim of helping to eliminate performance deficiencies.
Appraising performance is important for several reasons. Many employers still base pay and promotions on employee appraisals. Appraisals play an integral role in the employer's performance management process. The appraisal lets the boss and subordinate develop a plan for correcting any deficiencies while reinforcing those things the employee does correctly.Appraisals are a useful career planning tool. Finally, appraisals play a role in identifying training and development needs. 
Aligning the employee’s efforts with the job’s standards should be a continuous process. When you see a performance problem, the time to take action is immediately. Similarly, when someone does something well, the best reinforcement comes immediately, not six months later.
Performance management includes continuously adjusting how an organization and its team members do things. Team members who need coaching and training receive it, and procedures that need changing are changed.
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7. Why appraise Performance?
Human Resources Management 12e Gary Dessler
Why appraise Performance?
Because: 1 2
Is basis for pay and promotion decisions. 3
Plays an integral role in performance management. 4
Helps in correcting deficiencies and reinforcing good performance.
Appraisals have several purposes that relate both to the appraised employee and the organization.
Is useful in career planning.
Point No. 5?
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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

8. Performance Management
The continuous process of identifying, measuring and developing the performance of individuals and teams and aligning their performance with the organization’s goals.
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9. Performance Appraisal vs. Performance Management
Continuous feedback
Strategically related performance criteria
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10. Review Pay and promotions Planning Career planning
Training and development
Ongoing feedback
Teamwork and change
Employers frequently use (end employees have come to expect) their pay and promotions are determined by their appraisals. Improvement and career development planning also originates with an effective appraisal system. In addition, training and development activities are based on the appraisal system. Finally, providing continuous feedback and making improvements to how employees and employers do things contributes to organizational success.
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11. Set effective performance appraisal standards.
Most employees need and expect to know ahead of time on what basis their employerwill appraise them. Let’s discuss how you can make this happen.
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12. Defining the Employee’s Goals and Work Standards
Human Resources Management 12e Gary Dessler
Defining the Employee’s Goals and Work Standards
Set SMART goals
Assign challenging/ doable goals
Assign specific goals
Guidelines for Effective Goal Setting
Assign measurable goals
Encourage participation
Managers should appraise employees based on previously assigned criteria (goals and standards) that they are expected to achieve, such as “add 10 new customers next year.”
At the heart of performance management is the idea that employees’ efforts should be goal directed. Such a process involves clarifying expectations and quantifying them by setting measurable standards for each objective. Goals should be:
specific
measurable
challenging but attainable
relevant and timely
Finally, employees should always have the opportunity to have meaningful input into the goals they are to achieve.
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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

13. Employee’s Goals and Performance Standards
Basing appraisal standards on required competencies
The role of job descriptions
Competencies are often arranged according to the basic technical, motor, intellectual, and other skills needed to be successful in a job. In addition, the minimum level of each skill needed should be specified.
Ideally, what to appraise and how to appraiseit will be obvious from the job description. For the criteria to appraise, the jobdescription should list the job’s duties or tasks, including how critical each is to thejob and how often it’s performed.
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14. Who Should Do the Appraising?
Peer appraisals
Rating committees
Self-ratings
Appraisal by subordinates
360-degree feedback
Who should do the appraising? The immediate supervisor is usually in the best position to observe and evaluate the subordinate’s performance. He or she also is typically responsible for that person’s performance.
Peer appraisals are becoming more popular with firms using self-managing teams.
Rating committees consist of multiple raters, typically the employee’s immediate supervisor and three or four other supervisors.
Self-ratings tend to be higher than supervisor or peer ratings although input from the subordinate is always to be encouraged.
Appraisal by subordinates is also known as upward feedback. In this instance, subordinates anonymously rate their supervisor’s performance.
360-degree feedback has become more widely used. Ratings are collected from the employee’s supervisors, subordinates, peers, and occasionally, internal or external customers. The best advice is that firms should carefully assess costs, train those giving feedback thoroughly, and not rely solely on 360-degree feedback.
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15. Performance Appraisal Methods
Human Resources Management 12e Gary Dessler
Performance Appraisal Methods
Appraisal Methodologies 1 6 3 2 8
Graphic rating scale 7
Narrative forms 4 9
Alternation ranking
Behaviorally anchored rating scales (BARS) 5 10
Paired comparison
Management by objectives (MBO)
Forced distribution
Computerized and Web-based performance appraisal
Appraising performance requires choosing an appraisal tool, form, or methodology that provides an effective means for comparing a subordinate’s actual perfo
The Alternation Ranking Method ranks employees from best to worst on a specific trait, choosing highest, then lowest, until all are ranked.
The Paired Comparison Method involves ranking employees by making a chart of all possible pairs of employees for each trait. The manager then indicates which one is the better employee of the pair.
Forced Distribution Method – Predetermined percentages of employee ratings are placed in various performance categories, similar to grading on a curve.
Critical Incident Method – A supervisor keeps a record of uncommonly good and/or undesirable examples of an employee’s work-related behavior. The supervisor then reviews the record with the employee at predetermined times.
The Narrative Forms method involves rating the employee’s performance for each performance factor needed on the job. Written examples and an improvement plan is provided. The process then aidsthe employee in understanding where his/her performance was good or bad focusing on problem solving.
Behaviorally Anchored Rating Scales (BARS) is amethod that combines the benefits of narratives, critical incidents, and quantified scales. It does so by anchoring a scale with specific behavioral examples of good or poor performance. The advantages of BARS include accuracy, clearer standards, feedback, independent dimensions, and consistency.
rmance to the standards for his or her job.
Mixed Standard Scales are similar to BARS but generally list just three behavioral examples or standards for each of the threeperformance dimensions.
Management by Objectives (MBO) – The manager sets specific measurable goals with each employee and then periodically discusses the employee’s progress toward them. The process consists of six steps:
set organizational goals
set departmental goals
discuss
define expected results
conduct performance reviews
provide feedback
A computerized and web-based performance appraisal approachgenerally enables managers to keep notes on subordinates during the year. It allows employee ratings on a series of performance traits, and then generates text to support each part of the appraisal.
Electronic Performance Monitoring use computer network technology to allow managers access to their employees’ computers and telephones.
Note, however, the most effective appraisal forms often merge several approaches
Critical incident
Merged methods
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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

16. Techniques for Appraising Performance
Graphic rating scale method
What to rate?
The graphic rating scale method isthe simplest and most popular performance appraisal technique. First, a scale is used to list a number of traits and a range of performance for each. Then the employee is rated by identifying the score that best describes his/her performance level for each trait.
Managers must decide which job performance aspects to measure. Such aspects include generic dimensions, actual job duties, or behaviorally recognizable competencies.
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17. Human Resources Management 12e Gary Dessler
FIGURE 9–2 Sample Graphic Rating Performance Rating Form
Figure 9-2 shows one graphic rating scale. A graphic rating scale lists traits (such as “quality and reliability” or “teamwork”) and a range of performance values (from “unsatisfactory” to “outstanding,” or “below expectations” to “role model”) for each trait.
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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

18. Human Resources Management 12e Gary Dessler
TABLE 9–3 Important Advantages and Disadvantages of Appraisal Tools
Tool
Advantages
Disadvantages
Graphic rating scale
Simple to use; provides a quantitative rating for each employee.
Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems.
BARS
Provides behavioral “anchors.” BARS is very accurate.
Difficult to develop.
Alternation ranking
Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales.
Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent.
Forced distribution method
End up with a predetermined number or % of people in each group.
Employees’ appraisal results depend on your choice of cutoff points.
Critical incident method
Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis.
Difficult to rate or rank employees relative to one another.
MBO
Tied to jointly agreed-upon performance objectives.
Time-consuming.
Use the right appraisal tool—or combination of tools. Each has its own pros and cons. For example, the ranking method avoids central tendency but can cause bad feelings when employees’ performances are in fact all “high.” Table 9-3 summarizes each tool’s pros and cons.
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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

19. Explain and illustrate the problems to avoid in
appraising performance.
As we said, few things managers do are fraught with more peril than appraisingsubordinates’ performance.We now turn to appraisal problems and how to solvethem, and to several other appraisal issues.
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20. Dealing with Performance Appraisal Problems
Human Resources Management 12e Gary Dessler
Dealing with Performance Appraisal Problems
Unclear standards
Leniency or strictness
Halo effect
Potential Rating Scale Appraisal Problems
Central tendency
Bias
Graphic-type rating scales in particular are susceptible to several problems: unclear standards, halo effect, central tendency, leniency or strictness, and bias.
If standards are unclear, ambiguous traits and degrees of merit can result in an unfair appraisal.
The influence of a rater’s general impression on ratings of specific qualities is known as the halo effect.
Central tendency occurs when supervisors stick to the middle of the rating scales, thus rating everyone average.
Leniency or strictness occurs if supervisors have atendency to rate everyone either high or low.
Recency effectsinvolve letting what the employee has done recently blind the manager to the employee’s performance over the entire year.
Bias is a tendency to allow individual differences such as age, race, and sex affect employee appraisal ratings.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

21. Unclear Standards Eg. The use of graphic-type rating scale.
May result in unfair appraisals due to traits and degree of merits are ambiguous.
How to solve? – include descriptive phrases.
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22. Human Resources Management 12e Gary Dessler
TABLE 9–2 A Graphic Rating Scale with Unclear Standards
Table 9-2 illustrates the unclear standards problem. This graphic rating scale seems objective. However, it would probably result in unfair appraisals, because the traits and degrees of merit are ambiguous.
The best way to fix this problem is to include descriptive phrases that define or illustrate each trait.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

23. Halo Effect
It is the problem that occurs when a supervisor’s rating of a subordinate on one trait biases the rating of that person on other traits.
Eg. SV often rate unfriendly employees lower on all traits.
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24. Central Tendency
A tendency to rate all employees the same way, such as rating them all average.
It will distort evaluation and less useful for promotion, salary or counselling purposes.
To solve – use ranking scheme rather than using graphic rating scales
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25. Leniency or Strictness
The problem that occurs when a SV has a tendency to rate all subordinates either high or low.
It is severe with graphic rating scales.
How to solve?
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26. Recency Effects
Letting the employee has done recently blind you to what his or her performance has been over the year.
To solve – To accumulate critical incidents all year long.
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27. Bias
The tendency to allow individual differences such as age, race and sex to affect the appraisal ratings employees receive.
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28. cons of using different
Discuss the pros and
cons of using different
raters to appraise a
person’s performance.
It’s probably safe to say that problems like the ones we just discussed can make an appraisal worse than noappraisal at all. Do five things to have effective appraisals.
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29. Guidelines for Effective Appraisals
Know the problems
Use the right tool
Keep a diary
Get agreement on a plan
Ensure fairness
Appraisals and the law
Appraisals can be more effective by following these five guidelines: 
know the problem
use the right appraisal tool
keep a diary
get agreement on a plan
be fair
The courts have found that inadequate appraisal systems tend to be at the root of illegal discriminatory actions. In addition to being done legally, appraisals should be handled ethically and honestly.
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30. Perform an effective appraisal interview.
To perform an effective appraisal interview, the supervisor and subordinate review the appraisal and make plans to remedy deficiencies and reinforce strengths.
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31. Managing the Appraisal Interview
Types of appraisal interviews
How to conduct the appraisal interview
Objective data
Don’t get personal
Encouragement
Agreement
Supervisors face four types of appraisalinterviews, each with its unique objectives:
Satisfactory – PromotableThis is the easiest interview, the objective is to make development plans.
Satisfactory – Not Promotable This type of interview has the objective of maintaining performance when promotion is not possible.
Unsatisfactory – Correctable This has the objective to plan correction via the development and successful implementation of an action plan.
Prepare for the interview by assembling the data, preparing the employee, and choosing the time and place. Be direct and specific, using objective examples. Don’t get personal. Encourage the person to talk. Plan on reaching agreement.
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32. The Appraisal Interview
Human Resources Management 12e Gary Dessler
The Appraisal Interview
Satisfactory—Promotable
Satisfactory—Not Promotable
Unsatisfactory—Correctable
Unsatisfactory—Uncorrectable
Types of Appraisal Interviews
As a supervisor, you will face four types of appraisal interviews, each with its unique objectives.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

33. Managing the Appraisal Interview
Handling a defensive subordinate
Criticizing a subordinate
The formal written warning
Realistic appraisals
Recognize that defensive behavior is normal. Never attack or belittle a person’s defenses; they are legitimate to him or her. Postpone action as appropriate and recognize your own limitations.
When required, criticize in a private and constructive manner that lets the person maintain his/her dignity and sense of worth.
Written warnings should identify the standards by which the employee is judged, make it clear that the employee was aware of the standard. Then specify any violation of the standard, and show that the employee had an opportunity to correct the behavior. You may place this in his or her permanent personnel file. If circumstances warrant, you may remove the warning after a specified amount of time, say 90 days or longer.
Be realistic and honest when giving an appraisal. It is important that a manager be candid when a subordinate is underperforming. Focus on specifics and allow opportunities to improve.
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34. Handling Defensive Responses
Human Resources Management 12e Gary Dessler
Handling Defensive Responses
How to Handle a Defensive Subordinate 1 2
Recognize that defensive behavior is normal. 3
Never attack a person’s defenses. 4
Postpone action.
Defenses are a familiar aspect of our lives. When a supervisor tells someone his or her performance is poor, the first reaction is often denial. Denial is a defense mechanism. By denying the fault, the person avoids having to question his or her own competence. Others react with anger and aggression. This helps them let off steam and postpones confronting the immediate problem.
Recognize your own limitations.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

35. How to Deliver Criticism
Human Resources Management 12e Gary Dessler
How to Deliver Criticism
How to Criticize a Subordinate 1 3 2
Do it in a manner that lets the person maintain his or her dignity and sense of worth. 4
Criticize in private, and do it constructively. 5
Give daily feedback so that the review has no surprises.
When you must criticize, do so in a manner that lets the person maintain his or her dignity—in private, and constructively.
Never say the person is “always” wrong.
Criticism should be objective and free of biases.
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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

36. Formal Written Warnings
Human Resources Management 12e Gary Dessler
Formal Written Warnings
Purposes of a Written Warning
To shake your employee out of bad habits.
To help you defend your rating, both to your own boss and (if needed) to the courts.
A Written Warning Should:
Identify standards by which employee is judged.
Make clear that employee was aware of the standard.
Specify deficiencies relative to the standard.
Indicate employee’s prior opportunity for correction.
An employee’s performance may be so weak that it requires a formal written warning.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

37. Performance Management
Performance management vs. appraisals
Information technology
Talent management
Appraisal and active management
Segmenting employees
Three concepts distinguish performance management from performance appraisal:
performance management is continuous
it is goal-directed
it is continuously re-evaluating and modifying the way people accomplish their work
Using information technology to support performance management allows management to monitor and correct deficiencies in real time. The process involves:
assigning financial and nonfinancial goals
informing employees of their goals
using an IT system to monitor and assess performance and
taking corrective action
Talent management requires actively managing decisions affecting employees and making certain they have input and a clear understanding of expectations. The traditional practice of allocating pay raises, development opportunities, and other scarce resources across the board does not make for a competitive, successful firm. Today, employers must focus their attention and resources on their company’s mission-critical employees essential to the firm’s strategic needs.
Segmenting employees is a way to emphasize successful management of high potential employees. It may include such activities as identifying top performers and assessing them for promotability, time-frame, and leadership potential. You also may limit the “high potential group in whom the company invests heavily to no more than 10% to 20% of managerial and professional staff.” One company appoints “career stewards” to meet regularly with “emerging leaders.” In all situations, the goal is to focus effort and extra resources by investing in a firm’s future leaders.
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38. Performance Management Summary
Direction sharing
Goal alignment
Ongoing performance monitoring
Ongoing feedback
Coaching and developmental
Recognition and rewards
We can summarize performance management’s six basic elements as follows:
Direction sharing means communicating the company’s goals throughout thecompany. Then translating these into doable departmental, team, and individualgoals.
Goal alignment means having a method that enables managers and employeesto see the link between the employees’ goals and those of their department andcompany.
Ongoing performance monitoring usually includes using computerized systemsthat measure and then progress and exception reports. The reports are based on theperson’s progress toward meeting his or her performance goals.
Ongoing feedback includes both face-to-face and computerized feedback regardingprogress toward goals.
Coaching and developmental support should be an integral part of the feedbackprocess.
6. Recognition and rewards provide the consequences needed to keep the employee’sgoal-directed performance on track.
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39. Review Type of interviews Defensiveness Criticism Warnings Realism
Performance management vs. appraisals
Talent management
For this final learning objective, we have focused our energy on the types of appraisal interviews and how to conduct effective interviews. Using objective data, not getting personal, providing encouragement and obtaining agreement are key ingredients.
We also discussed subordinate defensiveness, handling criticism, using written warnings, and remaining realistic in the process.
Finally, we covered some of the differences between management and appraisals and using information technology as an aid to effective appraisals. Managing talent actively and segmenting employees also provided guidelines for the future.
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