1. Performance Appraisals
Chapter 11
Performance Appraisals

2. Learning Objectives After discussing Chapter 11, students should be able to:
Summarize the key issues involved in defining and measuring employee performance.
Discuss the key components of the four strategies to better understand and measure performance.
Identify the five categories of performance appraisal formats and discuss the issues involved in determining which format would be the most appropriate to use.
Understand how raters process information and identify the major errors that can occur in this process.
Outline the key elements to maximize a good outcome in a performance management system.
Understand the legal issues affecting performance appraisals.
Explain the issues involved in designing merit pay guidelines to link pay to performance.

3. Nature of Performance Appraisals
You can’t manage what you don’t understand.
You don’t understand what you don’t measure.
What gets measured gets done.
What gets measured gets rewarded.

4. Role of Performance Appraisal
Control mechanism for feedback
Allows employee progress to be assessed
Ensures strategy-consistent behavior
Reinforces values of organization
Ensures alignment of individual performance and behavior to
Organization culture
Work systems

5. Purposes of Performance Appraisal
Evaluation
Performance measurement
Compensation
Motivation
Development
Management development
Identification of Potential
Feedback
Human resource planning
Communications
Performance improvement

6. Steps to Improve Performance Appraisal Process
Recognize part of performance is influenced more by work environment and systems than by employee behaviors
Identify strategies to understand and measure job performance better

7. Strategies to Better Understand and Measure Job Performance1
Clearly define job performance 2
Recognize definition of performance and its components is expanding 3
Improve appraisal formats 4
Select the right raters 5
Understand way raters process information and mistakes that may be made 6
Train raters to improve rating skills

8. Strategy to Better Understand and Measure Job Performance
Improve Appraisal Formats

9. Performance Appraisal Approaches
Attribute
graphic rating scales
Comparative
ranking
forced distribution
paired comparison
Behavioral
critical incidents
BARS/BES
BOS
Results
- objective measures
Show me the
performance!

10. Rating Errors Group Errors Individual Errors Central tendency Leniency
Strictness
Individual Errors
Halo/stereotype/similar-to-me
Recency
Contrast

11. Rate each worker using the scales below.
Sample Trait Scales
Rate each worker using the scales below.
Decisiveness:
Very low Moderate Very high
Reliability:
Very low Moderate Very high
Energy:
Very low Moderate Very high
Trait appraisal instruments ask the supervisor to make judgments about traits. Shown here are four traits that are typically found on trait-based rating scales. Trait ratings have been criticized for being much too ambiguous, and leaving the door open for conscious or unconscious bias, In addition, trait ratings are less defensible in court than other types of ratings.
Loyalty:
Very low Moderate Very high

12. Trait Rating Scales Advantages Disadvantages Easy to develop
Inexpensive
Use across different jobs
Disadvantages
Subjective/subject to errors
Not job specific
Difficulty with feedback
Potential legal problems

13. Employee Comparisons Rank order/forced choice/paired comparison
Advantages
Distribution for decision making
No central tendency/leniency
Disadvantages
Halo error/individual errors
Comparing pears to bananas
Feedback/justification
Scale doesn’t provide for amount of differences

14. Behavior-based Scales
Behavior Expectation Scales
(Behaviorally Anchored Rating Scales)
1. Ask managers for critical incidents – behaviors that reflect particularly effective/ineffective behavior
2. Sort into categories and rank within each category
3. Ask for additional incidents to fill in categories
4. Retranslate – ask managers to sort

15. Objective-based Ratings
Profits/production/quality/sales
Advantages
Objective/eliminate rating errors
Disadvantages
Deficient – may omit important factors
Focus on quantifiable/observable results
Situational factors
Feedback
Encourages results at all costs

16. Usage of Performance Evaluation Formats

17. Strategy to Better Understand and Measure Job Performance
Select the Right Raters

18. Select the Right Raters
Supervisors
Peers
Self
Vendors
Subordinates
Customers

19. Strategy to Better Understand and Measure Job Performance
Understand How Raters Process Information and Potential Mistakes

20. The Rating Process Rater observes behavior of a ratee
Rater encodes ratee behavior
Rater stores information in memory
When it is time to evaluate a ratee, rater
Reviews performance dimensions and
Retrieves stored observations to determine relevance to performance dimensions
Information is reconsidered and integrated with other available information as rater decides on final ratings

21. Understand Why Raters Make Mistakes
Errors in rating process
Types of Errors
Errors in observation (attention)
Errors in storage and recall
Errors in actual evaluation

22. Training Raters to Rate More Accurately
Rater-error training
Goal is to reduce psychometric errors by familiarizing raters with their existence
Performance dimension training
Exposes supervisors to performance dimensions used
Performance-standard training
Provides raters with a standard or frame of reference for making appraisal

23. Putting it All Together: The Performance Evaluation Process
Key elements making for a good outcome 1
Need a sound basis for establishing performance appraisal dimensions and scales associated with each dimension 2
Need to involve employees in every stage of developing performance dimensions and building scales 3
Need to ensure raters are trained in use of appraisal system and that all employees understand how system operates 4
Need to ensure raters are motivated to rate accurately 5
Raters should maintain a diary of employee performance 6
Raters should attempt a performance diagnosis to determine if performance problems exist 7
Appraisal process should follow guidelines in Exhibit 11.11

24. Tips on Appraising Employee Performance1
Establish clear sense of direction 2
Provide opportunity for employees to participate in setting goals and standards for performance 3
Provide prompt, honest, and meaningful feedback 4
Allow for immediate and sincere reinforcement 5
Provide coaching and suggestions for improving future performance 6
Provide fair and respectful treatment 7
Allow an opportunity for employees to understand and influence decisions which effect them

25. EEO and Performance Evaluation
Key Issues: Establishing a Performance Appraisal System 1
Provide specific written instructions on how to complete appraisal 2
Incorporate clear criteria for evaluating performance - Performance dimensions should be written, objective, and clear 3
Provide a rational foundation for personnel decisions via adequately developed job descriptions 4
Require supervisors to provide feedback about appraisal results to employees 5
Incorporate a review of performance ratings by higher level supervisors 6
Consistent treatment across raters, regardless of race, color, religion, sex, and national origin should be evident

26. Tying Pay to Subjectively Appraised Performance
How do we get employees to view raises as a reward for performance?
Central issue involving merit pay

27. Pay Increase Guidelines with Low Motivational Impact
Provide equal increases to all employees regardless of performance
General increase
Cost-of-living adjustments
Pay increases based on a preset progression pattern based on seniority

28. Requirements to Link Pay to Performance
Define performance
Behaviors
Competencies
Traits
Specify a continuum describing different levels from low to high on performance measure
Decide how much of a merit increase is given for different levels of performance

29. Requirements to Link Pay to Performance
Define performance
Behaviors
Competencies
Traits
Specify a continuum describing different levels from low to high on performance measure
Decide how much of a merit increase is given for different levels of performance

30. Performance-based Guidelines

31. Designing Merit Guidelines
Four Questions . . . 1
What should the poorest performer be paid as an increase? 2
How much should average performers be paid as an increase? 3
How much should top performers be paid? 4
What should be the size of the percentage increase differential between different levels of performance?

32. Merit grids combine 3 variables:
Merit Pay Grid
Merit grids combine 3 variables:
Level of performance
Distribution of employees within their jobs’ pay ranges
Merit budget increase percentage

33. Promotional Increases as a Pay-for-Performance Tool
Promotion should be accompanied by a salary increase - 8 to 12%
Characteristics of promotional pay increases
Size of increment is approximately double a normal merit increase
Represent a reward to employees for commitment and exemplary performance

34. The Performance Management Process
Establish Expectations
Coaching and Development
Performance Management - Continuous process where employees and managers work together
Feedback
Review
Rewards and Recognition