2. Performance Management Systems
Chapter 11

3. Chapter Overview Understanding Performance
Performance Appraisal: Definition and Uses
Performance Appraisal Methods
Potential Errors in Performance Appraisals
Overcoming Errors in Performance Appraisals
Providing Feedback through the Appraisal Interview
Developing Performance Improvement Plans
Performance Appraisal and the Law
Summary of Learning Objectives
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4. Performance Management Systems
Performance management systems that are directly tied to an organization’s reward system
Provide a powerful incentive for employees to work diligently and creatively toward achieving organizational objectives
When properly designed and implemented, performance management systems let employees
Know how well they are presently performing
Clarify what needs to be done to improve performance
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5. Understanding Performance
Degree of accomplishment of the tasks that make up an employee’s job
Reflects how well an employee is fulfilling requirements of a job
Often confused with effort, which refers to energy expended, performance is measured in terms of results
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6. Determinants of Performance
Job performance is net effect of an employee’s effort as modified by abilities and role (or task) perceptions
Performance in a given situation can be viewed as resulting from interrelationships among effort, abilities, and role perceptions
Effort – Results from being motivated
Refers to amount of energy (physical and/or mental) an individual uses in performing a task
Abilities – Are personal characteristics used in performing a job
Usually do not fluctuate widely over short periods of time
Role (task) perceptions – Refer to direction(s) in which individuals believe they should channel their effort on their jobs
Activities and behaviors people believe are necessary in the performance of their jobs define their role perceptions
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7. Determinants of Performance
To attain an acceptable level of performance, a minimum level of proficiency must exist in each of the performance components
Level of proficiency in any one performance component can place an upper boundary on performance
If employees put forth tremendous effort and have excellent abilities, but lack a clear understanding of their roles, performance will probably not be good in the eyes of their managers
Much work will be produced, but it will be misdirected
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8. Determinants of Performance
An employee who puts forth a high degree of effort and understands the job but lacks ability probably will rate low on performance
An employee who has a good ability and understanding of the role but is lazy and expends little effort
Employee’s performance will likely be low
An employee can compensate up to a point for a weakness in one area by being above average in one or both of the other areas
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9. Environmental Factors as Performance Obstacles
Other factors beyond the control of the employee can also stifle performance
Such obstacles are sometimes used merely as excuses, they are very real and should be recognized
Common potential performance obstacles include
Employee’s lack of time or conflicting demands upon it
Inadequate work facilities and equipment
Restrictive policies that affect the job
Lack of cooperation from others
Type of supervision
Temperature, lighting, noise, machine or equipment pacing
Shifts
Even luck
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10. Environmental Factors as Performance Obstacles
Environmental factors should be viewed not as direct determinants of individual performance but as modifying the effects of effort, ability, and direction
Poor ventilation or worn-out equipment may well affect the effort an individual expends
Unclear policies or poor supervision can also produce misdirected effort
A lack of training can result in underutilized abilities
One of management’s greatest responsibilities is to provide
Employees with adequate working conditions
A supportive environment to eliminate or minimize performance obstacles
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11. Responsibilities of the Human Resource Department in Performance Management
Responsibilities of the human resource department are
Design the performance management system and select the methods and forms to be used for appraising employees
Train managers in conducting performance appraisals
Maintain a reporting system to ensure that appraisals are conducted on a timely basis
Maintain performance appraisal records for individual employees
Responsibilities of managers in performance appraisals are to
Evaluate the performance of employees
Complete the forms used in appraising employees and return them to the human resource department
Review appraisals with employees
Establish a plan for improvement with employees
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12. Performance Appraisal: Definition And Uses
Process of evaluating and communicating to an employee how he or she is performing the job and establishing a plan for improvement
When properly conducted
They let employees know how well they are performing
Influence their future level of effort and task direction
Effort should be enhanced if good performance is positively reinforced
Task perception of the employee should be clarified through establishing a plan for improvement
Common uses of performance appraisals is for making administrative decisions relating to promotions, firings, layoffs, and merit pay increases
An employee’s present job performance is often the most significant consideration for determining whether to promote the person
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13. Performance Appraisal: Definition And Uses
Performance appraisal information can
Provide needed input for determining both individual and organizational training and development needs
These data can then be used to help determine the organization’s overall training and development needs
For individual employees, completed performance appraisal should include a plan outlining specific training and development needs
Performance appraisals can also be used to encourage performance improvement
Used as a means of communicating to employees how they are doing
Suggesting needed changes in behavior, attitude, skills, or knowledge
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14. Performance Appraisal: Definition And Uses
Feedback clarifies for employees manager’s job expectations
Feedback must be followed by coaching and training
Information from performance appraisals can be used as
Input to validation of selection procedures
Input to human resource planning
How often to conduct performance appraisals
No real consensus on how frequently performance appraisals should be done
In general, as often as necessary to let employees know
What kind of job they are doing
If performance is not satisfactory, measures that must be taken for improvement
It is recommended that informal performance appraisals be conducted two or three times a year in addition to an annual formal performance appraisal
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15. Performance Appraisal Methods
Whatever method of performance appraisal an organization uses, it must be job related
Prior to selecting a performance appraisal method, an organization must conduct job analyses and develop job descriptions
Methods of performance appraisals include
Management by objectives (MBO)
Multi-rater assessment (or 360-degree feedback)
Graphic rating scale
Behaviorally anchored rating scale (BARS)
Critical-incident appraisal
Essay appraisal
Checklist
Forced-choice rating
Ranking methods
Work standards approach
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16. Management by Objectives (MBO)
More commonly used with professional and managerial employees
Consists of
Establishing clear and precisely defined statements of objectives for the work to be done by an employee
Establishing an action plan indicating how these objectives are to be achieved
Allowing employee to implement the action plan
Measuring objective achievement
Taking corrective action when necessary
Establishing new objectives for the future
Other names for MBO include management by results, performance management, results management, and work planning and review program
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17. Management by Objectives (MBO)
For this system to be successful, several requirements must be met
Objectives should be quantifiable and measurable
Objectives whose attainment cannot be measured or at least verified should be avoided where possible
Objectives should also be challenging yet achievable, and they should be expressed in writing and in clear, concise, unambiguous language
Employees participate in objective-setting process
Employee’s active participation is also essential in developing the action plan
Objectives and action plan must serve as a basis for regular discussions between manager and employee concerning employee’s performance
Provide an opportunity for manager and employee to discuss progress and modify objectives when necessary
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18. Examples of How to Improve Work Objects
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19. Typical Areas of Supervisory Objectives
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20. Multi-Rater Assessment (or 360-Degree Feedback)
Managers, peers, customers, suppliers, or colleagues are asked to complete questionnaires on the employee being assessed
Person assessed also completes a questionnaire
Questionnaires are generally lengthy. Typical questions are:
“Are you crisp, clear, and articulate? Abrasive? Spreading yourself too thin?”
Human resources department provides results to the employee, who in turn gets to see how his or her opinion differs from those of the group doing the assessment
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21. Graphic Rating Scale
Requires rater to indicate on a scale where the employee rates on factors such as
Quantity of work
Dependability
Job knowledge
Cooperativeness
Rating scales include both numerical ranges and written descriptions
Potential weakness
Evaluators are unlikely to interpret written descriptions in the same manner due to differences in background, experience, and personality
Choice of rating categories
It is possible to choose categories that have little relationship to job performance
Omit categories that have a significant influence on job performance
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22. Sample Items on a Graphic Rating Scale
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23. Behaviorally Anchored Rating Scale (BARS)
Determines an employee’s level of performance based on whether or not certain specifically described job behaviors are present
Focus of BARS is not on performance outcomes but on functional behaviors demonstrated on the job
Assumption is that these functional behaviors will result in effective job performance
Job dimensions – Means broad categories of duties and responsibilities that make up a job
Each job is likely to have several job dimensions, and separate scales must be developed for each
Scale values – Define specific categories of performance
Anchors – Specific written statements of actual behaviors that, when exhibited on the job, indicate the level of performance on the scale opposite that particular anchor
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24. Behaviorally Anchored Rating Scale (BARS)
Rating performance using a BARS requires
Rater to read list of anchors on each scale to find the group of anchors that best describe the employee’s job behavior during the period being reviewed
Scale value opposite the group of anchors is then checked. Process is followed for all the identified dimensions of the job
Total evaluation combines the scale values checked for all job dimensions
BARSs are normally developed following these steps:
Managers and job incumbents identify relevant job dimensions for the job
Managers and job incumbents write behavioral anchors for each job dimension
As many anchors as possible should be written for each dimension
Managers and job incumbents reach consensus concerning scale values to be used and grouping of anchor statements for each scale value
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25. Behaviorally Anchored Rating Scale (BARS)
Advantages
BARSs are developed through active participation of both managers and job incumbents
Anchors are developed from observations and experiences of employees who actually perform the job
Increases the likelihood that the method will be accepted
BARSs can be used to provide specific feedback concerning an employee’s job performance
Drawbacks
Takes considerable time and commitment to develop
Separate forms must be developed for different jobs
From a technical point of view, BARS is a graphic rating scale that was developed to help overcome errors in performance appraisals
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26. Example of a Behaviorally Anchored Rating Scale
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27. Critical-Incident Appraisal
Rater keeps a written record of incidents that illustrate both positive and negative employee behaviors
Rater then uses these incidents as a basis for evaluating the employee’s performance
Incidents recorded should involve job behaviors illustrating both satisfactory and unsatisfactory performance of employee being rated
Drawback
Rater is required to jot down incidents regularly, which can be burdensome and time-consuming
Definition of a critical incident is unclear and may be interpreted differently by different people
Method may lead to friction between manager and employees when employees believe manager is keeping a “book” on them
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28. Essay Appraisal
Rater prepares a written statement describing an individual’s strengths, weaknesses, and past performance
Requires that evaluation describe an employee’s performance in written narrative form
Instructions are often provided as to the topics to be covered
Typical essay appraisal question might be
“Describe, in your own words, this employee’s performance, including quantity and quality of work, job knowledge, and ability to get along with other employees.”
“What are the employee’s strengths and weaknesses?”
Drawback
Their length and content can vary considerably, depending on rater
Essay appraisals are difficult to compare
Writing skill of appraiser can also affect appraisal
It is possible to use a critical incident method to support essay methods however
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29. Checklist
Rater answers with a yes-or-no a series of questions about the behavior of the employee
Checklist can also assign varying weights to each question
Normally, human resource department keeps the scoring key for the checklist method
Evaluator is generally not aware of weights associated with each question
Drawbacks
Raters can see positive or negative connotation of each question, which introduces bias
It is time-consuming to assemble questions for each job category
Separate listing of questions must be developed for each job category
Checklist questions can have different meanings for different raters
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30. Sample Checklist Questions
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31. Forced-Choice Rating
Requires rater to rank a set of statements describing how an employee carries out the duties and responsibilities of the job
Statements are normally weighted
Rater generally does not know the weights
After rater ranks all the forced-choice statements, human resource department applies weights and computes a score
Attempts to eliminate evaluator bias by forcing rater to rank statements that are seemingly indistinguishable or unrelated
Drawbacks
Been reported to irritate raters, who feel they are not being trusted
Results of forced-choice appraisal can be difficult to communicate to employees
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32. Sample Set of Forced-Choice Statements
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33. Ranking Methods
Performance of an employee is ranked relative to the performance of others
Three of the more commonly used ranking methods are
Alternation
Paired comparison
Forced distribution
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34. Alternation Ranking
Lists names of employees to be rated on the left side of a sheet of paper
Rater chooses most valuable employee on the list, crosses that name off the left-hand list, and puts it at the top of the column on the right-hand side of the paper
Appraiser then selects and crosses off name of least valuable employee from left-hand column and moves it to bottom of right-hand column
Rater repeats this process for all names on the left-hand side of the paper
Resulting list of names in right-hand column gives a ranking of employees from most to least valuable
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35. Paired Comparison Ranking
Best illustrated with an example
Suppose a rater is to evaluate six employees; their names are listed on the left side of a sheet of paper
Evaluator then compares first employee with second employee on a chosen performance criterion, such as quantity of work
If he or she believes the first employee has produced more work than second employee, a check mark is placed by the first employee’s name
Rater then compares the first employee to the third, fourth, fifth, and sixth employee on the same performance criterion, placing a check mark by the name of employee who produced most work in each paired comparison
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36. Paired Comparison Ranking
Process is repeated until each employee has been compared to every other employee on all of the chosen performance criteria
Employee with most check marks is considered to be best performer
Employee with fewest check marks is lowest performer
Drawback
It becomes unwieldy when comparing more than five or six employees
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37. Force Distribution
Requires rater to compare performance of employees and place a certain percentage of employees at various performance levels
Assumes performance level in a group of employees will be distributed according to a bell-shaped, or “normal,” curve
Drawback
In small groups of employees, a bell-shaped distribution of performance may not be applicable
Even where distribution may approximate a normal curve, it is probably not a perfect curve
This means some employees probably will not be rated accurately
Ranking methods differ dramatically from other methods in that one employee’s performance evaluation is a function of performance of other employees in the job
Civil Service Reform Act does not permit use of ranking methods for federal employees
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38. Forced-Distribution Curve
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39. Work Standards
Involves setting a standard or an expected level of output and then comparing each employee’s level to the standard
Most frequently used for production employees and is a form of goal setting for these employees
Work standards should reflect average output of a typical employee
Attempt to define a fair day’s output
Advantage
Performance review is based on highly objective factors
To be effective, affected employees must view standards as being fair
Drawback
Lack of comparability of standards for different job categories
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40. Frequently Used Methods for Setting Work Standards
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41. Potential Errors In Performance Appraisals
Leniency
Occurs when a manager’s ratings are grouped at the positive end instead of being spread throughout the performance scale
Central tendency
Tendency of a manager to rate most employees’ performance near the middle of the performance scale
Recency
Tendency of a manager to evaluate employees on work performed most recently, usually one or two months prior to evaluation
These errors make it difficult to compare ratings from different raters
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42. Potential Errors In Performance Appraisals
Halo effect
Occurs when a rater allows a single prominent characteristic of an employee to influence his or her judgment on each separate item in the performance appraisal
Results in employee receiving approximately same rating on every item
Personal preferences, prejudices, and biases can also cause errors in performance appraisals
Managers with biases or prejudices tend to look for employee behaviors that conform to their biases
Appearance, social status, dress, race, and sex have influenced many performance appraisals
Managers have also allowed first impressions to influence later judgments of an employee
People tend to retain these impressions even when faced with contradictory evidence
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43. Overcoming Errors In Performance Appraisals
One approach to overcoming errors is to make refinements in the design of appraisal methods
One could say that forced-distribution method of performance appraisal attempts to overcome errors of leniency and central tendency
Behaviorally anchored rating scales are designed to reduce halo, leniency, and central tendency errors as they provide managers with specific examples of performance against which to evaluate
It does not appear likely that refining appraisal instruments will totally overcome errors in performance appraisals
Since refined instruments frequently do not overcome all the obstacles
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44. Overcoming Errors In Performance Appraisals
Another approach to overcoming errors is to improve the skills of raters
Suggestions on specific training to be given to evaluators, although vague, normally emphasize that evaluators should be trained to observe behavior more accurately and judge it more fairly
More research is needed before a definitive set of topics for rater training can be established
At a minimum, raters should receive training in
Performance appraisal method(s) used by company
Importance of rater’s role in total appraisal process
Use of performance appraisal information
Communication skills necessary to provide feedback to employee
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45. Providing Feedback Through the Appraisal Interview
Unless feedback interview is properly conducted, it can and does result in an unpleasant experience for both manager and employee
To prepare for it, the manager should answer the following questions:
What results should the interview achieve?
What good contributions is the employee making?
Is the employee working up to his or her potential?
Is the employee clear about the manager’s performance expectations?
What training does the employee need to improve?
What strengths does the employee have that can be built on or improved?
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46. Providing Feedback Through the Appraisal Interview
In addition, the manager should remember several basic guidelines in conducting the interview:
Manager must know the employee’s job description
Evaluation must be based on employee’s performance and not on his or her personality
Manager must be positive and build on the employee’s strengths
Manager must be candid and specific
Manager must listen to the employee as well as presenting her or his own views
Manager must elicit employee feedback on how to improve performance
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47. Factors Influencing Success or Failure of Appraisal Interviews
More the employees are allowed to participate in the appraisal process, the more
Satisfied they will be with the appraisal interview
Satisfied they will be with the manager
Likely they will be to accept and meet performance improvement objectives
More a manager uses positive motivational techniques, the more satisfied the employee is likely to be with appraisal interview and with manager
Manager and employee mutually setting specific performance improvement objectives results in better performance than when managers use a general discussion or criticism
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48. Factors Influencing Success or Failure of Appraisal Interviews
Discussing and solving problems hampering employee’s current job performance improve employee’s performance
More the thought and preparation that both manager and employee devote before the appraisal interview, greater the benefits of the interview
More the employee perceives that performance appraisal results are tied to organizational rewards, the more beneficial the interview will be
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49. Developing Performance Improvement Plans
Step of including a performance improvement plan in a completed performance appraisal is often ignored
Managers must recognize that an employee’s development is a continuous cycle of
Setting performance goals
Providing training necessary to achieve goals
Assessing performance related to accomplishing goals
Setting new, higher goals
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50. Developing Performance Improvement Plans
Performance improvement plan consists of the following components:
Where are we now?
Answered in the performance appraisal process
Where do we want to be?
Requires evaluator and person being evaluated to mutually agree on areas that can and should be improved
How does the employee get from where he or she is now to where he or she wants to be?
Critical to performance improvement plan
Manager and employee must agree upon specific steps to be taken
May include training employee to improve his or her performance
May include how evaluator will help employee achieve performance goals
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51. Performance Appraisal and the Law
Title VII of the Civil Rights Act permits use of a bona fide performance appraisal system
Generally not considered to be bona fide when their application results in adverse effects on minorities, women, or older employees
Number of court cases have ruled that performance appraisal systems used by organizations were discriminatory and not job related
Brito et al. v. Zia Company
Mistretta v. Sandia Corporation
Chamberlain v. Bissel, Inc.
Price Waterhouse v. Hopkins
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52. Performance Appraisal and the Law
Some suggestions that have been offered for making performance appraisal systems more legally acceptable include
Deriving the content of the appraisal system from job analyses
Emphasizing work behaviors rather than personal traits
Ensuring that the results of appraisals are communicated to employees
Ensuring that employees are allowed to give feedback during the appraisal interview
Training managers in how to conduct proper evaluations
Ensuring that appraisals are written, documented, and retained
Ensuring that personnel decisions are consistent with the performance appraisals
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53. Summary of Learning Objectives
Define performance
Define performance appraisal
Explain management by objectives
Describe multi-rater assessment
Describe the graphic rating scale
Explain critical-incident appraisal
Describe essay appraisal
Describe the checklist method of performance appraisal
Explain the forced-choice method of performance appraisal
Describe the work standards approach to performance appraisal
Define leniency, central tendency, recency, and the halo effect
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