1. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 1

2. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 2 Performance Evaluation and Management chapter 9

3. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 3 Performance Management Process by which executives, managers, and supervisors work to align employee performance with the firm’s goals Defines, measures, monitors, and gives feedback Performance evaluation is a crucial part of a firm’s performance management process

4. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 4 Performance Evaluation The activity used to determine the extent to which an employee performs work effectively Informal performance evaluation system Formal performance evaluation system

5. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 5 Communication Legal compliance HRM research Motivation HR and employment planning Development Purposes of Formal Performance Evaluation

6. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 6 Performance Evaluation and the Law Supervisors’ judgments are used in most performance evaluation procedures Bias can exist (intentional or unintentional) U.S. Supreme Court Case: Brito v. Zia Company (1973) Performance evaluation instrument must relate to important elements in the jobs for which employees were being evaluated (validity) Consistent application of evaluations

7. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 7 To provide information that can serve the organization’s goals and that complies with the law, a performance evaluation system must provide accurate and reliable data. This is enhanced if a systematic process is followed.

8. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 8 Six Steps for a Systematic Process: (1 of 2) 1. Establish performance standards for each position and the criteria for evaluation 2. Establish performance evaluation policies on when to rate, how often to rate, and who should rate 3. Have raters gather data on employees’ performance

9. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 9 Six Steps for a Systematic Process: (2 of 2) 4. Have raters (and employees in some systems) evaluate employees’ performance 5. Discuss the evaluation with the employee 6. Make decisions and file the evaluation

10. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 10 Characteristics of Effective Criteria Reliability – a measure of performance must be consistent Relevance – a measure of performance must be related to the actual output of an incumbent Sensitivity – criteria must be able to reflect the difference between high and low performers Practicality – the criteria must be measurable Data collection cannot be inefficient or too disruptive

11. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 11 Who Should Evaluate the Employee? Immediate supervisor Rating by a committee of several supervisors Rating by the employee’s peers (co-workers) Rating by the employee’s subordinates Rating by someone outside the immediate work situation Self-evaluation Rating by a combination of approaches

12. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 12 Positive Features of 360-Degree Appraisal Systems: Multiple perspectives of a person’s performance Ratings can evaluate person based on actual contact and observation Feedback is provided from multiple directions (above, below, and peer) Upward feedback when anonymous, results in full participation Learning about weaknesses and strengths is motivation

13. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 13 Negative Features of 360-Degree Appraisal Systems: Feedback from all sources can be overwhelming Rater can hide in a group of raters and provide harsh evaluations Conflicting ratings can be confusing and frustrating Providing feedback that is constructive requires a plan and well-trained raters Not typically found in organizations

14. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 14 Performance Evaluation Methods Individual Evaluation Methods Multiple-Person Evaluation Methods

15. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 15 Individual Evaluation Methods Graphic Rating Scale Forced Choice Essay Evaluation Critical Incident Technique Checklists and Weighted Checklists Behaviorally Anchored Rating Scales Behavioral Observation Scales

16. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 16 Advantages and Disadvantages of Some Individual Methods of Performance Evaluation Individual MethodsComments Rating ScalesEasy to use, easy to complete, relatively low cost; focuses too much on person instead of on performance. Forced ChoiceSelectively low cost, easy to use; difficult to explain to those evaluated. EssayGood in providing specific feedback if evaluator is a good writer; difficult in making comparisons across those being evaluated. Critical IncidentsTime consuming, must be disciplined to log in incidents, reveals critical behaviors that can be fed back easily. Behavior ScalesDifficult to develop, time consuming, great for providing specific feedback to aid in improving performance.

17. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 17 Multiple-Person Evaluation Methods Ranking Paired Comparison Forced Distribution Management by Objectives

18. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 18 Advantages and Disadvantages of Some Multiple- Person Methods of Performance Evaluation Multiple-Person Methods Comments Ranking and Paired Comparisons Hard to use for providing feedback, good for making comparisons among employees. MBOFocuses on results that are important, sometimes too short-term oriented, does not engage in comparisons among employees.

19. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 19 MBO Program Process (1 of 2) 1. Supervisor and employee conduct meetings to define key tasks of the subordinate and to set a limited number of objectives (goals) 2. Participants set objectives that are realistic, challenging, clear, and comprehensive 3. Supervisor, after consulting with the employee, establishes the criteria for assessing the accomplishment of the objectives

20. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 20 MBO Program Process (2 of 2) 4. Dates for reviewing intermediate progress are agreed upon and used 5. Supervisor and employee make any required modifications in the original objectives 6. Final evaluation by the supervisor is made; counseling meeting is held with employee 7. Objectives for next cycle are set by employee after consulting with supervisor (keeping in mind previous cycle and future expectations)

21. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 21 Problems with the MBO Process Too much paperwork is involved Too many objectives are set, and confusion occurs MBO is forced into jobs where establishing objectives is extremely difficult Failure to tie in MBO results and rewards Too much emphasis on the short term Supervisors are not trained in the MBO process and the mechanics involved Original objectives are never modified MBO is a used as a rigid control device that intimidates rather than motivates

22. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 22 Potential Problems in Performance Evaluation: Opposition to Evaluation System Design and Operating Problems Rater Problems

23. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 23 Employees’ Problems with Performance Evaluation: Employees do not understand the system or its purpose Employees are not work-oriented Evaluation may be below the employee’s expectations

24. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 24 Rater Problems Standards of Evaluation Halo Effect Leniency or Harshness Central Tendency Error “Recency of Events” Error Contrast Effects Personal Bias (stereotyping; “similar to me”)

25. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 25 The Feedback Interview Can be effective if the evaluation information is meaningful, clear, and helpful Feeding back information can be quite stressful if the evaluation is: considered unfair inaccurate poorly designed

26. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc. All rights reserved. 9 - 26 Summary Properly performed, performance evaluation can contribute to: organizational objectives employees’ development and satisfaction These are goals of performance management