1. Designing Appraisal Systems
MANA 4328
Dennis C. Veit 1

2. Developing an Appraisal System
GOAL SETTING
What type of work is examined?
Who sets the goals?
How difficult are the goals?
Team vs. individual goals?
What is measured?
TYPE OF APPRAISAL
What rating scale is used?
Includes a self-appraisal?
360 degree feedback?
Uses a forced ranking system?
ADMINISTRATION
How often?
Who conducts appraisals?
How frequent is feedback?
Is there an appeal process?
PERFORMANCE AND PAY
Tied to rewards?
Linked to development?
How are the results used?

3. How to Evaluate? Absolute Measurement
Employees are all measured strictly by absolute performance requirements or standards of their jobs.
Performance compared to set goals
Avoids conflict among workers
May decrease differentiation
Relative (Comparative) Assessment
Employees are measured against other employees .
Ranking allows for comparison of employees but does not shed light on the distribution of employee performance.
“Forced distribution” among workers
May create false distinctions and competition

4. Establish Performance Criteria (Standards)
“What get’s watched get’s done”
Management must carefully select performance criteria as it pertains to achieving corporate goals.
What goes into a “appraisal System”
Traits
Behaviors
Competencies
Goal achievement
Improvement potential

5. Responsibility for Appraisal
It is essential that line managers play a key role from beginning to end.
Several possibilities exist with regard to the person who will actually rate the employee:
Immediate Supervisor
Subordinates
Peers and Team Members
Self Appraisal
Customer Appraisal

6. Appraisal Period How do you establish your time frames for reviews?
There is nothing “Magical” about the period for formal appraisal reviews, in most organizations they occur annually or semi-annually.
However, Managers should be trained that continuous interaction (primarily informally) through coaching and other developmental activities should be continuous
It is a continuous effort built into their everyday job!

7. Appraisal Period (Cont.)
Standards:
Employee’s date of hire
Probation period of 30, 60, 90 days - ( Legal considerations must be involved)
Anniversary date
All at one time
Annual by calendar basis
Spread out over the year

8. Methods to Use Rating Scales Method – Defined factors
Critical Incident Method
Essay Method
Work Standards Method
Ranking Method
Forced Distribution Method
Behaviorally Anchored Rating Scale Method
Results-Based System

9. Problems in Performance Appraisals
Appraiser Discomfort
Lack of Objectivity
Halo / Horns
Leniency / Strictness
Ccntral Tendency
Recent Behavior Bias
Personal Bias (Sterotyping)
Manipulating the Evaluation
Employee Anxiety

10. Uses of Performance Appraisals?
Human Resource Planning
Recruitment and Selection
Training and Development
Career Planning and Development
Compensation Programs
Internal Employee Relations
Assessment of Employee Potential

11. Challenges for Performance Management
Rater errors and bias
Halo
Contrast effects
Range restriction / Central tendency
The influence of liking
Organizational politics
--Rater errors can be addressed by training
Performance appraisal is often a negative, disliked activity and one that seem to elude mastery

12. Challenges for PM (Cont)
Mangers do not like giving them and EE’s don’t like receiving them!
Surveys have shown that 80 percent of workers stated dissatisfaction with their PA process.
Why not eliminate PM’s?
Because:
managers must provide feedback
Encourage performance improvements
Make valid decisions,
Justify terminations
Identify training
Development needs
Defend personnel decisions

13. Acceptability
Performance management systems need to be perceived as fair
Procedural fairness
Interpersonal fairness
Outcome (distributive) fairness
Valid – evaluated based on job related metrics.
Reliable – evaluations should not depend on which manager are conducting the evaluations.

14. When managers have discretion:
They tend to give “Above average” ratings.
They prefer to give uniform ratings regardless of performance.
They tend not to use the ends of the rating scale.

15. PERFORMANCE APPRAISAL PROCESS
Identify Specific Performance Appraisal
Goals
Establish Performance Criteria and communicate to your employee
Examine Work Performed
Appraise Performance
Discuss Appraisal with
employee

16. Appraisal Forms Trait Behavior Results / Outcomes Global / Essay
“Least important elements of the appraisal process”
Appraisal forms are most often contain various styles
Performance focused vs. situation focused appraisal
Approaches to Appraisal Forms
Trait
Behavior
Results / Outcomes
Global / Essay
**Too many PA systems fail because management expects too much from one method and does not determine specifically what it wants the system to accomplish

17. Trait-Based Appraisals
Characteristics that are enduring and general
e.g. “Leadership” “Communication” “Decisiveness”
Competency models vs. Trait-based appraisal
Are the characteristics really related to performance?
Potential Problems
Focus on person rather than performance
May be ambiguous or arbitrary
Poor feedback and goal setting
Poor reliability and validity

18. Behavior-Based Appraisal
Focus on specific behaviors with examples
Behavioral Frequency / Observation Scale (BOS)
Behaviorally Anchored Rating Scales (BARS)
Positives
More valid and reliable
Acceptable to employees
Better for development and improvement

19. Developing Behavioral Scales
Identify critical incidents and behaviors
Sort similar behaviors into dimensions
Validate sorting
Collect data on relationship between behavior and performance
Assign a rating scale
Validate the scale

20. Behavior-Based Appraisal
Potential Problems
Difficult and expensive to develop
Needs to match jobs closely to be effective
Behaviors may be hard to develop and interpret
Emphasizes behaviors (at the expense of others?)
Focuses on behavior rather than results
May be no more reliable and valid than simple scale
Process of developing the rating system is more important than the system itself.

21. Results-Based Appraisal
Uses future results as performance targets
Challenge is setting goals and measures
Can the goals be quantified?
Unique goals for every individual
Appraisal forms tend to be very simple
Still need a rating scale

22. Results-Based Appraisal
“Management by Objectives” or MBO
Linking individual goals with business strategy
Organizational goals flow down to depts. and employees
Focus on planning, action items, and interim reviews
Objectives negotiated and agreed upon by employees

23. Results-Based Appraisal
Focus on results compared to specific goals
Should be clear and unambiguous
Requires alignment of expectations
May promote gaming of the system
Beware of results at any cost and excessive results orientation
Time consuming and needs constant updating

24. How to Judge Appraisal Types
Leads to desired behaviors
Minimizes negative behaviors
Reliability and validity
Perceived fairness (rater and employee)
Performance improvement and employee development
Flexibility and administrative cost

25. MBO and 360* Management by Objectives
Requires the manager to set specific measurable goals with each employee
Perodically discussed his or her progress toward these goals.
Refers to comprehensive, organization wide goal-setting and appraisal program consisting of six main steps:
Set the organization's goals.
Set department goals.
Discuss departmental goals
Define expected results
Performance reviews – measured by results
Provide feedback

26. MBA and 360* (Cont) Problems with MBA:
Setting unclear, un-measurable objectives
MBO is time consuming
Setting objectives with the subordinate sometimes turns into a tug of way with Mgr. asking for more subordinate pulling back.
360 Review - Process where employer collects performance information all around an employee – supervisor/peers/intrenal-external customers—generally for performance purposes – not pay