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.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

3. Learning Objectives
Develop, evaluate, and administer at least four performance appraisal tools.
Explain and illustrate the problems to avoid in appraising performance.
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.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

4. 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.

5. Comparing Performance Appraisal and Performance Management
Evaluating an employee’s current and/or past performance relative to his or her performance standards.
Performance management
The process employers use to make sure employees are working toward organizational goals.

6. Why Performance Management?
Increasing use by employers of performance management reflects:
The necessity in today’s globally competitive industrial environment for every employee’s efforts to focus on helping the company to achieve its strategic goals.

7. An Introduction to Appraising Performance
Why appraise performance?
Appraisals play an integral role in the employer’s performance management process.
Appraisals help in planning for correcting deficiencies and reinforce things done correctly.
Appraisals, in identifying employee strengths and weaknesses, are useful for career planning.
Appraisals affect the employer’s salary raise decisions.

8. The Performance Appraisal Process
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.
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. 
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9. Set effective performance appraisal standards.
Most employees need and expect to know ahead of time on what basis their employer will appraise them. Let’s discuss how you can make this happen.
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10. Employee’s Goals and Performance Standards
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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11. Employee’s Goals and Performance Standards
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 appraise it will be obvious from the job description. For the criteria to appraise, the job description should list the job’s duties or tasks, including how critical each is to the job and how often it’s performed.
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12. Who Should Do the Appraising?
Immediate supervisor
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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13. Techniques for Appraising Performance
The graphic rating scale method is the 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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14. Graphic Rating Scale with Space for Comments
Figure 9–3

15. Figure 9–5a
Source:

16. Performance Appraisal Methods (cont’d)
Alternation ranking method
Ranking employees from best to worst on a particular trait, choosing highest, then lowest, until all are ranked.
Paired comparison method
Ranking employees by making a chart of all possible pairs of the employees for each trait and indicating which is the better employee of the pair.

17. Alternation Ranking Scale
Figure 9–6

18. Ranking Employees by the Paired Comparison Method
Note: + means “better than.” − means “worse than.” For each chart, add up the number of 1’s in each column to get the highest-ranked employee.
Figure 9–7

19. Performance Appraisal Methods (cont’d)
Forced distribution method
Similar to grading on a curve; predetermined percentages of ratees are placed in various performance categories.
Example:
15% high performers
20% high-average performers
30% average performers
20% low-average performers
15% low performers

20. Performance Appraisal Methods (cont’d)
Behaviorally anchored rating scale (BARS)
An appraisal method that uses quantified scale with specific narrative examples of good and poor performance.
Developing a BARS:
Generate critical incidents
Develop performance dimensions
Reallocate incidents
Scale the incidents
Develop a final instrument

21. Examples of Critical Incidents for an Assistant Plant Manager
Table 9–1

22. Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skill
Source:Walter C. Borman, “Behavior Based Rating,” in Ronald A. Berk (ed.), Performance Assessment: Methods and Applications (Baltimore, MD: Johns
Hopkins University Press, 1986), p. 103.
Figure 9–9

23. Management by Objectives (MBO)
Involves setting specific measurable goals with each employee and then periodically reviewing the progress made.
Set the organization’s goals.
Set departmental goals.
Discuss departmental goals.
Define expected results (set individual goals).
Performance reviews.
Provide feedback.

24. Computerized and Web-Based Performance Appraisal
Performance appraisal software programs
Keep notes on subordinates during the year.
Electronically rate employees on a series of performance traits.
Generate written text to support each part of the appraisal.
Electronic performance monitoring (EPM)
Having supervisors electronically monitor the amount of computerized data an employee is processing per day, and thereby his or her performance.

25. Advantages and Disadvantages of Appraisal Tools
Table 9–3

26. Potential Rating Scale Appraisal Problems
Unclear standards
An appraisal that is too open to interpretation.
Halo effect
Occurs when a supervisor’s rating of a subordinate on one trait biases the rating of that person on other traits.
Central tendency
A tendency to rate all employees the same way, such as rating them all average.

27. A Graphic Rating Scale with Unclear Standards
Note: For example, what exactly is meant by “good,” “quantity of work,” and so forth?
Table 9–2

28. Potential Rating Scale Appraisal Problems (cont’d)
Strictness/leniency
The problem that occurs when a supervisor has a tendency to rate all subordinates either high or low.
Bias
The tendency to allow individual differences such as age, race, and sex to affect the appraisal ratings employees receive.

29. How to Avoid Appraisal Problems
Learn and understand the potential problems, and the solutions for each.
Use the right appraisal tool. Each tool has its own pros and cons.
Train supervisors to reduce rating errors such as halo, leniency, and central tendency.
Have raters compile positive and negative critical incidents as they occur.

30. 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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31. 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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32. The Appraisal Interview
Types of appraisal interviews
Satisfactory—Promotable: This 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.
Unsatisfactory—Uncorrectable

33. Managing the Appraisal Interview
How to conduct the appraisal interview
Objective data
Don’t get personal
Encouragement
Agreement
Supervisors face four types of appraisal interviews, each with its unique objectives:
Satisfactory – Promotable This 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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34. The Appraisal Interview (cont’d)
How to handle a defensive subordinate
Recognize that defensive behavior is normal.
Never attack a person’s defenses.
Postpone action.
Recognize your own limitations.

35. The Appraisal Interview (cont’d)
How to criticize a subordinate
Do it in a manner that lets the person maintain his or her dignity and sense of worth.
Criticize in private, and do it constructively.
Avoid once-a-year “critical broadsides” by giving feedback on a daily basis, so that the formal review contains no surprises.
Never say the person is “always” wrong
Criticism should be objective and free of any personal biases on your part.

36. The Appraisal Interview (cont’d)
How to ensure the interview leads to improved performance
Don’t make the subordinate feel threatened during the interview.
Give the subordinate the opportunity to present his or her ideas and feelings and to influence the course of the interview.
Have a helpful and constructive supervisor conduct the interview.
Offer the subordinate the necessary support for development and change.