1. Competencies
Describe general performance appraisal issues and summarize the functions of performance appraisals. (slides 1–6)
Identify and discuss potential problems with performance appraisals. (slides 7–9)
Describe the principal types of rating systems used in appraising employee performance. (slide 10)
Describe commonly used methods of appraising performance. (slides 11–18)

2. Competencies (con’t)
Identify who should evaluate performance, and discuss objectives for programs that train managers and supervisors to conduct performance appraisals. (slide 19–22)
Discuss how often performance appraisals should be conducted, identify legal issues relating to performance appraisals, and summarize keys to developing an effective employee appraisal system. (slide 23–27)

3. Performance Appraisal Issues
Mismanagement of employee performance evaluations can cause resentment and resistance, leading to organizational problems.
While managers should conduct performance appraisals as effectively as possible, they must also realize that both managers and employees are subject to human conditions that affect performance appraisals.
When managers use performance appraisals as a motivational tool, they should remember to focus on the positive aspects of an employee’s performance.
Slide 1

4. Functions of Performance Appraisals
Performance appraisals basically fill two kinds of needs in organizations: improving work performance or making work-related decisions.
The primary purpose of an appraisal intended to provide feedback to employees is to reinforce or encourage performance, or to help employees develop in their careers.
Since different appraisals are used for different purposes, appraisals should be designed with a specific purpose in mind.
Slide 2

5. Performance Feedback
One of the most common uses of a performance appraisal is to provide performance feedback, which is typically intended to reinforce or help improve performance.
Various hospitality professionals suggest that performance feedback include:
No surprises
Employee involvement
Primarily objective data
Slide 3

6. Employee Training and Development
Performance appraisals can:
Help identify employees or managers who need additional training.
Help identify employees who are ready to advance.
Be used to determine training needs on a department basis.
Be used to establish career goals or long-term employee development plans.
Slide 4

7. Decision-Making and Evaluation Tool
Performance appraisals:
Provide an effective way to link rewards and discipline to performance.
Provide a basis for compensation, promotion, transfer, grievance, or discipline decisions.
Can be used to measure the effectiveness of training if the employee is evaluated both before and after the training.
Can serve as an evaluation for new policies.
Slide 5

8. Validation of the Selection Process
Performance appraisals:
Provide an excellent opportunity to test the effectiveness of an organization’s selection system.
May help establish the predictive validity, i.e., the extent to which a measurement predicts future behavior, of selection methods.
Slide 6

9. Validity and Reliability Problems
Construct validity; performance appraisals must measure what they claim to measure.
Content validity; performance appraisals must measure the entire issue, not just a portion of it.
Inter-rater reliability; when two or more raters agree on the same rating , inter-rater reliability is high.
Consistency; it is important to look for consistency rather than just focusing on one or two particular points in time.
Slide 7

10. Bias
The following three errors create problems because managers tend to change jobs a lot, thus employees are often rated by new managers, and because the employees’ ratings may depend on who rates them, rather than on their performance.
Leniency errors occur when managers or interviewers rate an employee too positively.
Severity errors occur when managers or interviewers rate employees too severely.
Central tendency errors occur when managers or interviewers rate all or most employees as average.
Slide 8

11. Bias (con’t)
Three more errors common to the performance appraisal process are:
Recency errors, which occur when managers or interviewers base employee ratings primarily on the most recent events or behaviors.
Past anchoring errors, which occur when managers or interviewers rate employees on the basis of previous ratings.
Halo errors, which occur when managers or interviewers rate employees on the basis of a single positive attribute.
Slide 9

12. Principal Appraisal Rating Systems
When developing a performance appraisal system, managers must first determine the type of behavior they will rate. The three principal types of ratings used are:
Trait-based ratings, which are used primarily to assess the personal characteristics of employees.
Behavior-based ratings, which assess employees on their behaviors rather than on personal characteristics.
Results-based ratings, which is focused on measuring the extent to which employees accomplish results.
Slide 10

13. Methods of Appraising Performance
Ranking methods
Behavioral observation scales (BOS)
Forced distribution
Narrative essays
Graphic rating scale
Critical incidents
Behaviorally anchored rating scales (BARS)
Management by objectives (MBO)
Slide 11

14. Ranking Methods
The following ranking methods, which all eventually result in ranking employees from best to worst or first to last:
Simple ranking requires an employer to rank all employees from best to worst, but does not distinguish between different aspects of job responsibilities.
Alternative ranking requires an employer to list each employee on a separate piece of paper and order them from best to last.
Paired comparisons requires an employer to directly compare employees to one another on each job criterion.
Slide 12

15. Forced Distribution
Method in which a manager ranks employees on an exact bell-shaped curve, assuming that:
5% of employees are exceptional
40% of employees are average
15% of employees are below average
10% of employees are outstanding
10% of employees are poor
15% of employees are above average
5% of employees are very poor
Eliminates some leniency and severity problems by creating a central tendency, but can result in dissatisfaction among those who resent being categorized at the low end of the curve.
Slide 13

16. Graphic Rating Scale
Rating system in which appraisers typically rate employees on 10 to 15 criteria using a scale that ranges from 1 to 5.
Although simple to use, this method is the most susceptible to rating pattern errors.
An additional problem is that appraisers typically apply different levels of importance to different criteria.
Use of the graphic rating scale has dropped because it:
Does not provide clear and descriptive data for evaluating employees.
Has not proven to be as defensible in court as other methods.
Slide 14

17. Behaviorally Anchored Rating Scales (BARS)
Rating system in which appraisers rate employees on specific behaviors displayed using critical incidents as performance criteria.
Critical incidents are work-related events that managers observe and record to form an accurate picture of a job’s requirements.
The critical incidents provided on a BARS appraisal form provide examples of what are considered to be good and bad behaviors.
The major weakness of the BARS method is the amount of time and money required to develop the system.
Slide 15

18. Behavioral Observation Scales (BOS)
Rating system in which appraisers identify how often an employee displays desired behaviors.
Instead of using critical incidents as the measurements like the BARS method, BOS establishes critical incidents as the behavior to be observed and asks appraisers to evaluate how often employees behave in that way.
Slide 16

19. Narrative Essays and Critical Incidents
Rating system in which appraisers write a narrative essay that describes the strengths and weaknesses of each employee.
Critical incident observation is a job analysis technique based on capturing and recording actual events that occur at work, which, when combined, form an accurate picture of a job’s actual requirements.
The critical incident method creates symbolic goals or stories that depict behaviors to emulate.
A disadvantage to this method is that managers must keep careful logs of each critical incident they observer, which is difficult to do as accurately and frequently as is necessary for the method to succeed.
Slide 17

20. Management by Objectives (MBO)
Performance appraisal system in which a manager meets with each employee and sets specific goals to attain; both the manager and the employee meet later to assess the extent to which the goals were met.
The MBO system stresses the accomplishment of short- rather than long-term goals; in addition, some employees set more difficult goals than others under the MBO system, which makes it difficult to evaluate the accomplishment of different goals by different employees.
In the hospitality industry, an MBO system is often tied to the process of customer-based goal setting.
Research suggests the MBO process increases employee performance levels and overall firm productivity.
Slide 18

21. Supervisors as Appraisers
The immediate supervisor is responsible for appraisals the majority of the time; however, this person may have little to no contact with the employees he or she evaluates.
Immediate supervisors make vastly superior assessments when compared with those of a second-level supervisor.
Scholarly research has shown that bosses in a bad mood are more likely to issue negative performance appraisals.
Research also confirms that the subconscious stereotypes that managers hold regarding race, age, attractiveness, and other attributes directly affect their appraisals.
Slide 19

22. Other Methods of Evaluating Performance
Peer evaluations, which some researchers claim is the best appraisal method due to regular peer contact and the importance of teamwork.
Staff appraisals of managers, the success of which depends on the level of trust among employees, managers, and the organization.
Self-appraisal, which can be inflated by self-serving bias or “blind spots”; these can also be unfair toward women and minorities, who are found to self-assess more negatively than average.
Guest-appraisals, which can help determine training needs, but are hard to carry out since collecting accurate data from guests is hard.
Multiple rater evaluation systems, such as 360-degree appraisals, can increase appraisal accuracy and perceived fairness.
Slide 20

23. Performance Appraisal Training
Manager and supervisor trainees should complete training with:
An understanding of rating errors
An understanding of how to process observed information
An understanding of how to establish a frame of reference for what is observed
A familiarity with the performance appraisal system in use
The experience of having observed a performance appraisal
Practice in effective interviewing techniques
Practice in conducting a performance appraisal
Slide 21

24. Special Training Considerations
Cultural implications of the global marketplace; certain cultures may be less likely to embrace modern two-way appraisal systems. It is important to be sensitive to the feelings, needs and values of employees who have different belief systems.
Virtual workers; these off-site workers pose challenges to their supervisors, who have the task of issuing appraisals on individuals they seldom see.
Slide 22

25. Frequency of Performance Appraisals
Despite findings that once or twice a year is too infrequent for performance appraisals, this is the norm.
The problems with annual or semiannual appraisals relate to the appraiser’s ability to remember events and behaviors that occurred; the appraiser can minimize these issues by keeping notes.
Hospitality companies should strive for quarterly performance appraisals, and should schedule them more often if managerial turnover is a problem.
Performance appraisals are most effective when used often.
Slide 23

26. Appraisals and the Law
The key issues in discriminatory investigations are job relatedness and objectivity.
According to researchers, a valid performance appraisal system demonstrates a high correlation between the system and the company’s established, objective performance measures.
These researchers also suggest that managers should submit their performance appraisal system to ten tests to determine whether it meets the minimum legal requirements for any appraisal system.
Five of these tests relate to content issues while the other five relate to process requirements.
Slide 24

27. Content Issues
1. Performance standards must be based on an analysis of job requirements.
2. Evaluation should be based on specific dimensions of job performance rather than on a single broad source.
3. Performance standards should be objective and observable.
4. Ratings should be documented.
5. The validity of the appraiser’s ratings should be assessed.
Slide 25

28. Process Issues
1. Performance standards must be based communicated to and understood by employees.
2. Specific instructions for appraisals should be put in writing.
3. More than one appraiser should be used whenever possible.
4. Appraisers should carefully review results with employees.
5. Each employee should establish legitimate, formal appeal procedures and inform employees of such procedures.
Slide 26

29. Keys to Developing a Successful Employee Evaluation System
Identify the functions the performance appraisal will serve.
Develop sound criteria for the system.
Identify the types of performance to measure.
Choose the method of appraisal.
Determine who will conduct appraisals and train those appraisers.
Make sure the system meets all legal requirements.
Periodically evaluate the appraisal process to ensure that each function still meets the intended purpose.
Slide 27