1. Performance Management and Appraisal

2. © 2008 Prentice Hall, Inc. All rights reserved.9–2 Basic Concepts in Performance Management and Appraisal Performance Appraisal: Setting work standards, assessing performance, and providing feedback to employees to motivate, correct, and continue their performance. Performance Management: An integrated approach to ensuring that an employee’s performance supports and contributes to the organization’s strategic aims. Comparing Performance Appraisal and Performance Management

3. © 2008 Prentice Hall, Inc. All rights reserved.9–3 Why Performance Management? Total Quality Appraisal Issues Strategic Focus The Performance Management Approach

4. © 2005 Prentice Hall Inc. All rights reserved.9–4 Why Performance Management? Increasing use of performance management by employers reflects:Increasing use of performance management by employers reflects:  The popularity of the total quality management (TQM) concepts.  The belief that traditional performance appraisals are often not just useless but counterproductive.  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.

5. © 2008 Prentice Hall, Inc. All rights reserved.9–5 FIGURE The Building Blocks of an Effective Performance Management Process Direction sharingRole clarificationGoal setting and planning Goal alignmentDevelopmental goal setting Ongoing performance monitoring Ongoing feedback Coaching and support Performance assessment (appraisal) Rewards, recognition, and compensation Workflow, process control, and return on investment management

6. © 2008 Prentice Hall, Inc. All rights reserved.9–6 Defining the Employee’s Goals and Work Standards Assign Specific Goals Encourage Participation Assign Measurable Goals Assign Challenging but Doable Goals Guidelines for Effective Goal Setting

7. © 2008 Prentice Hall, Inc. All rights reserved.9–7 Setting Goals SMART Goals:SMART Goals:  Specific, and clearly state the desired results.  Measurable in answering “how much.”  Attainable, and not too tough or too easy.  Relevant to what’s to be achieved.  Timely in reflecting deadlines and milestones.

8. © 2008 Prentice Hall, Inc. All rights reserved.9–8 Performance Appraisal Roles SupervisorsSupervisors  Usually do the actual appraising.  Must be familiar with basic appraisal techniques.  Must understand and avoid problems that can cripple appraisals.  Must know how to conduct appraisals fairly.

9. © 2008 Prentice Hall, Inc. All rights reserved.9–9 Performance Appraisal Roles (cont’d) The HR DepartmentThe HR Department  Serves a policy-making and advisory role.  Provides advice and assistance regarding the appraisal tool to use.  Trains supervisors to improve their appraisal skills.  Monitors the appraisal system effectiveness and compliance with EEO laws.

10. © 2008 Prentice Hall, Inc. All rights reserved.9–10 An Introduction to Appraising Performance 1 Is useful in career planning. Plays an integral role in performance management. Why Appraise Performance? Is basis for pay and promotion decisions. Helps in correcting deficiencies and reinforcing good performance. 234

11. © 2008 Prentice Hall, Inc. All rights reserved.9–11 An Introduction to Appraising Performance 1 Appraising performance Steps in Appraising Performance Defining the job Providing feedback 23

12. © 2008 Prentice Hall, Inc. All rights reserved.9–12 Performance Appraisal Methods 12 345 Alternation Ranking Method Graphic Rating Scale Method Paired Comparison Method Forced Distribution Method Critical Incident Method 67 89 Behaviorally Anchored Rating Scales (BARS) Narrative Forms Management by Objectives (MBO) Merged Methods Appraisal Methodologies

13. © 2005 Prentice Hall Inc. All rights reserved.9–13 Performance Appraisal Methods Graphic rating scaleGraphic rating scale  A scale that lists a number of traits and a range of performance for each that is used to identify the score that best describes an employee’s level of performance for each trait.

14. © 2005 Prentice Hall Inc. All rights reserved.9–14 Graphic Rating Scale with Space for Comments Figure 9–3

15. © 2005 Prentice Hall Inc. All rights reserved.9–15 Portion of an Administrative Secretary’s Sample Performance Appraisal Form Figure 9–4 Source: James Buford Jr., Bettye Burkhalter, and Grover Jacobs, “Link Job Description to Performance Appraisals,” Personnel Journal, June 1988, pp. 135–136.

16. © 2005 Prentice Hall Inc. All rights reserved.9–16 Performance Management Outline Figure 9–5a Source: www.cwru.edu.

17. © 2005 Prentice Hall Inc. All rights reserved.9–17 Figure 9–5b Performance Management Outline (cont’d) Source: www.cwru.edu.

18. © 2005 Prentice Hall Inc. All rights reserved.9–18 Performance Management Outline (cont’d) Figure 9–5c Source: www.cwru.edu.

19. © 2005 Prentice Hall Inc. All rights reserved.9–19 Performance Appraisal Methods (cont’d) Alternation ranking methodAlternation ranking method  Ranking employees from best to worst on a particular trait, choosing highest, then lowest, until all are ranked. Paired comparison methodPaired 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.

20. © 2005 Prentice Hall Inc. All rights reserved.9–20 Alternation Ranking Scale Figure 9–6

21. © 2005 Prentice Hall Inc. All rights reserved.9–21 Ranking Employees by the Paired Comparison Method Figure 9–7 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.

22. © 2005 Prentice Hall Inc. All rights reserved.9–22 Performance Appraisal Methods (cont’d) Forced distribution methodForced 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 Narrative FormsNarrative Forms

23. © 2008 Prentice Hall, Inc. All rights reserved.9–23 TABLE Examples of Critical Incidents for a Plant Manager Continuing DutiesTargetsCritical Incidents Schedule production for plant 90% utilization of personnel and machinery in plant; orders delivered on time Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month Supervise procurement of raw materials and inventory control Minimize inventory costs while keeping adequate supplies on hand Let inventory storage costs rise 15% last month; overordered parts “A” and “B” by 20%; underordered part “C” by 30% Supervise machinery maintenance No shutdowns due to faulty machinery Instituted new preventative maintenance system for plant; prevented a machine breakdown by discovering faulty part

24. © 2008 Prentice Hall, Inc. All rights reserved.9–24 Behaviorally Anchored Rating Scale (BARS) Developing a BARS 1. Generate critical incidents 2. Develop performance dimensions 3. Reallocate incidents 4. Scale the incidents 5. Develop a final instrument Advantages of BARS  A more accurate gauge  Clearer standards  Feedback  Independent dimensions  Consistency

25. © 2005 Prentice Hall Inc. All rights reserved.9–25 Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skill Figure 9–9 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.

26. © 2008 Prentice Hall, Inc. All rights reserved.9–26 BARS for Grocery Clerks Researchers developed a BARS for grocery clerks by collecting critical incidents in 8 areas (rating scale given below):Researchers developed a BARS for grocery clerks by collecting critical incidents in 8 areas (rating scale given below): Knowledge and judgment Conscientiousness Skill in human relations Skill in operation of register Skill in bagging Ability of checkout work Skill in monetary transactions Observational ability Extremely PoorPoorAverageGoodExtremely Good

27. © 2008 Prentice Hall, Inc. All rights reserved.9–27 Management by Objectives (MBO) A comprehensive and formal organizationwide goal-setting and appraisal program requiring:A comprehensive and formal organizationwide goal-setting and appraisal program requiring: 1. Setting of organization’s goals. 2. Setting of departmental goals. 3. Discussion of departmental goals. 4. Defining expected results (setting individual goals). 5. Conducting periodic performance reviews. 6. Providing performance feedback.

28. © 2008 Prentice Hall, Inc. All rights reserved.9–28 Using MBO Problems with MBO Setting unclear objectives Conflict with subordinates over objectives Time-consuming appraisal process

29. © 2005 Prentice Hall Inc. All rights reserved.9–29 Computerized and Web-Based Performance Appraisal Performance appraisal software programsPerformance 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)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.

30. © 2008 Prentice Hall, Inc. All rights reserved.9–30 Appraising Performance: Problems and Solutions Unclear Standards Leniency or Strictness Halo Effect Potential Rating Scale Appraisal Problems Central Tendency Bias

31. © 2005 Prentice Hall Inc. All rights reserved.9–31 A Graphic Rating Scale with Unclear Standards Table 9–2 Note: For example, what exactly is meant by “good,” “quantity of work,” and so forth?

32. © 2008 Prentice Hall, Inc. All rights reserved.9–32 FIGURE Sample Rating Errors Focusing on one or two critical incidents Lower rating for less challenge Nobody can be that good (Strictness) Similarity Being influenced by prior performance Rating for retention Style differences Emotional rating Recent performance only Friendships

33. © 2008 Prentice Hall, Inc. All rights reserved.9–33 Appraising Performance: Problems and Solutions (cont’d) Know Problems Control Outside Influences Use the Right Tool How to Avoid Appraisal Problems Train Supervisors Keep a Diary

34. © 2008 Prentice Hall, Inc. All rights reserved.9–34 TABLE Important Advantages and Disadvantages of Appraisal Tools ToolAdvantagesDisadvantages Graphic rating scale Simple to use; provides a quantitative rating for each employee. Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems. BARSProvides behavioral “anchors.” BARS is very accurate. Difficult to develop. Alternation rankingSimple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales. Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent. Forced distribution method End up with a predetermined number or % of people in each group. Employees’ appraisal results depend on your choice of cutoff points. Critical incident method Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis. Difficult to rate or rank employees relative to one another. MBOTied to jointly agreed-upon performance objectives. Time-consuming.

35. © 2008 Prentice Hall, Inc. All rights reserved.9–35 Who Should Do the Appraising? Self-Rating Subordinates 360-Degree Feedback Potential Appraisers Immediate Supervisor Peers Rating Committee

36. © 2008 Prentice Hall, Inc. All rights reserved.9–36 The Appraisal Interview Satisfactory—Promotable Satisfactory—Not Promotable Unsatisfactory—Correctable Unsatisfactory—Uncorrectable Types of Appraisal Interviews

37. © 2008 Prentice Hall, Inc. All rights reserved.9–37 The Appraisal Interview (cont’d) Talk in terms of objective work data. Don’t tiptoe around. Don’t get personal. Encourage the person to talk. Guidelines for Conducting an Interview

38. © 2008 Prentice Hall, Inc. All rights reserved.9–38 The Appraisal Interview (cont’d) 1 Recognize your own limitations. Never attack a person’s defenses. How to Handle a Defensive Subordinate Recognize that defensive behavior is normal. Postpone action. 234

39. © 2008 Prentice Hall, Inc. All rights reserved.9–39 The Appraisal Interview (cont’d) 12 345 How to Criticize a Subordinate Criticize in private, and do it constructively. Do it in a manner that lets the person maintain his or her dignity and sense of worth. Give daily feedback so that the review has no surprises. Never say the person is “always” wrong. Criticism should be objective and free of biases.

40. © 2008 Prentice Hall, Inc. All rights reserved.9–40 The Appraisal Interview (cont’d) 12 345 How to Ensure Improved Performance Give the subordinate the opportunity to present his or her ideas and feelings. Don’t make the subordinate feel threatened during the interview. Give daily feedback so that the review has no surprises. Never say the person is “always” wrong. Criticism should be objective and free of biases.