1. PERFORMANCE APPRAISALS Chapter 6 Prepared by : Ly Sokcheu Updated : 1 st September, 2012 1

2. Chapter Objectives Define performance appraisal. Identify the uses of performance appraisal. Discuss performance appraisal environmental factors. Explain informal and systematic performance appraisal. Identify who may be responsible for performance appraisal and the performance period. Identify who does the appraisal. Identify the various performance appraisal methods used. After studying this chapter, you should be able to: 2

3. I. What is performance appraisal?  After an employee has been selected for a job, has been trained to do, and has work on its for a period of time, his or her performance should be reviewed. 3  It also has been called employee rating, employee evaluation, performance review, performance evaluation, and result appraisal.  Performance appraisal is the process of evaluation how well employees do their jobs compared with a set of standards and communicating that information to employees.

4. I. What is performance appraisal? (Cont.)  Performance Appraisal is a formal system of review and evaluation of individual or team task performance.  Performance appraisal involves the identification, measurement, & management of human performance in organizations. Identification means determining what area of work the manager should be examining when measuring performance.Identification means determining what area of work the manager should be examining when measuring performance. 4

5. I. What is performance appraisal? (Cont.) Management is the overriding goal of any appraisal system.Management is the overriding goal of any appraisal system.  Performance Mgt. : A management system consisting of all organizational processes that determine how well employees, teams, and ultimately, the organization perform. 5 Measurement, the centerpiece of the appraisal system, entails making managerial judgments of how “good” or “bad” observed employee performance was.Measurement, the centerpiece of the appraisal system, entails making managerial judgments of how “good” or “bad” observed employee performance was.

6. II. Why appraise performance? There are four reasons:  An appraisal provides information upon with you make promotion and salary decisions.  They provides an opportunity for you and your subordinate to review his or her work-related behavior.  The appraisal is part of the firm's career plans in light of his/her strengths and weaknesses.  Appraisals help you better manage and improve your firm's performance. 6

7. III. Uses of Performance Appraisal The 3 major uses of PA are for compensation administration, feedback for development, and various administrative decisions such as layoffs, promotions, and transfers. Compensationadministration Other administrative, decision Other administrative, decision Feedback for development Uses of Performance Appraisal 7

8. 1)Compensation administration A Performance appraisal system is link between the reward that employee hope to receive and his or her productivity. The linkage can be thought of as: Productivity Performance Appraisal Reward If any link fails, the most productive employees will not receive the larger reward, resulting in all the problems that come from perceived inequity in the workplace. 8

9. 2)Feedback for development  Performance appraisal is a primary source of information and feedback, for employees both on areas in which they are doing well and ones where improvement is needed. 9 So performance appraisal has a developmental use.So performance appraisal has a developmental use.

10. 2)Feedback for development (Cont.)  Managers & supervisor can identify employee's weakness, potentials and training needs of employees through performance appraisal feedback. 10  They can inform employees about their progress and tell them what skills they need to develop to become eligible for promotion, transfers & other HR activities.

11. 3)Other administrative decisions  Several other uses of performance appraisal result can be classified as administrative decisions such as promotion, termination, layoff, and transfer assignment decisions often are made on basis of performance. 11  Similarly, promotion and demotion base on differences in performance must be documented with performance appraisal.

12. Or III. Uses of Performance Appraisal 1)Human resource planning - Data must be available to identify those who have the potential to be promoted. 2)Recruitment and selection - May be helpful in predicting the performance of job applicants. 3)Training and development - Point out an employee’s specific needs for training and development. 4)Career planning and development - Essential in assessing an employee’s strengths and weaknesses and in determining the person’s potential. 12

13. Or III. Uses of P. A. (Cont.) 5)Compensation programs - Provide a basis for rational decisions regarding pay adjustments. 13 7)Assessment of employee potential - Some organizations attempt to assess employee potential as they appraise their job performance. 6)Internal employee relations - Used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer.

14. IV. PA. Environment Factors 1)External Environment Legislation requiring nondiscriminatory appraisal systemsLegislation requiring nondiscriminatory appraisal systems Labor unionsLabor unions 2)Internal environment Factors within internal environment, such as type of corporate culture.Factors within internal environment, such as type of corporate culture. 14

15. IV. PA. Environment Factors (Cont.)  Legislation Affecting Performance Appraisal Mistretta v Sandia Corporation - Federal judge ruled against company, stating, “There is sufficient circumstantial evidence to indicate that age bias and age based policies appear throughout the performance rating process to the detriment of the protected age group.”Mistretta v Sandia Corporation - Federal judge ruled against company, stating, “There is sufficient circumstantial evidence to indicate that age bias and age based policies appear throughout the performance rating process to the detriment of the protected age group.”  Albermarle Paper v Moody – Supreme Court case supported validation requirements for performance appraisals 15

16. IV. PA. Environment Factors (Cont.)  Labor Unions and Performance Appraisal Have traditionally stressed seniority as the basis for promotions and pay increases.Have traditionally stressed seniority as the basis for promotions and pay increases. May vigorously oppose the use of a management-designed performance appraisal system.May vigorously oppose the use of a management-designed performance appraisal system. 16

17. Identify Specific Performance Appraisal Goals Establish Performance Criteria (Standards) and Communicate Them To Employees Examine Work Performed Appraise the Results Discuss Appraisal with Employee Performance Appraisal Process External Environment Internal Environment 17

18. V. Informal and systematic PA. 1)Systematic / Formal PA:  Is used when the contact between manager and employee is formalized and a system is established to report managerial impression and observations on employee performance.  The day-to-day working for employee’s performance is to be judged. 2)Informal PA:  Is conducted whenever the contacts between managers and employees are not formalized periodically. 18

19. VI. PA responsibilities: 1)HR Department:  Designing, maintaining & establishing formal report system.  Making sure reports are on time  Training ratters 2)Managers:  Rating actual performance of employees  Making formal reports  Review appraisals of employees 19

20. VII. Timing of PA n Is important. Systematic appraisals typically are conducted once or twice a year: Usually near the employee’s anniversary date.Usually near the employee’s anniversary date. For new employees, an appraisal 90 days after employment, again at six months, and annually thereafter is common timing.For new employees, an appraisal 90 days after employment, again at six months, and annually thereafter is common timing. 20

21. VIII. Who does the appraisal? 1)Supervisor rating of subordinates: Managers & supervisors in each department rate their employees performance.Managers & supervisors in each department rate their employees performance. 2)A group of managers rating employees: A group of managers from various departments can rate the employee's performance with different departments.A group of managers from various departments can rate the employee's performance with different departments. 3)Peer ratings: Use a group of peer as raters to evaluate another employees.Use a group of peer as raters to evaluate another employees. 21

22. VIII. Who does the appraisal? (Cont.) 4)Subordinates rate their supervisors: Used to evaluate managers & supervisors in order to improve their decisions-making and leadership potentials.Used to evaluate managers & supervisors in order to improve their decisions-making and leadership potentials. 5)Self ratings: It is a self-development tool that force employees to think about their strengths, weakness & opportunities for improve themselves.It is a self-development tool that force employees to think about their strengths, weakness & opportunities for improve themselves. 6)Outsider rating: Rating also may be done by outsiders.Rating also may be done by outsiders. 22

23. IX. Method of Performance Appraisals 1.Job Ranking Method ¬viFIsaRsþerocMlMdab;fñak;karg ar¦ Consists of listing all employees from the highest to lowest performance.Consists of listing all employees from the highest to lowest performance. 2)Paired Comparison Method ¬viFIsaRsþeRboeFobCaKU²¦ Normally compare each employee with other employees in the groupand find out which employee is better.Normally compare each employee with other employees in the groupand find out which employee is better. 3)Management By Objective (MBO): Management by results/ Management of performance objectives.Management by results/ Management of performance objectives. 23

24. a)What is MBO ?  The process by which objectives/ goals/ targets are assigned through consultation to every department, sub-unit, and individual in an organization in order to increase individual and organization performance.  McGregor believed that, instead of creating antagonisms because of judgments, the superior should work with subordinates to set goals.  MBO is more than just an evaluation program and process. It is viewed as a philosophy of managerial practice, a method by which managers and subordinates plan, organize, control, communicate, and debate. 24

25. a)What is MBO ? (Cont.)  Usually, an MBO program follows a systematic process, such as the following: !The superior & subordinate conduct meetings to define key tasks of the subordinate and to set a limited number of objectives (goals). !The participants set objectives that are realistic, challenging, clear, and comprehensive. !The superior, after consulting with the subordinate, establishes the criteria for assessing the accomplishment of the objectives. !Dates for reviewing intermediate progress are agreed upon and used. 25

26. a)What is MBO ? (Cont.) !The superior and subordinate make any required modifications in the original objectives. !The final evaluation by the superior is made and a meeting is held with the subordinate in a counseling, encouraging session. !Objectives for the next cycle are set by the subordinate after consulting with the superior, keeping in mind the previous cycle and future expectations. 26

27. a)What is MBO ? (Cont.)  The pitfalls and problems with MBO have been identified, such as the following: !Too much paperwork is involved. !Too many objectives are set, and confusion occurs. !MBO is forced into jobs where establishing objectives is extremely difficult. !There may be a failure to tie in MBO results with rewards. !There is too much emphasis on the short term. !Superiors are not trained in the MBO process and the mechanics involved. !Original objectives are never modified. !MBO is used as a rigid control device that intimidates rather than motivates. 27

28. b)MBO Approaches:  Bottom-Up: performance goals are set first at the working unit, based on what workers & supervisors can achieve. These goals that are converted to tactical levels by middle managers. Finally, these goals are sent to strategic levels for consideration by top managers.  Top-Down: Top-Down: Organizational goals/strategic goals set by top managers who then consult with middle managers in order to set department goals. Then middle managers discuss with supervisors to set goals at working unit. Finally, supervisors have a meeting with their employees in order to establish individual goals. 28

29. c)MBO Process:   Developing overall company's goals/ strategic goals set by top managers.   Establishing specific goals to various departments and individuals.   Formulating action plans: When goals are set, action plans must be developed. Action plans focus on methods or necessary activities such as. What, Where, When, Whom, How, to achieve particular goals. 29

30. c)MBO Process (Cont.)  Implementing action plans:  Once goals are set, action plans are determined; individuals should be given a consideration in carrying out activities.  Reviewing progress periodically  Provide a good opportunity for managers to check employee's performance.  Identify and remove obstacles, solving problem and altering action plans that are not achieving the expected result. 30

31. c)MBO Process (Cont.)  Appraisal performance:  Usually, organizations appraise their employee's performance over a period of one year.  They can compare actual performance of their employees with established goals.  The Results Can Be:  Achieved stated goals Remaining the same  Not achieved stated goals Taking correction as needed  Exceeded stated goals rewarding 31