1. Performance Appraisals

2. The Role of Performance Appraisals in Compensation Decisions
Used for several organizational decisions
To guide allocation of merit increases
Performance ratings are influenced by:
Employee behaviors observed by raters
Organization values
Competition among departments
Differences in status between departments
Economic conditions

3. The Role of Performance Appraisals in Compensation Decisions (cont.)
Employees often frustrated about the appraisal process
Appraisals are too subjective
Possibility of unfair treatment by a supervisor
Experts argue that rather than throwing out the entire performance appraisal process, total-quality-management principles should be applied to improving it

4. Common Errors in the Appraisal Process

5. Factors Related to Inaccurate Appraisals
Guilt
Embarrassment about giving praise
Taking things for granted
Not noticing good or poor performance
The halo effect
Dislike of confrontation
Spending too little time on preparation of the appraisal

6. Strategies to Better Understand and Measure Job Performance
Clearly define job performance
Recognize definition of performance and its components is expanding
Improve appraisal formats
Select the right raters
Understand way raters process information and mistakes that may be made
Train raters to improve rating skills

7. Strategy to Better Understand and Measure Job Performance
Improve Appraisal Formats

8. Categories of Appraisal Formats
Ranking - Rater compares employees against each other
Categories
Rating - Rater evaluates employees on some absolute standard (measured on a continuum scale)
Essay - Rater answers open-ended questions in essay form describing employee performance

9. Ranking Formats Straight ranking Alternation ranking
Paired-comparison ranking

10. Rating Formats Raters evaluate employees on some absolute standard
Two common elements
Raters evaluate employees on some absolute standard
Each standard is measured on a scale -performance variation is described along a continuum

11. Rating Formats (cont.) Adjectives Behaviors Outcomes Essay format
Types of descriptors
Adjectives
Standard rating scale
Behaviors
Behaviorally anchored rating scales
Outcomes
Management by objectives
Essay format

12. Evaluating Performance Appraisal Formats
What makes for a good appraisal format?
Employee development potential
Administrative ease
Personnel research potential
Cost
Validity

13. An Evaluation of Performance Appraisal Formats

14. Strategy to Better Understand and Measure Job Performance
Select the Right Raters

15. Select the Right Raters
Focus on who might conduct the ratings and which of these sources is more likely to be accurate
360-degree feedback – assesses employee performance from five points of view
Supervisor
Peer
Self
Customer
Subordinate

16. Strategy to Better Understand and Measure Job Performance
Understand How Raters Process Information

17. The Rating Process Rater observes behavior of a ratee
Rater encodes ratee behavior
Rater stores information in memory
When it is time to evaluate a ratee, rater:
Reviews performance dimensions
Retrieves stored observations to determine relevance to performance dimensions
Information is reconsidered and integrated with other available information as rater decides on final ratings

18. Understand Why Raters Make Mistakes
Errors in rating process
Types of Errors
Errors in observation (attention)
Errors in storage and recall
Errors in actual evaluation

19. Strategy to Better Understand and Measure Job Performance
Training Raters to Rate More Accurately

20. Training Raters to Rate More Accurately
Rater-error training
Goal is to reduce psychometric errors by familiarizing raters with their existence
Performance-dimension training
Exposes supervisors to performance dimensions used
Performance-standard training
Provides raters with a standard or frame of reference for making appraisal

21. Ways to Improve Rater Training
Straightforward lecturing to ratees is ineffective
Individualized or small group discussions more effective
When sessions are combined with extensive practice and feedback, rating accuracy improves
Longer training programs are generally more successful than shorter programs
Performance-dimension and performance-standard training more effective than rater-error training
Success results from efforts to reduce halo errors and improve accuracy

22. Putting it All Together: The Performance Evaluation Process
Need a sound basis for establishing performance appraisal dimensions and scales associated with each dimension
Need to involve employees in every stage of developing performance dimensions and building scales
Need to ensure raters are trained in use of appraisal system and that all employees understand how system operates

23. Putting it All Together: The Performance Evaluation Process (cont.)
Need to ensure raters are motivated to rate accurately
Raters should maintain a diary of employee performance
Raters should attempt a performance diagnosis to determine if performance problems exist

24. Tying Pay to Subjectively Appraised Performance
How do we get employees to view raises as a reward for performance?
Central issue involving merit pay

25. Pay Increase Guidelines with Low Motivational Impact
Provide equal increases to all employees regardless of performance
General increase
Cost-of-living adjustments
Pay increases based on a preset progression pattern based on seniority

26. Requirements to Link Pay to Performance
Define performance
Behaviors
Competencies
Traits
Specify a continuum describing different levels from low to high on performance measure
Decide how much of a merit increase is given for different levels of performance

27. Designing Merit Guidelines
Four Questions . . . 1
What should the poorest performer be paid as an increase? 2
How much should average performers be paid as an increase? 3
How much should top performers be paid? 4
What should be the size of the percentage increase differential between different levels of performance?