Answer the following, assuming you are heading up HR in your company and
you’ve been tasked with implementing a brand new Performance
Management System:
I. What type of Performance Management System would you
use/implement? (no more than two types)
II. Why did you select this particular option(s) as the best for your
organization? (include at least three specific examples) III. In the use/implementation of this, how do you plan on eliminating Manager
or evaluator bias? No more than 1 page – typed- single space – 12 pt font – 1″ margins
hrm_ch07.ppt
Unformatted Attachment Preview
Chapter 7
Performance
Management
and Appraisal
Copyright © 2016 Pearson Education, Inc.
7-1
Learning Objectives
1.
2.
3.
4.
5.
Describe performance management.
Define performance appraisal.
Identify the uses of performance appraisal.
Discuss the performance appraisal process.
Identify the various performance criteria
(standards) that can be established.
6. Identify who may be responsible for performance
appraisal.
7. Explain the performance appraisal period.
8. Describe the various performance appraisal
methods.
7-2
Copyright © 2016 Pearson Education, Inc.
Learning Objectives (Cont.)
9. List the problems that have been associated
with performance appraisal.
10.Explain the characteristics of an effective
appraisal system.
11.Describe the legal considerations associated
with performance appraisal.
12.Explain how the appraisal interview should be
conducted.
13.Discuss how performance appraisal is affected
by a country’s culture.
Copyright © 2016 Pearson Education, Inc.
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LO 1
Performance Management (PM)
➢Goal-oriented process ensuring processes
are in place to maximize productivity at
employee, team, and organizational levels
➢Close relationship between incentives and
performance.
➢Dynamic, ongoing, continuous process
➢Each part of the system is integrated and
linked for continuous organizational
effectiveness
Copyright © 2016 Pearson Education, Inc.
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LO 2
Performance Appraisal
➢Formal system of review and evaluation
of individual or team task performance
➢Often negative, disliked activity that
seems to elude mastery
Copyright © 2016 Pearson Education, Inc.
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LO 3
Uses of Performance Appraisal
➢Human resource planning
➢Recruitment and selection
➢Training and development
➢Career planning and development
➢Compensation programs
➢Internal employee relations
➢Assessment of employee potential
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LO 4
Performance Appraisal Process
External Environment
Internal Environment
Identify Specific
Performance Appraisal
Goals
Establish Performance
Criteria (Standards) and
Communicate Them To
Employees
Examine Work Performed
Appraise the Results
Discuss Appraisal with
Employee
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LO 5
Establish Performance Criteria
(Standards)
➢Traits
➢Behaviors
➢Competencies
➢Goal achievement
➢Improvement potential
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LO 5
Traits
➢Employee traits such as attitude,
appearance, and initiative are basis for
some evaluations
➢May be unrelated to job performance or be
difficult to define
➢Certain traits may relate to job
performance
Copyright © 2016 Pearson Education, Inc.
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LO 5
Caution on Traits: Wade v. Mississippi
Cooperative Extension Service
In performance appraisal system, general
characteristics such as “leadership, public
acceptance, attitude toward people, appearance
and grooming, personal conduct, outlook on life,
ethical habits, resourcefulness, capacity for
growth, mental alertness, loyalty to organization
are susceptible to partiality and to the personal
taste, whim, or fancy of the evaluator as well as
patently subjective in form and obviously
susceptible to completely subjective treatment by
those conducting the appraisals”
Copyright © 2016 Pearson Education, Inc.
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LO 5
Behaviors
➢Organizations may evaluate employee’s
task-related behavior or competencies
➢Examples are leadership style, developing
others, teamwork and cooperation, or
customer service orientation
➢If certain behaviors result in desired
outcomes, there is merit in using them in
evaluation process
Copyright © 2016 Pearson Education, Inc.
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LO 5
Competencies
➢Broad range of knowledge, skills, traits,
and behaviors
➢May be technical in nature, business
oriented, or related to interpersonal skills
➢Should be those that are closely
associated with job success
Copyright © 2016 Pearson Education, Inc.
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LO 5
Goal Achievement
➢Use if organizations consider ends more
important than means
➢Should be within control of individual or
team
➢Should be those results that lead to firm’s
success
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LO 5
Improvement Potential
➢Many criteria used focus on past
➢Cannot change past
➢Should emphasize future
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LO 6
Responsibility for Appraisal
➢Immediate supervisor
➢Subordinates
➢Peers and team members
➢Self-appraisal
➢Customer appraisal
➢360-degree feedback
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LO 6
Immediate Supervisor
➢Traditionally most common choice
➢Usually in excellent position to observe
employee’s job performance
➢Has responsibility for managing particular
unit
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LO 6
Subordinates
➢Our culture has viewed evaluation by
subordinates negatively
➢Some firms find that evaluation of
managers by subordinates is both feasible
and needed
➢Issues:
➢Could be seen as a popularity contest
➢Possible reprisal against employees
Copyright © 2016 Pearson Education, Inc.
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LO 6
Peers and Team Members
➢Work closely with evaluated employee
and probably have undistorted
perspective on typical performance
➢Problems include reluctance of some
people who work closely together,
especially on teams, to criticize each
other
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LO 6
Self-Appraisal
➢If employees understand their objectives
and the criteria used for evaluation, they
are in a good position to appraise own
performance
➢Employee development is self-development
➢Self-appraisal may make employees more
highly motivated
Copyright © 2016 Pearson Education, Inc.
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LO 6
Customer Appraisal
➢Customer behavior determines firm’s
degree of success
➢Demonstrates commitment to customer
➢Holds employees accountable
➢Fosters change
Copyright © 2016 Pearson Education, Inc.
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LO 6
360-Degree Feedback
➢Input from multiple sources such as
supervisors, subordinates, peers, and
customers
➢Shifting responsibility to multiple sources
helps to reduce or eliminate common
appraisal errors
➢Process is more legally defensible
Copyright © 2016 Pearson Education, Inc.
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LO 7
The Appraisal Period
➢Prepared at specific intervals
➢Usually annually or semiannually
➢Period may begin with employee’s
date of hire
➢All employees may be evaluated at
same time
Copyright © 2016 Pearson Education, Inc.
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LO 8
Performance Appraisal Systems
➢Trait systems
➢Comparison systems
➢Behavioral systems
➢Results-based systems
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LO 8
Trait Systems
➢Evaluate employees based on traits (for
example):
➢Quality of work
➢Dependability
➢Limitations (e.g., traits represent a
predisposition for behavior, but not
behavior itself)
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LO 8
Trait-Oriented Performance
Appraisal
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LO 8
Comparison Systems
➢Evaluate an employee’s performance
against that of another
➢Employees ranked from the best
performer to the poorest performer
➢Supervisors judge overall performance or
specific ones (e.g., timeliness)
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LO 8
Paired Comparison
➢Variation of ranking method
➢Compares performance of each
employee with every other employee
in group
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LO 8
Paired Comparison System
Copyright © 2016 Pearson Education, Inc.
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LO 8
Forced Distribution
➢Rater assigns individual in work group to
limited number of categories
➢Assumes all groups of employees have
same distribution
➢Proponents of forced distribution believe:
➢They facilitate budgeting
➢They guard against weak managers who are
too timid to get rid of poor performers
Copyright © 2016 Pearson Education, Inc.
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LO 8
Forced Distribution (cont.)
➢ Require managers to be honest with workers
about how they are doing
➢ Also called a rank-and-yank system
➢ Unpopular with many managers
➢ May damage morale and generate mistrust of
leadership
➢ Rankings may be way for companies to
easily rationalize firings
Copyright © 2016 Pearson Education, Inc.
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LO 8
Forced Distribution System
Copyright © 2016 Pearson Education, Inc.
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LO 8
Behavioral Systems
➢Rates extent to which employees display
successful job performance behaviors
➢When correctly constructed, behavioral
systems are relatively free of rater errors
➢Three types:
➢Critical Incident Technique (CIT)
➢Behaviorally Anchored Rating Scales (BARS)
➢Behavioral Observation Scale (BOS)
Copyright © 2016 Pearson Education, Inc.
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LO 8
Critical Incident Technique (CIT)
Copyright © 2016 Pearson Education, Inc.
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LO 8
Behaviorally Anchored Rating
Scales (BARS)
➢Combines traditional rating scales and
critical incidents methods
➢Job behaviors derived from critical
incidents described more objectively
Copyright © 2016 Pearson Education, Inc.
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LO 8
Behaviorally Anchored Rating
Scale (BARS) (Cont.)
Copyright © 2016 Pearson Education, Inc.
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LO 8
Behavioral Observation Scales
➢Similar to BARS in its development
➢Compared to BARS, BOS focuses
exclusively on positive performance
behaviors
➢Appropriate for jobs that require
observable behaviors
➢Requires observation of job behaviors on
a regular basis
Copyright © 2016 Pearson Education, Inc.
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LO 8
Results-Based Systems
➢Focuses on measurable outcomes such
as sales, accident rates, and productivity
➢Selection of results depends on:
➢Relevance of results toward strategic goals
➢Reliability with which results can be measured
➢Validity of performance measure
Copyright © 2016 Pearson Education, Inc.
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LO 8
Management by Objectives
➢Supervisors and employees decide on
performance objectives
➢They decide whether objectives are tied to
the company’s strategic goals
➢Progress is reviewed and decisions such
as objective revision are made
➢A concern is a “results at any cost”
mentality
Copyright © 2016 Pearson Education, Inc.
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LO 8
Work Standards
➢Compares performance to predetermined
standard
➢Standards: Normal output of average
worker operating at normal pace
➢Time study and work sampling used
➢Workers need to know how standards
were set
Copyright © 2016 Pearson Education, Inc.
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LO 8
Work Standards Example
Copyright © 2016 Pearson Education, Inc.
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LO 9
Problems in Performance Appraisal
➢Appraiser discomfort
➢Subjectivity
➢Bias errors
➢Contrast errors
➢Errors of central tendency
➢Errors of leniency or strictness
➢Employee anxiety
Copyright © 2016 Pearson Education, Inc.
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LO 9
Appraiser Discomfort
➢Performance appraisal process cuts into
manager’s time
➢Experience can be unpleasant when
employee has not performed well
Copyright © 2016 Pearson Education, Inc.
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LO 9
Lack of Objectivity
➢Factors such as attitude, appearance, and
personality are difficult to measure
➢Factors may have little to do with
employee’s job performance
➢May place evaluator and company in
untenable positions
Copyright © 2016 Pearson Education, Inc.
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LO 9
Bias Errors
➢First-impression effect
➢Halo effect (positive halo)
➢Horn effect (negative halo)
➢Similar-to-me effect
➢Illegal discriminatory bias
Copyright © 2016 Pearson Education, Inc.
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LO 9
Contrast Errors
➢ Supervisors make contrast errors when they
compare an employee with other employees
rather than to specific, explicit standards
➢ Some comparisons qualify as errors because
other employees are required to perform only at
minimum acceptable standards
➢ Employees performing at minimally acceptable
levels should receive satisfactory ratings, even if
every other employee doing the job is performing
at outstanding levels
Copyright © 2016 Pearson Education, Inc.
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LO 9
Central Tendency
➢Error occurs when employees are
incorrectly rated near average or middle of
the rating scale
➢May be encouraged by some rating scale
systems requiring evaluator to justify
extremely high or extremely low ratings
Copyright © 2016 Pearson Education, Inc.
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LO 9
Leniency/Strictness
➢Leniency: Giving undeserved high ratings
➢Strictness: Being unduly critical of
employee’s work performance
➢Worst situation is when firm has both lenient
and strict managers and does nothing to
level inequities
Copyright © 2016 Pearson Education, Inc.
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LO 9
Employee Anxiety
➢Evaluation process may create anxiety for
appraised employee
➢Opportunities for promotion, better work
assignments, and increased
compensation may hinge on results
Copyright © 2016 Pearson Education, Inc.
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LO 10
Characteristics of Effective
Appraisal System
➢Job-related criteria
➢Performance expectations
➢Standardization
➢Trained appraisers
➢Continuous open communication
➢Performance reviews
➢Due process
Copyright © 2016 Pearson Education, Inc.
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LO 10
Job-Related Criteria
➢Most basic criterion needed in employee
performance appraisals
➢Uniform Guidelines and court decisions
are clear on this point
Copyright © 2016 Pearson Education, Inc.
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LO 10
Performance Expectations
➢Managers and subordinates must agree
on performance expectations in advance
of appraisal period
➢If employees clearly understand
expectations, they can evaluate their own
performance and make timely adjustments
Copyright © 2016 Pearson Education, Inc.
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LO 10
Standardization
Firms should use same evaluation
instrument for all employees in the same
job category who work for the same
supervisor
Copyright © 2016 Pearson Education, Inc.
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LO 10
Trained Appraisers
➢Seldom receive training on how to
conduct effective evaluations
➢Training should be ongoing
➢Includes how to rate employees and how
to conduct appraisal interviews
Copyright © 2016 Pearson Education, Inc.
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LO 10
Continuous Open Communication
➢Employees need to know how well they
are performing
➢Good appraisal system provides highly
desired feedback on continuing basis
➢Should be few surprises in performance
review
Copyright © 2016 Pearson Education, Inc.
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LO 11
Conduct Performance Reviews
➢Special time should be set for formal
discussion of employee’s performance
➢Withholding appraisal results is absurd
➢Performance review allows employees to
detect any errors or omissions in appraisal
➢Employee may simply disagree with
evaluation and want to challenge it
Copyright © 2016 Pearson Education, Inc.
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LO 11
Due Process
➢Provides employees opportunity to
appeal appraisal results
➢Must have procedure for pursuing
grievances and having them addressed
objectively
Copyright © 2016 Pearson Education, Inc.
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LO 11
Legal Implications
➢Employee lawsuits may result from
negative evaluations
➢Unlikely that any appraisal system will be
immune to legal challenge
Copyright © 2016 Pearson Education, Inc.
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LO 12
Appraisal Interview
➢Achilles heel of entire evaluation process
➢Scheduling interview
➢Interview structure
➢Use of praise and criticism
➢Employee’s role
➢Concluding interview
Copyright © 2016 Pearson Education, Inc.
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LO 12
Scheduling the Interview
➢Employees typically know when their
interview should take place
➢Anxiety tends to increase if their
supervisor delays the meeting
Copyright © 2016 Pearson Education, Inc.
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LO 12
Interview Structure
➢Discuss employee’s performance
➢Assist employee in setting goals and
personal development plans for next
appraisal period
➢Suggesting means for achieving
established goals, including support from
manager and firm
Copyright © 2016 Pearson Education, Inc.
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LO 12
Conducting Separate Interviews
➢Conduct separate interviews for
discussing:
➢ Employee performance and development
➢ Pay
➢When pay emerges in interview, it tends to
dominate conversation
➢Performance improvement then takes a
back seat
Copyright © 2016 Pearson Education, Inc.
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LO 12
Use of Praise and Criticism
➢Praise is appropriate when warranted
➢Criticism, even if warranted, is especially
difficult to give
➢“Constructive” criticism is often not
perceived that way
Copyright © 2016 Pearson Education, Inc.
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LO 12
Employee’s Role
➢Should go through diary or files and
make notes of all projects, regardless
of their success
➢Information should be on appraising
manager’s desk well before review
Copyright © 2016 Pearson Education, Inc.
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LO 12
Concluding the Interview
➢Ideally, employees will leave interview
with positive feelings about
management, company, job, and
themselves
➢Cannot change past behavior; future
performance is another matter
➢Interview should end with specific and
mutually agreed-upon plans for
employee’s development
Copyright © 2016 Pearson Education, Inc.
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LO 13
Performance Appraisal and
a Country’s Culture
➢Special problems when translated into
different cultural environments
➢Chinese managers often have different
idea about what performance is than do
Western managers
➢Culture also plays significant role in
success and failure of performance
appraisal systems in the Middle East
Copyright © 2016 Pearson Education, Inc.
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All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the
United States of America.
Copyright © 2016 Pearson Education, Inc.
7-66
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