Appraising and Managing Performance

Appraising and Managing Performance

Chapter Outline

•      Why Organizations Conduct Performance Appraisals

•      The Performance Appraisal Process

•      Methods for Appraising Performance

•      Understanding the Limitations of Performance Appraisals

•      Performance Management and Providing Feedback

Chapter Outline (cont’d)

•      Performance Management and Follow-Up Measures

•      Evaluating the Performance Appraisal and Management Processes

•      Legal Issues in Performance Appraisal

Chapter Objectives

•      Describe the purposes of performance appraisal in organizations.

•      Summarize the performance appraisal process in organizations.

•      Identify and describe the most common methods that managers use for performance appraisal.

•      Discuss the limitations of performance appraisal in organizations.

Chapter Objectives (cont’d)

•      Describe how performance feedback should be provided by managers.

•      Identify and discuss frequently used performance appraisal follow-up measures.

•      Identify and describe the basic legal issues in performance appraisal.


•      Performance appraisal

–  The specific and formal evaluation of an employee conducted to determine the degree to which the employee is performing his or her job effectively

•      Performance management

–  The general set of activities carried out by the organization to change (improve) employee performance

Why Organizations Conduct
Performance Appraisals

•      Both managers and employees tend to be dissatisfied with performance appraisals.

•      The fact that performance appraisals are so widely used in spite of this dissatisfaction is an indicator that managers believe that performance appraisals are important and play a meaningful role.

The Importance of
Performance Appraisal

•      It provides a benchmark for assessing recruiting and selection processes.

•      It plays an important role in training.

•      It should be fundamentally linked to the compensation system.

•      It provides legal documentation.

•      It plays a role in employee motivation and development.

•      It provides valuable and useful information for HR planning.

Goals of Performance Appraisal

•      Provide a valid and reliable measure of employee performance along all relevant dimensions.

•      Provide useful and appropriate information for the organization with regard to HR planning, recruiting and selection, compensation, training, and the legal context.

•      The ultimate goal is to improve performance on the job.

The Performance Management Process

The Performance Management Process (cont’d)

The Performance Appraisal Process

•      The role of the organization

–  Develop the process

–  Determine how the information will be used

–  Determine timing

–  Ensure that performance standards and clear and specific for managers and employees

The Performance Appraisal Process (cont’d)

•      The Role of the Rater

–   Compare performance information with standards

–   Consider the context of performance so that extenuating conditions can be considered

–   Communicate standards to the ratee

–   Collect information about behaviors and translate that into ratings

–   Communicate results and consequences to the ratee

–   Prepare the ratee to perform at desired levels

The Performance Appraisal Process (cont’d)

•      The Role of the Ratee

–  Have a clear and unbiased view of his or her performance

–  Have information about performance

–  Be receptive to feedback

Sources of Information for
Performance Appraisal

360-Degree Feedback

•      An approach to performance appraisal that involves gathering performance information from people on all sides of the manager—above, beside, below, and so forth

•      Feedback from different sources is likely to be inconsistent.

•      This approach is potentially helpful, especially when used for feedback purposes only.

Who Should Be Rated?

•      With work teams, the organization must decide whether to evaluate individual performance or team performance.

Methods for Appraising Performance

•      Simple ranking method

–  Having the manager rank-order, from top to bottom or from best to worst, each member of a particular work group or department

•      Paired comparison method

–  Comparing each individual employee with every other individual employee, one at a time

Methods for Appraising Performance (cont’d)

•      Forced distribution method

–  Grouping employees into predefined frequencies of performance ratings

•      Graphic rating scale

–  A statement or question about some aspect of an individual’s job performance

Example of Graphic Rating Scales

Methods for Appraising Performance (cont’d)

•      Critical incident method

–  Using instances of especially good or poor performance on the part of the employee

•      Behaviorally Anchored Rating Scales (BARS)

–  Appraisal systems that represent a combination of the graphic rating scale and the critical incident method

Behaviorally Anchored Rating Scales

Methods for Appraising Performance (cont’d)

•      Behavioral Observation Scales (BOS)

–  Use critical incidents like BARS but use substantially more critical incidents to define specifically all the measures necessary for effective performance

•      Goal-based or management-by-objectives (MBO)

–  Based largely on the extent to which individuals meet their personal performance objectives

Which System Is Best?

•      It is difficult to suggest which system is best because it is difficult to predict how a set of employees will react to a given system.

Understanding the Limitations of Performance Appraisals

•      Contextual performance

–  Tasks an employee does on the job that are not required as part of the job but that still benefit the organization in some way

•      Projection

–  The tendency to see in others characteristics that we ourselves have and that we think contribute to effectiveness

Understanding the Limitations of Performance Appraisals (cont’d)

•      Contrast errors

–  Occurs when we compare people against one another instead of against an objective standard

•      Distributional error

–  Occurs when the rater tends to use only one part of the rating scale

–  Can be severity, leniency, or central tendency

Understanding the Limitations of Performance Appraisals (cont’d)

•      Halo error

–  Occurs when one positive performance characteristic causes the manager to rate all other aspects of performance positively

•      Horns error

–  Occurs when the manager downgrades other aspects of an employee’s performance because of a single performance dimension

Understanding the Limitations of Performance Appraisals (cont’d)

•      Organizations should work to reduce rating error

–  Train managers to overcome weaknesses (rater-accuracy training)

–  Reward raters for doing a good job in performance appraisal

–  Punish raters who do not take the task seriously

–  Convince raters that it is in their best interest to do the best job they can in appraising employee performance

Performance Management and
Providing Feedback

•      After the appraisal is completed, the next major activity is the provision of feedback, coaching, and counseling.

•      Performance appraisals tend to focus on negatives and, as a result, managers may have a tendency to avoid giving feedback because when employees hear negative feedback they may be angry, hurt, discouraged, or argumentative.

Performance Management and
Providing Feedback (cont’d)

•      If employees are not told about their shortcomings, they have no reason to try to improve and have no guidance concerning how to improve.

•      It is critical that the rater follow-up the appraisal by providing feedback to the employee.

The Feedback Interview

•      Provide feedback on a regular, ongoing basis.

•      Have the individual appraise his or her own performance before an appraisal interview.

•      Encourage participation and two-way communication.

•      The manager should try to balance negative and positive feedback.

•      The manager should take a developmental and problem-solving orientation to the process.

•      Conclude with a future-oriented discussion.

Archiving Performance Appraisal
and Management Results

•      The results of the performance appraisal should be stored so that the records can be attained and referred to later.

•      It is important that the manager have access to this information when the next performance appraisal is completed.

•      Archiving results is important in terms of equal employment opportunity issues.

Performance Management and
Follow-Up Measures

•      Effective performance management involves some type of reward to employees who meet goals or improve their performance.

•      There are many types of rewards that can be used.

•      When performance is deficient corrective measures should take place such as training and development.

Evaluating the Performance Appraisal and Management Process

•      Performance appraisal feeds into the performance management process, and because the ultimate goal of this process is to improve performance on the job, managers should be able to see real improvements in organizational performance if the process is working.

Legal Issues in Performance Appraisal

•      When performance appraisals are used as the basis for human resource decisions, they are considered the same as any other test under law.

•      Appraisals that show evidence of disparate impact must be validated the same as any selection technique.