Week 7: Performance Appraisal

1. Week 7: Performance Appraisal Agenda for Today • Understand the elements of a performance management system • Understand the uses and criteria of effective performance appraisals • Understand the different methods of appraising performance and identify some common errors • In-class exercise: Performance Appraisal Interview Role Play (from Nkomo case book)

2. Purpose of Performance Appraisal • Organization’s Perspective: • Communication of strategic goals & employer expectations • Feedback to organization whether job requirements are met • Documenting satisfactory and unsatisfactory performance • Differentiate system from individual problems • Develop plans to maintain and improve performance • Reinforce values and culture of organization • Employee’s Perspective: • Communicate employee expectations • Monitor career and professional development • Reinforcement and feedback

3. Uses of Performance Appraisal • Administrative • Comparison of performance levels across employees and within employee • Compensation decisions (wage & salary adjustments) • Staffing decisions: promotions, demotions, transfers, layoffs • Evaluation of recruitment, selection & placement systems • HR planning; determining relative worth of jobs (job eval.) • Criterion for validation of selection devices • Developmental • Reinforce and sustain individual’s performance and behavior • Determine career progression goals • Training and development needs assessment • Job redesign and TQM • Improve manager/employee relationship

4. Define Performance: What is expected of people. Goal-setting: Set specific, challenging goals (On an avg. productivity increases by 10% using goal-setting) Measurement: Measure the extent to which goals are accomplished Assessment: Assess progress toward goals Facilitate Performance: Eliminate roadblocks to successful performance. Eliminate obstacles (e.g., poorly maintained equipment, inefficient work spaces and methods) Provide adequate resources: Capital, material, human resources & social support Carefully select people: P-J fit. Elements of a Good Performance Management System • Encourage Good Performance: • By providing sufficient amount of rewards that people value • By providing rewards in a timely and fair manner

5. Criteria for a Good Performance Appraisal • Clearly define & communicate performance standards • What are Performance Standards? • derived from job analysis, reflected in job descriptions & job specifications • translate organizational goals & objectives into job requirements; convey acceptable & unacceptable levels of performance to employees • Performance standards should capture entire range of employee’s responsibilities: performance criteria should not be deficient • Performance criteria should not be contaminated • Performance standards should be reliable and valid • Performance standards should be free from bias

6. Strategic Relevance: Performance standards linked to org. goals & competencies Effective Appraisal Program Criterion Contamination: Elements that affect appraisal measures that are not part of actual performance Strategies and Competencies Performance Measures Actual Performance Zone of Valid Assessment Criterion Deficiency:Aspects of actual performance that are not measured Reliability: Consistent measurement across raters and/or over time

7. Who Conducts the Performance Appraisal? • Supervisors • Subordinates • Self • Peers • Outside Sources (customers, vendors) • Team • Multisource (360 degree feedback) • Timing: How often? Annually, biannually, more frequently for new employees

8. Performance Criteria and Approaches • Criteria: • Trait-based: focus on abilities, personal characteristics (e.g., graphic rating scales, mixed standard scales, forced choice method, essay method) • Behavior-based: focus on specific, well-defined on-the-job behaviors (e.g., critical incident method, behavioral checklist, BARS, BOS) • Results (or Outcome) based: focus on “bottom line” associated with work (e.g., productivity measures, MBO) • Approaches: • Category Rating Methods (Common perf. standards approach) • Goals and Objectives: MBO (Individual/ Absolute judgments) • Comparative Methods (Ranking/Relative judgment approach)

9. Evaluation Against Common Performance Standards • Graphic Rating Scales • Oldest and most widely used method • Performance rated on selected traits, behaviors, or outputs • Scales range from low to high • Behavioral Checklist Method • Rater give adjectives, behavioral statements – check off most representative for the employee • Forced-Choice Method • Rater has to choose from pair of statements that appear to be equally favorable/unfavorable, but distinguish top performers • Problems: • Ambiguous traits or behaviors • Traits may overlap • Items equally weighted, but how are they related to job?

10. Common Performance Standards (contd.) • Behavioral Methods: • Behaviorally Anchored rating Scales (BARS) • Behavior Observation Scale (BOS) • Both based on job analysis and critical incident technique • Procedure: • Committee (subordinates and supervisor) identify job dimensions based on job analysis • Critical incidents developed for each dimension • Incidents used as anchors for scale • Second group rates each incident as a cross-check • Final version uses items agreed upon by both groups

11. Evaluation against Self: MBO Employee and manager review job description They develop specific standards of performance They agree on a set of performance objectives/goals to be achieved during a specified period of time Evaluation and feedback Set new performance objectives Useful for employee development in management positions, but equity issues with high performers Evaluation Against Others: Ranking Compared directly against one another Ranked best to worst Paired Comparison All possible pairs formed Which individual in each pair is a better performer No. of times chosen Forced Distribution Force a certain percentage of employees into a perf. category Useful for promotions, but limited use for compensation, employee development and feedback Evaluation Against Self and Others (Relative)

12. Errors in Performance Rating • Freedom from bias involves eliminating rating errors • Central Tendency Errors: most employees rated average • Failure to observe (or lack of knowledge) of employee perf. • Ambiguous description of performance dimensions • Organizational constraints against giving high or low ratings • Difficulty with giving negative feedback • Leniency Errors: most rated “outstanding” • Attempt to make everyone happy (indicates conflict aversion) • High evals. used to justify pay increases for avg. performers • End up losing truly outstanding performers • Severity Errors: rated more unfavorably than warranted • May be excuse for pay cuts; loss of morale & high performers • Contrast Errors: Rate according to others’ perf. rather than performance standards • Halo Errors (positive or negative characteristic) • Good or poor rating in one category influences others

13. Rater Errors (contd.) • Primacy Effect • First impressions override subsequent information • New information is distorted to fit first impressions • Recency Effect • Most recent behaviors predominate in influence • Avoid by keeping regular perf. logs & doing frequent appraisals • Similar/Dissimilar to Me Bias • Inflate/depress evals. based on mutual personal connection/disconnection • Similarity/dissimilarity based on race, gender, etc may result in discrimination • Training, observation of other managers to reduce errors • Influence of Liking/Disliking • Organizational Politics

14. Legal Issues of Fairness in Appraisals • Performance ratings must be job-related with performance standards developed through job analysis • Rating content should be valid • Employees must be given written copy of their job standards in advance of appraisals • Raters must be able to observe the behavior they are rating: important to have a measurable standard • Supervisors should be trained to use appraisal form correctly • Appraisals should be discussed openly with employees; corrective guidance offered to help improve performance • Appeals procedure should be established to enable employees to express disagreement with appraisal • Understand and eliminate race bias in ratings

15. Types of Performance Appraisal Interviews • Tell and Sell Interview: • “Let me tell you how you did and convince you to change.” • Objective: Give feedback and persuade employee to change/improve • Outcome: directive, one-sided; can lead to defensiveness, resentment & frustration; may suit new employees • Tell and Listen Interview: • “Let me tell you how you did and then hear your side.” • Objective: Give feedback and allow employees to react • Outcome: Two-way communication; opportunity to release frustrated feelings will help reduce/remove such feelings • Problem-Solving Interview: • “Let’s figure this out together.” • Objective: Stimulate growth and development • Outcome: Mutual learning

16. Conducting Effective Performance Appraisal Interviews • Prepare in advance • Separate administrative from developmental appraisal • Focus on limited number of topics • Support appraisal with facts • Consider your role in subordinate’s performance • Ask for a self-assessment • State purpose of interview at the beginning • Invite participation (really “listen”) • Indicate specific areas of good performance and those that need improvement (Avoid “sandwich technique”) • Emphasize strengths to build on (rather than weakness to overcome) • Suggest more acceptable/effective behaviors

17. Effective Appraisals (contd.) • Focus on performance not personality: change the behavior not the person • Focus on solving problems • Be supportive • Set attainable work goals and action plans • Summarize all major points at the end of the interview: • How current job relates to future promotions • Performance levels necessary for promotion • How they can improve and what results are expected by what time • How organizational goals relate to their job • Follow up Day to Day: focus on continuous improvement on an ongoing basis