Mgmt 383

1. Mgmt 383 Chapter 11 Performance Management and Appraisal Spring 2009

2. Performance Management • Performance Management – the process used to identify, measure, communicate, develop, and reward employee performance. • Ties organizational strategies to individual performance. • Communicates performance expectations. • Documents performance for personnel actions. • Provides rewards and incentives for performance.

3. Global Cultural Differences In Performance Management • Problems: • In some culture managers do not give employees direct feedback. • High respect for authority may preclude MBO styles of appraisal. • 360° Degree appraisal are inappropriate in some cultures. • Cultural customs tied to formal meetings must be observed. • Coffee and pastries • Alcoholic beverages

4. Types of Performance Information • Behavior-based: focuses on specific behaviors related to job success. • Verbal communication skills for sales personnel. • Timeliness of responses. • Decisiveness. • Results-based: focuses on employee’s accomplishments • Sales made during rating period. • Actual cost reductions. • Reduction of grievances

5. Types of Performance Information • Objective Performance Measures– measurable, observable work-related outcomes. • Quantity. • Quality. • Timeliness. • Attendance. • Subjective Performance Measures – behaviors or outcomes that require judgment on the part of the evaluator. • Supervisor/subordinate relations. • Appearance (in some instances). • Attitude.

6. Performance Appraisal • That part of performance management that evaluates how well employees do their jobs as compared to a set of performance standardsand provides performance feedback to the employee. • Performance standards – Expected levels of performance • In order to be effective performance standards must be communicated. • Your employees are not going to know what is expected of them by osmosis – R.G. Robinson. • Remember, the person who ultimately controls the employee’s performance is the employee.

7. Administrative Uses of Performance Appraisals • Compensation • Promotions • Dismissals (Terminations) • Downsizing • Layoffs • Disciplinary actions

8. Developmental Uses of Performance Appraisals • Identifying personal strengths • Identifying personal weakness (areas requiring change) • Training Needs • Development Needs • Career Planning

9. Uses of Performance Appraisals in HRM • If for no other reason, performance appraisal should be conducted to provide job incumbents with feed back!

10. Two Basic Forms of Performance Appraisals • Formal Appraisal - a systematic written evaluation. • Important work-related documentation. • Usually occurs in 6 to 12 month cycles. • Informal Appraisal - a continuous process that is conducted every time the supervisor thinks it is necessary. • Prevents the formal appraisal from being a surprise.

11. Timing of Formal Appraisals • The most common model requires a formal appraisal every 6 to 12 months. • Probationary employees are usually required to have a formal appraisal at the end of their probationary period (60 to 90 days). • The manager presents the formal appraisal face-to-face with the employee.

12. Elements of a Legal Performance Appraisal System (1)The performance appraisal criteria is based on job analysis. (2)Must be validated (job-related). (3)Formal evaluation criteria should limit managerial discretion. (4)There should be documentation of the appraisal activeities. (5)The rater should have knowledge of and contact with the ratee.

13. Elements of a Legal Performance Appraisal System (6)Raters should be trained in conducting appraisals. (7)Should use more than one rater. (8)Counseling should be available to help employee in improving performance.

14. Who Conducts the Performance Appraisals • Supervisor rates employees (most common). • Employees rate supervisor • Team/Peer members rate each other • Employee rate themselves • Outside sources rate the employees • Multisource (360°) appraisal

15. Supervisor Rates Employees • Conditions necessary for accuracy: • Rating must be based on actual performance. • Standards must be consistently applied. • Two-way communication must be permitted during the performance interview.

16. Supervisor Rates Employees Disadvantages • See rater error. • Supervisor may not take the evaluation seriously. • Time constraints. • Conflict avoidance. • Fails to see any benefit in it. • Supervisor may not observe all behaviors or outcomes.

17. Employees Rate Supervisor Advantages • Identifies supervisors who have good supervisor/subordinate relationships. • Encourages supervisors to be more responsive to subordinates. • Encourages coaching leadership styles.

18. Employees Rate Supervisor Disadvantages • Negative reaction by supervisors • Supervisors may become more concerned about placating subordinates than achieving organizational goals. • Subordinates may not provide an accurate rating. • Fear of reprisal. • Desire to retaliate against the Boss.

19. Team/Peer Evaluations • May “go easy” on coworkers to avoid conflict. • May crucify those group members who do not conform to group norms.

20. Employee Self-Ratings • May be too self-effacing. • May be too lenient on themselves and inflate their evaluations.

21. Outside Raters • Outside Raters- evaluation is done by parties outside the organization and its hierarchy. • Customers/clients. • College Presidents are often evaluated in this manner.

22. Multisource (360°) Appraisal • Multisource (360°) Appraisal- used primarily to evaluate key management personnel. • Supervisor • Peers • Subordinates • Customers • Self • Warning: (360°) appraisals can merely multiply the sources of rater error.

23. Tools for Appraising Performance • Category Ratings • Checklist • Graphic Rating Scales • Comparative Ratings • Ranking • Paired Comparisons • Forced Distribution

24. Tools for Appraising Performance • Narrative Ratings • Critical Incident Method • Essay Method • Field Review • Behavioral/Objectives Methods • BARS • MBO

25. Checklist (Category Ratings) • Checklist- a list of descriptions that are checked when they represent or approximate the employees performance. • Each description can be weighted based upon its importance to the job. Problem: the descriptions can be interpreted differently by different raters.

26. Checklist (Category Ratings) • Job Knowledge: Demonstrates knowledge and skill necessary to perform job effectively. □ Exceeds expectations □ Meets expectations □ Needs improvement • Job Judgment: Demonstrates maturity in problem solving and in dealing with people. □ Exceeds expectations □ Meets expectations □ Needs improvement • Teamwork: Works well with other employees. □ Exceeds expectations □ Meets expectations □ Needs improvement

27. Graphic Rating Scales(Category Ratings) Graphic Rating Scales- performance is rated along a Likert scale. Makes Sound Decision: Poor Below Average Average Above Average Outstanding Problems: What does “outstanding” mean? Performance dimensions are too open to interpretation (Makes Sound Judgements) 1 2 3 4 5

28. Ranking(Comparative Ratings) • Ranking- ratees are arranged from highest to lowest based upon performance. • Problems: • Intervals are not consistent (is the interval the same between the 2nd and 3rd employees as the 1st and 2nd?). • Encourages global (overall) ratings. • Difficult to manage with large groups.

29. Paired Comparisons(Comparative Ratings) • Paired Comparisons- each employee is compared and rated against each coworker. • Problems: • Very difficult to manage with large groups. N(n-1)10(10-1) 20(20-1) 2 2 2 = 45 = 190

30. Forced Distribution(Comparative Ratings) • Forced Distribution • Excellent 10% • Good 20% • Average 40% • Marginal 20% • Unsatisfactory 10% • When you ask for a curve, you are asking for a forced distribution. • They always result in contrast error.

31. Critical Incident Method(Narrative Ratings) (1)Create a file for each employee. Because of the sensitive nature of the materials kept in the file, ensure that access is limited to you. (2)Counsel each employee as to what performance standards you expect of them. Also convey individual performance goals for each employee.

32. Critical Incident Method(Narrative Ratings) (3)Record "critical incidents" throughout the evaluation period. A "critical incident" is any workplace behavior that falls below the performance standards, and any behavior that achieves or exceeds performance goals. • Employee’s name. • Date. • Time. • Brief description of the critical incident. • Recommended action.

33. Critical Incident Method(Narrative Ratings) (4)It is extremely important that in addition to recording the critical incident, you take the appropriate action. In the case of performance failure (not meeting the standard), corrective action is suggested. In the event of the employee exceeding expectations (meeting or exceeding a performance goal), the employee is praised or rewarded.

34. Critical Incident Method(Narrative Ratings) (5)At the end of the evaluation program period, collate each employee's critical incidents for the period into two categories: poor performance and exceptional performance. (6)Use the employee's critical incidents to develop a picture of the employee's entire performance. Consider the following: • Trends and patterns. • Corrected behavior. • Isolated incidents. • Explanations for poor performance.

35. Critical Incident Method(Narrative Ratings) Critical Incident Date__________ Name________________________ Location & Time____________________________________________________________ Description of Incident________________________ ________________________________________________________________________________________________ Corrective Action_______________________

36. Essay and Field Review Methods (Narrative Ratings) • Essay Method- overly dependent on the rater’s writing skills. • Field Review- HR Department conducts a structured interview with the supervisor about each employee’s performance. • Completed evaluation is reviewed by the supervisor. • It is time-consuming but it also enhances consistency.

37. Behaviorally Anchored Rating Scales (BARS) Identify Basic Job Responsibilities Assign Anchors to Each Job Dimension Assign Anchors a Point on a Scale Ensure a Scale is Assigned to Each Job Dimension Develop Job Dimensions (critical job activities)

38. Behaviorally Anchored Rating Scales (BARS) • Jobs are divided intoessential job dimensions(i.e., course organization, attitude toward students, etc.). • Performance behavior of each job dimension is evaluated on apoint scale. • Each point on the scale is tied to a short descriptive statement of behavior called ananchor.

39. Behaviorally Anchored Rating Scales (BARS)

40. Behaviorally Anchored Rating Scales (BARS) • Problems: • Expensive. • Time consuming. • Must be customized to each job. • Cumbersome in firms with numerous positions.

41. Management by Objectives (MBO) Corporate Objectives Department Objectives Supervisor Individual Performance Subordinates Objectives Action Plan Evaluation & Feedback

42. Management by Objectives (MBO) • Problems: • No benefit for jobs over which the employee has no control (i.e., assembly line work, teams, etc.). • Problem with subordinate inputs: • Understate capabilities. • Overstate capabilities.

43. Rater Error • Recency Error- most raters can only recall an employees last 30 to 60 days of performance (Critical Incident Method can reduce this error). • Primacy Error– the antithesis of recency error, information received first gets the most weight. (Initial impressions) • Central Tendency- rating all subordinates as average. • Common to Graphic Rating Scales when comments must be provided for below or above average ratings.

44. Rater Error • Leniency Error- everyone is rated above average (usually done to reduce or avoid conflict). • Strictness Error- rating all subordinates as lower than their actual performance indicates. • Rater Bias- personal prejudices cloud the evaluation (women are perceived as passive leaders, e.g.).

45. Rater Error • Halo Effect- one (or a few) characteristic the ratee possesses is generalized to the employee’s entire performance evaluation. • A negative halo is sometimes called the horns effect. • Contrast Error (Varying Standards)- rating employees performing similar jobs relative to one another rather than to established performance standards. • Similar performance is rated differently • A problem of all comparative methods.

46. Rater Error • Similar to Me/Different from Me– employees are compared to the rater, based on the similarity of their characteristics. • Sampling Error– rater only sees a small proportion of the employee’s performance. Example, I only see the 10% of your work that was error-ridden and not the 90% that was error-free.

47. Positive Hints for Raters • Prepare in advance • Focus on employee performance (not the employee) • Be specific about the reasons for the rating • Provide specific step to be taken for improvement • Consider how you can support improved performance • Reinforce desired behaviors • Focus on future behaviors

48. Things for Raters to Avoid • Don’t do all the talking (listen) • Don’t lecture the employee • Don’t mix performance appraisal and salry and promotion issues • Don’t concentrate only on negative behavior • Avoid “harping” on a failure • Don’t feel it’s necessary for both parties to agree on all points • Don’t compare the party to others