Appraising and Improving Performance

1. © 2007 Thomson/South-Western.All rights reserved. Appraising and Improving Performance

2. © 2007 Thomson/South-Western. All rights reserved. 8–2 ObjectivesAfter studying this chapter, you should be able to: Explain the purposes of performance appraisals and the reasons they can sometimes fail. Identify the characteristics of an effective appraisal program. Describe the different sources of appraisal information. Explain the various methods used for performance evaluation. Outline the characteristics of an effective performance appraisal interview.

3. © 2007 Thomson/South-Western. All rights reserved. 8–3 Performance Appraisal and Other HRM Functions

4. © 2007 Thomson/South-Western. All rights reserved. 8–4 Performance Appraisal Programs Performance Appraisal A process, typically performed annually by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success. Performance management The process of creating a work environment in which people can perform to the best of their abilities.

5. © 2007 Thomson/South-Western. All rights reserved. 8–5 Performance Appraisal

6. © 2007 Thomson/South-Western. All rights reserved. 8–6 Figure 8–1 Purposes for Performance Appraisal

7. © 2007 Thomson/South-Western. All rights reserved. 8–7 Reasons Appraisal Programs Sometimes Fail Lack of top-management information and support Unclear performance standards Rater bias Too many forms to complete Use of the appraisal program for conflicting (political) purposes.

8. © 2007 Thomson/South-Western. All rights reserved. 8–8 Figure 8–2 Let Me Count the Ways . . .

9. © 2007 Thomson/South-Western. All rights reserved. 8–9 Figure 8–2 Let Me Count the Ways (cont’d) . . .

10. © 2007 Thomson/South-Western. All rights reserved. 8–10 Managerial Issues Concerning Appraisals There is little face-to-face discussion between the manager and the employee being appraised. The relationship between the employee’s job description and the criteria on the appraisal form isn’t clear. Managers feel that little or no benefit will be derived from the time and energy spent in the process, or they are concerned only with bad performances. Managers dislike the face-to-face confrontation of appraisal interviews.

11. © 2007 Thomson/South-Western. All rights reserved. 8–11 Managerial Issues Concerning Appraisals (cont’d) Managers are not sufficiently adept at rating employees or providing them with appraisal feedback. The judgmental role of appraisal conflicts with the helping role of developing employees. The appraisal is just a once-a-year event, and there is little follow-up afterward.

12. © 2007 Thomson/South-Western. All rights reserved. 8–12 Figure 8–3 Establishing Performance Standards

13. © 2007 Thomson/South-Western. All rights reserved. 8–13 Performance Standards Characteristics

14. © 2007 Thomson/South-Western. All rights reserved. 8–14 Are You Complying with the Law? Brito v Zia The Supreme Court ruled that performance appraisals were subject to the same validity criteria as selection procedures. Albemarle Paper Company v Moody The U.S. Supreme Court found that employees had been ranked against a vague standard, open to each supervisor’s own interpretation.

15. © 2007 Thomson/South-Western. All rights reserved. 8–15 Legal Guidelines for Appraisals Performance ratings must be job-related. Employees must be given a written copy of their job standards in advance of appraisals. Managers who conduct the appraisal must be able to observe the behavior they are rating. Supervisors must be trained to use the appraisal form correctly. Appraisals should be discussed openly with employees and counseling or corrective guidance offered. An appeals procedure should be established to enable employees to express disagreement with the appraisal.

16. © 2007 Thomson/South-Western. All rights reserved. 8–16 Figure 8–4 Alternative Sources of Appraisal

17. © 2007 Thomson/South-Western. All rights reserved. 8–17 Sources of Performance Appraisal Manager and/or Supervisor Appraisal done by an employee’s manager and reviewed by a manager one level higher. Self-Appraisal Appraisal done by the employee being evaluated, generally on an appraisal form completed by the employee prior to the performance interview. Subordinate Appraisal Appraisal of a superior by an employee, which is more appropriate for developmental than for administrative purposes.

18. © 2007 Thomson/South-Western. All rights reserved. 8–18 Sources of Performance Appraisal Peer Appraisal Appraisal by fellow employees, compiled into a single profile for use in an interview conducted by the employee’s manager. Why peer appraisals are used more often: Peer ratings are simply a popularity contest. Managers are reluctant to give up control over the appraisal process. Those receiving low ratings might retaliate against their peers. Peers rely on stereotypes in ratings.

19. © 2007 Thomson/South-Western. All rights reserved. 8–19 Sources of Performance Appraisal Team Appraisal based on TQM concepts, that recognizes team accomplishment rather than individual performance Customer Appraisal A performance appraisal that, like team appraisal, is based on TQM concepts and seeks evaluation from both external and internal customers

20. © 2007 Thomson/South-Western. All rights reserved. 8–20 Figure 8–5 Pros and Cons of 360-Degree Appraisal

21. © 2007 Thomson/South-Western. All rights reserved. 8–21 Figure 8–5 Pros and Cons of 360-Degree Appraisal (cont’d)

22. © 2007 Thomson/South-Western. All rights reserved. 8–22 360-Degree Performance Appraisal System Integrity Safeguards Assure anonymity. Make respondents accountable. Prevent “gaming” of the system. Use statistical procedures. Identify and quantify biases.

23. © 2007 Thomson/South-Western. All rights reserved. 8–23 Training Performance Appraisers

24. © 2007 Thomson/South-Western. All rights reserved. 8–24 Rater Errors Error of Central Tendency A rating error in which all employees are rated about average. Leniency or Strictness Error A rating error in which the appraiser tends to give all employees either unusually high or unusually low ratings. Recency Error A rating error in which appraisal is based largely on an employee’s most recent behavior rather than on behavior throughout the appraisal period.

25. © 2007 Thomson/South-Western. All rights reserved. 8–25 Rater Errors Contrast Error A rating error in which an employee’s evaluation is biased either upward or downward because of comparison with another employee just previously evaluated. Similar-to-Me Error An error in which an appraiser inflates the evaluation of an employee because of a mutual personal connection.

26. © 2007 Thomson/South-Western. All rights reserved. 8–26 Rater Errors: Training and Feedback Rating Error Training Observe other managers making errors Actively participate in discovering their own errors Practice job-related tasks to reduce the errors they tend to make Feedback Skills Training Communicating effectively Diagnosing the root causes of performance problems Setting goals and objectives

27. © 2007 Thomson/South-Western. All rights reserved. 8–27 Highlights in HRM 1

28. © 2007 Thomson/South-Western. All rights reserved. 8–28 Performance Appraisal Methods

29. © 2007 Thomson/South-Western. All rights reserved. 8–29 Trait Methods Graphic Rating-Scale Method A trait approach to performance appraisal whereby each employee is rated according to a scale of individual characteristics. Mixed-Standard Scale Method An approach to performance appraisal similar to other scale methods but based on comparison with (better than, equal to, or worse than) a standard.

30. © 2007 Thomson/South-Western. All rights reserved. 8–30 Highlights in HRM 2

31. © 2007 Thomson/South-Western. All rights reserved. 8–31 Highlights in HRM 3

32. © 2007 Thomson/South-Western. All rights reserved. 8–32 Trait Methods Forced-Choice Method Requires the rater to choose from statements designed to distinguish between successful and unsuccessful performance. 1. ______ a) Works hard _____ b) Works quickly 2. ______ a) Shows initiative _____ b) Is responsive to customers 3. ______ a) Produces poor quality _____ b) Lacks good work habits Essay Method Requires the rater to compose a statement describing employee behavior.

33. © 2007 Thomson/South-Western. All rights reserved. 8–33 Behavioral Methods

34. © 2007 Thomson/South-Western. All rights reserved. 8–34 Behavioral Methods Critical Incident Method Critical incident An unusual event that denotes superior or inferior employee performance in some part of the job The manager keeps a log or diary for each employee throughout the appraisal period and notes specific critical incidents related to how well they perform. Behavioral Checklist Method The rater checks statements on a list that the rater believes are characteristic of the employee’s performance or behavior.

35. © 2007 Thomson/South-Western. All rights reserved. 8–35 Behavioral Methods Behaviorally Anchored Rating Scale (BARS) Consists of a series of vertical scales, one for each dimension of job performance; typically developed by a committee that includes both subordinates and managers. Behavior Observation Scale (BOS) A performance appraisal that measures the frequency of observed behavior (critical incidents). Preferred over BARS for maintaining objectivity, distinguishing good performers from poor performers, providing feedback, and identifying training needs.

36. © 2007 Thomson/South-Western. All rights reserved. 8–36 Highlights in HRM 4

37. © 2007 Thomson/South-Western. All rights reserved. 8–37 Highlights in HRM 5

38. © 2007 Thomson/South-Western. All rights reserved. 8–38 Results Methods Productivity Measures Appraisals based on quantitative measures (e.g., sales volume) that directly link what employees accomplish to results beneficial to the organization. Criterion contamination Focus on short-term results Management by Objectives (MBO) A philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager.

39. © 2007 Thomson/South-Western. All rights reserved. 8–39 Figure 8–6 Performance Appraisal under an MBO Program

40. © 2007 Thomson/South-Western. All rights reserved. 8–40 Highlights in HRM 6

41. © 2007 Thomson/South-Western. All rights reserved. 8–41 Highlights in HRM 7

42. © 2007 Thomson/South-Western. All rights reserved. 8–42 The Balanced Scorecard The appraisal focuses on four related categories Financial, customer, processes, and learning Ensuring the method’s success Translate strategy into a scorecard of clear objectives. Attach measures to each objective. Cascade scorecards to the front line. Provide performance feedback based on measures. Empower employees to make performance improvements. Reassess strategy.

43. © 2007 Thomson/South-Western. All rights reserved. 8–43 Summary of Appraisal Methods Trait Methods Advantages Are inexpensive to develop Use meaningful dimensions Are easy to use Disadvantages Have high potential for rating errors Are not useful for employee counseling Are not useful for allocating rewards Are not useful for promotion decisions

44. © 2007 Thomson/South-Western. All rights reserved. 8–44 Summary of Appraisal Methods (cont’d) Behavioral Methods Advantages Use specific performance dimensions Are acceptable to employees and superiors Are useful for providing feedback Are fair for reward and promotion decisions Disadvantages Can be time-consuming to develop/use Can be costly to develop Have some potential for rating error

45. © 2007 Thomson/South-Western. All rights reserved. 8–45 Summary of Appraisal Methods (cont’d) Results Methods Advantages Have less subjectivity bias Are acceptable to employees and superiors Link individual to organizational performance Encourage mutual goal setting Are good for reward and promotion decisions Disadvantages Are time-consuming to develop/use May encourage short-term perspective May use contaminated criteria May use deficient criteria

46. © 2007 Thomson/South-Western. All rights reserved. 8–46 Figure 8–7 Summary of Various Appraisal Methods

47. © 2007 Thomson/South-Western. All rights reserved. 8–47 Appraisal Interviews

48. © 2007 Thomson/South-Western. All rights reserved. 8–48 Appraisal Interview Guidelines

49. © 2007 Thomson/South-Western. All rights reserved. 8–49 Figure 8–8 Factors That Influence Performance

50. © 2007 Thomson/South-Western. All rights reserved. 8–50 Highlights in HRM 9

51. © 2007 Thomson/South-Western. All rights reserved. 8–51 Key Terms behavior observation scale (BOS) behaviorally anchored rating scale (BARS) contrast error critical incident customer appraisal error of central tendency essay method forced-choice method graphic rating-scale method leniency or strictness error management by objectives (MBO) manager and/or supervisor appraisal mixed-standard scale method peer appraisal performance appraisal performance management recency error self-appraisal similar-to-me error subordinate appraisal team appraisal