Chapter 16 Appraising and Rewarding Performance

1. 1 Chapter 16Appraising and Rewarding Performance

2. 2 Performance Appraisal Performance appraisal is a process that involves communicating to an employee how well he/she is performing the job Ideally, this also involvesestablishing a plan forimprovement

3. 3 Performance Appraisal Performance appraisals are generally handled in one of two ways: Via an informal system, with no formal procedures, methods, or times Via a formal appraisal system Any supervisor’s comment about an employee’s performance is viewed by the employee as a form of appraisal

4. 4 What is Performance? Performance is how well an employee is fulfilling the requirements of the job It is determined by a combination of three factors: Effort: how hard a person works Ability: how capable a person is Direction: how well the person understands what is expected on the job To obtain an acceptable level of performance, all three factors must be present to some extent

5. 5 What is Performance? Performance should be evaluated on results achieved, not effort expended Performance factors outside employee control: Inadequate facilities and equipment Restrictive policies Lack of cooperation from others The supervisor should eliminate environmental factors that negatively impact performance

6. 6 What is Performance? The key to obtaining good performance is: Encouraging effort by employees Helping employees develop their abilities Clearly communicate what employees are expected to do on the job

7. 7 Job Descriptions and Specifications Two of the best ways to ensure that employees are properly directed: A job description states the characteristics of a job and the type of work required in the job A job specification states the qualifications necessary to do the job, including experience, training, education, knowledge, skills, and abilities

8. 8 Job Descriptions and Specifications A job description and job specification result from a job analysis Job analysis is the process of determining, through observation and study, the pertinent information regarding a specific job In most large organizations, job analyses, descriptions, and specifications are developed by the human resources department

9. 9 Job Descriptions and Specifications When developing job descriptions and specifications, carefully study each job to ensure that it is described accurately The overriding purpose is to communicate what the employee is to do on the job Many organizations combine the job description and job specification into one document

10. 10 Performance Appraisal Defined The performance appraisal communicates how well a job is being done and how performance can be improved Appraisals are also used for: Wage and salary administration Promotions or demotions Transfers, layoffs, and discharges Counseling Human resource planning

11. 11 Performance Appraisal Defined Appraisal systems have three principal purposes: Improve employee performance in present job Prepare employee for future opportunities Provide a record of employee performance

12. 12 Appraisal System Benefits For the organization Provides an evaluation of the organization’s human resources Gives a basis for future human resource decisions Increases the potential for the present human resources to meet future needs Improves employee morale

13. 13 Appraisal System Benefits For the supervisor Presents a clearer picture of the employee’s understanding of job duties Allows supervisor input into employee development Improves employee morale and productivity Helps identify capable replacements for higher-level jobs within the work unit Helps identify future training needs

14. 14 Appraisal System Benefits For the employee Is allowed to present ideas for improvement Presents opportunity to change work behavior Lets employee know how the supervisor feels about current performance Assures employee of regular, systematic performance reviews Is an opportunity to discuss problem areas and design mutual solutions

15. 15 Performance Appraisal Methods Performance appraisals should be directly related to job success Creating measures of success can be difficult Job type can make measuring difficult Performance may be influenced by factors outside the employee’s control Using personal characteristics and other subjective factors is common, but has problems

16. 16 Performance Appraisal Methods Graphic rating scale Employee is rated on factors such as initiative, dependability, cooperativeness, and work quality Supervisors tend to evaluate everyone a little above average Provides the same information on all employees and is inexpensive to develop

17. 17 Performance Appraisal Methods Essay appraisals Supervisor writes a series of statements about an employee’s past performance, potential for promotion, strengths, and weaknesses Evaluations vary considerably from supervisor to supervisor Method depends on the writing skills of the supervisor

18. 18 Performance Appraisal Methods Checklist Supervisor records performance by checking yes or no to a series of questions Is easy to use Assembling the questions can be difficult and usually requires a different set for each job category

19. 19 Performance Appraisal Methods Forced-choice rating Supervisor chooses mot applicable from set of two statements Method attempts to eliminate bias by using statements where the supervisor cannot determine which answer is best May frustrate supervisors May be expensive to develop

20. 20 Performance Appraisal Methods Critical incident appraisals Supervisor keeps a written record of unusual incidents that show both positive and negative actions by an employee Employees should be given a chance to state their views Method is time consuming and tends to stress negative incidents

21. 21 Performance Appraisal Methods Work standards approach Establishes objective measures, such as number of pieced produced or sales quota Used more frequently for operative workers in production Standards must be fair, and viewed as such by the employees

22. 22 Performance Appraisal Methods Ranking methods Alternation: ranks employees from most to least valuable by alternatively selecting the most and least valuable out of a group Paired comparison: compares the performance of employee pairs to establish rankings Forced distribution: distributes employee performance according to a bell-shaped or normal curve

23. 23 Performance Appraisal Methods Management by objectives The supervisor and employee jointly agree on the employee’s work objectives and how they will be accomplished The employee’s appraisal is based on the degree to which the work objectives are accomplished

24. 24 Frequency of Performance Appraisals Appraisals should be done as frequently as necessary to let employees know how they are doing Many organizations require formal appraisals at least once a year Supervisors should do at least two or three reviews each year, in addition to the formal annual review New employees, or those being retrained, need more frequent appraisals

25. 25 Multi-Rater Assessment Also known as 360-degree feedback Managers, peers, customers, suppliers, and/or colleagues are asked to assess the employee The person being assessed also completes an evaluation questionnaire The human resources department provides the results to the employee, who gets to see how his/her opinion differs from the others

26. 26 Supervisor Biases in Performance Appraisals Leniency: grouping ratings at the positive end of the performance scale Central tendency: rating of all or most employees in the middle of the scale Recency error: occurs when the supervisor recalls only the events just prior to the appraisal Halo effect: a single prominent characteristic of an employee influences the supervisor’s judgment of all items in the appraisal

27. 27 Supervisor Biases in Performance Appraisals Personal preferences and prejudices can also cause errors in performance appraisals Supervisors tend to look for employee behaviors that conform to their biases First impressions can influence later judgments People tend to retain these impressions even when faced with contradictory evidence later

28. 28 Overcoming Biases in Appraisals The potential for biases in performance appraisals is great One way to overcome these biases is to refine the design of the appraisal method It is unlikely that instruments can be refined to the point of overcoming all obstacles A more promising approach is to improve the skills of raters

29. 29 Overcoming Biases in Appraisals Raters should receive training in: The appraisal method used by the company Rater biases and causes of those biases The importance of the rater’s role in the appraisal process The use of performance appraisal information The communication skills necessary to provide feedback to the employee

30. 30 Conducting Appraisal Interviews Communicating the appraisal: Provides a clear understanding of how the supervisor views the employee’s performance Clears up any misunderstanding about what is expected Establishes a program of improvement Improves the working relationship between the supervisor and the employee

31. 31 Conducting Appraisal Interviews The appraisal interview should be: Planned ahead of time Held in a private room Kept confidential Specific The employee should be asked for feedback

32. 32 Conducting Appraisal Interviews Questions to consider before the review On what will you compliment the employee? Which points do you intend to discuss? What reactions do you anticipate? Can you support the appraisal with facts? What help or corrective action will you offer? How will you gain acceptance of suggestions? What follow-up action will you take?

33. 33 Preparing for Your Appraisal Interview Evaluate your own performance Outline ways in which your boss can help you do a better job List any additional training you believe you need Suggest any changes that would make you more effective Develop a program for your self-improvement Outline your long-range plans

34. 34 Handling the Poor Performer Possible causes for an employee’s poor performance: Improper placement Poor training Poor communication Lack of motivation

35. 35 Handling the Poor Performer Alternatives for dealing with the poor performer Improve the employee’s performance Transfer the employee to a job that better fits his/her abilities Demote the employee to a job that can be handled Terminate the employee These alternatives are influenced by government regulations and unionization

36. 36 Handling the Poor Performer A supervisor who has decided that an employee’s performance is unacceptable should plan for an immediate interview Delaying the interview is unfair to both the employee and the organization Delaying can also increase the chance of litigation when action is finally taken

37. 37 Appraisal Interview with a Poor Performer Create a setting in which the employee can share his/her views and listen to what you say Be firm but fair Let the employee know exactly where he/she is weak and how to make improvements Get the employee to participate in setting goals for the present job If a transfer is in order, get the employee to participate in setting goals for the new job

38. 38 Appraisal Interview with a Poor Performer Reach an agreement on what is to be achieved and the deadline for achieving it Emphasize your availability for future talks and encourage the employee to come to you if problems remain or develop

39. 39 Performance Appraisal and the Law Title VII of the Civil Rights Act permits the use of a bona fide performance appraisal system Appraisal systems that have adverse effects for minorities, women, and older employees are not bona fide Evaluating employees by assuming or insisting that they match a stereotype is illegal

40. 40 Performance Appraisal and the Law To make performance appraisal systems more legally acceptable: Derive the content of the appraisal system from job analyses Emphasize work behaviors, not personal traits Ensure that the results of appraisals are communicated to employees Ensure that employees are allowed to give feedback during the appraisal interview

41. 41 Performance Appraisal and the Law Train managers to conduct proper evaluations Ensure that appraisals are written, documented, and retained Ensure that personnel decisions are consistent with performance appraisals

42. 42 Rewarding Performance Organizational rewards: all types of intrinsic and extrinsic rewards received as a result of employment by the organization Intrinsic rewards are internal to the individual and derived from involvement in work activities Extrinsic rewards are directly controlled and distributed by the organization and are more tangible

43. 43 Rewarding Performance Intrinsic Rewards Sense of achievement Feeling of accomplishment Informal recognition Job satisfaction Personal growth Status

44. 44 Rewarding Performance Compensation consists of the extrinsic rewards offered by the organization and includes: Base wage or salary Incentives or bonuses Any benefits received in exchange for work Benefits are rewards received because of employment with the organization Paid vacations, health insurance, retirement plans, among others

45. 45 Relating Rewards to Performance The free enterprise system is based on the premise that rewards should depend on performance Many extrinsic rewards do not lend themselves to being related to performance Examples include paid vacations, insurance plans, and paid holidays These rewards are often determined by organizational membership and seniority rather than performance

46. 46 Merit Pay Merit pay means basing an employee’s annual pay raise on his/her performance Many U.S. companies offer merit pay, but most do a poor job of linking pay and performance Surveys show that neither top management nor rank-and-file employees believe there is a positive link between performance and pay

47. 47 Linking Pay to Performance If relating rewards to performance is desirable, why isn’t it more widespread? It is not easy to measure performance accurately It requires discipline Many union contracts require that certain rewards be based on objective variables, such as seniority No successful formula for implementing a merit pay program has been developed

48. 48 Linking Pay to Performance Desirable preconditions include: Trust in management Absence of performance constraints Trained managers Good measurement systems Ability to pay Clear distinction among cost of living, seniority, and merit pay Well-communicated total pay policy Flexible reward schedule