Psy 9 – IO Psychology Step 2: Identify Environmental and
Cultural Limitations
Chapter 7: Evaluating Employee
Performance
The Performance Appraisal Process
1. Determine purpose of appraisal
2. Identify environmental and cultural
limitations
3. Determine who will evaluate
performance
4. Select the best appraisal methods
to accomplish goals
5. Train raters
6. Observe and document
performance
7. Evaluate performance
8. Communicate appraisal results to
employees
9. Make personnel decisions
10. Monitor the legality and fairness of
the appraisal process
Step 1: Determine the Reason for
Evaluating Employee Performance
 Forced-choice rating scale – a
method of performance appraisal
in which a supervisor is given
several behaviors and is forced to
choose which of them is most
typical of the employee.
A. Providing Employee Training
and Feedback
 Performance appraisal review –
a meeting between a supervisor
and a subordinate for the purpose
of discussing performance
appraisal results.
B. Determining Salary Increases
C. Making Promotion Decisions
 Peter Principle – the idea that
organizations tend to promote
good employees until they reach
the level at which they are not
competent – in other words, their
highest level of incompetence.
D. Making Termination Decisions
E. Conducting Personnel Research
Step 3: Determine Who Will Evaluate
Performance
 360-degree feedback – a
performance appraisal system in
which feedback is obtained from
multiple sources such as
supervisors, subordinates, and
peers.
 Multiple-source feedback – a
performance appraisal strategy in
which an employee receives
feedback from sources (e.g.,
clients, subordinates, peers other
than just his or her supervisor)
A. Supervisors
B. Peers
C. Subordinates (also called upward
feedback)
D. Customers
 Secret shoppers – current
customers who have been enlisted
by a company to periodically
evaluate the service they receive.
E. Self-Appraisal
Step 4: Select the Best Appraisal
Methods to Accomplish Your Goals
 Criteria – ways of describing
employee success.
A. Decision 1: Focus of the
Appraisal Dimensions
 Trait-Focused Performance
Dimensions – concentrates on
such employee attributes as
dependability, honesty, and
courtesy.
 Competency-Focused
Performance Dimensions –
concentrate on the employee’s
knowledge, skills, and abilities.
 Task-Focused Performance
Dimensions – organized by the
similarity of tasks that are
performed.
 Goal-Focused Performance
Dimensions – to organize the
appraisal on the basis of goals to
be accomplished by the employee.
 Contextual Performance – the
effort an employee makes to get
along with peers, improve the
organization, and perform tasks
that are needed but are not
necessarily an official part of the
employee’s job description.
B. Decision 2: Should Dimensions
Be Weighted?
C. Decision 3: Use of Employee
Comparisons, Objective
Measures, or Ratings
Employee Comparisons
 Rank order – a method of
performance appraisal in which
employees are ranked from best to
worst.
 Paired comparison – a form of
ranking in which a group of
employees to be ranked are
compared one pair at a time.
 Forced distribution method (also
called rank and yank) – a
performance appraisal method in
which a predetermined percentage
of employees are placed into a
number of performance categories.
Objective Measures
1. Quantity of Work
 Quantity – a type of objective
criterion used to measure job
performance by counting the
number of relevant job behaviors
that occur.
2. Quality of Work
 Quality – a type of objective
criterion used to measure job
performance by comparing a job
behavior with a standard.
 Error – deviation from a standard
of quality; also a type of response
to communication overload that
involves processing all information
but processing some of it
incorrectly.
3. Attendance
 Absenteeism
 Tardiness
 Tenure
4. Safety
Ratings of Performance
1. Graphic Rating Scale – a method
of performance appraisal that
involves rating employee
performance on an interval or ratio
scale.
2. Behavioral Checklists
 Contamination – the condition in
which a criterion score is affected
by things other than those under
the control of the employee.
 Comparison with Other
Employees
 Frequency of Desired Behaviors
 Extent to Which Organizational
Expectations Are Met
Evaluation of Performance
Appraisal Methods
Step 5: Train Raters
 Frame-of-reference training – a
method of training raters in which
the rater is provided with job-
related information, a chance to
practice ratings, examples of
ratings made by experts, and the
rationale behind the expert ratings.
Step 6: Observe and Document
Performance
 Critical incidents – a method of
performance appraisal in which the
supervisor records employee
behaviors that were observed on
the job and rates the employee on
the basis of that record.
  Documentation is important for
four reasons:
1. Documentation forces a
supervisor to focus on
employee behaviors rather
than traits and provides
behavioral examples to use
when reviewing performance
ratings with employees.
2. Documentation helps
supervisors recall behaviors
when they are evaluating
performance.
3. Documentation provides
examples to use when
reviewing performance ratings
with employees.
4. Documentation helps an
organization defend against
legal actions taken against it by
an employee who was
terminated or denied a raise or
promotion.
 Supervisors tend to remember
the following:
1. First impressions
2. Recent behaviors
3. Unusual or extreme behaviors
4. Behavior consistent with the
supervisor’s opinion
 Employee Performance Record
– a standardized use of the critical-
incident technique developed at
General Motors.
Step 7: Evaluate Performance
A. Obtaining and Reviewing
Objective Data
B. Reading Critical-Incident Logs
C. Completing the Rating Form
 Distribution errors – rating errors
in which a rater will use only a
certain part of a rating scale when
evaluating employee performance.
 Leniency error – a type of rating
error in which a rater consistently
gives all employees high ratings,
regardless of their actual levels of
performance.
 Central tendency error – a type
of rating error in which a rater
consistently rates all employees in
the middle of the scale, regardless
of their actual levels of
performance.
 Strictness error – a type of rating
error in which a rater consistently
gives all employees low ratings,
regardless of their actual levels of
performance.
 Halo error – occurs when a rater
allows either a single attribute or
an overall impression of an
individual to affect the ratings that
she makes on each relevant job
dimension.
 Proximity error – occurs when a
rating made on one dimension
affects the rating made on the
dimension that immediately follows
it on the rating scale.
 Contrast error – the performance
rating one person receives can be
influenced by the performance of a
previously evaluated person;
occurs between separate
performance evaluations of the
same person.
 Assimilation – a type of rating
error in which raters base their
rating of an employee during one
rating period on the ratings the
rater gave during a previous
period.
Low Reliability Across Raters
1. Raters often commit the rating
errors previously discussed (e.g.,
halo, leniency).
2. Raters often have very different
standards and ideas about the
ideal employee.
3. Two different raters may actually
see very different behaviors by the
same employee.
 Sampling Problems
 Recency effect
 Infrequent observation – the idea
that supervisors do not see most of
an employee’s behavior.
Cognitive Processing of
Observed Behavior
a. Observation of Behavior
 Factors affecting information
loss:
1. Observed behavior
2. Behavior placed in memory
3. Behavior processed
4. Behavior recalled
5. Behavior rated
b. Emotional State
 Stress – perceived psychological
pressure.
c. Bias
 Affect – feelings or emotion.
Step 8: Communicate Appraisal
Results to Employees
A. Prior to the Interview
 Allocating Time
 Scheduling the Interview
 Preparing for the Interview
B. During the Interview
 Feedback sandwich – the
negative feedback is sandwiched
between positive feedback.
 Fundamental attribution error –
to attribute others’ failure or poor
performance to personal rather
than situational factors.
Step 9: Terminate Employees
A. Employment-at-Will Doctrine –
the opinion of courts in most states
that employers have the right to
hire and fire an employee at will
and without any specific cause.
 Limitations to the employment-
at-will doctrine:
1. State law
2. Provisions of federal or state
law
3. Public policy/interest
4. Contracts
5. Implied contracts
6. Covenants of good faith and
fair dealing
 Employment-at-will statements –
statements in employment
applications and company manuals
reaffirming an organization’s right
to hire and fire at will.
B. Legal Reasons for Terminating
Employees
 Four reasons that an employee
can be legally terminated:
1. Probationary Period
2. Violation of Company Rules
(1) A rule against a particular
behavior must actually
exist.
(2) If a rule exists, a company
must prove that the
employee knew the rule.
(3) The ability of the employer
to prove that an employee
actually violated the rule.
(4) The extent to which the rule
has been equally enforced.
(5) The extent to which the
punishment fits the crime.
 Progressive discipline –
providing employees with
punishments of increasing severity,
as needed, in order to change
behavior.
3. Inability to Perform
4. Reduction in Force (Layoff)
C. The Termination Meeting
 Prior to the Meeting
1. To ensure that the legal
process has been followed.
2. To determine how much help, if
any, the organization wants to
offer the employee.
3. To schedule an appropriate
place and time for the meeting
to occur.
 During the Meeting
 After the Meeting
Step 10: Monitor the Legality and
Fairness of the Appraisal System

Prepared by: Mary Therese C. Lasanas

AB Psychology – 2