Appraising and

Improving
Performance

Nasr Shaker

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You can’t manage
what you don’t
understand.
You don’t
understand what you
don’t measure.
What gets measured
gets done.
What gets measured
gets rewarded.

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Performance Appraisals
How to Conduct Effectively

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 Session Objectives
• You will be able to:
‹ Identify the importance and benefits of PAs
‹ Assess and prepare necessary documentation
‹ Set motivational performance goals
‹ Plan for effective appraisal interviews
‹ Conduct fair and beneficial appraisals
‹ Avoid discrimination charges

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Why Appraisals Are Important

‹Recognize
accomplishments

‹Guide progress
‹Improve
performance

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Why Important (cont.)

‹Review performance
‹Set goals
‹Identify problems
‹Discuss career advancement

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 Appraisal Benefits
• Appraisals offer the
company:
‹ Documentation
‹ Employee
development
‹ Feedback

‹ Legal protection

‹ Motivation system
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 Appraisal Benefits (cont.)

• Appraisals offer
employees:
‹Direction

‹Feedback
‹Input
‹Motivation

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Appraisal Background
‹ Questions?

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 Measure Performance
• Measurement systems
need to be:
‹Specific
‹Fair
‹Consistent
‹Clear
‹Useful

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 Measure Performance (cont.)
• Systems can be:
‹ Numerical
‹ Textual
‹ Management by
Objective (MBO)
‹ Behavior oriented

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Document Performance
‹ Make sure documentation is objective
‹ Document performance of all employees
‹ Provide complete and accurate information
‹ Document performance on a regular basis

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Set Goals
‹ Based on job
requirements
‹ Realistic
‹ Measurable
‹ Observable
‹ Challenging
‹ Prioritized

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Employee Input
‹ Employees take an
active role:
„ Setting goals
„ Designing action
plans
„ Identifying
strengths and
weaknesses
‹ Employees
participate in the
performance
appraisal meeting
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 Preparation
• Employees:
‹ Review performance
‹ Think about new goals

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 Preparation (cont.)
• Supervisors:
‹ Review performance
‹ Complete written appraisal
‹ Think about new goals
‹ Schedule time and place

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Start the Meeting
‹ Lay out agenda
‹ Talk about money
‹ Encourage input
‹ Give good news first

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Presentation Tips
‹ Focus on the
professional
‹ Give objective
examples
‹ Invite response
‹ Listen actively
‹ Create “we” mentality

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 During the Meeting
• Review performance:
‹ Based on previous goals
‹ Noting strengths and accomplishments
‹ Identifying areas for improvement

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 During the Meeting (cont.)
• Set goals:
‹Based on
company goals
‹Building on
areas that need
improvement

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End the Meeting
‹Encourage good
performance
‹Lay out action
plan
‹Communicate
outcome of goals
not met
‹Confirm
understanding
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Appraisal Process
‹ Questions?

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Continuous Feedback
‹Formal
appraisals
‹Informal
appraisals
‹Open
communication

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Recognize Good Performance

‹Verbal
‹Public
‹Tangible
‹Monetary

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Identify Poor Performance
‹Act early
‹Take the right
approach
‹Deal with
employee
reaction
‹Handle
continued poor
performance 25
Discipline Poor Performance

‹Recognize
problems
‹Talk with
employee
‹Follow company
policy

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Handle Hard Cases
‹Reviewing
highly emotional
employees
‹Rating former
peers

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Key Points to Remember
‹ You must conduct objective appraisals on a
scheduled basis
‹ Appraisals tell employees how they’re doing
and how they can improve
‹ Appraisals help create a system of motivation
and rewards based on performance

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Performance Appraisal

• Control mechanism for feedback

• Allows progress to be assessed
• Ensures strategy-consistent behavior
• Reinforces values of the organization
• Ensures alignment of individual
performance and behavior to organization
culture and work systems

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 Purposes of Performance
Appraisal
Evaluation Development
• Performance • Management Development
• Identification of Potential
Measurement
• Feedback
• Compensation • Human Resource Planning

• Motivation • Communications
• Performance Improvement
• Research on Legal Compliance

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 Halo Error

Horn Error
Spillover Error
Common
Central Tendency Errors in the First Impression
Error Error
Appraisal
Process Recency Error
Clone Error

Leniency Error
Severity Error
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Strategies to Better Understand and
Measure Job Performance

Improve Appraisal Formats

Select the Right Raters

Understand Why Raters

Make Mistakes
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Performance Appraisal
Approaches
• Comparative
Comparative
Show me the
‹
‹ ranking
performance! ‹ forced distribution
‹
‹ paired comparison
‹
• Attribute
Attribute
‹
‹ graphic rating scales
‹ mixed standard scales
‹
• Behavioral
Behavioral
‹
‹ critical incidents
‹ BARS
‹
‹ essay
‹
• Results
Results
‹
‹ MBO

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 An Evaluation of Performance Appraisal Formats
CRITERIA
Employee Personnel
Format Development Administration Research Cost Validity

Ranking poor poor average good average

Standard
average average average good average
Rating Scale

BARs good good good average good

MBO excellent poor poor poor excellent

Essay unknown poor poor average unknown

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Select the Right Raters
Supervisors
Peers

Subordinates

Self

Customers
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 Understand Why Raters Make
Mistakes

Errors in
Errors in the
Observation
rating process
(Attention)

Errors in
Storage and
Recall

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 Training Raters to Rate More
Accurately
• Rater-error training to reduce psychometric
errors
• Performance dimension training
• Performance-standard training

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 At a minimum, the performance
measurement system should provide:
• A clear sense of direction.
• An opportunity for employees to participate in
setting the goals and standards for performance.
• Prompt, honest, and meaningful feedback.
• Immediate and sincere reinforcement.
• Coaching and suggestions for improving future
performance.
• Fair and respectful treatment.
• An opportunity for employees to understand and
influence decisions which affect them.
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 Tying Pay to Subjectively Appraised
Performance
Designing merit guidelines involves answering
four questions:
• What should the poorest performer be paid as an
increase?
• What should average performers be paid as an
increase?
• What should the top performers be paid as an increase?
• What should be the size of the percentage increase
differential between different levels of performance?
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How to Create a Merit Pay Grid

Merit Grids Combine 3 Variables:

• Level of Performance
• Distribution of Employees Within Pay
Ranges
• Merit Budget Increase Percentage

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 The Performance Management
Process
Establish
Expectations Coaching and
Development

Performance
Management is a
continuous process
Feedback
where employees
and managers work
together

Review
Rewards and
Recognition

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 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.
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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.

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Performance Standards Characteristics
Strategic
Strategic Individual
Individualstandards
standardsdirectly
directly
Relevance
Relevance relate
relateto
tostrategic
strategicgoals.
goals.

Criterion
Criterion Standards
Standardscapture
captureall
allof
ofan
an
Deficiency
Deficiency individual’s
individual’s contributions.
contributions.

Criterion
Criterion Performance
Performancecapability
capabilityis
isnot
not
Contamination
Contamination reduced
reducedby
byexternal
externalfactors.
factors.

Reliability
Reliability Standards
Standardsare
arequantifiable,
quantifiable,
(Consistency)
(Consistency) measurable,
measurable, and
and stable.
stable.

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Alternative Sources of Appraisal

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Sources of Performance Appraisal
•Manager and/or Supervisor
‹ Appraisaldone 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.
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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:
1. Peer ratings are simply a popularity contest.
2. Managers are reluctant to give up control over the
appraisal process.
3. Those receiving low ratings might retaliate against
their peers.
4. Peers rely on stereotypes in ratings.

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Sources of Performance Appraisal
•Team Appraisal
‹ basedon 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

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 Pros and Cons of 360-Degree Appraisal
• PROS
¾ The system is more comprehensive in that responses are
gathered from multiple perspectives.
¾ Quality of information is better. (Quality of respondents is more
important than quantity.)
¾ It complements TQM initiatives by emphasizing internal/external
customers and teams.
¾ It may lessen bias/prejudice since feedback comes from more
people, not one individual.
¾ Feedback from peers and others may increase employee self-
development.

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 Pros and Cons of 360-Degree Appraisal
• CONS
¾ The system is complex in combining all the responses.
¾ Feedback can be intimidating and cause resentment if employee
feels the respondents have “ganged up.”
¾ There may be conflicting opinions, though they may all be
accurate from the respective standpoints.
¾ The system requires training to work effectively.
¾ Employees may collude or “game” the system by giving invalid
evaluations to one another.
¾ Appraisers may not be accountable if their evaluations are
anonymous.

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3600 Performance Appraisal
Supervisor

Team

Peers

Self
Customers

Subordinates
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 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.
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 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.

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 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.

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 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.
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 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. 58
 Behavioral Methods
• Behaviorally Anchored Rating Scale (BARS)
‹ Consistsof 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.

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 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.

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Summary of Various Appraisal Methods

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 Summary
• Development of sound appraisal systems requires
an understanding of organizational objectives
balanced against the relative merits of each type of
appraisal system.
• Training supervisors effectively to appraise
performance requires an understanding of
organizational objectives.
• That combined with a knowledge of common
errors in evaluation can make a significant
difference in the quality of appraisals.

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 Review Questions
1. Employees in your department semi-autonomous work
teams. Individual performance is assessed using four
performance dimensions: quantity of work, quality of
work, interpersonal skills, and teamwork.
a. Should the supervisor have a role in the rating process?
b. What role, if any, should other members of the work team have
in the assessment process?
2. What do you think should be included in the design of a
performance appraisal process to lessen the probability
that your company would be accused of discrimination
in performance appraisal?
3. If you wanted to ensure that employees had good
feedback about performance problems and strengths,
which appraisal format would you recommend using?
Why?

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