UNIT 7 MODULE

PERFORMANCE MANAGEMENT AND EMPLOYMENT AND EMPLOYEE APPRAISAL PROCESS 342

DESIRED LEARNING OUTCOMES

At the end of the unit, the students have:
1. Explained what performance management is and how the establishment of goals,
ongoing performance feedback, and the appraisal process are part of it.
2. Explained the purposes of performance appraisals and the reasons they
sometimes fail.
3. Described the different sources of appraisal information.
4. Explained the various methods used to evaluate the performance of employees.
5. Outlined the characteristics of an effective performance appraisal interview.

Performance Management Systems

Performance management is the process of creating a work environment in which people can perform to the best of their
abilities in order to meet a company’s goals. It is an entire work system that emanates or originates from a company’s
goals.
.

Performance appraisals, which are an important part of performance management systems, are the result of an annual or
biannual process in which a manager evaluates an employee’s performance relative to the requirements of his or her job
and uses the information to show the person where improvements are needed and why. It is a tool organizations can use to
maintain and enhance their productivity and facilitate progress toward their strategic goals.

But as you can see from Figure 8.1, appraisals are just part of the performance management process. Aligning the goals
of employees with that of the firm, providing workers with continual on-the-job feedback, and rewarding them are critical
as well.
 Ongoing Performance Feedback

Feedback is any information exchanged by employees (formally or informally) regarding their performance,
skills, or ability to work within a team. Because feedback is very useful, it must be a regularly occurring
activity.

The University of Indiana’s “University HR Services” identifies eight key points to address during
feedback sessions:

1. Give specific examples of desirable and undesirable behaviors. Without specific examples of real life
situations, the employee will only be confused by the vagueness of the feedback.

2. Focused feedback on behavior, not the person. This will help the employee to “hear” the message and will
defuse what could be a confrontational conversation.

3. Frame the feedback in turns of helping the employee be successful. Let the employee know that you are
trying to help him or her be a successful employee within the organization.

4. Direct the feedback towards behavior the employee can control. Employees cannot do much about things
over which they have no control.

5. The feedback should be timely. When an event takes place, it is important to provide feedback within a
reasonable amount of time.

6. Limit feedback to the amount the employee can process. Most employees are able to handle feedback on
one or two issues at a time.

7. Use active communication skills and confirm the employee is engaged in the conversation.

-Providing employees with feedback on a continual basis also helps them know where they stand when they
receive their formal appraisals. Feedbacks will also serve as a reminder and update for employees to do their job
and responsibilities effectively and efficiently.

Performance Appraisal Programs

Typically the appraisals are delivered annually, biannually, or sometimes quarterly by a supervisor to a
subordinate. New employees are often put on probationary status for a period of time and evaluated thirty, sixty,
or ninety days after being hired.

A Focal performance appraisal is one in which all employees of a company are reviewed at the same time of
year rather than on the anniversary dates they were hired. It is a performance evaluation that occurs every
year wherein employee’s whole year performance is reviewed for their annual salary increase.
 The Purposes of Performance Appraisal

It has been said that “what gets measured gets done.” Performance appraisals are part of an organization’s
measurement process. Performance appraisal programs serve many purposes, but in general, those purposes can
be clustered into two categories:

Developmental- include those related to improving and enhancing an individual’s capabilities. These include
identifying a person’s strengths and weaknesses, eliminating external performance obstacles, and establishing
training needs.

Administrative- include decisions about who will be promoted, transferred, or laid off. Appraisals are
also conducted to make compensation decisions.

Why Appraisal Programs Sometimes Fail

Some human resource experts and firms believe performance appraisals are ineffective. Managers frequently
avoid conducting appraisals because they dislike passing judgment on people. Furthermore, if managers are not
adequately trained, subjectivity and organizational politics can distort employee reviews. They do not develop
good feedback skills and are often not prepared to conduct an appraisal. As a consequence, the appraisal is done
begrudgingly once a year and then forgotten. The ultimate success or failure of a performance appraisal pro-
gram depends on the philosophy underlying it, its connection with the firm’s business goals, and the attitudes
and skills of those responsible for its administration.

Developing an Effective Appraisal Program

What Are the Performance Standards?

-These are the clearly defined and well communicated standards and expectations that must be met by the
employee to be appraised.

Four Basic elements that must be considered when establishing performance standards

1. Strategic Relevance- refers to the extent to which the standards of an appraisal relate to the strategic
objectives of the organization in which they are applied.

2. Criterion Deficiency- is the extent to which the standards capture the entire range of an employee’s
responsibilities. When performance standards focus on a single criterion (such as sales revenues) to the
exclusion of other important but less quantifiable performance dimensions (such as customer service), then the
appraisal system is said to suffer from criterion deficiency.

3. Criterion Contamination – There are factors outside an employee’s control that can influence his or her
performance. A comparison of the performance of traveling salespeople should not be contaminated by
the fact that territories differ in terms of their sales potential.

4. Reliability- refers to the stability or consistency of a standard, or the extent to which individuals tend to
maintain a certain level of performance over time.

Calibration-is done to make sure managers are rating employees consistently. During calibration meetings, a
group of supervisors, led by their managers and facilitated by an HR professional, discuss the performance
of individual employees to ensure all managers apply similar standards to all of the firm’s employees

Are You Complying with the Law?

Performance Appraisals must meet certain legal requirements. Performance appraisals should meet the
following legal guidelines:

1. Performance ratings must be job-related, with performance standards developed through a job analysis. Only
evaluate those areas that are necessary for effective job performance.
2. Employees must be provided with clear, written job standards in advance of their appraisals so they
understand what they need to do to get top ratings.
3. Managers who conduct the appraisals must be able to observe the behavior they are rating. This implies
having measurable standards with which to compare employee behavior.
4. Do not allow performance problems to continue unchecked. Document problems when they occur and refer
to them in employeesí appraisals.
5. Supervisors should be trained to use the appraisal form correctly. They should be instructed as to how to
apply the appraisal standards when making judgments.
6. The appraisals should be discussed openly with employees and counseling or corrective guidance offered to
help poor performers improve their performance. Be open to the possibility that employees could be transferred
to other positions that better suit their abilities.
7. An appeals procedure should be established to enable employees to express their disagreement with the
appraisals.

- To comply with the legal requirements of performance appraisals, employers must ensure that managers and
supervisors document appraisals and reasons for subsequent HRM actions.

Who Should Appraise an Employee’s Performance?

Manager/Supervisor Appraisal- is a traditional performance appraisal done by an employee’s

manager and often reviewed by a manager one level higher.

Self-Appraisal- is a performance appraisal done by the employee being evaluated, generally on an appraisal
form completed by the employee prior to the performance interview. This is beneficial when managers seek to
increase an employee’s involvement in the review process.

Subordinate Appraisal- is a performance appraisal of a superior by an employee, which is more appropriate for
developmental than for administrative purposes

Peer Appraisal- is a performance appraisal done by one’s fellow employees, generally on forms that are
compiled into a single profile for use in the performance interview conducted by the employee’s manager. One
advantage of peer appraisals is the belief that they furnish more accurate and valid information than appraisals
by superiors.

Team Appraisal- is a performance appraisal based on TQM concepts, that recognizes team accomplish-
ment rather than individual performance.

Customer Appraisal-is a performance appraisal wherein customer provide feedback on the employee and the
company.

Putting It All Together: 360-Degree Appraisal

This is is intended to provide employees with as accurate a view of their performance as possible by getting
input from all angles: supervisors, peers, subordinates, customers, and the like.
 Safeguards to ensure 360-Appraisal’s maximum quality and acceptance

*Assure anonymity. Make certain that no employee ever knows how any evalu- ation team member responded.
(The supervisor’s rating is an exception to this rule.)

* Make respondents accountable. Supervisors should discuss each evaluation team member’s input, letting
each member know whether he or she used the rating scales appropriately, whether his or her responses were
reliable, and how other participants rated the employee.

* Prevent “gaming” of the system. Some individuals may try to help or hurt an employee by giving either too
high or too low an evaluation. Team members may try to collude with one another by agreeing to give each
other uniformly high ratings. Supervisors should check for obviously invalid responses.
* Use statistical procedures. Use weighted averages or other quantitative approaches to combine evaluations.
Supervisors should be careful about using subjective combinations of data, which could undermine the system.
* Identify and quantify biases. Check for prejudices or preferences related to age, gender, ethnicity, or other
group factors.

Training Appraisers

Performance appraisal programs are most effective when managers have been properly trained to adequately
observe and give feedback to their employees. The following are ways an effective appraiser does.

1. Establishing an Appraisal Plan

The appraiser must explain the objectives of the firm’s performance appraisal system as well as the purpose for
which the appraisal is to be used to every employee handled.

2. Eliminating Rater Error

Appraisal training should focus on eliminating the subjective errors made by managers in the rating process.

Types of Errors

1. “halo error”- occur if raters do not have carefully developed descriptions of the employee behaviors being
rated.
2. “horn error”- opposite of the halo effect. It occurs when a manager focuses on one negative aspect about
an employee and generalizes it into an overall poor appraisal rating.
3. distributional errors- involve a group of ratings given across various employees.
4.error of central tendency- a performance rating error in which all employees are rated about average
5.leniency or strictness error-a performance rating error in which the appraiser tends to give employees either
unusually high or unusually low ratings
6.a forced distribution- a performance appraisal ranking system whereby raters are required to place
a certain percentage of employees into various performance categories
7.recency error- a performance rating error in which the appraisal is based largely on the employee’s
most recent behavior rather than on behavior throughout the appraisal period
8.Contrast error- a performance rating error in which an employee’s evaluation is biased either upward or
downward because of comparison with another employee just previously evaluated
9.similar-to-me error- a performance rating error in which an appraiser inflates the evaluation of an em-
ployee because of a mutual personal connection
 Feedback Training

-the raters need training so the appraisals and feedback are reliable, strategically relevant, and free from either
criterion deficiency or criterion contamination.

Performance Appraisal Methods

Trait Methods
Trait approaches to performance appraisal are designed to measure the extent to
which an employee possesses certain characteristics—such as dependability, creativity, initiative, and
leadership

1. Graphic Rating Scales- a trait approach to performance appraisal whereby each employee is rated
according to a scale of characteristics. The ratings can include a scale of 1–10; excellent, average, or poor; or
exceeds, meets, or does not meet expectations.

2. Mixed-Standard Scales- a trait approach to performance appraisal similar to other scale methods but
based on comparison with (better than, equal to, or worse than) a standard

3. Forced-Choice Method- A trait approach to performance appraisal that requires the rater to choose from
statements designed to distinguish between successful and unsuccessful performance.

4. Essay Method- A trait approach to performance appraisal that requires the rater to compose a statement
describing employee behavior. The appraiser is usually instructed to describe the employee’s strengths and
weaknesses and to make recommendations for his or her development.

Behavioral Methods

1. Critical Incident Method-An unusual event that denotes superior or inferior employee performance in
some part of the job

2. Behavioral Checklist Method- One of the oldest appraisal techniques. It consists of having the rater check
the statements on a list that the rater believes are characteristic of the employee’s performance or behavior.

3. Behaviorally Anchored Rating Scale (BARS) -A behavioral approach to performance appraisal

that consists of a series of vertical scales, one for each important dimension of job performance

4. Behavior Observation Scale (BOS)- A behavioral approach to performance appraisal that measures the
frequency of observed behavior

Results Methods

1. Productivity Measures- measuring the output or individual performance of an employee

2. Management by Objectives-A philosophy of management that rates performance on the basis of employee
achievement of goals set by mutual agreement of employee and manager

The following guidelines can help an MBO

a, Managers and employees must be willing to establish goals and objectives together.
b. The objectives should be quantifiable and measurable for the long and short terms.
c. The results that are expected must be under the employee’s control.
d. The goals and objectives must be consistent for each employee level (top executive, manager, and employee).
e. Managers and employees must establish specific times when the goals are to be reviewed and evaluated.

3. The Balanced Scorecard(BSC)- an employee must pass all metrics expected from him. This allows
management to implement its strategy by aligning performance with goals.

Some recommendations for ensuring the method’s success include the following:

a. Translate the strategy into a scorecard of clear objectives.

b. Attach measures to each objective.
c. Cascade scorecards to the front line.
d. Provide performance feedback based on measures.
e. Empower employees to make performance improvements.
f. Reassess the strategy.

Which Performance Appraisal Method to Use?

Each appraisal methods has there own advantage and disadvantages. The main key for the method to be
successful is everyone’s commitment and action to deliver and perform their obligations to the company.

Appraisal Interviews

-the most important part of the entire performance appraisal process.

-The purpose of a performance appraisal interview is to initiate a dialogue that will help an employee improve
his or her performance, making the employee an active participant in the discussion. Such participation is
strongly related to an employee’s satisfaction with appraisal feedback.

Three Types of Appraisal Interviews

1. Tell-and-Sell Interview -In this type of interview, the manager does most of the talking and passes his or her
view to the employee. He persuades an employee to change in a prescribed manner.

2. Tell-and-Listen Interview. In this type of interview, the appraiser/ supervisor communicates the strong and
weak points of an employee’s job performance during the first part of the interview and during the second part,
employee’s feelings about the appraisal are thoroughly explored.
3. Problem-Solving Interview. Listening, accepting, and responding to feelings are essential elements of the
problem-solving interview. It seeks to stimulate the growth and development of an employee by discussing his
or her problems, needs, and on-the-job satisfaction and dissatisfaction.

Conducting the Appraisal Interview

1.Ask for a Self-Assessment

-it is useful to have employees evaluate their own performance prior to the appraisal interview.

2.Invite Participation
-Most experts advise supervisors to encourage their employees to speak freely and listen closely to what they
have to say during appraisal interviews.

3. Express Appreciation
-Praise is a powerful motivator, and in an appraisal interview, particularly, employees are seeking positive
feedback.

4. Minimize Criticism
-criticism should be given in small doses.
Some tips for using criticism constructively include the following:

a. Consider whether it is really necessary.

b. Consider the person.
c. Be specific and do not exaggerate.
d. Watch your timing.
e. Make improvement your goal.

5. Change the Behavior, Not the Person

-Avoid making suggestions to employees about personal traits they should change;instead suggest more
acceptable ways of performing.

6.Focus on Solving Problems

-Avoid blame game, appraisal interview should be directed at devising a solution to the problem.

7. Be Supportive
-One of the better techniques for engaging an employee in the problem-solving process is for the manager to
ask: “What can I do to help?”

8. Establish Goals
-Manager should focus the person’s attention on the future rather than the past.
*Emphasize strengths on which the employee can build rather than weaknesses to overcome and how the
employee’s efforts will contribute to the organization during the coming year.
* Concentrate on opportunities for growth that exist within the framework of the employee’s present position
and drop unproductive tasks.
* Limit plans for growth to a few important items that can be accomplished within a reasonable period of time.
* Establish specific action plans that spell out how each goal will be achieved. The plans might also include a
list of resources, contacts of people who can help the employee achieve the goals, and timetables for following
up to ensure they are met.
* End the review on a positive note by highlighting how both the employee and firm
will excel if the goals are achieved.

9. Follow Up Day to Day

-A better approach is to have informal talks periodically, perhaps quarterly, to follow up on the issues raised in
the appraisal interview because feedback is most useful when it is immediate and specific.

Improving Performance

Here are plans for improvement.

1.Identifying Sources of Ineffective Performance

-A person’s performance is a function of several factors, but perhaps it can be boiled down to three primary
concerns: ability, motivation, and environment. In addition, other factors in the work environment—or even in
the external environment, which includes personal, family, and community concerns—can affect a person’s
performance either positively or negatively.

2. Performance Diagnosis
-a comprehensive examination activity initiated to assess Performance Management needs and opportunities for
improvement within an organization

3. Managing Ineffective Performance

- During the interview, performance deficiencies can be discussed and plans for improvement can be made.