Fundamentals of Human Resource

Management

ELEVENTH EDITION
David A. DeCenzo,
Stephen P. Robbins, and
Susan L. Verhulst

Chapter 10
Performance Management
Management Grid
 Performance Management Systems

• Performance Management Systems is the process

to ?? ______________________

• Why needed?
1. Controlling people
2. Improvement of individual, group, team
3. Effectiveness of attainment of goal(s)
4. Employee motivation
5. Deciding the incentives
6. Set a new benchmark
 Performance Management Systems

•The performance management systems need to

include decisions about:
– who should evaluate performance
– what format should be used
– how the results should be utilized

•Purposes of a Performance Management System

– Feedback - let employees know how well they
have done and allow for employee input.
– Development – identify areas in which employees
have deficiencies or weaknesses.
– Documentation - to meet legal requirements.
 Performance Management Systems

• Difficulties in Performance Management Systems

– Focus on the individual: Discussions of performance
may provoke strong emotions and may generate
conflicts when subordinates and supervisors do not
agree.
• Emotion difficulty and satisfaction are negatively
corelated

– Focus on the process: Company policies and

procedures may present barriers to a properly
functioning appraisal process.

– Additionally, appraisers may be poorly trained.

 Performance Management Systems and EEO

• Solution:

• Two factors assist in biasfree /“reasonable” measure of

performance management systems
– The performance appraisal must be conducted
according to some established intervals,
– Appraisers must be trained in the process.
 The Appraisal Process
1. Establish performance standards with employees

2. Communicate expectations

3. Measure actual performance

4. Compare actual performance with standard

5. Discuss the appraisal with the employee

6. If necessary, initiate corrective action

 The Appraisal Process
1. Establish performance standards with employees
– Communication of performance standards to
employee.
• Derived from company’s strategic goals.
• Based on job analysis and job description.
2. Communicate expectations –both way
3. Measurement of actual performance using information
from:
• written reports
• statistical reports
• personal observation
• oral reports
 The Appraisal Process
4. Compare actual performance with standard
5. Discussion of appraisal with employee.
6. Initiate corrective action if/ where necessary.
• Immediate action deals with symptoms.
• Basic corrective action deals with causes.
 Appraisal Methods
Three approaches:
• Absolute standards
• Relative standards
• Otcomes
1. Evaluating absolute standards:
– Performance is measured against established
standards.
– Evaluation is independent of any other employee.
– This process assesses employee job traits and/or
behaviors.
 1. Absolute Standards
1. Critical Incident Appraisal: behavior that is critical /key
behavior in any incident to find out desirable behavior and
one need for improvement.
– Drawbacks are:
(1) time-consuming and burdensome for supervisors: writing
down all incidents daily or weekly basis for all employees. and
(2) Not easy to quantify. Comparison and ranking of
employees may be difficult.
– Example Discussion:
1. Incident of Bank 2008
2.
3.
 1. Absolute Standards
2. Checklist Appraisal: Appraiser uses a list of behavioral
descriptions and checks off behaviors that apply to the employee

Behavior Checklist Yes No

1. Are supervisor’s orders usually followed? √
2. Does the individual approach customers promptly? √
3. Does the individual suggest additional merchandise √
to customers?

4. Does the individual keep busy when not serving a √

customer?

5. Does the individual lose his or her temper in public? √

 1. Absolute Standards
3. Graphic Rating Scale Appraisal: the assessor goes down the list of factors and
notes the point along the scale that best describes the employee. There are typically
five to ten points on the continuum.

Quality of work is the Consistentl Occasion Consisten Sometim Consisten

accuracy, skill, and y ally tly es tly
completeness of work. unsatisfact unsatisfac satisfactor Superior Superior
ory tory y
Quantity of work is the Consistentl Occasion Consisten Sometim Consisten
volume of work done in a y ally tly es tly
normal workday unsatisfact unsatisfac satisfactor Superior Superior
ory tory y
Dependability is following Requires Requires Usually Requires Requires
directions and company constant occasiona can be little absolute
policies without supervision supervisio l follow-up counted supervisi minimum
n on on supervisio
n
 1. Absolute Standards
4. Forced Choice Appraisal: A checklist where the rater
must choose from a sets of statements-favorable or
unfavorable.
Raters may become frustrated with a system in which
they do not know what represents a good or poor
answer.

For Example: Students evaluating their instructor might

have to choose between
(a) keeps up with the schedule identified in the syllabus,
(b) lectures with confidence,
(c) keeps interest and attention of class,
 1. Absolute Standards
5. Behaviorally Anchored Rating Scales (BARS): it is a
combination of major elements from the critical incident and
graphic rating scale approaches. The appraiser rates based
on items along a continuum, but the points are examples of
actual behavior
Position: Employee Relations Specialist
Job Dimension: Ability to Absorb and Interpret Policies

3 Could be expected to be aware quickly of program

changes and explain these to employees
2 Could be expected to complete various HRM forms
correctly after receiving instruction on them
1 Could be expected to require some help and practice
in mastering new policies and procedures
 2. Relative Standards
– Compare individual against other individual
1. Group Order Ranking : Employees are placed in a
classification reflecting their relative performance, such
as “top 20 percent.” “ best of the worst”
2. Individual Ranking: Employees are ranked from highest
to lowest.
3. Paired Comparison:
• Each individual is compared to every other.
• Final ranking is based on number of times the
individual is preferred member in a pair.
Comparison with > Saika Sherin Samiya Result
Saika + + +,+
Sherin -- + +, -
Samaiya -- -- -, -
 3. Achieved Outcomes
1. Management by Objectives (MBO)
– includes mutual objective setting and evaluation based
on the attainment of the specific objectives
– Common elements in an MBO program are:
• goal specificity
• participative decision making
• an explicit time period
• performance feedback
– Effectively increases employee performance and
organizational productivity.
Factors that can Distort Appraisals
 Factors that can Distort Appraisals
1. Leniency error
– Each evaluator has his/her own value system.
– Some evaluate high (positive leniency) and others,
low (negative leniency).
2. Halo error: Evaluator lets an assessment of an
individual on one trait influence evaluation on all traits.
3. Similarity error: Evaluator rates others in the same
way that the evaluator perceives him or herself.
4. Low appraiser motivation: Evaluators may be
reluctant to be accurate if important rewards for the
employee depend on the results.
5. Central tendency: The reluctance to use the extremes
of a rating scale.
 Factors that can Distort Appraisals
6. Inflationary pressures: Pressures for equality and fear of
retribution for low ratings leads to less variation.
7. Inappropriate substitutes for performance: Effort,
enthusiasm, appearance, etc. are less relevant for some jobs
than others
8. Attribution Theory- Evaluation are affected based on
whether someone’s performance is due to: (i) internal factors
they can control, (ii) external factors which they cannot.
If poor performance is attributed to internal control,
the judgment is tougher.
6. Impression management: If employee positively influences
the relationship with the supervisor, he/she is likely to receive
a higher rating.
Creating More Effective Performance Management
Systems
 More Effective Performance Management Systems

1. Use Behavior-Based Measures: Measures based on

specific descriptions of job behavior, such as “loyalty” or
“friendliness”.
2. Combine Absolute and Relative Standards:
– Absolute standards tend to be positively lenient;
relative standards suffer when there is little variability.
– Combining the standards tends to offset the
weaknesses of each.
3. Provide Ongoing Feedback: Expectations and
disappointments should be shared with employees on a
frequent basis.
 More Effective Performance Management Systems

4. Use Multiple Raters: Increasing the number of raters

leads to more reliable and valid ratings.
– Use peer evaluations: Coworkers offer constructive
insights and more specific evaluations.
– Upward appraisals allow employees to give their
managers feedback.
– 360-Degree appraisals: Supervisors, peers,
employees, team members, customers and others with
relevant information evaluate the employee.
 Creating More Effective Performance Management
Systems

5. Rate Selectively
– Appraisers only evaluate in those areas about which
they have sufficient knowledge.
– Appraisers should be organizationally as close as
possible to the individual being evaluated.
– More effective raters are asked to do the appraisals.
6. Train Appraisers: Untrained appraisers who do poor
appraisals can demoralize employees and increase
legal liabilities.
 International Performance Appraisal

• Who performs the evaluation?

Difficulties:
–Different cultural perspectives and expectations
between the parent and local country may make
evaluation difficult.
–Evaluation forms may not be translated
accurately.
–Quantitative measures may be misleading.