MMZG511

Managing People and Organizations

BITS Pilani Session 14 Date : By : Prof. Jayashree Mahesh

Pilani Campus

MMZG 511 BITS Pilani- Pilani Campus

 BITS
Pilani
Pilani Campus

Chapter 9 : Appraising and Managing Performance

Text Book: Aswathappa K., Human Resource Management- Text and Cases, Tata McGraw Hill, 7th Edition, 2013.

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Learning Outcome

 The nature of performance appraisal and compare and contrast it with

performance management
 The different stages in appraisal process and describe each step
 Methods of performance appraisals
 Methods of job evaluation

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The Appraisal Process

 Performance Appraisal is an objective assessment of an individual’s

performance against well defined benchmarks.
 Also called performance rating, employee assessment, performance review,
performance evaluation, employee evaluation, merit rating
 Performance Management refers to the entire process of appraising
performances, giving feedback to the employees, and offering rewards or
punishments to them.

Performance Performance
Job Analysis
Standards Appraisal
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 Uses of Performance Appraisal

 Human resource planning - Data must be available to identify those who have the
potential to be promoted
 Recruitment and selection - May be helpful in predicting the performance of job
applicants
 Training and development - Point out an employee’s specific needs for training and
development
 Career planning and development - Essential in assessing an employee’s strengths
and weaknesses and in determining the person’s potential
 Compensation programs - Provide a basis for rational decisions regarding pay
adjustments
 Internal employee relations - Used for decisions in several areas of internal employee
relations, including promotion, demotion, termination, layoff, and transfer
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Multiple Purposes of Appraisal

Table 10.1. Multiple Purposes of Performance Assessment

General Applications Specific Purpose
Identification of individual needs
Performance feedback
Developmental Uses Determining transfer and job assignments
Identification of individual strengths and developmental needs

Salary
Promotion
Retention or termination
Administrative Uses/Decisions Recognition of individual performance
Lay-offs
Identification of poor performers

Organisational Maintenance/Objectives
HR planning
Determining organisation training needs
Evaluation of organisational goal achievement
Information for goal identification
Evaluation of HR systems
Reinforcement of organisational development

Criteria for validation research

Documentation Documentation for HR decisions
Helping to meet legal requirements

Source: Cynthia D. Fisher, et al. Human resource management, Houghton Mifflin, 1997, p.455 6

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Performance Appraisal and Competitive Advantage

 Improving performance
 Making correct decisions
 Ensuring Legal compliance
 Minimizing job dissatisfaction and turnover
 Consistency between organization strategy and behavior
 Organizational strategy and Performance appraisal

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The Performance Appraisal Process

Objectives of Performance Appraisal

Establish Job Expectations

Design an Appraisal Programme

Feedback

Appraise Performance

Performance Interview

Use Appraisal Data for Appropriate

Purposes
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Issues in Appraisal Design

Formal
Vs
Informal Whose
What
Performance
Methods?
?

When to Who are

Appraisal
Evaluate the
Design
? raters?

What to What
Evaluate? Problems?
How to
solve?

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 Who are the Raters? (Appraiser)

 Immediate Supervisor

 Appraisal by Subordinates

 Peer Appraisals (in self- managing teams)

 Customers

 Rating Committees (composed of employee’s immediate supervisor and 3 or 4

other supervisors/ known managers)
 Self- Ratings

 360- degree Feedback 10

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Problems of Rating

Leniency
or Severity
Status Central
Effect Tendency

Halo
Spillover
Error
effect
Appraisal
Design
Rater
Performance Effect
dimension
behavior
Primacy
&
Recency
Others
Perceptual
Set

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What should be rated? (measuring criteria)

Criteria Related to Past Performance

1. Quality
2. Quantity
3. Timeliness
4. Cost Effectiveness
5. Need for supervision
6. Interpersonal Impact
7. Community Service 12

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Appraisal Model (Future Oriented or Past
Oriented)
MBO Future-oriented

Rating Scales
Cost
Accounting Checklists

Essay

360 Degree Appraisal

Assessment Centres
Forced
Choice
ACRs Appraisal
Methods
Forced
Tests and Distribution
Observations

Critical
Field Review Incident

BARS

Psychological Past-oriented
Appraisals

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When to be Rated (Appraisal Cycle)

• Annual
• Semi annual
• Quarterly

What is the rating scale

Scale of 1-4
Eg: not met expectations, adequate, competent, outstanding

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Performance Appraisal Methods
Appraisal Methodologies

1 Rating scale 6 Confidential Records

Behaviorally anchored rating scales

2 Checklist 7
(BARS)

3 Paired comparison 8 Management by objectives (MBO)

4 Forced distribution 9 Essay Method

5 Critical incident 10 Merged methods

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Performance Appraisal Methods (contd.)

Essay
• Brief narrative describing performance
• Tends to focus on extreme behavior
• Depends heavily on evaluator's writing ability
• Comparing essay evaluations might be difficult

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Performance Appraisal Methods (contd.)
Graphic rating scale
A scale that lists a number of traits and a range of performance for each that is
used to identify the score that best describes an employee’s level of performance
for each trait.

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 Graphic
Rating
Scale with
Space for
Comments

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Performance
Performance Management
Management Outline
Outline

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 Performance Appraisal Methods (cont’d)

Alternation ranking method

– Ranking employees from best to worst on a particular trait, choosing highest, then
lowest, until all are ranked.

Paired comparison method

– Ranking employees by making a chart of all possible pairs of the employees for
each trait and indicating which is the better employee of the pair.

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Alternation Ranking Scale

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Ranking Employees by the Paired
Comparison Method

Note: + means “better than.” − means “worse than.” For each chart, add up the number of
1’s in each column to get the highest-ranked employee.
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Performance Appraisal Methods (cont’d)
Forced distribution method
 Similar to grading on a curve; predetermined percentages of ratees are
placed in various performance categories.
 Example:
• 15% high performers
• 20% high-average performers
• 30% average performers
• 20% low-average performers
• 15% low performers

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Performance Appraisal Methods (cont’d)

Critical Incidents
• Written records of highly favorable and unfavorable work actions
• Appraisal more likely to cover entire evaluation period
• Does not focus on last few weeks or months

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Examples of Critical Incidents for
an Assistant Plant Manager

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Performance Appraisal Methods (cont’d)

Behaviorally Anchored Rating Scales (BARS)

• Combines traditional rating scales and critical incidents methods

• Job behaviors derived from critical incidents described more objectively

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Example of a Behaviorally Anchored Rating Scale for
the Dimension Salesmanship Skill

Source:Walter C. Borman, “Behavior Based Rating,” in Ronald A. Berk (ed.),

Performance Assessment: Methods and Applications (Baltimore, MD: Johns
Hopkins University Press, 1986), p. 103.

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Performance Appraisal Methods (cont’d)
Management by Objectives (MBO)
Involves setting specific measurable goals with each employee and then
periodically reviewing the progress made.
1. Set the organization’s goals.
2. Set departmental goals.
3. Discuss departmental goals.
4. Define expected results (set individual goals).
5. Performance reviews.

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Steps in a Typical MBO Program

Jointly Set Objectives Develop Action Plans Review Objectives and Give Rewards for
to Achieve Objectives Provide Feedback Achieved Objectives

Overall objectives Managers and

and strategies of employees work on
organization action plans together

Objectives allocated to Action plans

divisional and implemented
departmental units

Specific objectives
collaboratively set
with employees

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Performance Appraisal Methods (cont’d)

360 Degree Feedback

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Advantages and Disadvantages of
Appraisal Tools

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What is to be measured?

 Individual traits
 Behaviors exhibited by assessees
 Knowledge/skills possessed
 Results acheived

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Basic Concepts in Performance
Management and Appraisal

Performance Appraisal Performance

Management

Setting work An integrated

standards, assessing approach to ensuring
performance, and that an employee’s
providing feedback to performance supports
employees to and contributes to the
motivate, correct, and organization’s
continue their strategic aims.
performance.

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 Performance Management

Performance Management
– Is the continuous process of identifying, measuring, and developing the
performance of individuals and teams and aligning their performance
with the organization’s goals.

How Performance Management Differs From Performance

Appraisal
– A continuous process for continuous improvement
– A strong linkage of individual and team goals to strategic goals
– A constant reevaluation and modification of work processes

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 Guidelines for Conducting
an Interview

Talk in terms of
Don’t get Encourage the Get
objective work
personal person to talk agreement
data

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Performance Appraisal in Wipro (example)

Parameters Wipro

Appraisal cycle annual system , project based reviews

online system where appraise -appraisal jointly uploads along with
instrument measurement criteria

model follows future oriented MBO model

self appraisal, supervisor apprasial, review by reviewer, review by HR ,
appriasal flow performance discussion, developlement pl;an drawn

ratings SAP (significanlty above plan), OP (on plan); BP (below plan)

purpose linked to promotion, not directly linked to reward

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Case Study on New Performance Appraisal
System at Xerox
In the mid-1980s Xerox Corporation was faced with a problem—its performance appraisal
system was not working. Rather than motivating the employees, its system was leaving them
discouraged and disgruntled.
The appraisal occurred once a year. It required employees to document their accomplishments.
The manager would assess these accomplishments in writing and assign numerical ratings. The
appraisal included a summary written appraisal and a rating from 1 (unsatisfactory) to 5
(exceptional). Merit increases were tied to the summary rating level. Merit increase information
and performance appraisals occurred in one session.
This system resulted in inequitable ratings and was cited by employees as a major source of
dissatisfaction. In fact, in 1983, the Reprographic Business Group (RBG), Xerox’s main copier
division, reported that 95 percent of its employees received either a 3 or 4 on their appraisal.
Merit rises for people in these two groups only varied by 1 to 2 percent. Essentially, across-the-
board raises were being given to all employees, regardless of performance.
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Rather than attempting to fix the old appraisal system, Xerox formed a task force to create a new
system from scratch. The task force itself was made up of senior human resources executives;
however, members of the task force also consulted with councils of employees and a council of
middle managers. Together they created a new system, which differed from the old one in many
key respects:
 The absence of a numerical rating system.
 The presence of a half-year feedback session.
 The provision for development planning.
 Prohibition in the appraisal guidelines of the use of subjective assessments of performance.
The new system has three stages, as opposed to the one-step process of the old system. These
stages are spread out over the course of the year. The first stage occurs at the beginning of the
year when the manager meets with each employee. Together, they work out a written agreement on
the employee’s goals, objectives, plans, and tasks for the year.

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The second stage is a mid-year, mandatory feedback and discussion session between the manager
and the employee. Progress toward objectives and performance strengths and weaknesses are
discussed, as well as possible means for improving performance in the latter half of the year. Both
the manager and the employee sign an “objectives sheet” indicating that the meeting took place.
The third stage in the appraisal process is the formal performance review, which takes place at
year’s end. Both the manager and the employee prepare a written document, stating how well the
employee met the preset performance targets. They then meet and discuss the performance of the
employee, resolving any discrepancies between the perceptions of the manager and the employee.
This meeting emphasizes feedback and improvement. Efforts are made to stress the positive
aspects of the employee’s performance as well as the negative. A follow-up survey was conducted
the year after the implementation of the new appraisal system. Results were as follows:
81 percent better understood work group objectives. 84 percent considered the new appraisal fair.
72 percent said they understood how their merit raise was determined. 70 percent met their personal
and work objectives. 77 percent considered the system a step in the right direction
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CASE 2 – PERFORMANCE MANAGEMENT AT NKS – Refer website

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