Performance Appraisal & Management

Human Resource Management, 5E
PERFORMANCE APPRAISAL &

PERFORMANCE MANAGEMENT
1
 Performance- what an employee does or does

not do on the job
 Performance Appraisal- system by which an
organization assigns some ‘score’ to indicate the
level of current and/ or past performance of a
target person or group
 Performance Management- an integrated
process that consolidates goal setting, employee
development, performance appraisal, correcting,
managing and rewarding performance into a
single common system.
2
 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.
3
MEANING & FEATURES OF PERFORMANCE APPRAISAL
 It is an objective assessment of an individual’s

performance against well defined benchmarks.
 The appraisal is carried out periodically according to a
definite plan
 It is not a past oriented activity. The intention is not to put
poor performers in a spot. Instead, it shows employees
where things have gone wrong, how to set things in order
and deliver superior performance using their potential fully
 The focus of appraisals is on employee growth and
development. It forces managers to be coaches rather than
judges.
4
OBJECTIVES OF APPRAISAL
 To effect promotions based on competence and
performance.
 To confirm the services of probationary employees upon
their completing the probationary period satisfactorily.
 To assess the training and development needs of
employees.
 To decide upon a pay raise where (as in the unorganised
sector) regular pay scales have not been fixed.
5
OBJECTIVES OF APPRAISAL (CONTD..)

 To let the employees know where they stand insofar as their
performance is concerned and to assist them with constructive
criticism and guidance for the purpose of their development.
 To improve communication. Performance appraisal provides a
format for dialogue between the superior and the subordinate, and
improves understanding of personal goals and concerns. This can
also have the effect of increasing the trust between the rater and
the ratee.
 Finally, performance appraisal can be used to determine whether
HR programmes such as selection, training, and transfers have
been effective or not.
6
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
HR planning
Determining organisation training needs
Evaluation of organisational goal achievement
Organisational Maintenance/Objectives 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
7
Source: Cynthia D. Fisher, et al. Human resource management, Houghton Mifflin, 1997, p.455
HOW PERFORMANCE APPRAISAL CAN CONTRIBUTE TO

FIRM’S COMPETITIVE ADVANTAGE
Improving
Performance
Making
Strategy and
Correct
Behaviour
Decisions
Competitive
Advantage
Ensuring
Values and
Legal
Behaviour
Compliance
Minimising
Dissatisfaction
and Turnover
8
8–9 © 2007 Thomson/South-Western.
All rights reserved.
WHY PERFORMANCE APPRAISAL PROGRAMS FAIL ?

There are many reasons why performance appraisal systems might
not be effective. Some of the most common problems include the
following:
• Inadequate preparation on the part of the manager.
• Employee is not given clear objectives at the beginning of
performance period.
• Manager may not be able to observe performance or have all
the information.
• Performance standards may not be clear.
• Inconsistency in ratings among supervisors or other raters.
• Rating personality rather than performance.
• The halo effect, contrast effect, or some other perceptual
bias.
• Inappropriate time span (either too short or too long).
• Overemphasis on uncharacteristic performance.
• Inflated ratings because managers do not want to
deal with “bad news.”
• Subjective or vague language in written appraisals.
• Organizational politics or personal relationships
cloud judgments.
• No thorough discussion of causes of performance
problems.
• Manager may not be trained at evaluation or giving
feedback.
• No follow-up and coaching after the evaluation.
MANAGERIAL ISSUES CONCERNING APPRAISALS
1. There is little face-to-face discussion between the manager and

the employee being appraised.
2. The relationship between the employee’s job description and
the criteria on the appraisal form isn’t clear.
3. Managers feel that little or no benefit will be derived from the
time and energy spent in the process, or they are concerned
only with bad performances.
4. Managers dislike the face-to-face confrontation of appraisal
interviews.
THE PERFORMANCE APPRAISAL PROCESS

Objectives of
Performance Appraisal
Establish Job
Expectations
Design an Appraisal
Programme
FEEDBACK
Appraise Performance
Performance Interview
PERFORMANCE
Archive Appraisal Data
MANAGEMENT
Use Appraisal Data for
12
Appropriate Purposes
ESTABLISH JOB EXPECTATIONS

These are benchmarks against which performance is
measured. They should relate to the desired results of
each job They must be clear to both the appraiser and
the appraisee.
Good performance goals should speak about
 What is the task to be accomplished?
 What will it look like when it is
accomplished?
 When must it be completed?
 What are the cost considerations?
 What are the likely payoffs to the
employee? 13
DESIGNING APPRAISAL PROGRAMME

 Formal vs Informal Appraisal
 Whose Performance is to be Assessed?
 Who are the Raters?
 What Problems are Encountered?
 How to solve the problems?
 What should be Evaluated?
 When to Evaluate?
 What Methods of Appraisal are to be used?
14
SOURCES/RATERS OF/IN PERFORMANCE APPRAISAL

 Manager and/or Supervisor
 Appraisal done 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.
 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.
 Team Appraisal
 based on 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
PROBLEMS OF RATING
 Leniency or severity
 Central tendency
 Halo error
 Rater effect
 Primacy and Recency effects
 Perceptual set
 Spillover effect
 Status effect
18
9–19
APPRAISING PERFORMANCE:
PROBLEMS AND SOLUTIONS (CONTINUED)
How to Avoid
Appraisal Problems
Control
Know Use the Train Keep
Outside
Problems Right Tool Supervisors a Diary
Influences
WHAT SHOULD BE RATED?

 Quality
 Quantity
 Timeliness
 Cost effectiveness
 Need for supervision
 Interpersonal impact and
 Community service
20
METHODS OF PERFORMANCE APPRAISAL

MBO Future-oriented
Rating
Scales
Cost
Accounting Checklists
360 Degree Appraisal

Essay
Assessment Centres
Forced
Choice
ACRS Appraisal
Methods
Forced
Tests and Distribution
Observations
Critical
Field Review Incident
BARS
Psychological Past-oriented
Appraisals
21
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.
Graphic Rating Scale with Provision for Comments
EXAMPLE OF A MIXED-STANDARD SCALE
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.
BEHAVIORAL METHODS
Critical
CriticalIncident
Incident
Behavioral
BehavioralChecklist
Checklist
Behavioral
Behavioral
Methods
Methods Behaviorally
BehaviorallyAnchored
Anchored
Rating
RatingScale
Scale(BARS)
(BARS)
Behavior
BehaviorObservation
Observation
Scale
Scale(BOS)
(BOS)
 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.
9–28
CRITICAL INCIDENT METHOD

EXAMPLE OF CRITICAL INCIDENTS FOR ASSISTANT PLANT MANAGER
Continuing Duties Targets Critical Incidents
Schedule production 90% utilization of Instituted new production scheduling

for plant personnel and system; decreased late orders by 10%
machinery in plant; last month; increased machine
orders delivered on utilization in plant by 20% last month
time
Supervise Minimize inventory Let inventory storage costs rise 15%

procurement of raw costs while keeping last month; overordered parts “A” and
materials and adequate supplies on “B” by 20%; underordered part “C” by
inventory control hand 30%
Supervise machinery No shutdowns due to Instituted new preventative

maintenance faulty machinery maintenance system for plant;
prevented a machine breakdown by
discovering faulty part
 Behaviorally Anchored Rating Scale (BARS)
 Consists of 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.
9–30
EXAMPLE OF A
BEHAVIORALLY
ANCHORED RATING
SCALE FOR THE
DIMENSION
SALESMANSHIP
SKILLS
8–31
Example of a BARS for Municipal Fire Companies

FIREFIGHTING STRATEGY: Knowledge of Fire Characteristics.
Source: Adapted from Landy, Jacobs, and Associates. Reprinted with permission.
8–32
Sample Items from Behavior Observation Scales

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.
FIGURE 8–6 PERFORMANCE APPRAISAL UNDER AN MBO PROGRAM
MANAGEMENT BY OBJECTIVES
The Balanced Scorecard 8–35
Source: Robert Kaplan and David Norton, “Strategic Learning and the Balanced Scorecard,” Strategy & Leadership 24, no. 5 (September/October
1996): 18–24.
Personal Scorecard 8–36
Source: Robert Kaplan and David Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January–February 1996): 75–85.
THE BALANCED SCORECARD

 The appraisal focuses on four related categories
 Financial, customer, processes, and learning
 Ensuring the method’s success
Translate strategy into a scorecard of clear objectives.
Attach measures to each objective.
Cascade scorecards to the front line.
Provide performance feedback based on measures.
Empower employees to make performance improvements.
Reassess strategy.
9–38
RANKING EMPLOYEES BY THE PAIRED COMPARISON METHOD
Note: + means “better than.” – means “worse than.” For each chart, add up the
number of +’s in each column to get the highest-ranked employee.
9–39
APPRAISAL-
COACHING
WORKSHEET
Source: Reprinted from www.HR.BLR.com with permission of the publisher Business and Legal Reports, Inc. 141 Mill Rock
Road East, Old Saybrook, CT © 2004.
SUMMARY OF VARIOUS APPRAISAL METHODS
APPRAISAL INTERVIEWS
Types
Types of
ofAppraisal
Appraisal Interviews
Interviews
Tell
Tell and
andSell
Sell -- persuasion
persuasion
Tell
Tell and
andListen
Listen -- nondirective
nondirective
Problem
Problem Solving
Solving -- focusing
focusingthe
the
interview
interview on
onproblem
problem resolution
resolution
and
andemployee
employeedevelopment
development
APPRAISAL INTERVIEW GUIDELINES

Invite Participation Ask for a Self-Assessment
Change Behavior Problem Solving Focus
Minimize Criticism Express Appreciation
Establish Goals Be Supportive
Follow Up Day by Day

9–43
THE APPRAISAL INTERVIEW (CONTINUED)

How to Handle a Defensive Subordinate
1 Recognize that defensive behavior is normal.
2 Never attack a person’s defenses.
3 Postpone action.
4 Recognize your own limitations.

9–44
THE APPRAISAL INTERVIEW (CONTINUED)

How to Criticize a Subordinate
1
Do it in a manner that lets the person maintain
his or her dignity and sense of worth.
2 Criticize in private, and do it constructively.

Give daily feedback so that the review has no
3
surprises.
4 Never say the person is “always” wrong.
5 Criticism should be objective and free of biases.

9–45
FIGURE 9–13
CHECKLIST
DURING THE
APPRAISAL
INTERVIEW
FIGURE 8–8 FACTORS THAT INFLUENCE PERFORMANCE
HIGHLIGHTS IN HRM 9 All rights reserved.
Performance Diagnosis
Source: Scott Snell, Cornell University.

CHALLENGES OF APPRAISAL
 Create a culture of excellence that inspires every employee to improve
and lend himself or herself to be assessed
 Align organisational objectives to individual aspirations
 Clear growth paths for talented individuals
 Provide new challenges to rejuvenate careers that have reached the
plateau stage
 Forge a partnership with people for managing their careers
 Empower employees to make decisions without the fear of failing
 Embed teamwork in all operational processes
 Debureaucratise the organisation structure for ease of flow of
information
48
APPRAISING TEAMS
Set tangible targets for Determine intangible
Identify KRAs critical each KRA. Incorporate parameters (like initiative),
to business during the stretch elements for each which indicate pockets of
year target. Fix the minimum individual excellence with
acceptable target the team
Evaluate performance Communicate the Measure the performance

of the team against results to ensure of the team (actual versus
pre-determined targets transparency targets) every month
Identify individuals who have excelled.

Discount subjective factors by including
assessors from outside the team to
identify outstanding individuals.
49
LEGAL ISSUES
 Legally Defensible Appraisal Procedures
 Legally Defensible Appraisal Content
 Legally Defensible Documentation of Appraisal
Results
 Legally Defensible Raters
50
DEFERENCE BETWEEN JOB EVALUATION AND

PERFORMANCE APPRAISAL
Table 10.7. Difference between Job Evaluation and Performance Appraisal
Job Evaluation Job Appraisal

The job is rated, keeping in view such factors as Employee is rated on the basis of his
responsibility, qualification, experience, working or her performance
conditions, etc. required for performance of the
job.
A job is rated before the employee is appointed to Evaluation takes after the employee
occupy it. has been hired and placed on a job
The purpose is to establish satisfactory wage The purpose is to effect promotions,

differentials offer reward, award punishments,
assess training needs, resort to lay-
offs, transfers, etc.
It is not compulsory. Many organisations carry on Compulsory. It is done regularly for all
without it. Where it is followed, it is mainly for jobs.
lower level jobs.
Job evaluation committee (comprising internal and Appraisal is done by employees
external experts) is constituted for the purpose of themselves, peers, superiors, group of
evaluation. people, or combinations of these.
51
JOB-EVALUATION PROCESS
Objectives of Job
evaluation
Job Analysis
Job description Job specification
Job evaluation
programme
Wage survey
Employee
classification
52
METHODS OF JOB EVALUATION

Analytical
Methods
• Point Ranking
Method
• Factor
Comparison
Method
Job
Evaluation Non-
Analytical
Methods
• Ranking
Method
• Job-Grading
Method
53
REALITY CHECK
 Were you at any time a beneficiary or victim of
halo-error? Recollect and write down the details.
54
REALITY CHECK
 In most family-owned business, sons or
daughters join fathers’ business. In such
scenarios, fathers are the bosses and off springs
are the subordinates. How should such bosses
rate performances of their subordinates? Which
of these errors are likely to occur.
55
REALITY CHECK
 Why is job evaluation not so pervasive as
performance appraisal?
56

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Human Resource Management, 5E

PERFORMANCE APPRAISAL &

 Performance- what an employee does or does

MEANING & FEATURES OF PERFORMANCE APPRAISAL

 It is an objective assessment of an individual’s

OBJECTIVES OF APPRAISAL (CONTD..)

MULTIPLE PURPOSES OF APPRAISAL

Criteria for validation research

HOW PERFORMANCE APPRAISAL CAN CONTRIBUTE TO

WHY PERFORMANCE APPRAISAL PROGRAMS FAIL ?

MANAGERIAL ISSUES CONCERNING APPRAISALS

1. There is little face-to-face discussion between the manager and

THE PERFORMANCE APPRAISAL PROCESS

ESTABLISH JOB EXPECTATIONS

DESIGNING APPRAISAL PROGRAMME

SOURCES/RATERS OF/IN PERFORMANCE APPRAISAL

WHAT SHOULD BE RATED?

METHODS OF PERFORMANCE APPRAISAL

360 Degree Appraisal

CRITICAL INCIDENT METHOD

Continuing Duties Targets Critical Incidents

Schedule production 90% utilization of Instituted new production scheduling

Supervise Minimize inventory Let inventory storage costs rise 15%

Supervise machinery No shutdowns due to Instituted new preventative

Example of a BARS for Municipal Fire Companies

Sample Items from Behavior Observation Scales

THE BALANCED SCORECARD

RANKING EMPLOYEES BY THE PAIRED COMPARISON METHOD

APPRAISAL INTERVIEW GUIDELINES

Change Behavior Problem Solving Focus

Minimize Criticism Express Appreciation

Establish Goals Be Supportive

Follow Up Day by Day

THE APPRAISAL INTERVIEW (CONTINUED)

1 Recognize that defensive behavior is normal.

2 Never attack a person’s defenses.

4 Recognize your own limitations.

THE APPRAISAL INTERVIEW (CONTINUED)

2 Criticize in private, and do it constructively.

5 Criticism should be objective and free of biases.

Source: Scott Snell, Cornell University.

Evaluate performance Communicate the Measure the performance

Identify individuals who have excelled.

DEFERENCE BETWEEN JOB EVALUATION AND

Job Evaluation Job Appraisal

The purpose is to establish satisfactory wage The purpose is to effect promotions,

Job description Job specification

METHODS OF JOB EVALUATION

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