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11-1

Performance Appraisals

Chapter

11

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11-2

1. Summarize the key issues involved in defining and measuring employee performance.

2. Discuss the key components of the four strategies to better understand and measure performance.

3. Identify the five categories of performance appraisal formats and discuss the issues involved in determining which format would be the most appropriate to use.

4. Understand how raters process information and identify the major errors that can occur in this process.

5. Outline the key elements to maximize a good outcome in a performance management system.

6. Understand the legal issues affecting performance appraisals.

7. Explain the issues involved in designing merit pay guidelines to link pay to performance.

Learning ObjectivesAfter discussing Chapter 11, students

should be able to:

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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.

Nature of Performance Appraisals

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11-4Role of Performance Appraisal

Control mechanism for feedbackAllows employee progress to be assessed

Ensures strategy-consistent behaviorReinforces values of organizationEnsures alignment of individual performance and behavior toOrganization cultureWork systems

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11-5Purposes of Performance Appraisal

Evaluation Performance

measurement Compensation Motivation

Development Management

development Identification of

Potential Feedback Human resource

planning Communications Performance

improvement

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11-6Steps to ImprovePerformance Appraisal Process

Recognize part of performance is influenced more by work environment and systems than by employee behaviors

Identify strategies to understand and measure job performance better

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11-7Strategies to Better Understandand Measure Job Performance

1 Clearly define job performance

2 Recognize definition of performance and its components is expanding

3 Improve appraisal formats

4 Select the right raters

5 Understand way raters process information and mistakes that may be made

6 Train raters to improve rating skills

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11-8Strategy to Better Understandand Measure Job Performance

Improve Appraisal Formats

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11-9

Performance Appraisal Approaches

Attribute graphic rating

scales Comparative

ranking forced distribution paired comparison

Behavioral critical incidents BARS/BES BOS

Results- objective measures

Show me theperformance!

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Rating Errors Group Errors

Central tendency Leniency Strictness

Individual Errors Halo/stereotype/similar-to-me Recency Contrast

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Sample Trait ScalesRate each worker using the scales below.

Decisiveness:1 2 3 4 5 6 7Very low Moderate Very high

Reliability:1 2 3 4 5 6 7Very low Moderate Very high

Energy:1 2 3 4 5 6 7Very low Moderate Very high

Loyalty:1 2 3 4 5 6 7Very low Moderate Very high

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Trait Rating Scales Advantages

Easy to develop Inexpensive Use across different jobs

Disadvantages Subjective/subject to errors Not job specific Difficulty with feedback Potential legal problems

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Employee Comparisons Rank order/forced choice/paired comparison Advantages

Distribution for decision making No central tendency/leniency

Disadvantages Halo error/individual errors Comparing pears to bananas Feedback/justification Scale doesn’t provide for amount of differences

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11-14

Behavior-based Scales Behavior Expectation Scales (Behaviorally Anchored Rating Scales) 1. Ask managers for critical incidents –

behaviors that reflect particularly effective/ineffective behavior

2. Sort into categories and rank within each category

3. Ask for additional incidents to fill in categories

4. Retranslate – ask managers to sort

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Objective-based Ratings Profits/production/quality/sales Advantages

Objective/eliminate rating errors Disadvantages

Deficient – may omit important factors Focus on quantifiable/observable results Situational factors Feedback Encourages results at all costs

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11-16 Usage of PerformanceEvaluation Formats

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11-17

Select the Right Raters

Strategy to Better Understandand Measure Job Performance

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11-18

Supervisors

Peers Self

Customers

Subordinates

Vendors

Select the Right Raters

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11-19Strategy to Better Understandand Measure Job Performance

Understand How Raters

Process Information

and Potential Mistakes

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11-20

The Rating ProcessRater observes behavior of a rateeRater encodes ratee behaviorRater stores information in memoryWhen it is time to evaluate a ratee, rater

Reviews performance dimensions andRetrieves stored observations to determine

relevance to performance dimensionsInformation is reconsidered and integrated with other available information as rater decides on final ratings

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11-21

Errors in observation (attention)

Errors in storage and recall

Errors in actual evaluation

Types of

Errors

Errors in rating process

Understand Why Raters Make Mistakes

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11-22Training Raters to Rate More Accurately

Rater-error trainingGoal is to reduce psychometric errors by

familiarizing raters with their existencePerformance dimension training

Exposes supervisors toperformance dimensions used

Performance-standard trainingProvides raters with a standard or

frame of reference for making appraisal

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1Need a sound basis for establishing performance appraisal dimensions and scales associated with each dimension

2 Need to involve employees in every stage of developing performance dimensions and building scales

3Need to ensure raters are trained in use of appraisal system and that all employees understand how system operates

4 Need to ensure raters are motivated to rate accurately

5 Raters should maintain a diary of employee performance

6 Raters should attempt a performance diagnosis to determine if performance problems exist

7 Appraisal process should follow guidelines in Exhibit 11.11

Key elements making for a good outcome

Putting it All Together:The Performance Evaluation

Process

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11-25Tips on Appraising Employee Performance

1 Establish clear sense of direction

2 Provide opportunity for employees to participate in setting goals and standards for performance

3 Provide prompt, honest, and meaningful feedback

4 Allow for immediate and sincere reinforcement

5 Provide coaching and suggestions for improving future performance

6 Provide fair and respectful treatment

7 Allow an opportunity for employees to understand and influence decisions which effect them

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11-26EEO and Performance Evaluation

1 Provide specific written instructions on how to complete appraisal

2Incorporate clear criteria for evaluating performance - Performance dimensions should be written, objective, and clear

3 Provide a rational foundation for personnel decisions via adequately developed job descriptions

4 Require supervisors to provide feedback about appraisal results to employees

5 Incorporate a review of performance ratings by higher level supervisors

6 Consistent treatment across raters, regardless of race, color, religion, sex, and national origin should be evident

Key Issues: Establishing a Performance Appraisal System

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11-27Tying Pay to SubjectivelyAppraised Performance

How do we get

employees to view raises as a reward

for performance

?

Central issue

involving merit pay

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11-28

Provide equal increases to all employees regardless of performance

General increase

Cost-of-living adjustments

Pay increases based on a preset progression pattern based on seniority

Pay Increase Guidelines withLow Motivational Impact

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11-29Requirements to LinkPay to Performance

Define performanceBehaviorsCompetenciesTraits

Specify a continuum describing different levels from low to high on performance measure

Decide how much of a merit increase is given for different levels of performance

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Define performance Behaviors Competencies Traits

Specify a continuum describing different levels from low to high on performance measure

Decide how much of a merit increase is given for different levels of performance

Requirements to Link Pay to Performance

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11-31 Performance-based Guidelines

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Designing Merit Guidelines

1 What should the poorest performer be paid as an increase?

2 How much should average performers be paid as an increase?

3 How much should top performers be paid?

4What should be the size of the percentage increase differential between different levels of performance?

Four Questions . . .

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Merit grids combine 3 variables:

Level of performance

Distribution of employees within their jobs’ pay ranges

Merit budget increase percentage

Merit Pay Grid

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11-34Promotional Increases as aPay-for-Performance Tool

Promotion should be accompanied by a salary increase - 8 to 12%

Characteristics of promotional pay increasesSize of increment is approximately double a

normal merit increase

Represent a reward to employees for commitment and exemplary performance

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11-35The Performance Management Process

Performance Management - Continuous process where employees and managers work together

Establish Expectations Coaching and

Development

Feedback

ReviewRewards and Recognition