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According to equity theory, an employee's perception of the fairness of his work's input and
outcome influences his motivation. Effective performance management systems enable a smallbusiness manager to clarify job responsibilities and expectations, develop an employee's
capabilities, and align an employee's behavior to the company's strategic goals and values. An
employee typically feels satisfied with the outcome of his effort, including his pay, when the
compensation matches what he feels he puts into the job. If an employee perceives that others get
more for doing less, he typically becomes less motivated to work hard. Managers create a
productive work environment by communicating job requirements clearly and establishing fair
and consistent performance objectives for all employees.
Achieving Balance
Effective small-business managers avoid underpaying and overpaying employees. They monitor
performance and compensation regularly to achieve a productive balance. If cuts need to be
made due to economic conditions, they distribute the decreases throughout the company. To
remain motivated, employees typically need to be able to provide input to their performance
plan, modify their goals if conditions change, and seek career development opportunities.
Communicating Clearly
It's not easy to make equitable decisions while supporting performance improvement. Managers
typically evaluate their employees, calibrate ratings and decide on rewards. These rewards
include pay increases, promotions, flexible work schedules or stock options. Justifying these
decisions becomes the focus, rather than relaying constructive feedback that can enhance
performance and foster career development. Successful small-business managers clearly
communicate company goals and make sure employees understand their role in achieving
business objectives. By recognizing the effort, loyalty, commitment, skill and enthusiasm that an
exemplary employee displays, an effective manager acknowledges accomplishments, establishes
trust and builds a productive workforce. A worker's sense of achievement tends to build loyalty
and enables him to feel secure about his future with the company.
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1. Essay Method
3. Rating Scale
Rating scales consists of several numerical scales
representing job related performance criterions such as
dependability, initiative, output, attendance, attitude etc.
Each scales ranges from excellent to poor. The total
numerical scores are computed and final conclusions are
derived. Advantages Adaptability, easy to use, low cost,
every type of job can be evaluated, large number of
employees covered, no formal training required.
Disadvantages Raters biases
4. Checklist method
5.Ranking Method
The ranking system requires the rater to rank his
subordinates on overall performance. This consists in
simply putting a man in a rank order. Under this method,
the ranking of an employee in a work group is done
against that of another employee. The relative position of
each employee is tested in terms of his numerical rank. It
may also be done by ranking a person on his job
performance against another member of the competitive
group.
Advantages of Ranking Method
Employees are ranked according to their
performance levels.
It is easier to rank the best and the worst
employee.
Limitations of Ranking Method
The whole man is compared with another
whole man in this method. In practice, it is very difficult
to compare individuals possessing various individual
traits.
This method speaks only of the position where an