Part

Part 3:
3: Training
Training and
and Developing
Developing
Human
Human Resources
Resources
Chapter 9: Performance Management
and Appraisal

Prepared by Linda Eligh, University of Western Ontario

Copyright 2008 by Nelson, a division of Thomson Canada Limited.

91

Learning
Learning Objectives
Objectives
After you have read this chapter, you should be able to:
1.
2.
3.
4.
5.
6.
7.

Identify the components of performance management systems.

Discuss important employee performance measures including
individual performance factors.
Explain the administrative and developmental uses of performance
appraisal and the legal implications of performance management.
Describe the decisions concerning the performance appraisal
process.
Introduce the methods of appraising performance and their
advantages and disadvantages.
Discuss the importance of training managers and employees about
performance appraisal, and give examples of several rater errors.
Identify several concerns about appraisal feedback and ways to
make it more effective.

Copyright 2008 by Nelson, a division of Thomson

92

Nature
Nature of
of Performance
Performance Management
Management
Performance Management
Processes used to identify, encourage, measure,
evaluate, improve, and reward employee
performance
Provide
Clarify

information to employees about their performance.

organizational performance expectations.

Identify

the development steps that are needed to enhance

employee performance.

Document
Provide

performance for personnel actions.

rewards for achieving performance objectives.

Copyright 2008 by Nelson, a division of Thomson

93

Performance
Performance
Management
ManagementLinkage
Linkage
Fig.
Fig.9-1
9-1

Copyright 2008 by Nelson, a division of Thomson

94

Difference
Difference Between
Between Performance
Performance
Management
Management and
and Performance
Performance Appraisals
Appraisals
Performance
Management
Processes used to
identify, encourage,
measure, evaluate,
improve, and reward
employee performance.

Performance
Appraisal
The process of evaluating
how well employees
perform their jobs and
then communicating that
information to the
employees.

Copyright 2008 by Nelson, a division of Thomson

95

Identifying
Identifying and
and Measuring
Measuring
Employee
Employee Performance
Performance
Performance
What an employee does and does not do.
Quantity

of output
Quality of output
Timeliness of output Presence at work

Job Criteria
Important elements in a given job

Copyright 2008 by Nelson, a division of Thomson

96

Types
Types of
of Performance
Performance Information
Information

Copyright 2008 by Nelson, a division of Thomson

Fig.
Fig.9-2
9-2

97

Relevance
Relevance of
of Performance
Performance Criteria
Criteria
Deficiency
Deficiency

Contamination
Contamination

Performance
Performance
Criteria
Criteria

Overemphasis
Overemphasis

Copyright 2008 by Nelson, a division of Thomson

98

Relevance
Relevance of
of Performance
Performance Criteria
Criteria
Reliability
Reliability

Practicality
Practicality

Performance
Performance
Appraisal
Appraisal

Fairness
Fairness

Copyright 2008 by Nelson, a division of Thomson

99

Performance
Performance Standards
Standards
Performance Standards
Expected levels of performance

Benchmarks, goals, and targets

S.M.A.R.T. approach for writing performance standards

S=Specific
M=Measurable
A=Attainable
R=Relevant
T=Time bound

Copyright 2008 by Nelson, a division of Thomson

910

Legal
Legal Concerns
Concerns and
and Performance
Performance Appraisals
Appraisals
Legally Defensible PA System:
Objective performance appraisal criteria based on job analysis
Absence of disparate impact and evidence of validity
Formal evaluation criteria that limit managerial discretion
A rating instrument linked to job duties and responsibilities
Documentation of the appraisal activities
Personal knowledge of and contact with the appraised individual
Training of supervisors in conducting appraisals
Review process to prevent undue control of careers
Counseling to help poor performers improve

Copyright 2008 by Nelson, a division of Thomson

911

Conflicting
ConflictingUses
Usesfor
for Performance
PerformanceAppraisal
Appraisal

Copyright 2008 by Nelson, a division of Thomson

Fig.
Fig.9-3
9-3

912

Uses
Uses of
of Performance
Performance Appraisal
Appraisal
Criticisms of Performance Appraisal
Focus is too much on the individual and does little to
develop employees.
Employees and supervisors believe the appraisal
process is seriously flawed.
Appraisals are inconsistent, short-term oriented,
subjective, and useful only at the extremes of
performance.

Copyright 2008 by Nelson, a division of Thomson

913

Developmental
Developmental Uses
Uses of
of
Performance
Performance Appraisal
Appraisal
Performance
Performance
Appraisal
Appraisal

Administering
AdministeringWages
Wages
and
andSalaries
Salaries

Giving
GivingPerformance
Performance
Feedback
Feedback

Copyright 2008 by Nelson, a division of Thomson

Identifying
IdentifyingStrengths
Strengths
and
andWeaknesses
Weaknesses

914

Typical
Typical Division
Division of
of HR
HR Responsibilities:
Responsibilities:
Performance
Performance Appraisal
Appraisal Fig.
Fig.9-4
9-4

Copyright 2008 by Nelson, a division of Thomson

915

Decisions
Decisions Concerning
Concerning PA
PAProcess
Process
Performance Appraisal (PA)
The process of evaluating how well employees
perform their jobs when compared to a set of
standards, and then communicating the information to
employees.
Informal Appraisal
Day-to-day

contacts, largely undocumented

Systematic Appraisal
Formal

contact at regular time intervals, usually documented

Timing of Appraisals
Probationary

(60-90 days), six months and annually

Copyright 2008 by Nelson, a division of Thomson

916

Who
Who Conducts
Conducts Appraisals
Appraisals

Supervisors who rate their employees

Employees who rate their supervisors
Team members who rate each other
Employees rating themselves
Outside sources rating employees
Multisource (360 feedback) appraisal

Copyright 2008 by Nelson, a division of Thomson

917

Traditional
Traditional
Performance
Performance
Appraisal
AppraisalProcess
Process
Fig 9-5
Fig
Fig9-5
9-5

Copyright 2008 by Nelson, a division of Thomson

918

Employee
Employee Rating
Rating of
of Managers
Managers
Advantages
Helps in identifying
competent managers
Serves to make managers
more responsive to
employees
Can contribute to the
career development of
managers

Disadvantages
Negative reactions by
managers to employee
ratings
Subordinates fear of
reprisals may inhibit them
from giving realistic
(negative) ratings
Ratings are useful only for
self-improvement purposes

Copyright 2008 by Nelson, a division of Thomson

919

Team/Peer
Team/Peer Rating
Rating
Advantages
Helps improve the
performance of lower-rated
individuals
Peers have opportunity to
observe other peers
Peer appraisals focus on
individual contributions to
teamwork and team
performance

Disadvantages
Can negatively affect
working relationships
Can create difficulties for
managers in determining
individual performance
Organizational use of
individual performance
appraisals can hinder the
development of teamwork

Copyright 2008 by Nelson, a division of Thomson

920

Multisource
Multisource Appraisal
Appraisal

Copyright 2008 by Nelson, a division of Thomson

Fig.
Fig.9-6
9-6

921

Methods
Methods for
for Appraising
Appraising Performance
Performance

Category Scaling
Behavioural Rating Scales
Comparative Methods
Narrative Methods
Results Based Methods
Combination Methods

Copyright 2008 by Nelson, a division of Thomson

922

Category
Category Scaling
Scaling Methods
Methods
Graphic Rating Scale
A scale that allows the rater to indicate an employees
performance on a continuum of job behaviours.
Aspects of performance measured:
Descriptive

categories, job duties, and behavioural

dimensions

Drawbacks
Restrictions

on the range of possible rater responses

Differences in the interpretations of the meanings of scale
items and scale ranges by raters
Poorly designed scales that encourage rater errors
Rating form deficiencies limit effectiveness of the appraisal

Copyright 2008 by Nelson, a division of Thomson

923

Sample
Sample
Performance
Performance
Appraisal
Appraisal
Form
Form Fig.
Fig.9-7
9-7

Copyright 2008 by Nelson, a division of Thomson

924

Terms
Terms Defining
DefiningStandards
Standardsat
atOne
OneCompany
Company

Copyright 2008 by Nelson, a division of Thomson

Fig.
Fig.9-8
9-8

925

Behavioural
Behavioural Rating
Rating Scales
Scales
Behavioural Rating Approach
Assesses employees behaviours instead of other
characteristics
Consists of a series of scales created by:
Identifying

important job dimensions

Creating statements describing a range of desired and
undesirable behaviours (anchors)

Behaviourally anchored rating scales (BARS)

Describes

behaviours, differentiating between effective and

ineffective performers that can be observed, and anchors
them at points on a scale.
Employees behaviour is compared against examples and
rated accordingly
Copyright 2008 by Nelson, a division of Thomson

926

Behaviourally-Anchored
Behaviourally-AnchoredRating
RatingScale
Scale
for
forCustomer
Customer Service
ServiceSkills
Skills Fig.
Fig.9-9
9-9

Copyright 2008 by Nelson, a division of Thomson

927

Comparative
Comparative Methods
Methods
Ranking
A listing of all employees from highest to lowest in
performance.
Drawbacks
Does

not show size of differences in performance between

employees.
Implies that lowest-ranked employees are unsatisfactory
performers.
Becomes an unwieldy process if the group to be ranked is
large.

Copyright 2008 by Nelson, a division of Thomson

928

Comparative
Comparative Methods
Methods (contd)
(contd)
Forced Distribution
Performance appraisal method in which ratings of
employees are distributed along a bell-shaped curve.
Drawbacks
Assumes

a normal distribution of performance.

Resistance

by managers to placing individuals in the lowest

or highest groups.

Providing

explanation for placement in a higher or lower

grouping can be difficult.

Is

not readily applicable to small groups of employees.

Copyright 2008 by Nelson, a division of Thomson

929

Forced
ForcedDistribution
Distributionon
onaaBell-Shaped
Bell-ShapedCurve
Curve

Copyright 2008 by Nelson, a division of Thomson

Fig.
Fig.9-10
9-10

930

Narrative
Narrative Methods
Methods
Critical Incident
Manager keeps a written record of highly favourable
and unfavourable employee actions.
Drawbacks
Variations

in how managers define a critical incident

Essay
Manager writes a short essay describing an
employees performance.
Drawback
Depends

on the managers writing skills and their ability to

express themselves.

Copyright 2008 by Nelson, a division of Thomson

931

Results
Results Based
Based Methods
Methods
Results Based Performance Appraisal System
focuses on concrete standards of performance
that employees are expected to achieve.
Management by Objectives
Specifies

the performance goals that an individual and

manager mutually identify.

Balanced Scorecard
Links

the strategy, resource allocation and performance

appraisal systems in an organization.
Expands on MBO by considering multiple segments of the
organization from which to develop employee objectives.
Four key perspectives measure: financial, internal business
process, customer and learning and growth.
Copyright 2008 by Nelson, a division of Thomson

932

The
The Management
Management by
by Objectives
Objectives (MBO)
(MBO) Process
Process

Job
JobReview
Review and
andAgreement
Agreement
Development
Development of
of Performance
PerformanceStandards
Standards
Objective
ObjectiveSetting
Setting

Continuing
ContinuingPerformance
PerformanceDiscussions
Discussions
Copyright 2008 by Nelson, a division of Thomson

933

The
The Balance
Balance Scorecard
Scorecard

Fig.
Fig.9-11
9-11

Copyright 2008 by Nelson, a division of Thomson

934

Combination
Combination of
of Methods
Methods
So whats the best method?
No single appraisal method is best for all situations.
Using a combination of methods may be sensible in
certain circumstances.
Using combinations may offset various advantages
and disadvantages of individual methods.
When managers can articulate what they want a
performance appraisal system to accomplish, they
can choose and mix methods for desired results.
Different categories of employees might require
different combinations of methods.

Copyright 2008 by Nelson, a division of Thomson

935

Training
Training of
of Managers
Managers and
and Employees
Employees
Appraisal Training Topics:
Appraisal process and timing
Performance criteria and job standards that should be
considered
How to communicate positive and negative feedback
When and how to discuss training and development
goals
Conducting and discussing the compensation review
How to avoid common rating errors

Copyright 2008 by Nelson, a division of Thomson

936

Common
Common Rater
Rater Errors
Errors

Copyright 2008 by Nelson, a division of Thomson

Fig.
Fig.9-12
9-12

937

Appraisal
Appraisal Feedback
Feedback
Appraisal Feedback Interview:
Communicate results to an employee after an
appraisal interview
Provide employee with a clear understanding of how
they stand in the eyes of immediate superiors and the
organization
Clear up any misunderstandings on both sides
Focus on coaching and development
Avoid Here is how you rate and why message

Copyright 2008 by Nelson, a division of Thomson

938

Appraisal
Appraisal Interview
Interview Hints
Hints

Fig.
Fig.9-13
9-13

DO

DONT

Prepare in advance
Focus on performance and
development
Be specific about reasons for
ratings
Decide on specific steps to be
taken for improvement
Consider supervisors role in
employees performance
Reinforce desired behaviours
Focus on future performance

Do all the talking

Lecture the employee
Mix performance appraisal and
salary or promotion issues
Concentrate only on the
negative
Be overly critical or harp on a
failing
Feel it is necessary that both
parties agree in all areas
Compare the employee with
others

Copyright 2008 by Nelson, a division of Thomson

939

Appraisal
Appraisal Feedback
Feedback
Evaluation
Evaluation
of
of Data
Data

Data
Data

Feedback
Feedbackas
as
aaSystem
System

Action
Action Based
Based on
on
Evaluation
Evaluation

Copyright 2008 by Nelson, a division of Thomson

940

Appraisal
Appraisal Feedback
Feedback
Effective Performance Management Systems
Consistent with the strategic mission of the
organization
Beneficial as development tool
Useful as an administrative tool
Legal and job-related
Viewed as generally fair by employees
Effective in documenting employee performance

Copyright 2008 by Nelson, a division of Thomson

941