9 Performance Management

and Appraisal

Chapter 6-1 Copyright © 2013 Pearson Education

 Learning Objectives

1. Define performance management and

discuss how it differs from performance
appraisal.
2. Describe the appraisal process.
3. Set effective performance appraisal
standards.

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Chapter 9-2
Education
 Learning Objectives

4. Develop, evaluate, and administer

performance appraisal tools.
5. Explain and illustrate the problems to
avoid in appraising performance.
6. Perform an effective appraisal interview.

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Chapter 9-3
Education
 Define performance
management
and discuss how it
differs from performance
appraisal.

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Chapter 9-4
Education
Basic Concepts in Performance Management and
Appraisal

Comparing
Performance Appraisal
and
Performance Management

Performance Appraisal: Performance Management:

Setting work standards, Performance management has to do with
assessing actual performance, and creating an organizational system that is fair,
providing feedback to employees effective, and widely understood by all.
to motivate, correct, and continue An integrated approach to ensuring that
their performance. an employee’s performance supports and
contributes to the organization’s strategic
aims by establishing a valid and reliable process
5 connecting the employees to it..
 Describe the appraisal
process.

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Chapter 9-6
Education
 The Performance Appraisal Process

• Why appraise performance?

• Continuous feedback
• Performance management

Effective appraisals begin before the actual appraisal, with the manager
defining the employee’s job and performance criteria. Defining the job means
making sure that you and your subordinate agree on his or her duties and job
standards and on the appraisal method you will use.

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Chapter 9-7
Education
To summarize the purpose of performance appraisal :

Why Appraise Performance?

1 Is the basis for pay and promotion decisions

2 Plays an integral role in performance management

Helps in correcting deficiencies and reinforcing good

3
performance

4 Is useful in career planning

8
Appraising performance is important for several reasons. Many employers still
base pay and promotions on employee appraisals. Appraisals play an integral role
in the employer's performance management process. The appraisal lets the boss
and subordinate develop a plan for correcting any deficiencies while reinforcing
correct actions. Appraisals are a useful career planning tool. In addition, appraisals
play a role in identifying training and development needs. In addition, training
and development activities are based on the appraisal system.
Aligning the employee’s efforts with the job’s standards should be a continuous
process. When you see a performance problem, the time to take action is
immediately. Similarly, when someone does something well, the best
reinforcement comes immediately, not six months later.
Finally, providing continuous feedback and making improvements to how
employees and employers do things contributes to organizational success.
Performance management includes continuously adjusting how an organization
and its team members do things. Team members who need coaching and training
receive it, and procedures that need changing are changed.

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Chapter 9-9
Education
 Set effective performance
appraisal standards.

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Chapter 9-10
Education
 Defining the Employee’s Goals and Work
Standards

Guidelines for
Effective Goal Setting

Assign
Assign Assign
Challenging Encourage
Specific Measurable
but Doable Participation
Goals Goals
Goals

11
 Setting Goals
• SMART Goals:
- Specific, and clearly state the desired results
- Measurable in answering “how much”
- Attainable, and not too tough or too easy
- Relevant to what’s to be achieved
- Timely in reflecting deadlines and milestones

 Encourage participation- employees should always have

the opportunity to have meaningful input into the goals they
are to achieve
12
 Employee’s Goals and Performance Standards

• Basing appraisal standards on required competencies.

Competencies are often arranged according to the basic
technical, motor, intellectual, and other skills needed to be
successful in a job. In addition, the minimum level of each skill
needed should be specified.

• The role of job descriptions: Ideally, what to appraise and

how to appraise it will be obvious from the job description.
For the criteria to appraise, the job description should list the
job’s duties or tasks, including how critical each is to the job
and how often it’s performed.

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Chapter 9-13
Education
 Who Should Do the Appraising?

Immediate
Self-rating
supervisor

Potential
HR Subordinates
Appraisers

360-degree
Peers
feedback

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9–14
Inc. publishing as Prentice Hall
 Performance Appraisal Roles
• Supervisors
- Usually do the actual appraising
- Must be familiar with basic appraisal techniques
- Must understand and avoid problems that can cripple
appraisals
- Must know how to conduct appraisals fairly

 Rating committees consist of multiple raters, typically the

employee’s immediate supervisor and three or four other
supervisors.

15
 (cont)

• The HR Department
- Serves a policy-making and advisory role
- Provides advice and assistance regarding the appraisal
tool to use
- Trains supervisors to improve their appraisal skills
- Monitors the appraisal system’s effectiveness
- Corrects any deviations from procedures

16
 (cont)
• Peer appraisal
Performance appraisal by peers is becoming popular.
Studies found that peer appraisal has a positive impact on
improving open communication, task motivation, cohesion
and satisfaction.

• Self ratings :
Some employers ask employee to evaluate him self.
The basic problem is that employees usually rate themselves higher
than do their supervisors or peers.

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9–17
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 (cont)

• Appraisal by subordinates
Studies found that managers who received upward feedback poor
or moderate showed significant improvements. And managers who
met their subordinates to discusse their assessment improved than
who did not.

• 360-degree feedback
It means that the employer collects performance information from
all around the employee:
Supervisors, peers, customers, self-ratings
Results are mixed
Most employees prefer this approach
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9–18
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 Develop, evaluate, and
administer at least four
performance appraisal tools.

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Chapter 9-19
Education
 Designing the Appraisal Tool
• The graphic rating scale method is the simplest and most popular
performance appraisal technique. First, a scale is used to list a number of traits
and a range of performance for each. Then the employee is rated by identifying
the score that best describes his/her performance level for each trait.

• What to Measure?
Managers must decide which job performance aspects to measure. Such
aspects include generic dimensions, actual job duties, or behaviorally
recognizable competencies.
- Generic dimensions – quality, quantity, and timeliness of
work
- Developing one’s competencies, or achieving one’s goals

20
 Performance Appraisal Tools
• Alternation ranking
• Forced distribution
• Critical incident
• Behaviorally Anchored Rating Scales (BARS)

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Chapter 9-21
Education
 Performance Appraisal Tools

• Management by objectives (MBO)

• Computerized and web-based
performance appraisal
• Electronic performance monitoring (EPM)

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Chapter 9-22
Education
 The Alternation Ranking Method ranks employees from best
to worst on a specific trait, choosing highest, then lowest, until
all are ranked.

Forced Distribution Method – Predetermined percentages of

employee ratings are placed in various performance
categories, similar to grading on a curve.

Critical Incident Method – A supervisor keeps a record of

uncommonly good and/or undesirable examples of an
employee’s work-related behavior. The supervisor then
reviews the record with the employee at predetermined
times.

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Chapter 9-23
Education
 Behaviorally Anchored Rating Scale (BARS)
Behaviorally Anchored Rating Scales (BARS) is a method that combines the
benefits of, critical incidents, and quantified scales. It does so by anchoring a scale
with specific behavioral examples of good or poor performance.

Developing a BARS Advantages of BARS

1. Generate critical incidents 1. A more accurate gauge

2. Develop performance dimensions 2. Clearer standards
3. Reallocate incidents 3. Feedback
4. Scale the incidents 4. Independent dimensions
5. Develop a final instrument 5. Consistency

2
4
Management by Objectives (MBO) – The manager sets specific measurable
goals with each employee and then periodically discusses the employee’s
progress toward them. The process consists of six steps:
1. set organizational goals
2. set departmental goals
3. discuss
4. define expected results
5. conduct performance reviews
6. provide feedback
A computerized and web-based performance appraisal approach generally
enables managers to keep notes on subordinates during the year. It allows
employee ratings on a series of performance traits, and then generates text
to support each part of the appraisal.
Electronic Performance Monitoring use computer network technology to
allow managers access to their employees’ computers and telephones.
Note, however, the most effective appraisal forms often merge several
approaches

Chapter 9-25
 Explain and illustrate the
problems to avoid in
appraising performance.

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Chapter 9-26
Education
 Appraising Performance:
Problems and Solutions

Potential Rating-
Scale Appraisal
Problems

Unclear Halo Central Recency Leniency or Bias

Standards Effect Tendency Effect Strictness

27
 If standards are unclear, ambiguous traits and degrees of merit can result
in an unfair appraisal.

The influence of a rater’s general impression on ratings of specific qualities is

known as the halo effect.

Central tendency occurs when supervisors stick to the middle of the rating
scales, thus rating everyone average.

Leniency or strictness occurs if supervisors have a tendency to rate

everyone either high or low.

Recency effects involve letting what the employee has done recently blind
the manager to the employee’s performance over the entire year.

Bias is a tendency to allow individual differences such as age, race, and sex
affect employee appraisal ratings.

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Chapter 9-28
Education
 Guidelines for Effective Appraisals
Dealing with appraisal problems

Guidelines for
effective appraisals

Get
Know the Use the Keep a Be
agreement on
problems right tool diary fair
a plan

9–29
 Guidelines for appraisal effectiveness

• Appraisals are always interpersonal and so subject to

human bias
• First The rater must learn and understand the potential appraisal
problems such as central tendency and work to avoid them.
• Second, he must use the right appraisal tool or combination of
tools because each tool has its pros and cons
• Third, he must keep a diary for employee’s performance over the
year. Studies proved that critical incidents as they occur reduces
appraisal problems.

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9–30
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 Guidelines for appraisal effectiveness Cont.

• Fourth, he must get agreement on a plan because the aim of

the appraisal is to improve unsatisfactory performance and
reinforce good performance.
Therefore the appraisal’s end product, should always be a plan for
what the employee must do to improve his effort.
• Fifth, ensure fairness. Some managers ignore accuracy and
honesty in performance appraisal, therefor performance
standards must be clear to ensure that the appraisal is fair.

9–31
 Perform an effective
appraisal interview.

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Chapter 9-32
Education
 Types of Appraisal Interview

Satisfactory—Promotable

Satisfactory—Not Promotable
Types of Appraisal
Interviews Unsatisfactory—Correctable

Unsatisfactory—Uncorrectable

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9–33
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 Satisfactory-promotable: the person’s performance is
satisfactory and there is a promotion a head. In this case, The
supervisor discuss the person’s career plans.
•Satisfactory-not promotable: the person’s performance is
satisfactory, but the promotion is not possible. The objective
here is to maintain satisfactory, so the best option is to find
incentives to maintain performance.
•Unsatisfactory but correctable. The objective here is to lay
out an action plan for correcting the unsatisfactory
performance.
•If the performance is unsatisfactory and uncorrectable the
interview is skipped

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9–34
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 How to conduct the appraisal
interview
Guidelines for Conducting
an Interview

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

Such as absences,
productivity, quality Try to compare Llisten and ask Make sure the person
person’s performance open questions know his weak points and
to standards put plan with him

9–35
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
 Performance Management

Three concepts distinguish performance

management from performance appraisal:
1.performance management is continuous
2.it is goal-directed
3.it is continuously re-evaluating and modifying the way
people accomplish their work

Using information technology to support performance

management allows management to monitor and correct
deficiencies in real time.

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Chapter 9-36
Education
 Six basic elements of
Performance Management

Ongoing
Goal
Direction sharing performance
alignment
monitoring

Coaching and Rewards,

Ongoing
development recognition, and
feedback
support compensation

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9–37
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 Performance Management Summary
Performance management’s six basic elements:
• Direction sharing means communicating the company’s goals throughout the company.
Then translating these into doable departmental, team, and individual goals.
• Goal alignment means having a method that enables managers and employees to see the
link between the employees’ goals and those of their department and company.
• Ongoing performance monitoring usually includes using computerized systems that
measure and then e-mail progress and exception reports. The reports are based on the
person’s progress toward meeting his or her performance goals.
• Ongoing feedback includes both face-to-face and computerized feedback regarding
progress toward goals.
• Coaching and developmental support should be an integral part of the feedback process.

• Recognition and rewards provide the consequences needed to keep the employee’s
goal-directed performance on track.

Chapter 9-38