Performance Appraisal

Performance Appraisals
Improve job performance
By directing employee behavior toward organizational goals By monitoring that behavior to ensure that goals are met

Make the correct employment decisions Ensure legal compliance Minimize job dissatisfaction and turnover

Standards for Effective Performance Appraisal Systems

The quality of the rating form Accuracy of the ratings Legal standards

Quality of Rating Form

Relevance
The degree to which the rating form includes necessary information To be relevant, the form must:
Include all the pertinent criteria for evaluating performance Exclude criteria that are irrelevant to job performance

Criterion deficiency: Omission of pertinent performance criteria Criterion contamination: Occurs when irrelevant criteria are included on the rating form

Accuracy of the Ratings

Leniency and severity errors
Leniency error
Occurs when raters provide ratings that are unduly high

Severity error
Occurs when ratings are unduly low

Causes of leniency and severity errors:

Political reasons Raters lack of conscientiousness Personal bias

Accuracy of Ratings (cont.)

Central tendency error
Occurs when appraisers purposely avoid giving extreme ratings even when such ratings are warranted
Causes of central tendency error:
Result of administrative procedures When the end points of the rating scale are unrealistically defined

Accuracy of Ratings (cont.)

Halo effect
Occurs when an appraisers overall impression of an employee is based on a particular characteristic
Causes of the halo effect:
Vague rating standards Failure to conscientiously complete the rating form

Accuracy of Ratings (cont.)

Implicit personality theory
When the raters estimation is based on a personal theory of how different types of people behave in certain situations Rater cannot observe all aspects of a workers performance. Rater classifies employee by type of person. Using this theory, organizations are unable to identify employees specific strengths and weaknesses.

Legal Standards
Appraisal systems must meet all the criteria imposed by EEO laws. Specifically a court would examine:
The nature of the appraisal instrument The fairness and accuracy of the ratings

Types of Rating Instruments

Employee comparison systems Management-by-objectives (MBO)

Employee Comparison Systems

Employee performance is evaluated relative to other employees performances. Ranking formats:
Simple rankings
Require raters to rank-order their employees from best to worst, according to their job performance
A rater compares each possible pair of employees. Requires a rater to assign a certain percentage of employees to each category of excellence, such as best, average, or worst.

Paired comparison Forced distribution

Management-by-Objectives (MBO)
A management system designed to achieve organizational effectiveness by steering each employees behavior toward organizations mission. MBO process includes:
Goal setting Planning Evaluation

MBO Goal Setting

Goal setting: Starts at the top of the organization with the establishment of the organizations mission statement and strategic goals
It then cascades down through the organizational hierarchy to the level of the individual employee.

MBO Planning and Evaluation

Planning: Employees and supervisors work together to identify potential obstacles to reaching goals and devise strategies to overcome these obstacles. Evaluation: In the final phase, the employees success at meeting goals is evaluated against the agreed-on performance standards.

Designing an Appraisal System

Step 1: Gaining support for the system
To gain the support of managers:
Get managers input in developing the system Train managers Hold managers accountable for providing accurate ratings on a timely basis

To gain the support of employees:

Encourage users (both managers and workers) to participate in the planning and development of the system to enhance support for it.

Step 2: Choosing Appropriate Rating Instrument

Practicality Cost
Development costs
Constructing an appraisal system

Implementation costs
Training appraisers Developing written guidelines

Utilization costs
Appraisers time observing, rating, and giving performance feedback

Nature of job

Step 3: Choose Raters

Supervisory ratings
Appraisals are typically responsibility of the immediate supervisor.

Peer ratings
Supplement supervisory ratings
May also help eliminate biases Competitive nature of the organizations reward system and friendships are potential problems if used in lieu of supervisory ratings.

Step 3: Choose Raters (cont.)

Self-ratings
May not be effective as an evaluative tool May be used for employee development

Using multiple raters: 360-degree

Evaluating managers performance using several raters Ratings are made by a circle of people who frequently interact with the manager Primarily used as feedback devices

Step 4: Determining Timing

Mostly conducted annually Difficulty remembering events
Appraisers should maintain records of employee performance to minimize this problem. Record keeping also serves as documentation for EEO suits.

Companies avoid more frequent appraisals because they are considered too time-consuming.

Step 5: Ensuring Fairness

Upper-level management review
May serve to keep appraisers honest

Appeals system
Means for employees to obtain a fair hearing if dissatisfied with their appraisals Considered beneficial because it:
Allows employees to voice their concerns Fosters more accurate ratings Prevents the involvement of outside third parties