7 Performance Appraisal

Performance Appraisal

Evaluating an employee's current and/or past performance relative to their performance standards; formal system of review and evaluation of individual or team task performance; it is a component of performance management.

Performance Appraisal Process

1. Setting work standards 2. Assessing employee's actual performance relative to standards 3. Providing feedback with aim of eliminating deficiencies or reinforcing strengths.

Reasons to Appraise Performance

Most employers base pay, promotion, and retention decisions on appraisal; plays central role in employer's performance management - continuously ensuring employee's performance makes sense in terms of company's overall goals.

Defining Employee Goals and Standards

Performance appraisal should compare 'what should be' (performance standard) with 'what is' (current performance).

Three Bases of Appraisal Standards

1. Extent to which employee is attaining numerical goals (overall profitability, cost reduction, or efficiency goals) 2. Basic job dimensions or traits 3. Mastery of competencies (skills, knowledge, and/or personal behaviors).

Immediate Supervisor (Appraiser)

Heart of most appraisals; in best position to observe and evaluate performance; responsible for employee's performance.

Peer Appraisals

Appraisals by one's peers; employee due for appraisal chooses appraisal chairperson; chairperson selects supervisor and several peers to evaluate work.

Crowd Appraisals / Social Media Tools

Almost everyone in company continuously appraising one's work through social media tools; virtual games help employees evaluate and reward each other.

Rating Committees

Consists of employee's immediate supervisor and 3-4 other supervisors; advantages include cancelling bias and picking up different facets of performance.

Self-Ratings

Obtained along with supervisor's ratings; employees usually rate themselves higher than supervisors or peers.

Appraisal by Subordinates

Subordinates rating their managers; usually for developmental purposes rather than for pay; anonymity affects feedback.

360-Degree Feedback

Collecting performance information all around employee - supervisors, subordinates, peers, and internal or external customers.

Establishing Performance Criteria - Traits

Commonly subjective and may be unrelated to job performance or difficult to define; important to establish connection between trait and job performance.

Establishing Performance Criteria - Behaviors

When task outcome is difficult to determine, task-related behavior or competencies may be evaluated.

Establishing Performance Criteria - Competencies

Broad range of knowledge, skills, traits, and behaviors that may be technical, interpersonal, or business-oriented.

Five Key Areas of Competencies linked to success in HR

1. Strategic contribution 2. Business knowledge 3. Personal credibility 4. HR delivery.

HR technology

Using technology and Web-based means to deliver value

Goal Achievement

Outcomes established should be within control of individual or team and should be those results that lead to organizational success; Upper level goals => financial aspects and market considerations; Lower level goals => meeting customer's needs and delivering according to schedule

Improvement Potential

Provides emphasis into future; assessment of employee's potential; helps ensure more effective career planning and development

Graphic Rating Scale Method

Simplest and most popular method; lists job dimensions or traits and range of performance values (unsatisfactory to outstanding); supervisor rates each subordinate by identifying score that best describes performance for each trait, ratings are totaled

Competency-based Graphic Rating Scale

Assesses person's competencies and skills; scale might rate how well employee did with respect to achieving specific profit, cost, or efficiency goals

Summary of Rating Scales

Rating scales based on either trait, competencies, or goals

Alternation Ranking Method

Ranking employees from best to worst on a trait; Process: list all subordinates to be rated, cross out names not known well enough, indicate highest then lowest, choose next highest and lowest alternating until all ranked

Paired Comparison Method

For every trait, every employee is compared with every other employee; uses chart of all possible pairs; choose who is better of pair for each trait

Forced Distribution Method

Similar to grading on a curve; manager places predetermined percentages of ratees into performance categories (top 20%, middle 70%, bottom 10%); most of bottom 10% lost jobs; advantage is preventing supervisors from rating all satisfactory/high; disadvantage: increase risk of discriminatory adverse impact, may leave employees feeling appraisal was dysfunctional; committee should review low ranking

Critical Incident Method

Supervisor keeps log of positive and negative examples (critical incidents) of subordinate's work-related behaviors; used as examples in appraisal; anchors appraisal in reality and improves outcomes; makes supervisor think about appraisal all during year (not just recent performance)

Narrative Forms

Supervisor's narrative assessment helps employee understand where performance was good or bad, and how to improve

Behaviorally Anchored Rating Scales (BARS)

Anchors numerical rating scale with specific illustrative examples of good or bad performance

BARS - Five Steps

1. Write critical incidents - ask jobholders or supervisors to write specific incidents of effective/ineffective performance 2. Develop performance dimensions - cluster incidents into performance dimensions 3. Reallocate incidents - second team verifies groupings, reallocates original incidents into dimension they think fits best, retain if most of second team assigns to same cluster as first 4. Scale the incidents - second group rates behavior described as to how effectively/ineffectively represents performance on dimension 5. Develop final instrument - choose 6-7 critical incidents as performance dimensions' behavioral anchors

BARS - Advantages

Illustrates what to look for in terms of superior, average, and poor performance; makes it easier to explain ratings to appraisees; clustering similar incidents into dimensions helps make dimensions more independent

Management by Objectives (MBO)

Multistep company-wide goal-setting and appraisal program

MBO Steps

1. Set organization goals - establish company-wide plan and set goals 2. Set departmental goals - department heads and superiors jointly set goals 3. Discuss departmental goals - goals discussed to subordinates, subordinates come up with individual goals to help department 4. Define expected results - setting short-term performance targets for each individual goal 5. Conduct performance review - compare actual and expected results 6. Provide feedback - holding periodic review meetings

Potential Rating Problems - Unclear Standards

Result in unfair appraisals because traits and degrees of merit are ambiguous; Fix: include descriptive phrases that define or illustrate each trait

Potential Rating Problems - Halo Effect

Influence of rater's general impression on rating of specific qualities; tendency to have general impression based on one specific quality; Fix: supervisory training, using BARS where dimensions independent

Potential Rating Problems - Central Tendency

Rating all employees average; distorts evaluations; Fix: ranking employees

Potential Rating Problems - Leniency or Strictness

Rating all subordinates high or low (two extremes); especially severe with graphic rating scales; Fix: ranking employees, employer recommendation to avoid leniency/strictness error, require forced distribution

Potential Rating Problems - Recency Effects

Letting what employee has done recently overshadow what they did for past year; Fix: accumulate critical incidents throughout year to use as examples

Appraisal Interview

Culmination of appraisals; manager and subordinate review appraisal and make plans to remedy deficiencies and reinforce strengths

Four Types of Appraisal Interviews

1. Satisfactory-Promotable - easiest, objective: develop specific development plans (reinforce strengths) 2. Satisfactory-Not promotable - objective: maintain satisfactory performance (through incentives) 3. Unsatisfactory-Correctable - objective: lay out action/development plan for correcting unsatisfactory performance 4. Unsatisfactory-Uncorrectable - particularly tense, objective: dismissal

How to Conduct Appraisal Interview - Before

Review person's job description, compare performance to standards, review previous appraisals, give employee week's notice and set date/time

How to Conduct Appraisal Interview - During

Conduct with no interruptions; duration lower-level => less than an hour; management => 1-2 hours

Effective Coaching Skills - Process

Preparation - understanding problem and employee; Planning - reaching agreement on problem and laying out change plan through steps to take, measures of success, and date to complete; Actual Coaching - offers ideas in way subordinates hear and respond and appreciate value

Appraisal Interview Guidelines

Talk in terms of objective work data; Don't go personal (compare performance to standard not to others); Encourage person to talk; Get agreement (subordinate leaves with impression of strengths/weaknesses and action plan); Best interviews are dialogues between equal partners - subordinate also heard and given chance to voice out

Defensive Subordinate

First reaction to poor performance feedback is denial; denial is defense mechanism; Guidelines: Recognize defensive behavior is normal, Never attack but concentrate on facts (e.g. sales is down), Postpone action, Recognize limitations

Criticizing a Subordinate

Criticize in manner that lets person maintain dignity => private and constructively; provide examples of critical incidents and specific suggestions; should be objective and unbiased

Handling a Written Warning

Warnings given to employees with very weak performance; Purpose: shake employee out of bad habits, helps manager defend rating to boss and courts; Warnings should: list employee's standards, make clear employee aware of standard, specify deficiencies relative to standard, show employee had opportunity to correct performance

Performance Management

Continuous process of identifying, measuring, and developing performance of individuals and teams; goal-oriented process directed towards ensuring organizational processes in place to maximize productivity of employees, teams, and organization; aligning employee performance with organization's goals; appraisal occurs at specific time while performance management is dynamic, ongoing, continuous process

Six Basic Elements of Performance Management

1. Direction Sharing - communicating company's goals to all employees, translating into departmental, team, and individual goals 2. Goal alignment - method enabling managers and employees to see link between employees' goals and department and company 3. Ongoing performance monitoring - continuously measuring team's and/or employee's progress towards meeting performance goals 4. Ongoing feedback - continuous feedback regarding progress towards goals 5. Coaching and developmental support - part of feedback process 6. Recognition and rewards - provide incentives to keep employee's goal-directed performance on track