BD0 329: Unit 1.2: Appraising performance

Performance appraisal methods

Category rating methods

Comparative methods

Behavioural/objective methods

Narrative methods

Comparative methods

This includes rating the overall performance of one employee directly against another and ranking or forced distribution.

Ranking

Force distribution

Paired comparison

Category rating methods

Graphic rating scale/non-graphic rating scale

Checklist of critical incidents

Behavioural/objective methods

Behavioural rating approaches

Management by objectives (MBO)

Narrative methods

Critical incident

Essay

Work standards

• Work standards are mainly used to measure performance of clerical and manufacturing employees in production/output-oriented jobs.

• Standards define normal/average production output, usually measured as production per hour or time per unit processed/served.

• They enable organisations to pay employees on a piece-rate system

• Time and motion studies help set output criteria for specific jobs.

• Performance appraisal should include not only quantity of output, but also quality, safety, planning, training, and maintenance activities.

• Individual output often depends on team performance, so basing promotion or pay decisions only on output numbers can be unfair.

Category rating methods: Graphic rating scale

A method of performance appraisal that requires the rater to indicate on a scale where the employee rates on factors such as quantity of work, dependability, job knowledge and cooperativeness. i.e you are placing the employee into a category based on their performance

The graphic rating scale rates the employee (ratee) on some standard or attribute of work (work behaviours) using a scale of 1-3 or 1-5. 1 = very unsatisfactory and 3 or 5 = excellent.

Examples of behaviours include ‘greets every customer who enters the store’, ‘maintains a clean work area’, ‘schedules frequent feedback meetings with employees’

Prone to rater errors

Category rating methods: Non-graphic rating scales

• Higher validity than graphic scales because each point on the scale includes a brief description of each point on the scale and not only the highest and lowest points.

• The rater can give a more accurate description of the employee’s behaviour regarding a particular attribute, because a description clarifies each level of the rating scale.

• Both graphic and non-graphic scales can be quick and easy to fill

• However, these appraisal methods allows for rater errors- halo or central tendency.

• Still relies on raters subjectivity

• May not be directly related to the job

Category rating methods: Checklist of critical incidents

Checklist of Critical incidents – A checklist of 20–30 critical behaviours related to an employee’s performance for a specific job, where the supervisor ticks whether the employee has demonstrated superior performance in any of those incidents.

The checklist is time-consuming and expensive to develop since checklist for each job in the organisation must be produced

The words or statements may mean different things to different raters

Comparative methods: Ranking

Listing of all employees from the highest to lowest in performance(employees from highest to lowest in terms)

Problems of central tendency, leniency and strictness are eliminated by forcing raters to evaluate employees over a predetermined range

Only compare employees from that same department with similar job descriptions- limited to department.

Can be directly related to compensation decisions if a numeric rating is used.

ranking is fast and easy to complete but employees do not receive feedback – not developmental

Comparative methods: Forced distribution

Ratings of employees performance are distributed along a bell-shaped curve

Force them into a performance category

The supervisor places employees in classifications ranging from poor to excellent.

eliminates central tendency and leniency biases. (LIKE RANKING)

Often, administrators will use forced distribution to compare employees from different departments only if each department has an equal number of excellent employees, above- average employees, and so on. That assumption is very difficult to make.

Comparative methods: Paired comparison

A variation of the ranking method of performance appraisal in which the performance of each employee is compared with that of every other employee in the particular group.

Raters pair employees and choose one as superior in overall job performance.

Job titles and descriptions must be the same.

Employees are compared to each other on overall job performance rather than on specific job-criteria

There are fair differentiations in terms of comparisons(outstanding employees receive higher positive comparisons and poor performer will naturally score much lower.

Easy and quick to use when rating few employees (raters only compare two employees at a time)

Time consuming with large numbers of employees

Provides flexibility by avoiding forced distributions, making it a useful alternative to ranking and forced distribution.

Narrative methods: Critical incidents

The rater keeps a written record of highly favourable and highly unfavourable employee work behaviours. These incidents are then used as a basis for evaluating the employee’s performance.

Several employees and supervisors compile a list of actual job experiences involving very good or bad performances

Normal procedures and average work performance is not included only critical/extraordinary incidents

Outstandingly good or bad performances separate good employees from those that are average and poor

Once the list of critical incidents is finalised a particular method of using these incidents are chosen

Critical incidents: Positive critical incident example

Date: June 10, 2025

Incident: A customer was upset after receiving the wrong item in an online pickup order. The sales assistant, Maria, calmly listened to the customer’s concern, apologized sincerely, and offered a solution within minutes. She found the correct item in stock, processed the return quickly, and provided a 10% discount as a goodwill gesture.

Impact: The customer left satisfied and later posted a positive review online, praising Maria by name.

Performance Note: Demonstrated excellent problem-solving, empathy, and customer recovery skills.

Critical incidents: Negative critical incident

Date: May 3, 2025

Incident: During a busy weekend sale, the sales assistant, Cathy, was seen arguing with a customer who asked about a refund policy. Instead of calmly explaining store policy, Cathy raised her voice and dismissed the customer’s concerns. A manager had to intervene.

Impact: The customer left dissatisfied, and a complaint was filed. Performance Note: Needs improvement in handling difficult situations

Narrative methods: Annual review/ calendar

Annual review or calendar – supervisor or appraiser keeps ongoing record of critical incidents during the period of appraisal

Supervisor reviews file just before appraisal

Employees who have no record during the period of performance are doing their jobs satisfactorily.

Method is very job specific with dates and incidents

Difficult to keep accurate record

Maintaining records is often neglected

Difficult to compare performances of different employees using this method

Narrative methods: Essay methods

Essay method – created primarily for employees development

Supervisor writes a narrative essay describing the employee’s performance with specific examples of strengths and weaknesses.

Discuss specific examples of work behaviour

Minimise halo effect, central tendency and leniency problems because it does not use a rating scale#

Time consuming

Behavioural/objective methods: Behaviourally anchored rating scales(BARS)

A behavioural approach to performance appraisal that consists of a series of vertical scales, one for each important dimension of job performance.

Most common use of critical-incident PA’S is in combination with rating scales, instead of using broad employee attributes, the points of the rating scale are critical incidents

Job related, specific behaviours & and more developmental

Quick and easy

Time consuming

Provides

more accurate gauge: People who know the job and its requirements better than anyone else develop the BARS.

clearer standards: The critical incidents along the scale help to clarify what is meant by extremely good performance, average performance

feedback: Very useful in providing feedback to appraises than simply informing them of their performance rating and not providing specific behaviour examples

independent dimensions: Systematically clustering the critical incidents into five or six performance dimensions should help to make the dimensions more independent of one another.

consistency: NARS evaluation seems to be relatively consistent and reliable in that different raters appraisals of the same person tend to be similar.

Behavioural/objective methods: Management by objectives

philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager

The Management by Objectives process

Step 1: Organisation goals and metrics

Step 2:Department goals and metrics

Step 3 A:Supervisor lists goals and metrics for subordinates

Step 3 B: Subordinate proposes goals and metrics

Step 4: Mutual agreement of goals and metrics

Step 5 A: Inappropriate goals/metrics deleted

Step 5 B: New inputs are then provided

Step 5: Interim review

Step 6:Final review

Step 7: Review of organisation performance

Management by objectives: Goal setting

lies at the heart of MBO.

MBO – goal-setting begins with formation of long-range objectives cascading to organisational objectives, departmental goals and individual goals.

At the individual goal-setting, goals are mutually set by the employee and his/her manager

The aspect of participation in goal setting is one of MBO’s strengths as there is general agreement that participation in decision-making strengthens employee motivation and commitment.

MBO concentrates on setting measurable goals as opposed to vague or subjective ones

Combination methods

Various combinations such as essay and MBO added to rating-scales

Combine team and individual performances

 Appraisal schedule – intervals between appraisals

Combination methods: Appraisal methods

The schedule provides consistency in the evaluation process because all employees are evaluated for the same period of time. A variable -interval process can be used when a goal -setting approach establishes specific time periods to achieve certain goals. Thus, at the end of each time period, an appraisal determines the achievement level for a particular goal.

Common Rater Errors

Rater bias

Stereotyping

Halo effect

Central tendency

Leniency

Strictness

Recency/primary effect

Overall ratings

Common Rater Errors: Rater bias

Error that occurs when a rater’s values or prejudices distort the rating. Towards and against. Error in judgement due to pre-existing personal prejudice/bias.

Such biases are not job performance related and may stem from personal characteristics or organisation-related characteristics (seniority or membership)

solution: Educate supervisors on common rating errors and the importance of objectivity.Tie ratings strictly to measurable, job-related standards. Conduct HR review/audit of appraisals.

example:A manager at a Johannesburg-based logistics company consistently gives higher performance ratings to employees who have qualifications from WITS, UP and UJ, while unfairly underrating those who didn’t

Common Rater Error: Stereotyping

Mentally classifying a person into an affinity group and identifying the person as having the same assumed characteristics of the group- generalised belief about a particular group of people.

Example: A supervisor assumes that all junior staff fresh out of university are innovative and energetic, and therefore rates a new graduate high on creativity without observing actual performance.

Solution: Supervisors should base ratings only on observed, job-related behaviours and evidence rather than assumed group traits. This can be reinforced by using behaviourally anchored rating scales (BARS), keeping a record of actual performance incidents, and training raters to consciously challenge stereotypes before finalising evaluations.

Common Rater Errors: Halo Effect

Rating a person high on all items because of performance in one area

Example: An employee in a Cape Town IT firm is very punctual, and their manager gives them top marks across all performance areas—including creativity and leadership—even though those haven’t been demonstrated.

Solution: halo effect can be minimised by supervisory training as supervisors should be trained to recognise all jobs even routine, low-level jobs as they require the application of many different skills and behaviours.

Common Rater Errors: Central tendency

A common error that occurs when employees are incorrectly rated near the average or middle of scale.

The problem of central tendency occurs when supervisors cannot evaluate employee performance objectively because of lack of familiarity with the work, lack of supervisory ability or fear that they will be reprimanded if they evaluate individuals too highly or too strictly.

Example: At a Pretoria-based insurance company, the team leader gives every staff member a “3 out of 5” to avoid confrontation, despite clear differences in work quality and commitment.

Common Rater Errors: Leniency

Giving undeserved high performance appraisal rating to an employee

Lack of accurate appraisal can lead to turnover among the best employees, who to organisations that can appraise their performance accurately and give them the recognition they deserve.

Example: At a Durban retail branch, a store manager gives all team members a 5/5 rating to “keep morale high,” even though some employees have had customer complaints and missed sales targets.

Common Rater Errors: Strictness

Being unduly critical of an employee’s work performance

Unreasonable performance expectations that employees find impossible to achieve can be demoralising.

A supervisor at a Port Elizabeth factory believes that no employee ever truly "exceeds expectations," so even top-performing workers only receive 2 out of 5, no matter their achievements.

Common Rater Errors: Recency/primacy effect

A rating error occurs when an appaiser assigns a rating on the basis of the employee’s most recent performance rather than on long term performance

Raters should conduct frequent appraisals (e.g., monthly or quarterly) and/or keep a running log of critical incidents of the employee’s behaviours and outcomes.

An employee in a Johannesburg financial services firm struggled in the last few months but excelled earlier in the year. However, the manager gives a low rating because they only remember the weak performance from September to November .

Common rater errors: Overall rating

Giving an overall rating based on a general impression (positive or negative) instead of specific performance criteria.

Parties/Sources involved in performance evaluations(Who should do the performance appraisal ratings?

Supervisors

Peer evaluations

Customer/client evaluations

Self-ratings

Reverse appraisals

Team portfolio appraisals

Supervisors

The person in the best position to observe the employee’s behaviour and determine whether the employee has reached specified goals and objectives is the best person to conduct the appraisal. only the supervisor directly and consistently observes the employee's performance and knows which level of performance should be expected.

Peer evaluations

Performance appraisal done by one's fellow employees, generally on forms that are compiled into a single profile for use in the performance interview conducted by the employee's manager. Peers can could in some situations provide information that the organisation could not get from the employee’s supervisor due to a lack of direct contact between the supervisors and the employee.

Customer/client evaluations

An increasing number of jobs are now considered service jobs, so evaluations by customers and clients are becoming more valuable as part of the multiple-rater PA process. This includes everything from comment cards to specialised questionnaires, telephone research and other techniques to enable the employer to receive a customer evaluation of the employee performance

It would be difficult or impossible for customers and clients to give a total PA because they generally view only part of the employee’s performance

Self-ratings

Performance appraisal done by the employee being evaluated, generally on an appraisal form completed by the employee prior to the performance interview. Ratings that employees give to themselves. Many personnel consultants believe that effective use of self-rating is critical to success in appraising white- collar employees.

Reverse appraisal

Whereas in traditional appraisals, the supervisor rates the employees, in reverse appraisals, or upwards evaluations, the employees rate the supervisor.

Team portfolio appraisals

having a team appraise the performance of individual team members.

The human asset accounting method

This method links human capital to the amount of income that a specific employee is generating, or sales leads that he or she has established, or how satisfied customers are. This reflects directly on the profits of the organisation.