Chapter 8 - Performance Appraisal

What is the macro vs. micro focused on?

Macro: Performance Management Systems (PM)
Micro: Performance Appraisal (PA)

What is the purpose of Performance Management?

• Implement & reformulate strategy

• Communicate key objectives

• Provide strategic alignment

• Support process improvement

• Encourage incremental innovation

What is Performance Management (PM)?

A basic tool used by organizations to make sure work activities are aligned, monitored, and achieving goals.

What are the six steps in the PM Framework?

1. Set goals aligned with higher-level goals

2. vSet behavioural expectations & standards

3. Provide ongoing performance feedback

4. Manager appraises performance

5. Conduct formal review session

6. HR decision-making (pay, promotion, termination)

What are the three organizational contexts for PM?

• Public Organizations → Serve society + profit

• Private Organizations → Profit

• Non-Profit Organizations → Benefit society

What determines PM success?

• Matching framework to context

• Identifying stakeholders

• Clear cause–effect links

• Alignment with strategy

• Flexibility in design

What organizational inadequacies cause PM failure?

• Lack of capabilities

• Lack of infrastructure

• Poor information flow

How can PM systems create inappropriate targets?

• Fail to measure correctly

• Misdirect attention (focus on wrong goals)

• Shift focus from core organizational values

• Become rigid in dynamic environments

How does PM influence people?

• Motivation: Encourages behaviours for rewards

• Control: Directs employee behaviour to meet goals

What is the tension between administrative and developmental purposes?

Administrative → Determines raises, promotions, firing
Developmental → Focuses on personal improvement
⚠ When combined, employees may feel threatened instead of supported.

What feedback issues lead to PM failure?

• Poor communication

• Defensive employee reactions

• Conflict between development vs. administrative goals

What steps are required to develop effective appraisals?

• Develop performance criteria

• Evaluate criteria

• Identify who should conduct appraisal

• Address errors & biases

• Train appraisers

• Select appraisal method

• Choose appropriate interview style

What is a performance criterion?

An evaluative standard used to measure an employee’s level of performance.

What is criterion deficiency?

When important aspects of performance are not captured by the criterion.

What is criterion relevance?

How much the criterion relates to actual job performance.

What is criterion contamination?

When measures are influenced by outside factors unrelated to performance.

What are subjective criteria?

• Based on rater opinion

• Not verifiable

• Lower accuracy and usefulness

• Example: “Overall performance rating”

What are objective criteria?

• Verifiable by others

• Quantitative & precise

• Less biased

• Examples: sales, defect rates, absenteeism

What are things you cannot quantify objectively?

• Emotional well-being

• Collaboration quality

• Creativity

What makes criteria effective?

• Strategic relevance → Aligns with organizational goals

• Reliability → Consistent results

• Sensitivity → Differentiates high/low performers

• Practicality → Easy & cost-effective to use

• Fairness → Perceived as just by employees

Who can conduct performance appraisals?

• Supervisors

• Employees (self-appraisal)

• Co-workers/peers

• Team evaluations

• 360-degree appraisal (all stakeholders)

What is a 360-degree appraisal?

Feedback from supervisor, coworkers, customers, subordinates — provides a full picture of performance.

What is confirmation bias?

Raters look for information that confirms their beliefs and ignore information that contradicts them.

What are distributional errors?

• Harshness: Rates too low

• Leniency: Rates too high

• Central Tendency: Rates everyone in the middle

What is the recency error?

Rater focuses too heavily on recent events rather than the whole evaluation period.

What is contrast error?

Comparing employees to each other instead of to standards.

What is mood bias?

Rater’s mood impacts the rating — good mood = higher rating; bad mood = lower.

What is the “similar-to-me” effect?

Raters score employees higher if they share similar qualities or backgrounds.

Why is rater training important?

It improves accuracy, reduces bias, and creates consistency.

What should rater training include?

• Explanation of goals

• Mechanics of rating system

• Awareness of weaknesses/biases

• Understanding evaluation plan

What is Frame-of-Reference (FOR) training?

Training raters to use a common standard of performance with clear examples of what each rating represents.

What are the four categories of appraisal methods?

1. Trait-based

2. Comparative

3. Behavioural

4. Results-based

Examples of trait methods

• Graphic rating scales

• Comparative
  ◦ Alternate Ranking
  ◦ Forced distribution
  ◦ Paired comparison

• Behavioural
  ◦ BARS, BOS
  ◦ Critical Incident

• Results
  ◦ MBO
  ◦ Balanced Scorecard

Examples of comparative methods

• Alternate ranking

• Paired comparison

• Forced distribution

Examples of behavioural methods

• BARS (Behaviourally Anchored Rating Scales)

• BOS (Behavioural Observation Scales)

• Critical incident method

Examples of results-based methods

• Management by Objectives (MBO)

• Balanced Scorecard

What is a Graphic Rating Scale?

A list of traits with rating boxes checked by the rater; risk of distributional errors and lack of clarity.

What is the Alternate Ranking method?

Employees ranked from best to worst on a trait or dimension.

What is Paired Comparison?

Employees are compared one-on-one to determine who performs better.

What is Forced Distribution?

Employees placed into performance categories (top, middle, bottom) based on a normal distribution.

What are the drawbacks of Forced Distribution?

• Good performers may be placed into low categories

• Causes morale issues

• Risky in tight labour markets

What is a BARS?

Behaviourally Anchored Rating Scale — uses specific behavioural examples to anchor each rating level.

What is a BOS?

Behavioural Observation Scale — rates frequency of behaviours over a specified time period.

Sales staff performance measures

• Volume

• Dollar amounts

• Increases over time

Production staff performance measures

• Number of units

• Defect rates

• Efficiency

Executive performance measures

• Profit

• Organizational growth

What is Management by Objectives (MBO)?

A collaborative goal-setting process where:

1. Organizational goals set

2. Departmental goals set

3. Employee goals set

4. Results measured & feedback given

What are the four perspectives of the Balanced Scorecard?

1. Financial measures

2. Customer measures

3. Internal business processes

4. Ability to learn & grow