Performance Appraisal Notes

Performance Appraisal

Module 2 Objectives

  • Define performance appraisal and specify HR functions affected by it.
  • Identify the techniques and approaches used to evaluate employee performance.
  • Understand how to improve the effectiveness of performance appraisal systems and how to best conduct the post-appraisal interview.

What is Performance Appraisal?

  • A systematic process used by organizations to evaluate employee performance and productivity in relation to predefined standards (Wienclaw, 2021).
  • Helps provide organizations with objectively-based reports to help employees understand their performance, as well as a basis for HR professionals to make career/training-related decisions.

Steps of the Performance Appraisal Process

  1. Determine the purpose of appraisal.
  2. Identify environmental/cultural limitations.
  3. Determine who will evaluate performance.
  4. Select the best appraisal methods for your goals.
  5. Train your raters.
  6. Observe and document performance.
  7. Evaluate performance.
  8. Communicate appraisal results to employees.
  9. Make personnel decisions (promote or terminate).
  10. Monitor the legality and fairness of the appraisal process.

Step 1: Determine the Purpose of Performance Appraisal

  • The reasons for performing PA will impact the tools and techniques used (e.g., 360-degree feedback for blue-collar/manufacturing jobs).
  • Unfortunately, most organizations do not set specific goals for their performance appraisal systems.
  • Employee training and feedback are the most important use of performance evaluation.
  • Performance appraisal review: a meeting between a supervisor and subordinate to discuss their performance appraisal results.

Determining Salary Increases

  • Differences in compensation between two people in the same job are a function of tenure AND job performance.
  • You need actual measurable metrics for this.
  • Might introduce competition for the workplace or perceptions of unfair evaluation.

Making Promotion Decisions

  • It may seem fair to promote someone who’s been there a while, but it’s not always smart (Peter principle).
  • If you use performance evaluations to promote employees, evaluate them on the dimensions relevant to the new position.

Making Termination Decisions

  • You need to learn how to let go of employees.
  • Make sure your reason for firing someone is legal.

Conducting Organizational Research

  • Validation of employment tests
  • To evaluate the effectiveness of training programs.

Step 2: Identify Environmental and Cultural Limitations

  • “What you wanna do is not necessarily what you're gonna do.”
  • Gauge your company situation first before coming up with a system.
  • Example: If everyone is busy and overworked, don’t use a system that is elaborate and time-consuming.
  • Be mindful of the practicality and the expenses behind your performance appraisal system.

Step 3: Determine Who Will Evaluate Performance

  • Relying on only one source of information may not provide enough information.
  • 360-degree feedback: a performance appraisal system in which feedback is obtained from multiple sources at all levels of the organization/job.
  • Multiple-source feedback: performance appraisal strategy wherein an employee receives feedback from sources aside from their supervisor.

Supervisors

  • Most common source of performance appraisal.
  • They may not see all the behavior but they see the result.

Peers

  • The witnesses of actual behavior.
  • Only reliable when the raters are similar and well-acquainted with the one being rated.
  • High performers rate more strictly than low performers.
  • Employees tend to react worse to negative feedback from peers.

Subordinates

  • Also called upward feedback.
  • Fear of backlash is a big barrier.
  • Can be possible if:
    • Supervisors are open to employee comments.
    • There is an option to remain anonymous.
    • The employee feels competent enough to make the rating.
    • There will be no retaliation.
    • Ratings are used for developmental purposes.
    • They can benefit by providing honest ratings.

Customers

  • May be obtained through evaluation cards, online surveys, or other methods.
  • Secret shoppers: current customers who have been enlisted by a company to evaluate the service they receive.

Self-Appraisal

  • Has become more popular in recent years, especially due to technology.
  • May suffer from leniency (seen in American, Chinese, Indian, and Singaporean samples) or modesty (Japanese, Korean, Taiwanese samples) issues (Barron & Sackett, 2008).

Step 4: Select the Best Appraisal Methods for Your Goals

  • Select the performance criteria and appraisal methods that will best accomplish your goals for the system.
  • Criteria: ways of defining employee success.

Three Decisions:

  • Focus of the appraisal dimensions.
  • Deciding whether dimensions should be weighted.
  • Deciding to use comparisons, objective measures, or ratings.

Four Performance Dimensions

Trait-Focused

  • Focuses on employee attributes like dependability, honesty, courtesy.
  • Provide poor feedback and may hurt the employee due to their personal nature.
  • Can be challenged legally.

Competency-Focused

  • Focuses on employee knowledge, skills, and abilities.
  • Examples include writing skills, oral presentation skills, computation skills.
  • Makes it easy to identify problems, provide feedback, and suggest steps for improvements.

Task-Focused

  • Organized based on similarity of tasks being performed.
  • Usually involves several competencies.
  • Easier to use, but may make it more difficult to offer suggestions on correcting deficiencies.

Goal-Focused

  • Makes it easier to make an employee understand why certain behaviors are expected.

  • Easier to identify and are more legally defensible.

  • Some organizations also measure contextual (the effort employees make to get along with their peers, improve the organization, and go the extra mile).

  • Prosocial organizational behaviors are important to the success of an organization.

  • The tests that predict task performance are not the ones that predict contextual performance.

Should You Make the Dimensions Weighted?

  • May reduce biases.
  • Makes logical sense.
  • Some organizations choose to weight all dimensions equally because it’s easier to compute and to explain.

Choosing Between Employee Comparisons, Objective Measures, or Ratings

Employee Comparisons

  • Rank order: a method of performance appraisal in which employees are ranked from best to worst; best used when there are only a few employees to rank.
  • Paired comparison: form of ranking wherein a group of employees to be ranked are compared one pair at a time.
  • Forced distribution method: performance appraisal method in which a predetermined percentage of employees are placed into a number of performance categories.

Paired Comparisons Example Equations:

  • Circle the better employee in each pair.

Forced Distribution Method

  • Also known as the “rank and yank” method.
  • Considered the least fair method of performance appraisal because someone always has to be at the bottom (even if you technically didn’t fail anything).
  • Has the potential to lead to adverse impact, especially in large organizations.

Objective Measures (Hard Criteria)

  • Quantity: Counting the number of relevant job behaviors that occur. May look objective but can be misleading, especially for certain kinds of occupations where it may not be practical/possible to measure quantity.
  • Quality: Objective criterion used to measure performance by comparing a job behavior to a standard.
  • Errors: any deviation from a standard of quality (even if it’s in a good way).
  • Attendance: May be measured in terms of absenteeism, tardiness, or tenure.
  • Safety: Employees who follow safety rules and have no occupational accidents save a company money. Tenure and safety are often used as evaluation metrics for research purposes.

Ratings of Performance

  • Often done through the graphic rating scale and the behavioral checklist.

  • Graphic rating scale: a method of performance appraisal that involves rating employees on an interval or ratio scale.

  • Very easy to create and use, but are susceptible to rating errors like halo and leniency.

  • Behavioral checklist: consists of a list of behaviors, expectations, or results for each dimension.

    • Statements may either be behaviors or results-focused.
      • Behaviors: Did you do what you were supposed to?
      • Results: What did you accomplish because of what you did?
    • Sometimes difficult to use, because failed results can be because of factors outside of the employee’s control.
    • Contamination: condition in which a criterion score is affected by outside factors.

  • Behavioral checklists are seen as fairer because employees are involved in creating them; easier to give suggestions for.

  • The more employees perceive your PA system is fair, the more satisfied and committed they become (Gaby and Woehr, 2005).

Decisions Based on Appraisal Ratings Will Survive Legal Challenges If:

  • They are based on job analysis.
  • Raters received training and written instructions.
  • Raters actually saw the employees performing
  • The performance standards were communicated to employees.
  • Employees were warned about problems and given a chance to improve.
  • Employees can comment on results.

Step 5: Training Your Raters

  • Frame-of-reference training: method of training raters where raters are provided with job-related information, a chance to practice ratings, examples of ratings made by experts, and the rationale behind the expert ratings.
  • Increases rater accuracy and reduced rater errors.
  • No point in training raters if employees don’t understand the system they’re being rated on.

Step 6: Observe and Document Performance

  • Supervisors must observe behavior and document critical incidents as they occur.
  • Critical incidents: method of PA wherein the supervisor records employee behaviors observed on the job, and rates the employee on the basis of that record.
  • Must be properly documented and communicated to the employee as they occur.

What Happens When You Don’t Document Critical Incidents:

  • Supervisors will only recall behaviors that are consistent with their first impression of an employee (primacy effects).
  • Supervisors may only recall the most recent behaviors that occurred during the evaluation period (recency effect).
  • Supervisors tend to remember unusual behaviors as opposed to uncommon ones.
  • Supervisors will tend to look for behaviors consistent with their opinion on an employee (confirmation bias).

Step 7: Evaluate Performance

  • Obtain and review objective data.
  • Read critical incident logs.
  • Complete the rating form.

Common Rating Errors:

  • Distribution error: where raters will only use a certain part of a rating scale.
    • Leniency error: When a rater is too generous, regardless of actual employee performance.
    • Central tendency error: Everyone is rated in the middle.
    • Strictness error: Everyone is rated low, regardless of performance.
  • Halo error: When raters allow a single attribute or overall impression of an individual to affect the ratings they make; occurs when rater is unfamiliar with the employee and is not familiar with the job.
  • Proximity error: when a rating made on one dimension affects the rating made on the next dimension because they’re near each other.
  • Contrast error: Where the rating of one employee will affect the rating of the employee who’s next in line to be rated (aka why no one wants to be graded after the smartest person in class).
  • Assimilation: when a rater bases their rating of an employee on a previously-completed rating.
  • Recency effect: Supervisors will tend to place more importance on recently-observed behaviors.
  • Infrequent observation: Supervisors will often be unable to see most employee behavior.
  • Observation of behavior: Sometimes they won’t be able to remember it accurately during the review.
  • Emotional state and stress: Kung gisapot imong supervisor, good luck!
  • Bias: may be preferential, racial, or gender-related.

Step 8: Communicate Appraisal Results to Employees

Considerations to be Made:

  • Allot enough time for the pre-interview and actual interview.
  • Schedule the interview somewhere neutral and private.
  • Formal interviews should be scheduled at least once every six months or more often if the employee is new; informal progress checks should be held throughout the year.

Process of the Interview

  • Establishing rapport.
  • Communicating to the employee:
    • (1) role of PA
    • (2) how the PA was conducted
    • (3) how the evaluation process was accomplished
    • (4) the expectation that the appraisal interview will be interactive, and
    • (5) the goal of understanding and improving performance.
  • Feedback sandwiching.
  • Discuss reasons why employee performance was not perfect.
  • Acknowledging external reasons for poor performance (to avoid fundamental attribution errors: attributing employee errors to them personally instead of situational factors).
  • Finding solutions (ask how management/peers/organization can support the employee).

Step 9: Terminating Employees

  • Aka when they do their best but their best isn’t good enough…

Step 10: Maintaining Legality and Fairness of the Appraisal System

  • How to avoid getting sued by unhappy employees
  • Will be discussed in the next chapter (Legal Issues in Employment).