Performance Appraisal Notes

Performance Appraisal

Overall Performance Appraisal

  • Consistency of Quality
  • Adherence to delivery schedule
  • Competence & professionalism of personnel

Subtopics

  • Performance Appraisal and Performance Appraisal Process
  • Uses of Performance Appraisal and Performance Criteria
  • Responsibility for Performance Appraisal
  • Choosing a Performance Appraisal Method
  • Limitations of Performance Appraisal

Organizations

  • Organizations are groups of people working together to achieve common goals.
  • Each person in the organization has his or her role and contribution.

Competitive Environment

  • To remain competitive in the current challenging economic environment, employers need to manage each employee’s performance and to find ways to maximize that performance.
  • Firms recruit people who will help the company succeed.
  • Passengers, employees who want a free ride, have no place in a competitive business environment.

Introduction to Performance Appraisal

  • Conducting performance appraisal is probably one of the most frustrating tasks in the field of human resource management.
  • The word performance appraisal can also be referred to as merit rating, performance review, and employee appraisal.

Definition of Performance Appraisal (PA)

  • Formal system of review and evaluation of individual or team task performance.

Purpose of Performance Appraisal

  • Develop better communication between the employee and the supervisor.
  • Improve the quality of work.
  • Increase productivity.
  • Promote employee development.
  • The supervisor should appraise the employee's overall performance primarily on whether the employee's performance produced the desired results in each of the principle accountabilities of the job during the performance periods.

Performance Rating Categories

  • 5. Outstanding - The employee consistently exceeds all the expectations for responsibilities and objectives, skills, abilities, and commitment required for the job. Possesses superior knowledge of major aspects of the total job and has had experience in each area. Demonstrated superior knowledge and ability to take initiative and improve processes and efficiency resulting in positive impact on the department or organization.
  • 6. Exceeds Expectations/Requirements ―The employee achieves and frequently exceeds expectations for responsibilities and objectives, skills, abilities, and knowledge for the job. Sought to enhance or increase skills, made recommendations offered possible solutions to improve processes.
  • 7. Meets Expectations / Requirements - The employee met established expectations for responsibilities and objectives of the position. Employee demonstrates requisite skills, ability knowledge and commitment for the job.
  • 8. Improvement Needed - The employee does not always meet the responsibilities and objectives of the job. Demonstrates some of the requisite skills, abilities, and knowledge to do the job, but additional training and or commitment is required. Individual may still be learning the job and/or willingness to develop or improve requisite skills, knowledge maybe in question.
  • 9. Unsatisfactory Job Performance- Responsibilities of the position have not been met. Employee does not demonstrate the necessary knowledge, skills, abilities, and commitment required for the position.

Performance Appraisal Process

  • Identify Specific Performance Appraisal Goals
  • Establish Performance Criteria and Communicate Them to Employees
  • Examine Work Performed
  • Appraise Performance
  • Discuss Appraisal with Employee

Steps in the Performance Appraisal (PA) Process

  • The starting point for the PA process is identifying specific performance goals.

  • An appraisal system probably cannot effectively serve every desired purpose, so management should select the specific goals it believes to be most important and realistically achievable.

  • For example, some firms may want to stress employee development, whereas other organizations may want to focus on pay adjustments.

  • Many firms rely on PA results to help inform decisions to terminate employment, particularly after a regular pattern of inadequate job performance. In any case, PA serves a developmental purpose, evaluative purpose, or both.

    • DEVELOPMENTAL
      • Provide performance feedback
      • Identify individual strengths & weakness
      • Recognize individual performance
      • Assist in goal identification
      • Identify individual training needs.
      • Determine organization training needs.
    • ADMINISTRATIVE
      • Determine promotion candidates
      • Determine transfers & assignment
      • Identify poor performance
      • Decide on layoff
      • Evaluate training programs
      • Make reward/compensation decision.

  • The next step in this ongoing cycle continues with establish performance criteria & communicate to employees.

  • This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives.

  • The standards set should be clear, easily understandable, and in measurable terms. Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.

  • The employees should be informed and the standards should be clearly explained to the employees. This will help them understand their roles and know what is expected from them. The standards should also be communicated to the appraisers or the evaluators.

  • The next step is to examine work performed.

  • The most difficult part of the performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time.

  • It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employee’s work.

  • The next step is to Appraise Performance

    • The actual performance is compared with the desired or the standard performance.
    • The comparison tells the deviations in the performance of the employees from the standards set.
    • The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance.
    • It includes recalling, evaluating, and analyzing data related to the employees’ performance.

  • The next step is to Discuss Appraisal with Employee

    • The result of the appraisal is communicated and discussed with the employees on one-to-one basis.
    • Some organizations may have discussions with employees on the appraisal results, thus allowing the employees to discuss the areas of improvement. This review helps determine how well employees have met these standards, determines reasons for deficiencies, and develops a plan to correct the problems.
    • At this meeting, goals are set for the next evaluation period, and the cycle repeats.

  • The next step in this ongoing cycle continues with establish performance criteria & communicate to employees.

  • This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives.

  • The standards set should be clear, easily understandable and in measurable terms. Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.

  • The employees should be informed and the standards should be clearly explained to the employees. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators.

Uses of Performance Appraisal

  • Human Resource Planning
  • Training And Development
  • Career Planning And Development
  • Compensation Programs
  • Internal Employee Relations
  • Assessment Of Employee Potential
  • PA data are potentially valuable for virtually every human resource functional area
  • Human Resource Planning
    • In assessing a firm’s HR, data must available to identify those who have the potential to be promoted.
    • A well-designed appraisal system provides a profile of the organization’s human resource strengths and weaknesses to support this effort.
  • Training and Development
    • To point out an employee’s specific needs for training and development.
    • Determining T&D needs is more precise when appraisal data is available.
  • Career Planning and Development
    • PA data is essential in assessing an employee’s strengths and weaknesses and in determining the person’s potential.
    • Managers may use such information to counsel employees and assist them in developing and implementing their career plans.
  • Compensation Programs
    • PA results provide a basis for rational decisions regarding pay adjustments.
    • Most managers believe that you should reward outstanding job performance tangibly with pay increases.
  • Internal Employee Relations
    • PA data are also used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer.
    • For example, when the performance level is unacceptable, demotion or even termination may be appropriate
  • Assessment of Employee Potential
    • Some organizations attempt to assess an employee’s potential as they appraise his or her job performance.
    • For example, the best salesperson in the company may not have what it takes to become a successful district sales manager, where the tasks are distinctly different.

Performance Criteria

The most common appraisal criteria:

  • Traits,
  • Behaviors, and
  • Competencies
  • Goal Achievement
  • Improvement Potential
  • Management must carefully select performance criteria as it pertains in achieving corporate goals.
    • Traits – Represent an individual’s predisposition to think, feel, and behave, and may traits are usually thought of as being biologically created.
    • A personality trait is more ingrained within an individual as with a person being introverted or extroverted, or less conscientious or more conscientious.
    • Behavior - Are typically viewed as resulting from a variety of sources including traits and situational context.
    • A behavior may have been learned from parents, from significant friends, or from a certain work environment. A behavior can be changed, but traits are usually more established. E.g. an appropriate behavior to evaluate for a manager might be leadership style.
    • Competencies – Refer to individual’s capacity to orchestrate and apply combinations of knowledge, skills and abilities consistently over time to perform work successfully in the required work situations.
    • Competencies may be technical in nature, relate to interpersonal skills, or a business-oriented. In leadership jobs, relevant competencies might include developing talent, delegating authority, and people management skills.
    • Goal Achievement – If organizations consider ends more important than means, goal achievement outcomes become an appropriate factor to evaluate.
    • For example, the outcomes might be meeting the customer’s quality requirements and delivering according to the promised schedule.
    • Improvement Potential – When organizations evaluate employees performance, many of the criteria used focus on the past and future including the behaviors and outcomes needed to develop the employees potential.

Responsibility for Performance Appraisal

  • Immediate Supervisor
  • Subordinates
  • Peers and Team Members
  • Self Appraisal
  • Customer Appraisal
  • 360 Degree Feedback
    • Immediate Supervisor
      • Done by an employees manager.
      • Eg. Supervisor
      • The supervisor is usually in an excellent position to observe the employee’s job performance and the supervisor has the responsibility for managing a unit.
    • Subordinates
      • Employees are in excellent position to view managers effectiveness.
      • Advocates believe that this approach leads supervisors/managers to become especially conscious of the work group’s needs and to do a better job of managing.
      • But the evaluators must be guaranteed anonymity.
    • Peers and Team Members
      • A major strength of using of peers to appraise performance.
      • Situation when individual of equal rank who work together evaluating each other.
    • Self-Appraisal
      • Self-appraisal provides employees with means of keeping the supervisor informed about everything they have done during the appraisal period.
      • Employee’s development is self-development, employees who appraise their own performance may become more highly motivated.
    • Customer Appraisal
      • Customer behavior determine a firm’s degree of success.
      • Organizations use this approach because it demonstrates a commitment to the customer, holds employees accountable, and fosters change.
    • 360-Degree Feedback
      • People all around the employees whose performance is being judged may provide input.
      • By shifting the responsibility for evaluation to more than one person, many of the common appraisal errors can be reduced or eliminated.
      • An appraisal system involving numerous evaluators such as the senior managers, the employee himself, a supervisor, peers, team members. It will naturally take more time and costlier.

Choosing a Performance Appraisal Methods

  • Trait Systems
    • Type of performance-appraisal method, requiring raters (e.g., supervisors or customers) to evaluate each employee’s traits or characteristics (e.g., quality of work and leadership). e.g: traits questionnaire
  • Comparison Systems
    • A type of performance-appraisal method, require that raters (e.g., supervisors) evaluate a given employee’s performance against other employees performance attainments.
    • Employee are ranked from the best performer to the poorest performer.
    • Forced Distribution Method
      • Performance appraisal method in which the rater is required to assign individuals in a work group to a limited number of categories, like a normal frequency distribution.
      • For example: 20% of employees must be classified as exceeding expectations, 70% must be classified as meeting expectation and 10% must be classified as not meeting expectations.
  • Behavioral Systems
    • Behavioral system rate employees on the extent to which they display successful job performance behaviors. In contrast to trait and comparison methods, behavioral methods rate objective job behaviors. When correctly develops and applied, behavioral models provide results that are relatively free of rater errors and biases.
  • Results-based Systems
    • Result-based performance appraisal method focus on measurable outcomes such as an individual or team sales, customer service rating, productivity, reduced incidents of workplace injuries and so forth.

Limitations of Performance Appraisal

  • Regardless of which method we choose, there are going to be many problems encountered in its use. No method is perfect, they all have limitations.
    • Appraiser Discomfort
    • Subjectivity of Performance Evaluations
    • Bias Errors
    • First impression effect
    • Positive halo effect (halo effect)
    • Negative halo effect (horn error)
    • Contrast Errors
    • Central Tendency Error
    • Leniency Error or Strictness Error
    • Similar-to-me effect
    • Illegal discriminatory bias
    • Appraiser Discomfort
      • Performance appraiser process cuts into a manager’s high-priority workload and experienced can be especially unpleasant when the employee in question has not performed well.
    • Subjectivity of Performance Evaluations
      • A potential weakness of many PA methods is that they lack objectivity. For example: commonly used factors such as traits, behaviors and competencies are virtually impossible to measure with objective measures.
      • Use subjective based on an individual's perspective or preferences such as opinion or feeling.
      • Use objective that's unbiased and based solely on the observable or verifiable facts such as assessment, decision, or report.
    • Bias error
      • Occur when the rater evaluates the employee based on personal negative or positive opinion of the employee rather than on the employees actual performance.
      • E.g., the way a supervisor feels about each of the individuals working under him - whether he likes or dislikes them - as a tremendous effect on the rating of their performances.
    • First-impression effect
      • An initial favorable or unfavorable judgment about an employees which is ignored or distorted.
      • E.g. this tendency to make initial judgments, positive or negative, about a candidate in those first few moments.
    • Positive halo effect (halo effect)
      • Evaluation error that occurs when a manager generalizes one positive performance feature or incident to all aspects of employee performance, resulting in a higher rating.
    • Negative halo effect (or horn error)
      • Evaluation error that occurs when a manager generalizes one negative performance feature or incident to all aspects of employee performance, resulting in a lower rating.
    • Contrast error
      • A rating error in which a rater compares an employee to other employees rather than to specific explicit performance standards.
      • For example, if employee A is seen as someone innovative and participates highly in his or her work, then when employee C’s turn for evaluation comes up, his or her performance will be compared to employee A’s performance, and not based on the set standards.
    • Central tendency error
      • Evaluation appraisal error that occurs when employees are incorrectly rated near the average or middle of a scale.
    • Leniency Error or Strictness Error
      • Leniency error – Giving an undeserved high performance appraisal rating to an employee.
      • E.g. an appraiser when he or she gives a high value to the employee being evaluated because the appraiser does not have the heart to give a low rating.
      • Strictness error – Being unduly (unfairly) critical of an employees work performance.
      • E.g. An appraiser awards a low rating to the employee being evaluated because he or she feels that none of the employees deserve a high rating.
    • Similar-to-me effect
      • Refers to the tendency on the part of raters to judge favorably employees whom they perceive as like themselves.
      • For example, an appraiser awards a high mark to the employee because they both like to drink tea.
    • Illegal discriminatory bias
      • A bias error for which a supervisor rates members of his or her race, gender, nationality, or religion more favorably than members of other classes.

Summary

  • Performance appraisal is a system that provides a periodic review and evaluation of an individual’s or group performance.
  • The performance appraisal process is used as a guideline for organizations that want to carry out effective performance appraisals.