8
© 2010 South-Western, a part of Cengage Learning
All rights reserved.
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Chapter Objectives
After studying this chapter, you should be able to
Explain the purposes of performance appraisals
and the reasons they can sometimes fail.
Identify the characteristics of an effective
appraisal program.
Describe the different sources of appraisal
information.
Explain the various methods used for
performance evaluation.
Outline the characteristics of an effective
performance appraisal interview.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–2
Performance Appraisal and Other HRM Functions
Performance appraisal judges
effectiveness of recruitment
efforts
Recruitment
Quality of applicants
determines feasible
performance standards
Selection
Selection should produce
workers best able to meet
job requirements
Performance appraisal
determines training needs
Training and
Development
Training and development
aids achievement of
performance standards
Performance appraisal is a
factor in determining pay
Compensation
Management
Compensation can affect
appraisal of performance
Performance appraisal
validates selection function
Performance appraisal
justifies personnel actions
Appraisal standards and
Labor Relations methods may be subject to
negotiation
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8–3
Performance Appraisal Programs
• Performance Appraisal
 A process, typically performed annually by a
supervisor for a subordinate, designed to help
employees understand their roles, objectives,
expectations, and performance success.
• Performance Management
 The process of creating a work environment in
which people can perform to the best of their
abilities.
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8–4
Performance Appraisal
Appraisal Programs
Administrative
Developmental
Compensation
Ind. Evaluation
Job Evaluation
Training
EEO/AA Support
Career Planning
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8–5
FIGURE
8.1
Purposes for Performance Appraisal
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8–6
Reasons Appraisal Programs
Sometimes Fail
• Lack of top-management
information and support
• Unclear performance standards
• Rater bias
• Too many forms to complete
• Use of the appraisal program
for conflicting (political)
purposes.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–7
FIGURE
8.2
Let Me Count the Ways…
There are many reasons why performance appraisal systems might not
be effective. Some of the most common problems include the following:
• Inadequate preparation on the part of the manager.
• Employee is not given clear objectives at the beginning of performance period.
• Manager may not be able to observe performance or have all the information.
• Performance standards may not be clear.
• Inconsistency in ratings among supervisors or other raters.
• Manager rating personality rather than performance.
• The halo effect, contrast effect, or some other perceptual bias.
• Inappropriate time span (either too short or too long).
• Overemphasis on uncharacteristic performance.
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8–8
FIGURE
8.2
Let Me Count the Ways…(cont’d)
There are many reasons why performance appraisal systems might not
be effective. Some of the most common problems include the following:
• Inflated ratings because managers do not want to deal with “bad
news.”
• Subjective or vague language in written appraisals.
• Organizational politics or personal relationships cloud judgments.
• No thorough discussion of causes of performance problems.
• Manager may not be trained at evaluation or giving feedback.
• No follow-up and coaching after the evaluation.
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8–9
Managerial Issues Concerning Appraisals
1. There is little face-to-face discussion between the
manager and the employee being appraised.
2. The relationship between the employee’s job
description and the criteria on the appraisal form
isn’t clear.
3. Managers feel that little or no benefit will be derived
from the time and energy spent in the process, or
they are concerned only with bad performances.
4. Managers dislike the face-to-face confrontation of
appraisal interviews.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–10
Managerial Issues Concerning Appraisals
(cont’d)
5. Managers are not sufficiently adept at rating
employees or providing them with appraisal
feedback.
6. The judgmental role of appraisal conflicts with the
helping role of developing employees.
7. The appraisal is just a once-a-year event, and there
is little follow-up afterward.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–11
Developing an Effective Appraisal Program
• Performance Standards
 Must be based on job-related requirements derived
from job analysis and reflected in job description
and job specifications.
 Help translate an organization’s goals and
objectives into job requirements that define
acceptable and unacceptable performance levels.
• Calibration
 A process whereby managers meet to discuss the
performance of individual employees to ensure
their employee appraisals are in line with one
another
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8–12
FIGURE
8.3
Establishing Performance Standards
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8–13
Performance Standards Characteristics
Strategic
Relevance
Individual standards directly
relate to strategic goals.
Criterion
Deficiency
Standards capture all of an
individual’s contributions.
Criterion
Performance capability is not
Contamination reduced by external factors.
Reliability
(Consistency)
Standards are quantifiable,
measurable, and stable.
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8–14
Are You Complying with the Law?
• Brito v Zia
 The Supreme Court ruled that performance
appraisals were subject to the same validity criteria
as selection procedures.
• Albemarle Paper Company v Moody
 The U.S. Supreme Court found that employees had
been ranked against a vague standard, open to each
supervisor’s own interpretation.
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8–15
Legal Guidelines for Appraisals
• Performance ratings must be job-related.
• Employees must be given a written copy of their job
standards in advance of appraisals.
• Managers who conduct the appraisal must be able to
observe the behavior they are rating.
• Supervisors must be trained to use the appraisal form
correctly.
• Appraisals should be discussed openly with employees
and counseling or corrective guidance offered.
• An appeals procedure should be established to enable
employees to express disagreement with the appraisal.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–16
FIGURE
8.4
Alternative Sources of Appraisal
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8–17
Sources of Performance Appraisal
• Manager and/or Supervisor
 Appraisal done by an employee’s manager and
reviewed by a manager one level higher.
• Self-Appraisal
 Appraisal done by the employee being evaluated,
generally on an appraisal form completed by the
employee prior to the performance interview.
• Subordinate Appraisal
 Appraisal of a superior by an employee, which is
more appropriate for developmental than for
administrative purposes.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–18
Sources of Performance Appraisal
• Peer Appraisal
 Appraisal by fellow employees, compiled into a
single profile for use in an interview conducted by
the employee’s manager.
 Why peer appraisals are not used more often:
1. Peer ratings are simply a popularity contest.
2. Managers are reluctant to give up control over the
appraisal process.
3. Those receiving low ratings might retaliate against their
peers.
4. Peers rely on stereotypes in ratings.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–19
Sources of Performance Appraisal
• Team Appraisal
 Based on TQM concepts; recognizes team
accomplishment rather than individual performance
• Customer Appraisal
 A performance appraisal that, like team appraisal,
is based on TQM concepts and seeks evaluation from
both external and internal customers
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8–20
FIGURE
8.5
Pros and Cons of 360-Degree Appraisal
PROS
• The system is more comprehensive in that responses are gathered from multiple
perspectives.
• Quality of information is better. (Quality of respondents is more important than quantity.)
• It complements TQM initiatives by emphasizing internal/external customers and teams.
• It may lessen bias/prejudice since feedback comes from more people, not one individual.
• Feedback from peers and others may increase employee self-development.
CONS
• The system is complex in combining all the responses.
• Feedback can be intimidating and cause resentment if employee feels the respondents
have “ganged up.”
• There may be conflicting opinions, though they may all be accurate from the respective
standpoints.
• The system requires training to work effectively.
• Employees may collude or “game” the system by giving invalid evaluations to one another.
• Appraisers may not be accountable if their evaluations are anonymous.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–21
360-Degree Performance Appraisal System
Integrity Safeguards
• Assure anonymity
• Make respondents accountable
• Prevent “gaming” of the system
• Use statistical procedures
• Identify and quantify biases
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8–22
Training Appraisers
• Establishing an Appraisal Plan
 Provide an explanation of the performance
appraisal system’s objectives so that raters will
understand the compensation and development
purposes for which the appraisal is to be used.
 Explain the mechanics of the rating system

How frequently the appraisals are to be conducted

Who will conduct them

What are the standards of performance.
 Alert raters to the weaknesses and problems of
appraisal systems so that they can be avoided.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–23
Training Performance Appraisers
Common rater-related errors
Error of central tendency
Leniency or strictness errors
Similar-to-me errors
Recency errors
Contrast and halo errors
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8–24
Rater Errors
• Error of Central Tendency
 A rating error in which all employees are rated
about average.
• Leniency or Strictness Error
 A rating error in which the appraiser tends to give
all employees either unusually high or unusually low
ratings.
• Recency Error
 A rating error in which appraisal is based largely on
an employee’s most recent behavior rather than on
behavior throughout the appraisal period.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–25
Rater Errors
• Contrast Error
 A rating error in which an employee’s evaluation is
biased either upward or downward because of
comparison with another employee just previously
evaluated.
• Similar-to-Me Error
 An error in which an appraiser inflates the
evaluation of an employee because of a mutual
personal connection.
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8–26
Rater Errors: Training and Feedback
• Rating Error Training
 Observe other managers making errors
 Actively participate in discovering their own errors
 Practice job-related tasks to reduce the errors they
tend to make
• Feedback Skills Training
 Communicating effectively
 Diagnosing the root causes of performance problems
 Setting goals and objectives
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8–27
1
Supervisor’s Checklist for the Performance Appraisal
Scheduling
1. Schedule the review and notify the employee ten days to two weeks in advance.
2. Ask the employee to prepare for the session by reviewing his or her performance, job
objectives, and development goals.
3. Clearly state that this will be the formal annual performance appraisal.
Preparing for the Review
1. Review the performance documentation collected throughout the year. Concentrate on
work patterns that have developed.
2. Be prepared to give specific examples of above- or below-average performance.
3. When performance falls short of expectations, determine what changes need to be made.
If performance meets or exceeds expectations, discuss this and plan how to reinforce it.
4. After the appraisal is written, set it aside for a few days and then review it again.
5. Follow whatever steps are required by your organization’s performance appraisal system.
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8–28
1
Supervisor’s Checklist…(cont’d)
Conducting the Review
1. Select a location that is comfortable and free of distractions. The location should
encourage a frank and candid conversation.
2. Discuss each topic in the appraisal one at a time, considering both strengths and
shortcomings.
3. Be specific and descriptive, not general and judgmental. Report occurrences rather than
evaluating them.
4. Discuss your differences and resolve them. Solicit agreement with the evaluation.
5. Jointly discuss and design plans for taking corrective action for growth and development.
6. Maintain a professional and supportive approach to the appraisal discussion.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–29
Performance Appraisal Methods
Graphic Rating
Scale
Trait
Methods
Mixed Standard
Scale
Forced-Choice
Essay
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8–30
Trait Methods
• Graphic Rating-Scale Method
 A trait approach to performance appraisal whereby
each employee is rated according to a scale of
individual characteristics.
• Mixed-Standard Scale Method
 An approach to performance appraisal similar to
other scale methods but based on comparison with
(better than, equal to, or worse than) a standard.
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8–31
2
Graphic Rating
Scale with
Provision for
Comments
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8–32
3
Example of a Mixed-Standard Scale
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8–33
Trait Methods
• Forced-Choice Method
 Requires the rater to choose from statements
designed to distinguish between successful and
unsuccessful performance.
 1. ______ a) Works hard
 2. ______ a) Shows initiative
 3. ______ a) Produces poor quality
_____ b) Works quickly
_____ b) Is responsive to customers
_____ b) Lacks good work habits
• Essay Method
 Requires the rater to compose a statement
describing employee behavior.
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8–34
Behavioral Methods
Critical Incident
Behavioral Checklist
Behavioral
Methods
Behaviorally Anchored
Rating Scale (BARS)
Behavior Observation
Scale (BOS)
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8–35
Behavioral Methods
• Critical Incident Method
 Critical incident

An unusual event that denotes superior or inferior employee
performance in some part of the job

The manager keeps a log or diary for each employee
throughout the appraisal period and notes specific critical
incidents related to how well they perform.
• Behavioral Checklist Method
 The rater checks statements on a list that the rater
believes are characteristic of the employee’s
performance or behavior.
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8–36
Behavioral Methods
• Behaviorally Anchored Rating Scale (BARS)
 Consists of a series of vertical scales, one for each
dimension of job performance; typically developed
by a committee that includes both subordinates and
managers.
• Behavior Observation Scale (BOS)
 A performance appraisal that measures the
frequency of observed behavior (critical incidents).
 Preferred over BARS for maintaining objectivity,
distinguishing good performers from poor
performers, providing feedback, and identifying
training needs.
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8–37
4
BARS Example
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8–38
4
BOS Example
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8–39
Results Methods
• Productivity Measures
 Appraisals based on quantitative measures (e.g.,
sales volume) that directly link what employees
accomplish to results beneficial to the organization.

Criterion contamination

Focus on short-term results
• Management by Objectives (MBO)
 A philosophy of management that rates
performance on the basis of employee achievement
of goals set by mutual agreement of employee and
manager.
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8–40
FIGURE
8.6
Performance Appraisal under an MBO Program
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8–41
Creating an Effective MBO Program
1. Managers and employees must be willing to establish
goals and objectives together.
2. Objectives should be quantifiable and measurable for
the long and short terms.
3. Expected results must be under the employee’s
control and free from criterion contamination.
4. Goals and objectives must be consistent for each
employee level (top executive, manager, and
employee).
5. Managers and employees must establish specific times
when the goals are to be reviewed and evaluated.
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8–42
The Balanced Scorecard
• The appraisal focuses on four related categories
 Financial, customer, processes, and learning
• Ensuring the method’s success:
 Translate strategy into a scorecard of clear
objectives.
 Attach measures to each objective.
 Cascade scorecards to the front line.
 Provide performance feedback based on measures.
 Empower employees to make performance
improvements.
 Reassess strategy.
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8–43
5
Personal Scorecard
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8–44
Summary of Appraisal Methods
• Trait Methods
 Advantages



Are inexpensive to develop
Use meaningful dimensions
Are easy to use
 Disadvantages




Have high potential for rating errors
Are not useful for employee counseling
Are not useful for allocating rewards
Are not useful for promotion decisions
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8–45
Summary of Appraisal Methods (cont’d)
• Behavioral Methods
 Advantages




Use specific performance dimensions
Are acceptable to employees and superiors
Are useful for providing feedback
Are fair for reward and promotion decisions
 Disadvantages



Can be time-consuming to develop/use
Can be costly to develop
Have some potential for rating error
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8–46
Summary of Appraisal Methods (cont’d)
• Results Methods
 Advantages





Have less subjectivity bias
Are acceptable to employees and superiors
Link individual to organizational performance
Encourage mutual goal setting
Are good for reward and promotion decisions
 Disadvantages




Are time-consuming to develop/use
May encourage short-term perspective
May use contaminated criteria
May use deficient criteria
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8–47
FIGURE
8.7
Summary of Various Appraisal Methods
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8–48
Appraisal Interviews
Types of Appraisal Interviews
Tell and Sell - persuasion
Tell and Listen - nondirective
Problem Solving - focusing the
interview on problem resolution
and employee development
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8–49
Appraisal Interview Guidelines
Invite Participation
Ask for a Self-Assessment
Change Behavior
Problem Solving Focus
Minimize Criticism
Express Appreciation
Establish Goals
Be Supportive
Follow Up Day by Day
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8–50
FIGURE
8.8
Factors That Influence Performance
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8–51
FIGURE
8.9
Performance Diagnosis
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8–52
Managing Ineffective Performance
• Possible Courses of Action
 Provide training to increase skills and abilities
 Transfer employee to another job or department
 Attention of actions to motivate employee
 Take disciplinary action
 Discharge the employee
• Cautions
 All actions taken must be objective and fair.
 Do not treat underperformer differently, setting the
employee up to fail.
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–53
behavior observation scale (BOS)
management by objectives (MBO)
behaviorally anchored
manager and/or supervisor appraisal
rating scale (BARS)
mixed-standard scale method
calibration
peer appraisal
contrast error
performance appraisal
critical incident
performance management
customer appraisal
recency error
error of central tendency
self-appraisal
essay method
similar-to-me error
forced-choice method
subordinate appraisal
graphic rating scale method
team appraisal
leniency or strictness error
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
8–54