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CHAPTER SEVEN
Appraising and
Managing Performance
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Chapter Objectives
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Explain why performance appraisal
is important and describe its
components
Discuss the advantages and
disadvantages of different
performance rating systems
Manage the impact of rating errors
and bias on performance appraisals
Discuss the potential role of
emotion in performance appraisal
and how to manage its impact
Identify the major legal
requirements for appraisal
Use performance appraisals to
manage and develop employee
performance

Review Key Terms
 360-degree
feedback
 Absolute judgment
 BARS
 Dimensions
 MBO
 Performance Appraisal
 Performance
Management
 Relative judgment
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What is Performance Appraisal?
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Performance Appraisal
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Evaluating an employee’s current and/or past
performance relative to his or her performance
standards.
The identification, measurement, and management
of human performance in organizations.
Performance Management

The process employers use to make sure employees
are working toward organizational goals.
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Uses of Performance Appraisal
 Administrative
purposes
Working conditions
 Promotions
 Termination
 Rewards

 Developmental
purposes
Improving Performance
 Strengthening job skills
 Providing feedback
 Counseling
 Training

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Identifying Performance Dimensions
 Dimensions
 Defined
as an aspect of performance that determines
effective job performance.
 Performance dimensions are defined based on the job
and the work itself.
 Identified based on the job analysis
 Performance dimensions help answer the question:
“How does someone act and/or behave when s/he
does the job well?”
 May be further defined through use of competencies
 Characteristics
associated with successful performance
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Identifying Performance Dimensions
 Examples
 Strong
of Performance Dimensions:
Interpersonal Skills
 Customer Service Orientation
 Teamwork
 Effective Communication
 Valuing Diversity
 Analysis and Problem-Solving
 Decision-Making and Results Orientation
 Adaptability
 Fostering a Safe and Secure Environment
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Identifying Performance Dimensions
 For
dimensions to be an effective means of
measuring performance, they must have two
characteristics:
 Have
a clear general definition
 Team
 Have
work might then be defined in terms of competencies
well-defined levels of performance at each point
along a rating scale.
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Measuring Performance
 Measuring
performance
 administering
numbers or labels towards performance
is difficult to quantify
 Two
formats that are most common, legally
defensible, and promising are classified by
 type
of judgment required
 focus of the measure
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Measuring Performance
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Measurement Tools
 Relative
judgment
 An
appraisal format that asks supervisors to compare
an employee’s performance to the performance of
other employees doing the same job.
 Rank
order
 Grouping
 Forced Ranking
 GE,
Ford Motor, Conoco, Sun Microsystems, Cisco Systems, EDS,
and Enron
 Pros:
Forced Differentiation and create conflict
 Cons: No absolute rankings and may force differences
where none truly exist
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Measurement Tools
 Absolute
 An
judgment
appraisal format that asks supervision to make
judgments about an employee’s performance based
solely on performance standards.
 Pros: Can be more specific, helpful and create less
conflict
 Cons: Different supervisors may have different
standards
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Measurement Tools
 Type
of Performances Data the tool focuses on:
 Trait Appraisal
Instrument
 Behavioral Appraisal Instrument (BARS)
 Outcome Appraisal Instrument (MBO)
Measurement Tools –
Trait Appraisal Instruments
 Focuses
on the person rather than on the
performance
 Graphic rating scale
 A scale
that lists a number of traits and a range of
performance for each that is used to identify the score
that best describes an employee’s level of
performance for each trait.
 Example:
 Pros:
Reliability 1 (very low) to 5 (very high)
We are good at it
 Cons: Legal Concerns because traits can be
ambiguous and focuses is on person
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Measurement Tools –
Behavioral Appraisal Instrument
 Combines
traditional rating scales and critical
incidents methods
 Job behaviors derived from critical incidents
described more objectively
 Pros – Legally defensible and provides specific
examples of behavior to engage in
 Cons - Can be time consuming to create and
behavior ‘may’ occur
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Measurement Tools –
Behavioral Appraisal Instrument
 Behaviorally Anchored
Rating Scale (BARS)
 An
appraisal method that uses quantified scale with
specific narrative examples of good and poor
performance.
 Developing
 Generate
a BARS:
critical incidents
 Develop performance dimensions
 Reallocate incidents
 Scale the incidents
 Develop a final instrument
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Measurement Tools –
Outcome Appraisal Instrument (MBO)

Involves setting specific measurable goals with each
employee and then periodically reviewing the progress
made.
–
–
–
–
–
–
Set the organization’s goals.
Set departmental goals.
Discuss departmental goals.
Define expected results (set individual goals).
Performance reviews.
Provide feedback.
Pros: tied to organizational strategy
 Cons: may develop results at any cost mentality
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Who Does the Appraisals?
 Self
Reviews
 Peer Reviews
 Subordinate Reviews
 360-degree feedback
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Who Does the Appraisals?
360-Degree Valuation
 Multi-rater
evaluation
 Input from multiple levels with firm and external
sources
 Focuses on skills needed across organizational
boundaries
 More objective measure of performance
 Process more legally defensible
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Challenges to Effective Performance
Measurement
 Rater
 An
Errors
error in performance appraisals that reflects
consistent biases on the part of the rater
 Frame-of-reference (FOR) training can help combat
this problem
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Problems in Performance Appraisal
Rater Errors & Bias
 Lack
of objectivity
 Halo error
 Comparability across Supervisors
 Leniency/strictness
 Central
tendency
 Recent behavior bias
 Personal bias
 Manipulating the evaluation
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Challenges to Effective Performance
Measurement
 Rater
Errors
 The Influence of Liking
 Precautions
Accurate
 Individual
record keeping - journals
or Group Focus
 Organizational Politics
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Reasons for Intentionally Inflating or
Lowering Ratings
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Believe accurate ratings would have a damaging effect on
subordinate’s motivation and performance.
Improve employee’s eligibility for merit raises.
Avoid airing department’s “dirty laundry.”
Avoid creating negative permanent record that might haunt
employee in the future.
Protect good workers whose performance suffered because of
personal problems.
Reward employees displaying great effort even when results
were relatively low.
Avoid confrontation with hard-to-manage employees.
Promote a poor or dislike employee up and out of the
department.
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Reasons for Intentionally Inflating or
Lowering Ratings
Scare better performance out of an employee.
 Punish a difficult or rebellious employee.
 Encourage a problem employee to quit.
 Create a strong record to justify a planned firing.
 Minimize the amount of merit increase a subordinate
receives.
 Comply with an organizational edict that discourages
managers from giving high ratings.
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Emerging Trends: Measuring the Performance of
Teams
 Review
existing measures to make sure the team
is aware of the measures and has commitment and
responsibilities to achieve them.
 Identify interim checkpoints at which team
progress or achievements can be assessed.
 Identify what the team and team members must
do to achieve the desired team-level results.
 Prioritize team goals according to relative
importance.
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Characteristics of an Effective
Appraisal System
 Develop
any needed measures of interim and final
team and individual performance.
 Develop team and individual performance
standards so that everyone has a clear
understanding of performance expectations.
 Determine how the performance management
system will work. Who will be the raters? How
will feedback be provided?
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Challenges to Effective Performance
Measurement
 Legal
Issues
 Factors
influencing judges’ decisions in cases
involving performance appraisals
 Use
of job analysis
 Providing written instructions
 Allowing employees to review appraisal results
 Agreement among multiple raters
 The presence of rater training
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Managing Performance
Performance Improvement

Because formal appraisal interviews typically are
conducted only once a year, they may not always have a
substantial and lasting impact on worker performance.
Thus, supervisors who manage performance effectively
generally share four characteristics.
Exploring the causes of performance problems
 Directing attention to the causes of problems
 Developing an action plan and empowering workers to reach a
solution
 Directing communication at performance & provide effective
feedback
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Tips for Better Performance Reviews
 Start
with the raw data
 Make sure you are evaluating performance on
appropriate dimensions
 Beware of rating biases
 Support ratings with written comments
 Evaluate several or all of your people at one time, if
possible
 Stick with performance and stay away from
inferences about cause
 Be consistent across workers