Part 3: Training and Developing
Human Resources
Chapter 9: Performance Management
and Appraisal
Prepared by Linda Eligh, University of Western Ontario
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–1
Learning Objectives
After you have read this chapter, you should be able to:
1.
2.
3.
4.
5.
6.
7.
Identify the components of performance management systems.
Discuss important employee performance measures including
individual performance factors.
Explain the administrative and developmental uses of performance
appraisal and the legal implications of performance management.
Describe the decisions concerning the performance appraisal
process.
Introduce the methods of appraising performance and their
advantages and disadvantages.
Discuss the importance of training managers and employees
about performance appraisal, and give examples of several rater
errors.
Identify several concerns about appraisal feedback and ways to
make it more effective.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–2
Nature of Performance Management
• Performance Management
 Processes used to identify, encourage, measure,
evaluate, improve, and reward employee
performance

Provide information to employees about their performance.

Clarify organizational performance expectations.

Identify the development steps that are needed to enhance
employee performance.

Document performance for personnel actions.

Provide rewards for achieving performance objectives.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–3
Performance
Management Linkage
Fig. 9-1
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–4
Difference Between Performance
Management and Performance Appraisals
• Performance
Management
 Processes used to
identify, encourage,
measure, evaluate,
improve, and reward
employee performance.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
• Performance
Appraisal
 The process of evaluating
how well employees
perform their jobs and then
communicating that
information to the
employees.
9–5
Identifying and Measuring
Employee Performance
• Performance
 What an employee does and does not do.
Quantity of output
• Quality of output
 Timeliness of output • Presence at work

• Job Criteria
 Important elements in a given job
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–6
Types of Performance Information
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Fig. 9-2
9–7
Relevance of Performance Criteria
Deficiency
Contamination
Performance
Criteria
Overemphasis
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–8
Relevance of Performance Criteria
Reliability
Practicality
Performance
Appraisal
Fairness
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–9
Performance Standards
• Performance Standards
 Expected levels of performance

Benchmarks, goals, and targets
 S.M.A.R.T. approach for writing performance standards





S=Specific
M=Measurable
A=Attainable
R=Relevant
T=Time bound
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–10
Legal Concerns and Performance Appraisals
• Legally Defensible PA System:
 Objective performance appraisal criteria based on job analysis
 Absence of disparate impact and evidence of validity
 Formal evaluation criteria that limit managerial discretion
 A rating instrument linked to job duties and responsibilities
 Documentation of the appraisal activities
 Personal knowledge of and contact with the appraised individual
 Training of supervisors in conducting appraisals
 Review process to prevent undue control of careers
 Counseling to help poor performers improve
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–11
Conflicting Uses for Performance Appraisal
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Fig. 9-3
9–12
Uses of Performance Appraisal
• Criticisms of Performance Appraisal
 Focus is too much on the individual and does little to
develop employees.
 Employees and supervisors believe the appraisal
process is seriously flawed.
 Appraisals are inconsistent, short-term oriented,
subjective, and useful only at the extremes of
performance.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–13
Developmental Uses of
Performance Appraisal
Performance
Appraisal
Administering Wages
and Salaries
Giving Performance
Feedback
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Identifying Strengths
and Weaknesses
9–14
Typical Division of HR Responsibilities:
Performance Appraisal Fig. 9-4
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–15
Decisions Concerning PA Process
• Performance Appraisal (PA)
 The process of evaluating how well employees
perform their jobs when compared to a set of
standards, and then communicating the information to
employees.
 Informal Appraisal

Day-to-day contacts, largely undocumented
 Systematic Appraisal

Formal contact at regular time intervals, usually documented
 Timing of Appraisals

Probationary (60-90 days), six months and annually
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–16
Who Conducts Appraisals
•
•
•
•
•
•
Supervisors who rate their employees
Employees who rate their supervisors
Team members who rate each other
Employees’ rating themselves
Outside sources rating employees
Multisource (360° feedback) appraisal
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–17
Traditional
Performance
Appraisal Process
Fig 9-5
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–18
Employee Rating of Managers
• Advantages
 Helps in identifying
competent managers
 Serves to make managers
more responsive to
employees
 Can contribute to the
career development of
managers
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
• Disadvantages
 Negative reactions by
managers to employee
ratings
 Subordinates’ fear of
reprisals may inhibit them
from giving realistic
(negative) ratings
 Ratings are useful only for
self-improvement purposes
9–19
Team/Peer Rating
• Advantages
 Helps improve the
performance of lower-rated
individuals
 Peers have opportunity to
observe other peers
 Peer appraisals focus on
individual contributions to
teamwork and team
performance
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
• Disadvantages
 Can negatively affect
working relationships
 Can create difficulties for
managers in determining
individual performance
 Organizational use of
individual performance
appraisals can hinder the
development of teamwork
9–20
Multisource Appraisal
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Fig. 9-6
9–21
Methods for Appraising Performance
Category Scaling
Behavioural Rating Scales
Comparative Methods
Narrative Methods
Results Based Methods
Combination Methods
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–22
Category Scaling Methods
• Graphic Rating Scale
 A scale that allows the rater to indicate an employee’s
performance on a continuum of job behaviours.
 Aspects of performance measured:

Descriptive categories, job duties, and behavioural
dimensions
 Drawbacks
Restrictions on the range of possible rater responses
 Differences in the interpretations of the meanings of scale
items and scale ranges by raters
 Poorly designed scales that encourage rater errors
 Rating form deficiencies limit effectiveness of the appraisal

Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–23
Sample
Performance
Appraisal
Form Fig. 9-7
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–24
Terms Defining Standards at One Company
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Fig. 9-8
9–25
Behavioural Rating Scales
• Behavioural Rating Approach
 Assesses employees’ behaviours instead of other
characteristics
 Consists of a series of scales created by:
Identifying important job dimensions
 Creating statements describing a range of desired and
undesirable behaviours (anchors)

 Behaviourally anchored rating scales (BARS)
Describes behaviours, differentiating between effective and
ineffective performers that can be observed, and anchors
them at points on a scale.
 Employee’s behaviour is compared against examples and
rated accordingly

Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–26
Behaviourally-Anchored Rating Scale
for Customer Service Skills Fig. 9-9
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–27
Comparative Methods
• Ranking
 A listing of all employees from highest to lowest in
performance.
 Drawbacks
Does not show size of differences in performance between
employees.
 Implies that lowest-ranked employees are unsatisfactory
performers.
 Becomes an unwieldy process if the group to be ranked is
large.

Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–28
Comparative Methods (cont’d)
• Forced Distribution
 Performance appraisal method in which ratings of
employees are distributed along a bell-shaped curve.
 Drawbacks

Assumes a normal distribution of performance.

Resistance by managers to placing individuals in the lowest
or highest groups.

Providing explanation for placement in a higher or lower
grouping can be difficult.

Is not readily applicable to small groups of employees.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–29
Forced Distribution on a Bell-Shaped Curve
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Fig. 9-10
9–30
Narrative Methods
• Critical Incident
 Manager keeps a written record of highly favourable
and unfavourable employee actions.
 Drawbacks

Variations in how managers define a “critical incident”
• Essay
 Manager writes a short essay describing an
employee’s performance.
 Drawback

Depends on the managers’ writing skills and their ability to
express themselves.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–31
Results Based Methods
• Results Based Performance Appraisal System
focuses on concrete standards of performance
that employees are expected to achieve.
 Management by Objectives

Specifies the performance goals that an individual and
manager mutually identify.
 Balanced Scorecard
Links the strategy, resource allocation and performance
appraisal systems in an organization.
 Expands on MBO by considering multiple segments of the
organization from which to develop employee objectives.
 Four key perspectives measure: financial, internal business
process, customer and learning and growth.

Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–32
The Management by Objectives (MBO) Process
Job Review and Agreement
Development of Performance Standards
Objective Setting
Continuing Performance Discussions
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–33
The Balance Scorecard
Fig. 9-11
.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–34
Combination of Methods
So what’s the best method?
 No single appraisal method is best for all situations.
 Using a combination of methods may be sensible in
certain circumstances.
 Using combinations may offset various advantages
and disadvantages of individual methods.
 When managers can articulate what they want a
performance appraisal system to accomplish, they
can choose and mix methods for desired results.
 Different categories of employees might require
different combinations of methods.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–35
Training of Managers and Employees
• Appraisal Training Topics:
 Appraisal process and timing
 Performance criteria and job standards that should be
considered
 How to communicate positive and negative feedback
 When and how to discuss training and development
goals
 Conducting and discussing the compensation review
 How to avoid common rating errors
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–36
Common Rater Errors
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
Fig. 9-12
9–37
Appraisal Feedback
• Appraisal Feedback Interview:
 Communicate results to an employee after an
appraisal interview
 Provide employee with a clear understanding of how
they stand in the eyes of immediate superiors and the
organization
 Clear up any misunderstandings on both sides
 Focus on coaching and development
 Avoid “Here is how you rate and why” message
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–38
Appraisal Interview Hints
Fig. 9-13
DO
DON’T
 Prepare in advance
 Focus on performance and
development
 Be specific about reasons for
ratings
 Decide on specific steps to be
taken for improvement
 Consider supervisor’s role in
employee’s performance
• Reinforce desired behaviours
• Focus on future performance
 Do all the talking
 Lecture the employee
 Mix performance appraisal and
salary or promotion issues
 Concentrate only on the
negative
 Be overly critical or “harp” on a
failing
 Feel it is necessary that both
parties agree in all areas
 Compare the employee with
others
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–39
Appraisal Feedback
Evaluation
of Data
Data
Feedback as
a System
Action Based on
Evaluation
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–40
Appraisal Feedback
• Effective Performance Management Systems
 Consistent with the strategic mission of the
organization
 Beneficial as development tool
 Useful as an administrative tool
 Legal and job-related
 Viewed as generally fair by employees
 Effective in documenting employee performance
Copyright © 2008 by Nelson, a division of Thomson Canada Limited.
9–41