BATAAN PENINSULA STATE UNIVERSITY
Balanga Campus
INSTRUCTIONAL MATERIALS
1ST SEMESTER 2021 – 2022
Course Code: HRPR 0813
Course Title: Special Topics in Human Resource Management
Topic 3
Performance Management and Appraisals
INTRODUCTION:
At this stage of human resource management (HRM), we now have employees in our
organization who can do the work, we’ve given them at least some initial training, and they are
now doing their individual jobs. Human resources are typically one of the few options available
to create a sustainable competitive advantage for the firm. So we need to ensure that our human
resources perform at the highest possible level. To this end, in this section, we discuss the
difference between performance management and performance appraisal, and present the
performance appraisal process.
How do we manage performance within the organization? The most common part of the process,
and the one with which we are most familiar, is the process of the performance appraisal, or
evaluation. In this chapter, we will use the phrases performance evaluation, performance
appraisal, and appraisal interchangeably. However, the performance appraisal process is not the
only thing that’s done in performance management. Performance management is the process of
identifying, measuring, managing, and developing the performance of the human resources in an
organization. Basically we are trying to figure out how well employees perform and then to
ultimately improve that performance level. When used correctly, performance management is a
systematic analysis and measurement of worker performance (including communication of that
assessment to the individual) that we use to improve performance over time. Performance
appraisal, on the other hand, is the ongoing process of evaluating employee performance.
Performance appraisals are reviews of employee performance over time3 , so appraisal is just one
piece of performance management. Although we will spend most of this chapter discussing
performance appraisal, there are several other significant pieces of performance management that
we already covered in past chapters and will cover in future chapters.
CONTENT:
What is performance management?
Performance management is a corporate management tool that helps managers monitor
and evaluate employees' work. Performance management goal is to create an environment where
people can perform to the best of their abilities and produce the highest quality work most
efficiently and effectively.
The performance-management process at many companies continues to struggle, but not
for lack of efforts to make things better. Of the respondents we surveyed recently, two-thirds
made at least one major change to their performance-management systems over the 18 months
prior to our survey. With growing frequency, human-resources departments are dispensing with
unpopular “forced curve” ranking systems, rejiggering relatively undifferentiated compensation
regimes, and digging deeply into employee data for clues to what really drives motivation and
performance.
The fairness factor
When we speak of fairness, we’re suggesting a tight definition that academics have
wrestled with and come to describe as “procedural fairness. It’s far from a platonic ideal but
instead addresses, in this context, the practical question of whether employees perceive that
central elements of performance management are designed well and function fairly. This eye-of-
the-beholder aspect is critical. The survey research showed that 60 percent of respondents who
perceived the performance-management system as fair also stated that it was effective.
More important, the data also crystallized what a fair system looks like. Of course, a host
of factors may affect employee perceptions of fairness, but three stood out. The research suggests
that performance-management systems have a much better chance of being perceived as fair
when they do these three things:
1. transparently link employees’ goals to business priorities and maintain a strong element
of flexibility
2. invest in the coaching skills of managers to help them become better arbiters of day-today fairness
3. reward standout performance for some roles, while also managing converging
performance for others
Winning the battle of perceptions
In working with companies pushing forward on the factors our research highlighted, we
have found that these require much greater engagement with employees to help them understand
how their efforts matter, a lot more coaching muscle among busy managers, and some delicate
recalibration of established compensation systems.
Such shifts support a virtuous cycle that helps organizations get down to business on
fairness.
1. Linking employees’ goals to business priorities
Building a foundation of trust in performance management means being clear about what
you expect from employees and specific about how their work ultimately fits into the larger
picture of what the company is trying to accomplish. Contrast that sense of meaning and purpose
with the situation at many organizations were the goals of employees are too numerous, too
broad, or too prone to irrelevance as events change corporate priorities but the goals of
individuals aren’t revisited to reflect them. A typical ground-level reaction: “Managers think we
aren’t sophisticated enough to connect the dots, but it’s obvious when our goals get disconnected
from what really matters to the company.”
Give employees a say and be flexible.
Connecting the dots starts with making employees at all levels feel personally
involved in shaping their own goals. Mandating goals from the top down rarely generates
the kind of employee engagement companies strive for.
Adapt goals as often as needed.
In today’s business environment, goals set at a high level in the strategy room are
often modified in a few months’ time. Revisiting goals throughout the year avoids wasted
effort by employees and prevents goals from drifting into meaninglessness by year-end,
undermining trust. Of respondents who reported that their companies managed
performance effectively
2. Teaching your managers to be coaches
Managers are at the proverbial coal face, where the hard work of implementing the
performance requirements embodied in KPIs gets done. They also know the most about
individual employees, their capabilities, and their development needs. Much of the fairness and
fidelity of performance-management procedures therefore rests on the ability of managers to
become effective coaches. Less than 30 percent of our survey respondents, however, said that
their managers are good coaches. When managers don’t do this well, only 15 percent of
respondents reported that the performance-management system was effective.
Start with agility.
In a volatile business environment, good coaches master the flux, which means
fighting the default position: goal setting at the year’s beginning ends with a perfunctory
year-end evaluation that doesn’t match reality.
Invest in capabilities.
The soft skills needed to conduct meaningful performance conversations don’t
come naturally to many managers, who often perform poorly in uncomfortable situations.
Building their confidence and ability to evaluate performance fairly and to nudge
employees to higher levels of achievement are both musts. While the frequency of
performance conversations matters, our research emphasizes that their quality has the
greatest impact.
One European bank transformed its performance-management system by holding
workshops on the art of mastering difficult conversations and giving feedback to
employees who are missing the ball. To prepare managers for impending steps in the
performance-management cycle, the bank requires them to complete skill-validation
sessions, moderated by HR, with their peers. Managers receive guidance on how to
encourage employees to set multi year stretch goals that build on their strengths and
passions. Just before these goal-setting and development conversations with employees
take place, managers and peers scrum it out to test each other’s ideas and refine their
messages.
Make it sustainable.
At the European bank, the support sessions aren’t one-off exercises; they have
become a central element in efforts to build a cadre of strong coaches. That required
some organizational rebalancing. In this case, the bank restructured aspects of HR’s role:
one key unit now focuses solely on enhancing the capabilities of managers and their
impact on the business and is freed up from transactional HR activities. Separate peopleservices and solutions groups handle HR’s administrative and technical responsibilities.
To break through legacy functional mind-sets and help HR directors think strategically,
they went through a mandated HR Excellence training program.
3. Differentiating compensation
Expert coaches with better goal setting skills should, and to some extent, alleviate some
of the pain of adjusting compensation. However, new organizational roles and performance
patterns
that leads to high-level employees adding to the challenges. The incentives for traditional
salespeople are still fairly intuitive: more effort (measured in terms of customer contacts) results
in more sales and probably a higher salary. Finding the right benchmarks or differentiating
between high, medium, and low performers is more difficult when roles are interdependent,
collaboration is critical,and results cannot easily be traced to individual efforts. In our experience,
the only way is to carefully follow a balanced measurement approach, no matter how demanding.
Most importantly, keep things simple so executives can clearly explain the reasons for a salary
decision and employees can understand them. Here are some principles we looked at:
Don’t kill ratings. In an effort to eliminate the fear of performance management,
especially when there is a mass of middle-class performers, it is tempting to eliminate
rating systems. But companies that have tried this approach often have a hard time
making it clear to their employees what their position is, why they are being paid, what
would be a fair reward for different levels of performance, and what guidelines underpin
the incentive structures. Only 16 percent of those surveyed in companies where
compensation was not differentiated found the performance management system to be
effective.
Dampen variations in the middle. Because midsize companies work in collaborative
team environments, it is risky for companies to have large differences in compensation
between team members, as some of them see them as unfair and unjustified. Giving the
impression of "haves" and "haves" in the company outweighs any benefits that may result
from developing granular wage differentials in the name of performance optimization.
Embrace the power curve for standout performers. Studies have shown that the
distribution of performance in most companies follows a "power curve": 20 percent of
employees generate 80 percent of value. We noted this idea in a previous article on
performance management and are starting to see more evidence that companies are
embracing it by awarding outsized rewards to those with exceptional superior
performance, usually a premium of at least 15 to 20 percent. Above what the mediumsized company receives, even as these companies distribute remuneration more evenly
among the middle class.
Innovate with spot bonuses. Recognition of outstanding efforts during the year can also
show that managers are dedicated and that the system is responsive. Cirque du Soleil
rewards extraordinary contributions to special projects with a payment of 2 to 5 percent
of total salary and a thank you letter. Last year, 160 of the company's 3,500 employees
were honored. One-off bonuses avoid excessive salary schedules, as payments are not
included in the employee's compensation basis.
Technology’s role
Digital technologies are powerful tools that can increase the speed and scope of a
performance management transformation while reducing administrative costs. They are generally
effective. For example, a mobile app at a global company that we know makes it easy for
managers and employees to record and track goals throughout the year. Employees feel more
engaged because they know their position. The app also encourages managers to have more realtime coaching conversations and refine goals throughout the year.
Does technology affect the perception of equity? That depends on how it is applied. If
application-based systems are only designed to increase the efficiency of a process, not so much.
However, by broadening the factual basis for measuring individual performance, capturing
different perspectives, and making suggestions for development, they can strengthen perceived
equity. We found that two improvements can help digital tools work better.
Sweat the small stuff
Attention to detail also means learning all you can about them as individuals, as people,
not just as perspectives. This creates the environment for you to foster the "know, like,
and trust" relationships that so often make a difference in today's resource-based
environment. In this case, paying attention to the little things gives you a decisive
advantage over your employees.
Separate development from evaluative feedback
Digitally triggered real-time feedback generates a wealth of collaborative data from
colleagues, as does the transmission of information from gamified problem-solving
applications. Data is powerful, but capturing it can make employees suspect that "Big
Brother is watching." One way to address these fears is to distinguish the systems that
evaluate employees from those that help them develop. Of course, it is tempting to share
all the data collected through these apps with an employee's manager. However, when
employees are open to honest feedback from colleagues about how to do their jobs better,
they are vulnerable, especially when this development data is fed into assessment tools.
This also undermines the purpose (and ultimately usefulness) of digitally enabled
feedback. Apps should be designed in such a way that employees can decide what kind of
feedback they should share with their supervisors in their reviews.
Issues and Concerns on Performance Management and Appraisal
Performance Management Problems
1. Lack of Credibility
A strong performance management system relies on a trusting relationship between
employees and supervisors. When the employees doubt the credibility of the supervisors, they
also will distrust the results of any performance management metrics those supervisors produce.
2. Lack of Consistency
Performance management issues can also stem from supervisors delivering inconsistent
feedback. Mixed messages and shifting types of employee evaluation methods can cause
confusion and resentment among employees, leading them to distrust the performance
management reports.
3. Lack of Established Goals
Business owners must have clear goals they wish to meet to keep the business alive. If they
have not established specific goals, the employees will have no idea whether or not they've
accomplished their tasks.
4. Lack of Clear Strategy
A clear strategy also gives the business owner "milestones" to measure the company's
progress toward its goals and alternative tactics if the current actions are ineffective.
Problems with the Performance Appraisal
1. Bias
Bias is simply a personality-based tendency, either toward or against something. In the case
of performance assessment, bias is toward or against an individual employee. Biases make the
evaluation process subjective rather than objective, and certainly provide the opportunity for a
lack of consistency in effect on different groups of employees.
2. Stereotyping
Stereotyping is mentally classifying a person into an affinity group, and then identifying the
person as having the same assumed characteristics as the group. Regardless of whether the
stereotype is positive or negative, making bership in a group, rather than explicitly identifying the
characteristics of the individuals, creates the potential for significant error in evaluations.
3.
Halo error
This error occurs when the evaluator has a generally positive or negative (negative halo error
is sometimes called “horns error”) impression of an individual, and the evaluator then artificially
extends that general impression to many individual categories of performance to create an overall
evaluation of the individual that is either positive or negative
4.
Distributional errors
These errors occur in three forms: severity or strictness, central tendency, and leniency.
a) Severity or strictness error
The rater evaluates everyone, or nearly everyone, as below average.
b) Central tendency error
The raters evaluate everyone under their control as average, nobody is either really good or
really bad.
c) Leniency error
The rater evaluates all others as above average. Leniency error, therefore, is basically a form
of grade inflation.
5. Similarity error
This error occurs when raters evaluate subordinates that they consider more similar to
themselves as better employees, and subordinates that they consider different from themselves as
poorer employees.
6.
Proximity error
This error states that similar marks may be given to items that are near (proximate to) each
other on the performance appraisal form, regardless of differences in performance on those
measures.
7.
Recency error
This error occurs when raters use only the last few weeks or month of a rating period as
evidence of their ratings of others.
8.
Contrast error
In contrast error, the rater compares and contrasts performance between two employees,
rather than using absolute measures of performance to measure each employee.
9. Attribution error.
In simplified terms, attribution is a process where an individual assumes reasons or
motivations (such as attitudes, values, or beliefs) for an observed behavior. So, attribution error in
performance appraisal might occur when the rater observes an employee action such as an
argumentative answer to a question and assumes that the individual has a negative attitude toward
the job and is a poor performer.
Assessment Centre Techniques
What is an Assessment Centre?
A certain function for identifying the skill and potential for growth, it uses few methods to
evaluate employees for human resource & manpower purposes & decisions. In simple words,
assessment centres are a series of exercises commonly used by employers to test skills not
readily accessible from an interview alone. Assessment centre is a method used particularly in
military or management. For e.g. for selecting officers; SSB assessment centre method is used in
the Indian Defense Force, designed by DRDO.
Assessment Centre in HRM
The assessment centre in HRM works in a certain way, it pre-determined adopts various
techniques of testing to allow the competencies that are the candidates to showcase their ability &
skills to achieve sheer success in a given particular job.
Preparation of Assessment Centre
The Assessment centre mainly focuses on performing well at performance related exercises that
bring out the actual work situations & activities.
It lets the competencies prepare for the assessment, makes the competencies familiarize with the
essentials & job duties of the job position and reviews the skills of the competencies before the
examination to make them improve themselves.
On Time Assessment Centre
Every Station is set with a particular time and the candidates are given the exact amount of time
to complete the exercises. A Set of assessment centre experts will assess each particular exercise.
The competencies will perform the exercise as soon as they finish the experts will direct them to
the next exercise. The candidate behaviour is observed by the assessment experts who have been
trained to perceive individual behaviour in terms of job dimensions.
After the Assessment Centre Finishes
After the assessment centre finishes the assessment centre the assessors i.e The experts will start
assessing the exercises given to them, the experts will assess the performances on each of the
exercises being rated.
When all the competencies complete their assessments, the expert assessors will put the
information together that they’ve gathered. They usually take the form of discussing a candidate
at a time. The competencies will be notified about the examination results in 10 days by the
Human Resources. Letting the competencies know about their performances doesn’t mean they’ll
be offered a position. It determines the placement on the eligible list depending on the eligibility
criteria the competencies name might be sent to the departments with vacancies & will be called
for the interview for the position. .
Use of Assessment Centre
The use of assessment centres is mainly for the HR department, because the HR Department
looks after required and actual skill sets of candidates and then selects them.
Following are the Use of Assessment Centre:
●
Selection
●
Career path
●
Identify the potential
●
Identification of talent
●
Training and development needs
●
Succession planning
●
Development of candidate
1. Selection
assessment centre method helps in getting the right people for the right job at the right time
2. Career path
It helps in deciding the candidate to decide his / her career path or career development. It is
because the candidate has got knowledge about the competencies required for a particular job.
3. Identify the potential
It helps the candidate to know his / her potential and strong areas. This helps him/her in
performance appraisal.
4. Identification of talent
Assessment centre method clearly indicates the talents available within the organization, which
helps in identifying potential people for a particular position.
5. Training and development needs
Assessment centres also facilitate training and development and need identification for a
candidate.
6. Succession planning
Succession planning as said above assessment centre method clearly indicates the skill sets or
competencies of an individual, it helps in succession planning. This decision of succession
planning based on assessment centre results helps in reducing errors or helps in the accuracy of
taking the right decision.
7. Development of candidate
Skill enhancement through simulations
Assessment Centre Method
Using the assessment center method, candidates are tested for the qualities required for a certain
position. If it is an executive function, candidates will have to show their leadership qualities in
the assessment. If it is an organisational function, the assessment will focus more on
organisational qualities.
Method of Assessment Centre are:
●
In Basket Exercise
●
Competency Based Interview
●
Case Study
●
Role Play
●
Group Discussion
●
Projective Techniques
●
Business Games
1. In Basket Exercise
In basket exercise method in the assessment Centre also known as the in-tray exercise method. It
is widely used across organizations which accurately tests knowledge, skill behaviour.
The motive of in-basket exercise is to know about the employee’s ability that how well one can
perform in a particular situation with the job-related task.
For example: If the management is hiring a content writer. a candidate needs to know about the
content writing basics, should be able to write an article with proper grammar and in a narrative
way with his skills. Also should be able to execute the article with the given information.
2. Competency Based Interview
Competency-based interviews and also called situational interviews or behaviour interviews
according to certain structures. The interviewer has a collection of questions that each
concentrates on a particular skill or ability of competency and the answers will be compared with
the pre-established criteria.
These competency interviews work on a certain principle that past behaviour is the best
route of future performance. The results will be used across all sectors of the organization by all
the employers, particularly favouring the large graduate recruiters that may come handy for them
in the assessment centre.
Comparing to the normal interviews, competency-based interviews are more informal.
Generally in the normal interviews, the interviews would be asking about the random questions
which will have a normal end but in competency-based interviews, it’s more systematic and more
intriguing.
3. Case Study
A case study in the assessment centre method is projected by giving case studies to the
competencies, that is giving them reports, situations to deal with and come up with accurate
results. Documents would also be given to analyze them and to come up with proper decisionmaking skills based on the information given. This can be done as individual exercise and also
can be given in the groups that would let the assessors know about the teamwork ability of the
competencies. After going through the case studies and form a conclusion, the competencies
have to present a brief report or presentation.
The assessor/expert of the interview would check the skill of the presentation and problemsolving method of the case study As much as a solution that the competency has arrived at. In the
fact case studies are usually framed to not have an accurate answer or one “correct answer”.
As long as the competency justifies the logic of the case study the assessor wouldn’t mind
interrogating, therefore the competency would score marks based on the ability to justify the
answer.
4. Role Play
Role-play exercise used in assessment Centre works in such a way that the employers would
keenly observe the competencies by giving them role-play to see how would they cope up with
the work situation.
The employers will give a lot of challenges through the role plays To the competencies and then
observe how the competency reacts and negotiate certain problems. And how would the
competency conclude with the given scenario role-play?
5. Group Discussion
Group discussion in an assessment Centre is executed With a small group of competencies. To
know about the abilities and skills of the competencies and also to see how the competencies
work In a team given.
6. Projective Techniques
The projective technique under assessment centre method is a series of relatively Project issues,
concerns organization.
There are various kinds of projective techniques and assessment centres. Different organizations
choose different types of projective techniques to project competencies and their issues and
concerns.
7. Business Games
It can also be effective for self-assessment. The candidate might select from a checklist of
different response options or choose different approaches and take different paths through
simulation.
The simulation could branch through different stimulus presentations. This type of selfassessment would help differentiate an employer as unique and sophisticated in their approach to
candidates.
Prepared by Group 3
Alyssa Mae P. Solis
Thea Nichole M. Sevilla
Jhoeverlyn V. Roberto
Reynalyn A. Sendayen
Alyssa Airish S. Ramos
Licca Joy F. Silverio