Chapter 10
Evaluating Individuals
Copyright © 2021 by Top Hat.
10-1
Learning Outcomes
(Slide 1 of 2)
•
•
•
Identify and explain the main reasons for conducting performance
appraisals.
Explain why many performance appraisal systems fail to accurately
measure employee performance.
Identify and describe the different methods for appraising performance,
along with their strengths and weaknesses.
Copyright © 2021 by Top Hat.
10-2
Learning Outcomes
(Slide 2 of 2)
•
•
•
•
Identify the possible sources of performance appraisals, and discuss the
circumstances under which each would be appropriate.
Explain the concept of “performance management.”
Discuss how to link merit pay to performance appraisals.
Identify the key design issues in developing an effective merit pay system.
Copyright © 2021 by Top Hat.
10-3
Microsoft
Changes It’s Performance Management
System to Support Strategy.
•
Has anyone worked under this
system of performance pay or a
similar one?
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10-4
What is
Performance
Appraisal?
The process of
assessing the overall
performance levels of
individual employees.
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10-5
Experience with Performance
Appraisals
•
Hard to establish satisfactory appraisal systems
– Many companies can’t seem to find a performance appraisal system
that they are happy with
– Despite their lack of success, they keep trying to make performance
appraisal work
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10-6
Why Do Performance Appraisals?
Administrative
Symbolic
Performance
Appraisal
Developmental
Supervisory
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Why Do Performance Appraisals?
(Slide 1 of 3)
•
Administrative reasons
– To identify individuals who are not performing to
required standards and for whom dismissal may
be necessary
– To identify individuals who should be considered for promotion or
merit increases
– To monitor the overall quality of performance in the firm
– Helps support legal arguments during unjust dismissal lawsuits
– Will show a firm attempted to manage employee performance in the
event of errors or accidents
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10-8
Why Do Performance Appraisals?
(Slide 2 of 3)
•
Developmental reasons
– Helping employees grasp the employer’s expectations, the key
performance dimensions of their jobs, the strengths and weaknesses
in their performance, and the ways they can improve their
performance
– Key task
• Provide useful feedback that will help individuals change their
behaviours in productive ways
Copyright © 2021 by Top Hat.
10-9
Why Do Performance Appraisals?
(Slide 3 of 3)
•
•
Supervisory reasons
– Improve the performance of the supervisors by encouraging them to
think systematically about employee performance and by encouraging
communication with employees
Symbolic reasons
– Creating the perception that management cares about good employee
performance
– Performance appraisals demonstrate this
concern to employees
Copyright © 2021 by Top Hat.
10-10
Assessment
Question
10.1
One of the key reasons organizations
conduct performance appraisals is to
identify poor performers in order to
implement disciplinary measures. What
type of reason is this?
a)
b)
c)
d)
supervisory
developmental
symbolic
administrative
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10-11
Pitfalls in Performance Appraisal
Performance appraisal reliability
Performance appraisal validity
Occurs when a performance appraisal
system produces the same scores even
when applied by different appraisers
Occurs when employees who receive the
highest scores in performance appraisal
system are in the fact the highest
performers
Copyright © 2021 by Top Hat.
10-12
Compensation
Today 10.1
The Beauty Effect:
Does “Hotness” Pay?
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10-13
Unintentional Inaccuracies in
Appraisals (Slide 1 of 2)
Central tendency
error
Occurs when appraisers rate all employees as “average” in
everything
Halo error
Occurs when appraisers rate an individual either high or low
on all characteristics because one characteristic is either high
or low
Recency effect
Tendency of appraisers to overweight recent events when
appraising employee performance
Contrast effect
Tendency for a set of performance appraisals to be
influenced upward by the presence of a very low performer
or downward by the presence of a very high performer
Copyright © 2021 by Top Hat.
10-14
Unintentional Inaccuracies in
Appraisals (Slide 2 of 2)
Similarity effect
Tendency of appraisers to inflate the
appraisals of appraisees they see as similar
to themselves
Leniency effect
Tendency of many appraisers to provide
unduly high performance appraisals
Harshness effect Tendency of some appraisers to provide
unduly low performance appraisals
Beauty effect
Tendency for the physical attractiveness of a
ratee to affect their performance appraisal
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10-15
Inaccuracies in
Appraisals
• What did I do wrong?
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10-16
Assessment
Question
10.2
John, a store manager, overly relies on
his associates' dollar value sales while
ignoring their other important
responsibilities. Which of the following
is a rating error committed by John?
a.
b.
c.
d.
recency
halo
central tendency
contrast
Copyright © 2021 by Top Hat.
10-17
Methods and Instruments for
Appraisals
1.
2.
3.
4.
5.
6.
7.
Ranking and forced distribution
Graphic rating scale
Behaviourally anchored rating scales
Behavioural observation scales
Objectives- and results-based systems
Field review
Combination approaches
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10-18
Ranking and Forced Distribution
Paired comparison
method
Forced distribution
method
• Determines the rank
order of all employees
in a unit by comparing
each employee with
each of the other
employees in the unit
• A performance
appraisal method that
stipulates the
distribution of
employees across the
performance
categories
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10-19
Graphic Rating
Scales
•
An appraisal method in which appraisers use a
numerical scale to rate employees on a series
of characteristics
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10-20
Figure 10.1
Example of
a Graphic
Rating Scale
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10-21
Behavioural Scales
Behaviourally
Anchored Rating
Scales (BARS)
Appraisal method
that provides specific
descriptors for each point on
the rating scale
Behavioural
Observation
Scales (BOS)
Management by
Objective
(MBO)
Appraisal method
under which appraisers
rate the frequency of
occurrence of different
employee behaviours
An approach to
management that
involves setting
employee goals and
providing feedback on goal
accomplishment
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10-22
Figure 10.2
Sample
Items from
Behavioural
Observation
Scales
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10-23
Field Review
•
•
Short period of direct observation of the job performance of the individual
being rated
Used for jobs that are not normally under direct observation by the
supervisor
– For example, truck drivers and airline pilots
– In the service sector, “mystery shoppers” are often used to assess sales
personnel and other service staff
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10-24
Continuous Performance
Management
•
•
•
•
A novel way to view traditional employee review
Involves aggregate information on employee outputs from various
touchpoints.
A significant factor is the check-in (every one-to-three months)
A check-in entails a one-on-one meeting with an employee and their
manager/supervisor
Copyright © 2021 by Top Hat.
10-25
Assessment
Question
10.3
Which of the following appraisal
methods involves aggregate information
on employee outputs from various
touchpoints and suggests supervisors
conduct frequent one-on-one meetings
with the employee?
a.
b.
c.
d.
field review
continuous performance
management
management by objective
behavioural
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10-26
Sources of Appraisals
Superiors
Customers
Self
360degree
feedback
Peers
Subordinates
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10-27
360-Degree Feedback
•
An appraisal system that uses feedback from superiors, peers,
subordinates, and possibly customers
•
Because of dissatisfaction with existing appraisal systems, 360-degree
feedback expanded rapidly in the 1990s but it appears to have slowed as
some of its shortcomings have become more apparent
Copyright © 2021 by Top Hat.
10-28
Multisource
360-Degree Feedback
•
Use standardized forms that provide numerical ratings of the appraisee
along numerous dimensions.
•
Individual raters (except the superior) are assured of anonymity so that
they can be candid in their ratings
•
The system employs several procedures to screen out invalid data
Copyright © 2021 by Top Hat.
10-29
Advantages of 360-Degree
Feedback
•
Advantages
– Fair; more safeguards to prevent bias; less rating inflation
– More accurate; encompass the perspectives of many raters
– Credible to the recipient
– More valuable for bringing about behaviour change, since work
associates more specific in their behavioural feedback.
– More motivational; peer pressure may motivate constructive
behaviour changes
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10-30
Disadvantages of 360-Degree
Feedback
•
Disadvantages
– Subject to same problems of peer and subordinate ratings
– Can be complicated to set up
– Must be voluntary
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10-31
720-Degree Feedback
•
•
•
Two common complaints of 360-degree
feedback:
– it fosters defensiveness, which constrains
development
– it promotes action without providing the
individual with the personal
understanding and motivation to develop
720-degree feedback is aimed at addressing
the complaints surrounding 360-degree
feedback
Although similar in process, compared to the
360-degree review, the 720-degree review is
more focused on ongoing development.
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10-32
Performance Management
•
Method for improving employee performance
based on goal-setting, feedback,
encouragement and support, and rewards for
success
– MBO
– TQM
– SMART:
• Specific, Measurable, Achievable,
Relevant, and Timely
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10-33
Which of the following statements is
NOT appropriate for a 720-Degree
feedback system?
Assessment
Question
10.4
a)
b)
c)
d)
The process is similar to 360Degree feedback
Addresses shortcomings of 360Degree feedback
The developmental aspect is
underemphasized
Mostly used for senior positions
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10-34
Linking Pay to Performance
Appraisals
•
Merit pay grid/merit pay matrix:
– A tool for allocating merit raises, based on the performance level of
the employee and the pay range quartile in which they fall
Copyright © 2021 by Top Hat.
10-35
Issues in Designing an Effective
Merit System
WHAT SHOULD BE THE
OBJECTIVES OF THE
SYSTEM?
WHAT IS THE MOST
APPROPRIATE
MEASUREMENT SYSTEM?
HOW FREQUENTLY
SHOULD APPRAISALS BE
CONDUCTED?
HOW ARE APPRAISALS TO
BE LINKED TO PAY?
HOW SHOULD FEEDBACK
BE PROVIDED?
HOW IS PROCEDURAL
JUSTICE TO BE ACHIEVED?
HOW ARE RATERS TO BE
TRAINED AND EVALUATED?
HOW IS THE SYSTEM TO BE
EVALUATED?
Copyright © 2021 by Top Hat.
10-36
Evaluating Individuals in Teams
•
Should you attempt to recognize individual performance when that
individual spends most or all of his or her time in a team? How?
– Members do not have strong intrinsic motivation
– Strong positive group norms do not exist
– Group sanctions against poor contributors are ineffective
– Little member commitment to overall team or organizational goals is
evident
– Teams are temporary and membership is part-time
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10-37
How Can Individuals in Teams Be
Evaluated?
•
Individual/team merit grid
– A method for linking individual merit pay to both individual and team
performance
Copyright © 2021 by Top Hat.
10-38
TABLE 10.2: Example of an
Individual/Team Merit Grid
INDIVIDUAL
MEMBER
CONTRIBUTION TO
TEAM
Unsatisfactory
Effective (%)
High (%)
Exceptional(%)
Team exceeds
—
8
12
16
Team meets goals
—
4
6
8
Team fails to meet
—
—
—
—
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10-39
Summary
(Slide 1 of 2)
•
•
•
The process of determining the individuals’ contribution to the job is
measured by performance appraisal
Although the concept of performance appraisal is a good thing, few
organizations, managers, or employees seem happy with their actual
performance appraisal systems
There are many threats to the accuracy of performance appraisal, including
the appraisal method itself
Copyright © 2021 by Top Hat.
10-40
Summary
(Slide 2 of 2)
•
•
•
The key is to select the method that fits best with the purpose of the
appraisal system, the nature of the behaviour being evaluated, and the
organizational context in which it is applied.
The same is true for selecting the most appropriate persons to actually
conduct the appraisals.
As merit pay is based on performance appraisal, it is critical to develop a
method for effectively linking pay to the appraisal results.
Copyright © 2021 by Top Hat.
10-41