C h a p te r 9 :
Performance Management and Appraisal
LEARNING OBJECTIVES
I.
Describe the appraisal process.
II.
Develop, evaluate, and administer at least four
performance appraisal tools.
III.
Explain and illustrate the problems to avoid in
appraising performance.
IV.
List and discuss the pros and cons of six
appraisal methods.
V.
Perform an effective appraisal interview.
VI.
Discuss the pros and cons of using different
raters to appraise a person’s performance.
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BEST PERFORMERS?
Z
AVERAGE PERFORMERS?
WORST PERFORMERS?
Image:
IBM254
Wikipedia
International Human Resource Management
3
PERFORMANCE MANAGEMENT
Terms and Definition
An integrated approach and continuous cycle of setting, reviewing, and
developing the individuals performance and capability, to ensure the alignment
and attainment of strategic goals across the organization”
“Performance Management is both a strategic and an
integrated approach to delivering successful results in
organizations by improving the performance and
developing the capabilities of teams and individuals.”
(Armstrong and Baron, 1998)
“Performance management is a continuous process of
identifying, measuring and developing the performance
of individuals and aligning performance with the
strategic goals of the organization”
(Aguinis, 2009).
“Performance management is a process for establishing a shared
understanding about what is to be achieved, and how it is to be achieved;
an approach to managing people which increases the probability of
achieving job-related success.”
(Weiss and Hartle, 1997)
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Comparing Performance Appraisal and
Performance Management
• Performance Appraisal
– Evaluating an employee’s current and/or past performance
Z
relative to his or her performance
standards.
• Performance Management
– The process employers use to make sure employees are working
toward organizational goals.
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Benefits of Performance Appraisal and
Performance Management
•
Increasing use by employers of performance management reflects:
– The popularity of the total quality management (TQM) concepts.
– The belief that traditional performance appraisals are often not just useless but
counterproductive.
– The necessity in today’s globally competitive industrial environment for every
Z
employee’s efforts to focus on helping the company to achieve its strategic goals.
•
Why appraise performance?
– Appraisals play an integral role in the employer’s performance management
process.
– Appraisals help in planning for correcting deficiencies and reinforce things done
correctly.
– Appraisals, in identifying employee strengths and weaknesses, are useful for career
planning
– Appraisals affect the employer’s salary raise decisions.
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CLASSROOM TEACHING
APPRAISAL BY STUDENTS
Source: Richard I. Miller, Evaluating Faculty
for Promotional and Tenure (San Francisco:
Jossey-Bass Publishers, 1987), pp. 164–165.
Copyright © 1987, Jossey-Bass Inc.,
Publishers. All rights reserved. Reprinted with
permission.
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CONTINUOUS IMPROVEMENT (KAIZAEN)
• A management philosophy that requires employers to continuously
set and relentlessly meet ever-higher quality, cost, delivery, and
availability goals by:
– Eradicating the seven wastes:
• overproduction, defective products, and unnecessary downtime,
transportation, processing costs, motion, and inventory.
– Requiring each employee to continuously improve his or her own
personal performance, from one appraisal period to the next.
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PERFORMANCE MANAGEMENT CYCLE
Communication process required at all level, with intensive involvement from managers
1
Objective &
Goal Setting
5
Individual Expectation
Career
Development
Career path , Rewards
& Recognition
Organization-wide
Communication System
Performance
Review
4
Review past performance,
Development opportunities,
Performance rating
2
Performance
Management Cycle
3
Progress
Review
Update Objectives
Two-way Feedback
On-going
Coaching &
Mentoring
Development Process
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A HOLISTIC VIEW OF HUMAN RESOURCE AND ORGANIZATION
DEVELOPMENT (HROD)
Learning &
Development
Performance Management
Competency
Development
Precedents to Performance Management
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Leadership
Development
Career Planning and Development
Jobs Analysis and Design
Organization Structure
Organization Culture
Strategy
Vision, Mission, Values
Recruitment
& Selection
Rewards
Talent &
Succession
Management
ORGANIZATIONAL PERFORMANCE
Performance Management is one of the key drivers towards high-performing
organization
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THE STRATEGY PYRAMID
Establish ‘tangible actions’ to achieve ‘Organization Purpose’
Aspirational
Achievable
Value
What do we stand for?
Beliefs, Principle
Vision
Where are we going?
What do we aspire to achieve?
Hope, Ambition
Mission
What do we do?
Who do we do it for?
Motivation, Purpose
Strategic Priority
Area
What are we going to concentrate on?
Focal point, Trends, Capabilities
Strategic Objective
How are we going to progress?
Plan, Goals, Sequencing
Actions & KPI’s
What do we have to do?
How do we know?
Actions, Owners, Timeframes
Resources, Outcomes
Specific &
Tangible
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EXAMPLE : APPLE’s VISION AND MISSION STATEMENT
VISION STATEMENT
•
•
•
•
•
•
•
•
We believe that we are on the face of the earth to make great products and that’s not changing.
We are constantly focusing on innovating.
We believe in the simple not the complex.
We believe that we need to own and control the primary technologies behind the products that we make, and participate
only in markets where we can make a significant contribution.
We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and
meaningful to us.
We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others
cannot.
And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty
to admit when we’re wrong and the courage to change.
And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.
MISSION STATEMENT
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional
software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the
mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing
devices with iPad”.
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STRATEGIES CREATION PROCESS
Strategic Analysis
Identify and Analyze
• Business Position
• Main Objectives
• Directions
• Strategic Issues
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Strategy Formulation
Analyze
• Organization and
Environment
• Competitive Landscape
Create
• Vision and Mission
Statement
• Core Values
• Strategies
Strategy Verification
& Cascading
Verify
• Vision and Mission Statement
• Core Values
• Strategies
Cascade
• Corporate KPIs
• Functional KPIs
• Individual KPIs
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KRIs
Key Result Indicator
Strategic
KEY PERFORMANCE INDICATORS (KPIs)
KPIs
KRIs
Key Performance
Indicators
PIs and RIs
What to do to increase
performance dramatically
How done
KPIs
RIs
Result Indicator
What done
Future
Operational
Historic
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PIs
Performance Indicators
What to do
Finding the Core
beneath the Skin
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STRATEGIC GOALS VS. OPERATIONAL GOALS
Design PMS with right balance of ‘Strategic’ and ‘Operational’ indicators
i.e. New Strategic Partnership / New Product Line
Operational
Goals
Strategic Goals
i.e. Country Sales Target
LEADERS
i.e. New Sales Channel
Strategic Goals
MANAGERS
Operational Goals
i.e. Regional Sales Target
i.e. Process or Activity Improvement
INDIVIDUAL
Strategic
Goals
CONTRIBUTORS
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Operational Goals
i.e. Individual Sales Target
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DEFINING GOALS AND WORK EFFORTS
•
Guidelines for effective goals
–
–
–
–
Assign specific goals
Assign measurable goals
Assign challenging but doable goals
Encourage participation
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SMART goals are:
Specific, and clearly state the desired results.
Measurable in answering “how much.”
Attainable, and not too tough or too easy.
Relevant to what’s to be achieved.
Timely in reflecting deadlines and milestones.
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S.M.A.R.T. GOAL
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The Components of an Effective
Performance Management Process
• Direction sharing
• Role clarification
• Goal alignment
• Developmental goal setting
Z
• Ongoing performance monitoring
• Ongoing feedback
• Coaching and support
• Performance assessment (appraisal)
• Rewards, recognition, and compensation
• Workflow and process control and return
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STAR VS. GUARDIAN TASKS
Emphasizing on tasks that are most impactful to the organization
Organizational Performance
HIGH
STAR: Strategic work that requires risk taking
and entrepreneurial inclinations.
Org. Performance if performed well.
Individual Performance
On the Job
STAR
LOW
HIGH
FOOT SOLDIER
Org. Performance if performed poorly.
FOOT SOLDIER: Work where performance is
concentrated near average.
Org. Performance if performed well.
Org. Performance if performed poorly.
GUARDIAN: Administrative work that requires
conscientiousness and systemic effort.
GUARDIAN
Org. Performance if performed well.
LOW
Source:
‘What International
Can We Learn?
Star and
Guardian
Elements’, Stanford Graduate School of Business
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Human
Resource
Management
Org. Performance if performed poorly.
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EXAMPLE : HIGH IMPACT JOB DESCRIPTION
Linking Star and Guardian Elements to Key Result Area and Activity
Key Result Area
E.g. Human Resources Function
Organization
Development
Organizational
Performance
HIGH
STAR
Individual Performance
On the Job
Organizational
Culture
Management and
Development
FOOT SOLDIER
Payroll
Management
GUARDIAN
LOW
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Activity
• Assess current HR systems and
activities and identify organization
improvement opportunities.
• Formulate and implement OD
strategies, policies, systems and
processes.
• Evaluate results of initiatives and
make middle-to-long term
recommendations to executives.
• Define organization culture factors
that are aligned with and/or drives
business success
• Design and implement culture
management methodology,
process, tools, and measurement.
• Evaluate results of initiatives and
make middle-to-long term
recommendations to executives.
• Update and maintain payroll
information by designing systems,
directing the collection, calculation,
and entering of data.
• Pays employees by directing the
production and issuance of
paychecks or electronic transfers to
bank accounts.
• Prepare and circulate monthly payroll
information to related parties
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GOAL CASCADING EXAMPLE: CORPORATE & FUNCTIONAL KPIs
All Department
Corporate KPIs
Sales
Marketing
HR
Revenue Growth by >15%
Revenue of THB 115 mil
Conduct 4 marketing events
Turnover Rate <10%
Customer Satisfaction >80%
Customer Satisfaction >80%
-
Conduct 4 training programs
on ‘Service-mindset’
Employee Engagement >60%
Departmental
engagement rate >60%
Departmental
engagement rate >60%
Departmental
engagement rate >60%
Sales Department
Functional KPIs
Director of Sales
Sales Manager
Sales Executive
Achieving Sales Targets
Sales achievement
rate - Corporate
Sales achievement
rate - Team
Sales achievement
rate - Individual
No. of sales calls
Maintaining and improving
client relationships
No. of repeat clients
Client satisfaction rate
Client satisfaction rate
No. of complaints
Motivate team members
Engagement Level
Turnover Rate
-
-
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Sales Coordinator
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GOAL CASCADING EXAMPLE : INDIVIDUAL KPIs
Position Title:
Director of Sales
Department:
Sales Department
Reporting to:
Chief Executive Officer (CEO)
Direct Report:
Sales Manager (5)
Secretary (1)
#
.
Key Tasks
Description
Measurement
1
Achieving sales targets
Devises strategies and techniques necessary for sales team to
achieve annual sales targets.
Sales achievement rate
2
Maintaining and improving
client relationships
Initiate activities, promotional plans, operational guideline, and
team behaviors that enriches customer experience.
No. of repeat clients
3
Motivate team members
Ensure team members share cordial relationship with each other.
Develop lucrative incentive schemes and introduce monetary
benefits to encourage team to deliver their level best.
Engagement Level
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Realistic Appraisals
• Motivations for soft (less-than-candid) appraisals
– The fear of having to hire and train someone new
– The unpleasant reaction of the appraisee
– A company appraisal process that’s not conducive to candor
Z
• Hazards of giving soft appraisals
– Employee loses the chance to improve before being forced to
change jobs.
– Lawsuits arising from dismissals involving inaccurate performance
appraisals.
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PERFORMANCE APPRAISAL ROLES
Supervisors
•
•
•
•
Usually do the actual appraising.
Must be familiar with basic
appraisal techniques.
Must understand and avoid
problems that can cripple
appraisals.
Must know how to conduct
appraisals fairly.
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HR department
•
•
•
•
•
Serves a policy-making and advisory role.
Provides advice and assistance regarding the
appraisal tool to use.
Prepares forms and procedures and insists that all
departments use them.
Responsible for training supervisors to improve
their appraisal skills.
Responsible for monitoring the system to ensure
that appraisal formats and criteria comply with
EEO laws and are up to date.
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STEPS IN APPRAISING PERFORMANCE
DEFINING THE JOB
Making sure that you and
your subordinate agree on his
or her duties and job
standards.
APPRAISING
PERFORMANCE
Comparing your subordinate’s
actual performance to the
standards that have been set;
this usually involves some
type of rating form.
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PROVIDING FEEDBACK
Discussing the subordinate’s
performance and progress,
and making plans for any
development required.
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DESIGNING THE APPRAISAL TOOL
WHAT
HOW
What to measure?
How to measure?
•
Work output (quality and quantity)
•
Graphic rating scales
•
Personal competencies
•
Alternation ranking method
•
Goal (objective) achievement
•
MBO
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GRAPHIC RATING
SCALE WITH SPACE
FOR COMMENTS
•
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.
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PORTION OF AN ADMINISTRATIVE SECRETARY’S SAMPLE PERFORMANCE
APPRAISAL FORM
Source: James Buford Jr., Bettye Burkhalter, and Grover Jacobs, “Link Job Description
to Performance Appraisals,” Personnel Journal, June 1988, pp. 135–136.
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PERFORMANCE MANAGEMENT OUTLINE
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PERFORMANCE MANAGEMENT OUTLINE (CONT’D)
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PERFORMANCE MANAGEMENT OUTLINE (CONT’D)
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EXAMPLE : PERFORMANCE APPRAISAL FORMS
Measurements:
•
Individual & Team KPIs
•
Competency
•
Career Aspiration (Optional)
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PERFORMANCE APPRAISAL FORM EXAMPLE : KPIS MEASUREMENT
Employee
Details
Employee Name:
Employee ID:
Position Name:
Dept.:
Manager Name:
Job Grade &
Echelon:
Summary of Division Head Opinion:
Summary of Manager Opinion:
Performance
Evaluation
Criteria
Rating of Individual
Factual Evidence
Observed
Behavior
Context for Evidence/
Observation (if any)
Any Other
Comments
Performance
Against Goals
Exceptional
Achievements
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PERFORMANCE APPRAISAL FORM EXAMPLE : COMPETENCY
Evaluation Criteria
Factual
Evidence
Rating of Individual
Observed
Behavior
Context for
Evidence/
Observation (if any)
Any Other
Comments
Demonstration of
Desired Behaviors
Potential
Little
Evidence
Limited/Mixed
Evidence
Strong
Evidence
Little
Evidence
Limited/Mixed
Evidence
Strong
Evidence
Little
Evidence
Limited/Mixed
Evidence
Strong
Evidence
Little
Evidence
Limited/Mixed
Evidence
Strong
Evidence
Values Alignment
Desire to Grow
Learning Agility
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COMPETENCY
Knowledge, Skills, Attributes, and Behaviors required to deliver excellence
Competency model should help an organization predict (1) potential success of a person in a position
and (2) suggest development areas that are most impactful to the position holder and organization.
KNOWLEDGE
SKILLS
ATTRIBUTES
‘What I need
to know’
‘What I need to
be able to do’
‘What is my
character to be’
COMPETENCY
BEHAVIORS
‘How I need to use my knowledge
and skills in my workplace’
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‘What is required to deliver
business success and
performance excellence’
35
COMPETENCY DETERMINES HOW PEOPLE PERFORM IN
A GIVEN SITUATION
•
•
•
•
WHO
WHEN
HOW
WHAT
PERSONALITY
SITUATION
COMPETENCY
ORGANIZATION
PERFORMANCE
Personality
Motive
Traits
Cognitive Ability
Copyright © 2016 Slingshot Consulting. All Rights Reserved.
•
•
•
•
Knowledge
Skill
Attribute
Behavior
36
Slingshot Consulting l 36
PERFORMANCE APPRAISAL METHODS - Alternation Ranking Scale
Ranking employees from best to worst on a particular trait, choosing highest, then lowest, until all
are ranked.
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PERFORMANCE APPRAISAL METHODS - Ranking Employees by the
Paired Comparison Method
Ranking employees by making a chart of all possible pairs of the employees for each trait and
indicating which is the better employee of the pair.
Note: + means “better than.” − means “worse than.” For each chart, add up the number of 1’s in each
column to get the highest-ranked employee.
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OTHER PERFORMANCE APPRAISAL METHODS
• Forced distribution method
– Similar to grading on a curve; predetermined percentages of ratees are
placed in various performance categories.
– Example:
•
•
•
•
•
15% high performers
20% high-average performers
30% average performers
20% low-average performers
15% low performers
• Narrative Forms
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OTHER PERFORMANCE APPRAISAL METHODS (CONT’D)
• Behaviorally anchored rating scale (BARS)
– An appraisal method that uses quantified scale with specific narrative
examples of good and poor performance.
• Developing a BARS:
– Generate critical incidents
– Develop performance dimensions
– Reallocate incidents
– Scale the incidents
– Develop a final instrument
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BEHAVIORALLY ANCHORED RATING SCALE (BARS)
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EXAMPLES OF CRITICAL INCIDENTS FOR AN ASSISTANT PLANT MANAGER
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Example of a
Behaviorally Anchored
Rating Scale for the
Dimension
Salesmanship Skill
Source:Walter C. Borman, “Behavior
Based Rating,” in Ronald A. Berk (ed.),
Performance Assessment: Methods and
Applications (Baltimore, MD: Johns
Hopkins University Press, 1986), p. 103.
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Management by Objectives (MBO)
•
Involves setting specific measurable goals with each
employee and then periodically reviewing the progress
made.
1.
2.
3.
4.
5.
6.
Set the organization’s goals.
Set departmental goals. Z
Discuss departmental goals.
Define expected results (set individual goals).
Performance reviews.
Provide feedback.
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APPRAISAL-COACHING WORKSHEET
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POTENTIAL RATING SCALE APPRAISAL PROBLEMS
Unclear standards
An appraisal that is too open to interpretation.
Halo effect
Occurs when a supervisor’s rating of a subordinate on
one trait biases the rating of that person on other traits.
Central tendency
A tendency to rate all employees the same way, such as
rating them all average.
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A GRAPHIC RATING SCALE WITH UNCLEAR STANDARDS
For example, what exactly is meant by “good,” “quantity of
work,” and so forth?
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POTENTIAL RATING SCALE APPRAISAL PROBLEMS (CONT’D)
Strictness/leniency
The problem that occurs when a supervisor has a
tendency to rate all subordinates either high or low.
Bias
The tendency to allow individual differences such as age,
race, and sex to affect the appraisal ratings employees
receive.
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How to Avoid Appraisal Problems
•
Learn and understand the potential problems, and the solutions for each.
•
Use the right appraisal tool. Each tool has its own pros and cons.
•
Train supervisors to reduce rating errors such as halo, leniency, and central
tendency.
•
Have raters compile positive and negative critical incidents as they occur.
Z
Who Should Do the Appraising?
•
•
•
•
•
•
The immediate supervisor
Peers
Rating committees
Self-ratings
Subordinates
360-Degree feedback
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ADVANTAGES AND DISADVANTAGES OF APPRAISAL TOOLS
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THE APPRAISAL INTERVIEW
• Types of appraisal interviews
– Satisfactory—Promotable
– Satisfactory—Not promotable
– Unsatisfactory—Correctable
– Unsatisfactory—Uncorrectable
• How to conduct the appraisal interview
– Talk in terms of objective work data.
– Don’t get personal.
– Encourage the person to talk.
– Don’t tiptoe around.
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PERFORMANCE CONTRACT
Source: David Antonion, “Improving the
Performance Management Process Before
Discontinuing Performance Appraisals,”
Compensation and Benefits Review May–
June 1994, p. 33, 34.
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CHECKLIST DURING THE APPRAISAL INTERVIEW
Source: Reprinted with permission of
the publisher, HRnext.com. Copyright
HRnext.com, 2003.
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High Potential
NEED COACHING
RISING STAR
STAR
Medium Potential
QUESTIONABLE
FIT
CONTRIBUTOR
EMERGING STAR
At Potential
Potential
PERFORMANCE-POTENTIAL GRID (9-CELLS)
MARGINAL
SPECIALIST
EXPERT
At Performance
Medium Performance
High Performance
Performance
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Medium Potential
At Potential
Potential
High Potential
DEFINE DEVELOPMENT FOR EACH GROUP OF PERFORMERS
NEED COACHING
• Unfit in current roles &
responsibilities
• Provide job rotation to positions
that require similar skills
QUESTIONABLE FIT
• Weak performer, may improve
• May be unfit in current roles &
responsibilities
• Provide job rotation to positions
that require similar skills
MARGINAL
RISING STAR
STAR
• Develop through coaching and
mentoring programs
• High possibility of promotion
• Coach other talents by sharing
experiences and best practices
• Rotate to complicated role or
promote to leadership position
• Assign to strategic initiatives
CONTRIBUTOR
EMERGING STAR
• Provide training and
development opportunities
• Focus on on-the-job training
and/or job shadowing programs
• Provide stretched targets and
greater challenges
• Provide training and
development opportunities
SPECIALIST
EXPERT
• Unnecessary to provide learning
and development
• Manage-out
• Average performer who meets
basic job requirements
• Provide training and
development opportunities
• Provide stretched targets and
greater challenges
• Develop subject-specific
expertise and provide specialist
career path
At Performance
Medium Performance
High Performance
Performance
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