PART THREE
C H A P T E R
TRAINING AND DEVELOPMENT
T
Performance Management and
Appraisal
N i n e
9
Lecture Outline
Strategic Overview
Basic Concepts in Performance Appraisal and
Performance Management
Comparing Performance Appraisal and Performance
Management
Why Performance Management?
Defining the Employee's Goals and Work Efforts
An Introduction to Appraising Performance
Why Appraise Performance?
Realistic Appraisals
The Supervisor's Role
Steps in Appraising Performance
Graphic Rating Scale Method
Alternation Ranking Method
Paired Comparison Method
Critical Incident Method
Narrative Forms
Behaviorally Anchored Rating Scales
Management by Objectives (MBO)
Computerized and Web-Based Performance Appraisal
Mixing the Methods
Appraising Performance: Problems and Solutions
Potential Rating Scale Appraisal Problems
How to Avoid Appraisal Problems
Who Should do the Appraising?
The Appraisal Interview
Types of Interviews
How to Conduct the Appraisal Interview
Appraisals in Practice
Creating the Total Performance Management Process
In Brief: This chapter gives an
overview of the
performance
appraisal process and the different
tools and methods available. The
main topics covered include the
performance management process,
appraisal
methods,
appraisal
performance problems and solutions,
and the appraisal interview.
Interesting Issues: Despite lots of
attention,
money
and
effort,
performance appraisals remain an
area with which few managers or
employees are satisfied.
The
following questions may be worth
discussing. Is it just that we don't
have a good enough system yet, is
there an intrinsic problem with
performance appraisals, or is it just
human nature to dislike them?
ANNOTATED OUTLINE
I.
Basic Concepts
Management
in
Performance
Appraisal
and
Performance
A. Comparing Performance Appraisal and Performance Management –
Performance appraisal is part of a total integrated process of
performance
management, which consolidates goal setting, performance appraisal,
and
development into a single, common system, the aim of which is to
ensure that the employee's performance is supporting the company's
strategic aims. Figure 9-2 illustrates the components of an effective
performance management process
B. Why Performance Management? – Performance management's
emphasis on the integrated nature of goal setting, appraisal and
development reflect Total Quality Management concepts. Second, it
reflects what many studies have shown that traditional performance
appraisals are useless and counter-productive. Third, it is a process that
recognizes that every employee' s efforts must focus on helping the
company to achieve its strategic goals.
C. Defining the Employee's Goals and Work Efforts – At the heart of
performance management is the idea that employees effort should be
goal directed, which involves clarifying expectations and quantifying
them by setting measurable standards for each objective. Some
guidelines for effective goal setting are:
1. Assign Specific Goals
2. Assign Measurable Goals
3. Assign Challenging but Doable Goals
4. Encourage Participation

II.
NOTES
Educational Materials to Use
An Introduction to Appraising Performance
A. Why Appraise Performance – For several reasons; 1) they play an
integral role in the employer's performance management process; 2) the
appraisal lets the boss and subordinate develop a plan for correcting any
deficiencies, and reinforce those things he does correctly; 3) they serve a
useful career planning purpose; and 4) it plays a part in salary decisions.
B. Realistic Appraisals - It is important that a manager be candidate when a
subordinate is underperforming.
C. The Supervisor's Role – Supervisors must be familiar with basic
appraisal techniques, understand and avoid problems that can cripple
appraisals, and know how to conduct appraisals fairly. The HR
Department serves as policy-making and advisory role.
D. Steps in Appraising Performance – 1) define the job; 2) appraise
performance; and 3) provide feedback.
E. Graphic Rating Scale Method – the simplest and most popular
appraising performance technique, is where a scale is used to list a
number of traits and a range of performance for each, then the employee
is rated by identifying the score that best describes his/her performance
level for each trait.
The New Workplace: Performance Appraisals and Joint Venture
Collaboration – A recent research project indicated that performance
appraisals that are properly designed can encourage employees to
collaborate and share information.
F. Alternation Ranking Method – is where employees are ranked from best
to worst on a particular trait, choosing highest, then lowest, until all are
ranked. Figure 9-6 shows an example of this method.
G. Paired Comparison Method – involves ranking employees by making a
chart of all possible pairs of employees for each trait and indicating which
is the better employee of the pair. Figure 9-7 shows an example of the
paired comparison method.
1. Forced Distribution Method – is where predetermined percentages of
rates are placed in various performance categories; similar to grading on
a curve.
H. Critical Incident Method – is where a supervisor keeps a record of
uncommonly good and/or undesirable examples of an employee’s workrelated behavior, and reviewing it with the employee at predetermined
times.
I.
Narrative Forms – involve rating the employee’s performance for each
performance factor, writing down examples and an improvement plan,
aiding the employee in understanding where his/her performance was
good or bad, and summarizing by focusing on problem solving.
J.
Behaviorally Anchored Rating Scales (BARS) – combines the benefits of
narratives, critical incidents, and quantified scales, by anchoring a scale
with specific behavioral examples of good or poor performance. The five
steps in developing a BARS are: 1) generate critical incidents; 2) develop
performance dimensions; 3) reallocate incidents; 4) scale the incidents;
and 5) develop final instrument.
1.
Research Insight – Three researchers developed a BARS for
checkout clerks at a grocery store.
2. Advantages of BARS: more accurate gauge; clearer standards;
feedback; independent dimensions; and consistency.
K. The Management by Objectives (MBO) Method – requires the manager to
set specific measurable goals with each employee and then periodically
discuss his/her progress toward these goals, and consist of six steps: 1)
set the organization's goals; 2) set departmental goals; 3) discuss
departmental goals; 4) define expected results; 5) performance reviews;
and 6) provide feedback.
L. Computerized and Web-Based Performance Appraisal – generally
enables managers to keep notes on subordinates during the year, to rate
employees on a series of performance traits, and then generate written
text to support each part of the appraisal.
M.

III.
Mixing the Methods – Most firms’ tools include combining several
methods.
NOTES
Educational Materials to Use
Appraising Performance: Problems and Solutions
A. Potential Rating Scale Appraisal Problems – unclear standards; halo
effect; central tendency; leniency or strictness; and bias.
1. Unclear Standards – Ambiguous traits and degrees of merit can
result in an unfair appraisal.
2. Halo Effect – the influence of a rater’s general impression on ratings
of specific qualities, can be a problem
3. Central Tendency – where supervisors stick to the middle of the
rating scales, thus rating everyone average.
4. Leniency or Strictness – supervisors have the tendency to rate
everyone either high or low.
5. Bias – the tendency to allow individual differences such as age, race,
and sex to affect the appraisal ratings employees receive, is a
problem.
Research Insight – One study illustrates how bias can
influence the way a person appraises another person.
B. How to Avoid Appraisal Problems – Appraisal problems can be
minimized by learning and understanding the potential problems and
solutions, using the right appraisal tool, training supervisors to reduce
rating errors; and keeping a diary.
Know Your Employment Law: Appraising Performance –
It has been found that inadequate appraisal systems tend to
be at the root of illegal discriminatory actions. In addition to
being done legally, appraisals should be done ethically and
honestly. This discussion box provides guidelines for
developing a legally defensible appraisal process.
C. Who Should Do the Appraising?
1. The Immediate Supervisor – usually in the best position to observe
and evaluate the subordinate’s performance, and is responsible for
that person’s performance.
2. Peer Appraisals – becoming more popular with firms using selfmanaging teams.
3. Rating Committees – consist of multiple raters, typically the
employee’s immediate supervisor and three or four other
supervisors.
4. Self-Ratings – tend to be higher than supervisor or peer ratings.
5. Appraisal by Subordinates – or upward feedback, is where
subordinates anonymously rate their supervisor’s performance.
Research Insight – One study shows that upward feedback
is very effective in improving supervisors’ behaviors.
6. 360-Degree Feedback – where ratings are collected from the
employee’s supervisors, subordinates, peers, and internal or external
customers.

IV.
NOTES
Educational Materials to Use
The Appraisal Interview is an interview in which the supervisor and
subordinate review the appraisal and make plans to remedy deficiencies and
reinforce strengths.
A. Types of Interviews – 1) Satisfactory – Promotable with the objective to
make development plans; 2) Satisfactory – Not Promotable with the
objective to maintain performance; and 3) Unsatisfactory – Correctable
with the objective to plan correction.
B. How to Conduct the Interview – Prepare for the Interview by assembling
the data, preparing the employee, and choosing the time and place. Be
direct and specific; don’t get personal; encourage the person to talk; and
don’t tiptoe around.
1.
How to Handle a Defensive Subordinate – Recognize that defensive
behavior is normal; never attack a person’s defenses; postpone
action; and recognize your own limitations.
2.
How to Criticize a Subordinate – When required, criticize in a manner
that lets the person maintain his/her dignity and sense of worth, in
private, and constructively.
3.
How to Ensure the Interview Leads to Improved Performance –
Clear-up job-related problems and set improvement goals and a
schedule for achieving them.
4.
How to Handle a Formal Written Warning – Written warnings should
identify the standards by which the employee is judged, make it clear
that the employee was aware of the standard, specify any violation of
the standard, and show that the employee had an opportunity to
correct the behavior.
C. Appraisals in Practice – Research shows that performance appraisals
are required for most employees. Various types of appraisal formats are
used, but most include reviews and feedback.

IV.
NOTES
Educational Materials to Use
Creating The Total Performance Management Process
In this section several examples are provided of how a small firm, a large
firm, and the Hotel Paris created a total performance management process.
When You're On Your Own:
Performance Appraisal and
Management – In this example the National Council on
Compensation Insurance NCCI integrated performance management
with the firm's HR Scorecard system. They had each employee and
supervisor devise goals for the employee to achieve over a 12 month
period, with a follow-up meeting after six months to assess progress
and take remedial action.
Improving Productivity through HRIS: The New Performance
Management System – In this example of how a large firm
implemented a performance management system, TRW moved from
a paper based performance appraisal system to an online system, in
which world-wide most TRW employees and supervisors could input
and review their data electronically. Figure 9-12 shows the
information required for this we-based system.
The HR Scorecard Strategy and Results: The New Performance
Appraisal System – The continuing example of Hotel Paris,
discusses how they used the HR Scorecard as a tool to focus
employee's behavior specifically on the performance that would help
the Hotel Paris achieve its strategic goals, as illustrated in Figure 913.