Performance Evaluation and Management
Srinivasan Subramanian, Verghese Kurien, and Fatima
Shahabuddin are typist/secretaries in a commercial
organization. Srinivasan is from Chennai, Kurien from Kerala
and Fatima from a little village in North Bihar.
Their average typing speeds (words per minute but without
discounting for mistakes) for the last three months have
been: Srinivasan, 60; Kurien, 50; Fatima, 30.
*What do you think of Fatima's performance?
Srinivasan and. Kurien had other jobs before joining this
organization three years ago. This is Fatima's first job.
She joined three months ago.
*What do you think of Fatima's performance?
While Srinivasan and Kurien have new imported
typewriters, Fatima has an old Godrej which 'jumps'
*What do you think of Fatima's performance?
Most of Srinivasan's and Kurien's work is straight typing of reports yet
they have a considerable number of errors. Fatima on the other hand is
usually given heavy statistical data and her work is practically errorless.
*What do you think of Fatima's performance?
Fatima does her typing by 'touch' whereas Srinivasan and
Kurien keep their eyes on the keyboard.
*What do you think of Fatima's performance?
What was your first image of Fatima?
What was your last?
Your images of the others?
Was there any change?
Why? How?
Does this tell us anything about how to define
What is Performance Management?
Performance management is the process by
which executives, managers, and supervisors
work to align employee performance with the
firm’s goals
Effective performance management
1. Has a precise definition of excellent
2. Uses measurements of performance
3. Provides feedback to employees
Impact of an effective PMS
A firm’s strategy must be aligned with
employees’ competencies and performance
To achieve:
Performance Management Process
Six Step Process
1. Establish performance standards for each
position and the criteria for evaluation (job
2. Establish performance evaluation policies
on when to rate, how often to rate, and
who should Rate
3. Have raters gather data on employees’
Performance Management Process
4. Have raters (and employees in some
systems) evaluate employees’
5. Discuss the evaluation with the employee
6. Make decisions and file the evaluation
Establish Criteria
• The dimensions of performance upon which
an employee is evaluated are called the
criteria of evaluation . Examples: quality,
quantity, and cost of work
• A major problem with many evaluation
systems is that they require supervisors to
make person evaluations rather than
performance evaluations
Establish Criteria
 An effective criterion should possess the
following characteristics:
 Reliability
 Relevance
 Sensitivity
 Practicality
 Multiple criteria are necessary to measure
performance completely
 One must evaluate both activities and
 Management must weigh these criteria
Who Should Evaluate the Employee?
• The immediate supervisor conducts most
• Other options:
1. Rating by a committee of several supervisors
2. Rating by the employee’s peers (co-workers)
3. Rating by the employee’s subordinates
4. Rating by someone outside the immediate
work situation
5. Self-evaluation
6. Rating by a combination of approaches
360-degree Feedback
• Positive features of a 360-degree system:
– Multiple perspectives of a person’s
– Raters base evaluations on contact and
– Feedback is provided from multiple
directions… above, below, peer
– Anonymous upward feedback, which
results in full participation
– Learning about weaknesses and strengths
is motivational
360-degree Feedback
Negative features of a 360-degree system:
1. Feedback from all sources can be
2. Rater can hide in a group of raters and
provide harsh evaluations
3. Conflicting ratings can be confusing and
4. Providing feedback that is constructive
requires a plan and well-trained raters
Individual Evaluation Methods
Graphic rating scale
1. The rater is presented with a set of
2. The employee is rated on the traits
3. Ratings are assigned points, which are
then computed
4. Raters are often asked to explain each
rating with a sentence or two
Example of a Rating Scale
Overall Output
Individual Evaluation Methods
• Forced choice:
1. Was developed because graphic rating
scales allowed supervisors to rate
everyone high
2. The rater must choose from a set of
descriptive statements about employee
3. Supervisors check the statements that
describe the employee, or they rank the
statements from most to least descriptive
4. Forced choice can be used by superiors,
peers, subordinates, or a combination of
Example of a Forced Choice Appraisal
1. Learns Fast
4. Works Hard
2. Work is reliable
5. Performance is a good example for
others usually sloppy.
3. Absents often
Individual Evaluation Methods
Essay Evaluation
1. The rater is asked to describe the strong
and weak aspects of the employee’s
2. It can be used by superiors, peers, or
3. Essay evaluations are flexible; an
evaluator can specifically address the
ratee’s skill in any area
4. Comparing essays is difficult. Skilled
writers can paint a better picture
Individual Evaluation Methods
Critical Incident Technique
1. Raters maintain a log of behavioral incidents
that represent effective and ineffective
performance for each employee
2. Two factors determine the success of this
a. The supervisor must have enough time
to observe subordinates during the
evaluation period
b. The supervisor must record incidents as
they are seen
3. Logs can help avoid common rating errors
and facilitate discussions about
performance improvement
Individual Evaluation Methods
In its simplest form, the checklist is
a set of objectives or descriptive statements
• If the rater believes that the employee
possesses a listed trait, the item is checked
• A rating score equals the number of checks
1. Is the employee really interested in the job?
2. Does he/she avoid responsibility? Y/N
Individual Evaluation Methods
Behaviorally Anchored Rating Scales
1. Smith and Kendall developed the
behaviorally anchored rating scale (BARS),
or the behavioral expectation scale (BES)
2. The BARS approach uses critical incidents
to anchor statements on a scale
3. The rater reads the anchors and places an X
at some point on the scale for the ratee
Individual Evaluation Methods
A BARS usually contains these features:
1. Six to 10 performance dimensions
identified and defined by raters and
2. The dimensions are anchored with
positive and negative critical incidents
3. Each ratee is then rated on the
4. Ratings are fed back using the terms on
the form
Bars scale for Knowledge and Judgment dimension of
A Grocery Checker
Extremely good performance
Good performance
Slightly good performance
Neither good nor poor.
Slightly poor
Extremely poor
1. By knowing the price of items ,the
Checker will be able to look for
mismarked or unmarked items
6. In order to take a break, the
checker is expected to block off
the check stand where people
wait in queue.
Comparative Evaluation Methods
 A supervisor is asked to rank subordinates in
order on some overall criterion
 It is easier to rank the best and worst
employees than average ones
 Alternative rankings can help with this difficulty
 Pick the top employee first, then the bottom
 The second best is chosen, then the second
 Follow this process until everyone has been
Comparative Evaluation Methods
Paired Comparison
1. The supervisor reviews a series of cards;
each contains two subordinates names
2. The higher performer in each pair is chosen
3. Final ranking is made by counting how
many times a given employee was chosen
as the better performer
4. A major limitation is the number of paired
comparisons that must be made
• With only 10 subordinates, a supervisor
would have 45 pairs of names
Comparative Evaluation Methods
Paired Comparison
With 10 subordinates, a supervisor would
have how many pairs of names ?
Answer :45 pairs
Comparative Evaluation Methods
• Forced Distribution
1. Employees are rated on a pre-existing
distribution of pre-determined categories
2. The predetermined distribution must be
followed, regardless of how well the
employees performed
3. A supervisor with all exceptional
subordinates will be forced to rate some
• A supervisor with mediocre
subordinates must rate some highly
Comparative Evaluation Methods
Point allocation technique (PAT)
1. A variation of forced distribution
2. Each rater is given a number of points per
3. The points must then be allocated on a
criterion basis
4. The total number of points cannot exceed
the number of points per employee times
the number of employees evaluated
Comparative Evaluation Methods
Management by Objectives (MBO)
1. The MBO approach emerged from the beliefs
of McGregor, Drucker, and Odiorne
2. With MBO, managers and subordinates plan,
organize, control, communicate, and debate
3. The subordinate has a course to follow and a
target to shoot for
Comparative Evaluation Methods
An MBO program follows a systematic process:
1. Superior/subordinates define tasks and set
2. The superior, consulting with subordinates, sets
criteria for assessing objective accomplishment
3. Dates to review progress are agreed upon and used
4. Superior and subordinates make any required
modifications in the original objectives
5. A final evaluation by the superior is made
6. The superior meets with the subordinate in a
counseling, encouraging session
7. Objectives for the next cycle are set
Which Technique to Use
• The most commonly used evaluation
1. The graphic rating scale
2. The essay method
3. Checklists
• Used by about 5 percent of firms:
Forced choice, critical incident, BARS, MBO
• Used by 10 to 13 percent of firms:
Ranking, paired comparison
Exercise for PMS
1. Prepare a Job Description in respect of any
member in the group.
2. Identify 1 Key Result Area.
3. Identify 3 objectives and measures for the KRA.
4. Identify two competencies for the KRA.
5. Report out.
Problems in Performance Evaluation
1. Opposition to Evaluation
2. Systems Design and Operating problems.
3. Rater problems.
4. Standards of Evaluation.
5. Halo effect.
6. Leniency or harshness error.
7. Central Tendency error.
8. Recency of Events error.
9. Contrast factor.
10. Personal bias.
Eliminating Rater Errors
Behavior-based rating scales were created to help
eliminate the kinds of ratings errors just described
1. Such scales didn’t demonstrate consistent
superiority over other rating formats
2. Researchers now concentrated on the
rating process
3. More effort is now placed on
helping raters accurately observe,
recall, and report behavior
Rater Training
 The two most popular training programs are
designed to:
 Eliminate common rating errors
 Improve supervisor observation and recording
 Programs dealing with errors are effective, even if
short and relatively inexpensive
 Focusing on observation and recording skills
offers greater improvement than simply focusing
on errors
 Training alone will not solve all problems
 Raters must be motivated to use the system and
be allowed to observe subordinate performance
Avoiding Problems with Employees
For an evaluation system to work well,
employees must:
1. Understand it
2. Feel that it is fair
3. Believe it is used correctly
The system should be:
1. As simple as possible
2. Implemented in a way that fully informs
employees about how it will be used
Avoiding Problems with Employees
• To foster understanding about the system:
– Allow employees to participate in its
– Provide training in performance
evaluation methods
• Self-evaluation can be a useful addition to an
evaluation system
– This facilitates performance evaluation
discussions with a supervisor
• If raters are incompetent or unfair, employees
may resist, sabotage, or ignore the rating
The Feedback Process
ABC is a Chemical Process plant owned by the Apex group of Industries, located in
Kanjurmarg, Thane. The Plant is on a high growth phase, contributing to around 30% of
the profits among 5 SBUs. It has the most high tech manufacturing process and is the
jewel in the crown of the Apex group.
Two years back, under the guidance of the Corporate HR group, a Performance Incentive
scheme was introduced linked to the Annual Performance Appraisal system. Under the
scheme, all executives are slotted into four levels of ratings: Outstanding, Good
Satisfactory and Poor. The payout for the levels was: 125% of the Basic salary, 50% of the
Basic salary, 25% of the Basic salary and zero.
Stephen, an assistant Plant Manager, who has completed 5 years in the plant, but is
considered having outstanding potential, has had a good growth in the Company so far.
Last year he got a fast track promotion superseding many of his contemporaries. This
year, despite his superior (Plant Manager) rating him Outstanding, the Moderating
committee of senior leadership down graded him to Good level.
As the Plant Manager, you can guess that the down gradation has been done to satisfy
the dissenting executives whom Stephen had superseded. Besides, the Field Sales
executives always get a better deal.
What would you do, when Stephen comes for the Performance Review meeting?
The Feedback Interview
 An effective performance interview involves
two-way communication
 Evaluation should be a continuing process
 Supervisors should hold evaluation
interviews in order to:
 Discuss the appraisal
 Set objectives for the upcoming appraisal
 The employee’s development or salary
should not be discussed during this interview
The Feedback Interview
 Suggestions for effective interviews:
 Prepare for the meeting
 Put the employee at ease
 Split the budgeted time with the employee
 Present facts, not opinions
 Be specific
 Discuss performance, not personal criticisms
 Include positive comments
 Don’t overwhelm the ratee with information
 Encourage the ratee’s involvement
 Focus on the future
The Feedback Interview
 With good interviewing skills, many problems related
to discussing performance can be overcome
 Speak clearly
 Listen carefully
 Gather and analyze information thoroughly
 Negotiate the amount and use of resources
 A poor feedback interview is due to:
 Poor preparation
 Miscalculation about the purpose of the session
 Failure of the rater and ratee to understand each
The Feedback Interview
• Sometimes there is no choice but to give
negative feedback
– It is easier to accept criticism if the
discussion is part of the larger topic:
ways to improve future performance
• The goal of the feedback interview is to:
– Recognize and encourage superior
– Sustain acceptable behaviors
– Change the behavior of ratees whose
performance is not meeting
organizational standards
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