Chap 7

© 2007 Thomson/South-Western.© 2007 Thomson/South-Western.All rights reserved.All rights reserved.

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Managing Human ResourcesManaging Human ResourcesBohlander Bohlander •• SnellSnell 1414thth edition edition

Appraising and Appraising and Improving Improving PerformancePerformance

Human Resource Human Resource ManagementManagementSnell • BohlanderSnell • Bohlander

© 2007 Thomson/South-Western. All rights reserved. 8–2

ObjectivesAfter studying this chapter, you should be able to:

1. Explain the purposes of performance appraisals and the reasons they can sometimes fail.

2. Identify the characteristics of an effective appraisal program.

3. Describe the different sources of appraisal information.

4. Explain the various methods used for performance evaluation.

5. Outline the characteristics of an effective performance appraisal interview.


Performance Appraisal and Other HRM Functions

Performance appraisal Performance appraisal validates selection functionvalidates selection function

Performance appraisal Performance appraisal validates selection functionvalidates selection function SelectionSelectionSelectionSelection

Selection should produce Selection should produce workers best able to meet workers best able to meet job requirementsjob requirements

Selection should produce Selection should produce workers best able to meet workers best able to meet job requirementsjob requirements

Performance appraisal Performance appraisal determines training needsdetermines training needs

Performance appraisal Performance appraisal determines training needsdetermines training needs

Training and Training and DevelopmentDevelopment

Training and Training and DevelopmentDevelopment

Training and development Training and development aids achievement of aids achievement of performance standardsperformance standards

Training and development Training and development aids achievement of aids achievement of performance standardsperformance standards

Performance appraisal is a Performance appraisal is a factor in determining payfactor in determining pay

Performance appraisal is a Performance appraisal is a factor in determining payfactor in determining pay

Compensation Compensation ManagementManagement

Compensation Compensation ManagementManagement

Compensation can affect Compensation can affect appraisal of performanceappraisal of performance

Compensation can affect Compensation can affect appraisal of performanceappraisal of performance

Performance appraisal judges Performance appraisal judges effectiveness of recruitment effectiveness of recruitment effortsefforts

Performance appraisal judges Performance appraisal judges effectiveness of recruitment effectiveness of recruitment effortsefforts

RecruitmentRecruitmentRecruitmentRecruitmentQuality of applicants Quality of applicants determines feasible determines feasible performance standardsperformance standards

Quality of applicants Quality of applicants determines feasible determines feasible performance standardsperformance standards

Performance appraisal justifies Performance appraisal justifies personnel actionspersonnel actions

Performance appraisal justifies Performance appraisal justifies personnel actionspersonnel actions Labor RelationsLabor RelationsLabor RelationsLabor Relations

Appraisal standards and Appraisal standards and methods may be subject to methods may be subject to negotiationnegotiation

Appraisal standards and Appraisal standards and methods may be subject to methods may be subject to negotiationnegotiation


Performance Appraisal Programs

• Performance AppraisalA process, typically performed annually by a

supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success.

• Performance managementThe process of creating a work environment in which

people can perform to the best of their abilities.


Performance Appraisal

Appraisal ProgramsAppraisal ProgramsAppraisal ProgramsAppraisal Programs

AdministrativeAdministrativeAdministrativeAdministrative DevelopmentalDevelopmentalDevelopmentalDevelopmental

CompensationCompensationCompensationCompensation Ind. EvaluationInd. EvaluationInd. EvaluationInd. Evaluation

Job EvaluationJob EvaluationJob EvaluationJob Evaluation

EEO/AA SupportEEO/AA SupportEEO/AA SupportEEO/AA Support

Training Training Training Training

Career PlanningCareer PlanningCareer PlanningCareer Planning


Figure 8Figure 8–1 –1 Purposes for Performance AppraisalPurposes for Performance Appraisal


Reasons Appraisal Programs Sometimes Fail

• Lack of top-management information and support

• Unclear performance standards• Rater bias• Too many forms to complete• Use of the appraisal program for

conflicting (political) purposes.


Figure 8Figure 8–2 –2 Let Me Count the Ways . . .Let Me Count the Ways . . .

There are many reasons why performance appraisal systems might not be effective. Some of the most common problems include the following:

Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no. 16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.

• Inadequate preparation on the part of the manager.

• Employee is not given clear objectives at the beginning of performance period.

• Manager may not be able to observe performance or have all the information.

• Performance standards may not be clear.

• Inconsistency in ratings among supervisors or other raters.

• Rating personality rather than performance.

• The halo effect, contrast effect, or some other perceptual bias.


Figure 8Figure 8–2 –2 Let Me Count the Ways (cont’d) . . .Let Me Count the Ways (cont’d) . . .

• Inappropriate time span (either too short or too long).

• Overemphasis on uncharacteristic performance.

• Inflated ratings because managers do not want to deal with “bad news.”

• Subjective or vague language in written appraisals.

• Organizational politics or personal relationships cloud judgments.

• No thorough discussion of causes of performance problems.

• Manager may not be trained at evaluation or giving feedback.

• No follow-up and coaching after the evaluation.Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no. 16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.

There are many reasons why performance appraisal systems might not be effective. Some of the most common problems include the following:


Managerial Issues Concerning Appraisals1. There is little face-to-face discussion between the

manager and the employee being appraised.

2. The relationship between the employee’s job description and the criteria on the appraisal form isn’t clear.

3. Managers feel that little or no benefit will be derived from the time and energy spent in the process, or they are concerned only with bad performances.

4. Managers dislike the face-to-face confrontation of appraisal interviews.


Managerial Issues Concerning Appraisals (cont’d)

5. Managers are not sufficiently adept at rating employees or providing them with appraisal feedback.

6. The judgmental role of appraisal conflicts with the helping role of developing employees.

7. The appraisal is just a once-a-year event, and there is little follow-up afterward.


Figure 8Figure 8–3 –3 Establishing Performance StandardsEstablishing Performance Standards


Strategic RelevanceStrategic Relevance

Individual standards directly relate to strategic goals.Individual standards directly relate to strategic goals.

Criterion DeficiencyCriterion Deficiency

Standards capture all of an individual’s contributions.Standards capture all of an individual’s contributions.

Criterion ContaminationCriterion Contamination

Performance capability is not reduced by external factors.Performance capability is not reduced by external factors.

Reliability(Consistency)Reliability(Consistency)

Standards are quantifiable, measurable, and stable.Standards are quantifiable, measurable, and stable.

Performance Standards Characteristics


Are You Complying with the Law?

• Brito v ZiaThe Supreme Court ruled that performance

appraisals were subject to the same validity criteria as selection procedures.

• Albemarle Paper Company v MoodyThe U.S. Supreme Court found that employees had

been ranked against a vague standard, open to each supervisor’s own interpretation.


Legal Guidelines for Appraisals

Performance ratings must be job-related.

Employees must be given a written copy of their job standards in advance of appraisals.

Managers who conduct the appraisal must be able to observe the behavior they are rating.

Supervisors must be trained to use the appraisal form correctly.

Appraisals should be discussed openly with employees and counseling or corrective guidance offered.

An appeals procedure should be established to enable employees to express disagreement with the appraisal.


Figure 8Figure 8–4 –4 Alternative Sources of AppraisalAlternative Sources of Appraisal

Source: From The Wall Street Journal—permission, Cartoon Features Syndicate.


Sources of Performance Appraisal

• Manager and/or SupervisorAppraisal done by an employee’s manager and

reviewed by a manager one level higher.

• Self-Appraisal Appraisal done by the employee being evaluated,

generally on an appraisal form completed by the employee prior to the performance interview.

• Subordinate AppraisalAppraisal of a superior by an employee, which is

more appropriate for developmental than for administrative purposes.



• Peer Appraisal Appraisal by fellow employees, compiled into a

single profile for use in an interview conducted by the employee’s manager.

Why peer appraisals are used more often:1. Peer ratings are simply a popularity contest.

2. Managers are reluctant to give up control over the appraisal process.

3. Those receiving low ratings might retaliate against their peers.

4. Peers rely on stereotypes in ratings.



• Team Appraisalbased on TQM concepts, that recognizes team

accomplishment rather than individual performance

• Customer AppraisalA performance appraisal that, like team appraisal, is

based on TQM concepts and seeks evaluation from both external and internal customers


Figure 8Figure 8–5 –5 Pros and Cons of 360-Degree AppraisalPros and Cons of 360-Degree Appraisal

Sources: Compiled from David A. Waldman, Leanne E. Atwater, and David Antonioni, “Has 360-Degree Feedback Gone Amok?” Academy of Management Executive 12, no. 2 (May 1998): 86–94; Bruce Pfau, Ira Kay, Kenneth Nowak, and Jai Ghorpade, “Does 360-Degree Feedback Negatively Affect Company Performance?” HRMagazine 47, no. 6 (June 2002): 54–59; Maury Peiperl, “Getting 360-Degree Feedback Right,” Harvard Business Review 79, no. 1 (January 2001): 142–47; Joyce E. Bono and Amy E. Colbert, Understanding Responses to Multi-Source Feedback: The Role of Core Self-Evaluations,” Personnel Psychology 58, no. 1 (Spring 2005): 171–205.

• PROS

The system is more comprehensive in that responses are gathered from multiple perspectives.

Quality of information is better. (Quality of respondents is more important than quantity.)

It complements TQM initiatives by emphasizing internal/external customers and teams.

It may lessen bias/prejudice since feedback comes from more people, not one individual.

Feedback from peers and others may increase employee self-development.


Figure 8Figure 8–5 –5 Pros and Cons of 360-Degree Appraisal (cont’d)Pros and Cons of 360-Degree Appraisal (cont’d)

Sources: Compiled from David A. Waldman, Leanne E. Atwater, and David Antonioni, “Has 360-Degree Feedback Gone Amok?” Academy of Management Executive 12, no. 2 (May 1998): 86–94; Bruce Pfau, Ira Kay, Kenneth Nowak, and Jai Ghorpade, “Does 360-Degree Feedback Negatively Affect Company Performance?” HRMagazine 47, no. 6 (June 2002): 54–59; Maury Peiperl, “Getting 360-Degree Feedback Right,” Harvard Business Review 79, no. 1 (January 2001): 142–47; Joyce E. Bono and Amy E. Colbert, Understanding Responses to Multi-Source Feedback: The Role of Core Self-Evaluations,” Personnel Psychology 58, no. 1 (Spring 2005): 171–205.

• CONS

The system is complex in combining all the responses.

Feedback can be intimidating and cause resentment if employee feels the respondents have “ganged up.”

There may be conflicting opinions, though they may all be accurate from the respective standpoints.

The system requires training to work effectively.

Employees may collude or “game” the system by giving invalid evaluations to one another.

Appraisers may not be accountable if their evaluations are anonymous.


360-Degree Performance Appraisal System Integrity Safeguards

• Assure anonymity. • Make respondents accountable.• Prevent “gaming” of the system. • Use statistical procedures. • Identify and quantify biases.


Training Performance Appraisers

Recency errorsRecency errorsRecency errorsRecency errors

Leniency or strictness errorsLeniency or strictness errorsLeniency or strictness errorsLeniency or strictness errors

Common rater-related errorsCommon rater-related errorsCommon rater-related errorsCommon rater-related errors

Error of central tendencyError of central tendencyError of central tendencyError of central tendency

Similar-to-me errorsSimilar-to-me errorsSimilar-to-me errorsSimilar-to-me errors

Contrast and halo errorsContrast and halo errorsContrast and halo errorsContrast and halo errors


Rater Errors

• Error of Central TendencyA rating error in which all employees are rated about

average.

• Leniency or Strictness ErrorA rating error in which the appraiser tends to give all

employees either unusually high or unusually low ratings.

• Recency ErrorA rating error in which appraisal is based largely on

an employee’s most recent behavior rather than on behavior throughout the appraisal period.


Rater Errors

• Contrast ErrorA rating error in which an employee’s evaluation is

biased either upward or downward because of comparison with another employee just previously evaluated.

• Similar-to-Me ErrorAn error in which an appraiser inflates the evaluation

of an employee because of a mutual personal connection.


Rater Errors: Training and Feedback

• Rating Error TrainingObserve other managers making errorsActively participate in discovering their own errorsPractice job-related tasks to reduce the errors they

tend to make

• Feedback Skills TrainingCommunicating effectivelyDiagnosing the root causes of performance problemsSetting goals and objectives


Highlights in HRM 1

Scheduling

1. Schedule the review and notify the employee ten days to two weeks in advance.

2. Ask the employee to prepare for the session by reviewing his or her performance, job objectives, and development goals.

3. Clearly state that this will be the formal annual performance appraisal.

Preparing for the Review

1. Review the performance documentation collected throughout the year. Concentrate on work patterns that have developed.

2. Be prepared to give specific examples of above- or below-average performance.

3. When performance falls short of expectations, determine what changes need to be made. If performance meets or exceeds expectations, discuss this and plan how to reinforce it.

4. After the appraisal is written, set it aside for a few days and then review it again.

5. Follow whatever steps are required by your organization’s performance appraisal system.

Conducting the Review

1. Select a location that is comfortable and free of distractions. The location should encourage a frank and candid conversation.

2. Discuss each topic in the appraisal one at a time, considering both strengths and shortcomings.

3. Be specific and descriptive, not general and judgmental. Report occurrences rather than evaluating them.

4. Discuss your differences and resolve them. Solicit agreement with the evaluation.

5. Jointly discuss and design plans for taking corrective action for growth and development.

6. Maintain a professional and supportive approach to the appraisal discussion.

Supervisor’s Checklist for the Performance Appraisal


Performance Appraisal Methods

Trait Trait MethodsMethods

Trait Trait MethodsMethods

Graphic Rating Graphic Rating ScaleScale

Graphic Rating Graphic Rating ScaleScale

Mixed Standard Mixed Standard ScaleScale

Mixed Standard Mixed Standard ScaleScale

Forced-ChoiceForced-ChoiceForced-ChoiceForced-Choice

EssayEssayEssayEssay


Trait Methods

• Graphic Rating-Scale MethodA trait approach to performance appraisal whereby

each employee is rated according to a scale of individual characteristics.

• Mixed-Standard Scale MethodAn approach to performance appraisal similar to other

scale methods but based on comparison with (better than, equal to, or worse than) a standard.


Highlights in HRM 2

Graphic Rating Scale with Provision for Comments


Highlights in HRM 3

Example of a Mixed-Standard Scale


Trait Methods

• Forced-Choice MethodRequires the rater to choose from statements

designed to distinguish between successful and unsuccessful performance.

1. ______ a) Works hard _____ b) Works quickly 2. ______ a) Shows initiative _____ b) Is responsive to

customers 3. ______ a) Produces poor quality _____ b) Lacks good work

habits

• Essay MethodRequires the rater to compose a statement describing

employee behavior.


Behavioral Methods

Behavioral Behavioral MethodsMethods

Behavioral Behavioral MethodsMethods

Critical IncidentCritical IncidentCritical IncidentCritical Incident

Behavioral ChecklistBehavioral ChecklistBehavioral ChecklistBehavioral Checklist

Behaviorally Anchored Behaviorally Anchored Rating Scale (BARS)Rating Scale (BARS)

Behaviorally Anchored Behaviorally Anchored Rating Scale (BARS)Rating Scale (BARS)

Behavior Observation Behavior Observation Scale (BOS)Scale (BOS)

Behavior Observation Behavior Observation Scale (BOS)Scale (BOS)


Behavioral Methods

• Critical Incident MethodCritical incident

An unusual event that denotes superior or inferior employee performance in some part of the job

The manager keeps a log or diary for each employee throughout the appraisal period and notes specific critical incidents related to how well they perform.

• Behavioral Checklist MethodThe rater checks statements on a list that the rater

believes are characteristic of the employee’s performance or behavior.


Behavioral Methods

• Behaviorally Anchored Rating Scale (BARS)Consists of a series of vertical scales, one for each

dimension of job performance; typically developed by a committee that includes both subordinates and managers.

• Behavior Observation Scale (BOS)A performance appraisal that measures the frequency

of observed behavior (critical incidents).Preferred over BARS for maintaining objectivity,

distinguishing good performers from poor performers, providing feedback, and identifying training needs.


Highlights in HRM 4

Example of a BARS for Municipal Fire Companies

FIREFIGHTING STRATEGY: Knowledge of Fire Characteristics.

Source: Adapted from Landy, Jacobs, and Associates. Reprinted with permission.


Highlights in HRM 5

Sample Items from Behavior Observation Scales


Results Methods

• Productivity MeasuresAppraisals based on quantitative measures (e.g.,

sales volume) that directly link what employees accomplish to results beneficial to the organization. Criterion contamination Focus on short-term results

• Management by Objectives (MBO)A philosophy of management that rates performance

on the basis of employee achievement of goals set by mutual agreement of employee and manager.


Figure 8Figure 8–6 –6 Performance Appraisal under an MBO ProgramPerformance Appraisal under an MBO Program

MANAGEMENT BY OBJECTIVES


Highlights in HRM 6

The Balanced Scorecard

Source: Robert Kaplan and David Norton, “Strategic Learning and the Balanced Scorecard,” Strategy & Leadership 24, no. 5 (September/October 1996): 18–24.


Highlights in HRM 7

Source: Robert Kaplan and David Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January–February 1996): 75–85.

Personal Scorecard


The Balanced Scorecard

• The appraisal focuses on four related categoriesFinancial, customer, processes, and learning

• Ensuring the method’s successTranslate strategy into a scorecard of clear objectives.

Attach measures to each objective.

Cascade scorecards to the front line.

Provide performance feedback based on measures.

Empower employees to make performance improvements.

Reassess strategy.


Summary of Appraisal Methods

• Trait MethodsAdvantages

Are inexpensive to develop Use meaningful dimensions Are easy to use

Disadvantages Have high potential for rating errors Are not useful for employee counseling Are not useful for allocating rewards Are not useful for promotion decisions


Summary of Appraisal Methods (cont’d)• Behavioral Methods

Advantages Use specific performance dimensions Are acceptable to employees and superiors Are useful for providing feedback Are fair for reward and promotion decisions

Disadvantages Can be time-consuming to develop/use Can be costly to develop Have some potential for rating error


Summary of Appraisal Methods (cont’d)• Results Methods

Advantages Have less subjectivity bias Are acceptable to employees and superiors Link individual to organizational performance Encourage mutual goal setting Are good for reward and promotion decisions

Disadvantages Are time-consuming to develop/use May encourage short-term perspective May use contaminated criteria May use deficient criteria


Figure 8Figure 8–7 –7 Summary of Various Appraisal MethodsSummary of Various Appraisal Methods


Appraisal Interviews

Tell and ListenTell and Listen - nondirective - nondirectiveTell and ListenTell and Listen - nondirective - nondirective

Types of Appraisal InterviewsTypes of Appraisal InterviewsTypes of Appraisal InterviewsTypes of Appraisal Interviews

Tell and SellTell and Sell - persuasion - persuasionTell and SellTell and Sell - persuasion - persuasion

Problem SolvingProblem Solving - focusing the - focusing the interview on problem resolution interview on problem resolution and employee developmentand employee development

Problem SolvingProblem Solving - focusing the - focusing the interview on problem resolution interview on problem resolution and employee developmentand employee development


Ask for a Self-AssessmentAsk for a Self-Assessment

Express AppreciationExpress Appreciation

Appraisal Interview Guidelines

Be SupportiveBe Supportive

Follow Up Day by DayFollow Up Day by Day

Establish GoalsEstablish Goals

Problem Solving FocusProblem Solving Focus

Minimize CriticismMinimize Criticism

Invite ParticipationInvite Participation

Change BehaviorChange Behavior


Figure 8Figure 8–8 –8 Factors That Influence PerformanceFactors That Influence Performance


Highlights in HRM 9

Performance Diagnosis

Source: Scott Snell, Cornell University.


Key Terms

• behavior observation scale (BOS)

• behaviorally anchored rating scale (BARS)

• contrast error• critical incident• customer appraisal• error of central tendency• essay method• forced-choice method• graphic rating-scale method• leniency or strictness error• management by objectives

(MBO)

• manager and/or supervisor appraisal

• mixed-standard scale method• peer appraisal• performance appraisal• performance management• recency error• self-appraisal• similar-to-me error• subordinate appraisal• team appraisal

Chap 7

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