Part 3: Training and Developing Human Resources Chapter 9: Performance Management and AppraisalPrepared by Linda Eligh, University of Western Ontario

Learning ObjectivesAfter you have read this chapter, you should be able to:Identify the components of performance management systems.Discuss important employee performance measures including individual performance factors.Explain the administrative and developmental uses of performance appraisal and the legal implications of performance management.Describe the decisions concerning the performance appraisal process.Introduce the methods of appraising performance and their advantages and disadvantages.Discuss the importance of training managers and employees about performance appraisal, and give examples of several rater errors.Identify several concerns about appraisal feedback and ways to make it more effective.

Nature of Performance ManagementPerformance Management Processes used to identify, encourage, measure, evaluate, improve, and reward employee performanceProvide information to employees about their performance.Clarify organizational performance expectations.Identify the development steps that are needed to enhance employee performance.Document performance for personnel actions.Provide rewards for achieving performance objectives.

Performance Management Linkage Fig. 9-1

Difference Between Performance Management and Performance AppraisalsPerformance Management Processes used to identify, encourage, measure, evaluate, improve, and reward employee performance.

Performance AppraisalThe process of evaluating how well employees perform their jobs and then communicating that information to the employees.

Identifying and Measuring Employee PerformancePerformanceWhat an employee does and does not do.Quantity of output Quality of outputTimeliness of output Presence at workJob CriteriaImportant elements in a given job

Types of Performance Information Fig. 9-2

Relevance of Performance CriteriaOveremphasisDeficiencyContaminationPerformance Criteria

Relevance of Performance CriteriaFairnessReliabilityPracticalityPerformance Appraisal

Performance StandardsPerformance StandardsExpected levels of performanceBenchmarks, goals, and targetsS.M.A.R.T. approach for writing performance standardsS=Specific M=Measurable A=Attainable R=Relevant T=Time bound

Legal Concerns and Performance AppraisalsLegally Defensible PA System:Objective performance appraisal criteria based on job analysisAbsence of disparate impact and evidence of validityFormal evaluation criteria that limit managerial discretionA rating instrument linked to job duties and responsibilitiesDocumentation of the appraisal activitiesPersonal knowledge of and contact with the appraised individualTraining of supervisors in conducting appraisalsReview process to prevent undue control of careersCounseling to help poor performers improve

Conflicting Uses for Performance Appraisal Fig. 9-3

Uses of Performance AppraisalCriticisms of Performance AppraisalFocus is too much on the individual and does little to develop employees.Employees and supervisors believe the appraisal process is seriously flawed.Appraisals are inconsistent, short-term oriented, subjective, and useful only at the extremes of performance.

Developmental Uses of Performance AppraisalPerformance Appraisal

Typical Division of HR Responsibilities: Performance Appraisal Fig. 9-4

Decisions Concerning PA ProcessPerformance Appraisal (PA)The process of evaluating how well employees perform their jobs when compared to a set of standards, and then communicating the information to employees.Informal AppraisalDay-to-day contacts, largely undocumentedSystematic AppraisalFormal contact at regular time intervals, usually documentedTiming of AppraisalsProbationary (60-90 days), six months and annually

Who Conducts AppraisalsSupervisors who rate their employeesEmployees who rate their supervisorsTeam members who rate each otherEmployees rating themselvesOutside sources rating employeesMultisource (360 feedback) appraisal

Traditional Performance Appraisal Process Fig 9-5

Employee Rating of ManagersAdvantagesHelps in identifying competent managersServes to make managers more responsive to employeesCan contribute to the career development of managersDisadvantagesNegative reactions by managers to employee ratingsSubordinates fear of reprisals may inhibit them from giving realistic (negative) ratingsRatings are useful only for self-improvement purposes

Team/Peer RatingAdvantagesHelps improve the performance of lower-rated individualsPeers have opportunity to observe other peersPeer appraisals focus on individual contributions to teamwork and team performance

DisadvantagesCan negatively affect working relationshipsCan create difficulties for managers in determining individual performanceOrganizational use of individual performance appraisals can hinder the development of teamwork

Multisource Appraisal Fig. 9-6

Methods for Appraising PerformanceCategory ScalingBehavioural Rating ScalesComparative MethodsNarrative MethodsResults Based MethodsCombination Methods

Category Scaling MethodsGraphic Rating ScaleA scale that allows the rater to indicate an employees performance on a continuum of job behaviours.Aspects of performance measured:Descriptive categories, job duties, and behavioural dimensionsDrawbacksRestrictions on the range of possible rater responsesDifferences in the interpretations of the meanings of scale items and scale ranges by ratersPoorly designed scales that encourage rater errorsRating form deficiencies limit effectiveness of the appraisal

Sample Performance Appraisal Form Fig. 9-7

Terms Defining Standards at One Company Fig. 9-8

Behavioural Rating ScalesBehavioural Rating ApproachAssesses employees behaviours instead of other characteristicsConsists of a series of scales created by:Identifying important job dimensionsCreating statements describing a range of desired and undesirable behaviours (anchors)Behaviourally anchored rating scales (BARS)Describes behaviours, differentiating between effective and ineffective performers that can be observed, and anchors them at points on a scale.Employees behaviour is compared against examples and rated accordingly

Behaviourally-Anchored Rating Scale for Customer Service Skills Fig. 9-9

Comparative MethodsRankingA listing of all employees from highest to lowest in performance.DrawbacksDoes not show size of differences in performance between employees.Implies that lowest-ranked employees are unsatisfactory performers.Becomes an unwieldy process if the group to be ranked is large.

Comparative Methods (contd)Forced DistributionPerformance appraisal method in which ratings of employees are distributed along a bell-shaped curve.DrawbacksAssumes a normal distribution of performance.Resistance by managers to placing individuals in the lowest or highest groups.Providing explanation for placement in a higher or lower grouping can be difficult.Is not readily applicable to small groups of employees.

Forced Distribution on a Bell-Shaped Curve Fig. 9-10

Narrative MethodsCritical IncidentManager keeps a written record of highly favourable and unfavourable employee actions.DrawbacksVariations in how managers define a critical incidentEssayManager writes a short essay describing an employees performance.DrawbackDepends on the managers writing skills and their ability to express themselves.

Results Based MethodsResults Based Performance Appraisal System focuses on concrete standards of performance that employees are expected to achieve.Management by ObjectivesSpecifies the performance goals that an individual and manager mutually identify.Balanced ScorecardLinks the strategy, resource allocation and performance appraisal systems in an organization.Expands on MBO by considering multiple segments of the organization from which to develop employee objectives.Four key perspectives measure: financial, internal business process, customer and learning and growth.

The Management by Objectives (MBO) ProcessJob Review and AgreementDevelopment of Performance StandardsObjective SettingContinuing Performance Discussions

The Balance Scorecard Fig. 9-11.

Combination of MethodsSo whats the best method? No single appraisal method is best for all situations.Using a combination of methods may be sensible in certain circumstances.Using combinations may offset various advantages and disadvantages of individual methods.When managers can articulate what they want a performance appraisal system to accomplish, they can choose and mix methods for desired results.Different categories of employees might require different combinations of methods.

Training of Managers and EmployeesAppraisal Training Topics:Appraisal process and timingPerformance criteria and job standards that should be consideredHow to communicate positive and negative feedbackWhen and how to discuss training and development goalsConducting and discussing the compensation reviewHow to avoid common rating errors

Common Rater Errors Fig. 9-12

Appraisal FeedbackAppraisal Feedback Interview:Communicate results to an employee after an appraisal interviewProvide employee with a clear understanding of how they stand in the eyes of immediate superiors and the organizationClear up any misunderstandings on both sidesFocus on coaching and developmentAvoid Here is how you rate and why message

Appraisal Interview Hints Fig. 9-13DO Prepare in advanceFocus on performance and developmentBe specific about reasons for ratingsDecide on specific steps to be taken for improvementConsider supervisors role in employees performanceReinforce desired behavioursFocus on future performanceDONTDo all the talkingLecture the employeeMix performance appraisal and salary or promotion issuesConcentrate only on the negativeBe overly critical or harp on a failingFeel it is necessary that both parties agree in all areasCompare the employee with others

Appraisal FeedbackAction Based on EvaluationDataEvaluation of DataFeedback as a System

Appraisal FeedbackEffective Performance Management Systems Consistent with the strategic mission of the organizationBeneficial as development toolUseful as an administrative toolLegal and job-relatedViewed as generally fair by employeesEffective in documenting employee performance