Performance Management and Appraisal
After you have read this chapter, you should be able to: • Identify the components of performance management
• Distinguish between performance management and performance appraisal.
• Explain the differences between administrative and developmental uses of performance appraisal.
• Describe the advantages and disadvantages of multisource (360-degree) appraisals.
• Discuss the importance of training managers and employees about performance appraisal, and give examples of rater errors.
• Identify several concerns about appraisal feedback and ways to make it more effective.
5315X_10_ch10_p318-356.indd 3185315X_10_ch10_p318-356.indd 318 26/06/10 5:19 PM26/06/10 5:19 PM
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Performance Management Does Not Focus Enough on Ethics
(Ryan McVay/Photodisc/Getty Images)
A recent study determined that many organizations do not focus enough on ethics when managing perfor- mance. For instance, only 43% of HR practitio- ners indicated that their employers included measures of ethics on performance evalua- tions. Making matters worse, professionals claimed that they were expected to take an active role in managing ethics, but many felt disconnected from the process. Further, many companies do not have a comprehensive program that raises awareness of ethics, and some companies have developed no ethics policies whatsoever. Such findings are trou- bling considering that problems are common.
Organizations need to develop standards governing how employees are expected to behave.1
Given these realities, HR professionals should be involved in the devel- opment of those standards. Performance management practices such as evaluation forms should include measures that identify positive behav- iors. HR professionals also need to create comprehensive programs that increase the motivation to take appropriate actions. Developing codes of conduct that outline company guidelines, offering training that teaches employees important workplace values, and increasing communication of important job standards can all work together to promote an ethical culture. In additon, reinforcement programs should be developed so that positive behaviors are rewarded and undesirable behaviors are punished. HR managers need to be in the “driver’s seat” when it comes to encourag- ing ethics.
5315X_10_ch10_p318-356.indd 3195315X_10_ch10_p318-356.indd 319 26/06/10 5:19 PM26/06/10 5:19 PM
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
SECTION 3 Training and Development320
Employers want employees who perform their jobs well and contribute to the mission and objectives of the organization, but managers have to provide the proper context for such high productivity. Performance management is the primary tool used to identify, communicate, measure, and reward employees so that they can make these contributions, and the process is one that supports a company’s strategic direction. Properly designing the performance manage- ment system is therefore a key method for increasing overall organizational performance.
THE NATURE OF PERFORMANCE MANAGEMENT The performance management process starts by identifying the strategic goals an organization needs to accomplish to remain competitive and profitable. After these ideas are crystallized, managers identify how they and their employees can help support organizational objectives by successfully com- pleting work. In a sense, the sum of the work completed in all jobs should advance the strategic plan. By adopting a “big-picture” quantitative approach, managers can successfully combine individual efforts in a manner that pro- vides practical measures of organizational effectiveness. Performance manage- ment can also provide a unified approach to dealing with individual career development.2
As Figure 10-1 shows, performance management links organizational strategy to ultimate results. Performance management enables a company to convert overall strategy into results that support the mission and objectives. However, just having a strategic plan does not guarantee that results will be achieved and objectives will be satisfied. When organizational strategies have been defined, they must be translated into department- or unit-level actions. Then these actions must be assigned to individuals who are held accountable for efficient and effective goal accomplishment.3
Often performance management is confused with one of its key compo- nents—performance appraisal. Performance management is a series of activi- ties designed to ensure that the organization gets the performance it needs from its employees. Performance appraisal is the process of determining how well employees do their jobs relative to a standard and communicating that information to them.
An effective performance management system should do the following:
• Make clear what the organization expects • Provide performance information to employees • Identify areas of success and needed development • Document performance for personnel records
Performance management starts with the development and understand- ing of organizational strategy, and then dovetails into a series of steps that involves identifying performance expectations, providing performance direc- tion, encouraging employee participation, assessing job performance, and conducting the performance appraisal. As Figure 10-2 suggests, successful per- formance management is a circular process that requires a system of admin- istrative tools that effectively structures the dialogue between managers and their employees, and the motivation to utilize the system in a productive way.4
A successful performance management system allows managers to better prepare employees to tackle their work responsibilities by focusing on
Performance management Series of activities designed to ensure that the organization gets the performance it needs from its employees.
Performance appraisal Process of determining how well employees do their jobs relative to a standard and communicating that information to them.
5315X_10_ch10_p318-356.indd 3205315X_10_ch10_p318-356.indd 320 26/06/10 5:19 PM26/06/10 5:19 PM
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
CHAPTER 10 Performance Management and Appraisal 321
these activities. For example, the software company CA recently revised its performance review procedures so that the process would better facilitate individual motivation and growth. Employees are rated on standardized job criteria, complete self-evaluations, and are given completed evaluation forms several days ahead of appraisal meetings to consider ratings. “Performance agreements” explicitly connect individual actions to corporate goals, and the whole process of performance management is strengthened through positive communication.5
Even well-intentioned employees do not always know what is expected or how to improve their performance, which also makes performance manage- ment necessary. Additionally, dismissal of an employee may become necessary, and without evidence that the employee has been advised of performance issues, legal problems may result.
F I G U R E 1 0 – 1 Performance Management Linkage
Organizational Results Goals met or not met Employee satisfaction or dissatisfaction strong or weak Coordination between performance and pay
Performance Management Outcomes Pay increases Incentive rewards Promotions/advancement Training and development Career planning Disciplinary actions
Performance Management Identify expected performance levels Encourage high levels of performance Measure individual performance; then evaluate Provide feedback on individual performance Provide assistance as needed Reward or discipline depending on performance
5315X_10_ch10_p318-356.indd 3215315X_10_ch10_p318-356.indd 321 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development322
Global Cultural Differences in Performance Management Performance management systems and appraisals are very common in the United States and some other countries. However, challenges can be experi- enced when performance management approaches are used in other countries where multinational organizations have operations, or when they are used with employees who have diverse cultural backgrounds with characteristics very different from those of an American background.
In some countries and cultures, it is uncommon for managers to rate employ- ees or to give direct feedback, particularly if some points are negative. For instance, in several countries, including China and Japan, there is a high respect for authority and age. Consequently, expecting younger subordinates to engage in joint discussions with their managers through a performance appraisal pro- cess is uncommon. Use of such programs as multisource/360-degree feedback (discussed later in this chapter) would be culturally inappropriate.
In various other cultures, employees may view criticism from superiors as personally devastating rather than as useful feedback that highlights individual training and development needs. Therefore, many managers do not provide feedback, nor do employees expect it.
Even in the physical settings for appraisal discussions, “cultural customs” associated with formal meetings may need to be observed. For example, in some Eastern European countries, it is common to have coffee and pastries
F I G U R E 1 0 – 2 Components of Performance Management
Developing and Understanding Corporate Strategy
Providing Performance Direction
Encouraging Employee Participation
Conducting Performance Appraisal
Identifying Performance Expectations
Assessing Job Performance
G L O B A L
5315X_10_ch10_p318-356.indd 3225315X_10_ch10_p318-356.indd 322 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 323
or an alcoholic drink before beginning any formal discussion. These examples illustrate that performance management processes may need to be adapted or even dropped in certain global settings.
Performance-Focused Organizational Cultures Organizational cultures vary on many dimensions, and one of these differences involves the degree to which performance is emphasized. Some corporate cultures are based on an entitlement approach, meaning that adequate perfor- mance and stability dominate the organization. Employee rewards vary little from person to person and are not based on individual performance differ- ences. As a result, performance appraisal activities are seen as having few ties to performance and as being primarily a “bureaucratic exercise.”
At the other end of the spectrum is a performance-driven organizational culture focused on results and contributions. In this context, performance appraisals link results to employee compensation and development. This approach is particularly important when evaluating CEO performance because companies want to hold top leaders accountable for corporate outcomes and motivate them to improve operational and financial results. CEO performance evaluations should therefore provide structure to the performance appraisal process (i.e., descriptions and dates), establish CEO roles and responsibilities, and identify important performance objectives.6
Studies have shown the benefits of developing a performance-focused cul- ture throughout the organization. One longitudinal study of 207 companies in 22 industries found that firms with performance-focused cultures had signifi- cantly higher growth in company revenue, employment, net income, and stock prices than did companies with different cultures. Another study also found that firms with strong performance cultures had dramatically better results.7 Figure 10-3 shows the components of a successful performance-focused culture.
However, a pay-for-performance approach can present several challenges to organizations, particularly in educational institutions. The teacher pay-for-per- formance plan recently implemented in the Houston school district has increased perceptions that the system creates inequity, with some teachers getting bonuses and others receiving no extra compensation.8 Denver Public Schools imple- mented a similar plan several years ago that ties bonuses to criteria such as stu- dents’ performance on tests/achievement, teaching evaluations, and professional growth/education, but the plan is being met with harsh criticism because it alleg- edly favors less senior teachers who accept challenging teaching assignments.9
Despite these setbacks, it appears that where possible, a performance-based- pay culture is desirable. One study found that 33% of managers and 43% of nonmanagers felt their company was not doing enough about poor performers. The nonmanagers felt that failure to deal with poor performance was unfair to those who worked hard.10 In one financial services company that did not give poor performance reviews, a new CEO instituted a performance system that gave
star performers raises as high as 20% and poor performers nothing. The tougher performance system encouraged poor performers to leave the company voluntarily, increased the performance of many other employees, and enhanced company profitability.11 Additionally, performance-based pay can strengthen the link between employee and organizational goals, increase individual motivation, and augment worker retention, especially when an organization develops sound compensation, performance, and strategic plans.12
L O G G I N G O NL
Free Management Library This website is an integrated online library with resources for profit and nonprofit entities regarding performance management. Visit the site at www.managementhelp.org.
5315X_10_ch10_p318-356.indd 3235315X_10_ch10_p318-356.indd 323 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development324
IDENTIFYING AND MEASURING EMPLOYEE PERFORMANCE
Performance criteria vary from job to job, but the most common employee performance measures associated with many jobs include the following:
• Quantity of output • Quality of output • Timeliness of output • Presence/attendance on the job • Efficiency of work completed • Effectiveness of work completed
Specific job duties identify the most important elements in a given job. For example, a salesperson must know a company’s products and services, identify the needs of customers, and actively sell in order to be successful at work. Since such actions are so important, duties are identified from job descriptions that contain the most important parts of individual jobs. They help to define what the organization pays employees to do. Therefore, the performance of individu- als on those important job duties should be measured and compared against appropriate standards, and the results should be communicated to the employee.
To complicate matters, multiple job duties are the rule rather than the exception in most jobs. An individual might demonstrate better performance
Job duties Important elements in a given job.
F I G U R E 1 0 – 3 Components of a Performance-Focused Culture
Clear Expectations, Goals, and Deadlines
Detailed Appraisal of Employee Performance
Clear Feedback on Performance
Manager and Employee Training as Needed
5315X_10_ch10_p318-356.indd 3245315X_10_ch10_p318-356.indd 324 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 325
on some duties than others, and some duties might be more important than others to the organization. For example, professors are broadly required to conduct research, teach classes, and provide service to important university stakeholders. Some professors focus heavily on one area of work over the oth- ers, which can cause performance management issues when their universities value all the different parts of the job.
Weights can be used to show the relative importance of several duties in one job. For example, in a management job at a company that wants to improve customer service feedback, control operational costs, and encourage quality improvements, weights might be assigned as follows:
Weighting of Management Duties at Sample Firm Weight
Improve customer feedback 50%
Control operational costs 30%
Encourage quality improvements 20%
Total Management Performance 100%
Types of Performance Information Managers can use three different types of information about employee perfor- mance, as Figure 10-4 shows. Trait-based information identifies a character trait of the employee—such as attitude, initiative, or creativity—and may or may not be job related. For example, one study concluded that conscientious- ness was an important determinant of job performance.13 Because traits tend to be ambiguous, and favoritism of raters can affect how traits are viewed, court decisions generally have held that trait-based performance appraisals are too vague to use when making performance-based HR decisions such as promotions or terminations. Also, fixating too much on characteristics such as “potential” can lead managers to ignore the important behaviors and out- comes that help organizations reach their objectives.14
F I G U R E 1 0 – 4 Types of Performance Information
Sales volume Cost reduction Units produced Improved quality
Less Useful More Useful
Customer satisfaction Verbal persuasion Timeliness of response Citizenship/ethics
Attitude Teamwork Initiative Effective communication Creativity Values Dispositions
5315X_10_ch10_p318-356.indd 3255315X_10_ch10_p318-356.indd 325 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development326
Behavior-based information focuses on specific behaviors that lead to job success. For a waitperson, the behavior “menu up-selling” can be observed and used as performance information. Additionally, a human resource director who institutes an “open-door policy” behaves in a manner that likely increases communication with employees. Behavioral information clearly specifies the behaviors management wants to see. A potential problem arises when any of several behaviors can lead to successful performance, and employees rely on these different behaviors to complete work. For example, salespeople might use different verbal persuasion strategies with customers because no one approach can be utilized successfully by all individuals.
Results-based information considers employee accomplishments. For jobs in which measurement is easy and obvious, a results-based approach works well. For instance, a professor might receive extra compensation for securing grants or publishing papers in academic journals, or a salesperson in a retail outlet might receive extra commission pay based on how many products are sold. However, in this approach, that which is measured tends to be empha- sized, which may leave out equally important but difficult-to-measure parts of work. For example, a car salesperson who gets paid only for sales may be unwilling to do paperwork and other work not directly related to selling cars. Further, ethical or even legal issues may arise when only results are empha- sized, and how the results were achieved is not considered, so care should be taken to balance the different types of information. For a study on behavior- based and results-based information, see the HR Perspective.
A study of human resource professionals con- ducted by Human Resource Executive determined that a majority of organizations focused on a bal- ance of behavioral and results criteria when man- aging individual performance.15 A smaller number (34%) focused on objectives and results, and even fewer professionals (11%) stated that their com- panies relied just on behaviors. The percentage breakdowns were similar for assessments of top managers, and a majority of professionals reported that corporate performance objectives originated from the top organizational ranks. According to Scott Cohen, a leader at Watson Wyatt Worldwide in Boston, even though results are extremely important, it is important for a business to focus on the kinds of actions and employee behaviors that ensure sustained viability from a long-range perspective, with a particular eye toward the
promotion of behaviors that are considered to be ethical in nature.
Companies should therefore consider developing a performance management process that takes into consideration the many different employee behaviors that bring about high levels of organizational per- formance. For instance, recognizing members of the organization for ethical conduct (i.e., helping others, doing the right thing, complying with the company’s codes of conduct), particularly when such conduct results in positive outcomes for the company, would serve to reinforce the notion that both behaviors and results are important employee considerations. Many of these behaviors can be emphasized in the com- pany’s value statements so that employees realize the importance of positive action on the job, making them more likely to function in a manner consistent with the company’s expectations.
Behaviors or Results . . . Why Not Both?
5315X_10_ch10_p318-356.indd 3265315X_10_ch10_p318-356.indd 326 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 327
Performance measures can be viewed as objective or subjective. The objec- tive measures can be observed—for example, the number of cars sold or the number of invoices processed can be counted. Subjective measures require judgment on the part of the evaluator and are more difficult to determine. One example of a subjective measure is a supervisor’s ratings of an employee’s “attitude,” which cannot be seen directly. Consequently, both objective and subjective measures should be used carefully.
Relevance of Performance Criteria Measuring performance requires focusing on the most important aspects of employees’ jobs. For example, measuring the initiative of customer service rep- resentatives in an insurance claims center may be less relevant than measuring the number of calls the representatives handle properly. Likewise, evaluating how well a hotel manager is liked by peers is likely to be less relevant than evaluating the policies created by the manager to increase hotel profitability. These examples stress that the most important job criteria or duties should be identified in job descriptions and then conveyed to employees.
Performance measures that leave out some important job duties are con- sidered deficient. For example, measurement of an employment interviewer’s performance is likely to be deficient if it evaluates only the number of appli- cants hired and not the quality of those hired or how long those hired stay at the company. On the other hand, including irrelevant criteria in performance measures contaminates the measures. For example, appearance might be a contaminating criterion in measuring the performance of a telemarketing sales representative whom customers never see. Managers need to guard against using deficient or contaminated performance measures.
Overemphasis on one or two criteria also can lead to problems. For example, overstressing the number of traffic tickets written by a police officer or the revenue generated by a sales representative may lead to the employee ignoring other important performance areas. In addition, cheating can become an issue when goals are set to support such criteria because individuals might act unethically to reach objectives, especially when the objectives are linked to specific rewards.16 The scandals involving Enron, Qwest, and Tyco and the financial crisis in the first decade of the twenty-first century clearly illustrate this concern.
Performance Standards Performance standards define the expected levels of employee performance. Sometimes they are labeled benchmarks, goals, or targets—depending on the approach taken. Realistic, measurable, clearly understood performance standards benefit both organizations and employees. In a sense, performance standards define what satisfactory job performance is, so performance stan- dards should be established before work is performed. Well-defined standards ensure that everyone involved knows the levels of accomplishment expected. For example, a business college might require each of its faculty members to publish at least one academic article a year to be considered in good standing as an employee.
Both numerical and nonnumerical standards can be established. Sales quotas and production output standards are familiar numerical performance standards. A standard of performance can also be based on nonnumerical cri- teria. Assessing whether someone has met a performance standard, especially a
Performance standards Defi ne the expected levels of employee performance.
5315X_10_ch10_p318-356.indd 3275315X_10_ch10_p318-356.indd 327 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development328
nonnumerical one, can be difficult, but usually can be done. For example, how would you correctly measure someone’s ability to speak a foreign lan- guage before the person was sent overseas? Figure 10-5 lists a number of performance standards that facilitate such measurement and make assessing a person’s performance level, even nonnumerical performance, much more accurate.17
Performance Metrics in Service Businesses Measuring performance in service businesses is difficult, but the process is important. Measuring service performance is difficult because services are very individualized for customers, there is typically great variation in the services that can be offered, and service quality is somewhat subjective. Yet the perfor- mance of people in service jobs is commonly evaluated along with the basic productivity measure used in the industry. Some of the most useful sources of performance differences among managers in service businesses are:
• Regional differences in labor costs • Service agreement differences • Equipment/infrastructure differences • Work volume
On an individual employee level, common measures are: cost per employee, incidents per employee per day, number of calls per product, cost per call, sources of demand for services, and service calls per day.
Once managers have determined appropriate measures of the service variance in their company, they can deal with waste and service delivery. Performance that is measured can be managed.18
M E A S U R E
F I G U R E 1 0 – 5 ACTFL Performance Standards for Speaking Proficiency
DEMONSTRATED ABILITYPERFORMANCE LEVEL
Participates fully in conversations relating to needs and professional interests Discusses topics both concretely and abstractly Can deal effectively with unfamiliar speaking situations
Can participate in simple conversations on predictable topics Can satisfy simple needs to survive in the language’s culture Can ask and answer questions
Can respond to simple questions Can convey minimal meaning by using isolated words or memorized phrases Can satisfy a limited number of immediate needs
5315X_10_ch10_p318-356.indd 3285315X_10_ch10_p318-356.indd 328 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 329
PERFORMANCE APPRAISALS Performance appraisals are used to assess an employee’s performance and provide a platform for feedback about past, current, and future performance expectations. Performance appraisal is variously called employee rating, employee evaluation, performance review, performance evaluation, or results appraisal.
Performance appraisals are widely used for administering wages and salaries, giving performance feedback, and identifying individual employee strengths and weaknesses. Most U.S. employers use performance appraisals for office, professional, technical, supervisory, middle management, and non- union production workers, and there are many reasons for this widespread use. According to a recent report issued by Bersin & Associates, performance management, which comprised self, manager, and multisource reviews and goal setting, benefits an organization with increased operational competence, legal compliance, enhanced corporate growth, and heightened transforma- tional processes and performance.19
Indeed, performance appraisals can provide answers to a wide array of work-related questions, and by advancing a road map for success, poor per- formance can be improved. Even after a positive appraisal, employees benefit if appraisals help them to determine how to improve job performance. In addition, even though an employer may not need a reason to terminate an employee, as a practical matter, appraisals can provide justification for such actions should that become necessary.
However, appraisal programs must be carefully developed to fully capital- ize on the talents and efforts of employees. For instance, research has indicated that a gap often exists between actual job performance and the ratings of the work.20 Poorly done performance appraisals lead to disappointing results for all concerned, and there is reason to believe that evaluations can cause bad feelings and damaged relationships if not managed well.21 Some believe that performance evaluations are an unnecessary part of work because of vague rating terms, self-interest, and/or deception on the part of rating managers.22
Managers need to display courage and honesty when they evaluate the performance of their workers.23 One study concluded that some of the top reasons for ineffective evaluations were: “unclear performance criteria/bad rating instrument” (78%), “poor working relationship with your boss” (72%), “lack of ongoing performance feedback” (67%), “superior lacks information on actual performance” (63%), and “perceived political reviews” (59%).24 Indeed, performance reviews can be politically oriented and highly subjective in nature, which can adversely impact the relationships between managers and their employees.25 However, having no formal performance appraisal can weaken discipline and harm an employee’s ability to improve.
Uses of Performance Appraisals Organizations generally use performance appraisals in two potentially conflict- ing ways. One use is to provide a measure of performance for consideration in making pay or other administrative decisions about employees. This adminis- trative role often creates stress for managers doing the appraisals and employees as well. The other use focuses on the development of individuals. In this role, the manager acts more as a counselor and coach than as a judge, a perspective that can change the overall tone of the appraisal process. The developmental
5315X_10_ch10_p318-356.indd 3295315X_10_ch10_p318-356.indd 329 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development330
performance appraisal emphasizes identifying current training and develop- ment needs, as well as planning employees’ future opportunities and career directions. Figure 10-6 shows both uses for performance appraisals.
Administrative Uses of Appraisals Three administrative uses of appraisal impact managers and employees the most: (1) determining pay adjustments; (2) making job placement decisions on promotions, transfers, and demotions; and (3) choosing employee disciplinary actions up to and including termina- tion of employment.
A performance appraisal system is often the link between additional pay and rewards that employees receive and their job performance. Performance- based compensation affirms the idea that pay raises are given for performance accomplishments rather than based on length of service (seniority) or granted automatically to all employees at the same percentage levels. In pay-for- performance compensation systems, historically supervisors and managers have evaluated the performance of individual employees and also made compensation recommendations for the same employees. If any part of the appraisal process fails, better-performing employees may not receive larger pay increases, and the result is perceived inequity in compensation.
Many U.S. workers say that they see little connection between their per- formance and the size of their pay increases due to flaws in performance appraisals.26 However, the use of such appraisals to determine pay is common. Consequently, many people argue that performance appraisals and pay discus- sions should be done separately. Two major realities support this view. One is that employees often focus more on the pay received than on the developmen- tal appraisal feedback. The other is that managers sometimes manipulate rat- ings to justify the pay they wish to give individuals or the amount the market or budget situation suggests should be given.27 As a result, many employees view the appraisal process as a “game,” because compensation increases have been predetermined before the appraisal.
To address these issues, numerous organizations have managers first con- duct performance appraisals and discuss the results with employees, and then several weeks later hold a shorter meeting to discuss pay issues. For example,
F I G U R E 1 0 – 6 Uses for Performance Appraisals
Dismissal from work Disciplinary procedures Compensation adjustments Promotions/demotions Transfers
l f ADMINISTRATIVE ACTIONS DEVELOPMENTAL ACTIONS
Career progression Training opportunities Coaching Mentoring Identifying strengths/weaknesses
USES FOR PERFORMANCE APPRAISALS
5315X_10_ch10_p318-356.indd 3305315X_10_ch10_p318-356.indd 330 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 331
Belimo Aircontrols developed an approach like this by creating different per- formance appraisal and compensation forms that are considered separately at different times.28 By adopting such an approach, the results of the performance appraisal can be considered before the amount of the pay adjustment is deter- mined. Also, the performance appraisal discussions between managers and employees can focus on the developmental uses of appraisals.
Employers are interested in the administrative uses of performance appraisals as well, such as decisions about promotions, terminations, layoffs, and transfer assignments. Promotions and demotions based on performance must be docu- mented through performance appraisals; otherwise, legal problems can result.
To improve the administrative processes of performance appraisals, many employers have implemented software so that managers can prepare apprais- als electronically. As the HR Online indicates, many firms are using such HR technology not only to administer appraisals but also to facilitate employee development and talent management in a fully integrated capacity.29 For instance, Porsche Cars North America utilizes a performance review system called Vurv Express Performance that facilitates employee participation in performance management.30 The Zoological Society of San Diego also uses a Web-based performance management program that enables employees to better understand the linkages between organizational and employee goals.31 Finally, Belkin International Inc., an electronic accessories provider located in Los Angeles, uses software developed by SuccessFactors to reduce administra- tive inefficiencies and enhance the strategic flavor of evaluations.32
Proper performance management requires consider- able time, resources, and paperwork, so companies are using more technology to become more effi cient in the management of human resources. A performance appraisal system that uses technology to automate pro- cesses can provide many advantages to organizations, so human resource professionals should consider uti- lizing electronic methods to facilitate the manner in which appraisal procedures are administered and managed.
Automated systems offered by vendors provide common formats, sample text, integration with com- pensation, and development and succession planning. These systems also can provide information on individ- uals, units, and the performance of entire companies. All of these features serve to enhance the effectiveness of a company’s performance management processes.
In addition, automated systems can help managers identify which of a company’s thousands of employees
are its top performers, or provide a breakdown of work- ers with certain competencies and the best perform- ers among them. The systems may use “dashboards,” which are advanced technologies that provide indi- cators of the current performance levels of the orga- nization. Aggregating performance information can provide “big picture,” overarching perspectives on performance management that are diffi cult for human resource professionals to get otherwise. Finally, online performance assessment can minimize face-to-face meetings and reduce time, perhaps allowing for more frequent reviews.
One survey found that about 28% of organiza- tions surveyed had automated their performance sys- tems. Those that had done so confi rmed that ease of use, time savings, and ability to track performance had improved. Other companies should therefore fi nd ways to better utilize technology to enhance perfor- mance management.33
Using Technology to Enhance Performance Appraisals
5315X_10_ch10_p318-356.indd 3315315X_10_ch10_p318-356.indd 331 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development332
Developmental Uses of Appraisals For employees, a performance appraisal can be a primary source of information and feedback that builds their future development in an organization. By identifying employee strengths, weaknesses, potentials, and training needs through performance appraisal feedback, supervisors can inform employees about their progress, discuss areas in which additional training may be beneficial, and outline future developmental plans.
The manager’s role in performance appraisal meetings parallels that of a coach, discussing good performance, explaining what improvements are needed, and showing employees how to improve. It is clear that employees do not always know where and how to improve, and managers should not expect improvement if they are unwilling to provide developmental feedback. Many firms, such as the diesel engine parts distributor Cummins Mid-South LLC, are combining performance and learning management processes with techno- logical support programs that prompt more effective evaluations, increased employee development, and reduced turnover.34
Positive reinforcement for desired behaviors contributes to both individual and organizational growth. The purpose of the feedback is both to reinforce satisfactory employee performance and to address performance deficiencies. The developmental function of performance appraisal can also identify areas in which the employee might wish to grow. For example, in a performance appraisal interview targeted exclusively to development, an employee found out that the only factor keeping her from being considered for a management job in her firm was the lack of a working knowledge of cost accounting. Her supervisor suggested that she consider taking some night courses at the local college.
The use of teams provides a different set of circumstances for develop- mental appraisals. The manager may not see all of an employee’s work, but the employee’s team members do. Teams can provide important feedback. However, it is still an open question as to whether teams can handle adminis- trative appraisals. When teams are allowed to design appraisal systems, they tend to “get rid of judgment” and avoid differential rewards. Thus, group appraisal may be best suited to developmental, not administrative, purposes.
Decisions about the Performance Appraisal Process A number of decisions must be made when designing performance appraisal systems. Some important ones are identifying the appraisal responsibilities of the HR unit and of the operating managers, the type of appraisal system to use, the timing of appraisals, and who conducts appraisals.
Appraisal Responsibilities The appraisal process can benefit both the organization and the employees, if done properly. As Figure 10-7 shows, the HR unit typically designs a performance appraisal system. The operating man- agers then appraise employees using the appraisal system. During development of the formal appraisal system, managers usually offer input as to how the final system will work.
It is important for managers to understand that appraisals are their respon- sibility. Through the appraisal process, effective employee performance can be developed to be even better, and poor employee performance can be improved or poor performers can be removed from the organization. Performance
5315X_10_ch10_p318-356.indd 3325315X_10_ch10_p318-356.indd 332 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 333
appraisal must not be simply an HR requirement but also a management process, because guiding employees’ performance is among the most impor- tant responsibilities of managers.
Informal versus Systematic Appraisal Processes Performance apprais- als can occur in two ways: informally and/or systematically. A supervisor conducts an informal appraisal whenever necessary. The day-to-day working relationship between a manager and an employee offers an opportunity for the employee’s performance to be evaluated. A manager communicates this evaluation through conversation on the job, over coffee, or by on-the-spot discussion of a specific occurrence. For instance, a restaurant manager might discuss a waiter’s table service while they both eat lunch in the break room. Although such informal feedback is useful and necessary, it should not take the place of formal appraisal.
Frequent informal feedback to employees can prevent “surprises” during a formal performance review. However, informal appraisal can become too informal. For example, a senior executive at a large firm so dreaded face- to-face evaluations that he delivered one manager’s review while both sat in adjoining stalls in the men’s room.
A systematic appraisal is used when the contact between a manager and employee is formal, and a system is in place to report managerial impressions and observations on employee performance. This approach to appraisals is quite common, and one survey found that almost 90% of employers have a formal performance management system or process.35 Systematic apprais- als feature a regular time interval, which distinguishes them from informal appraisals. Both employees and managers know that performance will be reviewed on a regular basis, and they can plan for performance discussions. For example, a front desk supervisor in a large hotel chain may wish to pro- vide more formalized feedback to a bell captain, so a systematic appraisal session will be scheduled so that both individuals can prepare ahead of time to discuss performance issues.
Timing of Appraisals Most companies require managers to conduct appraisals once or twice a year, most often annually. Employees commonly receive an appraisal 60 to 90 days after hiring, again at 6 months, and annu- ally thereafter. Probationary or introductory employees, who are new and in
F I G U R E 1 0 – 7 Typical Division of HR Responsibilities: Performance Appraisal
HR UNIT MANAGERS
Designs and maintains appraisal system Trains raters Tracks timely receipt of appraisals Reviews completed appraisals for consistency
Typically rate performance of employees Prepare formal appraisal documents Review appraisals with employees Identify development areas
5315X_10_ch10_p318-356.indd 3335315X_10_ch10_p318-356.indd 333 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development334
a trial period, should be informally evaluated often—perhaps weekly for the first month, and monthly thereafter until the end of the introductory period. After that, annual reviews are typical. For employees in high demand, some employers use accelerated appraisals—every 6 months instead of every year. This is done to retain those employees so that more feedback can be given and pay raises may occur more often. In some organizations, meeting more frequently with employees can enhance individual performance. For instance, Whirlpool Corp. requires managers to meet with employees on a quarterly basis, but because some want even more feedback, some managers schedule meetings every few weeks.36
One way to separate the administrative and developmental uses of apprais- als is to implement the following appraisal schedule: (1) First hold a perfor- mance review and discussion; (2) later hold a separate training, development, and objective-setting session; and (3) within two weeks, have a compensation adjustment discussion. Having three separate discussions provides both the employee and the manager with opportunities to focus on the administrative, developmental, and compensation issues. Using this framework is generally better than addressing all three areas in one discussion of an hour or less, once a year.
Legal Concerns and Performance Appraisals Because appraisals are supposed to measure how well employees are doing
their jobs, it may seem unnecessary to emphasize that perfor- mance appraisals must be job related. However, it is impor- tant for evaluations to adequately reflect the nature of work, and employees should have fair and nondiscriminatory performance appraisals. Companies need to have appraisal systems that satisfy the courts, as well as performance man- agement needs.37 The HR On-the-Job shows the elements of a legal performance appraisal system.
The elements of a performance appraisal system that can survive court tests can be determined from existing case law. It is generally agreed that a legally defensible performance appraisal should include the following:
• Performance appraisal criteria based on job analysis
• Absence of disparate impact • Formal evaluation criteria that limit managerial
discretion • A rating instrument linked to job duties and
• Documentation of the appraisal activities • Personal knowledge of and contact with each
appraised individual • Training of supervisors in conducting appraisals • A review process that prevents one manager,
acting alone, from controlling an employee’s career
• Counseling to help poor performers improve
Of course, having all these components is no guarantee against lawsuits. However, including them does improve the chance of winning any lawsuits that might be fi led.
Elements of a Legal Performance Appraisal System
L O G G I N G O NL
LegalWorkplace.Com For valuable legal management information on performance issues and other HR topics, visit this resource center website at www.ahipubs.com.
5315X_10_ch10_p318-356.indd 3345315X_10_ch10_p318-356.indd 334 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 335
WHO CONDUCTS APPRAISALS? Performance appraisals can be conducted by anyone familiar with the perfor- mance of individual employees. Possible rating situations include the following:
• Supervisors rating their employees • Employees rating their superiors • Team members rating each other • Employees rating themselves • Outside sources rating employees • A variety of parties providing multisource, or 360-degree, feedback
Supervisory Rating of Subordinates The most widely used means of rating employees is based on the assumption that the immediate supervisor is the person most qualified to evaluate an employee’s performance realistically and fairly. To help themselves provide accurate evaluations, some supervisors keep performance logs noting their employees’ accomplishments so that they can reference these notes when rating performance. For instance, a sales manager might periodically observe a salesperson’s interactions with clients so that constructive performance feedback can be provided at a later date. Figure 10-8 shows the traditional
F I G U R E 1 0 – 8 Traditional Performance Appraisal Process
Employee receives feedback, addresses issues, sets goals
HR department designs system and trains
Manager reviews ratings, coaches supervisors
Traditional Performance Appraisal Process
5315X_10_ch10_p318-356.indd 3355315X_10_ch10_p318-356.indd 335 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development336
review process by which supervisors conduct performance appraisals on employees.
Employee Rating of Managers A number of organizations today ask employees to rate the performance of their immediate managers. A prime example of this type of rating takes place in col- leges and universities, where students evaluate the teaching effectiveness of professors in the classroom. Another example is HCL Technologies in India, which requires employees to rate their bosses as part of a multisource review process that posts evaluations on the intranet.38 These performance appraisal ratings are generally used for management development purposes.
Having employees rate managers provides three primary advantages. First, in critical manager-employee relationships, employee ratings can be quite use- ful for identifying competent managers. The rating of leaders by combat sol- diers is one example of such a use. Second, this type of rating program can help make a manager more responsive to employees. This advantage can quickly become a disadvantage if the manager focuses on being “nice” rather than on managing; people who are nice but have no other qualifications may not be good managers in many situations. Finally, employee appraisals can contribute to career development efforts for managers by identifying areas for growth.
A major disadvantage of having employees rate managers is the negative reaction many superiors have to being evaluated by employees. Also, the fear of reprisals may be too great for employees to give realistic ratings. This may prompt workers to rate their managers only on the way the managers treat them, not on critical job requirements. The problems associated with this appraisal approach limit its usefulness to certain situations, including manage- rial development and improvement efforts.39
Team/Peer Rating Having employees and team members rate each other is another type of appraisal with potential both to help and to hurt. Peer and team ratings are especially useful when supervisors do not have the opportunity to observe each employee’s performance but other work group members do. For instance, some of the advanced training programs in the U.S. military use peer ratings to provide candidates more extensive feedback about their leadership qualities and accomplishments. Peer evaluations are also common in collegiate schools of business where professors commonly require students to conduct peer evaluations after the completion of group-based projects. One challenge of this approach is how to obtain ratings with virtual or global teams, in which the individuals work primarily through technology, not in person (i.e., an online college class). Another challenge is obtaining ratings from and for individuals who are on different special project teams throughout the year.
Some contend that any performance appraisal, including team/peer rat- ings, can negatively affect teamwork and participative management efforts. Although team members have good information on one another’s perfor- mance, they may not choose to share it in the interest of sparing feelings; alternatively, they may unfairly attack other group members. Some organiza- tions attempt to overcome such problems by using anonymous appraisals and/ or having a consultant or HR manager interpret team/peer ratings. Despite the problems, team/peer performance ratings are probably inevitable, especially where work teams are used extensively.40
5315X_10_ch10_p318-356.indd 3365315X_10_ch10_p318-356.indd 336 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 337
Self-Rating Self-appraisal works in certain situations. As a self-development tool, it requires employees to think about their strengths and weaknesses and set goals for improvement. Employees working in isolation or possessing unique skills may be particularly suited to self-ratings because they are the only ones qualified to rate themselves. Overall, the use of self-appraisals in organizations has increased. For instance, the YMCA located in Greater Rochester, New York, successfully incorporated self-ratings into a traditional rating approach that presumably did not generate enough dialogue and direction for indi- vidual development; reactions from both workers and supervisors have been favorable.41
However, employees may use quite different standards and not rate them- selves in the same manner as supervisors. Research exploring how people might be more lenient or more demanding when rating themselves is mixed, with self-ratings being frequently higher than supervisory ratings. Still, employee self-ratings can be a useful source of performance information for development.42
Outsider Rating People outside the immediate work group may be called in to conduct per- formance reviews. This field review approach can include someone from the HR department as a reviewer, or completely independent reviewers from outside the organization. Examples include a review team evaluating a college president or a panel of division managers evaluating a supervisor’s potential for advancement in the organization. A disadvantage of this approach is that outsiders may not know the important demands within the work group or organization.
The customers or clients of an organization are good sources for outside appraisals. For sales and service jobs, customers may provide useful input on the performance behaviors of employees. For instance, many hospitality organizations such as restaurants and hotels use customer comments cards to gather feedback about the service provided by customer contact personnel, and this information is commonly used for job development purposes.
Multisource/360-Degree Feedback The use of multisource rating, or 360-degree feedback, has grown in popu- larity in organizations. Multisource feedback recognizes that for many jobs, employee performance is multidimensional and crosses departmental, orga- nizational, and even global boundaries. Therefore, information needs to be collected from many different sources to adequately and fairly evaluate an incumbent’s performance in one of these jobs.
The major purpose of 360-degree feedback is not to increase uniformity by soliciting like-minded views. Instead, it is designed to capture evaluations of the employee’s different roles to provide richer feedback during an evaluation. Figure 10-9 shows graphically some of the parties who are often involved in 360-degree feedback. For example, an HR manager for an insurance firm deals with seven regional sales managers, HR administrators in five claims centers, and various corporate executives in finance, legal, and information technology. The Vice President of HR uses 360-degree feedback to gather data on all facets of the HR manager’s job before completing a performance appraisal on the
5315X_10_ch10_p318-356.indd 3375315X_10_ch10_p318-356.indd 337 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development338
manager. Similar examples can be cited in numerous managerial, professional, technical, operational, and administrative jobs.
Significant administrative time and paperwork are required to request, obtain, and summarize feedback from multiple raters. Using electronic systems to summarize the information can greatly reduce the administrative demands of multisource ratings and increase the effectiveness (i.e., privacy and expedi- ency) of the process.43
Developmental Use of Multisource Feedback As originally designed and used, multisource feedback focuses on the use of appraisals for future develop- ment of individuals. Conflict resolution skills, decision-making abilities, team effectiveness, communication skills, managerial styles, and technical capabili- ties are just some of the developmental areas that can be examined. Even in a multisource system, the manager remains a focal point, both to receive the feedback initially and to follow up with the employee appropriately.
Administrative Use of Multisource Feedback The popularity of 360-degree feedback systems has led to the results being used for compensa- tion, promotion, termination, and other administrative decisions. When using 360-degree feedback for administrative purposes, managers must anticipate potential problems. Differences among raters can present a challenge, espe- cially when using 360-degree ratings for discipline or pay decisions. Bias can just as easily be rooted in customers, subordinates, and peers as in a boss, and the lack of accountability of those sources can affect the ratings. “Inflation” of ratings is common when the sources know that their input will affect someone’s pay or career. At one manufacturing firm, the apparent “back scratching” associated with multisource reviews led the company to drop the program.44 Also, issues of confidentiality and anonymity have led to lawsuits. Even though multisource approaches offer possible solutions to the well- documented dissatisfaction associated with performance appraisals, a
F I G U R E 1 0 – 9 Multisource Appraisal
PERSON BEING APPRAISED
5315X_10_ch10_p318-356.indd 3385315X_10_ch10_p318-356.indd 338 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 339
number of questions have arisen as multisource appraisals have become more common.
Evaluating Multisource Feedback Research on multisource/360-degree feedback has revealed both positives and negatives. More variability than expected may be seen in the ratings given by the different sources. Thus, super- visor ratings must carry more weight than peer or subordinate input to resolve the differences. One concern is that those peers who rate poor-performing coworkers tend to inflate the ratings so that the peers themselves can get higher overall evaluation results.45
Another concern is whether 360-degree appraisals improve the process or simply multiply the number of problems by the total number of raters. Also, some wonder whether multisource appraisals really create better decisions that offset the additional time and investment required. These issues appear to be less threatening when the 360-degree feedback is used only for development, so companies should consider using multisource feedback primarily as a devel- opmental tool to enhance future job performance46 while effectively reducing the use of multisource appraisals as an administrative tool.
TOOLS FOR APPRAISING PERFORMANCE Performance can be appraised by a number of methods. Some employers use one method for all jobs and employees, some use different methods for different groups of employ- ees, and others use a combination of methods. The following discussion highlights different tools that can be used and some of the advantages and disadvantages of each approach.
Category Scaling Methods The simplest methods for appraising performance are category scaling meth- ods, which require a manager to mark an employee’s level of performance on a specific form divided into categories of performance. A checklist uses a list of statements or words from which raters check statements that are most rep- resentative of the characteristics and performance of employees. Often, a scale indicating perceived level of accomplishment on each statement is included, which becomes a type of graphic rating scale.
Graphic Rating Scales The graphic rating scale allows the rater to mark an employee’s performance on a continuum indicating low to high levels of a particular characteristic. Because of the straightforwardness of the process, graphic rating scales are commonly used in performance evaluations.47 Figure 10-10 shows a sample appraisal form that combines graphic rating scales with essays. Three aspects of performance are appraised using graphic rating scales: descriptive catego- ries (such as quantity of work, attendance, and dependability), job duties (taken from the job description), and behavioral dimensions (such as decision making, employee development, and communication effectiveness).
Graphic rating scale Scale that allows the rater to mark an employee’s performance on a continuum.
L O G G I N G O NL
Personnel Decisions International This is a website for a firm specializing in the development of people utilizing many different development tools, including managing performance data. Visit the site at www.personneldecisions.com.
5315X_10_ch10_p318-356.indd 3395315X_10_ch10_p318-356.indd 339 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development340
F I G U R E 1 0 – 1 0 Sample Performance Appraisal Form
Employment status (check one): Full-time Part-time
Rating period: From: 4/30/10 To: 4/30/11
Reason for appraisal (check one): Regular interval Introductory Counseling only Discharge
Date of hire:
Using the following definitions, rate the performance as I, M, or E. I—Performance is below job requirements and improvement is needed. M—Performance meets job requirements and standards. E—Performance exceeds job requirements and standards most of the time.
SPECIFIC JOB RESPONSIBILITIES: List the prinicipal activities from the job summary, rate the performance on each job duty by placing an X on the rating scale at the appropriate location, and make appropriate comments to explain the rating.
Job Duty #1: Inventory receiving and checking Explanation:
I M E
Job Duty #2: Accurate recordkeeping Explanation:
I M E
Attendance (including absences and tardies): Number of absences Number of tardies Explanation:
I M E
Overall rating: In the box provided, place the letter—I, M, or E—that best describes the employee’s overall performance.
Each of these types can be used for different jobs. How well employees meet established standards is often expressed either numerically (e.g., 5, 4, 3, 2, 1) or verbally (e.g., “outstanding,” “meets standards,” “below standards”). If two or more people are involved in the rating, they may find it difficult to agree on the exact level of performance achieved relative to the standard in
5315X_10_ch10_p318-356.indd 3405315X_10_ch10_p318-356.indd 340 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 341
evaluating employee performance. Notice that each level specifies performance standards or expectations in order to reduce variation in interpretations of the standards by different supervisors and employees.
Concerns with Graphic Rating Scales Graphic rating scales in many forms are widely used because they are easy to develop and provide a uniform set of cri- teria to equally evaluate the job performance of different employees. However, the use of scales can cause rater error because the form might not accurately reflect the relative importance of certain job characteristics, and some factors might need to be added to the ratings while others might need to be deleted. If they fit the person and the job, the scales work well. However, if they fit poorly, managers and employees who must use them frequently complain about “the rating form.”
A key point must be emphasized. Regardless of the scales used, the focus should be on the job duties and responsibilities identified in job descriptions. The closer the link between the scales and what people actually do, as identi- fied in current and complete job descriptions, the stronger the relationship between the ratings and the job, as viewed by employees and managers. Also, should the performance appraisal results be challenged by legal actions, the closer performance appraisals measure what people actually do, the more likely employers are to prevail in those legal situations.
An additional drawback to graphic rating scales is that often separate traits or factors are grouped together, and the rater is given only one box to check. For example, “dependability” could refer to meeting deadlines for reports, or it could refer to attendance and tardiness. If a supervisor gives an employee a rating of 3, which aspect of “dependability” is being rated? One supervisor might rate employees on meeting deadlines, while another rates employees on attendance.
Another drawback is that the descriptive words sometimes used in scales may have different meanings to different raters.48 Terms such as initiative and cooperation are subject to many interpretations, especially if used in conjunc- tion with words such as outstanding, average, and poor. Also, as Figure 10-11 shows, the number of scale points can be defined differently.
F I G U R E 1 0 – 1 1 Sample Terms for Defining Standards
Outstanding: The person is so successful at this job criterion that special note should be made, and performance ranks in the top 10%.
Exceeds Expectations: Performance is better than average for the unit, given the common standards and unit results.
Meets Expectations: Performance is at or above the minimum standards. This level is what one would expect from most experienced, competent employees.
Below Expectations: Performance is somewhat below the minimum standards. However, potential to improve within a resonable time frame is evident.
Unsatisfactory: Performance is well below standard. Whether the person can improve to meet the minimum standards is questionable.
5315X_10_ch10_p318-356.indd 3415315X_10_ch10_p318-356.indd 341 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development342
Behavioral Rating Scales In an attempt to overcome some of the con- cerns with graphic rating scales, employers may use behavioral rating scales designed to assess individual actions instead of personal attributes and char- acteristics.49 Different approaches are used, but all describe specific examples of employee job behaviors. In a behaviorally–anchored rating scale (BARS), these examples are “anchored” or measured against a scale of performance levels.
When creating a BARS system, identifying important job dimensions, which are the most important performance factors in a job description, is done first. Short statements describe both desirable and undesirable behaviors (anchors). These are then “translated,” or assigned, to one of the job dimen- sions. Anchor statements are usually developed by a group of people familiar with the job. Assignment to a dimension usually requires the agreement of 60% to 70% of the group. The group then assigns each anchor a number that represents how good or bad the behavior is, and the anchors are fitted to a scale. Figure 10-12 contains an example that rates customer service skills for individuals taking orders for a national catalog retailer. Spelling out the behaviors associated with each level of performance helps minimize some of the problems noted for the graphic rating scale.
Several problems are associated with the behavioral approaches. First, cre- ating and maintaining behaviorally–anchored rating scales requires extensive time and effort. In addition, various appraisal forms are needed to accommo- date different types of jobs in an organization. For instance, because nurses, dietitians, and admissions clerks in a hospital all have distinct job descriptions, a separate BARS form needs to be developed for each.
F I G U R E 1 0 – 1 2 Behaviorally–Anchored Rating Scale for Customer Service Skills
Used positive phrases to explain product
Offered additional pertinent information when asked questions by customer
Referred customer to another product when requested item was not available
Discouraged customer from waiting for an out-of-stock item
Argued with customer about suitability of requested product
The Customer Service Representative
5315X_10_ch10_p318-356.indd 3425315X_10_ch10_p318-356.indd 342 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 343
Comparative Methods Comparative methods require that managers directly compare the performance levels of their employees against one another, and these comparisons can pro- vide useful information for performance management. A recent study found that performance evaluations that utilize social comparisons provide more valid assessments of employee performance than do absolute measures.50 However, there are other issues. An example of this process would be an information sys- tems supervisor comparing the performance of a programmer with that of other programmers. Comparative techniques include ranking and forced distribution.
Ranking The ranking method lists the individuals being rated from high- est to lowest based on their performance levels and relative contributions.51 One disadvantage of this process is that the sizes of the performance differences between employees are often not fully investigated or clearly indicated. For example, the performances of individuals ranked second and third may differ little, while the performances of those ranked third and fourth differ a great deal. This limitation can be mitigated to some extent by assigning points to indicate performance differences. Ranking also means some- one must be last, which ignores the possibility that the last-ranked individual in one group might be equal to the top-ranked employee in a different group. Further, the ranking task becomes unwieldy if the group to be ranked is large.
Forced Distribution Forced distribution is a technique for distributing ratings that are generated with any of the other appraisal methods and com- paring the ratings of people in a work group. With the forced distribution method, the ratings of employees’ performance are distributed along a bell- shaped curve. For example, a medical clinic administrator ranking employees on a 5-point scale would have to rate 10% of the employees as a 1 (“unsat- isfactory”), 20% as a 2 (“below expectations”), 40% as a 3 (“meets expecta- tions”), 20% as a 4 (“above expectations”), and 10% as a 5 (“outstanding”).
Forced distribution has been used in some form by an estimated 30% of all firms with performance appraisal systems. At General Electric, in the “20/70/10” program, managers identify the top 20% and reward them richly so that few will leave. The bottom 10% are given a chance to improve or leave. The forced distribution system is controversial because of both its advantages and its disadvantages, which are discussed next.52
Advantages and Disadvantages of Forced Distribution One reason why firms have mandated the use of forced distributions for appraisal ratings is to deal with “rater inflation.” If employers do not require a forced distribu- tion, performance appraisal ratings often do not match the normal distribu- tion of a bell-shaped curve (see Figure 10-13).
The use of a forced distribution system forces managers to identify high, average, and low performers. Thus, high performers can be rewarded and developed, while low performers can be “encouraged” to improve or leave. Advocates of forced ranking also state that forced distribution ensures that compensation increases truly are differentiated by performance rather than being spread somewhat equally among all employees. Forced rankings may also enhance a company’s level of talent, instill a high-performance work envi- ronment, and increase workers’ self-confidence.53
Ranking Performance appraisal method in which all employees are listed from highest to lowest in performance.
Forced distribution Performance appraisal method in which ratings of employees’ performance levels are distributed along a bell-shaped curve.
5315X_10_ch10_p318-356.indd 3435315X_10_ch10_p318-356.indd 343 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development344
But the forced distribution method suffers from several drawbacks. One problem is that a supervisor may resist placing any individual in the lowest (or the highest) group. Difficulties also arise when the rater must explain to an employee why the employee was placed in one group and others were placed in higher groups. Further, particularly with small groups, the nature and magnitude of rating scores often may not conform to a bell-shaped distribution, possibly due to leniency bias.54 In some cases, the manager may make false distinctions between employees. By comparing people against each other, rather than against a standard of job performance, supervisors trying to fill the percentages may end up giving employees subjective ratings. Finally, forced ranking structures can increase anxiety in employees, promote conformity, and encourage gaming of the system.55 Consequently, a number of firms such as Ford and Goodyear Tire & Rubber have been involved in lawsuits about forced distribution performance appraisal processes.56
A number of actions are recommended to address these problems if a forced distribution system is to be used, including many that are similar to those for making other methods of appraisals more legal and effective57:
• Use specific, objective criteria and standards to evaluate employees.
• Involve employees in program development. • Ensure that sufficient numbers of individuals are being
rated, so that ranking profiles are relevant. • Train managers, and review their ratings to ensure job
relatedness (no favoritism).
F I G U R E 1 0 – 1 3 Forced Distribution on a Bell-Shaped Curve
1 2 3 4 5
L O G G I N G O NL
Zigon Performance Group For resources to measure, manage, and improve employee performance, visit this website at www.zigonperf.com.
5315X_10_ch10_p318-356.indd 3445315X_10_ch10_p318-356.indd 344 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 345
Narrative Methods Managers and HR specialists often are required to provide written appraisal information. However, some appraisal methods are entirely written, rather than relying on predetermined rating scales or ranking structures. Documentation and descriptive text are the basic components of the critical incident method and the essay method.
Critical Incident In the critical incident method, the manager keeps a writ- ten record of both highly favorable and unfavorable actions performed by an employee during the entire rating period. When a “critical incident” involving an employee occurs, the manager writes it down. For instance, when a sales clerk at a clothing store spends considerable time with a customer helping him purchase a new suit, a manager might document this exceptional service for later review during an annual evaluation. The critical incident method can be used with other methods to document the reasons why an employee was given a certain rating.
Essay The essay method requires a manager to write a short essay describ- ing each employee’s performance during the rating period. Some “free-form” essays are without guidelines; others are more structured, using prepared ques- tions that must be answered. The rater usually categorizes comments under a few general headings. The essay method allows the rater more flexibility than other methods do. As a result, appraisers often combine the essay with other methods.
The effectiveness of the essay approach often depends on a supervisor’s writing skills. Some supervisors do not express themselves well in writing and as a result produce poor descriptions of employee performance, whereas others have excellent writing skills and can create highly positive impressions. If well composed, essays can provide highly detailed and useful information about an employees’ job performance.
Management by Objectives Management by objectives (MBO) specifies the performance goals that an indi- vidual and manager identify together. Each manager sets objectives derived from the overall goals and objectives of the organization; however, MBO should not be a disguised means for a superior to dictate the objectives of individual managers or employees. Other names for MBO include appraisal by results, target coaching, work planning and review, performance objective setting, and mutual goal setting.
MBO Process Implementing a guided self-appraisal system using MBO is a four-stage process. The stages are as follows:
1. Job review and agreement: The employee and the superior review the job description and the key activities that constitute the employee’s job. The idea is to agree on the exact makeup of the job.
2. Development of performance standards: Together, the employee and the employee’s superior develop specific standards of performance and determine a satisfactory level of performance that is specific and measurable. For example, a quota of selling five cars a month may be an appropriate performance standard for a salesperson.
Management by objectives (MBO) Performance appraisal method that specifi es the performance goals that an individual and manager identify together.
5315X_10_ch10_p318-356.indd 3455315X_10_ch10_p318-356.indd 345 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development346
3. Setting of objectives: Together, the employee and the superior establish objectives that are realistically attainable.
4. Continuing performance discussions: The employee and the superior use the objectives as bases for continuing discussions about the employee’s performance. Although a formal review session may be scheduled, the employee and the supervisor do not necessarily wait until the appointed time to discuss performance. Objectives can be mutually modified as warranted.
The MBO process seems to be most useful with managerial personnel and employees who have a fairly wide range of flexibility and control over their jobs. When imposed on a rigid and autocratic management system, MBO often has failed. Emphasizing penalties for not meeting objectives defeats the development and participative nature of MBO.
Combinations of Methods No single appraisal method is best for all situations. Therefore, a performance measurement system that uses a combination of methods may be sensible in certain circumstances. Using combinations may offset some of the advan- tages and disadvantages of individual methods. Category scaling methods sometimes are easy to develop, but they usually do little to measure strategic accomplishments. Further, they may make inter-rater reliability problems worse. Comparative approaches help reduce leniency and other errors, which makes them useful for administrative decisions such as determining pay raises. But comparative approaches do a poor job of linking performance to organi- zational goals, and by themselves do not provide feedback for improvement as well as other methods do.
Narrative methods work well for development because they potentially generate more feedback information. However, without good definitions of performance criteria or standards, they can be so unstructured as to be of little value. Also, these methods work poorly for administrative uses. The MBO approach works well to link performance to organizational goals, but it can require much effort and time for defining objectives and explaining the process to employees. Narrative and MBO approaches may not work as well for lower-level jobs as for jobs with more varied duties and responsibilities.
When managers can articulate what they want a performance appraisal system to accomplish, they can choose and mix methods to realize those advantages. For example, one combination might include a graphic rating scale of performance on major job criteria, a narrative for developmental needs, and an overall ranking of employees in a department. Different catego- ries of employees (e.g., salaried exempt, salaried nonexempt, and maintenance) might require different combinations of methods.
TRAINING MANAGERS AND EMPLOYEES IN PERFORMANCE APPRAISAL
Court decisions on the legality of performance appraisals and research on appraisal effectiveness both stress the importance of training managers and employees on performance management and on conducting performance appraisals. Managers with positive views of the performance appraisal system
5315X_10_ch10_p318-356.indd 3465315X_10_ch10_p318-356.indd 346 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 347
are more likely to use the system effectively. Unfortunately, such training occurs only sporadically or not at all in many organizations.
For employees, performance appraisal training focuses on the purposes of appraisal, the appraisal process and timing, and how performance criteria and standards are linked to job duties and responsibilities. Some training also discusses how employees might rate their own performance and use that infor- mation in discussions with their supervisors and managers.
Most systems can be improved by training supervisors in how to do per- formance appraisals.58 Because conducting the appraisals is critical, training should center around minimizing rater errors and providing raters with details on documenting performance information. Training is especially essential for those who have recently been promoted to jobs in which conducting perfor- mance appraisals is a new experience for them. Without training, managers and supervisors often “repeat the past,” meaning that they appraise others much as they have been appraised in the past, whether accurately or inaccu- rately. The following list is not comprehensive, but it does identify some topics covered in appraisal training:
• Appraisal process and timing • Performance criteria and job standards that should be considered • How to communicate positive and negative feedback • When and how to discuss training and development goals • Conducting and discussing the compensation review • How to avoid common rating errors
Rater Errors There are many possible sources of error in the performance appraisal pro- cess. One of the major sources is the raters. Although completely eliminating errors is impossible, making raters aware of them through training is helpful. Figure 10-14 lists some common rater errors.
Varying Standards When appraising employees, a manager should avoid applying different standards and expectations to employees performing the same or similar jobs. Such problems often result from the use of ambiguous criteria and subjective weightings by supervisors.
Recency and Primacy Effects The recency effect occurs when a rater gives greater weight to recent events when appraising an individual’s performance. Examples include giving a student a course grade based only on the student’s performance in the last week of class and giving a drill press operator a high rating even though the operator made the quota only in the last two weeks of the rating period. The opposite of the recency effect is the primacy effect, which occurs when a rater gives greater weight to information received first when appraising an individual’s performance.
Central Tendency, Leniency, and Strictness Errors Ask students, and they will tell you which professors tend to grade easier or harder. A manager may develop a similar rating pattern. Appraisers who rate all employees within a narrow range in the middle of the scale (i.e., rate everyone as “average”) commit a central tendency error, giving even outstanding and poor performers an “average” rating.
Rating patterns also may exhibit leniency or strictness. The leniency error occurs when ratings of all employees fall at the high end of the scale. The
Recency effect Occurs when a rater gives greater weight to recent events when appraising an individual’s performance.
Primacy effect Occurs when a rater gives greater weight to information received fi rst when appraising an individual’s performance.
Central tendency error Occurs when a rater gives all employees a score within a narrow range in the middle of the scale.
Leniency error Occurs when ratings of all employees fall at the high end of the scale.
5315X_10_ch10_p318-356.indd 3475315X_10_ch10_p318-356.indd 347 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development348
strictness error occurs when a manager uses only the lower part of the scale to rate employees. To avoid conflict, managers often rate employees higher than they should. This “ratings boost” is especially likely when no manager or HR representative reviews the completed appraisals.
Rater Bias When a rater’s values or prejudices distort the rating, this is referred to as rater bias. Such bias may be unconscious or quite intentional. For example, a manager’s dislike of certain ethnic groups may cause distortion in appraisal information for some people. Use of age, religion, seniority, sex, appearance, or other “classifications” also may skew appraisal ratings if the appraisal process is not properly designed. A review of appraisal ratings by higher-level managers may help correct this problem.
Halo and Horns Effects The halo effect occurs when a rater scores an employee high on all job criteria because of performance in one area. For example, if a worker has few absences, the supervisor might give the worker a high rating in all other areas of work, including quantity and quality of output, without really thinking about the employee’s other characteristics separately. The opposite is the horns effect, which occurs when a low rating on one char- acteristic leads to an overall low rating.
Contrast Error Rating should be done using established standards. One problem is the contrast error, which is the tendency to rate people relative to one another rather than against performance standards. For example, if
Strictness error Occurs when ratings of all employees fall at the low end of the scale.
Rater bias Occurs when a rater’s values or prejudices distort the rating.
Halo effect Occurs when a rater scores an employee high on all job criteria because of performance in one area.
Contrast error Tendency to rate people relative to others rather than against performance standards.
F I G U R E 1 0 – 1 4 Common Rater Errors
Similar performances are rated differently.
Timing of information affects rating.
Everyone is rated the same.
Rater values or prejudices affect ratings.
Generalization is made from only one trait.
Comparison is made to other people, not to performance standards.
Rater compares employees to self.
Available information is insufficient or inaccurate.
RATER ERROR PRACTICAL IMPACT
Central Tendency, Leniency, and Strictness Errors
Halo and Horns Effects
Similar-to-Me/Different-from- Me Errors
Recency and Primacy Effects
5315X_10_ch10_p318-356.indd 3485315X_10_ch10_p318-356.indd 348 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 349
everyone else performs at a mediocre level, then a person performing only somewhat better may be rated as “excellent” because of the contrast effect. But in a group where many employees are performing well, the same person might receive a lower rating. Although it may be appropriate to compare people at times, the performance rating usually should reflect comparison against per- formance standards, not against other people.
Similar-to-Me/Different-from-Me Errors Sometimes, raters are influenced by whether people show characteristics that are the same as or different from their own. For example, a manager with an MBA degree might give subordi- nates with MBAs higher appraisals than those with only bachelor’s degrees. The error comes in measuring an individual against another person rather than measuring how well the individual fulfills the expectations of the job.
Sampling Error If the rater has seen only a small sample of the person’s work, an appraisal may be subject to sampling error. For example, assume that 95% of the reports prepared by an employee have been satisfactory, but a manager has seen only the 5% that had errors. If the supervisor rates the person’s performance as “poor,” then a sampling error has occurred. Ideally, the work being rated should be a broad and representative sample of all the work done by the employee.
APPRAISAL FEEDBACK After completing appraisals, managers need to communicate results in order to give employees a clear understanding of how they stand in the eyes of their immediate superiors and the organization. Organizations commonly require managers to discuss appraisals with employees. The appraisal feedback inter- view provides an opportunity to clear up any misunderstandings on both sides. In this interview, the manager should focus on coaching and development, and not just tell the employee, “Here is how you rate and why.” Emphasizing development gives both parties an opportunity to consider the employee’s performance as part of appraisal feedback.59
Appraisal Interview The appraisal interview presents both an opportunity and a danger. It can be an emotional experience for the manager and the employee because the manager must communicate both praise and constructive criticism. A major concern for managers is how to emphasize the positive aspects of the employee’s performance while still discussing ways to make needed improve- ments. If the interview is handled poorly, the employee may feel resentment, which could lead to future conflict. Consequently, a manager should identify how employees add value to the organization and show appreciation when employees make valuable contributions.60 When poor performance must be discussed, managers might consider using a “self-auditing” approach that relies on questions that encourage employees to identify their own perfor- mance deficiencies.61
Employees usually approach an appraisal interview with some concern. They may feel that discussions about performance are both personal and
5315X_10_ch10_p318-356.indd 3495315X_10_ch10_p318-356.indd 349 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development350
important to their continued job success. At the same time, they want to know how their managers feel about their performance. Figure 10-15 summarizes hints for an effective appraisal interview for supervisors and managers.
Feedback as a System The three commonly recognized components of a feedback system are data, evaluation of that data, and some action based on the evaluation. Data are factual pieces of information regarding observed actions or consequences. Most often, data are facts that report what happened, such as “Charlie solved a purchasing problem” or “Mary spoke harshly to an engineer.” Data alone rarely tell the whole story. For instance, Mary’s speaking harshly may have been an instance of poor communication and reflective of a lack of sensitivity, or it may have been a proper and necessary action. Someone must evaluate the meaning or value of the data.
Evaluation is the way the feedback system reacts to the facts, and it requires performance standards. Managers might evaluate the same factual information differently than would customers (e.g., regarding merchandise exchange or credit decisions) or coworkers. Evaluation can be done by the person supplying the data, by a supervisor, or by a group.
For feedback to cause change, some decisions must be made regarding subsequent action. In traditional appraisal systems, the manager makes spe- cific suggestions regarding future actions the employee might take. Employee input often is encouraged as well. In 360-degree feedback, people from whom
information was solicited might also suggest actions that the individual may consider. It may be necessary to involve those providing information if the subsequent actions are highly interdependent and require coordination with the information providers.62 Regardless of the process used, the feedback components (data, evaluation, and action) are nec- essary parts of a successful performance appraisal feedback system.
F I G U R E 1 0 – 1 5 Appraisal Interview Hints for Appraisers
DO DO NOT Prepare before interview Focus on objective performance Be specific about ratings and feedback Develop a future improvement plan Reinforce employee successes
Talk too much Berate or lecture the employee Focus entirely on negative job performance Think that the employee always has to agree Compare the employee with others
L O G G I N G O NL
HR-Software.net For links to numerous online performance appraisal software systems, visit this website at www.hr-software.net.
5315X_10_ch10_p318-356.indd 3505315X_10_ch10_p318-356.indd 350 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 351
Reactions of Managers Managers who must complete appraisals of their employees often resist the appraisal process.63 Many feel that their role calls on them to assist, encourage, coach, and counsel employees to improve their performance. However, being a judge on the one hand and a coach and a counselor on the other hand may cause internal conflict and confusion for managers.
Knowing that appraisals may affect employees’ future careers also may cause altered or biased ratings. This problem is even more likely when manag- ers know that they will have to communicate and defend their ratings to the employees, their bosses, or HR specialists. Managers can easily avoid provid- ing negative feedback to an employee in an appraisal interview and thus avoid unpleasantness in an interpersonal situation by making the employee’s ratings positive. But avoidance helps no one. A manager owes an employee a well- done appraisal, no matter how difficult an employee is, or how difficult the conversation about performance might be.64
Reactions of Appraised Employees Employees may well see the appraisal process as a threat and feel that the only way for them to get a higher rating is for someone else to receive a low rat- ing. This win-lose perception is encouraged by comparative methods of rating. Emphasis on the self-improvement and developmental aspects of appraisal appears to be the most effective way to reduce this reaction.65
Another common employee reaction resembles students’ response to tests. A professor may prepare a test that the professor feels is fair, but it does not necessarily follow that students will believe the test is fair; they simply may see it differently. Likewise, employees being appraised may not necessarily agree with the manager doing the appraising. However, in most cases, employees will view appraisals done well as what they are meant to be—constructive feedback.
Effective Performance Management Regardless of the approach used, managers must understand the intended outcome of performance management.66 When performance management is used to develop employees as resources, it usually works. When one key part of performance management, a performance appraisal, is used to pun- ish employees, performance management is less effective. In its simplest form as part of performance management, performance appraisal is a manager’s observation: “Here are your strengths and weaknesses, and here is a way to develop for the future.”
Done well, performance management can lead to higher employee moti- vation and satisfaction. To be effective, a performance management system, including the performance appraisal processes, should be:
• Consistent with the strategic mission of the organization • Beneficial as a development tool • Useful as an administrative tool • Legal and job related • Viewed as generally fair by employees • Effective in documenting employee performance
5315X_10_ch10_p318-356.indd 3515315X_10_ch10_p318-356.indd 351 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development352
When conducting employees’ performance evalua- tions, managers often make diffi cult decisions about job performance, many times without a strong refer- ence point about how the company really defi nes what is acceptable and what is unacceptable. Many evalu- ators also do not have a real understanding of how other managers rate their employees, making relative comparisons of job performance diffi cult to imple- ment throughout the organization. Consequently, rat- ings might not adequately or fairly convey how well employees are progressing in their jobs, which can present many different human resource challenges. Such inaccurate evaluations have the potential to derail a company’s ability to effectively manage moti- vation because employees are not given adequate feedback, and personnel decisions are not properly linked to performance the way it is defi ned by the company.
Performance calibration mitigates many of these challenges and concerns by developing a more con- sistent understanding about how employees’ job per- formance should be assessed. This understanding can be strengthened with company-sponsored training for evaluators that demonstrates how to properly rate indi- viduals, thus developing a more uniform understand- ing about the rating process that should occur in the different operational areas of the organization. In other words, calibration sessions explore how ratings should be used to more effectively document current job performance according to company standards, while emphasizing how ratings across different work areas should be uniform. The resulting appraisals are often times more consistent and comparative across com- pany ranks, and employees become more confi dent in the process as a whole, which serves to increase moti- vation and effort on the job.67
Calibration Is the Key to Better Employee Evaluations and Performance Management
HR best practices
S U M M A R Y
• Performance management systems attempt to identify, measure, communicate, develop, and reward employee performance.
• Performance management has a broad organi- zational focus, whereas performance appraisals are the processes used to evaluate how employ- ees perform their jobs and then communicate that information to employees.
• Effective performance management has a num- ber of components, beginning with a perfor- mance-focused organizational culture.
• Job criteria identify important elements of a job, and the relevance of job criteria affects the establishment of performance standards.
Many of these factors can be enhanced through the effective development of the performance management process. The HR Best Practices explores one approach called calibration, which enables organizations to establish more specific and consistent guidelines about how employee performance should be rated across different jobs and work areas during a rating cycle. Consequently, feedback provided to employees is more consistent and fair, which can enhance employees’ motivation to tackle their work responsibilities. By mak- ing sure that raters understand how to consistently evaluate job performance, managers should be able to increase support for the performance management process throughout the organization.
5315X_10_ch10_p318-356.indd 3525315X_10_ch10_p318-356.indd 352 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 353
• Federal employment guidelines and numerous court decisions affect the design and use of the performance appraisal process.
• Appraising employee performance serves both administrative and developmental purposes.
• Performance appraisals can be done either infor- mally or systematically.
• Appraisals can be conducted by superiors, employees (rating superiors or themselves), teams, outsiders, or a variety of sources.
• Appraisal methods include: category scaling, comparative, narrative, and management by objectives.
• Category scaling methods, especially graphic rating scales and behavioral rating scales, are widely used.
• Comparative methods include ranking and forced distribution, both of which raise meth- odological and legal concerns.
• Narrative methods include the critical incident technique and the essay approach.
• Training managers and employees on how to conduct performance appraisals can contribute to the effectiveness of a performance manage- ment system.
• Many performance appraisal problems are caused by a number of different rater errors.
• The appraisal feedback interview is a vital part of any appraisal system, and the reactions of both managers and employees must be consid- ered when evaluating the system.
C R I T I C A L T H I N K I N G A C T I V I T I E S
H R E X P E R I E N T I A L P R O B L E M S O L V I N G
1. Describe how an organizational culture and the use of performance criteria and standards affect the remaining components of a performance management system.
2. Suppose you are a supervisor. What errors might you make when preparing the performance appraisal on a clerical employee? How might you avoid those errors?
3. Based on your experiences, as well as the chapter information, what are some good
“rules of thumb” for conducting successful performance appraisal interviews?
4. Review the performance appraisal process and appraisal form used by a current or former employer, and compare them with those provided by other students. Also review other appraisal issues by going to www.workforce .com and searching for articles on performance appraisals. Develop a report suggesting changes to make the performance appraisal form and process you reviewed more effective.
As the new HR Director of a company in the behav- ioral health industry, you have the responsibility to develop a performance management system. You need to present a business case to senior execu- tives that the performance management system does not stand alone and must be integrated into the company’s strategic plan, business needs, and measurements. For information on performance management best practices, review various publica- tions in the articles tab at www.insala.com.
1. Given several key practices for a successful performance management system, which ones should be implemented first?
2. Identify key measurements to transition the company from the current system of looking at personality factors to a new system of looking at performance factors.
5315X_10_ch10_p318-356.indd 3535315X_10_ch10_p318-356.indd 353 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development354
S U P P L E M E N T A L C A S E S
Performance Management Improvements for Bristol-Myers Squibb This case identifies how performance management systems might be redesigned. (For the case, go to www.cengage.com/management/mathis.)
This case identifies the consequences of giving appraisal ratings that may not be accurate. (For the case, go to www.cengage.com/ management/mathis.)
A process of performance management is devel- oped in companies to better shape how employees execute their job responsibilities and complete their work. Ideally, employees should feel com- fortable with this process, believing that the communication occurring between managers and workers facilitates the completion of important workplace goals. Unfortunately, many employees become dissatisfied with how their organiza- tions encourage goal-directed behavior, which can result in poor job attitudes, decreased motivation, and reduced effort on the job. These negative fac- tors lead some companies to seek alternative ways to design and implement performance manage- ment systems so that employees are encouraged to work hard in their jobs.
Jewelers Mutual Insurance Company (JMI) is one such company that has actively improved its performance management approach, and the results have been very encouraging. Employees were initially dissatisfied with the feedback and goal-setting approaches that were being utilized to manage job performance, so company lead- ers decided to involve employees in the redesign efforts to create a more viable program that would be satisfactory for all the parties involved. An outside consultant started the process by inter- viewing top leaders in the company, and focus groups were used to solicit feedback from various other members of the organization. By utiliz- ing a more participative and inclusive approach, the company was able to identify the problems with the current performance management system and generate greater support for the proposed changes that would ultimately fix these issues. This case illustrates how important employee
participation is in the effective management of human resources, particularly when developing a viable performance management system.
Several key changes were made to the perfor- mance management system based on the feedback received from managers and employees. In par- ticular, inconsistencies in the administration of the performance management system, problems with the rating techniques and forms, and various chal- lenges linking pay to performance were specifi- cally targeted as part of the redesign effort. Such reflection and self-assessment prompted a number of specific improvements to management of job performance within the company. Evaluations are now based on narratives, various metrics of accountability, and job goals. Further, feedback is provided to employees on a quarterly basis, com- pensation is more strongly linked to individual effort, and the performance management system functions in concert with the other elements of human resource management. The changes made to the performance management processes at JMI Company demonstrate how human resource professionals can work with other staff members to create a system that excites employees and, ultimately, yields greater job performance.68
Q U E S T I O N S
1. Discuss how this case illustrates how greater support for a performance management system can be developed through employee participation.
2. Identify some of the ways that performance management systems can be improved based on the experiences at JMI.
Building Performance Management through Employee Participation
C A S E
5315X_10_ch10_p318-356.indd 3545315X_10_ch10_p318-356.indd 354 26/06/10 5:19 PM26/06/10 5:19 PM
CHAPTER 10 Performance Management and Appraisal 355
N O T E S
1. Based on “Performance Reviews Often Skip Ethics, HR Professionals Say,” June 13, 2008, www .worldatwork.org.
2. Paul Falcone, “Big-Picture Performance Appraisal: Tying Individual Ratings to an Overall Team Score Shows Senior Executives Organizational Performance,” HR Magazine, August 2007, 97–100.
3. Herman Aguinis, Performance Management (Upper Saddle River, NJ: Pearson/Prentice Hall, 2007), 50–51.
4. Adapted from Elaine D. Pulakos, “Performance Management: A Roadmap for Developing, Implementing and Evaluating Performance Management Systems,” Effective Practice Guidelines, SHRM Foundation, 2004.
5. Amy Joyce, “Bosses Strive for Fair Job Reviews,” Omaha- World Herald, November 20, 2006, D1.
6. Patrick Shannon, Colleen O’Neill, Nanci R. Hibschman, and J. Carlos Rivero, “CEO Performance Evaluation: Getting It Right,” Perspective, Mercer Human Resource Consulting, April 21, 2005.
7. Brian E. Becker, Mark A. Huselid, and Dave Ulrich, The HR Scorecard: Linking People, Strategy, and Performance (Boston, MA: Harvard Business School Press, 2001).
8. “Into the Hornet’s Nest,” The Economist, May 12, 2007, 30–31.
9. Stephanie Simon, “Denver Teachers Object to Changes in Pay-for-Performance Plan,” The Wall Street Journal, August 18, 2008, A3.
10. “Survey: Failure to Deal with Poor Performers May Decrease Engagement of Other Employees,” Newsline, June 22, 2006.
11. Susan J. Wells, “No Results, No Raise,” HR Magazine, May 2005, 76–80.
12. “The Missing Link: Driving Business Results Through Pay- for-Performance,” Best Practices in Performance Management, Special Advertising Supplement to Workforce Management (Success Factors), S4.
13. Frank L. Schmidt and John E. Hunter, “Development of a Causal Model of Processes Determining Job Performance,” Current Directions in Psychological Science, 1 (1992), 89–92.
14. Keith Rosen, “The Seduction of Potential,” HR Magazine, May 2009, 85–87.
15. Anne Freedman, “Performance Management: Balancing Values, Results in Reviews,” Human Resource Executive, August 2006, 62–63.
16. Peter Cappelli, “More Lessons from the Financial Crisis,” Human Resource Executive Online, October 13, 2008, http://hreonline .com/HRE; Wayne F. Cascio and Peter Cappelli, “Lessons from the Financial Services Crisis,” HR Magazine, January 2009, 47–50.
17. Adapted from American Counsel on the Teaching of Foreign Languages (ACTFL), Oral Proficiency Interview Tester Training Manual (Stamford, CT: ACTFL Inc., 2006), 81–109.
18. Eric Harmon, Scott Hensel, and T. E. Lukes, “Measuring Performance in Services,” The McKinsey Quarterly, February, 2006, 2–7.
19. Josh Bersin, “The Business Case for Performance Management Systems: A Handbook for Human Resources Executives and Managers,” Bersin & Associates Research Report, January 2008.
20. Kevin R. Murphy, “Explaining the Weak Relationship Between Job Performance and Ratings of Job Performance,” Industrial and Organizational Psychology, 1, (2008), 148–160.
21. Gerald R. Ferris, Timothy R. Munyon, Kevin Basik, and M. Ronald Buckley, “The Performance Evaluation Context: Social, Emotional, Cognitive, Political, and Relationship Components,” Human Resource Management Review, 18 (2008), 146–163; Adrienne Fox, “Curing What Ails Performance Reviews,” HR Magazine, January 2009, 52–56.
22. Jared Sandberg, “Performance Reviews Need Some Work, Don’t Meet Potential,” The Wall Street Journal, October 20, 2007, B1.
23. WorldatWork Staff, “Courage Is Critical to Success of Performance Appraisals,” Headlines, NewsEdge Enterprise Solutions Content Solutions, May 8, 2007, http://dialog.newsedge .com/newsedge.
24. Clinton Longnecker, “Managerial Performance Appraisals: The Good, The Bad, and The Ugly,” HR Advisor, May/June 2005, 19–26.
25. Samuel A. Culbert, “Get Rid of the Performance Review!” The Wall Street Journal, October 20, 2008, R4.
26. “Communicating Beyond Ratings Can Be Difficult,” Workforce Management, April 24, 2006, 35.
27. Samuel A. Culbert, “Get Rid of the Performance Review!” The Wall Street Journal, October 20, 2008, R4.
28. Adrienne Fox, “Curing What Ails Performance Reviews,” HR Magazine, January 2009, 52–56.
29. Lisa Hartley, “Unified Talent Management and the Holy Grail,” Best Practices in Performance Management, Special Advertising Supplement to Workforce Management (Taleo), S5; Paul Loucks, “The Need for Web- Based Talent & Performance Management,” Workspan, October 2007, 68–70.
30. “Performance Tuning at Porsche,” Best Practices in Performance Management, Special Advertising Supplement to Workforce Management (Vurv), S3.
31. Paul Loucks, “The Need for Web-Based Talent & Performance Management,” Workspan, October 2007, 68–70.
32. Drew Robb, “Appraising Appraisal Software,” HR Magazine, October 2008, 65–66, 68, 70.
33. “9 Critical Reasons to Automate Performance Management: For Small and Mid-Sized Businesses,” Success Factors, www.successfactors .com; “Performance Management,” HR Magazine, November 2005, 135; “Performance Tuning at Porsche,” Best Practices in Performance Management,
5315X_10_ch10_p318-356.indd 3555315X_10_ch10_p318-356.indd 355 26/06/10 5:19 PM26/06/10 5:19 PM
SECTION 3 Training and Development356
Special Advertising Supplement to Workforce Management (Vurv), S3; Dawn S. Onley, “Using Dashboards to Drive HR,” HR Magazine, April 2006, 109–115; Erin White, “For Relevance Firms Revamp Worker Reviews,” The Wall Street Journal, July 17, 2006, B1; Anne Freedman, “Balancing Values, Results in Reviews,” Human Resource Executive, August 2006, 62.
34. Jennifer Taylor Arnold, “Two Needs, One Solution,” HR Magazine, May 2009, 75–77.
35. “Performance Management Practices,” www.ddi.com.
36. Erin White, “For Relevance Firms Revamp Worker Reviews,” The Wall Street Journal, July 17, 2006, B1.
37. Gerard P. Panaro, “The Two- Edged Sword of Employee Job Evaluations,” HR Advisor, May/ June 2005, 39–43.
38. Jena McGregor, “The Employee Is Always Right,” BusinessWeek, November 19, 2007, 80–82.
39. Clinton Longnecker, “Managerial Performance Appraisals: The Good, The Bad, and The Ugly,” HR Advisor, May/June 2005, 19–26.
40. Aguinis, Performance Management, 256–265.
41. Adrienne Fox, “Curing What Ails Performance Reviews,” HR Magazine, January 2009, 52–56.
42. W. H. Berman, J. C. Scott, and D. Finch, “Assessments: Connecting Employees with the Performance Improvement Process,” Workforce Performance Solutions, June 2005, 20–24.
43. Leanne Atwater, John F. Brett, and Atira Cherise Charles, “Multisource Feedback: Lessons Learned and Implications for Practice,” Human Resource Management, 46 (2007), 285–307.
44. Jared Sandberg, “Performance Reviews Need Some Work, Don’t Meet Potential,” The Wall Street Journal, October 20, 2007, B1.
45. “360° Evaluation of Managers,” Omaha World-Herald, May 9, 2005, D1.
46. Leanne Atwater, John F. Brett, and Atira Cherise Charles, “Multisource Feedback: Lessons Learned and Implications for Practice,” Human Resource Management, 46 (2007), 285–307; Anne Freedman, “Performance Management: Balancing Values, Results in Reviews,” Human Resource Executive, August 2006, 62–63.
47. Leslie A. Weatherly, “Performance Management: Getting It Right from the Start,” SHRM Research Quarterly, 2004.
48. “What Is the ‘Rating Scale’ Method of Performance Evaluation?” Ceridian HR Compliance Reference System, http://hrcompliance.ceridian.com/ www/content/10/12487/15884.
49. Leslie A. Weatherly, “Performance Management: Getting It Right from the Start,” SHRM Research Quarterly, 2004.
50. Richard D. Goffin, R. Blake Jelley, Deborah M. Powell, and Norman G. Johnston, “Taking Advantage of Social Comparisons in Performance Appraisal: The Relative Percentage Method,” Human Resource Management, 48 (2009), 251–268.
51. Leslie A. Weatherly, “Performance Management: Getting It Right from the Start,” SHRM Research Quarterly, 2004.
52. Jena McGregor, “The Struggle to Measure Performance,” BusinessWeek, January 9, 2006, 26–28.
53. Michael O’Malley, “Forced Ranking: Proceed Only with Great Caution,” WorldatWork, First Quarter 2003, 31–39.
54. Leslie A. Weatherly, “Performance Management: Getting It Right from the Start,” SHRM Research Quarterly, 2004.
55. Michael O’Malley, “Forced Ranking: Proceed Only with Great Caution,” WorldatWork, First Quarter 2003, 31–39.
56. Dick Grote, “Making Forced Rankings Work,” Workforce Management Online, November 2005, www.workforce.com.
57. Steve Scullen, Paul Bergey, and Lynda Aiman-Smith, “Forced Distribution Rating Systems and the Improvement
of Workforce Potential,” Personnel Psychology, 58 (2005), 1–31.
58. Aguinis, Performance Management, 155–162.
59. Steve Hamm, “Motivating the Troops,” BusinessWeek, November 21, 2005, 88–92.
60. “A Positive Psychology Handbook for Entrepreneurs,” BusinessWeek, Small Biz, February/March 2009, 47.
61. “Can You Suggest Constructive Techniques for Discussing an Employee’s Poor Performance?” Ceridian HR Compliance Reference System, http:// hrcompliance.ceridian.com.
62. D. Van Fleet, T. Peterson, and E. Van Fleet, “Closing the Performance Feedback Gap with Expert Systems,” Academy of Management Executive, August 2005, 38–53.
63. G. Adler and M. Ambrose, “Toward Understanding Fairness Judgments Associated with Computer Performance Monitoring,” Human Resource Management Review, 15 (2005), 43–67.
64. Carol Hymowitz, “What to Do When Your Favorite Workers Don’t Make the Grade,” The Wall Street Journal, April 11, 2000, B1.
65. Laura Roberts, et al., “How to Play to Your Strengths,” Harvard Business Review, January 2005, 74–80; Peter Drucker, “Managing Oneself,” Harvard Business Review, January 2005, 100–109.
66. Aileen MacMillan, “Raising the Bar on Performance Management Practices to Optimize Performance Reviews and Goal Management,” HR.com, April 2006, 2–12.
67. Adrienne Fox, “Curing What Ails Performance Reviews,” HR Magazine, January 2009, 52–56; Jim Kochanski and Angelita Becom, “Four Key Steps to Performance Management,” Workspan, February 2008, 32–36.
68. “An ‘Inside-Out’ Approach to Enhancing Performance Management,” HR Focus, September 2006, 3–5.
5315X_10_ch10_p318-356.indd 3565315X_10_ch10_p318-356.indd 356 26/06/10 5:19 PM26/06/10 5:19 PM