Performance Management and Appraisal

PART THREE                                                            TRAINING AND DEVELOPMENT
CHAPTER		T Nine
Performance Management and Appraisal	9
Lecture Outline
Strategic Overview Basic Concepts in Performance Appraisal and Performance Management   Comparing Performance Appraisal and Performance Management    Why Performance Management?    Defining the Employee's Goals and Work Efforts An Introduction to Appraising Performance    Why Appraise Performance?    Realistic Appraisals    The Supervisor's Role    Steps in Appraising Performance Graphic Rating Scale Method Alternation Ranking Method Paired Comparison Method Critical Incident Method Narrative Forms Behaviorally Anchored Rating Scales Management by Objectives (MBO) Computerized and Web-Based Performance Appraisal Mixing the Methods Appraising Performance: Problems and Solutions Potential Rating Scale Appraisal Problems How to Avoid Appraisal Problems Who Should do the Appraising? The Appraisal Interview Types of Interviews How to Conduct the Appraisal Interview Appraisals in Practice Creating the Total Performance Management Process How appraisals are done in some companies in Asia	In Brief:  This chapter gives an overview of the performance appraisal process and the different tools and methods available.  The main topics covered include the performance management process, appraisal methods, appraisal performance problems and solutions, and the appraisal interview. Interesting Issues:  Despite lots of attention, money and effort, performance appraisals remain an area with which few managers or employees are satisfied.  The following questions may be worth discussing.  Is it just that we don't have a good enough system yet, is there an intrinsic problem with performance appraisals, or is it just human nature to dislike them?

ANNOTATED OUTLINE

I.              Basic Concepts in Performance Appraisal and Performance Management

A.   Comparing Performance Appraisal and Performance Management –
Performance appraisal is part of a total integrated process of performance
management, which consolidates goal setting, performance appraisal, and
development into a single, common system, the aim of which is to ensure that the employee's performance is supporting the company's strategic aims. Figure 9-1 illustrates the components of an effective performance management process

B.    Why Performance Management? – Performance management's emphasis on the integrated nature of goal setting, appraisal and development reflect Total Quality Management concepts.  Second, it reflects what many studies have shown that traditional performance appraisals are useless and counter-productive.  Third, it is a process that recognizes that every employee's efforts must focus on helping the company to achieve its strategic goals.

C.    Defining the Employee's Goals and Work Efforts – At the heart of performance management is the idea that employees effort should be goal directed, which involves clarifying expectations and quantifying them by setting measurable standards for each objective.  Some guidelines for effective goal setting are:

1.   Assign Specific Goals

2.   Assign Measurable Goals

3.   Assign Challenging but Doable Goals

           

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Educational Materials to Use

II.            An Introduction to Appraising Performance

A.    Why Appraise Performance – For several reasons; 1) they play an integral role in the employer's performance management process; 2) the appraisal lets the boss and subordinate develop a plan for correcting any deficiencies, and reinforce those things he does correctly; 3) they serve a useful career planning purpose; and 4) it plays a part in salary decisions.

B.    Realistic Appraisals - It is important that a manager be candidate when a subordinate is underperforming.

C.    The Supervisor's Role – Supervisors must be familiar with basic appraisal techniques, understand and avoid problems that can cripple appraisals, and know how to conduct appraisals fairly.  The HR Department serves as policy-making and advisory role.

D.    Steps in Appraising Performance – 1) define the job; 2) appraise performance; and 3) provide feedback.

E.    Graphic Rating Scale Method – the simplest and most popular appraising performance technique, is where a scale is used to list a number of traits and a range of performance for each, then the employee is rated by identifying the score that best describes his/her performance level for each trait.

            F.   Alternation Ranking Method – is where employees are ranked from best to worst on a particular trait, choosing highest, then lowest, until all are ranked.  Figure 9-7 shows an example of this method.

            G.   Paired Comparison Method – involves ranking employees by making a chart of all possible pairs of employees for each trait and indicating which is the better employee of the pair. Figure 9-8 shows an example of the paired comparison method.

            H. Forced Distribution Method – is where predetermined percentages of rates are placed in various performance categories; similar to grading on a curve.

            I.    Critical Incident Method – is where a supervisor keeps a record of uncommonly good and/or undesirable examples of an employee’s work-related behavior, and reviewing it with the employee at predetermined times.

            J.   Narrative Forms – involve rating the employee’s performance for each performance factor, writing down examples and an improvement plan, aiding the employee in understanding where his/her performance was good or bad, and summarizing by focusing on problem solving.

            K.  Behaviorally Anchored Rating Scales (BARS) – combines the benefits of narratives, critical incidents, and quantified scales, by anchoring a scale with specific behavioral examples of good or poor performance.  The five steps in developing a BARS are:

           

1) generate critical incidents;

2) develop performance dimensions;

3) reallocate incidents;

4) scale the incidents; 

5) develop final instrument.

           

The advantages of BARS: more accurate gauge; clearer standards; feedback; independent dimensions; and consistency.

L.   Management by Objectives (MBO) Method – requires the manager to set specific measurable goals with each employee and then periodically discuss his/her progress toward these goals, and consist of six steps:

1) set the organization's goals

2) set departmental goals

3) discuss departmental goals

4) define expected results

5) performance reviews

6) provide feedback.

           

                  Problems with MBO (listed in Asian Perspective)

            M.  Computerized and Web-Based Performance Appraisal – generally enables managers to keep notes on subordinates during the year, to rate employees on a series of performance traits, and then generate written text to support each part of the appraisal.

            N. Mixing the Methods – Most companies use a combination of several methods.

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Educational Materials to Use

III.           Appraising Performance:  Problems and Solutions

            A.   Potential Rating Scale Appraisal Problems – unclear standards; halo effect; central tendency; leniency or strictness; and bias.

1.   Unclear Standards – Ambiguous traits and degrees of merit can result in an unfair appraisal.

2.   Halo Effect – the influence of a rater’s general impression on ratings of specific qualities, can be a problem

3.   Central Tendency – where supervisors stick to the middle of the rating scales, thus rating everyone average.

4.   Leniency or Strictness – supervisors have the tendency to rate everyone either high or low.

5.   Bias – the tendency to allow individual differences such as age, race, and sex to affect the appraisal ratings employees receive, is a problem.

            B.   How to Avoid Appraisal Problems – Appraisal problems can be minimized by learning and understanding the potential problems and solutions, using the right appraisal tool, training supervisors to reduce rating errors; and keeping a diary.

            C.   Who Should Do the Appraising?

1.   The Immediate Supervisor – usually in the best position to observe and evaluate the subordinate’s performance, and is responsible for that person’s performance.

2.   Peer Appraisals – becoming more popular with firms using self-managing teams.

3.   Rating Committees – consist of multiple raters, typically the employee’s immediate supervisor and three or four other supervisors.

4.   Self-Ratings – tend to be higher than supervisor or peer ratings.

5.   Appraisal by Subordinates – or upward feedback, is where subordinates anonymously rate their supervisor’s performance.

6.   360-Degree Feedback – where ratings are collected from the employee’s supervisors, subordinates, peers, and internal or external customers.

           

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Educational Materials to Use

IV.        The Appraisal Interview is an interview in which the supervisor and subordinate review the appraisal and make plans to remedy deficiencies and reinforce strengths.

            A. Types of Interviews –

      1) Satisfactory – Promotable with the objective to make development plan

      2) Satisfactory – Not Promotable with the objective to maintain performance;

      3) Unsatisfactory – Correctable with the objective to plan correction via the development of an action plan.

      4) Unsatisfactory – Uncorrectable

            B.  How to Conduct the Interview – Prepare for the Interview by assembling the data, preparing the employee, and choosing the time and place.  Be direct and specific; don’t get personal; encourage the person to talk; and don’t tiptoe around.

                 1.    How to Handle a Defensive Subordinate – Recognize that defensive behavior is normal; never attack a person’s defenses; postpone action; and recognize your own limitations.

                 2.    How to Criticize a Subordinate – When required, criticize in a manner that lets the person maintain his/her dignity and sense of worth, in private, and constructively.

                 3.    How to Ensure the Interview Leads to Improved Performance – Clear-up job-related problems and set improvement goals and a schedule for achieving them.

                 4.    How to Handle a Formal Written Warning – Written warnings should identify the standards by which the employee is judged, make it clear that the employee was aware of the standard, specify any violation of the standard, and show that the employee had an opportunity to correct the behavior.

C.   Appraisals in Practice – Research shows that performance appraisals are required for most employees.  Various types of appraisal formats are used, but most include reviews and feedback.

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Educational Materials to Use

IV.        Creating The Total Performance Management Process

In this section several examples are provided of how a small firm, a large firm, and the Hotel International created a total performance management process.

The HR Scorecard Strategy and Results: The New Performance Appraisal System – The continuing example of Hotel International, discusses how they used the HR Scorecard as a tool to focus employee's behavior specifically on the performance that would help the Hotel International achieve its strategic goals, as illustrated in Figure 9-16.

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Educational Materials to Use

           

PERFORMANCE APPRAISAL IN ASIA

Performance appraisal practices in Asian companies are varied.

China: Performance appraisals are widely practiced in state-owned enterprises.

Hong Kong: Performance appraisals are more common in larger companies.

Malaysia: Practices are similar among American and British subsidiaries.

Singapore: Rating scales using standard form are commonly used.

South Korea: Companies have annual performance appraisal for employee development purposes as promotion is based on seniority

Thailand: American and European subsidiaries have appraisals to link pay with work-related performance. Among local companies, performance-based approach is more common for managers and professionals.

Vietnam: Appraisal in state-owned enterprises depended on the agreeableness of the subordinate-manager relationship.

DISCUSSION QUESTIONS

1.   What is the purpose of a performance appraisal?  The purpose of a performance appraisal is to provide employees with feedback on how they are doing, as well as give them an opportunity to give feedback. 

2.   Discuss the pros and cons of at least four performance appraisal tools.  The text lists eight different performance appraisal tools.  Students might discuss the pros and cons of any four of these eight.  An example of some of the pros and cons is:  Graphic Rating Scale method is easy to use, simple, and does not take much time to administer.  However, different supervisors may interpret a numerical rating differently and the traits rated may or may not relate to performance.

3.   Explain how do you use the alternation ranking method, the paired comparison method, and the forced distribution methodThe supervisor is limited to giving a pre-determined percentage of his or her employees' rating.  For example:  15% can get a 1; 20% can get   a 2; 30 % can get a 3 ... and so forth.

4.   Explain in your own words how do you develop a behaviorally anchored rating scale. 

5.  Explain the problems to be avoided in appraising performance.  The five main rating scale problems listed in the text are:  1) unclear standards; 2) halo effect; 3) central tendency; 4) leniency or strictness; and 5) bias.

7.   Compare and contrast performance management and performance appraisal.  Performance appraisal means evaluating an employee's current and/or past performance relative to his or her performance standards.  Performance management is the process that consolidates goal setting, performance appraisal, and development into a single, common system, the aim of which is to ensure that the employee's performance is supporting the company's strategic aims.  Performance management includes practices through which the manager defines the employee's capabilities, and evaluates and rewards the person's effort.

INDIVIDUAL AND GROUP ACTIVITIES

1.     Working individually or in groups, develop a graphic rating scale for the following jobs:  secretary, engineer.  Job characteristics may include, but not be limited to:  Secretary--quantity of work, frequency of errors, attendance, and initiative; Engineer--initiative, significance of contribution to the organization, problem solving skills, frequency of errors, and communication skills.

2.     Working individually or in groups, describe the advantages and disadvantages of using the forced distribution appraisal method for college professors.  Students should review the section on the forced distribution method and describe the use of this method would impact the rating of their college professors.

2.   Develop a performance appraisal method for the workers and managers in each store. The students need to be familiar with different appraisal methods discussed in the chapter.  They should use the sample appraisal forms given in the chapter as guides.

HOTEL INTERNATIONAL

In this case, HR Director Li must develop a performance appraisal system that supports the hotel’s competitive strategy.

KEY TERMS

performance appraisal             Evaluating an employee’s current and/or past performance relative to his or her performance standards.

performance management        Managing all elements of the organizational process that affect how well employees perform.

graphic rating scale                 A scale that lists a number of traits and a range of performance for each.  The employee is then rated by identifying the score that best describes his or her performance for each trait.

alternation ranking                   Ranking employees from best to worst on a particular

method                                    trait, choosing highest, then lowest, until all are ranked.

paired comparison                   Ranking employees by making a chart of all possible pairs of the

method                                    employees for each trait and indicating which is the better employee of the pair.

forced distribution                   Similar to grading on a curve; predetermined percentages

method                                    of rates are placed in various performance categories.

critical incident method           Keeping a record of uncommonly good or undesirable examples of an employee's work-related behavior and reviewing it with the employee at predetermined times.

behaviorally anchored              An appraisal method that aims at combining the benefits

rating scale (BARS)                  of narrative and quantified ratings by anchoring a quantified scale with specific narrative examples of good and poor performance.

                       

management by                       Involves setting specific measurable goals with each employee

objectives (MBO)                      and then periodically reviewing the progress made.

                       

unclear standards                   An appraisal scale that is too open to interpretation.

halo effect                                In performance appraisal, the problem that occurs when a supervisor's rating of a subordinate on one trait biases the rating of that person on other traits.

central tendency                       A tendency to rate all employees the same way, such as rating them all average.

strictness / leniency                 The problem that occurs when a supervisor has a tendency to rate all subordinates either high or low.

bias                                          The tendency to allow individual differences such as age, race, and sex to affect the appraisal rates these employees receive.

appraisal interviews                 An interview in which the supervisor and subordinate review the appraisal and make plans to remedy deficiencies and reinforce strengths.