Performance Management and Appraisal

Training and Developing Employees

中国经济管理大学/中國經濟管理大學

ANNOTATED OUTLINE

I. Basic Concepts in Performance Management and Appraisal

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.   

B. Defining the Employee's Goals and Work Standards – 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; and 4. encourage participation.

Ø NOTES Educational Materials to Use

II. Techniques for 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 candid 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 in a policy-making and advisory role.

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

The New Workplace:  Performance Appraisals and Joint Venture Collaboration – A recent research project indicated that performance appraisals that are properly designed can encourage employees to collaborate and share information

E. Graphic Rating Scale Method – is the simplest and most popular performance appraisal technique. 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. (See example, Figure 9-3) Managers must decide which job performance aspects to measure. Some options include generic dimensions, actual job duties, or behaviorally recognizable competencies.

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 9-6 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 9-7 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.

Teaching Tip: Discuss what the ramifications of using the forced distribution method for class grades would be. Students will have strong opinions.

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 reviews 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; and 5) develop final instrument. The advantages of BARS include a more accurate gauge; clearer standards; feedback; independent dimensions; and consistency.

L. Management by Objectives (MBO) – requires the manager to set specific measurable goals with each employee and then periodically discuss his/her progress toward these goals. The process consists of six steps: 1) set the organization's goals; 2) set departmental goals; 3) discuss departmental goals; 4) define expected results; 5) performance reviews; and 6) provide feedback.

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. About 1/3 of employers use online performance management tools for at least some employees.

N. Electronic Performance Monitoring – these systems use computer network technology to allow managers access to their employees’ computers and telephones.

O.  Appraisal in Practice – the most effective appraisal forms often merge several approaches.

Ø NOTES Educational Materials to Use

III. Dealing with Performance Appraisal Problems 

It can be difficult to rate performance for several reasons. Much depends on a good rating, including career progress, or being able to obtain a raise. There are also technical problems that can affect the fairness of the process.

A. Potential 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.

a. Research Insight – Bias can influence the way a person appraises another person. In one study, for example, the identical employee was rated differently if pregnant. Figure 9-10 lists other sample rating errors. 

B. Five Guidelines for How to Hold Effective Appraisals – Appraisal problems can be more effective by following these five things:  a) know the problem; b) use the right appraisal tool; c) keep a diary; d) get agreement on a plan; e) be fair. 

C.  Appraisals and the Law:  Appraising – It has been found that inadequate appraisal systems tend to be at the root of illegal discriminatory actions. In addition to being done legally, appraisals should be done ethically and honestly. This discussion box provides guidelines for developing a legally defensible appraisal process.

D. Who Should Do the Appraising?

1. The Immediate Supervisor – is 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.

Research Insight – One study shows that upward feedback is very effective in improving supervisors’ behaviors.

6. 360-Degree Feedback – where ratings are collected from the employee’s supervisors, subordinates, peers, and internal or external customers. This method is the subject of considerable debate. One study found significant correlation between 360-degree ratings and conventional ratings. Firms should carefully assess potential costs, carefully train those giving feedback, and not rely solely on 360-degree feedback.

Ø NOTES 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 Appraisal Interviews – 1) Satisfactory – Promotable This is the easiest interview, with the objective to make development plans; 2) Satisfactory – Not Promotable This type of interview has the objective of maintaining performance when promotion is not possible; and 3) Unsatisfactory – Correctable with the objective to plan correction via the development of an action plan.

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, using objective examples; don’t get personal; encourage the person to talk; and don’t tiptoe around.

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

2. 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.

     3. 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.

     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.

V. Performance Management 

A. What is Performance Management? – is the continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organization’s goals.

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. Improving Productivity through HRIS:  TRW’s New Performance Management System – In this example of how a large firm implemented a performance management system, TRW moved from a paper-based performance appraisal system to an online system, through which most TRW employees and supervisors could input and review their data electronically. Figures 9-12 and 9-13 show the information required for this Web-based system. 

Ø NOTES Educational Materials to Use

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 you would use the alternation ranking method, the paired comparison method, and the forced distribution method.  The alternation ranking method would be used by listing all employees to be rated, deciding who is the best in a trait to be rated, and which is the worst.  Then decide who is the second best, and the second worst ... the third best and the third worst ... and so on until all the employees have been ranked for that trait.  Then do the same with the next trait to be rated.  With the paired comparison, for each trait to be rated, the supervisor would have a sheet with employee names in pairs ... every employee name is paired with every other name.  For each pair, the supervisor would circle the one of the two that is better in that trait.  Forced Distribution gives the supervisor a set rating scale (such as 1 through 5).  The 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 you would go about developing a behaviorally anchored rating scale.  Each student should express the five steps in his or her own words.  Those five steps are:  1) generate critical incidents; 2) develop performance dimensions; 3) reallocate incidents; 4) scale the incidents; and 5) develop final instrument. 

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.

6. Discuss the pros and cons of using different potential raters to appraise a person's performance.  The advantage of using several raters (either a rating committee, or a combination of peer, supervisor, and subordinate ratings) is that the ratings tend to be more valid than those of one individual rater.  The negatives might include the time and cost involved as well as problems with the amount of daily contact that some raters may not have with the employee being rated.

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.

8. Answer the question: How would you get the interviewee to talk during an appraisal interview?  There are several techniques that will help:  1) stop and listen to what the person is saying ... don't be afraid of a little silence; 2) ask open-ended questions; 3) use prompting statements like "go on," or "tell me more;" 4) restate the person's last statement as a question.  

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, develop a graphic rating scale for the following jobs:  secretary, engineer, directory assistance operator.  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; Directory Assistance Operator--speed, attendance, accuracy, and friendliness.  In each case, the students should come up with a defining statement that clarifies what the job characteristic means.

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 how the use of this method would impact the rating of their college professors.

3. Working individually or in groups, develop, over the period of a week, a set of critical incidents covering the classroom performance of one of your instructors.  If you had the class conduct a job analysis and create a job description for an instructor in Chapter 3, it would be helpful to refer to that to help identify what kinds of behavior and tasks the instructor should be doing.  This will give a good basis for students to observe and watch for critical incidents.  If they find critical incidents that are not based in these other documents, it will be a good opportunity to go back and review how all this ties together and that we haven't communicated to the instructor in the job description these behaviors or tasks that they are now wanting to rate them on. 

4.  The HRCI "Test Specifications" appendix at the end of this book lists the knowledge someone studying for the HRCI certification exam needs to know in each area of human resource management (such as in Strategic Management, Workforce Planning, and Human Resource Development).  In groups of 4-5 students, do four things:  (1) review that appendix now; (2) identify the material in this chapter that relates to the required knowledge the appendix lists; (3) write four multiple-choice exam questions on this material that you believe would be suitable for inclusion in the HRCI exam; and (4) if time permits, have someone from your team post your team's questions in front of the class, so the students in other teams can take each other's exam questions.

5.  Every week, like clockwork, during 2004, Donald Trump told another "apprentice," "you're fired."  Review recent (or archived) episodes of Donald Trump's The Apprentice show, and answer this:  What performance appraisal system did Mr. Trump use, and do you think it resulted in valid appraisals?  What techniques discussed in this chapter did he seem to apply?  How would you suggest he change his appraisal system to make it more effective?   Most critics agree that Trump's method of providing performance feedback could be vastly improved.  Lead a discussion by first asking students to identify the methods Trump used, a critique on how well he used any methods discussed in this chapter, and then suggest which methods outlined in this chapter would be more effective, and specifically how it would be applied in the scenario/episode they selected.

EXPERIENTIAL EXERCISES & CASES

Experiential Exercise: Grading the Professor

1. Students should develop their own tool for appraising the performance of an instructor.  Look for them to apply concepts discussed in this chapter.

2. Students should present their tools to the class.  How similar are the tools?  Do they all measure about the same factors?  Which factor appears most often?  Which do you think is the most effective tool?  Encourage students to reflect on the factors that they chose, or did not choose. 

The class should select the top 10 factors from all of the appraisal tools presented to create what the class perceives to be the most effective tool for appraising the performance of the instructor. Share your perspective on what makes a good teacher.  

Application Case: Appraising the Secretaries at Sweetwater U 

1. Do you think that the experts' recommendations will be sufficient to get most of the administrators to fill out the rating forms properly?  Why? Why not?  What additional actions (if any) do you think will be necessary?  While controversial, the recommendations would, in fact, encourage administrators to fill the forms out correctly.  Using the more detailed form and not tying the performance ratings to salary increases would allow the managers to feel more free about rating the secretaries accurately.  There would, however, need to be some strong training sessions (both for administrators and secretaries) to help them understand the new system.  Since all secretaries have traditionally received the same salary increases, and have been pleased with that, it would be advisable to consider lowering the maximum increase to an amount that could be given to all secretaries while staying within budget.  Then all secretaries with a satisfactory rating or better would receive that increase.

2. Do you think that Vice President Winchester would be better off dropping graphic rating forms, substituting instead one of the other techniques we discussed in this chapter such as a ranking method?  Why?  Certainly other methods could be used.  He has already had a taste of what would result if he went to a forced distribution or other ranking method.  A BARS system might be best, but it could be costly to develop if the clerical staff has positions that are significantly different.

3. What performance appraisal system would you develop for the secretaries if you were Rob Winchester?  Defend your answer.  If the development costs are not too great, the BARS system would give the strongest solution to the current situation.  The behavioral anchors would make it more difficult to just rate everyone at the top.  It would also help to eliminate the different interpretations of what the rating scales mean.

Continuing Case: Carter Cleaning Company:  The Performance Appraisal

1.  Is Jennifer right about the need to evaluate the workers formally?  The managers? Why or why not?   Based on the information presented in the chapter, the students need to determine if the workers and managers should be evaluated formally or informally, and the need to provide reasons for their decision. 

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.

Translating Strategy into HR Policies and Practices Case: The Hotel Paris

The New Performance Appraisal System – In this case, HR manager Lisa Cruz must develop a performance appraisal system that supports company competitive strategies.

1. Pick out one job, such as front desk clerk. Based on any information you have (including job descriptions you may have created in other chapters), write a list of duties, competencies, and performance standards for that chosen job.

Answers should include competencies that will help Hotel Paris become more service oriented. Use examples from the case itself, such as “ability to check a guest in or out in five minutes or less,” to get the class started. Discuss what has made students happy or unhappy when checking into a hotel, or in seeking other services.

2. Based on that, create a performance appraisal form for appraising that job.

There are samples in the text. If possible, before class ask students to bring sample performance appraisal forms in to class, either from jobs they have held or samples from the Internet. Suggest combining graphic rating scales with use of the critical incident method to improve on-going coverage of employee performance. Also stress that a once-yearly formal appraisal will not be sufficient unless it is supplemented by regular verbal feedback.

KEY TERMS

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

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 trait, choosing

method 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 of rates are

method 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 of narrative and

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

electronic performance Having supervisors electronically monitor the amount of computerized

monitoring (EPM) data an employee is processing per day, and thereby his or her performance.

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.

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

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