Session 6

PERFORMANCE APPRAISALS

Chapter Objectives
After studying this chapter, you should be able to:
Define performance appraisal.
Identify the uses of performance appraisal.
Discuss performance appraisal environmental factors.

Explain informal and systematic performance appraisal.

Identify who may be responsible for performance

appraisal and the performance period.

Identify who does the appraisal.
Identify the various performance appraisal methods

used.
2

I. What is performance
appraisal?
After an employee has been selected for a
job, has been trained to do, and has work on
its for a period of time, his or her performance
should be reviewed.
Performance appraisal is the process of
evaluation how well employees do their jobs
compared with a set of standards and
communicating that information to employees.

It also has been called employee rating,

employee evaluation, performance
review, performance evaluation, and
result appraisal.

I. What is performance appraisal?

(Cont.)
Performance Appraisal is a formal system
of review and evaluation of individual or
team task performance.
Performance appraisal involves the
identification, measurement, &
management of human performance in
organizations.

Identification means determining what

area of work the manager should be
examining when measuring performance.

I. What is performance appraisal?

(Cont.)
Measurement, the centerpiece of the
appraisal system, entails making managerial
judgments of how good or bad observed
employee performance was.

Management is the overriding goal of any

appraisal system.

Performance Mgt. : A management system

consisting of all organizational processes
that determine how well employees, teams,
and ultimately, the organization perform.
5

II. Why appraise performance?

There are four reasons:
An appraisal provides information upon with
you make promotion and salary decisions.
They provides an opportunity for you and your
subordinate to review his or her work-related
behavior.
The appraisal is part of the firm's career plans
in light of his/her strengths and weaknesses.
Appraisals help you better manage and
improve your firm's performance.
6

III. Uses of Performance Appraisal

The 3 major uses of PA are for compensation
administration, feedback for development, and
various administrative decisions such as
layoffs, promotions, and transfers.

Uses of Performance Appraisal

Compensation
administration
7

Feedback for
development

Other
administrative
,
decision

1) Compensation administration
A Performance appraisal system is link
between the reward that employee hope to
receive and his or her productivity.
The linkage can be thought of as:
Productivity

Performance
Appraisal

Reward

If any link fails, the most productive

employees will not receive the larger reward,
resulting in all the problems that come from
perceived inequity in the workplace.
8

2) Feedback for development

Performance appraisal is a primary source
of information and feedback, for employees

both on areas in which they are doing well

and ones where improvement is needed.

So performance appraisal has a

developmental use.

2) Feedback for development (Cont.)

Managers & supervisor can identify
employee's weakness, potentials and
training needs of employees through
performance appraisal feedback.
They can inform employees about their
progress and tell them what skills they
need to develop to become eligible for
promotion, transfers & other HR
activities.

10

3) Other administrative decisions

Several other uses of performance
appraisal result can be classified as
administrative decisions such as
promotion, termination, layoff, and
transfer assignment decisions often are
made on basis of performance.
Similarly, promotion and demotion base
on differences in performance must be
documented with performance
appraisal.
11

Or III. Uses of Performance

Appraisal
1) Human resource planning - Data must be

12

available to identify those who have the

potential to be promoted.
2) Recruitment and selection - May be helpful in
predicting the performance of job applicants.
3) Training and development - Point out an
employees specific needs for training and
development.
4) Career planning and development - Essential
in assessing an employees strengths and
weaknesses and in determining the persons
potential.

Or III. Uses of P. A. (Cont.)

5) Compensation programs - Provide a
basis for rational decisions regarding
pay adjustments.

6) Internal employee relations - Used for

decisions in several areas of internal
employee relations, including promotion,
demotion, termination, layoff, and transfer .
7) Assessment of employee potential Some organizations attempt to assess
employee potential as they appraise
their job performance.
13

IV. PA. Environment Factors

1) External Environment
Legislation requiring
nondiscriminatory appraisal
systems
Labor unions

2) Internal environment
Factors within internal environment,
such as type of corporate culture.

14

IV. PA. Environment Factors

(Cont.)
Legislation Affecting Performance Appraisal

Mistretta v Sandia Corporation - Federal

judge ruled against company, stating,
There is sufficient circumstantial
evidence to indicate that age bias and
age based policies appear throughout the
performance rating process to the
detriment of the protected age group.

Albermarle Paper v Moody Supreme

Court case supported validation
requirements for performance appraisals
15

IV. PA. Environment Factors

(Cont.)
Labor Unions and Performance Appraisal

16

Have traditionally stressed seniority as

the basis for promotions and pay
increases.
May vigorously oppose the use of a
management-designed performance
appraisal system.

Performance Appraisal Process

External Environment
Internal Environment

Identify Specific
Performance Appraisal
Goals
Establish Performance
Criteria (Standards) and
Communicate Them To
Employees
Examine Work Performed
Appraise the Results
Discuss Appraisal with
Employee
17

V. Informal and systematic

1)PA.
Systematic / Formal PA:

Is used when the contact between manager

and employee is formalized and a system is
established to report managerial impression
and observations on employee
performance.
The day-to-day working for employees
performance is to be judged.

2) Informal PA:

18

Is conducted whenever the contacts

between managers and employees are not
formalized periodically.

VI. PA responsibilities:
1) HR Department:
Designing, maintaining & establishing formal
report system.
Making sure reports are on time
Training ratters
2) Managers:
Rating actual performance of employees
Making formal reports
Review appraisals of employees

19

VII. Timing of PA
n

Is important. Systematic appraisals typically

are conducted once or twice a year:

20

Usually near the employees anniversary

date.
For new employees, an appraisal 90 days
after employment, again at six months, and
annually thereafter is common timing.

VIII. Who does the appraisal?

1) Supervisor rating of subordinates:
Managers & supervisors in each
department rate their employees
performance.
2) A group of managers rating employees:

A group of managers from various

departments can rate the employee's
performance with different departments.

3) Peer ratings:
Use a group of peer as raters to
evaluate another employees.
21

VIII. Who does the appraisal?

(Cont.)
4)
Subordinates rate their supervisors:

Used to evaluate managers & supervisors in

order to improve their decisions-making and
leadership potentials.
5) Self ratings:

It is a self-development tool that force

employees to think about their strengths,
weakness & opportunities for improve
themselves.

6) Outsider rating:

22

Rating also may be done by outsiders.

IX. Method of Performance

Appraisals

1. Job Ranking Method

Consists of listing all employees from the
highest to lowest performance.
2) Paired Comparison Method

Normally compare each employee with

other employees in the group and find
out which employee is better.
3) Management By Objective (MBO):

23

Management by results/ Management of

performance objectives.

a)

24

What is MBO ?

The process by which objectives/ goals/ targets

are assigned through consultation to every
department, sub-unit, and individual in an
organization in order to increase individual and
organization performance.
McGregor believed that, instead of creating
antagonisms because of judgments, the superior
should work with subordinates to set goals.
MBO is more than just an evaluation program
and process. It is viewed as a philosophy of
managerial practice, a method by which
managers and subordinates plan, organize,
control, communicate, and debate.

a)

What is MBO ? (Cont.)

Usually, an MBO program follows a systematic

process, such as the following:
!
!
!
!
25

The superior & subordinate conduct meetings to

define key tasks of the subordinate and to set a
limited number of objectives (goals).
The participants set objectives that are realistic,
challenging, clear, and comprehensive.
The superior, after consulting with the
subordinate, establishes the criteria for
assessing the accomplishment of the objectives.
Dates for reviewing intermediate progress are
agreed upon and used.

a)

What is MBO ? (Cont.)

!
!
!

26

The superior and subordinate make any

required modifications in the original
objectives.
The final evaluation by the superior is made
and a meeting is held with the subordinate in
a counseling, encouraging session.
Objectives for the next cycle are set by the
subordinate after consulting with the superior,
keeping in mind the previous cycle and future
expectations.

a) What is MBO ? (Cont.)

The pitfalls and problems with MBO have been
identified, such as the following:
!
!
!
!
!
!
!
!
27

Too much paperwork is involved.

Too many objectives are set, and confusion occurs.
MBO is forced into jobs where establishing
objectives is extremely difficult.
There may be a failure to tie in MBO results with
rewards.
There is too much emphasis on the short term.
Superiors are not trained in the MBO process and
the mechanics involved.
Original objectives are never modified.
MBO is used as a rigid control device that
intimidates rather than motivates.

b) MBO Approaches:
Bottom-Up: performance goals are set first at the
working unit, based on what workers &
supervisors can achieve.

These goals that are converted to tactical levels

by middle managers.
Finally, these goals are sent to strategic levels for
consideration by top managers.

Top-Down:

28

Top-Down: Organizational goals/strategic goals

set by top managers who then consult with middle
managers in order to set department goals.
Then middle managers discuss with supervisors
to set goals at working unit.
Finally, supervisors have a meeting with their
employees in order to establish individual goals.

c) MBO Process:
Developing overall company's goals/ strategic
goals set by top managers.
Establishing specific goals to various
departments and individuals.
Formulating action plans:

29

When goals are set, action plans must be

developed.
Action plans focus on methods or necessary
activities such as.
What, Where, When, Whom, How, to
achieve particular goals.

c) MBO Process (Cont.)

Implementing action plans:
Once goals are set, action plans are
determined; individuals should be given a
consideration in carrying out activities.
Reviewing progress periodically
Provide a good opportunity for managers to
check employee's performance.
Identify and remove obstacles, solving
problem and altering action plans that are
not achieving the expected result.
30

c) MBO Process (Cont.)

Appraisal performance:
Usually, organizations appraise their
employee's performance over a period of
one year.
They can compare actual performance of
their employees with established goals.

The Results Can Be:

Achieved stated goals
Remaining the same
Not achieved stated goals
Taking correction
as needed
Exceeded stated goals
rewarding
31