Performance Management and Appraisal

Alayssa P. Silva
By PresenterMedia.com

Chapter Objectives:
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Understand the value and uses of performance appraisal in organizations and the prescriptions for effective appraisal. Present a definition of performance and apply the definition to various job functions. Understand the various error in ratings and proven methods to reduce them

The overall objective of this chapter

To provide recommendations for improving the effectiveness of performance management and appraisal in organizations. There are major discrepancies between the way in which appraisal is practiced and the way in which experts say it should be done.

Prescription for Effective Management

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Precision in the definition and measurement of performance is a key element of effective appraisal. The content and measurement of performance should derive from internal and external customers. The PM system should incorporate a formal process for investigating and correcting the effects of situational constraints the effects of situational constraints on performance.

An effective performance management process sets the foundation for rewarding excellence.

By linking individual employee work efforts with the organizations mission and objectives, the employee and the organization understand how that job contributes to the organization. By focusing attention on setting clear performance expectations (results + actions & behaviors), it helps the employee know what needs to be done to be successful on the job. Through the use of objectives, standards, performance dimensions, and other measures it focuses effort. This helps the department get done what needs to be done and provides a solid rationale for eliminating work that is no longer useful. By defining job-mastery and career development goals as part of the process, it makes it very clear how the current position supports employee growth and the additional opportunities the employee needs to explore.

Through regular check-in discussions, which include status updates, coaching, and feedback, it promotes flexibility, allowing you and the employee to identify problems early and change the course of a project or work assignment. By emphasizing that an annual appraisal should simply be a summary of the conversations held between you and the employee during the entire cycle, it shifts the focus away from performance as an annual event to performance as an on-going process. An effective performance management process, while requiring time to plan and implement, can save you and the employee time and energy. Most importantly, it can be a very effective motivator, since it can help you and the employee achieve the best possible performance.

How do we define performance and why do we measure it?

Definition of Performance Management

Performance Management is one of the key processes that, when effectively carried out, helps employees know that their contributions are recognized and acknowledged. Performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization. The communication process includes clarifying expectations, setting objectives, identifying goals, providing feedback, and evaluating results.

How do we define performance and why do we measure it?

Definition of Performance Management
Performance is defined as the record of outcomes produced on specified job functions or activities during a specified time period. Performance on the job as a whole would be equal to the sum (or average) of performance on the major job functions or activities. The functions have to do with the work that is performed and not the characteristics of the person performing. Performance refers to the set of outcomes produced during a certain period of time, and does not refer to the traits, personal characteristics, or competencies of the performer.

Managing Employee Performance The Cycle

The Performance management process is a cycle, with discussions varying year-to-year based on changing objectives. The cycle includes Planning, Checking-In, and Assessment. To begin the planning process, you and your employee review overall expectations, which includes collaborating on the development of performance objectives. Individual development goals are also updated. You then develop a performance plan that directs the employee's efforts toward achieving specific results to support organizational excellence and employee success. Goals and objectives are discussed throughout the year, during check-in meetings. This provides a framework to ensure employees achieve results through coaching and mutual feedback. At the end of the performance period, you assess the employee's performance against expected objectives, as well as the means used and behaviors demonstrated in achieving those objectives. Together, you establish new objectives for the next performance period.

What are the Uses of Performance Data

The information collected from performance management is typically used for compensation, performance improvement or management (e.g. personnel decision making), and documentation. Performance data are often used for staffing decision (e.g. promoting, transfer, discharge, layoffs). Moreover, Performance Management is also used for training needs analysis, employee development, and research and program evaluation (e.g. validation research for selection methods).

Designing an Appraisal System

The process of designing an appraisal system should involve managers, employees, HR professionals, and most important, internal and external customers in making decisions about each of the following issues

Appraisal is often person-oriented (focusing on the person who performed the behavior), but should be work-oriented (focusing on the record of outcomes that the person achieved on the job). Effective performance appraisal focuses on the record of outcomes and, in particular, outcomes directly linked to an organization's mission and objectives. There are six categories outcomes by which the value of performance in any work activity or work function may be assessed. In general, the greater the specificity and precision in the content of the appraisal, assuming the content is compatible with the strategic goals of the organization, the more effective the appraisal system regardless of the purpose for the appraisal system.

The six primary criteria on which the value of performance may be assessed
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Quality the degree to which the process or result of carrying out an activity approaches perfection in terms of either conforming to some ideal way of performing the activity or fulfilling the activitys intended purpose. Quantity - the amount produced, expressed in terms as dollar value, number of units, or number of completed activity cycles. Timeliness the degree to which an activity is completed, or a result produced, at the earliest time desirable from the standpoints of both coordinating with the outputs of others and maximizing the time available for other activities. Cost-effectiveness The degree to which the use of the organizations resources (e.g. human, monetary, technological, material) is maximized in the sense of getting the highest gain or reduction in loss from each unit or instance of use of a resource. Need for supervision - The degree to which a performer can carry out a job function without either having to request supervisory assistance or requiring supervisory intervention to prevent an adverse outcome. Interpersonal impact/contextual performance the degree to which a performer promotes feelings of self-esteem, goodwill, and cooperation among co-workers and subordinates.

There are three basic ways in which raters can make performance assessments: COMPARISONS AMONG PERFORMANCE

Compare the performances of all

ratees to each anchor (or standard) for each job activity, function, or overall performance. Rater judgments may be made in one of the following ways: Indicate which ratee in each possible pair of ratees performed closest to the performance level described by the anchor or attained the highest level of overall performance. (PAIRED COMPARISON)

ILLUSTRATIVE METHOD

Paired Comparison require the rater to compare all possible pairs of ratees on overall performance or some other, usually vaguely defined, standard.

There are three basic ways in which raters can make performance assessments: COMPARISONS AMONG PERFORMANCE

ILLUSTRATIVE METHOD

Indicate how the ratees ranked

in terms of closeness to the performance level described by the anchor or standard (STRAIGHT RANKING) Identify a predetermined percentage of employees as ineffective and highly effective (FORCED DISTRIBUTION)

Straight ranking or rank ordering ask the rater to simply identify the best employee, the second best, and so forth, until the rater has identified the worst employee. Forced distribution presents the rater with a limited number of categories (usually three to seven) and requires (or forces) the rater to place a designated portion of the ratees into each category. It usually places the majority of employees in the middle category while fewer employees are placed in higher and lower categories.

There are three basic ways in which raters can make performance assessments: COMPARISONS AMONG ANCHORS

ILLUSTRATIVE METHOD

Compare all anchors for each

job activity or function and select the one (or more) that best describes the ratees performance level. Rater judgments are made in the following way: Indicate which of the anchors fit the ratees performance best (and/ or worst). (CARS, forced choice)

Computerized adaptive rating scales (CARS) is a promising rating method that presents rater with pairs of behavioral statements reflecting different levels of performance on the same performance dimension. Forced choice requires rater to compare performance statements and select one (or more) as most descriptive. Unlike the CARS method, the forced choice method is specifically designed to reduce (or eliminate) intentional rating bias where the rater deliberately attempts to rate individuals high (or low) irrespective of their performance.

There are three basic ways in which raters can make performance assessments: COMPARISONS TO ANCHORS

ILLUSTRATIVE METHOD

Compare each ratees

performance to each anchor for each job activity or function. Rater judgments are made in one of the following ways: Whether or not the ratees performance matches the anchor. (graphic rating scales such as BARS, MBO)

Behaviorally anchored rating scale (BARS) graphic scales with specific behavioral descriptions defining various points along the scale for each dimension. Management by objectives (MBO) a performance management and appraisal system that calls for a comparison between specific, quantifiable target goals and the actual results achieved by an employee. It is an effective approach to improving performance and motivating employee.

There are three basic ways in which raters can make performance assessments: COMPARISONS TO ANCHORS

ILLUSTRATIVE METHOD

The frequency with which the

ratees performance matches the anchor. (all summated rating

scales such as BOS and PDA methods )

Whether the ratees

performance was better than, or equal to, or worse that the described by the anchor. (mixed standard scales)

Behavioral Observation Scales (BOS) the rater is asked to indicated how frequently the ratee has performed each of the listed behaviors. The ratings are them averaged or totaled for each person rated. Performance distribution assessment (PDA) a more complicated rating method based on the theory that ratings should be made in the context of opportunities to perform at a certain level. It is the only method that statistically incorporates constraints on performance as a formal part of the measurement process.

Performance ratings are subject to a wide variety of inaccuracies and biases referred to as rating errors. These errors occur in rater judgment and information processing and can seriously affect performance appraisal results. 1. Leniency/Severity occurs when ratings for employees are generally at the high end of the rating scale regardless of the actual performance of ratees. 2. Halo/horns effect occurs when a rater allows a rating on one dimension (or an overall impression) for an employee to influence the ratings he or she assigns to other dimensions for that employee. 3. Central tendency - occurs when rating for employees tend to be toward the center (midpoint) of the scale regardless of the actual performance of ratees.

4. Fundamental attribution errors refers to the tendency

to attribute observed behaviors or outcomes to the disposition of the person being observed while underestimating the causal role of factors beyond the control of the performer. 5. Representativeness Error the tendency to make judgments about people (or their performance) on the basis of their similarity to people who exhibited prominent or memorable levels on the attribute being judged, even though the similarity may have no causal connection to the attribute.

5. Availability Bias people tend to mistake the ease with

which a category of outcomes can be recalled as an indication of its frequency of occurrence relative to other categories. It has been found that negative events instances of ineffective performance seem to have greatest availability in memory. 6. Anchoring - tendency to insufficiently alter a judgment away from some starting point when new information is received. A persons reputation, or even his/her past performance, should not be a factor in how his/her performance during the period under consideration is judged.

Training to improve the raters observational and

categorization skills (called frame-of-reference training) has been shown to increase rater accuracy and consistency. This training consists of creating a common frame of reference among raters in the observation process.

Ratings can be provided by ratees, supervisors, peers, clients or customers, or high-level managers. While most companies still give the supervisor the sole responsibility for employees appraisal, formal multirater systems are becoming quite popular. Ratings collected from several raters, are also known as 360-degree appraisal system. The use of 360-degree appraisal system is one of the characteristics of high-performance work systems, which have been linked to superior corporate financial performance.

 The ratee may be defined at the individual, work group, division, or

organizationwide level. It is also possible to define the ratee at multiple levels.

For example, for some performance dimensions, it may be desirable to

appraise performance at the work group level for merit pay purposes and additionally at the individual level to identify development needs.
For example: 1.

Burger King awards cash bonuses to branch stores based on a customer-based evaluation process while maintaining an individual appraisal system within each store. Delta Airlines assesses customer service at the unit level only, while other job activities are assessed at the individual employee level.

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 One administrative issue is the possible automation of

performance measurement. The practice of monitoring employees while they perform their jobs through the use of surveillance cameras, telephone monitoring, or computer monitoring is growing in popularity.

Rater should communicate appraisal results to ratees through a formal feedback meeting held between the supervisor and the employee. For example, supportive feedback can lead to greater motivation, and feedback discussions about pay and advancement can lead to greater employee satisfaction with the process.

RECOMMENDATIONS:
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The rater should avoid being disturbed, and take sufficient time in the meeting. They should keep notes on effective and ineffective behavior as it occurs so that they will have some notes to refer when conducting feedback sessions. Raters should be informal and relaxed and allow the employee to share his or her insights. Raters should provide feedback that is clear, specific, descriptive, job related, constructive, frequent, and timely.

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Case Study:

A College of Business at a large university is currently implementing a new professor teaching appraisal system that is linked directly to college goals. Some of the college goals include teaching international aspects of business, providing team skills and sensitivity to ethical issues, and encouraging collaborative learning. The dean formed a committee to develop ways to measure how well professors meet each of these goals. For example, the committee proposed that students give feedback about how much they developed team collaboration skills in a course or how much they improved their ability to make ethical decisions. With this type of appraisal system, the college goals are the dimensions on which professor performance levels are measured. Because the major purpose of the new appraisal system is to encourage professors to contribute to the college goals in their teaching efforts, merit pay is tied to how well the professors rate in the categories.

Critical Questions:
1. Do you think that students should be the raters in this appraisal system? What other sources of appraisal would you recommend? 2. A number of faculty are concerned that student ratings are only a popularity contest and do not indicate teaching quality or amount of learning. Do you agree? 3. In small groups design a faculty evaluation system for your college. Here are some key issues to address: What should be the criteria? How should performance be measured (what items, or outcomes, and so on)? Who should be the raters? Should faculty set weights on criteria or choose criteria to be evaluated on? Should customers be involved in developing the system? Who are the customers?