Contents

Performance Appraisal
1. Introduction
2. Performance Management system
3. Performance Appraisal Methods
4. Factors that can distort Appraisal
5. Creating more effective Performance Management
system
6. International Performance Appraisal
1. Introduction
Once the employee has put in around one year of
service, performance appraisal is conducted i.e. the HR
department checks the performance of the employee.
Based on these appraisal future promotions, incentives,
increments in salary are decided.
Employees generally see performance evaluations as
having a direct effect on their work lives.
The performance management systems need to include:
Decisions about who should evaluate performance;
What format should be used; and
How the results should be utilized.
2. Performance Management System
2.1 Purposes of a Performance Management System
Feedback: let employees know how well they have done
and allow for employee input.
Development: identify areas in which employees have
deficiencies or weaknesses.
Documentation: to meet legal requirements.
2.2 Difficulties of Performance Management System
Focus on the individual: discussions of performance
may elicit strong emotions and may generate conflicts
when subordinates and supervisors do not agree.
Focus on the process: company policies and procedures
may present barriers to a properly functioning appraisal
process.
Additionally, appraisers may be poorly trained.
2. Performance Management System
2.3 Performance Appraisal Process
HRM practices must be bias free, objective and job-
related.
Valid performance appraisals are conducted at
established intervals and are done by trained appraisers.
2. Performance Management System
2.3 Performance Appraisal Process
Establishment of performance standards:
Derived from companys strategic goals; and

Based on job analysis and job description.

Communication of performance standards to employee.

Discussion of appraisal with employee.
Identification of corrective action where necessary:
Immediate action deals with symptoms; and

Basic corrective action deals with causes.

3. Performance Appraisal Methods
Three approaches:
Absolute standards;
Relative standards; and
Objectives.
3. Performance Appraisal Methods
3.1 Evaluating Absolute Standards
An employees performance is measured against
established standards.
Evaluation is independent of any other employee.
3. Performance Appraisal Methods
3.1 Evaluating Absolute Standards
Essay Appraisal: appraiser writes narrative describing
employee performance and suggestions.
Critical Incident Appraisal: based on key behavior
anecdotes illustrating effective or ineffective job
performance.
Checklist Appraisal: appraiser checks off behaviors that
apply to the employee.
Adjective Rating Scale Appraisal: Appraiser rates
employee on a number of job-related factors.
3. Performance Appraisal Methods
3.1 Evaluating Absolute Standards
Forced-Choice Appraisal: appraisers choose from sets
of statements which appear to be equally favorable, the
statement which best describes the employee.
Behaviorally Anchored Rating Scales (BARS):
appraiser rates employee on factors which are defined by
behavioral descriptions illustrating various dimensions
along each rating scale.
3. Performance Appraisal Methods
3.2 Relative Standards
Employees are evaluated by comparing their
performance to the performance of other employees.
Group Order Ranking: employees are placed in a
classification reflecting their relative performance, such
as top one-fifth.
Individual Ranking: employees are ranked from highest
to lowest.
Paired Comparison:
Each individual is compared to every other.

Final ranking is based on number of times the individual

is preferred member in a pair.
3. Performance Appraisal Methods
3.3 Using Achieved Outcomes to Evaluate Employees
Management by Objectives (MBO)
Includes mutual objective setting and evaluation based
on the attainment of the specific objectives.
Common elements in MBO program are:
Goal specificity;
Participative decision making;
Explicit time period; and
Performance feedback.

Effectively increases employee performance and

organizational productivity.
4. Factors that can Distort Appraisal
4.1 Distortions
4. Factors that can Distort Appraisal
4.1 Distortions
Leniency error:
Each evaluator has his/her own value system.

Some evaluate high (positive leniency) and others, low

(negative leniency).
Halo error: evaluator lets an assessment of an individual
on one trait influence evaluation on all traits.
Similarity error: evaluator rates others in the same way
that the evaluator perceives him or herself.
Low appraiser motivation: evaluators may be reluctant
to be accurate if important rewards for the employee
depend on the results.
4. Factors that can Distort Appraisal
4.1 Distortions
Central tendency: the reluctance to use the extremes of a
rating scale and to adequately distinguish among
employees being rated.
Inflationary pressures: pressures for equality and fear of
retribution for low ratings leads to less differentiation
among rated employees.
Inappropriate substitutes for performance: effort,
enthusiasm, appearance, etc. are less relevant for some
jobs than others.
4. Factors that can Distort Appraisal
4.2 Attribution Theory
Evaluations are affected based on whether someones
performance is due to:
Internal factors they can control; or

External factors which they cannot.

If poor performance is attributed to internal control, the

judgment is harsher than when it is attributed to
external control.
4.3 Impression management
If employee positively influences the relationship with
the supervisor, s/he is likely to receive a higher rating.
5. Creating More Effective PMS
5.1 Use Behavior-Based Measures
Measures based on specific descriptions of behavior are
more job-related and elicit more inter-rater agreement
than traits, such as loyalty or friendliness.
5.2 Combine Absolute and Relative Standards
Absolute standards tend to be positively lenient; relative
standards suffer when there is little variability.
Combining the standards tends to offset the weaknesses
of each.
5.3 Provide Ongoing Feedback
Expectations and disappointments should be shared with
employees on a frequent basis.
5. Creating More Effective PMS
5.4 Use Multiple Raters
Increasing the number of raters leads to more reliable
and valid ratings.
Use peer evaluations: co-workers offer constructive
insights and more specific evaluations.
Upward appraisals: allow employees to give their
managers feedback.
360-Degree appraisals: supervisors, peers, employees,
team members, customers and others with relevant
information evaluate the employee.
5. Creating More Effective PMS
5.5 Rate Selectively
Appraisers only evaluate in those areas about which they
have sufficient knowledge.
Appraisers should be organizationally as close as
possible to the individual being evaluated.
More effective raters are asked to do the appraisals.
5.6 Train Appraisers
Untrained appraisers who do poor appraisals can
demoralize employees and increase legal liabilities.
5. Creating More Effective PMS
6. International Performance Appraisal
6.1 Who performs the evaluation?
Different cultural perspectives and expectations between
the parent and local country may make evaluation
difficult.
Evaluation forms may not be translated accurately.
Quantitative measures may be misleading.
6.2 Evaluation Formats
May make sense to use different forms for parent-
country nationals and host-country nationals.
Performance criteria for a particular position should be
modified to fit the overseas position and site.
Include a current expatriates insights as part of the
evaluation.
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