CHAPTER SEVEN

1. CHAPTER SEVEN Appraising and Managing Performance

2. Explain why performance appraisal is important and describe its components Discuss the advantages and disadvantages of different performance rating systems Manage the impact of rating errors and bias on performance appraisals Discuss the potential role of emotion in performance appraisal and how to manage its impact Identify the major legal requirements for appraisal Use performance appraisals to manage and develop employee performance Review Key Terms 360-degree feedback Absolute judgment BARS Dimensions MBO Performance Appraisal Performance Management Relative judgment Chapter Objectives

3. What is Performance Appraisal? • Performance Appraisal • Evaluating an employee’s current and/or past performance relative to his or her performance standards. • The identification, measurement, and management of human performance in organizations. • Performance Management • The process employers use to make sure employees are working toward organizational goals.

4. Uses of Performance Appraisal • Administrative purposes • Working conditions • Promotions • Termination • Rewards • Developmental purposes • Improving Performance • Strengthening job skills • Providing feedback • Counseling • Training

5. Identifying Performance Dimensions • Dimensions • Defined as an aspect of performance that determines effective job performance. • Performance dimensions are defined based on the job and the work itself. • Identified based on the job analysis • Performance dimensions help answer the question: “How does someone act and/or behave when s/he does the job well?” • May be further defined through use of competencies • Characteristics associated with successful performance

6. Identifying Performance Dimensions • Examples of Performance Dimensions: • Strong Interpersonal Skills • Customer Service Orientation • Teamwork • Effective Communication • Valuing Diversity • Analysis and Problem-Solving • Decision-Making and Results Orientation • Adaptability • Fostering a Safe and Secure Environment

7. Identifying Performance Dimensions • For dimensions to be an effective means of measuring performance, they must have two characteristics: • Have a clear general definition • Team work might then be defined in terms of competencies • Have well-defined levels of performance at each point along a rating scale.

8. Measuring Performance • Measuring performance • administering numbers or labels towards performance is difficult to quantify • Two formats that are most common, legally defensible, and promising are classified by • type of judgment required • focus of the measure

9. Measuring Performance

10. Measurement Tools • Relative judgment • An appraisal format that asks supervisors to compare an employee’s performance to the performance of other employees doing the same job. • Rank order • Grouping • Forced Ranking • GE, Ford Motor, Conoco, Sun Microsystems, Cisco Systems, EDS, and Enron • Pros: Forced Differentiation and create conflict • Cons: No absolute rankings and may force differences where none truly exist

11. Measurement Tools • Absolute judgment • An appraisal format that asks supervision to make judgments about an employee’s performance based solely on performance standards. • Pros: Can be more specific, helpful and create less conflict • Cons: Different supervisors may have different standards

12. Measurement Tools • Type of Performances Data the tool focuses on: • Trait Appraisal Instrument • Behavioral Appraisal Instrument (BARS) • Outcome Appraisal Instrument (MBO)

13. Measurement Tools –Trait Appraisal Instruments • Focuses on the person rather than on the performance • Graphic rating scale • A scale that lists a number of traits and a range of performance for each that is used to identify the score that best describes an employee’s level of performance for each trait. • Example: Reliability 1 (very low) to 5 (very high) • Pros: We are good at it • Cons: Legal Concerns because traits can be ambiguous and focuses is on person

14. Measurement Tools –Behavioral Appraisal Instrument • Combines traditional rating scales and critical incidents methods • Job behaviors derived from critical incidents described more objectively • Pros – Legally defensible and provides specific examples of behavior to engage in • Cons - Can be time consuming to create and behavior ‘may’ occur

15. Measurement Tools –Behavioral Appraisal Instrument • Behaviorally Anchored Rating Scale (BARS) • An appraisal method that uses quantified scale with specific narrative examples of good and poor performance. • Developing a BARS: • Generate critical incidents • Develop performance dimensions • Reallocate incidents • Scale the incidents • Develop a final instrument

16. Measurement Tools –Outcome Appraisal Instrument (MBO) • Involves setting specific measurable goals with each employee and then periodically reviewing the progress made. • Set the organization’s goals. • Set departmental goals. • Discuss departmental goals. • Define expected results (set individual goals). • Performance reviews. • Provide feedback. • Pros: tied to organizational strategy • Cons: may develop results at any cost mentality

17. Who Does the Appraisals? • Self Reviews • Peer Reviews • Subordinate Reviews • 360-degree feedback

18. Who Does the Appraisals?360-Degree Valuation • Multi-rater evaluation • Input from multiple levels with firm and external sources • Focuses on skills needed across organizational boundaries • More objective measure of performance • Process more legally defensible

19. Challenges to Effective Performance Measurement • Rater Errors • An error in performance appraisals that reflects consistent biases on the part of the rater • Frame-of-reference (FOR) training can help combat this problem

20. Problems in Performance AppraisalRater Errors & Bias • Lack of objectivity • Halo error • Comparability across Supervisors • Leniency/strictness • Central tendency • Recent behavior bias • Personal bias • Manipulating the evaluation

21. Challenges to Effective Performance Measurement • Rater Errors • The Influence of Liking • Precautions • Accurate record keeping - journals • Individual or Group Focus • Organizational Politics

22. Reasons for Intentionally Inflating or Lowering Ratings • Believe accurate ratings would have a damaging effect on subordinate’s motivation and performance. • Improve employee’s eligibility for merit raises. • Avoid airing department’s “dirty laundry.” • Avoid creating negative permanent record that might haunt employee in the future. • Protect good workers whose performance suffered because of personal problems. • Reward employees displaying great effort even when results were relatively low. • Avoid confrontation with hard-to-manage employees. • Promote a poor or dislike employee up and out of the department.

23. Reasons for Intentionally Inflating or Lowering Ratings • Scare better performance out of an employee. • Punish a difficult or rebellious employee. • Encourage a problem employee to quit. • Create a strong record to justify a planned firing. • Minimize the amount of merit increase a subordinate receives. • Comply with an organizational edict that discourages managers from giving high ratings.

24. Emerging Trends: Measuring the Performance of Teams • Review existing measures to make sure the team is aware of the measures and has commitment and responsibilities to achieve them. • Identify interim checkpoints at which team progress or achievements can be assessed. • Identify what the team and team members must do to achieve the desired team-level results. • Prioritize team goals according to relative importance.

25. Characteristics of an Effective Appraisal System • Develop any needed measures of interim and final team and individual performance. • Develop team and individual performance standards so that everyone has a clear understanding of performance expectations. • Determine how the performance management system will work. Who will be the raters? How will feedback be provided?

26. Challenges to Effective Performance Measurement • Legal Issues • Factors influencing judges’ decisions in cases involving performance appraisals • Use of job analysis • Providing written instructions • Allowing employees to review appraisal results • Agreement among multiple raters • The presence of rater training

27. Managing Performance Performance Improvement • Because formal appraisal interviews typically are conducted only once a year, they may not always have a substantial and lasting impact on worker performance. Thus, supervisors who manage performance effectively generally share four characteristics. • Exploring the causes of performance problems • Directing attention to the causes of problems • Developing an action plan and empowering workers to reach a solution • Directing communication at performance & provide effective feedback

28. Tips for Better Performance Reviews • Start with the raw data • Make sure you are evaluating performance on appropriate dimensions • Beware of rating biases • Support ratings with written comments • Evaluate several or all of your people at one time, if possible • Stick with performance and stay away from inferences about cause • Be consistent across workers