Chapter 8 Appraising Employee Job Performance

1. Chapter 8Appraising Employee Job Performance

2. Chapter Outline • 8-1 Gaining Competitive Advantage • 8-2 HRM Issues and Practices • 8-3 The Manager’s Guide

3. 8-1a Opening Case: Gaining Competitive Advantage at McKesson Information Solutions • Problem: An inadequate performance appraisal system. • Solution: Develop an effective performance appraisal system. • How the new performance appraisal system enhanced competitive advantage • Workforce has become much more motivated. • Employees’ job satisfaction levels have enhanced. • Retention rates have increased.

4. 8-1b Linking Performance Appraisal to Competitive Advantage • Performance appraisals should accurately assess the quality of employee job performance. • Job performance can be improved in two ways: • Directing employee behavior towards organizational goals. • Monitoring behavior to ensure that goals are met.

5. Figure 8-1 Performance Appraisals Can Help Assess the Quality of Employee Performance

6. 8-2a Standards for Effective Performance Appraisal Systems • The quality of the rating form • Accuracy of the ratings • Legal standards

7. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • The quality of the rating form • Relevance • The degree to which the rating form includes necessary information. • Criterion deficiency: Omission of pertinent performance criteria. • Criterion contamination: Inclusion of irrelevant criteria on the rating form.

8. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • The quality of the rating form (cont.) • Clear performance standards • Indicate the level of performance an employee is expected to achieve. • Help direct employee behavior. • Help supervisors provide more accurate ratings.

9. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Accuracy of the ratings • Accurate ratings reflect the employees’ actual job performance levels. • Inaccuracy is most often attributable to the presence of rater errors.

10. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Leniency error: Raters provide ratings that are unduly high. • Severity error: Ratings are unduly low. • Causes of leniency and severity errors: • Political reasons • Raters’ lack of conscientiousness • Personal bias

11. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Central tendency error: Appraisers purposely avoid giving extreme ratings even when such ratings are warranted. • Causes of central tendency error: • Administrative procedures. • End points of the rating scale are unrealistically defined.

12. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Halo effect: • Appraiser’s overall impression of an employee is based on a particular characteristic. • Acts as a barrier to accurate appraisals. • Caused due to vague rating standards and failure to conscientiously complete the rating form.

13. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • The rater’s use of implicit personality theory • Implicit personality theory: Rater’s estimation based on a personal “theory” of how different types of people behave in certain situations. • Using this theory, organizations are unable to identify employees’ specific strengths and weaknesses.

14. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Recency error • Is a consequence of memory decay. • Ratings are heavily influenced by recent events that are more easily remembered. • Ratings that unduly reflect recent events can present a false picture of the individual’s job performance during the entire rating period.

15. 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Legal standards • Appraisal systems must meet all the criteria imposed by EEO laws. • Specifically, a court would examine the: • Nature of the appraisal instrument. • Fairness and accuracy of the ratings.

16. 8-2b Types of Rating Instruments • Employee comparison systems • Graphic rating scale (GRS) • Behaviorally anchored rating scale (BARS) • Behavior observation scale (BOS) • Management by objectives (MBO)

17. 8-2b Types of Rating Instruments (cont.) • Employee comparison systems • Employee performance is evaluated relative to other employees’ performances. • Uses rankings rather than ratings. • Ranking formats: • Simple rankings: Require raters to rank-order their employees from best to worst, according to their job performance. • Paired comparison: A rater compares each possible pair of employees. • Forced distribution: Requires a rater to assign a certain percentage of employees to each category of excellence such as “best,” “average,” or “worst.”

18. 8-2b Types of Rating Instruments (cont.) • Employee comparison systems • Strengths • Low cost and practical. • Take very little time and effort. • Eliminates some rating errors. • Employment decisions become much easier to make. • Weaknesses • Disrupts teamwork. • Accuracy and fairness questioned. • Fails to adequately direct employee behavior. • Performance of people from different departments cannot be compared.

19. 8-2b Types of Rating Instruments (cont.) • Graphic rating scales • Presents appraisers with a list of traits assumed to be necessary to successful job performance. • A five- or seven-point rating scale accompanies each trait. • Points on the scale are defined by numbers and/or descriptive words or phrases that indicate level of performance.

20. 8-2b Types of Rating Instruments (cont.) • Graphic rating scales • Weaknesses • Vaguely defined traits to evaluate (e.g. demeanor or attitude) • Does not effectively direct behavior. • Fails to provide specific, nonthreatening feedback. • Accurate ratings are not likely to be achieved. • Can lead to a multitude of rating errors. • Occurrence of bias. • Strengths • Practical. • Low cost. • Can be developed quickly. • A single form is applicable to all or most jobs within an organization.

21. 8-2b Types of Rating Instruments (cont.) • Behaviorally anchored rating scales (BARS) • Similar to graphic rating scale. • Requires appraisers to rate employees on their traits. • Includes seven or eight traits, referred to as “dimensions,” each anchored by a seven- or nine-point scale. • Anchors each trait with examples of specific job behaviors that reflect varying levels of performance.

22. 8-2b Types of Rating Instruments (cont.) • Behaviorally anchored rating scales (BARS) • Strengths • Ability to direct and monitor behavior. • Weaknesses • Difficult to select one behavior that is most indicative of the employee’s performance. • Time consuming to develop. • Requires a lot of effort to develop.

23. 8-2b Types of Rating Instruments (cont.) • Behavior observation scales (BOS) • Contains a list of desired behaviors required for the successful performance of specific jobs. • Developed like BARS, where critical incidents are collected and categorized into dimensions. • An appraiser rates job performance by indicating the frequency with which the employee engages in each behavior. • A five-point scale is used ranging from “almost never” (1) to “almost always” (5).

24. 8-2b Types of Rating Instruments (cont.) • Behavior observation scales (BOS) • Strengths • Is more legally defensible than BARS or graphic rating scales. • Effective in directing employees’ behavior. • Used to monitor behavior and give specific feedback. • Weaknesses • Time consuming to develop. • Not always cost-effective.

25. 8-2b Types of Rating Instruments (cont.) • Management by objectives (MBO) • A management system designed to achieve organizational effectiveness by steering each employee’s behavior towards the organization’s mission. • MBO process includes: • Goal setting: Establishment of the organization’s mission statement and strategic goals. • Planning: Identify potential obstacles to reaching goals and devise strategies to overcome these obstacles. • Evaluation: Success at meeting goals is evaluated against agreed-on performance standards.

26. 8-2b Types of Rating Instruments (cont.) • Management-by-objectives (MBO) • Strengths • Outcome-focused. • Widely practiced. • Improves job performance. • States performance standards in relatively objective terms. • Practical and cost effective. • Provides employees a greater stake in achieving their goals and more perceived control over their work environment. • Weaknesses • Behaviors required to reach goals not specified. • Success may be attributed to factors outside employee’s control. • Performance standards vary, providing no common basis for comparison. • Creates performance pressures and stress.

27. 8-2c Designing an Appraisal System • Step 1: Gaining support for the system • Gain the support of upper-level managers: • Make the performance appraisal process meaningful. • Get managers’ input in developing the system. • Train managers and help them find a way to keep track of things employees have done during the review period. • Hold managers accountable for providing accurate ratings on a timely basis. • Gain the support of employees: • Encourage both managers and workers to participate in the planning and development of the system to enhance support for it.

28. 8-2c Designing an Appraisal System (cont.) • Step 2: Choosing the appropriate rating Instrument – Three important factors to be considered are: • Practicality: The performance appraisal instrument must be practical. • Cost: Includes development costs, implementation costs, and utilization costs. • Nature of job: The choice of rating instrument depends, in part, on the type of data that can be realistically collected about a particular job. • Executive, managerial, and professional employees are usually rated based on results. • Lower-level jobs are most often rated on behavioral or trait-oriented criteria.

29. 8-2c Designing an Appraisal System (cont.) • Step 3: Choosing the rater(s) • Supervisory ratings: Serve as management tools for supervisors, giving them a means to direct and monitor employee behavior. • Peer ratings: Supplement supervisory ratings, helping develop a consensus about an individual’s performance; helps eliminate biases and leads to greater employee acceptance of appraisal systems. • Competitive nature of the organization’s reward system and friendship are potential problems limiting the usefulness of peer ratings.

30. 8-2c Designing an Appraisal System (cont.) • Self-ratings • May be used for employee development. • May not be effective as an evaluative tool. • 360-degree feedback system • Appraisal system for managers , who are evaluated by a “circle” of people who frequently interact with the manager. • Evaluations are limited to job behaviors directly observed. • Primarily used as feedback devices. • Lacks accountability.

31. 8-2c Designing an Appraisal System (cont.) • Step 4: Determining the appropriate timing of appraisals • Mostly conducted annually; frequent appraisals are considered too time-consuming. • Annual appraisals pose a problem as appraisers may have a difficult time remembering events of the past year; this can be minimized by: • Maintaining records of employee performance; record keeping also serves as documentation for EEO suits.

32. 8-2c Designing an Appraisal System (cont.) • Step 5: Ensuring appraisal fairness • Upper-level management review: Helps to ensure fairness, and may serve to keep appraisers “honest.” • Appeals system • Provides a means for employees to obtain a fair hearing if they are dissatisfied with their appraisals. • Allows employees to voice their concerns. • Fosters more accurate ratings. • Prevents the involvement of outside third parties. • Tends to undermine the authority of the supervisor and may encourage leniency error.

33. 8-3a Performance Appraisal and the Manager’s Job • Completing the ratings • Providing performance feedback • Setting performance goals

34. 8-3b How the HRM Department Can Help • Developing the appraisal system • Providing rater training: Usually focuses on: • Establishing work expectations. • Observing and documenting behavior. • Conducting day-to-day performance feedback and coaching. • Appraising performance and avoiding rating errors. • Providing written justifications for ratings. • Conducting formal performance appraisal feedback conferences. • Identifying training needs and formulating a development plan for employees.

35. 8-3b How the HRM Department Can Help (cont.) • Monitoring and evaluating the appraisal system • Monitoring means taking steps to ensure that each appraisal has been completed on time and that instructions have been followed. • Evaluation consists of gauging the users’ satisfaction with the appraisal system.

36. 8-3c HRM Skill-Building for Managers • Conducting periodic performance review sessions • Objective is to identify problems the employee is facing and to discuss solutions to these problems. • Should be brief, informal, and employee-centered. • Conducting the annual performance review conference • Objective is to inform employees of their ratings and how the information will be used, keep effective workers “on target,” and improve ineffective workers’ performance.

37. 8-3c HRM Skill-Building for Managers (cont.) • Setting goals for MBO: An individual’s goals must be: • Consistent with goals set at higher organizational levels. • Specific and challenging. • Realistic and achievable. • Measurable.