Human Resource Management 10 th Edition Chapter 8 PERFORMANCE MANAGEMENT AND APPRAISAL

1. Human Resource Management 10th EditionChapter 8 PERFORMANCE MANAGEMENT AND APPRAISAL © 2008 by Prentice Hall

2. HRM In Action: Identifying Those In The Middle Is Also Important • Many focus solely on top-performing and high-potential employees • More middle-friendly • They’re workhorses; they get the job done • Make incentive system objective through clearly defined goals and precise definitions • Nonfinancial rewards © 2008 by Prentice Hall

3. Performance Management • Goal-oriented process directed toward ensuring organizational processes are in place to maximize productivity of employees, teams, and organization • Training and performance appraisal play significant role in process • With PM, training, appraisal, and rewards, is integrated and linked for the purpose of continuous organizational effectiveness © 2008 by Prentice Hall

4. Performance Appraisal Defined • Formal system of review and evaluation of individual or team task performance • Often negative, disliked activity that seems to elude mastery © 2008 by Prentice Hall

5. Uses of Performance Appraisal • Human resource planning - Data must be available to identify those who have the potential to be promoted • Recruitment and selection - May be helpful in predicting the performance of job applicants • Training and development - Point out an employee’s specific needs for training and development • Career planning and development - Essential in assessing an employee’s strengths and weaknesses and in determining the person’s potential © 2008 by Prentice Hall

6. Uses of Performance Appraisal (Cont.) • Compensation programs - Provide a basis for rational decisions regarding pay adjustments • Internal employee relations - Used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer • Assessment of employee potential - Some organizations attempt to assess employee potential as they appraise their job performance © 2008 by Prentice Hall

7. Performance Appraisal Environmental Factors • External: • Legislation requiring nondiscriminatory appraisal systems • Labor unions • Factors within internal environment, such as type of corporate culture © 2008 by Prentice Hall

8. 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.” © 2008 by Prentice Hall

9. Legislation Affecting Performance Appraisal (Cont.) • Albermarle Paper v Moody – Supreme Court case supported validation requirements for performance appraisals © 2008 by Prentice Hall

10. Labor Unions and Performance Appraisal • Have traditionally stressed seniority as the basis for promotions and pay increases • May vigorously oppose the use of a management-designed performance appraisal system © 2008 by Prentice Hall

11. Performance Appraisal ProcessExternal EnvironmentInternal 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 © 2008 by Prentice Hall

12. Establish Performance Criteria (Standards) • Traits • Behaviors • Competencies • Goal Achievement • Improvement Potential © 2008 by Prentice Hall

13. Traits • Certain employee traits such as attitude, appearance, and initiativeare the basis for some evaluations • May be either unrelated to job performance or difficult to define • Certain traits may relate to job performance and, if this connection is established, using them may be appropriate © 2008 by Prentice Hall

14. Caution on Traits: Wade v. Mississippi Cooperative Extension Service • In a performance appraisal system, general characteristics such as “leadership, public acceptance, attitude toward people, appearance and grooming, personal conduct, outlook on life, ethical habits, resourcefulness, capacity for growth, mental alertness, loyalty to organization” are susceptible to partiality and to the personal taste, whim, or fancy of the evaluator” as well as “patently subjective in form and obviously susceptible to completely subjective treatment” by those conducting the appraisals. © 2008 by Prentice Hall

15. Behaviors • Organizations may evaluate person’s task-related behavior or competencies • Examples: leadership style, developing others, teamwork and cooperation, or customer service orientation • If certain behaviors result in desired outcomes, there is merit in using them in the evaluation process © 2008 by Prentice Hall

16. Competencies • Broad range of knowledge, skills, traits and behaviors that may be technical in nature, relate to interpersonal skills, or be business oriented • In leadership jobs, relevant competencies might include developing talent, delegating authority and people management skills • Competencies selected should be those that are closely associated with job success © 2008 by Prentice Hall

17. Goal Achievement • Use if organizations consider ends more important than means • Outcomes established should be within control of individual or team • Should be those results that lead to firm’s success © 2008 by Prentice Hall

18. Improvement Potential • Many of criteria used focus on the past • Cannot change past • Firms should emphasize future, including behaviors and outcomes needed to develop the employee, and, in the process, achieve firm’s goals © 2008 by Prentice Hall

19. Responsibility for Appraisal • Immediate supervisor • Subordinates • Peers and team members • Self-appraisal • Customer appraisal © 2008 by Prentice Hall

20. Immediate Supervisor • Traditionally been most common choice • Supervisor is usually in excellent position to observe employee’s job performance • Supervisor has responsibility for managing a particular unit © 2008 by Prentice Hall

21. Subordinates • Our culture has viewed evaluation by subordinates negatively • Some firms conclude that evaluation of managers by subordinates is both feasible and needed • Will do a better job of managing • Might be caught up in a popularity contest © 2008 by Prentice Hall

22. Peers and Team Members • Work closely with evaluated employee and probably have an undistorted perspective on typical performance • Problems include reluctance of some people who work closely together, especially on teams, to criticize each other © 2008 by Prentice Hall

23. Self-Appraisal • If employees understand their objectives and criteria used for evaluation, they are in good position to appraise their own performance • Employee development is self-development • Employees who appraise their own performance may become more highly motivated © 2008 by Prentice Hall

24. Customer Appraisal • Customer behavior determines a firm’s degree of success • Organizations use this approach because it demonstrates a commitment to customer, holds employees accountable, and fosters change © 2008 by Prentice Hall

25. The Appraisal Period • Prepared at specific intervals • Usually annually or semiannually • Period may begin with employee’s date of hire • All employees may be evaluated at same time © 2008 by Prentice Hall

26. 360-Degree Evaluation Rating Scales Critical Incidents Essay Work Standards Ranking Paired Comparisons Forced Distribution Behaviorally Anchored Rating Scales (BARS) Result-Based Systems Performance Appraisal Methods © 2008 by Prentice Hall

27. 360-Degree Valuation • Multi-rater evaluation • Input from multiple levels within firm and external sources • Focuses on skills needed across organizational boundaries • More objective measure of performance • Process more legally defensible © 2008 by Prentice Hall

28. Trends & Innovations: 720-Degree Review • More intense, personalized and greater review of upper-level managers that brings in perspective of their customers or investors, as well as subordinates • Start with a 360-degreereview, but then go out and do interviews © 2008 by Prentice Hall

29. Rating Scales • Rates according to defined factors • Judgments are recorded on a scale • Many employees are evaluated quickly © 2008 by Prentice Hall

30. Critical Incidents • Written records of highly favorable and unfavorable work actions • Appraisal more likely to cover entire evaluation period • Does not focus on last few weeks or months © 2008 by Prentice Hall

31. Essay • Brief narrative describing performance • Tends to focus on extreme behavior • Depends heavily on evaluator's writing ability • Comparing essay evaluations might be difficult © 2008 by Prentice Hall

32. Work Standards • Compares performance to predetermined standard • Standards - Normal output of average worker operating at normal pace • Time study and work sampling used • Workers need to know how standards were set © 2008 by Prentice Hall

33. Ranking • All employees from group ranked in order of overall performance • Comparison is based on single criterion, such as overall performance © 2008 by Prentice Hall

34. Paired Comparison • Variation of ranking method • Compares performance of each employee with every other employee in the group © 2008 by Prentice Hall

35. Forced Distribution • Rater assigns individual in work group to limited number of categories similar to normal distribution • Assumes all groups of employees have same distribution © 2008 by Prentice Hall

36. Behaviorally Anchored Rating Scales (BARS) • Combines traditional rating scales and critical incidents methods • Job behaviors derived from critical incidents described more objectively © 2008 by Prentice Hall

37. Result-Based Systems • Manager and subordinate agree on objectives for next appraisal • Evaluation based on how well objectives accomplished © 2008 by Prentice Hall

38. Use of Computer Software • Available in recording appraisal data • Reduces required paperwork © 2008 by Prentice Hall

39. Problems in Performance Appraisal • Appraiser discomfort • Lack of objectivity • Halo/horn error • Leniency/strictness • Central tendency • Recent behavior bias • Personal bias • Manipulating the evaluation • Employee anxiety © 2008 by Prentice Hall

40. Appraiser Discomfort • Performance appraisal process cuts into manager’s time • Experience can be unpleasant when employee has not performed well © 2008 by Prentice Hall

41. Lack of Objectivity • In rating scales method, commonly used factors such as attitude, appearance, and personality are difficult to measure • Factors may have little to do with employee’s job performance • Employee appraisal based primarily on personal characteristics may place evaluator and company in untenable positions © 2008 by Prentice Hall

42. Halo/Horn Error • Halo error - Occurs when manager generalizes one positive performance feature or incident to all aspects of employee performance resulting in higher rating • Horn error - Evaluation error occurs when manager generalizes one negativeperformance feature or incident to all aspects of employee performance resulting in lower rating © 2008 by Prentice Hall

43. Leniency/Strictness • Leniency - Giving undeserved high ratings • Strictness - Being unduly critical of employee’s work performance • Worst situation is when firm has both lenient and strict managers and does nothing to level inequities © 2008 by Prentice Hall

44. Central Tendency • Error occurs when employees are incorrectly rated near average or middle of scale • May be encouraged by some rating scale systems requiring evaluator to justify in writing extremely high or extremely low ratings © 2008 by Prentice Hall

45. Recent Behavior Bias • Employee’s behavior often improves and productivity tends to rise several days or weeks before scheduled evaluation • Only natural for rater to remember recent behavior more clearly than actions from more distant past • Maintaining records of performance © 2008 by Prentice Hall

46. Personal Bias (Stereotyping) • Managers allow individual differences such as gender, race or age to affect ratings they give • Effects of cultural bias, or stereotyping, can influence appraisals • Other factors – Example: mild-mannered employees may be appraised more harshly simply because they do not seriously object to results © 2008 by Prentice Hall

47. Manipulating the Evaluation • Sometimes, managers control virtually every aspect of appraisal process and are in position to manipulate system • Example: Want to give pay raise to certain employee. Supervisor may give employee a undeserved high performance evaluation © 2008 by Prentice Hall

48. Employee Anxiety • Evaluation process may create anxiety for appraised employee • Opportunities for promotion, better work assignments, and increased compensation may hinge on results © 2008 by Prentice Hall

49. Believe accurate ratings would damage 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 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 disliked employee up and out of department. Reasons for Intentionally Inflating Ratings © 2008 by Prentice Hall

50. Scare better performance out of employee. Punish difficult or rebellious employee. Encourage problem employee to quit. Create strong record to justify planned firing. Minimize amount of merit increase a subordinate receives. Comply with organizational edict that discourages managers from giving high ratings. Reasons for Intentionally Lowering Ratings © 2008 by Prentice Hall