91

Basic Concepts in Performance

Management and Appraisal
Comparing
Performance Appraisal
and
Performance Management

Performance Appraisal:

Performance Management:

Setting work standards, assessing

performance, and providing
feedback to employees to
motivate, correct, and continue
their performance.

An integrated approach to
ensuring that an employees
performance supports and
contributes to the organizations
strategic aims.

Purpose of PM System
Strategic: help top mgmt achieve strategic objective
Administrative: furnish valid information to make

admin decisions about employees

Developmental: allow managers to coach employees
Informational: inform employees about their
performance and expectations from them
Organisational maintenance: provide information to
be used in HR planning and allocation
Documentational: collect information that can be used
for different purposes

PM is goal directed
At the heart of performance management is the idea that

employees effort should be goal directed, which involves

clarifying expectations and quantifying them by setting
measurable standards for each objective.
SMART Goal Setting

WHEN?
Frequency of Appraisal
Informal evaluation Continuous
Formal evaluation Annual or Biannual

WHAT?
Criteria used
Traits or
characteristics
Actual
performance

Training
Needs
Behaviour

Potential

WHO are the appraisers?

Superior(s)
Self
Peers / Team members
Subordinates
Customers internal and external
Committee

98

Performance Appraisal Roles

Supervisors
Usually do the actual appraising.
Must be familiar with basic

appraisal techniques.
Must understand and avoid

problems that can cripple

appraisals.
Must know how to conduct

appraisals fairly.

99

Performance Appraisal Roles (continued)

The HR Department
Serves a policy-making and advisory role.
Provides advice and assistance regarding the appraisal tool to use.
Trains supervisors to improve their appraisal skills.
Monitors the appraisal system effectiveness and compliance with

relevant laws and guidelines.

910

Performance Appraisal Roles (continued)

The HR Department
Serves a policy-making and advisory role.
Provides advice and assistance regarding the appraisal tool to use.
Trains supervisors to improve their appraisal skills.
Monitors the appraisal system effectiveness and compliance with

relevant laws and guidelines.

911

Performance Appraisal Methods

Appraisal Methodologies
1

Graphic Rating Scale Method

Narrative Forms

Alternation Ranking Method

Behaviorally Anchored Rating

Scales (BARS)

Paired Comparison Method

Management by Objectives
(MBO)

Forced Distribution Method

Computerized and Web-Based

Performance Appraisal

Critical Incident Method

10

Merged Methods

11

Annual Confidential Report (ACR)

Graphic
Rating
Form

Scale for Alternate Ranking of Appraisee

Ranking Employees by the Paired Comparison Method

Note: + means better than. - means worse than. For each chart, add up
the number of +s in each column to get the highest ranked employee.

Forced Distribution on a Bell-Shaped Curve

Examples of Critical Incidents for Assistant Plant Manager

Continuing Duties

Targets

Critical Incidents

Schedule production
for plant

90% utilization of
personnel and machinery
in plant; orders delivered
on time

Instituted new production

scheduling system; decreased
late orders by 10% last month;
increased machine utilization in
plant by 20% last month

Supervise
procurement of raw
materials and on
inventory control

Minimize inventory costs

while keeping adequate
supplies on hand

Let inventory storage costs rise

15% last month; over-ordered
parts A and B by 20%;
under-ordered part C by 30%

Supervise machinery
maintenance

No shutdowns due
to faulty machinery

Instituted new preventative

maintenance system for plant;
prevented a machine breakdown
by discovering faulty part

Narrative Forms
Final appraisals are

frequently written in
a narrative form
Supervisor rates
employee by
describing the
behaviour related to
each factor

Behaviorally Anchored Rating Scale (BARS)

BARS is an appraisal tool that anchors a

numerical rating scale with specific examples of

good or poor performance.
Its proponents say it provides better, more
equitable appraisals than do the other appraisal
tools.
It takes more time to develop a BARS, but the
tool has several advantages.

Example of
BARS for
Dimension

Salesmanship
Skills

Management by
Objectives
MBO refers to a organizational 6 step goal
setting and appraisal program
Set the
organizations
goals

Set the
departmental
goals

Discuss
developmental
goals

Define
expected
results

Performance
reviews

Provide
feedback

Defining the Employees Goals and Work

Standards
Guidelines for
Effective
Goal Setting

Set
SMART
goals

Assign
specific
goals

Assign
measurable
goals

Assign
challenging/
doable goals

Encourage
participation

Appraisal Form for Assessing Both Competencies and Specific Objectives

Appraisal Form for Assessing Both Competencies and Specific Objectives (contd)

Choosing the Right Appraisal Tool

Criteria for Choosing an
Appraisal Tool

Accessibility

Ease-of-use

Employee
acceptance

Accuracy

Errors in Performance Measurement

RATER ERROR

PRACTICAL IMPACT

Varying standards

Similar perf is rated differently

Primacy and Recency Error

Timing of information affects rating

Leniency/Strictness/
Central Tendency

Everyone is rated the same

Rater bias

Rater prejudices affect rating

Halo / Horns

Generalisation is made from only one

trait

Contrast error

Comparison is made to other people

not standards

Similar-to-me Error

Rater compares employee to self

Sampling error

Available information is insufficient

or inaccurate

Sources of Information for Performance

Appraisal: 360 degree feed back

The Appraisal Interview

SatisfactoryPromotable

Types of
Appraisal
Interviews

SatisfactoryNot Promotable
UnsatisfactoryCorrectable
UnsatisfactoryUncorrectable

929

The Building Blocks of an Effective Performance Management Process

Direction sharing

Role clarification

Goal alignment

Goal setting and planning

Developmental goal setting

Ongoing performance monitoring

Ongoing feedback

Coaching and support

Performance assessment (appraisal)

Rewards, recognition, and compensation

Workflow, process control, and return on investment management