Topic:

Performance Management & Appraisal

301 MGM Human Resource Management
 Performance Management

Performance management: the integration of performance

appraisal systems with other HRM systems for the purpose of
aligning the employees work behaviors and results with the
organizations goals
Example: link an employees pay increase to the employees job
performance
To do this, we have to measure the employees job performance
Goal: Improve the organization by improving the employees
work behaviors and results

Performance appraisal: the measurement and assessment of

an employees job performance
 Performance Management Cycle
Development Tool

Administra2ve Tool

Adapted from Fisher, Schoenfeldt, & Shaw (2006)

 Common appraisal errors
Halo/Horn Effect
Stereotyping
False attribution
Central Tendency
Confrontation Avoidance
Initial Performance
Recency error
Leniency error
Severity error
 Types of Performance to Measure

What aspects of an employees job performance

can we measure?
We have 3 basic choices:
Results produced by the employee
Example for a salesperson: Amount of sales ($) in the past
month
Behaviors of the employee
Example for a salesperson: Number of sales calls in the
past month
Traits of the employee
Example for a salesperson: Friendliness
 Types
of
Performance
to
Measure
Results-based (results-
oriented): measure the results
produced by the employee
Examples for a retail store
manager (examples of some
results for which the store
manager has responsibility and
so should be held accountable):
Sales of the store
Profit per square foot
Inventory shrinkage
Customer satisfaction
Makes sense for most jobs
Results matter (usually)
Challenges:
Which results are relevant
may not be obvious for all
jobs
Some results are not
under the employees
control
May foster a results at all
costs mentality
May interfere with
teamwork
May be difficult to provide
effective feedback
 Types
of
Performance
to
Measure

Behavior-based
(behavior- Advantage:
Makes
it
easier
to
provide

oriented):
measure
the
eective
performance
feedback
to

employees

employees
behaviors

Examples
for
a
retail
store
manager:

Examples
for
a
retail
store

manager:
Feedback
with
results-oriented

performance
appraisal:
You
didnt

Good
attendance
achieve
your
sales
goal
(Measured

Completes
management
reports
by
sales
reports)

correctly
&
on
time
Feedback
with
behavior-oriented

Monitors
customers
and
performance
appraisal:
You
are

employees
for
theft
allowing
your
employees
to
wait

Coaches
employees
to
welcome
too
long
before
oering
help
to

customers
to
the
store
&
oer
customers.
(Measured
by

assistance
within
3
minutes,
and
observations
of
a
secret
shopper)

to
thank
customers
as
they
leave
Challenges:

Conducts
regular
sessions
with
Dicult
to
capture
the
full
range
of

employees
to
develop
teamwork
relevant
behaviors

Makes
sense
for
many
jobs
Dierent
behaviors
can
lead
to
the

Use
it
where
how
the
employee
same
results

produces
results
matters
We
may
not
always
care
which

behaviors
were
used

 Types
of
Performance
to
Measure

Trait-based (trait-oriented): measure the employees
personal characteristics
Examples for a retail store manager:
Ability to make decisions
Loyalty to the company
Communication skills
Level of initiative
This is usually a bad idea for several reasons:
Poor reliability & validity of measures of traits
Weak relationship between traits and job effectiveness
Measurements of traits are more likely to be subject to biases
(sexism, racism, ageism, etc.)
Hard to use traits to provide effective feedback
 Performance
Appraisal
Methods

Once we decide which results & behaviors we want
to measure, we next need to decide how to measure
those results & behaviors

We have some categories of choices:

Objective measures of performance
Subjective measures of performance
Management By Objectives
360 Feedback
 Performance Appraisal: Objective measures

Objective measures: measure an employees job

performance in terms of things we can see and count with
no (or minimal) use of opinion
Production measures: count units produced by an employee
Sales measures: count the sales ($) of an employee
Personnel data: count things in the employees personnel
file
Examples:
Number of times late to work
Number of times absent
Number of disciplinary actions taken
 Performance Appraisal: Objective measures

Objective measures (more):

Performance tests: for an employee, evaluate work samples or
simulations under standardized conditions
Example: for an airline pilot, program a flight simulator with
specific flight conditions to test if the pilot handles it correctly
Business unit performance measures: for managers who are
responsible for a business unit, measure their performance by
measuring the performance of the business unit they lead
Examples:
Market share of the business unit
Profit measures for the business unit: profits & profit rates (return on
sales, return on assets, return on equity)
Stock price
 Performance appraisal method: Ranking

Subjective measures: measure an employees job

performance using human judgment
Ranking: subjectively rank employees from best to worst
Example:
1. Bob
2. Carol
3. Ted
4. Alice
Note that the ranking requires you to compare one employee to
another
Problem: it can be hard to determine the subjective ranking
position of employees who are in the middle (it all blurs together)
 Performance appraisal method: Rating
Subjective measures (cont-ed)
Rating scale (graphic rating scale): subjectively rate
the employees job performance on a labeled numeric
measuring scale
Rating scales are perhaps the most commonly used
method of subjectively evaluating an employees
job performance
Before we use a rating scale to subjectively rate an
employees job performance, we need to:
Identify the aspects of job performance (results & behaviors)
that are to be evaluated (rated) using the rating scale
Develop the rating scale
 Performance appraisal method: Rating

Examples of a 5-point scale Example of a 7-point scale

5 = Excellent 7 = Truly exceptional
4 = Very satisfactory 6 = Excellent
3 = Satisfactory 5 = Very good
2 = Unsatisfactory 4 = Good
1 = Very unsatisfactory 3 = Satisfactory
5 = Greatly exceeds 2 = Unsatisfactory
standards 1 = Very unsatisfactory
4 = Exceeds standards
3 = Meets standards
2 = Below standards
1 = Far below standards
 Performance appraisal method: Rating

Rating scale (more)

The same rating scale can be used to rate:
Overall job performance, and
Multiple specific aspects of job performance
Some aspects of job performance can be measured
objectively and subjectively
Example: Quality of work
Objective measure: defect rate (percentage of units
produced by an employee that fail inspection)
Subjective measure: subjectively rate the quality of the
employees work using a 5-point rating scale
 Performance appraisal method: Rating
Decisions:
Use a graphic or just
use words?
Label all the points
on the scale, or just
label some?
Odd or even number
of points on the
scale?
Fewer points on the
scale, or more points
on the scale?

Fisher, Schoenfeldt, & Shaw

(2006)
 Performance appraisal method: Rating

Subjective measures (more)

Rating scale (more)
Note that rating scales do not require you to compare one
employee to another the ratings are absolute, not comparative
Problems:
No limits on leniency, severity, & central tendency errors
Example: a manager rates all of his employees at 5 =
Excellent regardless of the employees actual performances
Possible solution: forced distribution?
The terms used in a rating scale to describe different levels of
performance tend to be short and vague
Example: What doesExcellentreally mean?
Possible solution: BARS?
PART ABC Outsta Very Good Fair Needs Unsati Not
CUSTOMERS nding Good Improve sfactor Applic
ment y able

1.Places high priority on 5 4 3 2 1 0 N/A

achieving customer
satisfaction (both
internal and external
customers)

1.Displays effective 5 4 3 2 1 0 N/A

negotiation skills with
both suppliers,
customers and internal
staff
Performance appraisal method: BARS
Subjective measures (more)
Behaviorally Anchored Rating Scale (BARS): replace the
vague descriptors in a rating scale with specific examples of
performance
Example: Customer assistance
5 = Could be expected to volunteer to help customer and to walk
with customer to location of desired product
4 = Could be expected to walk with customer to location of desired
product when asked for help by customer
3 = Could be expected to tell and point customer to where the
desired product is located when asked for help by customer
2 = Could be expected to shrug shoulders and walk away when
asked for assistance by customer
1 = Could be expected to hide from customers in the employee
break-room
Performance appraisal method: BARS
Performance appraisal method: BARS
BARS (more)
Note that a different scale will be needed for each
aspect of job performance
Advantages:
Job-relevant measures of performance
Involves employees in developing scales
Disadvantages:
More work (time & money) to develop BARS
Employees may not consistently fit into one of the BARS
categories
Possible solution: BOS?
 Performance appraisal method: BOS
Subjective measures (more)
Behavioral Observation Scale (BOS): evaluators rate the
frequency with which an employee engages in specific
behaviors
Example: on a list of possible employee behaviors, rate how
often the employee engages in each behavior using a rating
scale where:
1 = almost never 5 = almost always
Weighted checklist: from a list of possible employee
behaviors, check off the ones that apply to the employee
Performance appraisal method: BOS
 Performance appraisal method: MBO
Management By Objectives (MBO): evaluate
employee job performance in terms of the extent
to which the employee achieved each of his or her
goals during a specified period of time
Goals can be both objective and subjective
Example goals (some of many) for a retail store manager:
Objective: Sales goal for year = $2 million
Subjective: Customer satisfaction goal = average rating
of 4.5 on 5-point customer satisfaction rating scale
Commonly used for managers and professionals
 Performance appraisal method: MBO
MBO (more)
Process:
At the beginning of the review period, the employee
and the supervisor meet and they agree on a set of
goals to be achieved by the employee during the
review period
Review period is typically one year, but could be more often
Apply the goal setting principles:
Involve the employee in goal setting
Make the goals specific, concrete, & measurable
Make the goals difficult but achievable, challenging but
realistic
Empower employees to achieve their goals
 Performance Appraisal Methods

MBO (more)
Process (more):
Throughout the review period, progress toward the
goals is monitored
Employees supervisor should be providing coaching to
help the employee achieve his or her goals
At the end of the review period, the employee and
the supervisor meet to evaluate the extent to which
each goal was achieved and to set new goals for
the next review period
 Performance Raters (Evaluators)

Options for Job Performance Evaluators

Supervisors
Self-evaluation
Peers (co-workers)
Subordinates
Customers
External customers
Internal customers
360-Degree Appraisals
Performance appraisal method: 360

360 Feedback
Collects behavioural feedback from anyone in role-
set may include customers
Colleagues, supervisor, subordinates, partners, customers
and other people who are directly involved with employees
activity should provide rating against given criteria
 Performance Feedback
Employees need effective feedback
Allow time & eliminate distractions
Both administrative issues (e.g., pay increase) &
developmental issues (e.g., future goals) can be covered in
one feedback session
Provide specific feedback
Example:
Dont say: Youre always late.
Do say: You were more than 5 minutes late on 25 occasions in
the past 3 months. This is unacceptable. We need to develop (1) a
specific goal concerning prompt attendance and (2) an action plan
that you will follow to achieve the goal.
 Performance Feedback
Types of feedback:
Tell-and-sell: the supervisor tells the employee the results of
the performance appraisal and explains the reasons why the
appraisal is correct
Tell-and-listen: the supervisor tells the employee the results
of the performance appraisal and listens to the employees
response
Problem solving: the supervisor acts as a coach to assist
the employees in setting their own goals and in evaluating
their own job performance
 The end
QuesHons?