Running head: PERFORMANCE APPRAISALS 1

Performance Appraisals Shortcomings and Ways to Mitigate

Randall S. Jobski

Siena Heights University

December 12, 2016

PERFORMANCE APPRAISALS 2

Performance Appraisals Shortcomings and Ways to Mitigate

Performance appraisals are a mechanism organizations utilize to review how an employee

is performing both against their own pre-written and agreed upon objectives for the period

often written annually, and also against their peers in the organization. This paper will review

common performance appraisal methods, evaluation techniques utilized, and review some

common rating errors exercised during the execution of the employee performance appraisals

process. Next, after a quick review of a poorly implemented performance appraisal approach at

an organization, we will review some literature on the performance appraisal process. Finally,

we will review performance appraisal approaches at two organizations that are working

reasonably well, and some recommendations for improving performance appraisals applicable to

all organizations.

Performance Appraisal Analysis

Performance appraisals come in almost infinite variations as organizations create their

unique performance appraisal process with their own objectives in mind. As such, it is likely that

no two performance appraisal processes are identical in structure and in the way they are

executed across the organization. However, that being said, all organizations utilize performance

appraisals for a common purpose, and there are distinct appraisal methods to choose from,

distinct ways to evaluate performance appraisals, and distinct rating errors observed which are

common across all performance appraisal implementations.

Purpose

The dictionary describes performance appraisals as:

The process by which a manager or consultant (1) examines and evaluates an

employee's work behavior by comparing it with preset standards, (2) documents

PERFORMANCE APPRAISALS 3

the results of the comparison, and (3) uses the results to provide feedback to the

employee to show where improvements are needed and why. Performance

appraisals are employed to determine who needs what training, and who will be

promoted, demoted, retained, or fired. (Performance Appraisal, n.d.)

Performance Appraisal Methods

Aamodt (2016) outlines five performance appraisal methods, four of which have a focus

on either traits, competency, tasks, or goals. The fifth appraisal method discussed by Aamodt

(2016) is contextual performance which is typically used in conjunction with one of the first four

methods just mentioned.

Trait-Focused. Trait-focused performance appraisals place emphasis on dependability,

honesty, and courtesy. This method lacks definable and defendable feedback by the supervisor to

the employee, and hence, will not be productive in determining future employee development

goals (Aamodt, 2016).

Competency-Focused. Competency-focused performance appraisals place emphasis on

knowledge, skills, and abilities. This method, unlike trait-focused, provides an effective way for

a supervisor to provide direct feedback to an employee on how to improve in areas that are

falling below expectations, or how to further advance their abilities in areas they are already

doing well in.

Task-Focused. Task-focused performance appraisals organize the work an employee

performs into groups of tasks which often covers multiple competencies. This method often

makes it easier for a supervisor to evaluate an employee as the grouping of the tasks to complete

various goals helps the supervisor visualize the work being completed by the employee and they

can compare that to the outcome being strived for. The issue with this method, however, is that
PERFORMANCE APPRAISALS 4

if an employee is falling short in an area, it is difficult for the supervisor to know what

development the employee needs as there are multiple competencies at play in each group of

tasks. As such, it is hard for the supervisor to know which specific competency the employee is

falling short on that is bringing down the performance for the group of tasks as a whole (Aamodt,

2016).

Goal-Focused. Goal-focused performance appraisals organize the work an employee

performs into goals. This method helps the employee internalize the desired outcome, and helps

the employee understand why certain behaviors are required to meet these goals for the

organization (Aamodt, 2016).

Contextual performance. Contextual performance involves the idea of evaluating how

an employee works with others, works to improve the organization, and goes above and beyond

their stated duties in their job description for the betterment of their peers and their organization.

As such, it is often scored for an employee in conjunction with one of the other methods

described above. An important aspect of contextual performance, beyond the obvious positive

impact to the organization, is that these abilities tend to be similar across jobs (Aamodt, 2016).

How to Evaluate Performance

There are three primary ways an employee is evaluated during the performance appraisal

including through employee comparisons, through a set of objective measures, or using a rating

scale which indicates the degree at which the employee fell short of, met, or exceeded the target

set by their supervisor in a particular area (Aamodt, 2016).

Employee comparisons. For employee comparison evaluations, employees are

compared to one another rather than being evaluated by oneself against pre-determined and

agreed to targets. There are three common employee comparison methods utilized, namely rank
PERFORMANCE APPRAISALS 5

order, paired comparisons, and forced distribution method. Employee comparisons works better

for smaller sized teams. For larger teams, it is relatively easy to identify where an exceptional or

unexceptional performer would fall, but it is difficult to rank a large number of employees who

did what they were asked to do during the review period, i.e. meets expectations, in priority order

(Aamodt, 2016).

Rank order. Rank order places employees in a numbered, priority order from 1 to n based

on outcome of their supervisors evaluation of their contributions over the performance appraisal

period (Aamodt, 2016).

Paired comparison. Paired comparisons can be used to complete the task of ranking

employees in priority order for large groups of employees. As the name implies, a supervisor

would compare two employees at a time and decide out of the two which was stronger in a given

dimension. After all employees included in the performance appraisal are compared for each

dimension, then the ranking would be complete (Aamodt, 2016). However, Aamodt (2016)

points out that for 100 employees to be ranked, the number of comparisons needed to be

completed is 25,000. This is an excessive number, and supervisors with a large number of

employees would surely rebel against having to use this method.

Forced distribution method. Forced distribution method uses predetermined percentages

for each performance appraisal outcome, e.g. does not meet, meets, or exceeds expectations,

such that the supervisor must put a number of their employees in each outcome that is equal to

the preset percentage regardless of how they truly performed during that review period (Aamodt,

2016).

Objective measures. Objective measures use quantitative data to evaluate an employees

performance during the review period. These criteria are measurable, such as attendance,
PERFORMANCE APPRAISALS 6

quantity of widgets produced, etc., and the supervisor merely compares the achievements of the

employee to the targets set for the review period in order to determine their overall performance

(Aamodt, 2016).

Ratings. Ratings are the most popular way to evaluate an employees performance during

the review cycle, and involve some form of a rating scale that is used by the supervisor to score

the employees performance during the review period (Aamodt, 2016).

Common Rating Errors in Performance Appraisals

Since the ratings method is heavily favored in evaluating employees during the

performance appraisal process, it is important to understand that supervisors, being human, are

susceptible to multiple types of errors and human realities that can both negatively and positively

affect the outcome of the employees score (Aamodt, 2016).

Distribution errors. Distribution errors occur when a supervisor only uses a portion of

the overall rating scale. For instance, perhaps they never give out 5s on a scale from 1 to 5

because they believe everyone has room for improvement (Aamodt, 2016).

Halo errors. Halo errors occur when a supervisor is so influenced by one dimension

being scored for an employee, that they allow this influence, be it negative or positive, to

undeservingly impact scoring of other dimensions of the performance appraisal. This influence

can affect the scoring of all of the employees dimensions (Aamodt, 2016).

Contrast errors. Contrast errors occur when a supervisor caries over the impressions

from a previously rated employee into the next review. So, instead of the second employee being

rated based solely on their own contributions, the score is negatively or positively impacted by

the score given to the previous employee scored (Aamodt, 2016).

PERFORMANCE APPRAISALS 7

Low reliability across raters. Low reliability across raters means that one supervisor

could rank the same employee differently given the exact same input for the performance review.

This can be attributed to one or more of the rating errors described above or just the mere

difference in the two supervisors opinion and belief on what constitutes a specific score; for

example, what is required to earn a score of 5 out of 5 in a performance appraisal (Aamodt,

2016).

Sampling problems. Sampling problems occur during performance appraisal evaluations

because supervisors, being human, tend to give more weight, negative or positive, to work the

supervisor has witnessed more recently than to work done by the employee earlier in the review

period (Aamodt, 2016).

Cognitive processing of observed behavior. Cognitive processing of observed behavior

is the cause of rating errors during a performance appraisal evaluation as the supervisor is more

likely to recall and focus on observations and data for the employee that meets with their general

impression, negative or positive, of the employee (Aamodt, 2016).

Review of Ineffective Performance Appraisal Process

While an employee at Electronic Data Systems (EDS) from Jan, 1989 through Mar, 2008,

I participated in a large variety of performance appraisal processes as this process was updated,

ranging from minor tweaks to a major overall, virtual every year. For the last twelve years of my

EDS employment, I participated in the process as both a leader and as an employee.

In December, 2008, EDS brought on a new CEO named Dick Brown. Mr. Brown

decided to leverage the forced distribution method utilized by John Jack Welch in General

Electric for many years for the purposes of improving EDS. EDS number one expense, by far,

was its employees as the company was the originator of Information Technology (IT)
PERFORMANCE APPRAISALS 8

outsourcing. Hence, Mr. Brown figured that through the use of this forced distribution method,

he would weed out the employees that werent contributing enough, and reward those that were.

The problem was that he didnt seem to take into consideration the negative psychological

impact this performance appraisal process had on the organization. This impact caused untold

hardship and worry on a large number of otherwise solidly contributing employees, it caused

unnecessary and unhealthy strain between the leadership and its employees, and it caused some

solid employees to seek employment elsewhere where they would be evaluated more fairly.

Sadly, after Mr. Browns departure in 2003, for as long as I was employed at EDS, the CEOs that

followed Mr. Brown decided to retain this flawed performance evaluation process for the

organization.

Leadership Impact

Supervisors were required to utilized the forced distribution system at EDS with

predetermined percentages set for each evaluation outcome (e.g. does not meet expectations,

meets expectations, exceeds expectations, etc.) by the corporate office in Plano, Texas. The

typical breakdown of the distribution from top to bottom was 10% - Far Exceeds, 15% -

Exceeds, 50% - Meets, 15% - Needs Improvement, and 10% - Does Not Meet. Supervisors, and

employees alike, knew that any employee that fell in the Meets category would only be eligible

for a very negligible raise that year, and those in the Needs Improvement category would get no

raise at all. Plus, employees who fell in the Does Not Meet category would almost certainly be

severed from the company within a few months. When this process was first rolled out,

employees who recently moved to another team as part of an organic change, often found

themselves placed in one of the two lowest categories. Hence, people stopped moving around

within the company. Later, as a direct result of this, a new category of New to Job was added
PERFORMANCE APPRAISALS 9

which protected the employee who moved for one performance appraisal cycle. The

implementation of this change worked as intended as people started to organically move around

again within the company.

As one might expect, this forced distribution system caused some very tough, but

unnecessary conversations between supervisors of solid employees who were forced into

categories that were lower than Meets. EDS had a very strong workforce, and that is what

attracted many of these highly technical people to EDS in the first place. But, with this forced

distribution system in place, now a person who was a solid employee may not even reach the

Meets category because there were so many other very strong employees on the same team.

Furthermore, supervisors with a superstar team, and they did exist within EDS, were the worst

affected by this system as they had to inform their superstars they didnt even make a Meets

score or worse yet, that they were given a Does Not Meet score, and would likely be losing

their job in the very near future.

Employee Impact

As you can tell from the comments described above, employees were no happier with the

forced distribution system implemented at EDS than the supervisors were. Employees in the

Meets category down to the Does Not Meet category often felt that they were inappropriately

categorized, and often, they were correct. If the ranking was left solely up to the supervisors

discretion, in many cases, the employees would have ranked at least one category higher than

they were placed in. And, in some cases possibly two categories higher as it was rare that 25%

of a given team actually needed to be placed in the combined Needs Improvement and Does Not

Meet categories.
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The daily fear, angst, and psychological strain the use of this system placed on employees

cannot be understated. Employees talked about this performance appraisal system all the time,

and they worried all the time where they would be ranked the next time around. Would they

receive a raise next year? Or worse yet, would they be laid off? And, so they would get a higher

ranking in the next review cycle, employees did increase their competitiveness as the corporate

executives hoped for, but primarily in very negative ways. People were less apt to assist others

as they may not get the credit for doing so, teamwork was greatly diminished, and employee

morale and motivation sank to rock bottom. The overall culture of EDS took an unrecoverable

turn for the worst when this system was implemented.

Review of Performance Appraisal Research Literature

The performance appraisal process is relied on by so many organizations as input into

making significant staffing decisions within their organization. As noted above there are known

and definable errors in the rating of an employee during this process that supervisors must

recognize and work to offset. The following is a review of various professional literature that

offers further insights into challenges supervisors face providing fair and objective performance

evaluations, and a few ways the literature suggests to help offset those concerns.

Supervisors who have a knowledge, or a perceived knowledge, of an employees job

satisfaction level negative or positive, may impact the score the employee receives

during their performance appraisal regardless of how well they actually perform the

job. As such, employees may try to influence the supervisor into believing the

employee is happier on the job than they actually are (Smither, Collins, & Buda,

1989).
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Supervisors who complete their performance appraisal ratings by recalling

information from memory will exhibit systematically higher levels of halo errors as

compared to ratings entered immediately after observing an employees actions.

Thus, the greater reliance on a supervisors memory to complete the performance

appraisals leads to overall lower levels of rating accuracy (Murphy & Balzer, 1986).
Supervisors who received training to improve observation skills improved the

accuracy of their ratings (Hedge & Kavanagh, 1988, p. 72). This training revealed

to those who were performing the ratings the correct scores afterwards, and they

could then discuss with the class how and why their scores varied. Latham and

Wexley (as cited in Hedge & Kavanagh, 1988) indicate that increasing the length of

time a rater receives training will yield more accurate results. Furthermore,

combining training for raters focused on both observation and decision-making may

lead to even more accurate results than receiving either type of training alone (Hedge

& Kavanagh, 1988).

Much of the information a supervisor uses in performance appraisals is often

subjective data, and can be defective and incomplete. To combat this problem, one

can employ fuzzy logic which was derived from Zadehs seminal paper Fuzzy Sets

in Information and Control. Fuzzy inference is when one uses fuzzy logic to map

from an input of data to an output of data. This mapping enables consistent decisions

(i.e. output) to be made based on the input data. The actual fuzzy logic itself can be

quite complex, but luckily is not needed to be understood by the supervisors. It can

be just a black box (i.e. model) where one puts input into, and the output comes out.

This method could be used as a tool to provide supervisors a consistent method for

rating employees across the organization (Ahmed, Sultana, Paul, & Azeem, 2013).
PERFORMANCE APPRAISALS 12

Supervisors are prone to give higher ratings during a performance appraisal for

employees who demonstrate prosocial behaviors which benefit others such as

coworkers, supervisors, the wider team, and so on. As the supervisors are charged

with the success of the entire team, they look upon these actions favorably, and it is

reflected in their scores of the employees demonstrating these characteristics

regardless of how well they performed their duties as employees (Grant, Parker, &

Collins, 2009).
According to Antonioni (as cited in Miller, Amy, & Goswami, 2014), both employees

and employers consider the performance appraisal process to yield dissatisfaction.

And, Brown et al. (as cited in Miller et al., 2014) found that performance appraisals

which were of low quality resulted in reduced job satisfaction and organizational

commitment, and also increased employee intensions to leave to organization.

When job resources are scarce, employee satisfaction of the performance appraisal

rose in connection with their level of preparedness for the discussion. On the

contrary, when job resources were plentiful, then the satisfaction rose with no

employee preparedness for the performance appraisal. Thus, for organizations with

low job resources, employees should be encouraged to prepare for their performance

appraisal to increase their satisfaction in the process. Regardless of job resource

levels, performance appraisals are viewed more favorably when they occur in

organizations with open and freely flowing communication through such vehicles as

newsletters, town hall meetings, social media, and so on. Hence, organizations

should communicate openly with employees, encourage employees to prepare for

their performance appraisals, provide training on how to do so, and provide the time

needed to complete this task (Miller et al., 2014).

PERFORMANCE APPRAISALS 13

According to Organ (as cited in Oh, Chen, & Sun, 2015), organizational citizenship

behavior (OCB) consists of conscientiousness, civic virtue, altruism, courtesy, and

sportsmanship and are not directly part of the performance appraisal process.

However, although not typically scored as part of the performance appraisal, it has

been shown that OCB does impact the scoring of performance appraisals by

supervisors, and the impact of the score is more pronounced in poorly performing

teams. Hence, supervisors need to be aware of this bias when scoring employees

performance appraisals (Oh et al., 2015).

Supervisors show positive bias in performance appraisals when they favor and have

social preferences toward the employee (Breuer, Nieken, & Sliwka, 2013).
Supervisors score performance appraisals worse for large teams than they do for

small teams. However, employees who have been scored previously by the same

supervisor will receive better scores. Hence, an employee with given experience and

performance who moves to a larger team, and/or changes supervisors will receive a

lower score on their performance appraisal. To work to avoid this bias, supervisors

need to be trained to understand how this bias can come into play. Finally, it is noted

that due to the fact that this negative bias does exist for employees in larger teams

and/or who are working for a new supervisor, comparing employees or making

decisions across departments about raises based solely on the outcome of

performance appraisals is problematic (Breuer et al., 2013).

Few supervisors are trained in executing effective performance appraisals. They

assess the wrong things, such as an employees popularity, or they assess the right

things, but inconsistently across the team. In addition, supervisors may not

communicate the outcome of the performance appraisal clearly such that top
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performers leave the discussion feeling they should be doing more, and poor

performers leave feeling they are doing just fine (Sreejith, 2015).
Employees are motivated by timely reward and recognition, and the way to

accomplish this is through continuous evaluations as opposed to much longer term

(e.g. annual) evaluations most organizations use. In addition, this continuous

evaluation process should not be a major bureaucratic undertaking, but rather

supervisors need to be able to provide recognition and rewards right on the spot as it

is observed. The criteria for these evaluations should be clearly understood and

communicated to the employees so there are no secrets or surprises. This approach

allows employees to know where they stand at all times rather than only one point in

time during the periodic performance appraisal process (Sreejith, 2015).

Organizations should aggregate the individual performance appraisal results to

identify ways to improve the overall organizations performance (Sreejith, 2015).

More Effective Use of Performance Appraisals

Below is an outline of the performance appraisal process followed at Michigan State

University (MSU) and Lansing Community College (LCC) which are both examples of

performance appraisal processes that are better than what was followed while I was an employee

at EDS.

Michigan State University

MSU refers to their performance appraisal process as Performance Excellence, and it is

executed annually. This process consists of four levels of evaluations consisting of exceeds or

meets expectations, developing, or does not meet expectations for non-probationary employees,

and two levels of evaluations consisting of meets or does not meet expectations for those
PERFORMANCE APPRAISALS 15

employees still under probation. The probationary period is for 1 year, and the interim

performance review takes place at six months.

Overall, the process has been very well document by the MSU Human Resources

department, and also very well communicated out to the field. In addition, there are online

training courses that can be run at any time for both the employees and the supervisors.

Furthermore, the forms to complete for each employees appraisal are succinct and easy to

understand. Employees are given a spot right on the appraisal form to provide their own

comments related to the evaluation, and/or they can attach separate pages, as needed. There is

also an employee pre-appraisal form that assists them in preparing for the upcoming performance

appraisal discussion with their supervisor. All in all, this process is well thought out and well

executed by the University.

Lansing Community College

At the time I worked at LCC, they had only rolled out the probationary performance

review process. This process was documented and reasonably well communicated to

supervisors. Employees in the probationary period were less knowledgeable about the process.

There were occasional face-to-face trainings available for supervisors to attend, but the timing

doesnt always work out for a supervisor to get trained before they need to execute the process.

Emails were used to remind the supervisor that a probationary review was upcoming, but the

follow through from Human Resources on these was almost non-existent. The form used was

concise, and easy to understand by both the employee and the supervisor. And, the ultimate

intent to ensure the supervisor was talking with the probationary employee about their

expectations from them and whether they were on track to exit the probationary stage was being

met. Hence, although this process has room for improvement, it was low impact for both the
PERFORMANCE APPRAISALS 16

supervisor and the employee, and was sufficiently meeting its intended outcomes. Hence, I

considered this a more favorable performance appraisal process as compared to those I had

experienced over the years at EDS.

Improving Performance Evaluations

Performance appraisal processes vary greatly, and clearly some are more effective than

others. In order to increase the value of these to the employees, the supervisors, and the

organization as a whole, one should look to improve performance appraisal training and

processes.

Training

Training of employees and supervisors is an area where clearly improvements in the

outcomes of the performance appraisal process could be easily gained. Employees can be

trained on the overall process, what their role is in it, why it is important to them, and how to

prepare for their performance appraisal to get the most benefit out of it. Supervisors can be

trained on the process, how to effectively and fairly evaluate employees by avoiding the many

rating errors that find their way into the results, and how best to communicate the results to the

employees such that the message is clearly received and they can take appropriate steps going

forward to improve their performance.

Process

Procedures and templates. It is critical for the performance appraisal process to have

clearly articulated procedures and templates for both the employees and the supervisors to

follow. This, in conjunction with training on these items, allows for the greatest chance of

success of the organization reaching its intended purpose of doing the performance appraisals in
PERFORMANCE APPRAISALS 17

the first place, namely to continuously improve the employees, and ultimately the overall

organizations, performance.

Time to complete appraisal. If executing performance appraisals are required by an

organization, then employees, and supervisors alike, need the organization to provide adequate

time for the performance appraisal process to be carried out. If these duties are just piled onto

the existing workload, then something will suffer, and often it will be the quality of the

performance appraisals conducted.

Level set scores across organization. Since the performance appraisals are carried out

by supervisors, which are human beings, inherently the scores provided to a set of employees by

one supervisor may not be the scores provided to that same team by another supervisor. As such,

great care must be given to compare scores from one supervisors team to another. In order for

an organization to reduce this negative effect, after supervisors have scored their individual

teams, they can sit together and walk through all of the scores for the larger team or organization,

and ensure there is some degree of fairness in scoring across the board for all employees.

Avoid forced-distribution method. Although the forced-distribution model is a valid

approach to carrying out the performance appraisal process, the decision to use this method over

one of the others should be made with a clear understanding of all the negative ramifications that

come along with this model.

Use Fuzzy Logic method. This method allows for repeatable evaluations of the data

input into the model, and provides consistent outputs regardless of who the supervisor is. This

will reduce the impact of many of the rating errors outlined above. The downside of using this

method is that the creation of the fuzzy logic model appears to be quite complex, and the

supervisors whom are using it may not be happy with the fact that they are no longer in charge of
PERFORMANCE APPRAISALS 18

determining the outcome of the score for the performance appraisal, but rather must rely on the

calculations of the model to provide this score.

Conclusion

Performance appraisals are used by many organizations in order to assess how each

employee is doing as compared to their stated objectives for the review period. The hope is that

if each employee is incrementally and continuously improving, and also working toward the

common organizations goals, then the organization as a whole will also be improving as well.

From a theoretical sense, this is indisputable. However, as this paper outlines, in practical terms,

this reality is much harder to attain than it sounds. Due to the fact that supervisors, who are

human beings, are the ones doing the evaluations, known and definable errors make their way

into employees appraisal scores. These errors can be reduced when the supervisors

consciousness is raised on the existence of these errors through training. Furthermore,

improving performance appraisal processes can also help advance the fairness and consistency of

the outcomes of these evaluations across the entire organization.

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