Part 3: Training and Developing Human Resources
- Chapter 9: Performance Management and Appraisal
- Prepared by Linda Eligh, University of Western Ontario
- After you have read this chapter, you should be able to:
- Identify the components of performance management systems.
- Discuss important employee performance measures including individual performance factors.
- Explain the administrative and developmental uses of performance appraisal and the legal implications of performance management.
- Describe the decisions concerning the performance appraisal process.
- Introduce the methods of appraising performance and their advantages and disadvantages.
- Discuss the importance of training managers and employees about performance appraisal, and give examples of several rater errors.
- Identify several concerns about appraisal feedback and ways to make it more effective.
Nature of Performance Management
- Performance Management
- Processes used to identify, encourage, measure, evaluate, improve, and reward employee performance
- Provide information to employees about their performance.
- Clarify organizational performance expectations.
- Identify the development steps that are needed to enhance employee performance.
- Document performance for personnel actions.
- Provide rewards for achieving performance objectives.
Performance Management Linkage Fig. 9-1
Difference Between Performance Management and Performance Appraisals
- Performance Management
- Processes used to identify, encourage, measure, evaluate, improve, and reward employee performance.
- Performance Appraisal
- The process of evaluating how well employees perform their jobs and then communicating that information to the employees.
Identifying and Measuring Employee Performance
- What an employee does and does not do.
- Quantity of output • Quality of output
- Timeliness of output • Presence at work
- Job Criteria
- Important elements in a given job
Types of Performance Information Fig. 9-2
Relevance of Performance Criteria
- Performance Standards
- Expected levels of performance
- Benchmarks, goals, and targets
- S.M.A.R.T. approach for writing performance standards
- T=Time bound
Legal Concerns and Performance Appraisals
- Legally Defensible PA System:
- Objective performance appraisal criteria based on job analysis
- Absence of disparate impact and evidence of validity
- Formal evaluation criteria that limit managerial discretion
- A rating instrument linked to job duties and responsibilities
- Documentation of the appraisal activities
- Personal knowledge of and contact with the appraised individual
- Training of supervisors in conducting appraisals
- Review process to prevent undue control of careers
- Counseling to help poor performers improve
Conflicting Uses for Performance Appraisal Fig. 9-3
- Criticisms of Performance Appraisal
- Focus is too much on the individual and does little to develop employees.
- Employees and supervisors believe the appraisal process is seriously flawed.
- Appraisals are inconsistent, short-term oriented, subjective, and useful only at the extremes of performance.
- Developmental Uses of Performance Appraisal
- Giving Performance Feedback
- Administering Wages and Salaries
- Identifying Strengths and Weaknesses
Typical Division of HR Responsibilities: Performance Appraisal Fig. 9-4
Decisions Concerning PA Process
- Performance Appraisal (PA)
- The process of evaluating how well employees perform their jobs when compared to a set of standards, and then communicating the information to employees.
- Informal Appraisal
- Day-to-day contacts, largely undocumented
- Systematic Appraisal
- Formal contact at regular time intervals, usually documented
- Timing of Appraisals
- Probationary (60-90 days), six months and annually
Who Conducts Appraisals
- Supervisors who rate their employees
- Employees who rate their supervisors
- Team members who rate each other
- Employees’ rating themselves
- Outside sources rating employees
- Multisource (360° feedback) appraisal
Traditional Performance Appraisal Process Fig 9-5
Employee Rating of Managers
- Helps in identifying competent managers
- Serves to make managers more responsive to employees
- Can contribute to the career development of managers
- Negative reactions by managers to employee ratings
- Subordinates’ fear of reprisals may inhibit them from giving realistic (negative) ratings
- Ratings are useful only for self-improvement purposes
- Helps improve the performance of lower-rated individuals
- Peers have opportunity to observe other peers
- Peer appraisals focus on individual contributions to teamwork and team performance
- Can negatively affect working relationships
- Can create difficulties for managers in determining individual performance
- Organizational use of individual performance appraisals can hinder the development of teamwork
Multisource Appraisal Fig. 9-6
Methods for Appraising Performance
- Category Scaling
- Behavioural Rating Scales
- Comparative Methods
- Narrative Methods
- Results Based Methods
- Combination Methods
Category Scaling Methods
- Graphic Rating Scale
- A scale that allows the rater to indicate an employee’s performance on a continuum of job behaviours.
- Aspects of performance measured:
- Descriptive categories, job duties, and behavioural dimensions
- Restrictions on the range of possible rater responses
- Differences in the interpretations of the meanings of scale items and scale ranges by raters
- Poorly designed scales that encourage rater errors
- Rating form deficiencies limit effectiveness of the appraisal
Sample Performance Appraisal Form Fig. 9-7
Terms Defining Standards at One Company Fig. 9-8
Behavioural Rating Scales
- Behavioural Rating Approach
- Assesses employees’ behaviours instead of other characteristics
- Consists of a series of scales created by:
- Identifying important job dimensions
- Creating statements describing a range of desired and undesirable behaviours (anchors)
- Behaviourally anchored rating scales (BARS)
- Describes behaviours, differentiating between effective and ineffective performers that can be observed, and anchors them at points on a scale.
- Employee’s behaviour is compared against examples and rated accordingly
Behaviourally-Anchored Rating Scale for Customer Service Skills Fig. 9-9
- A listing of all employees from highest to lowest in performance.
- Does not show size of differences in performance between employees.
- Implies that lowest-ranked employees are unsatisfactory performers.
- Becomes an unwieldy process if the group to be ranked is large.
Comparative Methods (cont’d)
- Forced Distribution
- Performance appraisal method in which ratings of employees are distributed along a bell-shaped curve.
- Assumes a normal distribution of performance.
- Resistance by managers to placing individuals in the lowest or highest groups.
- Providing explanation for placement in a higher or lower grouping can be difficult.
- Is not readily applicable to small groups of employees.
Forced Distribution on a Bell-Shaped Curve Fig. 9-10
- Critical Incident
- Manager keeps a written record of highly favourable and unfavourable employee actions.
- Variations in how managers define a “critical incident”
- Manager writes a short essay describing an employee’s performance.
- Depends on the managers’ writing skills and their ability to express themselves.
Results Based Methods
- Results Based Performance Appraisal System focuses on concrete standards of performance that employees are expected to achieve.
- Management by Objectives
- Specifies the performance goals that an individual and manager mutually identify.
- Balanced Scorecard
- Links the strategy, resource allocation and performance appraisal systems in an organization.
- Expands on MBO by considering multiple segments of the organization from which to develop employee objectives.
- Four key perspectives measure: financial, internal business process, customer and learning and growth.
The Management by Objectives (MBO) Process
- Development of Performance Standards
- Continuing Performance Discussions
The Balance Scorecard Fig. 9-11
- So what’s the best method?
- No single appraisal method is best for all situations.
- Using a combination of methods may be sensible in certain circumstances.
- Using combinations may offset various advantages and disadvantages of individual methods.
- When managers can articulate what they want a performance appraisal system to accomplish, they can choose and mix methods for desired results.
- Different categories of employees might require different combinations of methods.
Training of Managers and Employees
- Appraisal Training Topics:
- Appraisal process and timing
- Performance criteria and job standards that should be considered
- How to communicate positive and negative feedback
- When and how to discuss training and development goals
- Conducting and discussing the compensation review
- How to avoid common rating errors
Common Rater Errors Fig. 9-12
- Appraisal Feedback Interview:
- Communicate results to an employee after an appraisal interview
- Provide employee with a clear understanding of how they stand in the eyes of immediate superiors and the organization
- Clear up any misunderstandings on both sides
- Focus on coaching and development
- Avoid “Here is how you rate and why” message
Appraisal Interview Hints Fig. 9-13
- Prepare in advance
- Focus on performance and development
- Be specific about reasons for ratings
- Decide on specific steps to be taken for improvement
- Consider supervisor’s role in employee’s performance
- Reinforce desired behaviours
- Focus on future performance
- Do all the talking
- Lecture the employee
- Mix performance appraisal and salary or promotion issues
- Concentrate only on the negative
- Be overly critical or “harp” on a failing
- Feel it is necessary that both parties agree in all areas
- Compare the employee with others
- Action Based on Evaluation
- Effective Performance Management Systems
- Consistent with the strategic mission of the organization
- Beneficial as development tool
- Useful as an administrative tool
- Legal and job-related
- Viewed as generally fair by employees
- Effective in documenting employee performance
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