Part 3: Training and Developing Human Resources



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Part 3: Training and Developing Human Resources

  • Chapter 9: Performance Management and Appraisal
  • Prepared by Linda Eligh, University of Western Ontario

Learning Objectives

  • 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

  • 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

  • Overemphasis
  • Deficiency
  • Contamination
  • Performance Criteria

Relevance of Performance Criteria

  • Fairness
  • Reliability
  • Practicality
  • Performance Appraisal

Performance Standards

  • Performance Standards
    • Expected levels of performance
      • Benchmarks, goals, and targets
    • S.M.A.R.T. approach for writing performance standards
      • S=Specific
      • M=Measurable
      • A=Attainable
      • R=Relevant
      • 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

Uses of Performance Appraisal

  • 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
  • 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

  • Advantages
    • Helps in identifying competent managers
    • Serves to make managers more responsive to employees
    • Can contribute to the career development of managers
  • Disadvantages
    • 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

Team/Peer Rating

  • Advantages
    • 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
  • Disadvantages
    • 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
    • Drawbacks
      • 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

Comparative Methods

  • Ranking
    • A listing of all employees from highest to lowest in performance.
    • Drawbacks
      • 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.
    • Drawbacks
      • 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

Narrative Methods

  • Critical Incident
    • Manager keeps a written record of highly favourable and unfavourable employee actions.
    • Drawbacks
      • Variations in how managers define a “critical incident”
  • Essay
    • Manager writes a short essay describing an employee’s performance.
    • Drawback
      • 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

  • Job Review and Agreement
  • Development of Performance Standards
  • Objective Setting
  • Continuing Performance Discussions

The Balance Scorecard Fig. 9-11

  • .

Combination of Methods

  • 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

  • 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

  • DO
  • 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
  • DON’T
  • 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

Appraisal Feedback

  • Action Based on Evaluation
  • Data
  • Evaluation of Data
  • Feedback as a System

Appraisal Feedback

  • 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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