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LEARNING OBJECTIVES
After studying this chapter, you should be able to do the
following:
8-1 Discuss the difference between performance
management and performance appraisals. PAGE 263
8-2 List and briefly discuss the purposes of performance
appraisals. PAGE 269
8-3 Identify and briefly discuss the options for what to
evaluate in a performance appraisal. PAGE 272
8-4 Briefly discuss the commonly used performance
measurement methods and forms. PAGE 276
8-5 Identify and briefly discuss available options for the rater/
evaluator. PAGE 281
8-6 Identify some of the common problems, and how to avoid
the problems, with performance appraisals. PAGE 286
8-7 Briefly discuss the differences between evaluative
performance reviews and developmental performance
reviews. PAGE 290
8-8 Review the methods to improve employee engagement
through performance management and the issue of
electronic performance management. PAGE 292
8 Performance Management and Appraisal
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Chapter 8: Performance Management and Appraisal 263
Practitioner’s Perspective
Cindy remarks that although performance evaluation can be
uncomfortable for both managers
and employees, failure to accurately and honestly evaluate
performance is never a good choice.
She recalls the time that a supervisor, Annette, came to see her.
“I want to fire Christine,” Annette said angrily. “She entered
the wrong invoice numbers again, and
now I have to stay and correct her mistakes—again!”
“Is this common?” Cindy asked. “Have you expressed your
concerns or initiated a performance
improvement plan?”
“She does it all the time, but I usually don’t catch it until after
she is off for the day,” Annette
replied. “By morning, it doesn’t seem worth my time go over it
with her.”
“How about her performance evaluation?” she asked next.
“Have you brought Christine’s poor
performance to her attention at her annual evaluation?”
“Well, no, I always give all my employees a satisfactory
rating—it’s easier that way,” answered
Annette.
Without ever bringing Christine’s unacceptable performance to
her attention and thus giving
her a chance to change, firing or otherwise severely disciplining
Christine at this point would be
questionable. How can this problem be avoided? In Chapter 8,
you will learn how to create and
utilize a performance evaluation process that works.
E. Job Analysis/Job Design
(required)
4. Performance management
(performance criteria and
appraisal)
H. Performance Management
(required)
1. Identifying and measuring
employee performance
2. Sources of information (e.g.,
managers, peers, clients)
3. Rater errors in performance
measurement
4. Electronic monitoring
5. Performance appraisals
6. Appraisal feedback
7. Managing performance
Q. Organization Development
(required—graduate students
only)
5. Improving organizational
effectiveness
9. Ongoing performance and
productivity initiatives
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SHRM HR CONTENT
See Appendix: SHRM 2016 Curriculum
Guidebook for the complete list
PERFORMANCE MANAGEMENT SYSTEMS
After we have recruited, selected, and trained employees, we
must evaluate how well they
perform their jobs so they know how they are doing. Therefore,
performance evaluation is
an important part of the jobs of managers and HRM staff.1 We
need to figure out how to
manage employees’ performance over time to ensure that they
remain productive and
LO 8-1
Discuss the difference between
performance management and
performance appraisals.
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264 PART III: DEVELOPING AND MANAGING
hopefully become even more capable as they progress in their
careers. So the primary pur-
pose of performance appraisal should be to help employees to
continuously improve their
performance.2 Remember our earlier discussion about the fact
that human resources are
typically one of the few resources we can leverage to create a
sustainable competitive
advantage for the firm. To this end, we discuss in this section
the difference between per-
formance management and performance appraisal, and we
present the performance
appraisal process.
Performance Management Versus Performance Appraisal
“In a knowledge economy, organizations rely heavily on their
intangible assets to build
value. Consequently, performance management at the individual
employee level is essen-
tial and the business case for implementing a system to measure
and improve employee
performance is strong.”3 Committing management time and
effort to increase perfor-
mance not only meets this goal but also decreases turnover
rates.4
How do we manage performance within the organization? The
most common part of
the process, and the one with which we are most familiar, is the
performance appraisal,
or evaluation. (In this chapter, we will use the terms
performance evaluation, perfor-
mance appraisal, and just appraisal interchangeably.) However,
the performance
appraisal process is not the only thing that’s done in
performance management.
Q:5
Improving Organizational
Effectiveness
SHRM
CHAPTER OUTLINE
Performance Management Systems
Performance Management Versus Performance
Appraisal
Is It Time to Delete the Annual Appraisal Process?
Performance Appraisals
Accurate Performance Measures
Why Do We Conduct Performance Appraisals?
Communication (Informing)
Decision Making (Evaluating)
Motivation (Engaging)
Evaluating and Motivating = Development
What Do We Assess?
Trait Appraisals
Behavioral Appraisals
Results Appraisals
Which Option Is Best?
How Do We Use Appraisal Methods and Forms?
Critical Incidents Method
Management by Objectives (MBO) Method
Narrative Method or Form
Graphic Rating Scale Form
Behaviorally Anchored Rating Scale (BARS) Form
Ranking Method
Which Option Is Best?
Who Should Assess Performance?
Supervisor
Peers
Subordinates
Self
Customers
360-Degree Evaluations
Whom Do We Choose?
Performance Appraisal Problems
Common Problems Within the Performance
Appraisal Process
Avoiding Performance Appraisal Problems
Debriefing the Appraisal
The Evaluative Performance Appraisal Interview
The Developmental Performance Appraisal Interview
Trends and Issues in HRM
Building Engagement Through Performance
Management
Technology: Electronic Performance Monitoring
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Chapter 8: Performance Management and Appraisal 265
Performance management is the process of identifying,
measuring, managing, and devel-
oping the performance of the human resources in an
organization. Basically we are trying
to figure out how well employees perform and then ultimately
improve that performance
level. When used correctly, performance management is a
systematic analysis and mea-
surement of worker performance (and communication of that
assessment to the individ-
ual) that we use to improve performance over time.
Performance appraisal, on the other hand, is the ongoing
process of evaluating
employee performance. Notice that it is an ongoing process.
Employees need regular feed-
back on their performance,5 so we should give them routine and
candid assessments.6
New tools that we will discuss shortly are allowing us to do this
much more efficiently.
Performance appraisals are reviews of employee performance
over time, so appraisal is
just one piece of performance management. Although we will
spend most of the chapter
discussing performance appraisals, there are several significant
pieces to performance
management that we have already covered in past chapters and
others that we will cover
in future chapters. We discussed “strategic planning,” which
provides inputs into what we
want to evaluate in our performance management system, in
Chapter 2. We also discussed
the major method of identifying performance requirements in a
particular job when we
went through “job analysis and design” in Chapter 4. In Chapter
7, we discussed “train-
ing and development,” which obviously plays a part in
performance management. Addi-
tionally, we will discuss motivating employees, coaching and
counseling, employee
relations, compensation, and other pieces in Chapters 9 through
14. Now that we under-
stand the difference between performance management and
performance appraisal, let’s
look at the performance appraisal issue in more detail.
Is It Time to Delete the Annual
Appraisal Process?
It is worth noting right at the beginning that
many people in organizations do not like per-
formance appraisal systems and think that
these systems do not have the ability to
improve employee performance. One study
even noted that 95% of managers are dissatis-
fied with their performance management sys-
tem and 90% of HR managers believe the
system does not yield accurate performance
information!7 Routinely, there are calls to do
away with performance appraisal processes.8
Netflix is one company that has completely
stopped doing formal performance appraisals,
even though the CEO noted that “excellent
colleagues trump everything else.”9 (Netflix still does complete
informal 360-degree
appraisals. We will introduce you to these shortly.) So why does
this process continue to
be used by most major organizations?
In the past three or four years, it would seem to the average HR
manager that there has
been a never-ending line of companies that have decided to
dump their annual perfor-
mance appraisals. In addition to Netflix, a list of Fortune 500
companies like Deloitte,
Adobe Systems, GE, PwC,10 and SAP11 have trashed their
annual appraisal approaches.
Looking at all of the articles written about dumping appraisals,
the natural question
would be, “Why are we studying this if it is going away?” The
quickest answer is that it
isn’t quite gone yet and probably won’t be for some time—if
ever. Based on a number of
different surveys in the past couple of years, around 10 to 15%
of companies have decided
to stop using annual reviews. The numbers were about 6% of
Fortune 500 companies
Performance
management The process of
identifying, measuring, managing,
and developing the performance
of the human resources in
an organization
Performance appraisal
The ongoing process of
evaluating employee performance
Q:9
Ongoing Performance and
Productivity Initiatives
SHRM
E:4
Performance Management
(Performance Criteria and Appraisal)
SHRM
Netflix is one company that
has stopped doing formal
performance appraisals.
Ry
an
A
ns
on
/A
FP
/G
et
ty
Im
ag
es
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266 PART III: DEVELOPING AND MANAGING
in 201512 and about 12% to 15% in 2017,13 which leaves
around 85% of those compa-
nies and many other smaller firms still using annual
evaluations.
Why hasn’t the rest of the business world let go of this relic of
the industrial age if it
doesn’t work like it needs to? Again, the quick answer is that
there is valuable information
that is gained from the process; and the latest online, app-based,
and/or social options
have not gotten to the point yet where they can provide all of
the same valuable informa-
tion. “The documentation that traditional appraisals produce is a
business necessity. The
data collected . . . allows the organization to make important
decision in a whole host of
business areas.”14 So one of the most valuable reasons for
performance appraisals is to
provide information for making good management decisions;
and if we don’t have that
information, decisions become more difficult and dangerous. In
addition, at least some
research shows that deleting the performance appraisal does not
automatically make the
organization better, and may make it worse. Research by CEB
showed that “[a]t firms
where reviews had been eliminated, measures of employee
engagement and performance
dropped by 10%. . . . Managers actually spent less time on
conversations, and the quality
of those conversations declined.”15
But new ideas for some form of routine or continuous
technology-based appraisal and
feedback (often called “check-ins” by the firms) have
proliferated over the recent past,16
with dozens if not hundreds of tech companies now offering
apps or other software solu-
tions17 to provide companies with the ability to give all
employees constant feedback. For
obvious reasons, this continuous appraisal seems to be more
common in organizations
that are less traditional and bureaucratic, and that are more
comfortable with technology
solutions. We spoke about Zappos’s holacracy earlier. Zappos is
trying to use holistic
feedback from all sides (a massive 360-degree evaluation) in
order to evaluate its employ-
ees and encourage creativity and innovation.
Still, we have to struggle with a significant problem:
Organizations legitimately use
periodic appraisals to make good decisions about their
employees and employee develop-
ment.18 If performance appraisals are not completed, the
organization doesn’t have valid
and reliable information about its human resources; and
therefore it has no ability to
make good decisions about things such as training, promotions,
and pay raises. Because of
this major issue, it is unlikely that most organizations will hit
the delete button on their
annual appraisal process until the newer technologies have been
proven capable of
defending the organization from claims of employment
discrimination.
Performance Appraisals
Let’s take a look now at the performance appraisal process in
Exhibit 8-1. Note the con-
nection between the organization’s mission and objectives and
the performance appraisal
process. Here we briefly discuss each step of the process.
Step 1: Job analysis. This is logically our first step because if
we don’t know what a job
consists of, how can we possibly evaluate an employee’s
performance in that job? We
already learned how to do a job analysis in Chapter 4, but as
shown in Exhibit 8-1, we
should realize that the job must be based on the organizational
mission and objectives, the
department, and the job itself.
Step 2: Develop standards and measurement methods. If we
don’t have standards of acceptable
behavior and methods of measuring performance, how can we
assess that performance?
We will discuss performance measurement methods in the next
part of this section; and in
the section “How Do We Use Appraisal Methods and Forms?”
we will discuss these top-
ics in more detail.
Step 3: Informal performance appraisal—Coaching and
disciplining. Performance appraisal
should not be simply a once- or twice-a-year formal interview.
As its definition states,
performance appraisal is an ongoing process. While a formal
evaluation may take place
only once or twice a year, people need regular feedback on their
performance to know
how they are doing.19 We will briefly discuss coaching in the
“Critical Incidents Method”
WORK
APPLICATION 8-1
Select a job you have or have
had. Do you or did you know
the organization’s mission and
objectives? Briefly state the
mission. If you don’t know it,
find out. Do you understand
how your job fits or helps to meet
the organization’s mission and
objectives? Explain in some detail.
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Chapter 8: Performance Management and Appraisal 267
subsection of “How Do We Use Appraisal Methods and
Forms?” and we will discuss it in
more detail in the next chapter.
Step 4: Prepare for and conduct the formal performance
appraisal. The common practice is to have
a formal performance review with the boss once or sometimes
twice a year, using one or
more of the measurement forms we will be learning about. Later
in this chapter, we will
discuss the steps involved in preparing for and conducting the
performance appraisal.
In the chapter sections to come, we discuss why we assess
performance, what we
assess, how we assess it, and who conducts the performance
appraisal. Then we discuss
performance appraisal problems and how to avoid them, and we
end the performance
appraisal process with the actual formal review session. But
before we leave this sec-
tion, we need to understand a critically important part of each
step in the performance
appraisal process: accurate performance measurement.
Accurate Performance Measures
To effectively assess performance, we need to have clear
standards for and methods of
measuring performance.20 The American National Standards
Institute (ANSI) has out-
lined the minimum required elements of a performance
management system for goal set-
ting, performance review, and performance improvement
plans.21 For details, visit the
ANSI website at http://www.ansi.org. We need accurate
standards and measures of
employee performance both to effectively assess performance
and to let employees know
where they can improve.22 This in turn should lead to training
employees to develop the
new skills they need to improve their performance.23
Also, to be an accurate measure of performance, our measure
must be valid, reliable,
acceptable and feasible, specific, and based on the mission and
objectives. Let’s discuss
each of those requirements here.
VALID AND RELIABLE. As in all areas of our people
management process, we must do
our best to make sure that all of our performance management
tools are valid and
Organizational mission
and objectives
Step 1: Job analysis
Step 2: Develop standards
and measurement
methods; communicate
Step 4: Prepare for and
conduct the formal PA
Step 3: Informal PA—
Coaching and discipline
EXHIBIT 8-1
EXHIBIT 8-1 THE PERFORMANCE APPRAISAL PROCESS
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268 PART III: DEVELOPING AND MANAGING
reliable. Here again, we can pull out and dust off the OUCH test
as a quick way to
ensure fairness and equity in the performance management and
appraisal process. We
remember by now that OUCH stands for Objective, Uniform in
application, Consistent
in effect, and Has job relatedness. However, we still need to
analyze validity and
reliability in some detail.
We have to create valid and reliable measurement to be
accurate. Recall that we dis-
cussed reliability and validity in Chapter 4 and Chapter 6. Valid
means that a measure is
true and correct; a valid measure is a factual one that measures
the process that you
wanted to measure. Reliable means the measure is consistent; it
works in generally the
same way each time we use it.24
ACCEPTABLE AND FEASIBLE. In addition to validity and
reliability, we need to look
at a couple of other characteristics of our performance
measures—acceptability
and feasibility.25 Acceptability means that the use of the
measure is satisfactory or
appropriate to the people who must use it. However, in
performance appraisal, this
isn’t enough. To be acceptable, an evaluation tool must also be
feasible. Is it possible to
reasonably apply the evaluation tool in a particular case, or is it
too complex or lengthy
to work well? As an example, if the performance evaluation
form is two or three pages
long and covers the major aspects of the job that is being
evaluated, and if managers
and employees both believe that the form truly evaluates
performance measures that
identify success on the job, then managers and employees are
likely to feel that the tool is
acceptable and feasible to use. However, if the manager must
fill out a 25-page form that
has very little to do with the job being evaluated, the manager
may not feel that the form
is acceptable or feasible, at least partially due to its length,
even if the employees do.
Conversely, if the manager fills out a two-page evaluation that
they feel is a true mea-
sure of performance in an employee’s job, but the employee
feels that the evaluation leaves
out large segments of what is done in the work routine, the
employee may not feel that the
form is acceptable and feasible. If either management or
employees feel that the form is
unacceptable, it most likely will not be used correctly. (This
would also mean that the per-
son would not see the evaluation as a valid measure.26) And as
we saw in the section on
deleting the performance appraisal process, many managers and
employees do not cur-
rently see their appraisal process as acceptable and feasible—a
significant problem with
the process.
SPECIFIC. The evaluation measure must be specific enough to
identify what is going
well and what is not. The word specific means that something is
explicitly identified or
defined well enough that all involved completely understand the
issue. In performance
appraisals, a specific form provides enough information for
everyone to understand
what level of performance has been achieved by a particular
employee within a well-
identified job.
Creating specific measures is the only way to use a performance
appraisal to improve
the performance of employees over time. The employees have to
understand what they are
and are not doing successfully. Many times, evaluation forms
may be too general in nature
to be of value for modifying employee behaviors because we
want the form to serve for a
large number of different types of jobs. This can create
significant problems in the perfor-
mance appraisal process.
BASED ON THE MISSION AND OBJECTIVES. Finally, you
want to make sure that your
performance management system leads to the accomplishment
of your organizational
mission and objectives. As with everything else we do in HR,
we need to ensure that the
performance management process guides our employees toward
achievement of the
company’s mission and objectives over time. As managers,
making sure of this connection
will allow us to reinforce employee behaviors that aim at
achieving organizational goals,
and it will also allow us to identify for our employees things
that they may be doing that
actively or unintentionally harm our ability to reach those goals.
WORK
APPLICATION 8-2
Assess the accuracy of the
measurements of your performance
on your last performance appraisal.
Be sure to describe the measures’
validity, reliability, acceptability,
and feasibility, plus whether the
measures were specific and based
on the organization’s mission
and objectives.
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Chapter 8: Performance Management and Appraisal 269
Thus, stating specific objectives saying exactly what each
person in each job should
achieve, or their performance outcomes, leads to accurate
assessment that can increase
performance. For some examples of inaccurate measures of
performance, complete
Applying the Concept 8-1.
WHY DO WE CONDUCT PERFORMANCE APPRAISALS?
As you can already see, the appraisal process gets to be
extremely complicated very
quickly. And remember, anytime that a process in an
organization is complicated, it is
going to cost a lot of money. So what’s the value provided to
the organization and to the
individual that makes the process of evaluating the performance
of our workers so
critical?
If performance appraisals are done in the correct manner, they
can provide us with a
series of valuable results. However, if not done correctly,
evaluating employee perfor-
mance can actually lead to lower levels of job satisfaction and
productivity. Let’s discuss
three major reasons (communicating, decision making, and
motivating) why performance
evaluations are completed and why they are so critical to
continually improving organiza-
tional performance.27
Communication (Informing)
The first major reason for performance appraisals is to provide
an opportunity for formal
communication between management and the employees
concerning how the organiza-
tion believes each employee is performing. All of us know
intuitively that successful com-
munication requires two-way interaction between people.
“Organizations can prevent or
remedy the majority of performance problems by ensuring that
two-way conversations
occur between managers and employees, resulting in a complete
understanding of what is
required, when it is required, and how everyone’s contribution
measures up.”28
Communication always requires that employees have the
opportunity and ability to
provide feedback to their bosses in order to make sure that their
communication is under-
stood. So in performance appraisals, the communication process
requires that we as man-
agers communicate with the employee to provide them with
information about how we
APPLYING THE CONCEPT8-1
Measurement Accuracy
Before each of the situation descriptions below, write the letter
corresponding to the accuracy criterion for a measure that is
NOT met in the situation.
a. valid
b. reliable
c. accepted
d. feasible
e. specific
f. based on the mission and objectives
____ 1. My boss is on my case because I’m not producing
as much as I used to. But it’s not my fault that the
machine jams more often and then I have to stop work-
ing to fix it.
____ 2. My boss said I have to evaluate all 25 of my
employees
four times a year instead of only once. I told her I don’t
have the time to do it that many times. It’s just not
possible to do a good review that often without cutting
back on other things that are more important.
____ 3. My boss said I have a bad attitude and gave me a
lower overall performance rating. I questioned what my
attitude had to do with my performance because I get
all my work done well, and by the deadline.
____ 4. My boss asked me to complete a self-evaluation form
rating my performance. But I didn’t do it because it is
her job—I let her do it.
____ 5. My boss told me that I was not doing a very good job.
But when I asked him why, he never gave me any details
to support his assessment. Good answer.
LO 8-2
List and briefly discuss the pur-
poses of performance appraisals.
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270 PART III: DEVELOPING AND MANAGING
believe they’re doing in their job. However, the process also
requires that we provide the
opportunity for the employee to speak to us concerning factors
that inhibit their ability to
successfully perform to expectations.
Factors in a job that management may not know about can
include lack of training,
poorly maintained equipment, lack of necessary tools, conflict
within work groups, and
many other things that management may not see on a daily
basis. If the communication
component of the performance appraisal process does not allow
for this two-way com-
munication, managers may not know of the obstacles that the
employee has to overcome.
We can resolve problems only when we know about them. So as
managers, we need to
communicate with our employees to find out when issues within
the work environment
are causing a loss of productivity so we can fix them. Thus,
two-way communication is a
critical component of correcting problems through the
performance appraisal process.
Decision Making (Evaluating)
The second major purpose of performance appraisal is to allow
management to make
decisions about employees within the organization. We need to
make decisions based on
the information we get from our communication. Accurate
information is necessary for
management decision making and is absolutely critical to allow
the manager to improve
organizational productivity.29 We use information from annual
performance appraisals to
make evaluative decisions concerning our workforce, including
such things as pay raises,
promotions, demotions, training and development, and
termination. When we have valid
and reliable information concerning each individual within our
division or department,
we have the ability to make administrative and performance
decisions that can enhance
productivity for the firm.
If, for instance, through the process of coaching (the third step
of the performance
appraisal process), we find that several machine operators are
having trouble keeping
their equipment in working order, then that information would
quite likely lead to a needs
assessment (as discussed in Chapter 7) to determine whether or
not maintenance training
is necessary for our group of operators. Without our rigorous
evaluation process, we
might not learn of this common problem in a timely fashion, and
the result could be signif-
icant damage to very expensive equipment. This and similar
types of information fre-
quently come to the forefront as we go through the performance
appraisal process.
Therefore, decision making based on good communication is a
very large part of why we
take the time to do annual performance appraisals.
Motivation (Engaging)
The third major purpose of performance appraisals is to
motivate our employees to
improve the way they work, which in turn will improve
organizational productivity
overall.30 But what is motivation, and are performance
appraisals normally motivational?
We define motivation here as the willingness to achieve
organizational objectives. We
want to create this willingness to achieve the organization’s
objectives,
which will in turn increase organizational productivity.
Our evaluative decisions should lead to development of
employees.
Returning to the above example of the machine operators having
trou-
ble keeping their equipment in working order, making the
decision to
train employees leads to their development, which then
improves their
individual performance, as well as better utilizing
organizational
resources.
Evaluating and Motivating = Development
An effective performance appraisal process has two parts—
evaluating and motivating—
and it does both parts well. Evaluating is about assessing past
performance, and motivat-
ing is about developing employees to improve their future
performance. But are both parts
done well? Have you ever been in a position of being evaluated
and debriefed as an
HRM in Action
Performance Appraisal
H:7
Managing Performance
SHRM
Motivation The willingness to
achieve organizational objectives
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by any means without express written permission of the
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Chapter 8: Performance Management and Appraisal 271
employee? Was the process motivational? Most of us would
probably reply no. Think
about that appraisal process and how it was carried out. Here we
discuss problems with
evaluation and how to overcome them, as well as how to
motivate employees. We also
suggest separating formal assessment meetings designed to
evaluate or motivate.
PROBLEMS IN EVALUATION. A common problem in
appraisals is overpowering an employee
during the evaluation debrief with large amounts of negative
information that they
have not heard during coaching. This tends to cause the
employee to “turn off” or stop
listening as the manager explains what is wrong. Employees
will just “raise their shields”
to ward off all of the negative information. This is a natural
human trait. We are naturally
suspicious of negative information for a variety of
psychological reasons (i.e., defensive
mechanisms), so when we are presented with a large amount of
negative information,
we tend to discount or even disbelieve it. Therefore, employees
in such situations may
consider the process unfair or one-sided and not an accurate
measure of their performance
(not acceptable), and as a result, the evaluation may become
useless as a motivator that
develops the employee.
AVOIDING PROBLEMS IN EVALUATION. To help overcome
this problem during employee
evaluations, an effective manager who is a good coach will
generally never identify a
weakness that the employee has not previously been made aware
of during the formal
appraisal interview. This is the key to making the appraisal
acceptable to the employee.
In other words, there are no surprises in a well-run evaluation.
The evaluative part of
the appraisal should be a review only of what the employee
already knows and should
be willing hear because they have been coached on their
performance throughout the
evaluation period.
However, avoiding surprises is not enough.31 The appraisal
debrief must be a well-
rounded look at the individual employee, and it should identify
both positive and negative
(specific) factors in the employee’s behaviors and results within
the job (and remember,
the communication needs to be two-way). As the manager, we
want to tell the employees
what they did right but also where they have room for
improvement. This more balanced
approach to the debriefing process will minimize the risk that
the employee will raise
those shields and avoid listening.
MOTIVATING DEVELOPMENT. An important part of
development is the need for managers to
provide motivational opportunities for the employees to
improve their performance over
time. In other words, we need to tell them how to fix their own
problems. We need to
provide them with tools, training, or other methods that will
allow them to improve to
the point where their behavior is sufficient. Then, we must
continually strive to get them
to perform at an above-average level and ultimately become
superior performers, helping
them along the way through ongoing coaching between formal
reviews.
If we provide employees with tools that allow them to improve
over time, we’re not
focusing on negative past results but on positive future potential
results.32 If employees are
given an honest opportunity to fix something that they know is a
problem and are given
the necessary tools or training, most will take advantage of that
opportunity. So perfor-
mance appraisals can be motivational if they are properly used
and debriefed.
SEPARATING EVALUATION AND DEVELOPMENT. To
improve both parts of the performance
appraisal, we suggest splitting the debriefing into two separate
interviews. The first
meeting is to evaluate the employee’s past performance,
pointing out strengths
and areas for improvement; the employee is asked to think about
how to improve
performance. At the second meeting, manager and employee
jointly come up with a
developmental plan that should lead to increased performance,
which in turn will result
in a higher future evaluative rating during the next formal
appraisal. We will discuss
how to conduct the two separate interviews in the “Debriefing
the Appraisal” section of
this chapter.
WORK
APPLICATION 8-3
Assess the effectiveness of an
evaluative performance appraisal
you had. Did the manager present
both positive and negative
performance areas? Did you really
listen? Were there any surprises?
Explain any problems and how the
evaluation could be improved.
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272 PART III: DEVELOPING AND MANAGING
WHAT DO WE ASSESS?
Now that we know why we conduct performance appraisals, the
next step is to figure out
what needs to be evaluated. In other words, we have to decide
what aspects of the individ-
ual and their performance we’re going to measure. Discovering
the best options for what
to evaluate would come from analyzing the essential functions
and qualifications required
for a particular job, or in HR terms, our job analysis. We could
then use these facts to
design an appraisal instrument that uses measurable and
observable factors to evaluate
performance.33 However, we can’t evaluate everything that is
done over the course of the
year. We have to choose what we will focus on because what
gets measured, and evalu-
ated, gets done.34 Our three primary options for what to
evaluate are traits, behaviors, and
results.
Trait Appraisals
Traits identify the physical or psychological characteristics of a
person. Traits of an indi-
vidual can be part of the performance appraisal process. There
is evidence that traits such
as inquisitiveness, conscientiousness, and general cognitive
ability are valuable in jobs that
require management and leadership skills.35,36 However, we
must ensure that we focus on
traits that have a direct relationship to the essential functions of
the job, that they are
within the control of the individual, and that they are accurate
measures. Can we accu-
rately measure traits that affect job performance, can trait
measures pass the OUCH test,
are traits commonly measured, and should we measure traits as
part of our performance
appraisal process? Here we answer these questions, and we will
answer these same ques-
tions for our behavior and results options.
CAN WE ACCURATELY MEASURE TRAITS THAT AFFECT
JOB PERFORMANCE? Many traits that
most of us would be likely to focus on—such as physical
attractiveness, height, and
extroversion—actually have been shown to have very little
bearing on job performance
in most cases. If we’re going to use traits in performance
evaluation, we must ensure that
we focus on traits that have a direct relationship to the essential
functions of the job being
done, and they have to be accurate measures.
Is using trait-based evaluation a good method of judging work
performance? How
many of us would want to have judgments made about our work
based on our appear-
ance or personality? Would you consider this to be a valid and
reliable measure of your
work performance? In most cases, it’s very difficult to show
that personal traits are valid
and reliable measures of work performance.
GIVE TRAITS THE OUCH TEST. Let’s take a look at trait-
based measurements using the
OUCH test. Is a physical characteristic such as height or a
psychological characteristic
such as cheerfulness, work ethic, or enthusiasm an objective
measure of an individual’s
work performance? We would have great difficulty in creating a
quantifiable and factual
link between height or enthusiasm and job performance. So
when measuring traits, it’s
difficult to meet the objective requirement of the OUCH test.
If we utilized these trait-based measures in all cases in
employee evaluations, we would
be able to meet the uniform in application requirement of the
OUCH test. The third test—
consistent in effect—would likely be extremely difficult to meet
due to the fact that differ-
ent racial, ethnic, social, and gender groups tend to have
different physical and
psychological characteristics. Remember, reliability is a
measure of consistency. Physical
and personality characteristics have less to do with success in
the job than certain behav-
iors do. So it’s difficult to meet the has job relatedness test in
most cases. Finally, it would
be very difficult to get different supervisors to evaluate
subjective traits the same, because
of their own personality traits.
ARE TRAITS COMMONLY USED TO MEASURE
PERFORMANCE? Surprisingly, if you go to
the local office supply store and look at standard evaluation
forms that are available in
LO 8-3
Identify and briefly discuss the
options for what to evaluate in a
performance appraisal.
Traits The physical or
psychological characteristics
of a person
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Chapter 8: Performance Management and Appraisal 273
preprinted pads, you will find that they usually list many traits
as part of the evaluation.
Why would this be the case? The simple answer is that at least
some traits, both physical
and psychological, are fairly easy to identify and we assume
that they are related to how
the individual will perform on the job. Many of us, individually
and as managers, value
certain things like enthusiasm, even if enthusiasm has very little
to do with the ability to do
a particular job or the actual results of job performance.
Certainly, there are some jobs where enthusiasm is critical.
However, being an enthu-
siastic employee may have very little to do with success in the
job, so if we evaluate indi-
viduals based on the characteristic of enthusiasm, we might
make an error in judgment
concerning their performance. And if we make errors in
analyzing the performance of our
employees, the appraisal form becomes less valid and reliable
and much less acceptable to
both the individual employee and management.
Finally, if our organization happened to be sued by a former
employee who claimed
that they were fired based on an appraisal process that was
unreliable and not valid, it
would be very difficult to defend trait-based evaluation forms
due to their subjective
nature.
SHOULD WE MEASURE TRAITS? Author Ken Blanchard said
that there are too many
evaluation items that can’t be objectively measured—such as
attitude, initiative, and
promotability. Therefore, it’s important to ask whether both
managers and employees
will agree with the measured rating as being accurate. The
bottom-line test (we will call
it the Blanchard test) is this: Does everyone understand why
they are assessed at a specific
level (evaluation) and what it takes to get a higher rating
(development)?37 We should
assess only traits that meet the bottom-line test of having a
direct and obvious objective
relationship between the trait and success in the job.
Behavioral Appraisals
Our second option in the assessment process is to evaluate
employees based on behaviors.
You will recall that behaviors are simply the actions taken by an
individual—the things
that they do and say. Behavioral appraisals measure what
individuals do at work, not
their personal characteristics. Is this a good option to use in a
performance appraisal
process?
CAN WE ACCURATELY MEASURE BEHAVIORS THAT
AFFECT JOB PERFORMANCE? As a general
rule, it is much better to use behaviors in an appraisal than it is
to use traits. While an
individual supervisor or manager may make a mistake in
judgment about the traits of an
employee, physical actions or behaviors can be directly
observed; and as a result, they are
more likely to be a valid assessment of the individual’s
performance.
GIVE BEHAVIOR THE OUCH TEST. Let’s take a look at a
behavioral evaluation using the
OUCH test. Would an evaluation based on actions taken by an
employee be objective?
In general, directly observing and evaluating an action is
significantly more objective than
making an attempt to judge a trait like individual effort. If we
applied the same evaluation
of behaviors to all of the individuals in the same type of job, we
would have a reasonable
certainty that we were being uniform in application. The same
thing would be true here in
evaluating the concept of consistent in effect.
So, it comes down to whether or not a behavior-based
evaluation has job relatedness.
Would a behavioral evaluation be directly related to the
essential functions of a job? The
answer is that it would be if we made sure that we chose
behaviors that were necessarily a
part of successfully accomplishing a task. For instance, if we
determine that a person acts
correctly in filling out a requisition form, putting the proper
information in the correct
blocks, and providing the requisition to the appropriate person
who would then order the
material, then we are assessing behaviors that are job related.
If, however, we evaluated
the action of walking to the lunchroom and walking back to
one’s workstation, would we
Behaviors The actions taken
by an individual
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274 PART III: DEVELOPING AND MANAGING
be measuring a valid job-related behavior? The answer is more
than likely no. Of course,
this is a silly example, but it should help you understand that no
matter what we do in the
evaluation process, we need to ensure that our actions are job
related.
OK, but would behavioral evaluations be defensible in the
situation of our fired
employee above? Would it be possible for us to show that our
evaluation process was
valid and reliable? If we choose to measure job-related
behaviors, it becomes much easier
for the organization to defend the validity and reliability of the
appraisal process.
Observation of actions that are directly related to a job would
provide at least some pre-
sumption of validity as well as reliability, purely because the
behaviors are directly job
related. Again, if we chose behaviors that could not be directly
associated with the job, the
validity and reliability of the measures would be suspect.
SHOULD WE MEASURE BEHAVIOR? Are behaviors that
measure performance more
acceptable to the individual employee and the managers than
personal traits? In fact,
evidence shows that most individuals are very comfortable with
the evaluation of their
performance being based on “what they do,” not “who they are.”
In general, the most
useful and therefore most acceptable feedback to employees is
feedback on specific job-
related behaviors.38 As managers, though, we still need to be
cognizant of the fact that a
behavioral evaluation can be a poor measure of work
performance unless the behaviors
chosen are directly applicable to being successful in the job. So
as with traits, the
Blanchard test asks whether employees understand why they are
assessed at a specific level
(evaluation) and what it takes to get a higher rating
(development).39
Results Appraisals
Our final option is to evaluate the results, or outcomes, of the
work process. Results are
simply a measure of the goals achieved through a work process.
Using results as an evalua-
tion measure provides management with an assessment of the
goals that were achieved in
a particular job over time.
CAN WE ACCURATELY MEASURE RESULTS THAT
AFFECT JOB PERFORMANCE? Is measuring
the outcomes of a particular individual’s job a valid and reliable
measure of that person’s
performance? Well, results are certainly concrete measures of
performance. However,
could results of a job have been skewed based on factors that
were outside the control of
the individual who is performing that job? The answer is
obviously that the results could
be affected by many other factors besides the individual’s
performance. For example,
standards could be set too low or high, and equipment and
machines don’t always work
correctly. As a result, employees can’t do as much, or any,
work.
Even though this is true, the measurement of results is the final
organizational measure
of success. The results produced through organizational
processes provide the company
with its return on investment—in this case, its investment in the
people in the organiza-
tion. So, organizations really like to measure results.
GIVE RESULTS THE OUCH TEST. Let’s take a look at the
OUCH test concerning results-based
evaluations. Is a result achieved in a particular job a concrete,
factual measure that can
easily be quantified? Obviously, results are a very objective
measure of what has happened
in that particular job. If we apply the same results-based
measure to each similar job, then
our measure is uniform in application. The measure of results
would almost certainly be
consistent across different groups of employees, so we would
also meet the consistency
in effect requirement of the OUCH test. And of course, if we
are measuring the results
of what happens in a job, we are certainly providing a measure
that has job relatedness.
So with a quick scan, we can see that a results-based
performance appraisal meets the
requirements of the OUCH test better than do either of the other
two options.
SHOULD WE MEASURE RESULTS? Results-based
evaluations, like behavior-based
evaluations, are typically very acceptable to both the employee
and the manager.
Results A measure of the goals
achieved through a work process
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Chapter 8: Performance Management and Appraisal 275
Employees readily accept results-based appraisals because they
feel that such appraisals
are one of the fairest methods of analyzing their performance.
After all, results are the
most concrete measures available—either the result was
achieved, or it wasn’t. We can
also defend this type of appraisal much more easily than we can
defend the other two
options, even in court. It tends to be very easy for the
organization to go into a courtroom
and show that an individual’s results were objectively lower
than those achieved by other
people in the same or similar jobs, if such an action becomes
necessary.
But is a performance evaluation measured on results valid and
reliable? The results-
based evaluation would most likely be highly valid and would
usually be reliable, assum-
ing that we were able to take into account factors outside the
individual’s control that
nonetheless affect job performance. So as with traits and
behaviors, the Blanchard test
asks: Does everyone understand why they are assessed at a
specific level (evaluation) and
what it takes to get a higher rating (development)?40
Which Option Is Best?
Our three options concerning what we evaluate are traits,
behaviors, and results. But
which option is best? The answer’s not as easy as you might
think. Certainly, results-based
and behavior-based evaluations are more defensible due to the
fact that they are more reli-
able and valid than trait-based evaluations. But we have to
include a large number of fac-
tors in order to select which option is best in a particular
situation.
For example, if we need to evaluate employees who work on the
assembly line, we
may need to evaluate behaviors such as punctuality. Do they
show up to work on time? If
we have an employee who produces at 150% of the standard
when they show up, but they
only show up 2 or 3 days a week, that creates a problem for the
whole assembly line. In
that case, we may need to evaluate attendance and punctuality
(behaviors) because every-
one on the assembly line depends on everyone else.
However, if we have individuals who don’t do their actual work
where managers can
see and measure traits and behaviors—for example, people who
work from home (tele-
commuters) and independent outside salespeople—then we need
to rely on results-based
measures. Other employees are often not affected by the hours
that the telecommuters and
salespeople work. It will not matter when they are at the office,
as long as they get the job
done. The firm will be concerned with how much they produced
or sold. So circumstances
dictate which method we will use; we cannot say one method
will always be superior to
the other two.
WORK
APPLICATION 8-4
Very briefly describe a job you
have or had. Describe how your
performance was assessed based
on traits, behavior, and/or results.
APPLYING THE CONCEPT8-2
Assessment Options
Write the letter corresponding to each of the following assess-
ment options for measuring performance before the situation
describing it.
a. traits
b. behavior
c. results
____ 6. On the assessment form question number 7, “willing-
ness to take responsibility,” I’m giving you an average
rating.
____ 7. You have to stay calm and stop yelling at your
coworkers.
____ 8. You sold only 25 units 3 weeks in a row. You know
the
standard is 35, so I’m giving you a formal warning that
if you don’t get up to standard in 2 weeks, you will be
fired.
____ 9. When you promote one of the women, make sure she is
attractive.
____ 10. I’m pleased with your performance. It is only your
sec-
ond week on the job, and you are already producing
the standard 10 units per day. I don’t think it will be long
before you exceed the standard and get bonus pay.
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276 PART III: DEVELOPING AND MANAGING
HOW DO WE USE APPRAISAL METHODS AND FORMS?
The formal performance appraisal usually involves the use of a
standard form purchased,
or developed by the HR department, to measure employee
performance. Again, “If you
can’t measure it, you can’t manage it.”41 But you must be
careful how you measure suc-
cess,42 as the assessment should be as objective as possible, not
subjective.43 Employees
need to know the standards and understand what good
performance looks like, and they
need to be able to measure their own performance. If you are
stuck with a form that has
subjective sections, work with your employees to develop clear,
accurate standards.
Exhibit 8-2 lists the commonly used performance appraisal
measurement methods
and forms and displays them on a continuum based on their use
in evaluative and develop-
mental decisions. In this section, we discuss each of the
measurement methods and forms,
starting with the developmental methods and working toward
the evaluative ones.
Critical Incidents Method
The critical incidents method is a performance appraisal method
in which a manager
keeps a written record of the positive and negative performance
of employees throughout
the performance period. There is no standard form used, so it is
a method. Here, and for
each of the other methods and forms, let’s answer two
questions: Why and when do we
use the method or form, and how do we use it?
WHY AND WHEN DO WE USE THE CRITICAL INCIDENTS
METHOD? Most formal reviews take
place only once or twice a year. But do you want to wait for a
formal review before you
talk to employees about what they are doing well and when they
are not performing up
to expectations? No, you want to let them know how they are
doing on an ongoing basis.
Also, let’s say you are a manager with 12 employees. Can you
really remember everything
each of them did well, when they made a mistake, and on what
dates to evaluate their
total performance over the past 6 to 12 months? Odds are, you
can’t. However, many
managers don’t keep a record of critical incidents, which leads
to the problem of
inaccurate measures during the formal review meeting.
We use critical incidents to do a good assessment of the entire
review period, and we
coach during the entire review period when needed for
developmental decisions. We need
to continually conduct informal coaching and discipline, when
warranted, as we make
notes of critical incidents to use during the formal review. With
clear standards and coach-
ing, you can minimize disagreements over performance during
the formal performance
appraisal because employees will know what is coming.44
Although critical incidents are commonly used for
developmental decisions, they are
also used for evaluative decisions. For legal purposes, having a
list of documented critical
incidents is especially important leading up the evaluative
decision of firing employees.
We will discuss discipline and documentation in detail in
Chapter 9.
HOW DO WE USE CRITICAL INCIDENTS? Managers
commonly keep track of incidents with
each employee, in either hard-copy or electronic form. Robert
Graham CEO Michael
LO 8-4
Briefly discuss the commonly
used performance measurement
methods and forms.
Critical incidents
method A performance appraisal
method in which a manager
keeps a written record of the
positive and negative performance
of employees throughout the
performance period
H:5
Performance Appraisals
SHRM
1. Ranking
Method
2. Graphic Rating
Scales Form
3. BARS
Form
4. Narrative
Method or
Form
5. MBO
Method
6. Critical
Incidents
Method
Evaluative
Decisions
Development
Decisions
1 2 3 4 5 6
EXHIBIT 8-2 PERFORMANCE APPRAISAL
MEASUREMENT METHODS AND FORMS
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Chapter 8: Performance Management and Appraisal 277
Buckly does it the old fashion way with a file folder for each of
his direct reports,45 but
there are many different software programs available now to
track performance over the
entire review period. Remember that critical incidents are
important employee actions,
not minor ones, which help or hurt personal and organizational
performance. Every
time an employee does something very well, like beating a
tough deadline or keeping
an angry customer from terminating a business relationship with
the firm, a note goes
in the employee’s file. Notes also go into the file every time the
employee’s behavior
hurts performance, such as when the employee comes to work
late or doesn’t meet
quality standards. In today’s environment, the note may be
written by the manager,
a coworker, customer, or even a subordinate. When desired, it
will be put in the form
of documentation, such as a warning, a performance report, or a
letter from a happy
customer thanking the employee for doing a great job.
Coaching is part of this ongoing process, and it involves helping
employees succeed by
monitoring their performance through giving feedback to praise
progress and to redirect
inappropriate behavior as often as needed.46 One error that
inexperienced or unskilled
managers tend to make in critical incidents evaluation is
focusing on the negative actions
of employees. Remember that a good, balanced evaluation
includes both positive and neg-
ative feedback, so look for good performance, not just poor
performance, and praise good
work when you see it.47
Management by Objectives (MBO) Method
The management by objectives (MBO) method is a process in
which managers and
employees jointly set objectives for the employees, periodically
evaluate performance, and
reward employees according to the results. Although there is a
three-step process, there is
no standard form used with MBO, so it is a method. MBO is
also referred to as work
planning and review, goals management, goals and controls, and
management by results.
WHY AND WHEN DO WE USE THE MBO METHOD? In many
cases, the MBO method is one of
the best methods of developing employees. As with the use of
critical incidents, employees
get ongoing feedback on how they are doing, usually at
meetings scheduled at regular
intervals. We can use the MBO method successfully with our
employees if we commit to
the process and truly involve employees rather than trying to
make them believe that our
objectives are theirs.
On an organization-wide basis, MBO is not too commonly used
as the sole assessment
method. It is more commonly used based on the evaluative
assessment during the develop-
ment part of the performance appraisal. One difficult part of
MBO is that different
employees will have varying individual goals, making MBO
more difficult and time-
consuming than using a standard assessment form.
HOW DO WE USE MBO? MBO is a three-step process:
Step 1: Set individual objectives and plans. The manager sets
objectives jointly with each
individual employee.48 The objectives are the heart of the MBO
process and should be
accurate measures of performance results. To be accurate,
objectives should be SMART.49
They need to be Specific, Measurable, Attainable, Relevant, and
Time based. Being
specific, measurable, and time based is fairly easy to determine
in a written goal, but
attainable and relevant are more difficult. So we developed a
model based on the work of
Max E. Douglas, and we have provided two examples in Model
8-1 that we can use when
setting objectives for ourselves or others.
Step 2: Give feedback and evaluate performance.
Communication is the key factor in determin-
ing MBO’s success or failure, and employees should continually
critique their own perfor-
mance.50 Thus, the manager and employee must communicate
often to review progress.51
The frequency of evaluations depends on the individual and the
job performed. However,
most managers do not conduct enough review sessions.
Step 3: Reward according to performance. Employees’
performance should be measured
against their objectives, again jointly by both the manager and
employee. Employees
H:1
Identifying and Measuring
Employee Performance
SHRM
WORK
APPLICATION 8-5
Select a job you have had. Did your
boss use critical incidents in your
evaluations? Assess how well your
boss used coaching between formal
performance appraisal meetings to
review your performance.
Management by objectives
(MBO) method A process
in which managers and
employees jointly set objectives
for the employees, periodically
evaluate performance, and
reward employees according
to the results
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278 PART III: DEVELOPING AND MANAGING
who meet their objectives should be rewarded through
recognition, praise, pay raises,
promotions, and so on.52 Employees who do not meet their
goals, so long as the reason is
not out of their control, usually have rewards withheld and even
punishment given when
necessary.
Narrative Method or Form
The narrative method or form requires a manager to write a
statement about the employee’s
performance. There may not be an actual standard form used,
especially for high-level
professional and executive positions, but there can be a form—
so it can be a method or
a form.
WHY AND WHEN DO WE USE THE NARRATIVE METHOD?
A narrative gives the manager the
opportunity to give the evaluative assessment in a written form
that can go beyond
simply checking a box to describe a predetermined assessment
item. The manager can
also write up a developmental plan of how the employee will
improve performance in the
future. Narratives can be used alone, but they often follow an
objective part of the form.
Although the narrative is ongoing, it is commonly used during
the formal review. A letter
of recommendation is often an example of a narrative evaluation
method.
HOW DO WE USE THE NARRATIVE METHOD OR FORM?
The system can vary. Managers may
be allowed to write whatever they want (i.e., use the method),
or they may be required to
answer questions with a written narrative about the employee’s
performance (i.e., use the
form). Let’s discuss both here.
The no-form narrative method can be the only assessment
method used during the for-
mal review process. But the narrative method, when used alone,
is more commonly used
with professionals and executives, not with operative
employees. How we write the for-
mal narrative assessment varies, as writing content and styles
are different. A narrative
based on critical incidents and MBO results is clearly the best
basis for the written
assessment.
The narrative is also often used as part of a larger form. For
example, you have most
likely seen an assessment form (such as a recommendation) that
has a list of items to be
checked off. Following the checklist, the form may ask one or
more questions requiring a
narrative written statement.
Graphic Rating Scale Form
The graphic rating scale form is a performance appraisal
checklist form on which a man-
ager simply rates performance on a continuum such as excellent,
good, average, fair, and
poor. The continuum often includes a numerical scale, for
example from level 1 (lowest
performance level) to 5 (highest). The Self-Assessment and
Skill Builder exercise 8-1 uses a
graphic rating scale form; it is found at the end of this chapter.
WHY AND WHEN DO WE USE THE GRAPHIC RATING
SCALE FORM? The graphic rating scale
form is probably the most commonly used form during the
formal performance appraisal
Narrative method or
form Method in which the
manager is required to write a
statement about the employee’s
performance
Graphic rating scale form
A performance appraisal checklist
form on which a manager simply
rates performance on a continuum
such as excellent, good, average,
fair, and poor
MODEL 8-1 SETTING OBJECTIVES MODEL
(1) To + (2) Action Verb + (3) Specific and Measurable Result
+ (4) Target Date
To increase widget productivity 5% by December 31, 2020
To + produce + 20 units + per day
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Chapter 8: Performance Management and Appraisal 279
(primarily for evaluative decisions), but use of
the form should lead to development decisions
as well. Why the popularity? Graphic rating
scales can be used for many different types of
jobs, making them a kind of one-size-fits-all
form that requires minimal time, effort, cost,
and training. Walk into an office supply store
and you can find pads of them. But on the
negative side, graphic rating scales are not very
accurate measures of performance because the
selection of one rating over another, such as an
excellent versus good rating, is very subjective.
For example, think about professors and how
they measure performance with grades. Some
give lots of work and few As, while others give
less work and almost all As.
HOW DO WE USE THE GRAPHIC RATING SCALE
FORM? It is very simple, and we have most
likely all used one. For example, many colleges let students
assess professors at the end
of a course, and all the students do is check a box or fill in a
circle to give their rating.
One of the problems with this method is that some of us don’t
bother to actually read
the questions. Based on our biases, some of us just go down the
list, checking the same
rating regardless of actual performance on the items. To be fair,
this problem is not
common with managers formally evaluating their employees.
However, it does tend to
occur when customers evaluate products and services, including
when students assess
professors.
To overcome this problem, we can reverse the scale from good
to poor on different
questions, but this is unfortunately not commonly done. Why
isn’t this done all the time?
Some managers who make the scales do not know they should
do this. Also, some who do
know they should reverse the scales don’t because they don’t
want to end up with overall
ratings being pushed to the middle because people don’t read
the questions.
Behaviorally Anchored Rating Scale (BARS) Form
A behaviorally anchored rating scale (BARS) form is a
performance appraisal that pro-
vides a description of each assessment along a continuum. As
with graphic rating scales,
the continuum often includes a numerical scale that runs from
low to high; but with the
BARS form, each item is an analysis of a specific behavior. A
simple example here would
be in a restaurant where the server is supposed to clean and
reset the tables (a behavior)
after each customer leaves. A BARS item might be “Server
cleans and resets table after cus-
tomers what percent of the time (choose the closest answer)?”
Answers: 100%; 75%;
50%; 25%; 0%.
WHY AND WHEN DO WE USE THE BARS FORM? The
answers to why and when are the same
here as they are with graphic rating scales, so let’s focus on the
differences between
graphic rating scales and BARS forms. BARS forms overcome
the problem of subjectivity
by providing an actual description of the performance (the
required behaviors) for each
rating along the continuum, rather than that one simple word
(excellent, good, etc.)
that graphic rating scales provide. A description of each level of
performance makes the
assessment a more objective, accurate measure.
Why aren’t BARS more commonly used than graphic rating
scales? It’s partly eco-
nomics and partly expertise. Again, the graphic rating scale can
be used for many differ-
ent jobs, but BARS forms have to be customized to every
different type of job. And
developing potentially hundreds of different BARS forms takes
a lot of time, money, and
expertise. Even when a firm has an HR staff, the question
becomes, “Is developing
Behaviorally anchored
rating scale (BARS)
form A performance appraisal
that provides a description of each
assessment along a continuum
There shouldn’t be any surprises or
lack of agreement on performance
levels during the formal perfor-
mance appraisal interview.
Th
om
as
B
ar
w
ic
k v
ia
G
et
ty
Im
ag
es
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280 PART III: DEVELOPING AND MANAGING
BARS forms the most effective use of our time?” Obviously, the
answer is, “It depends
on the types of jobs being evaluated and the resources available
to complete the evalua-
tion process.”
HOW DO WE USE BARS FORMS? As with graphic rating
scales, we simply select a level of
performance along a continuum. College accreditation
associations are requiring more
measures of student outcomes as assurance of learning; and as
part of that process,
they want more BARS rubrics as evidence. So in college
courses, especially for written
assignments, professors give out rubrics that describe in some
detail the difference
between an excellent (A), good (B), average (C), poor (D), and
not acceptable (F) grade,
using multiple criteria to put together a final grade. Students
use the rubric to do the work
by meeting the written descriptive of how each part will be
graded/objectives. When
getting the assignment back with a grade, students better
understand why they got the
grade they did and how to improve in the future. Here is another
simple example of
making a graphic rating scale item into the more objective
BARS.
Attendance—excellent, good, average, fair, poor
becomes
Attendance—number of days missed 0–1, 2, 3–4, 5, 6 or more
Ranking Method
Ranking is a performance appraisal method that is used to
evaluate employee perfor-
mance from best to worst. There often is no actual standard
form used, and we don’t
always have to rank all employees. This method can be
contentious, as evidenced by
changes at GE, which until about 2015 was the king of the “rank
and yank” companies
that was notorious for ranking their employees and, at the end
of each year, terminating
the lowest ranked performers. According to a 2016 Wall Street
Journal article, GE is
working to reinvent their employee review process, providing
routine feedback from man-
agers and coworkers during the year, but also doing a brief
review with each employee at
the end of the period.53 Dell is another company that tried
forced-ranking but it “turned
good employees into politicians, bad employees into
backstabbers, and colleagues into
enemies. It hurt collaboration”—so Dell dumped it.54
WHY AND WHEN DO WE USE THE RANKING FORM?
Managers have to make evaluative
decisions such as determining who gets a raise or promotion and
who gets laid off.
So when we have to make evaluative decisions, we generally
have to use some type of
ranking. However, our ranking can, and when possible should,
be based on other valid
and reliable methods and forms.
Managers can also use ranking for developmental purposes by
letting employees
know where they stand in comparison to their peers—meaning
managers can use rank-
ings to motivate employees to improve their performance. For
example, when one of the
authors passes exams back to students, he places the grade
distribution on the board. This
does not in any way affect the current grades—but it lets
students know where they stand,
and he does it to motivate them to improve. Using the ranking
method for employee devel-
opment is generally more valuable to the organization than
using it for evaluative pur-
poses. Showing an employee comparative strengths and
weaknesses and working with
them to fix weaknesses tends to be motivational, but evaluating
them as “poor” overall
versus their coworkers tends to be demotivational.
HOW DO WE USE RANKING? Under the ranking method, the
manager compares an employee
to other similar employees, rather than to an objective standard.
An offshoot of ranking
is the forced distribution method, which is similar to grading on
a curve. Predetermined
WORK
APPLICATION 8-6
Select an organization, preferably
one you work for or have worked
for. Identify and briefly describe
the assessment methods and/
or forms that are used to assess
employee performance.
Ranking A performance
appraisal method that is used to
evaluate employee performance
from best to worst
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Chapter 8: Performance Management and Appraisal 281
percentages of employees are placed in various performance
categories—for example,
excellent, 5%; above average, 15%; average, 60%; below
average, 15%; and poor, 5%.
The employees ranked in the top group usually get the rewards
(a raise, a bonus, or a
promotion), those not in the top tend to have rewards withheld,
and the ones in the
bottom group sometimes get punished. In Self-Assessment and
Skill Builder 8-1, you are
asked to rank the performance of some of your peers.
Which Option Is Best?
While this section does not contain an exhaustive list, it
provides examples of each of the
major methods of performance appraisal. Which appraisal
method or form is best
depends on the objectives of the organization. Using a
combination of the methods and
forms is usually superior to using just one. For developmental
objectives, the critical inci-
dents, MBO, and narrative methods work well. Alternately, you
can’t decide who gets the
promotion or merit raise without an evaluative method, so for
administrative decisions, a
ranking method based on the evaluative methods, and especially
graphic rating scales or
BARS forms, works well.
Remember that the success of the performance appraisal process
does not lie just in
the formal method or form used once or twice a year. It depends
on the manager’s human
relations skills in ongoing critical incidents coaching, and it
also depends on effective mea-
sures of performance that are accurate enough to let everyone
know why they are rated at
a given level (evaluative) and how they should improve
(developmental) for the next
assessment.55
Insperity’s PerformanceReview.com is one website that has
been designed to help
managers write complete and effective performance appraisals
online. The site offers
practical advice to guide managers through the appraisal
process.56
WHO SHOULD ASSESS PERFORMANCE?
Now that we’ve learned the why, what, and how of the
performance appraisal process, we
next need to discuss the options for choosing a rater or
evaluator. There are a number of
different options concerning who should evaluate the individual
employee, and the deci-
sion needs to be based on a series of factors. Let’s take a look
at our options for deciding
who should evaluate an employee.
APPLYING THE CONCEPT8-3
Appraisal Methods and Forms
State which of the following assessments is being described in
each of the given situations, writing each assessment’s corre-
sponding letter before the situation(s) in which it is described.
a. critical incidents method
b. MBO method
c. narrative method and forms
d. BARS forms
e. graphic rating scale forms
f. ranking method
____ 11. Hank is not doing a good job, so you decided to talk
to
him about it and keep track of his performance regularly.
____ 12. Your employees perform different tasks. You want to
create a system for developing each of them.
____ 13. Sara is moving, has applied for a job at another com-
pany, and asked you for a letter of recommendation.
____ 14. You started a new business a year ago, and you are
extremely busy focusing on sales; but you want to
develop a performance appraisal form you can use with
all 14 of your employees, who do a variety of jobs.
____ 15. You have been promoted, and you have been asked to
select your replacement.
LO 8-5
Identify and briefly discuss
available options for the
rater/evaluator.
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282 PART III: DEVELOPING AND MANAGING
Supervisor
When we ask who should evaluate an employee, the most
common response is that
their immediate supervisor should do it. But why would the
supervisor be the best
person to evaluate an employee? Well, the supervisor is
supposed to know the level of
performance of their employees. Certainly, supervisors are often
one of the best and
most commonly used options as an evaluator for the employees
under their control.
However, this is not always the case due to problems with
supervisor performance
assessments.
PROBLEMS WITH SUPERVISOR EVALUATIONS. What if the
supervisor doesn’t see the
employee very frequently? This may not be all that uncommon
in a modern organization.
Many times today, supervisors have little or no direct contact
with their employees
because they may be in a different building, city, state, or even
country. Virtual teams,
Internet-linked offices, telecommuting, and other factors cause
supervisors not to be in
constant touch with their employees, unlike the situation 20 or
30 years ago.
There are other problems as well. What if there’s a personality
conflict? Supervisors
are human, just like their employees; and they may just not
relate well to some of their
employees. This may cause a personal bias for or against certain
employees that may
invalidate the appraisal process.
What if the supervisor doesn’t know what you’re supposed to be
doing in your job?
Aren’t supervisors always supposed to know every job for
which they are responsible?
Again, 30 years ago, this may have been true. However, in
today’s work environment,
with the amount of information necessary to do the complex
tasks that organizations
must accomplish in order to compete, nobody can know every
job. There’s just too much
information for any one individual to learn. So jobs have been
segmented down into
smaller and smaller areas, and the supervisor may not know
each of those jobs in great
detail. So there are certainly problems that can occur in the case
of a supervisor being
responsible for a subordinate employee’s evaluation process.
AVOIDING SUPERVISOR REVIEW PROBLEMS. A simple
way to overcome these problems is
to have others, in addition to (or in place of) the supervisor,
assess performance. Also,
multiple measures can make a performance assessment more
accurate—valid and reliable.
Using other evaluators and multiple measures can help
overcome personal bias and
provide information that supervisors don’t always know about.
Peers
In addition to, or in place of supervisors, the trend is to use
more teams; and teams com-
monly evaluate each member’s performance.57 Why? If the
supervisor is absent or has
infrequent contact with the employees, but each of the
employees frequently interacts
with multiple coworkers in a team or group, then peer
evaluations may be valuable.58
Peers often know the job of the individual employee better than
the supervisor does, and
they are more directly affected by the employee’s actions—
either positive or negative. In
addition, peers can evaluate the ability of the individual to
interact with others success-
fully in a group or team setting—something that may be very
difficult for the supervisor to
see unless they are intimately involved with the group.
PROBLEMS WITH PEER REVIEWS. Peer evaluations can
cause problems because the process
may become less objective. In fact, research evidence regarding
the validity of peer
evaluations is really unclear.59 Personality conflicts and
personal biases can affect how
individual employees rate their peers. A major problem is with
perception because most
of us see ourselves as being better at our job than our boss and
peers. Individuals within
a group or team may also just have significantly different
personality types, and these
differences can cause friction within the workgroup that may
spill over when it comes
time to evaluate the person that they are in conflict with.
H:2
Sources of Information (e.g.,
Managers, Peers, Clients)
SHRM
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Chapter 8: Performance Management and Appraisal 283
AVOIDING PEER REVIEW PROBLEMS. Because we know
that problems can occur within a
peer evaluation, the manager can take the issues into account
and adjust rating values
as necessary. For example, assume you are the manager of a
work group of six people
who, in your opinion, work very well together and provide a
quality work product. When
you review a set of peer evaluations from the work group, you
notice that two of the
group members (a young male and an older female) gave each
other significantly lower
than average grades. However, the other four members of the
group gave both of them
good marks for their contributions to the group. This quite
likely is a situation where a
personality conflict has occurred between the two members that
caused them to lower
each other’s grades. Knowing that the other four members of the
group evaluated these
two individuals as valued members of the team, the ratings from
the two individuals can
be adjusted, noting that a personality conflict may have lowered
their evaluations of each
other. Some research shows that as peers evaluate each other
more, their ability to provide
relevant and valuable feedback increases, as does their personal
confidence. So giving
employees practice in peer evaluations can improve the validity
and reliability of such
evaluations.60 Even with the potential for personality conflicts
and bias, peer evaluations
can give us good insight into the inner workings of a group or
team when the supervisor
has infrequent contact with the team. In Self-Assessment and
Skill Builder 8-1, you will do
a performance assessment of your peers.
Subordinates
We may also have subordinates evaluate their supervisor. We
would typically use only
subordinate evaluation for managerial-level employees.
However, who within the firm
knows, and suffers the consequences from, the actions of a
supervisor more than the
people who work for them? Subordinate evaluations can give us
good insight into the
managerial practices and potential missteps of people who
oversee others. As a result, sub-
ordinate evaluations may give us valuable information that we
would be unable to find
out using any other means. Have you filled out a form that
assesses your professors? If so,
you have participated in one form of subordinate evaluation.
PROBLEMS WITH SUBORDINATE REVIEWS. There is
potential for bias here, especially from
subordinates who have been disciplined by their supervisor.
Obviously, subordinates
may try to get back at their supervisor for giving them tasks that
they did not want to
perform or for disciplining them for failure in their jobs. There
may also be a personality
conflict, or some subordinates may be biased against their
supervisor or manager for
other reasons. So there are certainly negative aspects to
subordinate evaluations. On the
other end of the scale, the subordinates may inflate the
capabilities of their manager, at
least partly because of a lack of understanding of all the tasks
and duties required of the
manager. In fact, in a recent survey, about two thirds of
employees rated their managers
higher than the managers rated themselves.61
AVOIDING SUBORDINATE REVIEW PROBLEMS. In all of
these problem areas, if we know
that there is a potential problem, we can most likely guard
against it. In many cases,
as we go through a group of subordinate evaluations, we will
see one or two outliers
providing either very high or very low marks for the supervisor.
In such a case, we should
probably throw those outliers out of the calculation when
determining overall marks
for the supervisor. It’s surprising how often these outliers are
extremely easy to spot in a
subordinate evaluation process.
Another significant issue in the case of subordinate evaluations
is confidentiality. Sub-
ordinate evaluations must be anonymous or it is unlikely that
the subordinates will pro-
vide an honest evaluation of their supervisor. Obviously, if the
evaluation is not
confidential, the supervisor can and may exact retribution on
subordinates who provide
unflattering evaluations. In such cases, subordinates will likely
inflate the capabilities of
the supervisor, which minimizes the value of the evaluation
process itself. Despite poten-
tial for bias and other problems, subordinate evaluations can
provide us with valuable
information about the supervisor’s capabilities.
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284 PART III: DEVELOPING AND MANAGING
Self
Have you ever done a self-assessment at work? Virtually all of
us have informally evalu-
ated how we perceive we are doing on the job, whether we are
actually formally asked to
do so as part of the assessment or not. It is required with MBO.
Even when they are not
asked to do a self-assessment, employees will still walk into the
review discussion with
some informal self-assessment that they will compare to the
supervisor’s rating. But are
self-evaluations valuable, or is the employee going to
overestimate their individual capa-
bilities and tell us that they’re perfect? (As you know, every
chapter of this book has one or
more self-assessments, and in one for this chapter—Self-
Assessment and Skill Builder 8-1
at the end of the chapter—you will assess your performance on
a group project. If you
want to, you can do the skill-builder now.)
PROBLEMS WITH SELF-ASSESSMENTS. Most research
evidence shows that self-assessments
tend to overestimate the individual’s ability to do a job.62
However, some of the research
says that employees either underestimate or accurately estimate
their job performance
over time. A significant portion of the evidence seems to show
that individuals with
lower overall levels of knowledge and skills tend to inflate their
self-assessment of their
abilities.63 Conversely, as individuals become more
knowledgeable and more skilled, the
evidence tends to show that they will either accurately estimate
or even underestimate
their capabilities in their jobs.64,65,66
AVOIDING SELF-ASSESSMENT PROBLEMS. Based on the
fact that most of the evidence
shows that employees overestimate their ability to do their job,
is self-assessment a valid
performance measure? Here again, even though the measure
may have validity concerns,
if we know that self-evaluations tend to be skewed, we can most
likely adjust for that.
In addition, receiving information from the individual
concerning their perception of
their skill set is extremely valuable in a number of management
processes—including
plans for training and development opportunities, providing
work assignments, and
counseling and disciplinary measures. As stated in the
Blanchard test, both the manager
and employee need to agree on the level of performance, and
what it takes to get to the
next level—it’s called perceptual congruence.67
Customers
We may want to use customers as evaluators when the
individual being evaluated has fre-
quent contact with customers. We use the word customers in a
broad sense to include peo-
ple outside the organization, including customers for our
products and services and
suppliers to the firm, and those inside the organization,
including people in other depart-
ments of the firm (for example, the print shop that makes copies
for other departments
and the mail room that receives mail and delivers
communications to the rest of the firm).
If an employee interacts routinely with internal or external
customers, we need to know
how those customers feel about their interactions with the
employee. This particularly
applies to external customers, who are the ones who ultimately
pay the bills.
It does not matter what else we do successfully if our customers
are uncomfortable
with their interactions with our employees. If external
customers are upset about their
interactions with our employees, then they have the ability to go
elsewhere with their busi-
ness. And even internal customers can create significant
problems within the firm due to
conflict between departments or divisions. So we want to ask
internal and external cus-
tomers to evaluate the individuals with whom they come into
contact.
PROBLEMS WITH CUSTOMER ASSESSMENTS. What do you
think the major problem
would be with customer-based evaluations? One problem is that
customer assessments
commonly use simple graphic rating scales, which we discussed
as being very subjective.
Also, customers are usually not trained to do an accurate
assessment, so bias is a problem.
For these and other reasons, the popular opinion is that
customer evaluations are almost
WORK
APPLICATION 8-7
Select your current job or a past
job. Identify who has or had input
into your performance appraisal.
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Chapter 8: Performance Management and Appraisal 285
always negatively skewed. However, research shows that this is
not necessarily the case.68
In some situations, customer evaluations actually exceed
internal evaluations.
AVOIDING CUSTOMER ASSESSMENT PROBLEMS.
Regardless of problems, customer
evaluations provide us with valuable information concerning
our employees who have
direct customer contact. And we can always adjust the
evaluation process knowing that
customer evaluations may be biased. One of the basic methods
of adjusting the customer
evaluation process is by comparing the individuals being
evaluated and identifying the
ratios of negative and positive comments. This allows us to
identify more successful and
less successful employees. Although this is an imperfect
measure, it still provides value to
the firm because customers’ perceptions are critical to our
relationships with them. So, we
need to measure this relationship.
360-Degree Evaluations
In some cases, the evaluation is expanded to everyone that an
employee comes into con-
tact with through 360-degree feedback.69 The 360-degree
evaluation analyzes individu-
als’ performance from all sides—from their supervisor’s
viewpoint, from their
subordinates’ viewpoint, from their customers (if applicable),
from their peers, and from
their own self-evaluation. The 360-degree evaluation would
generally give us the most
accurate analysis of the individual and their performance within
the company.
DuPont developed 360-degree reviews back in 1973, and they
are still popular
today.70 With the trend of structuring work in teams, peer
evaluations are now used regu-
larly.71 Those who fill out the appraisal form would usually do
so anonymously. The feed-
back from all these people is used to evaluate and develop the
employee.
PROBLEMS WITH 360-DEGREE EVALUATIONS. Although
considered the best, why don’t
we always use 360 degree evaluations? The simple answer is
time and money. It takes
a significant amount of time for a group of individuals to
evaluate one person if we use
a 360-degree format. Using up so much organizational time
obviously also costs us a
significant amount of money. If we multiply those numbers by
the time it takes everyone
associated with the organization to evaluate one individual, the
costs can quickly become
massive.
AVOIDING 360-DEGREE PROBLEMS. Unfortunately, there
really is no easy way to avoid these
problems besides what is commonly done—simply not using
360-degree evaluations.
The 360-degree evaluation format tends to be most valuable if it
is used for purposes
of individual development, rather than to make administrative
evaluative decisions.72
A good 360-degree feedback system can provide specific
suggestions about how to
improve individual competencies.”73 It can also go a long way
toward minimizing some
of the most common problems with the performance appraisal
process, which we will
review in the next section.
Whom Do We Choose?
Now that we know our options for who should conduct an
evaluation of each employee,
which option should we use? Again, we need to remember that
each of the options costs
us money because it takes time for the individual to perform the
appraisal. So, we need to
determine which option or options to use. We can combine any
of these methods with any
other, all the way up to the point of the 360-degree evaluation.
However, we want to use a
360-degree evaluation only when it’s worth it. If it’s not
necessary, then it doesn’t make a
lot of sense due to the cost of this method.
For instance, is there any need to do a 360-degree evaluation of
janitorial or house-
keeping staff? Would this make sense? Obviously, it would not.
In most cases, with low-
level staff members, a supervisor’s evaluation is sufficient. This
is true because even
though only the supervisor does the formal assessment, the
supervisor often gets informal
360-degree evaluation
An evaluation that analyzes
individuals’ performance
from all sides—from their
supervisor’s viewpoint, from their
subordinates’ viewpoint, from
their customers (if applicable),
from their peers, and from their
own self-evaluation
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286 PART III: DEVELOPING AND MANAGING
feedback on the employee’s performance from customers and
peers of that employee.
Customers will often complain to the supervisor if the
employee’s service is not satisfac-
tory, and peers will complain about a fellow employee who is
not meeting standards for
some reason. The supervisor’s critical incident file is often
written based on information
received from peers and customers, and that reduces the
influence of any personal bias the
supervisor may have toward the employee.
What about the case of an outside salesperson? In this situation,
the results tend to
speak for themselves. Sales numbers are available to the
salesperson and manager. If the
supervisor rarely sees the individual but the customer interacts
with our salesperson on a
routine basis, we can ask the customer to do an evaluation of
the salesperson and ask the
salesperson for a self-appraisal. With the sales figures, a self-
assessment, and customer
feedback, we can develop a plan to increase future performance.
Finally, if we are evaluating the marketing manager for the
firm, we may want to do a
360-degree evaluation because of the fact that this individual
would affect all of the
groups—subordinates, customers, peers, the organization, and
themselves. So, we evalu-
ate the specific situation and use the number of methods
necessary to get an accurate
assessment of the individual.
So once again, to get an understanding of the return on our
investment, we need to do
a cost-benefit analysis to determine when the benefits of
increasing performance outweigh
the costs of a particular person or group completing a
performance appraisal. In essence,
we attempt to maximize performance while minimizing the total
cost of the appraisal
process.
PERFORMANCE APPRAISAL PROBLEMS
During the performance appraisal process, we face some
common problems. However,
we can take measures to avoid them. So in this section, we
discuss the problems first with
simple ways to avoid each of them as an individual. Then we
discuss what the organiza-
tion can do to overcome these problems on an organization-wide
basis. We can actually
overcome multiple problems with the same method. See Exhibit
8-3 for a list of problems
and ways to avoid them.
Common Problems Within the Performance Appraisal Process
Let’s briefly discuss each of the common problems during the
performance appraisal pro-
cess listed in Exhibit 8-3.
BIAS. Bias is simply a personality-based tendency, either
toward or against something. In
the case of performance assessment, bias is toward or against an
individual employee. We
all have biases, but supervisors especially cannot afford to
allow their biases to enter into
their evaluation of subordinates. This is very easy to say but
very difficult to do. Biases
make the evaluation process subjective rather than objective,
and they certainly provide
the opportunity for a lack of consistency in effect on different
groups of employees. So to
overcome the bias problem, we need to be objective and not let
our feelings of liking or
disliking an individual influence our assessment of that person.
STEREOTYPING. Stereotyping is mentally classifying a person
into an affinity group and
then identifying the person as having the same assumed
characteristics as the group.
Though stereotyping is almost always assumed to be negative,
there are many incidents
of positive stereotypes. However, making assumptions about
individual employee
characteristics based on their supposed membership in a group,
rather than explicitly
identifying the performance of the individual, creates the
potential for significant error
in evaluations. So we can avoid stereotyping by getting to know
each employee as an
individual and then objectively evaluating actual performance.
WORK
APPLICATION 8-8
Select an organization, preferably
one you work for or have
worked for. Identify some of the
positions and people who should
be evaluated using 360-degree
evaluations. Briefly describe your
cost-benefit analysis to justify your
selection.
LO 8-6
Identify some of the common
problems, and how to avoid
the problems, with
performance appraisals.
Bias A personality-based
tendency, either toward or
against something
Stereotyping Mentally
classifying a person into an
affinity group and then identifying
the person as having the same
assumed characteristics as
the group
H:3
Rater Errors in
Performance Measurement
SHRM
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Chapter 8: Performance Management and Appraisal 287
HALO ERROR. Halo error occurs when the evaluator forms a
generally positive impression
of an individual and then artificially extends that general
impression to many of that
individual’s categories of performance to create an overall
evaluation of the individual
that is positive.74 (Alternatively, the evaluator can form a
negative initial impression and
extend it to form an overall negative evaluation—this is
sometimes called the “horns
error.”) In other words, if an employee is judged by their
supervisor to be generally a
“good” employee, and if the supervisor then evaluates each of
the areas of the employee’s
performance as good, then regardless of any behaviors or results
to the contrary,
the supervisor is guilty of halo error. So we can avoid halo error
by remembering that
employees are often strong in some areas and weaker in others,
and we need to objectively
evaluate each employee based on their actual performance for
each and every item of
assessment.
DISTRIBUTIONAL ERRORS. These errors occur in three
forms: severity or strictness, central
tendency, and leniency. They are based on a standard normal
distribution, or the bell
curve that we are all so familiar with. In severity or strictness
error, the rater evaluates
everyone or nearly everyone as below average. Central tendency
error occurs when the
rater evaluates everyone under their control as average—
meaning nobody is rated as
either really good or really bad. Finally, leniency error occurs
when the rater evaluates
everyone as above average—meaning it is basically a form of
grade inflation. So we
need to give a range of evaluations because we really aren’t all
equal in our level of
performance, and everyone can’t be the worst or the best.
SIMILARITY ERROR. This error, also called “like me,” occurs
when the rater gives better
evaluations to subordinates whom they consider more similar to
themselves and poorer
evaluations to subordinates whom they consider to be different
from themselves. We all
have a tendency to feel more comfortable with people who we
feel are more similar to
ourselves;75 and if we are not careful, we can allow this feeling
of comfort with similar
individuals to be reflected in the performance appraisal process.
So we can avoid
similarity error by embracing diversity and objectively
evaluating each employee based on
their actual performance, even if they are different from us and
don’t do things the same
way that we do.
PROXIMITY ERROR. This error states that similar marks may
be given to items that are near
(in other words, proximate to) each other on the performance
appraisal form, regardless
of differences in performance on those measures. For instance,
if we mark the first three
items as “meets expectations,” we tend to continue marking the
same way on down
the form. So we can avoid proximity error by objectively
evaluating employees’ actual
performance on each and every item on the assessment form,
and having reverse item
scales really helps.
EXHIBIT 8-3 PERFORMANCE APPRAISAL PROBLEMS
AND AVOIDING THEM
Common Problems How to Avoid Problems
Bias
Stereotyping
Halo error
Distributional errors
Similarity error
Proximity error
Recency error
Contrast error
Attribution error
Develop accurate performance measures
Use multiple criteria
Minimize the use of trait-based evaluations
Use the OUCH and Blanchard tests
Train your evaluators
Use multiple raters
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288 PART III: DEVELOPING AND MANAGING
RECENCY ERROR. This occurs when the rater uses only the
last few weeks of a rating period
as evidence when putting together performance ratings. For
instance, if a warehouse
worker has been a strong performer for most of the appraisal
period, but right before his
annual evaluation, he accidentally set a fire, he may be rated
poorly due to recency error.
So we can avoid recency error by evaluating the employee based
on their performance
during the entire assessment period, which is commonly 6 to 12
months. Using the
critical incident evaluation method really helps our recall, and it
helps us assess employee
performance more objectively for the entire period.
CONTRAST ERROR. Here the rater compares and contrasts
performance between two
employees, rather than using absolute measures of performance
to assess each employee.
For example, the rater may contrast a good performer with an
outstanding performer;
then, as a result of the significant contrast, the good performer
seems to be “below
average.” This would be a contrast error. So we can avoid
contrast error by objectively
evaluating the individual based on their actual performance
against an objective standard.
ATTRIBUTION ERROR. In simplified terms, attribution is a
process in which an individual
makes assumptions about the reasons or motivations (such as
attitudes, values, or
beliefs) for an observed behavior. So, attribution error in
performance appraisal might
occur when the rater observes an employee action—such as an
argumentative answer to
a question—and assumes that the individual has a negative
attitude toward their job and
is a poor performer. This may not be true; and if it isn’t, the
rater is guilty of an attribution
error.76 So we need to avoid attribution error because it is
based on our subjective
conclusions. When in doubt, we shouldn’t assume we know why
the employee did or
didn’t do something. We should investigate actions so that we
can objectively evaluate
employees based on their actual performance.
Avoiding Performance Appraisal Problems
As you can see above, there are a significant number of ways
that performance appraisals
can fail to provide an accurate assessment of the capabilities
and behaviors of individual
employees. Thus far, we have provided only simple solutions to
help us overcome these
problems as individuals. But how can a firm avoid these
problems on an organiza-
tion-wide basis throughout the performance appraisal process?
Luckily, we can take a number of basic steps to minimize the
negative issues that occur
in the performance appraisal process. All we have to do is look
at the problems noted, and
we can fairly quickly come up with some possible solutions to
at least the majority of
those problems using the same methods. Let’s discuss how the
firm can limit the potential
for the appraisal process to go astray by developing accurate
performance measures,
training evaluators, and using multiple raters.
DEVELOP ACCURATE PERFORMANCE MEASURES. As
discussed earlier in this chapter, if the
performance appraisal methods and forms are not accurate
measures, then the entire
performance appraisal process will have problems. Therefore,
the organization should
have its own HR specialist or hired consultants develop an
objective assessment process
and measures. Now, let’s discuss three things HR specialists
commonly do to help ensure
accurate measures.
Use multiple criteria. One method of overcoming some of the
problems with the appraisal
process is to ensure that we use more than one or two criteria to
evaluate an individual’s
performance. We should generally have at least one evaluation
criterion for each major
function within an individual job. As we noted earlier,
behaviors and results that occur
over the entire course of the evaluation period are typically the
best criteria to use in the
process of evaluating an individual’s performance. However,
employees behave in many
different ways in different circumstances throughout the course
of a year, so we shouldn’t
limit the appraisal process to one or two actions on the part of
that individual employee.
WORK
APPLICATION 8-9
Select your current job or a past
job. Identify common mistakes
your supervisor made when
assessing your performance, during
either an informal coaching or a
formal appraisal review.
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Chapter 8: Performance Management and Appraisal 289
By evaluating multiple criteria, we have the ability to lower the
incidence of halo, recency,
contrast, and attribution errors; and we may even be able to
affect bias and stereotyping
because of the fact that many criteria, not just one or two, are
being analyzed.
Minimize the use of trait-based evaluations. Our next method of
overcoming problems within
the appraisal process is to minimize the evaluation of individual
traits. As we noted earlier,
trait-based evaluations tend to be more subjective than
behavior- or results-based evalu-
ations, and as a result, they should generally not be used unless
there is a specific reason
why employees must exhibit a particular trait to be successful in
a job. Only when we have
a specific reason for trait-based evaluations should we measure
those traits and evaluate
them in the appraisal process.
In addition, because of their subjectivity, trait-based
evaluations are much more diffi-
cult to defend in cases where the organization used the
evaluation process for later disci-
plinary action against an individual employee. By minimizing
the evaluation of traits, we
lower the incidence of bias, stereotyping, similarity errors, and
(potentially) attribution
errors. So, minimizing trait evaluations lowers the ability of the
rater to make some of the
most significant mistakes that can occur in the appraisal
process.
Give the measures the OUCH and Blanchard tests. We already
stated this with each of the three
types of assessment, but these two tests are so important to
successful, accurate measures
that they bear repeating here. With the OUCH test, the measure
has to be objective, uni-
form in application, consistent in effect, and have job
relatedness. With the Blanchard test,
everyone must understand why they are assessed at a specific
level (evaluation) and what
it takes to get a higher rating (development).77
TRAIN EVALUATORS. Once we have accurate measurement
methods and forms, the next
thing that we should do to help overcome some of the issues
with the appraisal process is to
train our evaluators to avoid the common errors and problems
that occur in performance
assessment and to train them in how to use the various methods
and forms.
Train evaluators to overcome the common problems of
assessment. Simply through the process of
rater error training, we can mitigate or even eliminate many of
the common problems.
Once the evaluator becomes aware that the common errors occur
with some regular-
ity, the evaluator almost immediately begins to evaluate such
errors and guard against
them. Even bias and stereotyping errors may be mitigated
through the rater error–training
process. As we’ve said several times throughout this book,
most of our employees want
to do a good job; and once they know that an error is being
committed, they will make
APPLYING THE CONCEPT8-4
Avoiding Appraisal Problems
Review the list of common problems or errors, and then write
the
letter corresponding to each one before the statement describ-
ing or involving it.
a. bias f. proximity error
b. stereotyping g. recency error
c. halo error h. contrast error
d. distributional errors i. attribution error
e. similarity error
____ 16. I got a lower rating than I deserve because I’m not
afraid
to speak my mind to the boss, and she doesn’t like it.
____ 17. I’m sick and tired of hearing how many units Sally
produces and that I should be more like her.
____ 18. I told my boss that I thought I deserve an excellent
rating,
but she said that she gives everyone a good rating.
____ 19. I tend to take it easy during the year, but I make sure
to
really push and do a good job for the month of December,
and that’s why I got a good performance review.
____ 20. I attended all the classes and participated in the class
discussions, so the professor gave me an A, even
though my final average on my test scores was a B.
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290 PART III: DEVELOPING AND MANAGING
attempts to correct that error. So, rater error training provides
them with knowledge of
these errors and allows them the opportunity to correct them.
A robust form of rater training is frame-of-reference training,
which defines job per-
formance dimensions in more concrete terms, provides samples
of behaviors at each per-
formance level, emphasizes the fact that job performance has
many dimensions, and
allows practice and feedback sessions. While the details of
frame-of-reference training are
beyond the scope of this introductory text, this method of rater
training has been shown
to have a significant positive effect on rater accuracy in the
appraisal process.78
Train evaluators to use the measurement methods and forms.
Evaluators should also be trained
to use the various performance assessment methods and forms.
Because the critical inci-
dent method is not commonly used as a formal assessment
method, evaluators should be
taught to use it to help overcome recency error. Evaluators also
need training to effec-
tively use MBO and to write a good narrative. When using a
rating scale, the organiza-
tion should provide some training for the raters so they better
understand the differences
between the word descriptors along the continuum (excellent,
good, etc.). BARS forms
and ranking are fairly straightforward; but supervisors need to
realize that they, too, are
subject to common problems when selecting each rating, and
training can help overcome
any problems encountered.
USE MULTIPLE RATERS. The next tool we can use to
minimize errors in the evaluation
process, at least in some cases, is to have multiple raters
evaluate an individual. As we
noted earlier, this becomes expensive very quickly, so we must
decide whether or not the
value inherent in using multiple evaluators overcomes the cost
of the process. However, if
it does, using multiple evaluators can conquer some significant
problems in the appraisal
process. What will the process of using multiple evaluators do
to improve the appraisal
process? It limits the ability of one individual appraiser to
provide a biased opinion
concerning an employee’s performance, and it limits the
potential for stereotyping in the
appraisal process. In addition, halo, similarity, contrast, and
attribution errors become
less likely; and distributional errors tend to even out among
multiple raters. It is for these
reasons that 360-degree evaluations have gained favor in many
organizations over the
past 20 years.
DEBRIEFING THE APPRAISAL
The debriefing process is where we communicate to individuals
our analysis of their per-
formance. Companies may have guidelines for this process. For
instance, Facebook man-
agers are told that performance reviews should be 80% focused
on strengths.79 Earlier in
the chapter, we noted that there are two major reasons for
assessing performance: for
evaluative decisions and for development. We also suggested
breaking the formal perfor-
mance appraisal debriefing into two separate interviews. In this
section, we describe how
to conduct both reviews.
The Evaluative Performance Appraisal Interview
Planning ahead is critical to the performance appraisal
interview process. Therefore, this
section is separated into preparing for and conducting the
evaluative interview. Because
the evaluative interview is the basis for the developmental
interview, it should be con-
ducted first.
PREPARING FOR AN EVALUATIVE INTERVIEW. When
preparing for an evaluative interview,
follow the steps outlined in Model 8-2. Our evaluation should
be fair (meaning ethically
and legally not based on any of the problems discussed).80 If
we have had regular coaching
conversations with our employees, they know where they
stand,81 and our preparation
is mostly done except for filling out the form. So our
relationship with the employee will
directly affect the outcome.82 Employees should also critique
their own performance
through a self-assessment using the form.83
WORK
APPLICATION 8-10
Select your current job or a past
job. Identify and explain how
the organization’s performance
appraisal process does or doesn’t
use each of the three methods of
overcoming common performance
appraisal problems. How can the
organization improve the process?
LO 8-7
Briefly discuss the differences
between evaluative performance
reviews and developmental
performance reviews.
H:6
Appraisal Feedback
SHRM
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Chapter 8: Performance Management and Appraisal 291
So step 1 of Model 8-2 is to simply set up the meeting. Step 2
has the employee use the
form to conduct a self-assessment; and in step 3 we, too, assess
the employee’s perfor-
mance using the form. In keeping with the balanced evaluation,
in step 4 we identify both
strengths and areas for improvement that serve as the basis for
the developmental inter-
view. Finally, step 5 involves predicting employee reactions to
our assessment, and plan-
ning how to handle them. Using critical incidents will help
support our assessment when
employees disagree. And don’t forget that the Blanchard test
states that both you and the
employee should be able to explain and agree on the employee’s
level of performance.
CONDUCTING AN EVALUATIVE INTERVIEW. During the
interview, encourage the employee to
talk and also listen to the critique of their performance.84
Model 8-2 lists the steps for
conducting an evaluative performance appraisal interview. In
step 1, we open the meeting
with some small talk to put the person at ease. Then in step 2,
we go over our evaluation
of the items on the assessment form. In step 3, we identify the
employee’s strengths
and weaknesses, discuss them, and agree on them. Finally, in
step 4, we conclude the
interview, which may involve making the
appointment for the developmental interview.
During this process, employees should be
open to negative feedback, even if they don’t
agree with it. They shouldn’t make excuses or
blame others. If they don’t agree with the
assessment, they may say something like,
“Thanks for the feedback, but I don’t agree
with it because. . . .” Giving objective reasons
for the disagreement is fine, as long as they do
it without being argumentative and disre-
spectful. If there is such disagreement, we
may want to schedule a follow-up meeting
with the employee so that we and they may
gather facts that support our or their stance
on the assessment.85
The Developmental Performance Appraisal Interview
Again, planning ahead is critical when it comes to performance
appraisal interviews.
Therefore, this section is also separated into preparing for and
conducting the
interview.
MODEL 8-2 THE EVALUATIVE PERFORMANCE
APPRAISAL INTERVIEW
Preparation for the Appraisal Interview
Conducting the Appraisal Interview
2. Go over the
assessment
form
3. Agree on strengths
and areas for
improvement
4. Conclude the
interview
1. Open
the
interview
2. Have the
employee
perform a self-
assessment
3. Assess
the employee’s
performance
4. Identify
strengths
and areas for
improvement
1. Make an
appointment
5. Predict the
employee’s reactions
and plan how to
handle them
A performance appraisal can be
more effective as a conversation,
rather than as a single speech about
the employee’s performance.
Ga
ry
B
ur
ch
el
l v
ia
G
et
ty
Im
ag
es
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292 PART III: DEVELOPING AND MANAGING
PREPARING FOR A DEVELOPMENTAL INTERVIEW. After
the employee’s performance
evaluation is completed, you should prepare for the
developmental interview based on
targeting areas for improvement that you already discussed in
the evaluative interview.
Yes, as a manager you are busy, and you may question the need
for coaching and the cost
of separate formal developmental interviews, but the benefit of
spending time developing
employees will lead to increased performance and lower
turnover in your organization.86
To prepare for the interview, follow the steps in Model 8-3,
which begins with simply set-
ting up a time to conduct the review. As stated in step 2, have
employees come up with their
own objectives and strategies for improvement,87 and also
develop your own for them (step 3).
CONDUCTING A DEVELOPMENTAL INTERVIEW. The steps
to follow when conducting a
developmental performance appraisal interview are listed in
Model 8-3. Again, step
1 starts with small talk to open the interview. In step 2, it is
important to agree on
developmental objectives. As part of step 3, the employee needs
to be made aware of
exactly what they must do to improve and increase the rating on
the next review; and
you must also let the employee know that follow-up progress
feedback is essential for
changing behavior.88 So step 4 is to set up a follow-up meeting
to review the employee’s
progress. When conducting steps 3 and 4, we don’t want the
employee working on too
many things at once, so we should keep the number of
objectives down to three or fewer.
We can always add new objectives later. We end in step 5 by
concluding the interview
with some positive encouragement to reach the objectives.
TRENDS AND ISSUES IN HRM
It’s time to take a look at some of the trends and issues in
performance management. First
we will evaluate whether or not we can improve employee
engagement through good
performance management processes, and secondly, we take a
look at electronic
performance monitoring, or EPM. Does it improve performance
and add value to the
organization’s performance appraisal process by providing
results-based evidence of
employee productivity?
Building Engagement Through Performance Management
We discussed performance management at the beginning of the
chapter. Recall that it is
a broad process of analysis and measurement of worker
performance and communica-
tion of that assessment to the individual over time. But can
performance management
actually create a more highly engaged workforce? Well, there is
at least some evidence
WORK
APPLICATION 8-11
Assess how well your present
or past boss helped develop
your knowledge, skills, and
competencies through informal
coaching and/or the formal
performance appraisal interviews.
Describe how the boss
could improve.
LO 8-8
Review the methods to improve
employee engagement through
performance management and
the issue of electronic perfor-
mance management.
WORK
APPLICATION 8-12
Select an organization you work
for or have worked for. Does it use
formal evaluations? Do you believe
the organization should or should
not conduct formal evaluations?
MODEL 8-3 THE DEVELOPMENTAL PERFORMANCE
APPRAISAL INTERVIEW
1. Make an
appointment
2. Have the employee
develop objectives and
plans for improving
performance
3. Develop objectives
and plans for improving
performance
Preparation for the Appraisal Interview
Conducting the Appraisal Interview
1. Open the
interview
2. Agree on
objectives
3. Develop
plans for
meeting the
objectives
4. Make a
follow-up
appointment
5. Conclude
the interview
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Chapter 8: Performance Management and Appraisal 293
that this is the case when performance management is done as
we discussed during the
body of the chapter.
Going back to Chapter 1, you will also remember that employee
engagement is a com-
bination of job satisfaction, ability, and a willingness to
perform for the organization at a
high level and over an extended period of time. Job satisfaction
alone isn’t enough, and
neither is annual or more frequent performance appraisal.
You’re probably getting the
feeling by now that good people management processes are
always a combination of
things—there is no simple solution.
So how do we increase engagement by managing performance?
It starts at the begin-
ning—with orientation/onboarding where the new employee
learns about the company
culture. High-quality onboarding processes allow us to socialize
the new employee into
the work environment. Through the socialization process, the
employee learns how to
function successfully in their new environment by participating
in conversations with oth-
ers, including their future supervisor, concerning how things are
done in the organiza-
tion.89 These conversations have to endure though. The
manager/supervisor needs to
provide frequent feedback about how well the job is being done,
as well as taking the time
to listen during these feedback sessions to what issues are
confronting the employee.90
This continuing conversation and accessibility to their manager
can ultimately lead to an
increased level of trust between the manager and employee,
assuming the manager/super-
visor takes action on issues identified during the conversations.
The ultimate goal here is to increase employee engagement
through continuing perfor-
mance management, and there is real evidence that this does
occur. One research study
identified five performance management activities that
influence engagement: Setting per-
formance goals; providing ongoing feedback and recognition;
managing employee devel-
opment; conducting appraisals; and creating a climate of trust
and empowerment.91 So if
we can do these things, performance management can “have a
positive and direct influ-
ence on employee engagement,” as well as individual attitudes,
behaviors, and ultimately,
organizational outcomes.92
Technology: Electronic Performance Monitoring
Electronic performance monitoring (EPM) is the process of
observing ongoing employee
actions using computers or other nonhuman methods. The
number of employees moni-
tored through EPM has increased drastically in the past 20
years. In the early 1990s,
about one third of employees were being monitored
electronically. By 2001, approxi-
mately 78% were being monitored electronically,93 and that
percentage has more than
likely increased ever since. The reason for this steep increase is
that using EPM apparently
is an effective means of increasing productivity.94 EPM allows
management to know if
employees are actually working or doing personal things during
paid work hours. The
biggest upside to EPM seems to be that it provides information
for concrete, results-based
performance evaluations.
Certainly, this is a valuable outcome. However, some
researchers and practitioners
argue against EPM because of a number of factors, including
ethical questions concerning
such monitoring, legal concerns over employee privacy, and
potential increases in stress
due to constant monitoring of performance. Stress research
provides an interesting
dichotomy. If the monitoring is done for employee development
and involves more com-
munication between the employee and manager, stress is
generally reduced. If, however,
monitoring is done as a means of giving rewards and
administering punishment, stress
appears to generally increase.95 So, the questions are these:
Should organizations use EPM
systems? And if so, how should they use them?
There’s no simple answer. Again, EPM has been shown to
increase productivity, and
organizations need to maximize employee productivity.
However, when stress levels
become too great, increased stress is known to decrease
productivity. So there’s an obvi-
ous tradeoff between more employee monitoring and controlling
stress levels in our work-
force. Management must understand this tradeoff to successfully
improve productivity in
the organization overall.
WORK
APPLICATION 8-13
Select an organization you work
for or have worked for. Does
it use EPM? If so, describe the
EPM system. Do you believe the
organization should or
should not use EPM?
Electronic performance
monitoring (EPM) The process
of observing ongoing employee
actions using computers or other
nonhuman methods
H:4
Electronic Monitoring
SHRM
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294 PART III: DEVELOPING AND MANAGING
In addition, the ethical and legal questions noted in the previous
paragraph may be sig-
nificant enough in some cases to cause individual employees to
leave the organization.96 If
these individuals are our more productive workers, and
especially if they are knowledge
workers, then what does the loss of these knowledgeable
individuals do to organizational
productivity? There doesn’t appear to be any current research-
based answer to these ques-
tions. Therefore, because these questions exist, organizations
must be careful in how they
implement EPM processes so that they can improve their
chances of reaching the stated
goal of EPM—improving organizational productivity.
Finally, as these programs are rolled out in the organization,
managers must be acutely
aware of the potential downside effects of increased stress
levels and employees feeling
that their privacy is being invaded. These could lead to
decreases in productivity and
higher rates of turnover.97 In other words, management must
work to overcome the
potential problems and costs associated with EPM to gain the
benefits.
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DIGITAL RESOURCES
Performance Appraisal*
Awkward Performance Review
Performance Appraisal Interview
Benefits of Performance Appraisal*
Preparing for a Performance Evaluation Meeting
Performance Appraisal Procedural Justice
What Do We Assess?*
Keys to Effective Performance Appraisals
* premium video only available in the interactive eBook
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Chapter 8: Performance Management and Appraisal 295
CHAPTER SUMMARY
8-1 Discuss the difference between performance man-
agement and performance appraisals.
Performance management is a continual process that iden-
tifies, measures, manages, and develops the performance
of people in the organization. It is designed to improve
worker performance over time. Performance appraisal is the
part of the performance management process that identi-
fies, measures, and evaluates the employee’s performance
and then discusses that performance with the individual.
This should also be on an ongoing basis.
8-2 List and briefly discuss the purposes of perfor-
mance appraisals.
Communication is the first purpose. Appraisals need to
provide an opportunity for formal two-way communication
between management and the employee concerning how
the organization feels the employee is performing. The sec-
ond purpose is to gain information for evaluative decisions.
We need good information on how employees are perform-
ing so that we can take fair and equitable actions with our
workforce, to improve organizational productivity. Providing
motivation for development is the last major purpose. Used
correctly, appraisals can motivate by providing opportuni-
ties for the employees to improve their performance over
time.
8-3 Identify and briefly discuss the options for what to
evaluate in a performance appraisal.
Our three primary options for what to evaluate are traits,
behaviors, and results. There is some evidence that
particular types of traits are valuable in jobs that require
management and leadership skills, but many traits have
been shown to have very little bearing on job performance,
meaning they are not valid measures of performance. We
can also use behaviors to evaluate our workers. Measur-
ing behaviors is usually a much better appraisal option
because physical actions or behaviors can be directly
observed, and as a result, they are more likely to be a valid
assessment of the individual’s performance. Finally, we
can evaluate performance based on results. Results are
a concrete measure of what has happened in the organi-
zation. However, results may be skewed based on factors
that are outside the control of the individual who is being
evaluated.
8-4 Briefly discuss the commonly used performance
measurement methods and forms.
The critical incidents method utilizes records of major
employee actions over the course of the appraisal period
to complete the employee evaluation. MBO uses objec-
tives jointly set by the manager and employee to gauge
employee performance during the evaluation period. In the
narrative method, the manager writes either a structured or
unstructured paragraph about the employee’s performance.
Graphic rating scales provide a numerical scale so that the
manager can check off where an employee falls on the con-
tinuum. BARS forms provide a description of the behaviors
that make up acceptable performance at each level on the
scale. Finally, ranking creates a hierarchy of employees,
from best to worst.
8-5 Identify and briefly discuss available options for
the rater/evaluator.
It is logical to choose supervisors as evaluators when they
have ongoing contact with the subordinate and know the
subordinate’s job. When the supervisor may not spend lots
of time with the individual employee, peers may make better
evaluators because they may know the job of the individual
employee better than the supervisor does and may be more
directly affected by the employee’s actions. Subordinate
evaluations can give us good insight into the managers who
control employees in our organization. We may want to use
customers as evaluators when the individual being evaluated
has frequent contact with those customers, because we
need to know how customers feel about their interactions
with our employees. Self-evaluation is valuable in a number
of management processes, from training and development
to counseling and disciplinary measures, among others.
The 360-degree evaluation gives us the best overall anal-
ysis of any employee in the firm, because it looks at an
employee’s performance in the eyes of all others who are
affected by that individual. The 360-degree evaluation for-
mat is more useful for individual development than it is for
administrative purposes. The biggest downside is that the
process takes a lot of time, which means that it also costs
the company a lot of money.
8-6 Identify some of the common problems, and
how to avoid the problems, with performance
appraisals.
Personal biases and stereotyping are two of the most sig-
nificant appraisal problems. Other problems include halo
error, distributional errors (either the grading is too harsh or
too lenient, or everyone is judged to be average), similarity
error, proximity error, recency error, contrast error, and attri-
bution error.
There are several ways to avoid these problems. The first
option would be to develop accurate performance mea-
sures. Accurate performance measures use multiple crite-
ria, minimize trait-based evaluations, and can be analyzed
using the OUCH test and the Blanchard test. Next, we
should train the evaluators, because as soon as they know
some of the common errors, those errors will become less
pronounced. We can also use multiple raters to mitigate
any potentially biased evaluations and minimize other errors
such as similarity, contrast, and attribution errors. Finally,
don’t evaluate what you don’t know. Find someone in the
organization who does know the job, and have that person
evaluate the individual performing the job.
8-7 Briefly discuss the differences between evaluative
performance reviews and developmental perfor-
mance reviews.
The evaluative interview is a review of the individual employ-
ee’s performance over a certain period. The evaluation
needs to be fair and equitable, not based on bias. The
employee must be given the opportunity to talk as well as lis-
ten to the critique of their performance. The developmental
interview, on the other hand, focuses on areas for improve-
ment over time. You should have employees come up with
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296 PART III: DEVELOPING AND MANAGING
their own objectives and strategies for improvement, and
you should develop your own objectives for them.
8-8 Review the methods to improve employee engage-
ment through performance management and the
issue of electronic performance management.
Performance management to improve engagement starts at
the onboarding process where the new employee is social-
ized into the work environment. Continual feedback from
their manager/supervisor should continue with frequent
feedback concerning how the employee is doing and assis-
tance overcoming obstacles. This will build greater trust
between the two which ultimately leads to a positive and
direct influence on employee engagement, as well as indi-
vidual attitudes and behaviors.
Electronic performance management (EPM) has contin-
ued to increase at work. The biggest value to EPM seems
to be that it provides information for concrete results-based
performance evaluations. But there are ethical questions
concerning constant monitoring of employees, as well as
questions of how the monitoring affects health of those
employees. Finally, the negative consequences of EPM may
cause lower productivity overall if employees are unhappy,
as well as an increase in turnover—both seriously negative
outcomes.
KEY TERMS
behaviorally anchored rating scale (BARS)
form 279
behaviors 273
bias 286
critical incidents method 276
electronic performance monitoring
(EPM) 293
graphic rating scale form 278
management by objectives (MBO)
method 277
motivation 270
narrative method or form 278
performance appraisal 265
performance management 265
ranking 280
results 274
stereotyping 286
360-degree evaluation 285
traits 272
KEY TERMS REVIEW
Complete each of the following statements using one of this
chap-
ter’s key terms.
1. ________ is the process of identifying, measuring,
managing,
and developing the performance of the human resources in
an organization.
2. ________ is the ongoing process of evaluating employee
per-
formance.
3. ________ is the willingness to achieve organizational objec-
tives.
4. ________ identify the physical or psychological characteris-
tics of a person.
5. ________ are the actions taken by an individual.
6. ________ are a measure of the goals achieved through a
work process.
7. ________ is a performance appraisal method in which a
man-
ager keeps a written record of positive and negative perfor-
mance of employees throughout the performance period.
8. ________ is a process in which managers and employees
jointly set objectives for the employees, periodically evaluate
performance, and give rewards according to the results.
9. ________ requires a manager to write a statement about the
employee’s performance.
10. ________ is a performance appraisal checklist on which a
manager simply rates performance on a continuum such as
excellent, good, average, fair, and poor.
11. ________ is a performance appraisal that provides a
descrip-
tion of each assessment along a continuum.
12. ________ is a performance appraisal method that is used to
evaluate employee performance from best to worst.
13. ________ analyzes individual performance from all sides—
from the supervisor’s viewpoint, from the subordinates’ view-
point, from customers’ viewpoints (if applicable), from peers,
and using the employee’s own self-evaluation.
14. ________ is a personality-based tendency, either toward or
against something.
15. ________ consists of mentally classifying a person into an
affinity group and then identifying the person as having the
same assumed characteristics as that group.
16. ________ is the process of observing ongoing employee
actions using computers or other nonhuman methods.
COMMUNICATION SKILLS
The following critical-thinking questions can be used for class
dis-
cussion and/or for written assignments to develop
communication
skills. Be sure to give complete explanations for all answers.
1. Other than giving an annual evaluation, what would you do
to
manage the performance of your employees? Explain why.
2. Do you agree that performance appraisals should be discon-
tinued in companies? Defend your answer.
3. What would you do as the manager in order to make sure
that your employees knew the standards that they would be
evaluated against? Explain your answer.
4. Do you really think that it is possible for a performance
appraisal to be motivational? Why or why not?
5. Can you think of a situation in which a trait-based
evaluation
would be necessary? Explain your answer.
6. You are in charge and you want to evaluate a group of
assembly workers. Who would you choose as the evalua-
tor(s)? What about evaluating the Director of Operations—
who would you choose to do that? Explain your answer.
7. How would you minimize the chances that stereotyping
could affect the evaluation process in your company?
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Chapter 8: Performance Management and Appraisal 297
8. Which of the solutions to performance appraisal problems
would you implement first if you were in charge? Second?
Why?
9. What would you do to make the performance appraisal
debriefing more comfortable and less confrontational for your
employees? How do you think this would help?
10. Is electronic performance monitoring ethical? Would you
use
it? Why or why not?
CASE 8-1 NOT SPILLING THE BEANS AT JELLY BELLY:
DEVELOPING A MORE ACCURATE
PERFORMANCE APPRAISAL SYSTEM
What might be the sweetest job in the world? Why not working
alongside such tempting treats as chocolates, gummies, gum
balls,
buttered popcorn, cheesecake, candy corns, licorice, sour can-
dies, cinnamon confections, jellies, and of course let us not
forget
jelly bellies! That’s the way it is at Fairfield, California–based
Jelly
Belly Candy Company (JBCC). They offer over 100 varieties of
candies (including such novelty flavors as cinnamon confections
and Chili Mango) in over 70 countries globally. They also
operate
six retail stores in California and offer tours in their Pleasant
Prairie,
Wisconsin, visitor’s center.(1)
JBCC’s mission statement captures the flavor of the firm.
Jelly Belly Candy Company is dedicated to producing the
highest quality confections, delivering superior customer
service and creating a reliable and enjoyable product line
to the consuming public. We seek to be a responsible
corporate citizen and to ensure high quality and safety
standards. We expect our consumers and business part-
ners to have confidence in the products bearing our name
and that our products are manufactured in accordance
with a guiding code of conduct. Jelly Belly is committed
to conducting business with ethical business standards
and asks its vendors, suppliers and licensees to conduct
themselves in the same manner.(2)
Given this family firm’s commitment to maintaining high
operating
and ethical standards, there is no “sugar coating” employee per-
formance and job satisfaction. Every successful firm
understands
that employee retention is strongly tied to the employees feeling
that they are an integral part of the firm and that their work is
appre-
ciated and rewarded. JBCC understood that the best way to exe-
cute their mission statement, have employees both understand
and
implement the firm’s underlying priorities and values, was
through
their employee evaluation performance system. JBCC saw the
need for a precise, automated talent and employee appraisal sys-
tem as the panacea for maximizing the human assets.
The bittersweet truth was that it took a merger of the two
branches
of the family business into one unit to surface this issue. One
part of
the firm was doing employee evaluations using 1960’s
technology:
hard copy forms and personnel files. The other part was using a
computer-based system, but the software was antiquated.
JBCC’s
head of HR for their Midwest operations, Margie Poulos, and
her
HR staff, were tasked with the responsibility of taking HR data
from three locations (600 employees) and creating one
integrated
process.
According to Jeff Brown, JBCC’s HR Director, “When
employees
feel they have gotten a thorough and accurate review, it boosts
their morale.” This was the foundation of their new appraisal
system—comprehensive, unbiased, and precise measurements
of employee performance would serve as the viable feedback
employees both wanted and needed to establish and obtain spe-
cific quantifiable objectives. Employees, according to
motivation
literature, who know what are expected of them, perform at a
higher
level with greater job satisfaction. Happy workers lead to higher
retention, and retention is the name of the game for superior
perfor-
mance, industry leadership, and expansion.
JBCC used a traditional appraisal system where annual evalua-
tions were conducted, with no comparison to prior years. They
wanted a new system that would be online, use one standardized
form, allow managers to have access and input periodic updates
of the employee’s performance from remote locations, and
allow
for signoffs. “In our old system, a few folks in Chicago would
have
access to the system. However, we have managers in California
with Chicago subordinates. It is important that they can share
the
same forms across the board. And we have folks who are on the
road a lot or are working out of home offices, so having them be
able to access this is a huge point for us,” according to Brown.
Poulos and her team did have concerns and drew up a list of
fac-
tors the system had to incorporate. Primarily “we didn’t want to
end
up with a system that is so complicated that the managers
wouldn’t
use it,” and therefore Poulos made sure the new software system
would be simple, flexible, save time, and allow for developing
vari-
ations of the firm’s core competencies. The new software had to
structure and formalize the appraisal process while allowing for
customization of the firm’s competencies and staff/managers’
sug-
gested modifications.
Once the software was selected, 50 managers received fast-track
training with annual appraisals immediately commencing.
Brown
had high praise for the system, indicating that:
It allows us to standardize competencies across job clas-
sifications, add signature and comment sections to make
our process more interactive, and increase accessibility
for remote managers. . . . Organizing and automating the
appraisal process results in performance appraisals that
are more accurate and fair. This is important because,
after all, an employee appraisal is a legal document.
Poulos and her team were also enamored with the new system
because it allowed them to connect employee training and
development needs with employee performance. “We’ve
always had a separate training manual. Now we can go in to
the evaluations and more easily monitor employees’ skills
devel-
opment, see what training individuals need, and check the due
dates for training and renewal. That makes it much easier for us
to keep track.”
First, the new system has achieved its primary objective of con-
necting employees’ personal objectives with employee goals.
“The feedback has been really positive, from both managers and
employees as well. Some staff said this was the best appraisal
they’ve had,” Poulos said. “They felt the evaluations were fair
and
realistic, and supervisors had the scope to provide more relevant
and legitimate comments than they could before. Rather than
just
clicking on a bunch of canned comments, they were accurately
reviewing the employee.”
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298 PART III: DEVELOPING AND MANAGING
A great side effect of the new automated system is that this
system
has proven to be far more efficient than the old one. “Since this
year
was the first time using the new system, it took us a little longer
than
it will next year. But the process was a whole lot faster,” Poulos
said. “It has already saved us a lot of time, and we got
everybody’s
appraisals done in one shot.”(3)
References
(1) Biesada, A. (n.d.). Jelly Belly Candy Company. Hoovers.
Retrieved May 2, 2017, from http://0-subscriber.hoovers.
com.liucat.lib.liu.edu/H/company360/fulldescription.html?-
companyId=57880000000000
(2) Jelly Belly Candy Company. (n.d.). Jelly Belly Candy
Company mission statement. Retrieved May 2, 2017, from
https://www.jellybelly.com/mission-statement
(3) Halogen Software. (n.d.). A sweet employee performance
appraisal system for Jelly Belly. Retrieved May 2, 2017, from
http://www.halogensoftware.com/customers/stories/jelly-belly
Questions
1. What is performance management, and what is the driving
force behind Jelly Belly Candy Company’s performance man-
agement approach?
2. What is performance appraisal, and what are the key features
Jelly Belly Candy Company wanted in their new appraisal
system?
3. What is the performance appraisal process, and how does
Jelly Belly Candy Company’s new appraisal system incorpo-
rate those processes?
4. How did the question of performance accuracy affect the
development of Jelly Belly Candy Company’s automated
appraisal system?
5. Why did Jelly Belly Candy Company redesign their perfor-
mance appraisal system?
6. What does Jelly Belly Candy Company evaluate when they
conduct employee appraisals, and why are they using that
approach?
7. Who is assessing training performance at Jelly Belly Candy
Company?
8. What trends in performance appraisal are affecting Jelly
Belly
Candy Company’s appraisal system?
Case created by Herbert Sherman and Theodore Vallas, Depart-
ment of Management Sciences, School of Business Brooklyn
Campus, Long Island University
CASE 8-2 AMAZON.COM: SELLING EMPLOYEE
PERFORMANCE WITH ORGANIZATION AND
LEADERSHIP REVIEW
Amazon.com, which started as the biggest online bookstore, has
become a household name by expanding rapidly in the retail
mar-
ket. It offers millions of movies, games, music, electronics, and
other general merchandise products in several categories,
includ-
ing apparel and accessories, auto parts, home furnishings, health
and beauty aids, toys, and groceries. Shoppers can also
download
e-books, games, MP3s, and films to their computers or handheld
devices, including Amazon’s own portable e-reader, the Kindle.
Amazon also offers products and services, such as self-
publishing,
online advertising, an e-commerce platform, hosting, and a
cobranded credit card.(1)
To keep this megastore running at a fast pace, Amazon hired
115,000 employees, who generated $74 billion in 2013. Target
and Home Depot made a combined income of close to $74
billion
in the same year, yet they employed more than 340,000 people
between them in their retail stores.(2) Why does Amazon need
only one third of its competitors’ labor force to produce the
same
revenue? Like the other mega retailer, Walmart, Amazon has
deliv-
ered creative business solutions to their own processes to con-
tinuously increase their operating effectiveness. However, their
strategy focuses on enhancing the customer-shopping
experience
and providing excellent customer service rather than providing
the
lowest-priced products. To meet their customers’ needs,
Amazon
must deliver more speed and efficiency in its giant warehouse.
They use more automated work processes that reduce the com-
pany’s operational costs and also increase labor efficiency and
employee safety.
The quality of Amazon’s warehouse labor has become the
critical
issue in the firm’s success; and hence, hiring and retaining the
best, most suitable candidates for the company’s manual labor
positions is a key success factor. That being said, Amazon’s
turn-
over rate at these lowest-ranked positions in the organization is
high since Amazon lets go of its lowest-performing employees
to
make room for new, more appropriate candidates while promot-
ing the very best. To detect the lowest- and highest-performing
employees, Amazon initiated a performance evaluation system
called the Organization and Leadership Review (OLR).(3)
OLR actually has two main goals: (1) finding future leaders and
preparing them to be able to face the most challenging tasks
pre-
sented in a fast-paced work environment; and (2) determining
the
10% of employees who are the least effective and taking neces-
sary corrective action with them. OLRs take place twice a year
to
grant promotions and find the least effective employees.(4)
Only
the top-level managers attend these meetings, where there could
be two reasons why an employee’s name may be mentioned.
Either
the employee is being considered for a promotion, or the
employ-
ee’s job might be at stake.
OLRs start with the attendees reading the meeting agenda. Then
supervisors suggest the most deserving subordinates to be con-
sidered for promotion. All executives in the room evaluate these
suggestions and then debate the alternatives. Promotions are
given at the end. During the process, instead of using hard data,
executives tend to evaluate employees’ performance on the
basis
of personal, anecdotal experiences. Anyone in the meeting may
deny a promotion; therefore, ambitious employees seeking a
pro-
motion should also be very friendly with their boss’s peers. If
an
employee’s supervisor cannot present that worker well enough,
another’s favorite subordinate will get the promotion.(5)
In terms of promotion, Amazon CEO Jeff Bezos expects the
managers to set the performance bar quite high to allow only the
most exceptional talent to progress.(6) Promotions are protected
by well-written guidelines, which focus on delivery and impact,
but not on internal politics. People spend less time campaigning
for their own promotions, and top performers are highly
compen-
sated based upon the quality of their work.(7) Therefore, only a
few promotions are available each year, and receiving positive
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Chapter 8: Performance Management and Appraisal 299
feedback from a supervisor is quite rare. The approval that
employ-
ees get from their supervisor is not enough to earn a promotion;
employees still have to “fight” for a promotion, which may not
occur
immediately.
References
(1) Hoover’s Inc. (2014). Amazon.com, Inc. [Hoover’s
Company
Records—Competitive Landscape/In-Depth Records].
Retrieved July 13, 2014, from Long Island University
Academic Database.
(2) Ibid.
(3) Stone, B, (2013, October 15). Why it’s so difficult to climb
Amazon’s corporate ladder. Bloomberg BusinessWeek.
Retrieved from http://www.businessweek.com/articles/
2013-10-15/careers-at-amazon-why-its-so-hard-to-climb-
jeff-bezoss-corporate-ladder/
(4) Ibid.
(5) Ibid.
(6) Ibid.
(7) Soper, T. (2012, December 13). Here’s what employees love
and hate about working at Amazon, Microsoft. Geek Wire.
Retrieved from http://www.geekwire.com/2012/employ-
ees-love-hate-working-amazon-microsoft/
Questions
1. Do you think OLRs increase employee motivation? If not,
why
would Amazon conduct such performance appraisals?
2. How might rater bias, stereotyping, and traits appraisal
impact the accuracy of OLR? Could this be corrected? If so,
how?
3. Given the differing appraisal systems described in this chap-
ter, which appraisal systems most closely resemble OLR?
4. Given your answer to the above question, what appraisal
system do you think would best meet Amazon’s objectives
of retaining the best employees while taking corrective action
with the bottom 10%?
5. Amazon is a high-technology firm. How might it use elec-
tronic performance monitoring to supplement the OLR pro-
cess?
6. What are the advantages and disadvantages of having per-
formance reviews like OLR that involve only one-way commu-
nication, rather than MBO?
Case created by Herbert Sherman and Theodore Vallas, Depart-
ment of Management Sciences, School of Business Brooklyn
Campus, Long Island University
SELF-ASSESSMENT AND SKILL BUILDER 8-1 PEER AND
SELF-ASSESSMENTS
This exercise includes the usual self-assessment for each
chapter,
plus an evaluation of peers and developing measures of perfor-
mance.
Objectives
To develop your skill at assessing your performance and that of
your peers, and to develop your skill at developing measures of
per-
formance
Skills
The primary skills developed through this exercise are as
follows:
1. HR management skills—technical, business, and conceptual
and design skills
2. SHRM 2016 Curriculum Guidebook—H: Performance
management
Assignment Part 1—Self-Assessment
During your college courses, you most likely had to do some
form
of group assignments, and you’ve also done group assignments
in this course. Select one group you worked with, and based on
your performance in that group, do a self-evaluation using the
rating
scale form below.
Evaluator (you) ____________________________________
(Self-Evaluation)
A A−
Always
B+ B B–
Usually
C + C C–
Frequently
D+ D D–
Sometimes
F
Rarely
Did a “good” analysis of project
Developed “good” questions to ask
Actively participated (truly interested/involved)
Made “quality” effort and contributions
Got along well with group members
Displayed leadership
List at least three of your own measures of performance here
Class attendance—number of absences 0–1 2 3 4 5+
Attendance at group meetings to prepare group project—number
of absences
0 1 2 3 4+
Managed the group’s time well
Copyright ©2019 by SAGE Publications, Inc.
This work may not be reproduced or distributed in any form or
by any means without express written permission of the
publisher.
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or
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te
300 PART III: DEVELOPING AND MANAGING
This exercise can stop with just a self-assessment, or it can
continue to also include peer evaluations.
Assignment Part 2—Peer Review
1. Part 2 begins by conducting a peer evaluation using the
above form for each of the other members in your group, but
using this heading for the form:
Group Member ___________________________________
(Peer Evaluation)
Either copy the above form for each group member, do your
assessment on any sheet without using the form, or have
your instructor provide you with multiple forms that you can
complete for each group member.
2. Below, rank each group member (including yourself) based
on their performance. The first person you list should be
the best performer, and the last person you list should be
the least effective performer, based on the performance
appraisal above. If members are close or equal in perfor-
mance, you may assign them the same rank number, but you
must list the better one first.
3. To the right of each group member (including yourself),
place
the overall letter grade (A–F) you would assign to that mem-
ber based on the performance appraisal. You may give more
than one member the same grade if those individuals deserve
the same grade. You may also use plus and minus grades.
Rank Name Grade
_______ __________________________________________
_______
_______ __________________________________________
_______
_______ __________________________________________
_______
_______ __________________________________________
_______
_______ __________________________________________
_______
SKILL BUILDER 8-2 DEBRIEFING THE APPRAISAL
Note: This exercise is designed for groups that have been
working
together for some time as part of the course requirements. It is a
continuation of Skill Builder 8-1. Based on your peer
evaluations,
you will conduct performance appraisals for your group
members.
Objective
To develop a plan to improve your team performance, and to
develop your skills in conducting performance appraisals
Skills
The primary skills developed through this exercise are as
follows:
1. HR management skills—technical, business, and conceptual
and design skills
2. SHRM 2016 Curriculum Guidebook—H: Performance man-
agement
Assignment
You will be both the evaluator and evaluatee. Get together with
group members and have each member select a letter, beginning
with the letter A. Pair off as follows: A and B, C and D, E and
F,
and so on. If the group consists of an odd number of people,
each
member will sit out one round. A should conduct the evaluation
interview for B, C should conduct the evaluation interview for
D,
and so on, using the form in Skill Builder 8-1. The evaluators
should
follow up the evaluation interview with the developmental
interview
to give suggestions on improving B, D, and F’s performance (be
sure to follow the evaluative and developmental interview steps
in
Models 8-2 and 8-3). Make sure you are evaluators and
evaluatees;
do not be peers having a discussion. When you finish, or when
the
instructor tells you time is up, reverse roles of evaluators and
eval-
uatees. B, D, and F will become the new evaluators for A, C,
and E.
When the instructor tells you to, or when time is up, form new
groups of two and decide who will be the evaluators first.
Continue
changing groups of two until every group member has appraised
and been appraised by every other group member.
Apply It
What did I learn from this experience? How will I improve my
group
performance in the course? How will I use this knowledge in the
future?
_____________________________________________________
__
_____________________________________________________
__
Copyright ©2019 by SAGE Publications, Inc.
This work may not be reproduced or distributed in any form or
by any means without express written permission of the
publisher.
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or
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ibu
te

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LEARNING OBJECTIVESAfter studying this chapter, you should .docx

  • 1. LEARNING OBJECTIVES After studying this chapter, you should be able to do the following: 8-1 Discuss the difference between performance management and performance appraisals. PAGE 263 8-2 List and briefly discuss the purposes of performance appraisals. PAGE 269 8-3 Identify and briefly discuss the options for what to evaluate in a performance appraisal. PAGE 272 8-4 Briefly discuss the commonly used performance measurement methods and forms. PAGE 276 8-5 Identify and briefly discuss available options for the rater/ evaluator. PAGE 281 8-6 Identify some of the common problems, and how to avoid the problems, with performance appraisals. PAGE 286 8-7 Briefly discuss the differences between evaluative performance reviews and developmental performance reviews. PAGE 290 8-8 Review the methods to improve employee engagement through performance management and the issue of electronic performance management. PAGE 292 8 Performance Management and Appraisal ©iStockphoto.com/Bill Oxford
  • 2. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 263 Practitioner’s Perspective Cindy remarks that although performance evaluation can be uncomfortable for both managers and employees, failure to accurately and honestly evaluate performance is never a good choice. She recalls the time that a supervisor, Annette, came to see her. “I want to fire Christine,” Annette said angrily. “She entered
  • 3. the wrong invoice numbers again, and now I have to stay and correct her mistakes—again!” “Is this common?” Cindy asked. “Have you expressed your concerns or initiated a performance improvement plan?” “She does it all the time, but I usually don’t catch it until after she is off for the day,” Annette replied. “By morning, it doesn’t seem worth my time go over it with her.” “How about her performance evaluation?” she asked next. “Have you brought Christine’s poor performance to her attention at her annual evaluation?” “Well, no, I always give all my employees a satisfactory rating—it’s easier that way,” answered Annette. Without ever bringing Christine’s unacceptable performance to her attention and thus giving her a chance to change, firing or otherwise severely disciplining Christine at this point would be questionable. How can this problem be avoided? In Chapter 8, you will learn how to create and utilize a performance evaluation process that works. E. Job Analysis/Job Design (required) 4. Performance management (performance criteria and appraisal) H. Performance Management
  • 4. (required) 1. Identifying and measuring employee performance 2. Sources of information (e.g., managers, peers, clients) 3. Rater errors in performance measurement 4. Electronic monitoring 5. Performance appraisals 6. Appraisal feedback 7. Managing performance Q. Organization Development (required—graduate students only) 5. Improving organizational effectiveness 9. Ongoing performance and productivity initiatives Get the edge on your studies. edge.sagepub.com/lussierhrm3e • Take a quiz to find out what you’ve learned. • Review key terms with eFlashcards.
  • 5. • Watch videos that enhance chapter content. SHRM HR CONTENT See Appendix: SHRM 2016 Curriculum Guidebook for the complete list PERFORMANCE MANAGEMENT SYSTEMS After we have recruited, selected, and trained employees, we must evaluate how well they perform their jobs so they know how they are doing. Therefore, performance evaluation is an important part of the jobs of managers and HRM staff.1 We need to figure out how to manage employees’ performance over time to ensure that they remain productive and LO 8-1 Discuss the difference between performance management and performance appraisals. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y,
  • 6. po st, or di str ibu te 264 PART III: DEVELOPING AND MANAGING hopefully become even more capable as they progress in their careers. So the primary pur- pose of performance appraisal should be to help employees to continuously improve their performance.2 Remember our earlier discussion about the fact that human resources are typically one of the few resources we can leverage to create a sustainable competitive advantage for the firm. To this end, we discuss in this section the difference between per- formance management and performance appraisal, and we present the performance appraisal process. Performance Management Versus Performance Appraisal “In a knowledge economy, organizations rely heavily on their intangible assets to build value. Consequently, performance management at the individual employee level is essen- tial and the business case for implementing a system to measure and improve employee
  • 7. performance is strong.”3 Committing management time and effort to increase perfor- mance not only meets this goal but also decreases turnover rates.4 How do we manage performance within the organization? The most common part of the process, and the one with which we are most familiar, is the performance appraisal, or evaluation. (In this chapter, we will use the terms performance evaluation, perfor- mance appraisal, and just appraisal interchangeably.) However, the performance appraisal process is not the only thing that’s done in performance management. Q:5 Improving Organizational Effectiveness SHRM CHAPTER OUTLINE Performance Management Systems Performance Management Versus Performance Appraisal Is It Time to Delete the Annual Appraisal Process? Performance Appraisals Accurate Performance Measures Why Do We Conduct Performance Appraisals?
  • 8. Communication (Informing) Decision Making (Evaluating) Motivation (Engaging) Evaluating and Motivating = Development What Do We Assess? Trait Appraisals Behavioral Appraisals Results Appraisals Which Option Is Best? How Do We Use Appraisal Methods and Forms? Critical Incidents Method Management by Objectives (MBO) Method Narrative Method or Form Graphic Rating Scale Form Behaviorally Anchored Rating Scale (BARS) Form Ranking Method Which Option Is Best? Who Should Assess Performance?
  • 9. Supervisor Peers Subordinates Self Customers 360-Degree Evaluations Whom Do We Choose? Performance Appraisal Problems Common Problems Within the Performance Appraisal Process Avoiding Performance Appraisal Problems Debriefing the Appraisal The Evaluative Performance Appraisal Interview The Developmental Performance Appraisal Interview Trends and Issues in HRM Building Engagement Through Performance Management Technology: Electronic Performance Monitoring Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or
  • 10. by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 265 Performance management is the process of identifying, measuring, managing, and devel- oping the performance of the human resources in an organization. Basically we are trying to figure out how well employees perform and then ultimately improve that performance level. When used correctly, performance management is a systematic analysis and mea- surement of worker performance (and communication of that assessment to the individ- ual) that we use to improve performance over time.
  • 11. Performance appraisal, on the other hand, is the ongoing process of evaluating employee performance. Notice that it is an ongoing process. Employees need regular feed- back on their performance,5 so we should give them routine and candid assessments.6 New tools that we will discuss shortly are allowing us to do this much more efficiently. Performance appraisals are reviews of employee performance over time, so appraisal is just one piece of performance management. Although we will spend most of the chapter discussing performance appraisals, there are several significant pieces to performance management that we have already covered in past chapters and others that we will cover in future chapters. We discussed “strategic planning,” which provides inputs into what we want to evaluate in our performance management system, in Chapter 2. We also discussed the major method of identifying performance requirements in a particular job when we went through “job analysis and design” in Chapter 4. In Chapter 7, we discussed “train- ing and development,” which obviously plays a part in performance management. Addi- tionally, we will discuss motivating employees, coaching and counseling, employee relations, compensation, and other pieces in Chapters 9 through 14. Now that we under- stand the difference between performance management and performance appraisal, let’s look at the performance appraisal issue in more detail. Is It Time to Delete the Annual
  • 12. Appraisal Process? It is worth noting right at the beginning that many people in organizations do not like per- formance appraisal systems and think that these systems do not have the ability to improve employee performance. One study even noted that 95% of managers are dissatis- fied with their performance management sys- tem and 90% of HR managers believe the system does not yield accurate performance information!7 Routinely, there are calls to do away with performance appraisal processes.8 Netflix is one company that has completely stopped doing formal performance appraisals, even though the CEO noted that “excellent colleagues trump everything else.”9 (Netflix still does complete informal 360-degree appraisals. We will introduce you to these shortly.) So why does this process continue to be used by most major organizations? In the past three or four years, it would seem to the average HR manager that there has been a never-ending line of companies that have decided to dump their annual perfor- mance appraisals. In addition to Netflix, a list of Fortune 500 companies like Deloitte, Adobe Systems, GE, PwC,10 and SAP11 have trashed their annual appraisal approaches. Looking at all of the articles written about dumping appraisals, the natural question would be, “Why are we studying this if it is going away?” The quickest answer is that it isn’t quite gone yet and probably won’t be for some time—if ever. Based on a number of different surveys in the past couple of years, around 10 to 15%
  • 13. of companies have decided to stop using annual reviews. The numbers were about 6% of Fortune 500 companies Performance management The process of identifying, measuring, managing, and developing the performance of the human resources in an organization Performance appraisal The ongoing process of evaluating employee performance Q:9 Ongoing Performance and Productivity Initiatives SHRM E:4 Performance Management (Performance Criteria and Appraisal) SHRM Netflix is one company that has stopped doing formal performance appraisals. Ry an A ns
  • 14. on /A FP /G et ty Im ag es Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu
  • 15. te 266 PART III: DEVELOPING AND MANAGING in 201512 and about 12% to 15% in 2017,13 which leaves around 85% of those compa- nies and many other smaller firms still using annual evaluations. Why hasn’t the rest of the business world let go of this relic of the industrial age if it doesn’t work like it needs to? Again, the quick answer is that there is valuable information that is gained from the process; and the latest online, app-based, and/or social options have not gotten to the point yet where they can provide all of the same valuable informa- tion. “The documentation that traditional appraisals produce is a business necessity. The data collected . . . allows the organization to make important decision in a whole host of business areas.”14 So one of the most valuable reasons for performance appraisals is to provide information for making good management decisions; and if we don’t have that information, decisions become more difficult and dangerous. In addition, at least some research shows that deleting the performance appraisal does not automatically make the organization better, and may make it worse. Research by CEB showed that “[a]t firms where reviews had been eliminated, measures of employee engagement and performance dropped by 10%. . . . Managers actually spent less time on
  • 16. conversations, and the quality of those conversations declined.”15 But new ideas for some form of routine or continuous technology-based appraisal and feedback (often called “check-ins” by the firms) have proliferated over the recent past,16 with dozens if not hundreds of tech companies now offering apps or other software solu- tions17 to provide companies with the ability to give all employees constant feedback. For obvious reasons, this continuous appraisal seems to be more common in organizations that are less traditional and bureaucratic, and that are more comfortable with technology solutions. We spoke about Zappos’s holacracy earlier. Zappos is trying to use holistic feedback from all sides (a massive 360-degree evaluation) in order to evaluate its employ- ees and encourage creativity and innovation. Still, we have to struggle with a significant problem: Organizations legitimately use periodic appraisals to make good decisions about their employees and employee develop- ment.18 If performance appraisals are not completed, the organization doesn’t have valid and reliable information about its human resources; and therefore it has no ability to make good decisions about things such as training, promotions, and pay raises. Because of this major issue, it is unlikely that most organizations will hit the delete button on their annual appraisal process until the newer technologies have been proven capable of defending the organization from claims of employment
  • 17. discrimination. Performance Appraisals Let’s take a look now at the performance appraisal process in Exhibit 8-1. Note the con- nection between the organization’s mission and objectives and the performance appraisal process. Here we briefly discuss each step of the process. Step 1: Job analysis. This is logically our first step because if we don’t know what a job consists of, how can we possibly evaluate an employee’s performance in that job? We already learned how to do a job analysis in Chapter 4, but as shown in Exhibit 8-1, we should realize that the job must be based on the organizational mission and objectives, the department, and the job itself. Step 2: Develop standards and measurement methods. If we don’t have standards of acceptable behavior and methods of measuring performance, how can we assess that performance? We will discuss performance measurement methods in the next part of this section; and in the section “How Do We Use Appraisal Methods and Forms?” we will discuss these top- ics in more detail. Step 3: Informal performance appraisal—Coaching and disciplining. Performance appraisal should not be simply a once- or twice-a-year formal interview. As its definition states, performance appraisal is an ongoing process. While a formal evaluation may take place only once or twice a year, people need regular feedback on their
  • 18. performance to know how they are doing.19 We will briefly discuss coaching in the “Critical Incidents Method” WORK APPLICATION 8-1 Select a job you have or have had. Do you or did you know the organization’s mission and objectives? Briefly state the mission. If you don’t know it, find out. Do you understand how your job fits or helps to meet the organization’s mission and objectives? Explain in some detail. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y,
  • 19. po st, or di str ibu te Chapter 8: Performance Management and Appraisal 267 subsection of “How Do We Use Appraisal Methods and Forms?” and we will discuss it in more detail in the next chapter. Step 4: Prepare for and conduct the formal performance appraisal. The common practice is to have a formal performance review with the boss once or sometimes twice a year, using one or more of the measurement forms we will be learning about. Later in this chapter, we will discuss the steps involved in preparing for and conducting the performance appraisal. In the chapter sections to come, we discuss why we assess performance, what we assess, how we assess it, and who conducts the performance appraisal. Then we discuss performance appraisal problems and how to avoid them, and we end the performance appraisal process with the actual formal review session. But before we leave this sec-
  • 20. tion, we need to understand a critically important part of each step in the performance appraisal process: accurate performance measurement. Accurate Performance Measures To effectively assess performance, we need to have clear standards for and methods of measuring performance.20 The American National Standards Institute (ANSI) has out- lined the minimum required elements of a performance management system for goal set- ting, performance review, and performance improvement plans.21 For details, visit the ANSI website at http://www.ansi.org. We need accurate standards and measures of employee performance both to effectively assess performance and to let employees know where they can improve.22 This in turn should lead to training employees to develop the new skills they need to improve their performance.23 Also, to be an accurate measure of performance, our measure must be valid, reliable, acceptable and feasible, specific, and based on the mission and objectives. Let’s discuss each of those requirements here. VALID AND RELIABLE. As in all areas of our people management process, we must do our best to make sure that all of our performance management tools are valid and Organizational mission and objectives Step 1: Job analysis
  • 21. Step 2: Develop standards and measurement methods; communicate Step 4: Prepare for and conduct the formal PA Step 3: Informal PA— Coaching and discipline EXHIBIT 8-1 EXHIBIT 8-1 THE PERFORMANCE APPRAISAL PROCESS Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str
  • 22. ibu te 268 PART III: DEVELOPING AND MANAGING reliable. Here again, we can pull out and dust off the OUCH test as a quick way to ensure fairness and equity in the performance management and appraisal process. We remember by now that OUCH stands for Objective, Uniform in application, Consistent in effect, and Has job relatedness. However, we still need to analyze validity and reliability in some detail. We have to create valid and reliable measurement to be accurate. Recall that we dis- cussed reliability and validity in Chapter 4 and Chapter 6. Valid means that a measure is true and correct; a valid measure is a factual one that measures the process that you wanted to measure. Reliable means the measure is consistent; it works in generally the same way each time we use it.24 ACCEPTABLE AND FEASIBLE. In addition to validity and reliability, we need to look at a couple of other characteristics of our performance measures—acceptability and feasibility.25 Acceptability means that the use of the measure is satisfactory or appropriate to the people who must use it. However, in performance appraisal, this isn’t enough. To be acceptable, an evaluation tool must also be
  • 23. feasible. Is it possible to reasonably apply the evaluation tool in a particular case, or is it too complex or lengthy to work well? As an example, if the performance evaluation form is two or three pages long and covers the major aspects of the job that is being evaluated, and if managers and employees both believe that the form truly evaluates performance measures that identify success on the job, then managers and employees are likely to feel that the tool is acceptable and feasible to use. However, if the manager must fill out a 25-page form that has very little to do with the job being evaluated, the manager may not feel that the form is acceptable or feasible, at least partially due to its length, even if the employees do. Conversely, if the manager fills out a two-page evaluation that they feel is a true mea- sure of performance in an employee’s job, but the employee feels that the evaluation leaves out large segments of what is done in the work routine, the employee may not feel that the form is acceptable and feasible. If either management or employees feel that the form is unacceptable, it most likely will not be used correctly. (This would also mean that the per- son would not see the evaluation as a valid measure.26) And as we saw in the section on deleting the performance appraisal process, many managers and employees do not cur- rently see their appraisal process as acceptable and feasible—a significant problem with the process.
  • 24. SPECIFIC. The evaluation measure must be specific enough to identify what is going well and what is not. The word specific means that something is explicitly identified or defined well enough that all involved completely understand the issue. In performance appraisals, a specific form provides enough information for everyone to understand what level of performance has been achieved by a particular employee within a well- identified job. Creating specific measures is the only way to use a performance appraisal to improve the performance of employees over time. The employees have to understand what they are and are not doing successfully. Many times, evaluation forms may be too general in nature to be of value for modifying employee behaviors because we want the form to serve for a large number of different types of jobs. This can create significant problems in the perfor- mance appraisal process. BASED ON THE MISSION AND OBJECTIVES. Finally, you want to make sure that your performance management system leads to the accomplishment of your organizational mission and objectives. As with everything else we do in HR, we need to ensure that the performance management process guides our employees toward achievement of the company’s mission and objectives over time. As managers, making sure of this connection will allow us to reinforce employee behaviors that aim at achieving organizational goals,
  • 25. and it will also allow us to identify for our employees things that they may be doing that actively or unintentionally harm our ability to reach those goals. WORK APPLICATION 8-2 Assess the accuracy of the measurements of your performance on your last performance appraisal. Be sure to describe the measures’ validity, reliability, acceptability, and feasibility, plus whether the measures were specific and based on the organization’s mission and objectives. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y,
  • 26. po st, or di str ibu te Chapter 8: Performance Management and Appraisal 269 Thus, stating specific objectives saying exactly what each person in each job should achieve, or their performance outcomes, leads to accurate assessment that can increase performance. For some examples of inaccurate measures of performance, complete Applying the Concept 8-1. WHY DO WE CONDUCT PERFORMANCE APPRAISALS? As you can already see, the appraisal process gets to be extremely complicated very quickly. And remember, anytime that a process in an organization is complicated, it is going to cost a lot of money. So what’s the value provided to the organization and to the individual that makes the process of evaluating the performance of our workers so critical? If performance appraisals are done in the correct manner, they can provide us with a
  • 27. series of valuable results. However, if not done correctly, evaluating employee perfor- mance can actually lead to lower levels of job satisfaction and productivity. Let’s discuss three major reasons (communicating, decision making, and motivating) why performance evaluations are completed and why they are so critical to continually improving organiza- tional performance.27 Communication (Informing) The first major reason for performance appraisals is to provide an opportunity for formal communication between management and the employees concerning how the organiza- tion believes each employee is performing. All of us know intuitively that successful com- munication requires two-way interaction between people. “Organizations can prevent or remedy the majority of performance problems by ensuring that two-way conversations occur between managers and employees, resulting in a complete understanding of what is required, when it is required, and how everyone’s contribution measures up.”28 Communication always requires that employees have the opportunity and ability to provide feedback to their bosses in order to make sure that their communication is under- stood. So in performance appraisals, the communication process requires that we as man- agers communicate with the employee to provide them with information about how we APPLYING THE CONCEPT8-1
  • 28. Measurement Accuracy Before each of the situation descriptions below, write the letter corresponding to the accuracy criterion for a measure that is NOT met in the situation. a. valid b. reliable c. accepted d. feasible e. specific f. based on the mission and objectives ____ 1. My boss is on my case because I’m not producing as much as I used to. But it’s not my fault that the machine jams more often and then I have to stop work- ing to fix it. ____ 2. My boss said I have to evaluate all 25 of my employees four times a year instead of only once. I told her I don’t have the time to do it that many times. It’s just not possible to do a good review that often without cutting back on other things that are more important. ____ 3. My boss said I have a bad attitude and gave me a lower overall performance rating. I questioned what my attitude had to do with my performance because I get all my work done well, and by the deadline. ____ 4. My boss asked me to complete a self-evaluation form rating my performance. But I didn’t do it because it is her job—I let her do it. ____ 5. My boss told me that I was not doing a very good job. But when I asked him why, he never gave me any details
  • 29. to support his assessment. Good answer. LO 8-2 List and briefly discuss the pur- poses of performance appraisals. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 270 PART III: DEVELOPING AND MANAGING believe they’re doing in their job. However, the process also requires that we provide the
  • 30. opportunity for the employee to speak to us concerning factors that inhibit their ability to successfully perform to expectations. Factors in a job that management may not know about can include lack of training, poorly maintained equipment, lack of necessary tools, conflict within work groups, and many other things that management may not see on a daily basis. If the communication component of the performance appraisal process does not allow for this two-way com- munication, managers may not know of the obstacles that the employee has to overcome. We can resolve problems only when we know about them. So as managers, we need to communicate with our employees to find out when issues within the work environment are causing a loss of productivity so we can fix them. Thus, two-way communication is a critical component of correcting problems through the performance appraisal process. Decision Making (Evaluating) The second major purpose of performance appraisal is to allow management to make decisions about employees within the organization. We need to make decisions based on the information we get from our communication. Accurate information is necessary for management decision making and is absolutely critical to allow the manager to improve organizational productivity.29 We use information from annual performance appraisals to make evaluative decisions concerning our workforce, including such things as pay raises,
  • 31. promotions, demotions, training and development, and termination. When we have valid and reliable information concerning each individual within our division or department, we have the ability to make administrative and performance decisions that can enhance productivity for the firm. If, for instance, through the process of coaching (the third step of the performance appraisal process), we find that several machine operators are having trouble keeping their equipment in working order, then that information would quite likely lead to a needs assessment (as discussed in Chapter 7) to determine whether or not maintenance training is necessary for our group of operators. Without our rigorous evaluation process, we might not learn of this common problem in a timely fashion, and the result could be signif- icant damage to very expensive equipment. This and similar types of information fre- quently come to the forefront as we go through the performance appraisal process. Therefore, decision making based on good communication is a very large part of why we take the time to do annual performance appraisals. Motivation (Engaging) The third major purpose of performance appraisals is to motivate our employees to improve the way they work, which in turn will improve organizational productivity overall.30 But what is motivation, and are performance appraisals normally motivational? We define motivation here as the willingness to achieve
  • 32. organizational objectives. We want to create this willingness to achieve the organization’s objectives, which will in turn increase organizational productivity. Our evaluative decisions should lead to development of employees. Returning to the above example of the machine operators having trou- ble keeping their equipment in working order, making the decision to train employees leads to their development, which then improves their individual performance, as well as better utilizing organizational resources. Evaluating and Motivating = Development An effective performance appraisal process has two parts— evaluating and motivating— and it does both parts well. Evaluating is about assessing past performance, and motivat- ing is about developing employees to improve their future performance. But are both parts done well? Have you ever been in a position of being evaluated and debriefed as an HRM in Action Performance Appraisal H:7 Managing Performance SHRM
  • 33. Motivation The willingness to achieve organizational objectives Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 271 employee? Was the process motivational? Most of us would probably reply no. Think about that appraisal process and how it was carried out. Here we discuss problems with evaluation and how to overcome them, as well as how to motivate employees. We also
  • 34. suggest separating formal assessment meetings designed to evaluate or motivate. PROBLEMS IN EVALUATION. A common problem in appraisals is overpowering an employee during the evaluation debrief with large amounts of negative information that they have not heard during coaching. This tends to cause the employee to “turn off” or stop listening as the manager explains what is wrong. Employees will just “raise their shields” to ward off all of the negative information. This is a natural human trait. We are naturally suspicious of negative information for a variety of psychological reasons (i.e., defensive mechanisms), so when we are presented with a large amount of negative information, we tend to discount or even disbelieve it. Therefore, employees in such situations may consider the process unfair or one-sided and not an accurate measure of their performance (not acceptable), and as a result, the evaluation may become useless as a motivator that develops the employee. AVOIDING PROBLEMS IN EVALUATION. To help overcome this problem during employee evaluations, an effective manager who is a good coach will generally never identify a weakness that the employee has not previously been made aware of during the formal appraisal interview. This is the key to making the appraisal acceptable to the employee. In other words, there are no surprises in a well-run evaluation. The evaluative part of the appraisal should be a review only of what the employee
  • 35. already knows and should be willing hear because they have been coached on their performance throughout the evaluation period. However, avoiding surprises is not enough.31 The appraisal debrief must be a well- rounded look at the individual employee, and it should identify both positive and negative (specific) factors in the employee’s behaviors and results within the job (and remember, the communication needs to be two-way). As the manager, we want to tell the employees what they did right but also where they have room for improvement. This more balanced approach to the debriefing process will minimize the risk that the employee will raise those shields and avoid listening. MOTIVATING DEVELOPMENT. An important part of development is the need for managers to provide motivational opportunities for the employees to improve their performance over time. In other words, we need to tell them how to fix their own problems. We need to provide them with tools, training, or other methods that will allow them to improve to the point where their behavior is sufficient. Then, we must continually strive to get them to perform at an above-average level and ultimately become superior performers, helping them along the way through ongoing coaching between formal reviews. If we provide employees with tools that allow them to improve over time, we’re not
  • 36. focusing on negative past results but on positive future potential results.32 If employees are given an honest opportunity to fix something that they know is a problem and are given the necessary tools or training, most will take advantage of that opportunity. So perfor- mance appraisals can be motivational if they are properly used and debriefed. SEPARATING EVALUATION AND DEVELOPMENT. To improve both parts of the performance appraisal, we suggest splitting the debriefing into two separate interviews. The first meeting is to evaluate the employee’s past performance, pointing out strengths and areas for improvement; the employee is asked to think about how to improve performance. At the second meeting, manager and employee jointly come up with a developmental plan that should lead to increased performance, which in turn will result in a higher future evaluative rating during the next formal appraisal. We will discuss how to conduct the two separate interviews in the “Debriefing the Appraisal” section of this chapter. WORK APPLICATION 8-3 Assess the effectiveness of an evaluative performance appraisal you had. Did the manager present
  • 37. both positive and negative performance areas? Did you really listen? Were there any surprises? Explain any problems and how the evaluation could be improved. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 272 PART III: DEVELOPING AND MANAGING
  • 38. WHAT DO WE ASSESS? Now that we know why we conduct performance appraisals, the next step is to figure out what needs to be evaluated. In other words, we have to decide what aspects of the individ- ual and their performance we’re going to measure. Discovering the best options for what to evaluate would come from analyzing the essential functions and qualifications required for a particular job, or in HR terms, our job analysis. We could then use these facts to design an appraisal instrument that uses measurable and observable factors to evaluate performance.33 However, we can’t evaluate everything that is done over the course of the year. We have to choose what we will focus on because what gets measured, and evalu- ated, gets done.34 Our three primary options for what to evaluate are traits, behaviors, and results. Trait Appraisals Traits identify the physical or psychological characteristics of a person. Traits of an indi- vidual can be part of the performance appraisal process. There is evidence that traits such as inquisitiveness, conscientiousness, and general cognitive ability are valuable in jobs that require management and leadership skills.35,36 However, we must ensure that we focus on traits that have a direct relationship to the essential functions of the job, that they are within the control of the individual, and that they are accurate measures. Can we accu- rately measure traits that affect job performance, can trait
  • 39. measures pass the OUCH test, are traits commonly measured, and should we measure traits as part of our performance appraisal process? Here we answer these questions, and we will answer these same ques- tions for our behavior and results options. CAN WE ACCURATELY MEASURE TRAITS THAT AFFECT JOB PERFORMANCE? Many traits that most of us would be likely to focus on—such as physical attractiveness, height, and extroversion—actually have been shown to have very little bearing on job performance in most cases. If we’re going to use traits in performance evaluation, we must ensure that we focus on traits that have a direct relationship to the essential functions of the job being done, and they have to be accurate measures. Is using trait-based evaluation a good method of judging work performance? How many of us would want to have judgments made about our work based on our appear- ance or personality? Would you consider this to be a valid and reliable measure of your work performance? In most cases, it’s very difficult to show that personal traits are valid and reliable measures of work performance. GIVE TRAITS THE OUCH TEST. Let’s take a look at trait- based measurements using the OUCH test. Is a physical characteristic such as height or a psychological characteristic such as cheerfulness, work ethic, or enthusiasm an objective measure of an individual’s work performance? We would have great difficulty in creating a
  • 40. quantifiable and factual link between height or enthusiasm and job performance. So when measuring traits, it’s difficult to meet the objective requirement of the OUCH test. If we utilized these trait-based measures in all cases in employee evaluations, we would be able to meet the uniform in application requirement of the OUCH test. The third test— consistent in effect—would likely be extremely difficult to meet due to the fact that differ- ent racial, ethnic, social, and gender groups tend to have different physical and psychological characteristics. Remember, reliability is a measure of consistency. Physical and personality characteristics have less to do with success in the job than certain behav- iors do. So it’s difficult to meet the has job relatedness test in most cases. Finally, it would be very difficult to get different supervisors to evaluate subjective traits the same, because of their own personality traits. ARE TRAITS COMMONLY USED TO MEASURE PERFORMANCE? Surprisingly, if you go to the local office supply store and look at standard evaluation forms that are available in LO 8-3 Identify and briefly discuss the options for what to evaluate in a performance appraisal. Traits The physical or psychological characteristics of a person
  • 41. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 273 preprinted pads, you will find that they usually list many traits as part of the evaluation. Why would this be the case? The simple answer is that at least some traits, both physical and psychological, are fairly easy to identify and we assume that they are related to how the individual will perform on the job. Many of us, individually and as managers, value
  • 42. certain things like enthusiasm, even if enthusiasm has very little to do with the ability to do a particular job or the actual results of job performance. Certainly, there are some jobs where enthusiasm is critical. However, being an enthu- siastic employee may have very little to do with success in the job, so if we evaluate indi- viduals based on the characteristic of enthusiasm, we might make an error in judgment concerning their performance. And if we make errors in analyzing the performance of our employees, the appraisal form becomes less valid and reliable and much less acceptable to both the individual employee and management. Finally, if our organization happened to be sued by a former employee who claimed that they were fired based on an appraisal process that was unreliable and not valid, it would be very difficult to defend trait-based evaluation forms due to their subjective nature. SHOULD WE MEASURE TRAITS? Author Ken Blanchard said that there are too many evaluation items that can’t be objectively measured—such as attitude, initiative, and promotability. Therefore, it’s important to ask whether both managers and employees will agree with the measured rating as being accurate. The bottom-line test (we will call it the Blanchard test) is this: Does everyone understand why they are assessed at a specific level (evaluation) and what it takes to get a higher rating (development)?37 We should
  • 43. assess only traits that meet the bottom-line test of having a direct and obvious objective relationship between the trait and success in the job. Behavioral Appraisals Our second option in the assessment process is to evaluate employees based on behaviors. You will recall that behaviors are simply the actions taken by an individual—the things that they do and say. Behavioral appraisals measure what individuals do at work, not their personal characteristics. Is this a good option to use in a performance appraisal process? CAN WE ACCURATELY MEASURE BEHAVIORS THAT AFFECT JOB PERFORMANCE? As a general rule, it is much better to use behaviors in an appraisal than it is to use traits. While an individual supervisor or manager may make a mistake in judgment about the traits of an employee, physical actions or behaviors can be directly observed; and as a result, they are more likely to be a valid assessment of the individual’s performance. GIVE BEHAVIOR THE OUCH TEST. Let’s take a look at a behavioral evaluation using the OUCH test. Would an evaluation based on actions taken by an employee be objective? In general, directly observing and evaluating an action is significantly more objective than making an attempt to judge a trait like individual effort. If we applied the same evaluation of behaviors to all of the individuals in the same type of job, we would have a reasonable
  • 44. certainty that we were being uniform in application. The same thing would be true here in evaluating the concept of consistent in effect. So, it comes down to whether or not a behavior-based evaluation has job relatedness. Would a behavioral evaluation be directly related to the essential functions of a job? The answer is that it would be if we made sure that we chose behaviors that were necessarily a part of successfully accomplishing a task. For instance, if we determine that a person acts correctly in filling out a requisition form, putting the proper information in the correct blocks, and providing the requisition to the appropriate person who would then order the material, then we are assessing behaviors that are job related. If, however, we evaluated the action of walking to the lunchroom and walking back to one’s workstation, would we Behaviors The actions taken by an individual Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y,
  • 45. po st, or di str ibu te 274 PART III: DEVELOPING AND MANAGING be measuring a valid job-related behavior? The answer is more than likely no. Of course, this is a silly example, but it should help you understand that no matter what we do in the evaluation process, we need to ensure that our actions are job related. OK, but would behavioral evaluations be defensible in the situation of our fired employee above? Would it be possible for us to show that our evaluation process was valid and reliable? If we choose to measure job-related behaviors, it becomes much easier for the organization to defend the validity and reliability of the appraisal process. Observation of actions that are directly related to a job would provide at least some pre- sumption of validity as well as reliability, purely because the behaviors are directly job related. Again, if we chose behaviors that could not be directly associated with the job, the
  • 46. validity and reliability of the measures would be suspect. SHOULD WE MEASURE BEHAVIOR? Are behaviors that measure performance more acceptable to the individual employee and the managers than personal traits? In fact, evidence shows that most individuals are very comfortable with the evaluation of their performance being based on “what they do,” not “who they are.” In general, the most useful and therefore most acceptable feedback to employees is feedback on specific job- related behaviors.38 As managers, though, we still need to be cognizant of the fact that a behavioral evaluation can be a poor measure of work performance unless the behaviors chosen are directly applicable to being successful in the job. So as with traits, the Blanchard test asks whether employees understand why they are assessed at a specific level (evaluation) and what it takes to get a higher rating (development).39 Results Appraisals Our final option is to evaluate the results, or outcomes, of the work process. Results are simply a measure of the goals achieved through a work process. Using results as an evalua- tion measure provides management with an assessment of the goals that were achieved in a particular job over time. CAN WE ACCURATELY MEASURE RESULTS THAT AFFECT JOB PERFORMANCE? Is measuring the outcomes of a particular individual’s job a valid and reliable measure of that person’s
  • 47. performance? Well, results are certainly concrete measures of performance. However, could results of a job have been skewed based on factors that were outside the control of the individual who is performing that job? The answer is obviously that the results could be affected by many other factors besides the individual’s performance. For example, standards could be set too low or high, and equipment and machines don’t always work correctly. As a result, employees can’t do as much, or any, work. Even though this is true, the measurement of results is the final organizational measure of success. The results produced through organizational processes provide the company with its return on investment—in this case, its investment in the people in the organiza- tion. So, organizations really like to measure results. GIVE RESULTS THE OUCH TEST. Let’s take a look at the OUCH test concerning results-based evaluations. Is a result achieved in a particular job a concrete, factual measure that can easily be quantified? Obviously, results are a very objective measure of what has happened in that particular job. If we apply the same results-based measure to each similar job, then our measure is uniform in application. The measure of results would almost certainly be consistent across different groups of employees, so we would also meet the consistency in effect requirement of the OUCH test. And of course, if we are measuring the results of what happens in a job, we are certainly providing a measure
  • 48. that has job relatedness. So with a quick scan, we can see that a results-based performance appraisal meets the requirements of the OUCH test better than do either of the other two options. SHOULD WE MEASURE RESULTS? Results-based evaluations, like behavior-based evaluations, are typically very acceptable to both the employee and the manager. Results A measure of the goals achieved through a work process Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te
  • 49. Chapter 8: Performance Management and Appraisal 275 Employees readily accept results-based appraisals because they feel that such appraisals are one of the fairest methods of analyzing their performance. After all, results are the most concrete measures available—either the result was achieved, or it wasn’t. We can also defend this type of appraisal much more easily than we can defend the other two options, even in court. It tends to be very easy for the organization to go into a courtroom and show that an individual’s results were objectively lower than those achieved by other people in the same or similar jobs, if such an action becomes necessary. But is a performance evaluation measured on results valid and reliable? The results- based evaluation would most likely be highly valid and would usually be reliable, assum- ing that we were able to take into account factors outside the individual’s control that nonetheless affect job performance. So as with traits and behaviors, the Blanchard test asks: Does everyone understand why they are assessed at a specific level (evaluation) and what it takes to get a higher rating (development)?40 Which Option Is Best? Our three options concerning what we evaluate are traits, behaviors, and results. But which option is best? The answer’s not as easy as you might
  • 50. think. Certainly, results-based and behavior-based evaluations are more defensible due to the fact that they are more reli- able and valid than trait-based evaluations. But we have to include a large number of fac- tors in order to select which option is best in a particular situation. For example, if we need to evaluate employees who work on the assembly line, we may need to evaluate behaviors such as punctuality. Do they show up to work on time? If we have an employee who produces at 150% of the standard when they show up, but they only show up 2 or 3 days a week, that creates a problem for the whole assembly line. In that case, we may need to evaluate attendance and punctuality (behaviors) because every- one on the assembly line depends on everyone else. However, if we have individuals who don’t do their actual work where managers can see and measure traits and behaviors—for example, people who work from home (tele- commuters) and independent outside salespeople—then we need to rely on results-based measures. Other employees are often not affected by the hours that the telecommuters and salespeople work. It will not matter when they are at the office, as long as they get the job done. The firm will be concerned with how much they produced or sold. So circumstances dictate which method we will use; we cannot say one method will always be superior to the other two.
  • 51. WORK APPLICATION 8-4 Very briefly describe a job you have or had. Describe how your performance was assessed based on traits, behavior, and/or results. APPLYING THE CONCEPT8-2 Assessment Options Write the letter corresponding to each of the following assess- ment options for measuring performance before the situation describing it. a. traits b. behavior c. results ____ 6. On the assessment form question number 7, “willing- ness to take responsibility,” I’m giving you an average rating. ____ 7. You have to stay calm and stop yelling at your coworkers. ____ 8. You sold only 25 units 3 weeks in a row. You know the standard is 35, so I’m giving you a formal warning that if you don’t get up to standard in 2 weeks, you will be fired. ____ 9. When you promote one of the women, make sure she is
  • 52. attractive. ____ 10. I’m pleased with your performance. It is only your sec- ond week on the job, and you are already producing the standard 10 units per day. I don’t think it will be long before you exceed the standard and get bonus pay. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 276 PART III: DEVELOPING AND MANAGING HOW DO WE USE APPRAISAL METHODS AND FORMS?
  • 53. The formal performance appraisal usually involves the use of a standard form purchased, or developed by the HR department, to measure employee performance. Again, “If you can’t measure it, you can’t manage it.”41 But you must be careful how you measure suc- cess,42 as the assessment should be as objective as possible, not subjective.43 Employees need to know the standards and understand what good performance looks like, and they need to be able to measure their own performance. If you are stuck with a form that has subjective sections, work with your employees to develop clear, accurate standards. Exhibit 8-2 lists the commonly used performance appraisal measurement methods and forms and displays them on a continuum based on their use in evaluative and develop- mental decisions. In this section, we discuss each of the measurement methods and forms, starting with the developmental methods and working toward the evaluative ones. Critical Incidents Method The critical incidents method is a performance appraisal method in which a manager keeps a written record of the positive and negative performance of employees throughout the performance period. There is no standard form used, so it is a method. Here, and for each of the other methods and forms, let’s answer two questions: Why and when do we use the method or form, and how do we use it? WHY AND WHEN DO WE USE THE CRITICAL INCIDENTS
  • 54. METHOD? Most formal reviews take place only once or twice a year. But do you want to wait for a formal review before you talk to employees about what they are doing well and when they are not performing up to expectations? No, you want to let them know how they are doing on an ongoing basis. Also, let’s say you are a manager with 12 employees. Can you really remember everything each of them did well, when they made a mistake, and on what dates to evaluate their total performance over the past 6 to 12 months? Odds are, you can’t. However, many managers don’t keep a record of critical incidents, which leads to the problem of inaccurate measures during the formal review meeting. We use critical incidents to do a good assessment of the entire review period, and we coach during the entire review period when needed for developmental decisions. We need to continually conduct informal coaching and discipline, when warranted, as we make notes of critical incidents to use during the formal review. With clear standards and coach- ing, you can minimize disagreements over performance during the formal performance appraisal because employees will know what is coming.44 Although critical incidents are commonly used for developmental decisions, they are also used for evaluative decisions. For legal purposes, having a list of documented critical incidents is especially important leading up the evaluative decision of firing employees. We will discuss discipline and documentation in detail in
  • 55. Chapter 9. HOW DO WE USE CRITICAL INCIDENTS? Managers commonly keep track of incidents with each employee, in either hard-copy or electronic form. Robert Graham CEO Michael LO 8-4 Briefly discuss the commonly used performance measurement methods and forms. Critical incidents method A performance appraisal method in which a manager keeps a written record of the positive and negative performance of employees throughout the performance period H:5 Performance Appraisals SHRM 1. Ranking Method 2. Graphic Rating Scales Form 3. BARS Form 4. Narrative Method or
  • 56. Form 5. MBO Method 6. Critical Incidents Method Evaluative Decisions Development Decisions 1 2 3 4 5 6 EXHIBIT 8-2 PERFORMANCE APPRAISAL MEASUREMENT METHODS AND FORMS Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st,
  • 57. or di str ibu te Chapter 8: Performance Management and Appraisal 277 Buckly does it the old fashion way with a file folder for each of his direct reports,45 but there are many different software programs available now to track performance over the entire review period. Remember that critical incidents are important employee actions, not minor ones, which help or hurt personal and organizational performance. Every time an employee does something very well, like beating a tough deadline or keeping an angry customer from terminating a business relationship with the firm, a note goes in the employee’s file. Notes also go into the file every time the employee’s behavior hurts performance, such as when the employee comes to work late or doesn’t meet quality standards. In today’s environment, the note may be written by the manager, a coworker, customer, or even a subordinate. When desired, it will be put in the form of documentation, such as a warning, a performance report, or a letter from a happy customer thanking the employee for doing a great job.
  • 58. Coaching is part of this ongoing process, and it involves helping employees succeed by monitoring their performance through giving feedback to praise progress and to redirect inappropriate behavior as often as needed.46 One error that inexperienced or unskilled managers tend to make in critical incidents evaluation is focusing on the negative actions of employees. Remember that a good, balanced evaluation includes both positive and neg- ative feedback, so look for good performance, not just poor performance, and praise good work when you see it.47 Management by Objectives (MBO) Method The management by objectives (MBO) method is a process in which managers and employees jointly set objectives for the employees, periodically evaluate performance, and reward employees according to the results. Although there is a three-step process, there is no standard form used with MBO, so it is a method. MBO is also referred to as work planning and review, goals management, goals and controls, and management by results. WHY AND WHEN DO WE USE THE MBO METHOD? In many cases, the MBO method is one of the best methods of developing employees. As with the use of critical incidents, employees get ongoing feedback on how they are doing, usually at meetings scheduled at regular intervals. We can use the MBO method successfully with our employees if we commit to the process and truly involve employees rather than trying to make them believe that our
  • 59. objectives are theirs. On an organization-wide basis, MBO is not too commonly used as the sole assessment method. It is more commonly used based on the evaluative assessment during the develop- ment part of the performance appraisal. One difficult part of MBO is that different employees will have varying individual goals, making MBO more difficult and time- consuming than using a standard assessment form. HOW DO WE USE MBO? MBO is a three-step process: Step 1: Set individual objectives and plans. The manager sets objectives jointly with each individual employee.48 The objectives are the heart of the MBO process and should be accurate measures of performance results. To be accurate, objectives should be SMART.49 They need to be Specific, Measurable, Attainable, Relevant, and Time based. Being specific, measurable, and time based is fairly easy to determine in a written goal, but attainable and relevant are more difficult. So we developed a model based on the work of Max E. Douglas, and we have provided two examples in Model 8-1 that we can use when setting objectives for ourselves or others. Step 2: Give feedback and evaluate performance. Communication is the key factor in determin- ing MBO’s success or failure, and employees should continually critique their own perfor- mance.50 Thus, the manager and employee must communicate often to review progress.51
  • 60. The frequency of evaluations depends on the individual and the job performed. However, most managers do not conduct enough review sessions. Step 3: Reward according to performance. Employees’ performance should be measured against their objectives, again jointly by both the manager and employee. Employees H:1 Identifying and Measuring Employee Performance SHRM WORK APPLICATION 8-5 Select a job you have had. Did your boss use critical incidents in your evaluations? Assess how well your boss used coaching between formal performance appraisal meetings to review your performance. Management by objectives (MBO) method A process in which managers and employees jointly set objectives for the employees, periodically evaluate performance, and
  • 61. reward employees according to the results Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 278 PART III: DEVELOPING AND MANAGING who meet their objectives should be rewarded through recognition, praise, pay raises, promotions, and so on.52 Employees who do not meet their goals, so long as the reason is not out of their control, usually have rewards withheld and even punishment given when
  • 62. necessary. Narrative Method or Form The narrative method or form requires a manager to write a statement about the employee’s performance. There may not be an actual standard form used, especially for high-level professional and executive positions, but there can be a form— so it can be a method or a form. WHY AND WHEN DO WE USE THE NARRATIVE METHOD? A narrative gives the manager the opportunity to give the evaluative assessment in a written form that can go beyond simply checking a box to describe a predetermined assessment item. The manager can also write up a developmental plan of how the employee will improve performance in the future. Narratives can be used alone, but they often follow an objective part of the form. Although the narrative is ongoing, it is commonly used during the formal review. A letter of recommendation is often an example of a narrative evaluation method. HOW DO WE USE THE NARRATIVE METHOD OR FORM? The system can vary. Managers may be allowed to write whatever they want (i.e., use the method), or they may be required to answer questions with a written narrative about the employee’s performance (i.e., use the form). Let’s discuss both here. The no-form narrative method can be the only assessment method used during the for-
  • 63. mal review process. But the narrative method, when used alone, is more commonly used with professionals and executives, not with operative employees. How we write the for- mal narrative assessment varies, as writing content and styles are different. A narrative based on critical incidents and MBO results is clearly the best basis for the written assessment. The narrative is also often used as part of a larger form. For example, you have most likely seen an assessment form (such as a recommendation) that has a list of items to be checked off. Following the checklist, the form may ask one or more questions requiring a narrative written statement. Graphic Rating Scale Form The graphic rating scale form is a performance appraisal checklist form on which a man- ager simply rates performance on a continuum such as excellent, good, average, fair, and poor. The continuum often includes a numerical scale, for example from level 1 (lowest performance level) to 5 (highest). The Self-Assessment and Skill Builder exercise 8-1 uses a graphic rating scale form; it is found at the end of this chapter. WHY AND WHEN DO WE USE THE GRAPHIC RATING SCALE FORM? The graphic rating scale form is probably the most commonly used form during the formal performance appraisal Narrative method or form Method in which the
  • 64. manager is required to write a statement about the employee’s performance Graphic rating scale form A performance appraisal checklist form on which a manager simply rates performance on a continuum such as excellent, good, average, fair, and poor MODEL 8-1 SETTING OBJECTIVES MODEL (1) To + (2) Action Verb + (3) Specific and Measurable Result + (4) Target Date To increase widget productivity 5% by December 31, 2020 To + produce + 20 units + per day Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or
  • 65. di str ibu te Chapter 8: Performance Management and Appraisal 279 (primarily for evaluative decisions), but use of the form should lead to development decisions as well. Why the popularity? Graphic rating scales can be used for many different types of jobs, making them a kind of one-size-fits-all form that requires minimal time, effort, cost, and training. Walk into an office supply store and you can find pads of them. But on the negative side, graphic rating scales are not very accurate measures of performance because the selection of one rating over another, such as an excellent versus good rating, is very subjective. For example, think about professors and how they measure performance with grades. Some give lots of work and few As, while others give less work and almost all As. HOW DO WE USE THE GRAPHIC RATING SCALE FORM? It is very simple, and we have most likely all used one. For example, many colleges let students assess professors at the end of a course, and all the students do is check a box or fill in a circle to give their rating. One of the problems with this method is that some of us don’t bother to actually read
  • 66. the questions. Based on our biases, some of us just go down the list, checking the same rating regardless of actual performance on the items. To be fair, this problem is not common with managers formally evaluating their employees. However, it does tend to occur when customers evaluate products and services, including when students assess professors. To overcome this problem, we can reverse the scale from good to poor on different questions, but this is unfortunately not commonly done. Why isn’t this done all the time? Some managers who make the scales do not know they should do this. Also, some who do know they should reverse the scales don’t because they don’t want to end up with overall ratings being pushed to the middle because people don’t read the questions. Behaviorally Anchored Rating Scale (BARS) Form A behaviorally anchored rating scale (BARS) form is a performance appraisal that pro- vides a description of each assessment along a continuum. As with graphic rating scales, the continuum often includes a numerical scale that runs from low to high; but with the BARS form, each item is an analysis of a specific behavior. A simple example here would be in a restaurant where the server is supposed to clean and reset the tables (a behavior) after each customer leaves. A BARS item might be “Server cleans and resets table after cus- tomers what percent of the time (choose the closest answer)?” Answers: 100%; 75%;
  • 67. 50%; 25%; 0%. WHY AND WHEN DO WE USE THE BARS FORM? The answers to why and when are the same here as they are with graphic rating scales, so let’s focus on the differences between graphic rating scales and BARS forms. BARS forms overcome the problem of subjectivity by providing an actual description of the performance (the required behaviors) for each rating along the continuum, rather than that one simple word (excellent, good, etc.) that graphic rating scales provide. A description of each level of performance makes the assessment a more objective, accurate measure. Why aren’t BARS more commonly used than graphic rating scales? It’s partly eco- nomics and partly expertise. Again, the graphic rating scale can be used for many differ- ent jobs, but BARS forms have to be customized to every different type of job. And developing potentially hundreds of different BARS forms takes a lot of time, money, and expertise. Even when a firm has an HR staff, the question becomes, “Is developing Behaviorally anchored rating scale (BARS) form A performance appraisal that provides a description of each assessment along a continuum There shouldn’t be any surprises or lack of agreement on performance levels during the formal perfor-
  • 68. mance appraisal interview. Th om as B ar w ic k v ia G et ty Im ag es Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op
  • 69. y, po st, or di str ibu te 280 PART III: DEVELOPING AND MANAGING BARS forms the most effective use of our time?” Obviously, the answer is, “It depends on the types of jobs being evaluated and the resources available to complete the evalua- tion process.” HOW DO WE USE BARS FORMS? As with graphic rating scales, we simply select a level of performance along a continuum. College accreditation associations are requiring more measures of student outcomes as assurance of learning; and as part of that process, they want more BARS rubrics as evidence. So in college courses, especially for written assignments, professors give out rubrics that describe in some detail the difference between an excellent (A), good (B), average (C), poor (D), and not acceptable (F) grade, using multiple criteria to put together a final grade. Students use the rubric to do the work
  • 70. by meeting the written descriptive of how each part will be graded/objectives. When getting the assignment back with a grade, students better understand why they got the grade they did and how to improve in the future. Here is another simple example of making a graphic rating scale item into the more objective BARS. Attendance—excellent, good, average, fair, poor becomes Attendance—number of days missed 0–1, 2, 3–4, 5, 6 or more Ranking Method Ranking is a performance appraisal method that is used to evaluate employee perfor- mance from best to worst. There often is no actual standard form used, and we don’t always have to rank all employees. This method can be contentious, as evidenced by changes at GE, which until about 2015 was the king of the “rank and yank” companies that was notorious for ranking their employees and, at the end of each year, terminating the lowest ranked performers. According to a 2016 Wall Street Journal article, GE is working to reinvent their employee review process, providing routine feedback from man- agers and coworkers during the year, but also doing a brief review with each employee at the end of the period.53 Dell is another company that tried forced-ranking but it “turned good employees into politicians, bad employees into backstabbers, and colleagues into
  • 71. enemies. It hurt collaboration”—so Dell dumped it.54 WHY AND WHEN DO WE USE THE RANKING FORM? Managers have to make evaluative decisions such as determining who gets a raise or promotion and who gets laid off. So when we have to make evaluative decisions, we generally have to use some type of ranking. However, our ranking can, and when possible should, be based on other valid and reliable methods and forms. Managers can also use ranking for developmental purposes by letting employees know where they stand in comparison to their peers—meaning managers can use rank- ings to motivate employees to improve their performance. For example, when one of the authors passes exams back to students, he places the grade distribution on the board. This does not in any way affect the current grades—but it lets students know where they stand, and he does it to motivate them to improve. Using the ranking method for employee devel- opment is generally more valuable to the organization than using it for evaluative pur- poses. Showing an employee comparative strengths and weaknesses and working with them to fix weaknesses tends to be motivational, but evaluating them as “poor” overall versus their coworkers tends to be demotivational. HOW DO WE USE RANKING? Under the ranking method, the manager compares an employee to other similar employees, rather than to an objective standard. An offshoot of ranking
  • 72. is the forced distribution method, which is similar to grading on a curve. Predetermined WORK APPLICATION 8-6 Select an organization, preferably one you work for or have worked for. Identify and briefly describe the assessment methods and/ or forms that are used to assess employee performance. Ranking A performance appraisal method that is used to evaluate employee performance from best to worst Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po
  • 73. st, or di str ibu te Chapter 8: Performance Management and Appraisal 281 percentages of employees are placed in various performance categories—for example, excellent, 5%; above average, 15%; average, 60%; below average, 15%; and poor, 5%. The employees ranked in the top group usually get the rewards (a raise, a bonus, or a promotion), those not in the top tend to have rewards withheld, and the ones in the bottom group sometimes get punished. In Self-Assessment and Skill Builder 8-1, you are asked to rank the performance of some of your peers. Which Option Is Best? While this section does not contain an exhaustive list, it provides examples of each of the major methods of performance appraisal. Which appraisal method or form is best depends on the objectives of the organization. Using a combination of the methods and forms is usually superior to using just one. For developmental objectives, the critical inci- dents, MBO, and narrative methods work well. Alternately, you can’t decide who gets the
  • 74. promotion or merit raise without an evaluative method, so for administrative decisions, a ranking method based on the evaluative methods, and especially graphic rating scales or BARS forms, works well. Remember that the success of the performance appraisal process does not lie just in the formal method or form used once or twice a year. It depends on the manager’s human relations skills in ongoing critical incidents coaching, and it also depends on effective mea- sures of performance that are accurate enough to let everyone know why they are rated at a given level (evaluative) and how they should improve (developmental) for the next assessment.55 Insperity’s PerformanceReview.com is one website that has been designed to help managers write complete and effective performance appraisals online. The site offers practical advice to guide managers through the appraisal process.56 WHO SHOULD ASSESS PERFORMANCE? Now that we’ve learned the why, what, and how of the performance appraisal process, we next need to discuss the options for choosing a rater or evaluator. There are a number of different options concerning who should evaluate the individual employee, and the deci- sion needs to be based on a series of factors. Let’s take a look at our options for deciding who should evaluate an employee.
  • 75. APPLYING THE CONCEPT8-3 Appraisal Methods and Forms State which of the following assessments is being described in each of the given situations, writing each assessment’s corre- sponding letter before the situation(s) in which it is described. a. critical incidents method b. MBO method c. narrative method and forms d. BARS forms e. graphic rating scale forms f. ranking method ____ 11. Hank is not doing a good job, so you decided to talk to him about it and keep track of his performance regularly. ____ 12. Your employees perform different tasks. You want to create a system for developing each of them. ____ 13. Sara is moving, has applied for a job at another com- pany, and asked you for a letter of recommendation. ____ 14. You started a new business a year ago, and you are extremely busy focusing on sales; but you want to develop a performance appraisal form you can use with all 14 of your employees, who do a variety of jobs. ____ 15. You have been promoted, and you have been asked to select your replacement. LO 8-5 Identify and briefly discuss available options for the
  • 76. rater/evaluator. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 282 PART III: DEVELOPING AND MANAGING Supervisor When we ask who should evaluate an employee, the most common response is that their immediate supervisor should do it. But why would the supervisor be the best person to evaluate an employee? Well, the supervisor is
  • 77. supposed to know the level of performance of their employees. Certainly, supervisors are often one of the best and most commonly used options as an evaluator for the employees under their control. However, this is not always the case due to problems with supervisor performance assessments. PROBLEMS WITH SUPERVISOR EVALUATIONS. What if the supervisor doesn’t see the employee very frequently? This may not be all that uncommon in a modern organization. Many times today, supervisors have little or no direct contact with their employees because they may be in a different building, city, state, or even country. Virtual teams, Internet-linked offices, telecommuting, and other factors cause supervisors not to be in constant touch with their employees, unlike the situation 20 or 30 years ago. There are other problems as well. What if there’s a personality conflict? Supervisors are human, just like their employees; and they may just not relate well to some of their employees. This may cause a personal bias for or against certain employees that may invalidate the appraisal process. What if the supervisor doesn’t know what you’re supposed to be doing in your job? Aren’t supervisors always supposed to know every job for which they are responsible? Again, 30 years ago, this may have been true. However, in today’s work environment,
  • 78. with the amount of information necessary to do the complex tasks that organizations must accomplish in order to compete, nobody can know every job. There’s just too much information for any one individual to learn. So jobs have been segmented down into smaller and smaller areas, and the supervisor may not know each of those jobs in great detail. So there are certainly problems that can occur in the case of a supervisor being responsible for a subordinate employee’s evaluation process. AVOIDING SUPERVISOR REVIEW PROBLEMS. A simple way to overcome these problems is to have others, in addition to (or in place of) the supervisor, assess performance. Also, multiple measures can make a performance assessment more accurate—valid and reliable. Using other evaluators and multiple measures can help overcome personal bias and provide information that supervisors don’t always know about. Peers In addition to, or in place of supervisors, the trend is to use more teams; and teams com- monly evaluate each member’s performance.57 Why? If the supervisor is absent or has infrequent contact with the employees, but each of the employees frequently interacts with multiple coworkers in a team or group, then peer evaluations may be valuable.58 Peers often know the job of the individual employee better than the supervisor does, and they are more directly affected by the employee’s actions— either positive or negative. In addition, peers can evaluate the ability of the individual to
  • 79. interact with others success- fully in a group or team setting—something that may be very difficult for the supervisor to see unless they are intimately involved with the group. PROBLEMS WITH PEER REVIEWS. Peer evaluations can cause problems because the process may become less objective. In fact, research evidence regarding the validity of peer evaluations is really unclear.59 Personality conflicts and personal biases can affect how individual employees rate their peers. A major problem is with perception because most of us see ourselves as being better at our job than our boss and peers. Individuals within a group or team may also just have significantly different personality types, and these differences can cause friction within the workgroup that may spill over when it comes time to evaluate the person that they are in conflict with. H:2 Sources of Information (e.g., Managers, Peers, Clients) SHRM Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c
  • 80. op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 283 AVOIDING PEER REVIEW PROBLEMS. Because we know that problems can occur within a peer evaluation, the manager can take the issues into account and adjust rating values as necessary. For example, assume you are the manager of a work group of six people who, in your opinion, work very well together and provide a quality work product. When you review a set of peer evaluations from the work group, you notice that two of the group members (a young male and an older female) gave each other significantly lower than average grades. However, the other four members of the group gave both of them good marks for their contributions to the group. This quite likely is a situation where a personality conflict has occurred between the two members that caused them to lower
  • 81. each other’s grades. Knowing that the other four members of the group evaluated these two individuals as valued members of the team, the ratings from the two individuals can be adjusted, noting that a personality conflict may have lowered their evaluations of each other. Some research shows that as peers evaluate each other more, their ability to provide relevant and valuable feedback increases, as does their personal confidence. So giving employees practice in peer evaluations can improve the validity and reliability of such evaluations.60 Even with the potential for personality conflicts and bias, peer evaluations can give us good insight into the inner workings of a group or team when the supervisor has infrequent contact with the team. In Self-Assessment and Skill Builder 8-1, you will do a performance assessment of your peers. Subordinates We may also have subordinates evaluate their supervisor. We would typically use only subordinate evaluation for managerial-level employees. However, who within the firm knows, and suffers the consequences from, the actions of a supervisor more than the people who work for them? Subordinate evaluations can give us good insight into the managerial practices and potential missteps of people who oversee others. As a result, sub- ordinate evaluations may give us valuable information that we would be unable to find out using any other means. Have you filled out a form that assesses your professors? If so, you have participated in one form of subordinate evaluation.
  • 82. PROBLEMS WITH SUBORDINATE REVIEWS. There is potential for bias here, especially from subordinates who have been disciplined by their supervisor. Obviously, subordinates may try to get back at their supervisor for giving them tasks that they did not want to perform or for disciplining them for failure in their jobs. There may also be a personality conflict, or some subordinates may be biased against their supervisor or manager for other reasons. So there are certainly negative aspects to subordinate evaluations. On the other end of the scale, the subordinates may inflate the capabilities of their manager, at least partly because of a lack of understanding of all the tasks and duties required of the manager. In fact, in a recent survey, about two thirds of employees rated their managers higher than the managers rated themselves.61 AVOIDING SUBORDINATE REVIEW PROBLEMS. In all of these problem areas, if we know that there is a potential problem, we can most likely guard against it. In many cases, as we go through a group of subordinate evaluations, we will see one or two outliers providing either very high or very low marks for the supervisor. In such a case, we should probably throw those outliers out of the calculation when determining overall marks for the supervisor. It’s surprising how often these outliers are extremely easy to spot in a subordinate evaluation process. Another significant issue in the case of subordinate evaluations
  • 83. is confidentiality. Sub- ordinate evaluations must be anonymous or it is unlikely that the subordinates will pro- vide an honest evaluation of their supervisor. Obviously, if the evaluation is not confidential, the supervisor can and may exact retribution on subordinates who provide unflattering evaluations. In such cases, subordinates will likely inflate the capabilities of the supervisor, which minimizes the value of the evaluation process itself. Despite poten- tial for bias and other problems, subordinate evaluations can provide us with valuable information about the supervisor’s capabilities. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu
  • 84. te 284 PART III: DEVELOPING AND MANAGING Self Have you ever done a self-assessment at work? Virtually all of us have informally evalu- ated how we perceive we are doing on the job, whether we are actually formally asked to do so as part of the assessment or not. It is required with MBO. Even when they are not asked to do a self-assessment, employees will still walk into the review discussion with some informal self-assessment that they will compare to the supervisor’s rating. But are self-evaluations valuable, or is the employee going to overestimate their individual capa- bilities and tell us that they’re perfect? (As you know, every chapter of this book has one or more self-assessments, and in one for this chapter—Self- Assessment and Skill Builder 8-1 at the end of the chapter—you will assess your performance on a group project. If you want to, you can do the skill-builder now.) PROBLEMS WITH SELF-ASSESSMENTS. Most research evidence shows that self-assessments tend to overestimate the individual’s ability to do a job.62 However, some of the research says that employees either underestimate or accurately estimate their job performance over time. A significant portion of the evidence seems to show that individuals with lower overall levels of knowledge and skills tend to inflate their
  • 85. self-assessment of their abilities.63 Conversely, as individuals become more knowledgeable and more skilled, the evidence tends to show that they will either accurately estimate or even underestimate their capabilities in their jobs.64,65,66 AVOIDING SELF-ASSESSMENT PROBLEMS. Based on the fact that most of the evidence shows that employees overestimate their ability to do their job, is self-assessment a valid performance measure? Here again, even though the measure may have validity concerns, if we know that self-evaluations tend to be skewed, we can most likely adjust for that. In addition, receiving information from the individual concerning their perception of their skill set is extremely valuable in a number of management processes—including plans for training and development opportunities, providing work assignments, and counseling and disciplinary measures. As stated in the Blanchard test, both the manager and employee need to agree on the level of performance, and what it takes to get to the next level—it’s called perceptual congruence.67 Customers We may want to use customers as evaluators when the individual being evaluated has fre- quent contact with customers. We use the word customers in a broad sense to include peo- ple outside the organization, including customers for our products and services and suppliers to the firm, and those inside the organization, including people in other depart-
  • 86. ments of the firm (for example, the print shop that makes copies for other departments and the mail room that receives mail and delivers communications to the rest of the firm). If an employee interacts routinely with internal or external customers, we need to know how those customers feel about their interactions with the employee. This particularly applies to external customers, who are the ones who ultimately pay the bills. It does not matter what else we do successfully if our customers are uncomfortable with their interactions with our employees. If external customers are upset about their interactions with our employees, then they have the ability to go elsewhere with their busi- ness. And even internal customers can create significant problems within the firm due to conflict between departments or divisions. So we want to ask internal and external cus- tomers to evaluate the individuals with whom they come into contact. PROBLEMS WITH CUSTOMER ASSESSMENTS. What do you think the major problem would be with customer-based evaluations? One problem is that customer assessments commonly use simple graphic rating scales, which we discussed as being very subjective. Also, customers are usually not trained to do an accurate assessment, so bias is a problem. For these and other reasons, the popular opinion is that customer evaluations are almost WORK
  • 87. APPLICATION 8-7 Select your current job or a past job. Identify who has or had input into your performance appraisal. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 285 always negatively skewed. However, research shows that this is not necessarily the case.68
  • 88. In some situations, customer evaluations actually exceed internal evaluations. AVOIDING CUSTOMER ASSESSMENT PROBLEMS. Regardless of problems, customer evaluations provide us with valuable information concerning our employees who have direct customer contact. And we can always adjust the evaluation process knowing that customer evaluations may be biased. One of the basic methods of adjusting the customer evaluation process is by comparing the individuals being evaluated and identifying the ratios of negative and positive comments. This allows us to identify more successful and less successful employees. Although this is an imperfect measure, it still provides value to the firm because customers’ perceptions are critical to our relationships with them. So, we need to measure this relationship. 360-Degree Evaluations In some cases, the evaluation is expanded to everyone that an employee comes into con- tact with through 360-degree feedback.69 The 360-degree evaluation analyzes individu- als’ performance from all sides—from their supervisor’s viewpoint, from their subordinates’ viewpoint, from their customers (if applicable), from their peers, and from their own self-evaluation. The 360-degree evaluation would generally give us the most accurate analysis of the individual and their performance within the company. DuPont developed 360-degree reviews back in 1973, and they
  • 89. are still popular today.70 With the trend of structuring work in teams, peer evaluations are now used regu- larly.71 Those who fill out the appraisal form would usually do so anonymously. The feed- back from all these people is used to evaluate and develop the employee. PROBLEMS WITH 360-DEGREE EVALUATIONS. Although considered the best, why don’t we always use 360 degree evaluations? The simple answer is time and money. It takes a significant amount of time for a group of individuals to evaluate one person if we use a 360-degree format. Using up so much organizational time obviously also costs us a significant amount of money. If we multiply those numbers by the time it takes everyone associated with the organization to evaluate one individual, the costs can quickly become massive. AVOIDING 360-DEGREE PROBLEMS. Unfortunately, there really is no easy way to avoid these problems besides what is commonly done—simply not using 360-degree evaluations. The 360-degree evaluation format tends to be most valuable if it is used for purposes of individual development, rather than to make administrative evaluative decisions.72 A good 360-degree feedback system can provide specific suggestions about how to improve individual competencies.”73 It can also go a long way toward minimizing some of the most common problems with the performance appraisal process, which we will
  • 90. review in the next section. Whom Do We Choose? Now that we know our options for who should conduct an evaluation of each employee, which option should we use? Again, we need to remember that each of the options costs us money because it takes time for the individual to perform the appraisal. So, we need to determine which option or options to use. We can combine any of these methods with any other, all the way up to the point of the 360-degree evaluation. However, we want to use a 360-degree evaluation only when it’s worth it. If it’s not necessary, then it doesn’t make a lot of sense due to the cost of this method. For instance, is there any need to do a 360-degree evaluation of janitorial or house- keeping staff? Would this make sense? Obviously, it would not. In most cases, with low- level staff members, a supervisor’s evaluation is sufficient. This is true because even though only the supervisor does the formal assessment, the supervisor often gets informal 360-degree evaluation An evaluation that analyzes individuals’ performance from all sides—from their supervisor’s viewpoint, from their subordinates’ viewpoint, from their customers (if applicable), from their peers, and from their own self-evaluation
  • 91. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 286 PART III: DEVELOPING AND MANAGING feedback on the employee’s performance from customers and peers of that employee. Customers will often complain to the supervisor if the employee’s service is not satisfac- tory, and peers will complain about a fellow employee who is not meeting standards for some reason. The supervisor’s critical incident file is often written based on information received from peers and customers, and that reduces the
  • 92. influence of any personal bias the supervisor may have toward the employee. What about the case of an outside salesperson? In this situation, the results tend to speak for themselves. Sales numbers are available to the salesperson and manager. If the supervisor rarely sees the individual but the customer interacts with our salesperson on a routine basis, we can ask the customer to do an evaluation of the salesperson and ask the salesperson for a self-appraisal. With the sales figures, a self- assessment, and customer feedback, we can develop a plan to increase future performance. Finally, if we are evaluating the marketing manager for the firm, we may want to do a 360-degree evaluation because of the fact that this individual would affect all of the groups—subordinates, customers, peers, the organization, and themselves. So, we evalu- ate the specific situation and use the number of methods necessary to get an accurate assessment of the individual. So once again, to get an understanding of the return on our investment, we need to do a cost-benefit analysis to determine when the benefits of increasing performance outweigh the costs of a particular person or group completing a performance appraisal. In essence, we attempt to maximize performance while minimizing the total cost of the appraisal process. PERFORMANCE APPRAISAL PROBLEMS
  • 93. During the performance appraisal process, we face some common problems. However, we can take measures to avoid them. So in this section, we discuss the problems first with simple ways to avoid each of them as an individual. Then we discuss what the organiza- tion can do to overcome these problems on an organization-wide basis. We can actually overcome multiple problems with the same method. See Exhibit 8-3 for a list of problems and ways to avoid them. Common Problems Within the Performance Appraisal Process Let’s briefly discuss each of the common problems during the performance appraisal pro- cess listed in Exhibit 8-3. BIAS. Bias is simply a personality-based tendency, either toward or against something. In the case of performance assessment, bias is toward or against an individual employee. We all have biases, but supervisors especially cannot afford to allow their biases to enter into their evaluation of subordinates. This is very easy to say but very difficult to do. Biases make the evaluation process subjective rather than objective, and they certainly provide the opportunity for a lack of consistency in effect on different groups of employees. So to overcome the bias problem, we need to be objective and not let our feelings of liking or disliking an individual influence our assessment of that person. STEREOTYPING. Stereotyping is mentally classifying a person into an affinity group and then identifying the person as having the same assumed
  • 94. characteristics as the group. Though stereotyping is almost always assumed to be negative, there are many incidents of positive stereotypes. However, making assumptions about individual employee characteristics based on their supposed membership in a group, rather than explicitly identifying the performance of the individual, creates the potential for significant error in evaluations. So we can avoid stereotyping by getting to know each employee as an individual and then objectively evaluating actual performance. WORK APPLICATION 8-8 Select an organization, preferably one you work for or have worked for. Identify some of the positions and people who should be evaluated using 360-degree evaluations. Briefly describe your cost-benefit analysis to justify your selection. LO 8-6 Identify some of the common problems, and how to avoid the problems, with performance appraisals.
  • 95. Bias A personality-based tendency, either toward or against something Stereotyping Mentally classifying a person into an affinity group and then identifying the person as having the same assumed characteristics as the group H:3 Rater Errors in Performance Measurement SHRM Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di
  • 96. str ibu te Chapter 8: Performance Management and Appraisal 287 HALO ERROR. Halo error occurs when the evaluator forms a generally positive impression of an individual and then artificially extends that general impression to many of that individual’s categories of performance to create an overall evaluation of the individual that is positive.74 (Alternatively, the evaluator can form a negative initial impression and extend it to form an overall negative evaluation—this is sometimes called the “horns error.”) In other words, if an employee is judged by their supervisor to be generally a “good” employee, and if the supervisor then evaluates each of the areas of the employee’s performance as good, then regardless of any behaviors or results to the contrary, the supervisor is guilty of halo error. So we can avoid halo error by remembering that employees are often strong in some areas and weaker in others, and we need to objectively evaluate each employee based on their actual performance for each and every item of assessment. DISTRIBUTIONAL ERRORS. These errors occur in three forms: severity or strictness, central tendency, and leniency. They are based on a standard normal
  • 97. distribution, or the bell curve that we are all so familiar with. In severity or strictness error, the rater evaluates everyone or nearly everyone as below average. Central tendency error occurs when the rater evaluates everyone under their control as average— meaning nobody is rated as either really good or really bad. Finally, leniency error occurs when the rater evaluates everyone as above average—meaning it is basically a form of grade inflation. So we need to give a range of evaluations because we really aren’t all equal in our level of performance, and everyone can’t be the worst or the best. SIMILARITY ERROR. This error, also called “like me,” occurs when the rater gives better evaluations to subordinates whom they consider more similar to themselves and poorer evaluations to subordinates whom they consider to be different from themselves. We all have a tendency to feel more comfortable with people who we feel are more similar to ourselves;75 and if we are not careful, we can allow this feeling of comfort with similar individuals to be reflected in the performance appraisal process. So we can avoid similarity error by embracing diversity and objectively evaluating each employee based on their actual performance, even if they are different from us and don’t do things the same way that we do. PROXIMITY ERROR. This error states that similar marks may be given to items that are near (in other words, proximate to) each other on the performance
  • 98. appraisal form, regardless of differences in performance on those measures. For instance, if we mark the first three items as “meets expectations,” we tend to continue marking the same way on down the form. So we can avoid proximity error by objectively evaluating employees’ actual performance on each and every item on the assessment form, and having reverse item scales really helps. EXHIBIT 8-3 PERFORMANCE APPRAISAL PROBLEMS AND AVOIDING THEM Common Problems How to Avoid Problems Bias Stereotyping Halo error Distributional errors Similarity error Proximity error Recency error Contrast error Attribution error Develop accurate performance measures Use multiple criteria Minimize the use of trait-based evaluations Use the OUCH and Blanchard tests Train your evaluators Use multiple raters Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the
  • 99. publisher. Do no t c op y, po st, or di str ibu te 288 PART III: DEVELOPING AND MANAGING RECENCY ERROR. This occurs when the rater uses only the last few weeks of a rating period as evidence when putting together performance ratings. For instance, if a warehouse worker has been a strong performer for most of the appraisal period, but right before his annual evaluation, he accidentally set a fire, he may be rated poorly due to recency error. So we can avoid recency error by evaluating the employee based on their performance during the entire assessment period, which is commonly 6 to 12 months. Using the
  • 100. critical incident evaluation method really helps our recall, and it helps us assess employee performance more objectively for the entire period. CONTRAST ERROR. Here the rater compares and contrasts performance between two employees, rather than using absolute measures of performance to assess each employee. For example, the rater may contrast a good performer with an outstanding performer; then, as a result of the significant contrast, the good performer seems to be “below average.” This would be a contrast error. So we can avoid contrast error by objectively evaluating the individual based on their actual performance against an objective standard. ATTRIBUTION ERROR. In simplified terms, attribution is a process in which an individual makes assumptions about the reasons or motivations (such as attitudes, values, or beliefs) for an observed behavior. So, attribution error in performance appraisal might occur when the rater observes an employee action—such as an argumentative answer to a question—and assumes that the individual has a negative attitude toward their job and is a poor performer. This may not be true; and if it isn’t, the rater is guilty of an attribution error.76 So we need to avoid attribution error because it is based on our subjective conclusions. When in doubt, we shouldn’t assume we know why the employee did or didn’t do something. We should investigate actions so that we can objectively evaluate employees based on their actual performance.
  • 101. Avoiding Performance Appraisal Problems As you can see above, there are a significant number of ways that performance appraisals can fail to provide an accurate assessment of the capabilities and behaviors of individual employees. Thus far, we have provided only simple solutions to help us overcome these problems as individuals. But how can a firm avoid these problems on an organiza- tion-wide basis throughout the performance appraisal process? Luckily, we can take a number of basic steps to minimize the negative issues that occur in the performance appraisal process. All we have to do is look at the problems noted, and we can fairly quickly come up with some possible solutions to at least the majority of those problems using the same methods. Let’s discuss how the firm can limit the potential for the appraisal process to go astray by developing accurate performance measures, training evaluators, and using multiple raters. DEVELOP ACCURATE PERFORMANCE MEASURES. As discussed earlier in this chapter, if the performance appraisal methods and forms are not accurate measures, then the entire performance appraisal process will have problems. Therefore, the organization should have its own HR specialist or hired consultants develop an objective assessment process and measures. Now, let’s discuss three things HR specialists commonly do to help ensure accurate measures.
  • 102. Use multiple criteria. One method of overcoming some of the problems with the appraisal process is to ensure that we use more than one or two criteria to evaluate an individual’s performance. We should generally have at least one evaluation criterion for each major function within an individual job. As we noted earlier, behaviors and results that occur over the entire course of the evaluation period are typically the best criteria to use in the process of evaluating an individual’s performance. However, employees behave in many different ways in different circumstances throughout the course of a year, so we shouldn’t limit the appraisal process to one or two actions on the part of that individual employee. WORK APPLICATION 8-9 Select your current job or a past job. Identify common mistakes your supervisor made when assessing your performance, during either an informal coaching or a formal appraisal review. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher.
  • 103. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 289 By evaluating multiple criteria, we have the ability to lower the incidence of halo, recency, contrast, and attribution errors; and we may even be able to affect bias and stereotyping because of the fact that many criteria, not just one or two, are being analyzed. Minimize the use of trait-based evaluations. Our next method of overcoming problems within the appraisal process is to minimize the evaluation of individual traits. As we noted earlier, trait-based evaluations tend to be more subjective than behavior- or results-based evalu- ations, and as a result, they should generally not be used unless
  • 104. there is a specific reason why employees must exhibit a particular trait to be successful in a job. Only when we have a specific reason for trait-based evaluations should we measure those traits and evaluate them in the appraisal process. In addition, because of their subjectivity, trait-based evaluations are much more diffi- cult to defend in cases where the organization used the evaluation process for later disci- plinary action against an individual employee. By minimizing the evaluation of traits, we lower the incidence of bias, stereotyping, similarity errors, and (potentially) attribution errors. So, minimizing trait evaluations lowers the ability of the rater to make some of the most significant mistakes that can occur in the appraisal process. Give the measures the OUCH and Blanchard tests. We already stated this with each of the three types of assessment, but these two tests are so important to successful, accurate measures that they bear repeating here. With the OUCH test, the measure has to be objective, uni- form in application, consistent in effect, and have job relatedness. With the Blanchard test, everyone must understand why they are assessed at a specific level (evaluation) and what it takes to get a higher rating (development).77 TRAIN EVALUATORS. Once we have accurate measurement methods and forms, the next thing that we should do to help overcome some of the issues with the appraisal process is to
  • 105. train our evaluators to avoid the common errors and problems that occur in performance assessment and to train them in how to use the various methods and forms. Train evaluators to overcome the common problems of assessment. Simply through the process of rater error training, we can mitigate or even eliminate many of the common problems. Once the evaluator becomes aware that the common errors occur with some regular- ity, the evaluator almost immediately begins to evaluate such errors and guard against them. Even bias and stereotyping errors may be mitigated through the rater error–training process. As we’ve said several times throughout this book, most of our employees want to do a good job; and once they know that an error is being committed, they will make APPLYING THE CONCEPT8-4 Avoiding Appraisal Problems Review the list of common problems or errors, and then write the letter corresponding to each one before the statement describ- ing or involving it. a. bias f. proximity error b. stereotyping g. recency error c. halo error h. contrast error d. distributional errors i. attribution error e. similarity error ____ 16. I got a lower rating than I deserve because I’m not afraid
  • 106. to speak my mind to the boss, and she doesn’t like it. ____ 17. I’m sick and tired of hearing how many units Sally produces and that I should be more like her. ____ 18. I told my boss that I thought I deserve an excellent rating, but she said that she gives everyone a good rating. ____ 19. I tend to take it easy during the year, but I make sure to really push and do a good job for the month of December, and that’s why I got a good performance review. ____ 20. I attended all the classes and participated in the class discussions, so the professor gave me an A, even though my final average on my test scores was a B. Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di
  • 107. str ibu te 290 PART III: DEVELOPING AND MANAGING attempts to correct that error. So, rater error training provides them with knowledge of these errors and allows them the opportunity to correct them. A robust form of rater training is frame-of-reference training, which defines job per- formance dimensions in more concrete terms, provides samples of behaviors at each per- formance level, emphasizes the fact that job performance has many dimensions, and allows practice and feedback sessions. While the details of frame-of-reference training are beyond the scope of this introductory text, this method of rater training has been shown to have a significant positive effect on rater accuracy in the appraisal process.78 Train evaluators to use the measurement methods and forms. Evaluators should also be trained to use the various performance assessment methods and forms. Because the critical inci- dent method is not commonly used as a formal assessment method, evaluators should be taught to use it to help overcome recency error. Evaluators also need training to effec- tively use MBO and to write a good narrative. When using a rating scale, the organiza-
  • 108. tion should provide some training for the raters so they better understand the differences between the word descriptors along the continuum (excellent, good, etc.). BARS forms and ranking are fairly straightforward; but supervisors need to realize that they, too, are subject to common problems when selecting each rating, and training can help overcome any problems encountered. USE MULTIPLE RATERS. The next tool we can use to minimize errors in the evaluation process, at least in some cases, is to have multiple raters evaluate an individual. As we noted earlier, this becomes expensive very quickly, so we must decide whether or not the value inherent in using multiple evaluators overcomes the cost of the process. However, if it does, using multiple evaluators can conquer some significant problems in the appraisal process. What will the process of using multiple evaluators do to improve the appraisal process? It limits the ability of one individual appraiser to provide a biased opinion concerning an employee’s performance, and it limits the potential for stereotyping in the appraisal process. In addition, halo, similarity, contrast, and attribution errors become less likely; and distributional errors tend to even out among multiple raters. It is for these reasons that 360-degree evaluations have gained favor in many organizations over the past 20 years. DEBRIEFING THE APPRAISAL The debriefing process is where we communicate to individuals
  • 109. our analysis of their per- formance. Companies may have guidelines for this process. For instance, Facebook man- agers are told that performance reviews should be 80% focused on strengths.79 Earlier in the chapter, we noted that there are two major reasons for assessing performance: for evaluative decisions and for development. We also suggested breaking the formal perfor- mance appraisal debriefing into two separate interviews. In this section, we describe how to conduct both reviews. The Evaluative Performance Appraisal Interview Planning ahead is critical to the performance appraisal interview process. Therefore, this section is separated into preparing for and conducting the evaluative interview. Because the evaluative interview is the basis for the developmental interview, it should be con- ducted first. PREPARING FOR AN EVALUATIVE INTERVIEW. When preparing for an evaluative interview, follow the steps outlined in Model 8-2. Our evaluation should be fair (meaning ethically and legally not based on any of the problems discussed).80 If we have had regular coaching conversations with our employees, they know where they stand,81 and our preparation is mostly done except for filling out the form. So our relationship with the employee will directly affect the outcome.82 Employees should also critique their own performance through a self-assessment using the form.83
  • 110. WORK APPLICATION 8-10 Select your current job or a past job. Identify and explain how the organization’s performance appraisal process does or doesn’t use each of the three methods of overcoming common performance appraisal problems. How can the organization improve the process? LO 8-7 Briefly discuss the differences between evaluative performance reviews and developmental performance reviews. H:6 Appraisal Feedback SHRM Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no
  • 111. t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 291 So step 1 of Model 8-2 is to simply set up the meeting. Step 2 has the employee use the form to conduct a self-assessment; and in step 3 we, too, assess the employee’s perfor- mance using the form. In keeping with the balanced evaluation, in step 4 we identify both strengths and areas for improvement that serve as the basis for the developmental inter- view. Finally, step 5 involves predicting employee reactions to our assessment, and plan- ning how to handle them. Using critical incidents will help support our assessment when employees disagree. And don’t forget that the Blanchard test states that both you and the employee should be able to explain and agree on the employee’s level of performance.
  • 112. CONDUCTING AN EVALUATIVE INTERVIEW. During the interview, encourage the employee to talk and also listen to the critique of their performance.84 Model 8-2 lists the steps for conducting an evaluative performance appraisal interview. In step 1, we open the meeting with some small talk to put the person at ease. Then in step 2, we go over our evaluation of the items on the assessment form. In step 3, we identify the employee’s strengths and weaknesses, discuss them, and agree on them. Finally, in step 4, we conclude the interview, which may involve making the appointment for the developmental interview. During this process, employees should be open to negative feedback, even if they don’t agree with it. They shouldn’t make excuses or blame others. If they don’t agree with the assessment, they may say something like, “Thanks for the feedback, but I don’t agree with it because. . . .” Giving objective reasons for the disagreement is fine, as long as they do it without being argumentative and disre- spectful. If there is such disagreement, we may want to schedule a follow-up meeting with the employee so that we and they may gather facts that support our or their stance on the assessment.85 The Developmental Performance Appraisal Interview Again, planning ahead is critical when it comes to performance appraisal interviews. Therefore, this section is also separated into preparing for and conducting the
  • 113. interview. MODEL 8-2 THE EVALUATIVE PERFORMANCE APPRAISAL INTERVIEW Preparation for the Appraisal Interview Conducting the Appraisal Interview 2. Go over the assessment form 3. Agree on strengths and areas for improvement 4. Conclude the interview 1. Open the interview 2. Have the employee perform a self- assessment 3. Assess the employee’s performance
  • 114. 4. Identify strengths and areas for improvement 1. Make an appointment 5. Predict the employee’s reactions and plan how to handle them A performance appraisal can be more effective as a conversation, rather than as a single speech about the employee’s performance. Ga ry B ur ch el l v ia G et ty
  • 115. Im ag es Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 292 PART III: DEVELOPING AND MANAGING PREPARING FOR A DEVELOPMENTAL INTERVIEW. After the employee’s performance evaluation is completed, you should prepare for the developmental interview based on
  • 116. targeting areas for improvement that you already discussed in the evaluative interview. Yes, as a manager you are busy, and you may question the need for coaching and the cost of separate formal developmental interviews, but the benefit of spending time developing employees will lead to increased performance and lower turnover in your organization.86 To prepare for the interview, follow the steps in Model 8-3, which begins with simply set- ting up a time to conduct the review. As stated in step 2, have employees come up with their own objectives and strategies for improvement,87 and also develop your own for them (step 3). CONDUCTING A DEVELOPMENTAL INTERVIEW. The steps to follow when conducting a developmental performance appraisal interview are listed in Model 8-3. Again, step 1 starts with small talk to open the interview. In step 2, it is important to agree on developmental objectives. As part of step 3, the employee needs to be made aware of exactly what they must do to improve and increase the rating on the next review; and you must also let the employee know that follow-up progress feedback is essential for changing behavior.88 So step 4 is to set up a follow-up meeting to review the employee’s progress. When conducting steps 3 and 4, we don’t want the employee working on too many things at once, so we should keep the number of objectives down to three or fewer. We can always add new objectives later. We end in step 5 by concluding the interview
  • 117. with some positive encouragement to reach the objectives. TRENDS AND ISSUES IN HRM It’s time to take a look at some of the trends and issues in performance management. First we will evaluate whether or not we can improve employee engagement through good performance management processes, and secondly, we take a look at electronic performance monitoring, or EPM. Does it improve performance and add value to the organization’s performance appraisal process by providing results-based evidence of employee productivity? Building Engagement Through Performance Management We discussed performance management at the beginning of the chapter. Recall that it is a broad process of analysis and measurement of worker performance and communica- tion of that assessment to the individual over time. But can performance management actually create a more highly engaged workforce? Well, there is at least some evidence WORK APPLICATION 8-11 Assess how well your present or past boss helped develop your knowledge, skills, and competencies through informal coaching and/or the formal
  • 118. performance appraisal interviews. Describe how the boss could improve. LO 8-8 Review the methods to improve employee engagement through performance management and the issue of electronic perfor- mance management. WORK APPLICATION 8-12 Select an organization you work for or have worked for. Does it use formal evaluations? Do you believe the organization should or should not conduct formal evaluations? MODEL 8-3 THE DEVELOPMENTAL PERFORMANCE APPRAISAL INTERVIEW 1. Make an appointment 2. Have the employee develop objectives and plans for improving
  • 119. performance 3. Develop objectives and plans for improving performance Preparation for the Appraisal Interview Conducting the Appraisal Interview 1. Open the interview 2. Agree on objectives 3. Develop plans for meeting the objectives 4. Make a follow-up appointment 5. Conclude the interview Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher.
  • 120. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 293 that this is the case when performance management is done as we discussed during the body of the chapter. Going back to Chapter 1, you will also remember that employee engagement is a com- bination of job satisfaction, ability, and a willingness to perform for the organization at a high level and over an extended period of time. Job satisfaction alone isn’t enough, and neither is annual or more frequent performance appraisal. You’re probably getting the feeling by now that good people management processes are always a combination of
  • 121. things—there is no simple solution. So how do we increase engagement by managing performance? It starts at the begin- ning—with orientation/onboarding where the new employee learns about the company culture. High-quality onboarding processes allow us to socialize the new employee into the work environment. Through the socialization process, the employee learns how to function successfully in their new environment by participating in conversations with oth- ers, including their future supervisor, concerning how things are done in the organiza- tion.89 These conversations have to endure though. The manager/supervisor needs to provide frequent feedback about how well the job is being done, as well as taking the time to listen during these feedback sessions to what issues are confronting the employee.90 This continuing conversation and accessibility to their manager can ultimately lead to an increased level of trust between the manager and employee, assuming the manager/super- visor takes action on issues identified during the conversations. The ultimate goal here is to increase employee engagement through continuing perfor- mance management, and there is real evidence that this does occur. One research study identified five performance management activities that influence engagement: Setting per- formance goals; providing ongoing feedback and recognition; managing employee devel- opment; conducting appraisals; and creating a climate of trust and empowerment.91 So if
  • 122. we can do these things, performance management can “have a positive and direct influ- ence on employee engagement,” as well as individual attitudes, behaviors, and ultimately, organizational outcomes.92 Technology: Electronic Performance Monitoring Electronic performance monitoring (EPM) is the process of observing ongoing employee actions using computers or other nonhuman methods. The number of employees moni- tored through EPM has increased drastically in the past 20 years. In the early 1990s, about one third of employees were being monitored electronically. By 2001, approxi- mately 78% were being monitored electronically,93 and that percentage has more than likely increased ever since. The reason for this steep increase is that using EPM apparently is an effective means of increasing productivity.94 EPM allows management to know if employees are actually working or doing personal things during paid work hours. The biggest upside to EPM seems to be that it provides information for concrete, results-based performance evaluations. Certainly, this is a valuable outcome. However, some researchers and practitioners argue against EPM because of a number of factors, including ethical questions concerning such monitoring, legal concerns over employee privacy, and potential increases in stress due to constant monitoring of performance. Stress research provides an interesting dichotomy. If the monitoring is done for employee development
  • 123. and involves more com- munication between the employee and manager, stress is generally reduced. If, however, monitoring is done as a means of giving rewards and administering punishment, stress appears to generally increase.95 So, the questions are these: Should organizations use EPM systems? And if so, how should they use them? There’s no simple answer. Again, EPM has been shown to increase productivity, and organizations need to maximize employee productivity. However, when stress levels become too great, increased stress is known to decrease productivity. So there’s an obvi- ous tradeoff between more employee monitoring and controlling stress levels in our work- force. Management must understand this tradeoff to successfully improve productivity in the organization overall. WORK APPLICATION 8-13 Select an organization you work for or have worked for. Does it use EPM? If so, describe the EPM system. Do you believe the organization should or should not use EPM?
  • 124. Electronic performance monitoring (EPM) The process of observing ongoing employee actions using computers or other nonhuman methods H:4 Electronic Monitoring SHRM Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te
  • 125. 294 PART III: DEVELOPING AND MANAGING In addition, the ethical and legal questions noted in the previous paragraph may be sig- nificant enough in some cases to cause individual employees to leave the organization.96 If these individuals are our more productive workers, and especially if they are knowledge workers, then what does the loss of these knowledgeable individuals do to organizational productivity? There doesn’t appear to be any current research- based answer to these ques- tions. Therefore, because these questions exist, organizations must be careful in how they implement EPM processes so that they can improve their chances of reaching the stated goal of EPM—improving organizational productivity. Finally, as these programs are rolled out in the organization, managers must be acutely aware of the potential downside effects of increased stress levels and employees feeling that their privacy is being invaded. These could lead to decreases in productivity and higher rates of turnover.97 In other words, management must work to overcome the potential problems and costs associated with EPM to gain the benefits. Want a better grade? Get the tools you need to sharpen your study skills. Access practice quizzes, eFlashcards, video and multimedia, and more at edge.sagepub.com/lussierhrm3e.
  • 126. DIGITAL RESOURCES Performance Appraisal* Awkward Performance Review Performance Appraisal Interview Benefits of Performance Appraisal* Preparing for a Performance Evaluation Meeting Performance Appraisal Procedural Justice What Do We Assess?* Keys to Effective Performance Appraisals * premium video only available in the interactive eBook Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or
  • 127. di str ibu te Chapter 8: Performance Management and Appraisal 295 CHAPTER SUMMARY 8-1 Discuss the difference between performance man- agement and performance appraisals. Performance management is a continual process that iden- tifies, measures, manages, and develops the performance of people in the organization. It is designed to improve worker performance over time. Performance appraisal is the part of the performance management process that identi- fies, measures, and evaluates the employee’s performance and then discusses that performance with the individual. This should also be on an ongoing basis. 8-2 List and briefly discuss the purposes of perfor- mance appraisals. Communication is the first purpose. Appraisals need to provide an opportunity for formal two-way communication between management and the employee concerning how the organization feels the employee is performing. The sec- ond purpose is to gain information for evaluative decisions. We need good information on how employees are perform- ing so that we can take fair and equitable actions with our workforce, to improve organizational productivity. Providing
  • 128. motivation for development is the last major purpose. Used correctly, appraisals can motivate by providing opportuni- ties for the employees to improve their performance over time. 8-3 Identify and briefly discuss the options for what to evaluate in a performance appraisal. Our three primary options for what to evaluate are traits, behaviors, and results. There is some evidence that particular types of traits are valuable in jobs that require management and leadership skills, but many traits have been shown to have very little bearing on job performance, meaning they are not valid measures of performance. We can also use behaviors to evaluate our workers. Measur- ing behaviors is usually a much better appraisal option because physical actions or behaviors can be directly observed, and as a result, they are more likely to be a valid assessment of the individual’s performance. Finally, we can evaluate performance based on results. Results are a concrete measure of what has happened in the organi- zation. However, results may be skewed based on factors that are outside the control of the individual who is being evaluated. 8-4 Briefly discuss the commonly used performance measurement methods and forms. The critical incidents method utilizes records of major employee actions over the course of the appraisal period to complete the employee evaluation. MBO uses objec- tives jointly set by the manager and employee to gauge employee performance during the evaluation period. In the narrative method, the manager writes either a structured or unstructured paragraph about the employee’s performance. Graphic rating scales provide a numerical scale so that the
  • 129. manager can check off where an employee falls on the con- tinuum. BARS forms provide a description of the behaviors that make up acceptable performance at each level on the scale. Finally, ranking creates a hierarchy of employees, from best to worst. 8-5 Identify and briefly discuss available options for the rater/evaluator. It is logical to choose supervisors as evaluators when they have ongoing contact with the subordinate and know the subordinate’s job. When the supervisor may not spend lots of time with the individual employee, peers may make better evaluators because they may know the job of the individual employee better than the supervisor does and may be more directly affected by the employee’s actions. Subordinate evaluations can give us good insight into the managers who control employees in our organization. We may want to use customers as evaluators when the individual being evaluated has frequent contact with those customers, because we need to know how customers feel about their interactions with our employees. Self-evaluation is valuable in a number of management processes, from training and development to counseling and disciplinary measures, among others. The 360-degree evaluation gives us the best overall anal- ysis of any employee in the firm, because it looks at an employee’s performance in the eyes of all others who are affected by that individual. The 360-degree evaluation for- mat is more useful for individual development than it is for administrative purposes. The biggest downside is that the process takes a lot of time, which means that it also costs the company a lot of money. 8-6 Identify some of the common problems, and how to avoid the problems, with performance
  • 130. appraisals. Personal biases and stereotyping are two of the most sig- nificant appraisal problems. Other problems include halo error, distributional errors (either the grading is too harsh or too lenient, or everyone is judged to be average), similarity error, proximity error, recency error, contrast error, and attri- bution error. There are several ways to avoid these problems. The first option would be to develop accurate performance mea- sures. Accurate performance measures use multiple crite- ria, minimize trait-based evaluations, and can be analyzed using the OUCH test and the Blanchard test. Next, we should train the evaluators, because as soon as they know some of the common errors, those errors will become less pronounced. We can also use multiple raters to mitigate any potentially biased evaluations and minimize other errors such as similarity, contrast, and attribution errors. Finally, don’t evaluate what you don’t know. Find someone in the organization who does know the job, and have that person evaluate the individual performing the job. 8-7 Briefly discuss the differences between evaluative performance reviews and developmental perfor- mance reviews. The evaluative interview is a review of the individual employ- ee’s performance over a certain period. The evaluation needs to be fair and equitable, not based on bias. The employee must be given the opportunity to talk as well as lis- ten to the critique of their performance. The developmental interview, on the other hand, focuses on areas for improve- ment over time. You should have employees come up with Copyright ©2019 by SAGE Publications, Inc.
  • 131. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 296 PART III: DEVELOPING AND MANAGING their own objectives and strategies for improvement, and you should develop your own objectives for them. 8-8 Review the methods to improve employee engage- ment through performance management and the issue of electronic performance management. Performance management to improve engagement starts at the onboarding process where the new employee is social- ized into the work environment. Continual feedback from
  • 132. their manager/supervisor should continue with frequent feedback concerning how the employee is doing and assis- tance overcoming obstacles. This will build greater trust between the two which ultimately leads to a positive and direct influence on employee engagement, as well as indi- vidual attitudes and behaviors. Electronic performance management (EPM) has contin- ued to increase at work. The biggest value to EPM seems to be that it provides information for concrete results-based performance evaluations. But there are ethical questions concerning constant monitoring of employees, as well as questions of how the monitoring affects health of those employees. Finally, the negative consequences of EPM may cause lower productivity overall if employees are unhappy, as well as an increase in turnover—both seriously negative outcomes. KEY TERMS behaviorally anchored rating scale (BARS) form 279 behaviors 273 bias 286 critical incidents method 276 electronic performance monitoring (EPM) 293 graphic rating scale form 278 management by objectives (MBO) method 277 motivation 270 narrative method or form 278
  • 133. performance appraisal 265 performance management 265 ranking 280 results 274 stereotyping 286 360-degree evaluation 285 traits 272 KEY TERMS REVIEW Complete each of the following statements using one of this chap- ter’s key terms. 1. ________ is the process of identifying, measuring, managing, and developing the performance of the human resources in an organization. 2. ________ is the ongoing process of evaluating employee per- formance. 3. ________ is the willingness to achieve organizational objec- tives. 4. ________ identify the physical or psychological characteris- tics of a person. 5. ________ are the actions taken by an individual. 6. ________ are a measure of the goals achieved through a work process. 7. ________ is a performance appraisal method in which a man-
  • 134. ager keeps a written record of positive and negative perfor- mance of employees throughout the performance period. 8. ________ is a process in which managers and employees jointly set objectives for the employees, periodically evaluate performance, and give rewards according to the results. 9. ________ requires a manager to write a statement about the employee’s performance. 10. ________ is a performance appraisal checklist on which a manager simply rates performance on a continuum such as excellent, good, average, fair, and poor. 11. ________ is a performance appraisal that provides a descrip- tion of each assessment along a continuum. 12. ________ is a performance appraisal method that is used to evaluate employee performance from best to worst. 13. ________ analyzes individual performance from all sides— from the supervisor’s viewpoint, from the subordinates’ view- point, from customers’ viewpoints (if applicable), from peers, and using the employee’s own self-evaluation. 14. ________ is a personality-based tendency, either toward or against something. 15. ________ consists of mentally classifying a person into an affinity group and then identifying the person as having the same assumed characteristics as that group. 16. ________ is the process of observing ongoing employee actions using computers or other nonhuman methods.
  • 135. COMMUNICATION SKILLS The following critical-thinking questions can be used for class dis- cussion and/or for written assignments to develop communication skills. Be sure to give complete explanations for all answers. 1. Other than giving an annual evaluation, what would you do to manage the performance of your employees? Explain why. 2. Do you agree that performance appraisals should be discon- tinued in companies? Defend your answer. 3. What would you do as the manager in order to make sure that your employees knew the standards that they would be evaluated against? Explain your answer. 4. Do you really think that it is possible for a performance appraisal to be motivational? Why or why not? 5. Can you think of a situation in which a trait-based evaluation would be necessary? Explain your answer. 6. You are in charge and you want to evaluate a group of assembly workers. Who would you choose as the evalua- tor(s)? What about evaluating the Director of Operations— who would you choose to do that? Explain your answer. 7. How would you minimize the chances that stereotyping could affect the evaluation process in your company? Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the
  • 136. publisher. Do no t c op y, po st, or di str ibu te Chapter 8: Performance Management and Appraisal 297 8. Which of the solutions to performance appraisal problems would you implement first if you were in charge? Second? Why? 9. What would you do to make the performance appraisal debriefing more comfortable and less confrontational for your employees? How do you think this would help? 10. Is electronic performance monitoring ethical? Would you use it? Why or why not?
  • 137. CASE 8-1 NOT SPILLING THE BEANS AT JELLY BELLY: DEVELOPING A MORE ACCURATE PERFORMANCE APPRAISAL SYSTEM What might be the sweetest job in the world? Why not working alongside such tempting treats as chocolates, gummies, gum balls, buttered popcorn, cheesecake, candy corns, licorice, sour can- dies, cinnamon confections, jellies, and of course let us not forget jelly bellies! That’s the way it is at Fairfield, California–based Jelly Belly Candy Company (JBCC). They offer over 100 varieties of candies (including such novelty flavors as cinnamon confections and Chili Mango) in over 70 countries globally. They also operate six retail stores in California and offer tours in their Pleasant Prairie, Wisconsin, visitor’s center.(1) JBCC’s mission statement captures the flavor of the firm. Jelly Belly Candy Company is dedicated to producing the highest quality confections, delivering superior customer service and creating a reliable and enjoyable product line to the consuming public. We seek to be a responsible corporate citizen and to ensure high quality and safety standards. We expect our consumers and business part- ners to have confidence in the products bearing our name and that our products are manufactured in accordance with a guiding code of conduct. Jelly Belly is committed to conducting business with ethical business standards and asks its vendors, suppliers and licensees to conduct themselves in the same manner.(2) Given this family firm’s commitment to maintaining high
  • 138. operating and ethical standards, there is no “sugar coating” employee per- formance and job satisfaction. Every successful firm understands that employee retention is strongly tied to the employees feeling that they are an integral part of the firm and that their work is appre- ciated and rewarded. JBCC understood that the best way to exe- cute their mission statement, have employees both understand and implement the firm’s underlying priorities and values, was through their employee evaluation performance system. JBCC saw the need for a precise, automated talent and employee appraisal sys- tem as the panacea for maximizing the human assets. The bittersweet truth was that it took a merger of the two branches of the family business into one unit to surface this issue. One part of the firm was doing employee evaluations using 1960’s technology: hard copy forms and personnel files. The other part was using a computer-based system, but the software was antiquated. JBCC’s head of HR for their Midwest operations, Margie Poulos, and her HR staff, were tasked with the responsibility of taking HR data from three locations (600 employees) and creating one integrated process. According to Jeff Brown, JBCC’s HR Director, “When employees feel they have gotten a thorough and accurate review, it boosts their morale.” This was the foundation of their new appraisal
  • 139. system—comprehensive, unbiased, and precise measurements of employee performance would serve as the viable feedback employees both wanted and needed to establish and obtain spe- cific quantifiable objectives. Employees, according to motivation literature, who know what are expected of them, perform at a higher level with greater job satisfaction. Happy workers lead to higher retention, and retention is the name of the game for superior perfor- mance, industry leadership, and expansion. JBCC used a traditional appraisal system where annual evalua- tions were conducted, with no comparison to prior years. They wanted a new system that would be online, use one standardized form, allow managers to have access and input periodic updates of the employee’s performance from remote locations, and allow for signoffs. “In our old system, a few folks in Chicago would have access to the system. However, we have managers in California with Chicago subordinates. It is important that they can share the same forms across the board. And we have folks who are on the road a lot or are working out of home offices, so having them be able to access this is a huge point for us,” according to Brown. Poulos and her team did have concerns and drew up a list of fac- tors the system had to incorporate. Primarily “we didn’t want to end up with a system that is so complicated that the managers wouldn’t use it,” and therefore Poulos made sure the new software system would be simple, flexible, save time, and allow for developing
  • 140. vari- ations of the firm’s core competencies. The new software had to structure and formalize the appraisal process while allowing for customization of the firm’s competencies and staff/managers’ sug- gested modifications. Once the software was selected, 50 managers received fast-track training with annual appraisals immediately commencing. Brown had high praise for the system, indicating that: It allows us to standardize competencies across job clas- sifications, add signature and comment sections to make our process more interactive, and increase accessibility for remote managers. . . . Organizing and automating the appraisal process results in performance appraisals that are more accurate and fair. This is important because, after all, an employee appraisal is a legal document. Poulos and her team were also enamored with the new system because it allowed them to connect employee training and development needs with employee performance. “We’ve always had a separate training manual. Now we can go in to the evaluations and more easily monitor employees’ skills devel- opment, see what training individuals need, and check the due dates for training and renewal. That makes it much easier for us to keep track.” First, the new system has achieved its primary objective of con- necting employees’ personal objectives with employee goals. “The feedback has been really positive, from both managers and employees as well. Some staff said this was the best appraisal they’ve had,” Poulos said. “They felt the evaluations were fair and
  • 141. realistic, and supervisors had the scope to provide more relevant and legitimate comments than they could before. Rather than just clicking on a bunch of canned comments, they were accurately reviewing the employee.” Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 298 PART III: DEVELOPING AND MANAGING A great side effect of the new automated system is that this system has proven to be far more efficient than the old one. “Since this
  • 142. year was the first time using the new system, it took us a little longer than it will next year. But the process was a whole lot faster,” Poulos said. “It has already saved us a lot of time, and we got everybody’s appraisals done in one shot.”(3) References (1) Biesada, A. (n.d.). Jelly Belly Candy Company. Hoovers. Retrieved May 2, 2017, from http://0-subscriber.hoovers. com.liucat.lib.liu.edu/H/company360/fulldescription.html?- companyId=57880000000000 (2) Jelly Belly Candy Company. (n.d.). Jelly Belly Candy Company mission statement. Retrieved May 2, 2017, from https://www.jellybelly.com/mission-statement (3) Halogen Software. (n.d.). A sweet employee performance appraisal system for Jelly Belly. Retrieved May 2, 2017, from http://www.halogensoftware.com/customers/stories/jelly-belly Questions 1. What is performance management, and what is the driving force behind Jelly Belly Candy Company’s performance man- agement approach? 2. What is performance appraisal, and what are the key features Jelly Belly Candy Company wanted in their new appraisal system? 3. What is the performance appraisal process, and how does Jelly Belly Candy Company’s new appraisal system incorpo- rate those processes?
  • 143. 4. How did the question of performance accuracy affect the development of Jelly Belly Candy Company’s automated appraisal system? 5. Why did Jelly Belly Candy Company redesign their perfor- mance appraisal system? 6. What does Jelly Belly Candy Company evaluate when they conduct employee appraisals, and why are they using that approach? 7. Who is assessing training performance at Jelly Belly Candy Company? 8. What trends in performance appraisal are affecting Jelly Belly Candy Company’s appraisal system? Case created by Herbert Sherman and Theodore Vallas, Depart- ment of Management Sciences, School of Business Brooklyn Campus, Long Island University CASE 8-2 AMAZON.COM: SELLING EMPLOYEE PERFORMANCE WITH ORGANIZATION AND LEADERSHIP REVIEW Amazon.com, which started as the biggest online bookstore, has become a household name by expanding rapidly in the retail mar- ket. It offers millions of movies, games, music, electronics, and other general merchandise products in several categories, includ- ing apparel and accessories, auto parts, home furnishings, health and beauty aids, toys, and groceries. Shoppers can also download
  • 144. e-books, games, MP3s, and films to their computers or handheld devices, including Amazon’s own portable e-reader, the Kindle. Amazon also offers products and services, such as self- publishing, online advertising, an e-commerce platform, hosting, and a cobranded credit card.(1) To keep this megastore running at a fast pace, Amazon hired 115,000 employees, who generated $74 billion in 2013. Target and Home Depot made a combined income of close to $74 billion in the same year, yet they employed more than 340,000 people between them in their retail stores.(2) Why does Amazon need only one third of its competitors’ labor force to produce the same revenue? Like the other mega retailer, Walmart, Amazon has deliv- ered creative business solutions to their own processes to con- tinuously increase their operating effectiveness. However, their strategy focuses on enhancing the customer-shopping experience and providing excellent customer service rather than providing the lowest-priced products. To meet their customers’ needs, Amazon must deliver more speed and efficiency in its giant warehouse. They use more automated work processes that reduce the com- pany’s operational costs and also increase labor efficiency and employee safety. The quality of Amazon’s warehouse labor has become the critical issue in the firm’s success; and hence, hiring and retaining the best, most suitable candidates for the company’s manual labor positions is a key success factor. That being said, Amazon’s turn-
  • 145. over rate at these lowest-ranked positions in the organization is high since Amazon lets go of its lowest-performing employees to make room for new, more appropriate candidates while promot- ing the very best. To detect the lowest- and highest-performing employees, Amazon initiated a performance evaluation system called the Organization and Leadership Review (OLR).(3) OLR actually has two main goals: (1) finding future leaders and preparing them to be able to face the most challenging tasks pre- sented in a fast-paced work environment; and (2) determining the 10% of employees who are the least effective and taking neces- sary corrective action with them. OLRs take place twice a year to grant promotions and find the least effective employees.(4) Only the top-level managers attend these meetings, where there could be two reasons why an employee’s name may be mentioned. Either the employee is being considered for a promotion, or the employ- ee’s job might be at stake. OLRs start with the attendees reading the meeting agenda. Then supervisors suggest the most deserving subordinates to be con- sidered for promotion. All executives in the room evaluate these suggestions and then debate the alternatives. Promotions are given at the end. During the process, instead of using hard data, executives tend to evaluate employees’ performance on the basis of personal, anecdotal experiences. Anyone in the meeting may deny a promotion; therefore, ambitious employees seeking a pro-
  • 146. motion should also be very friendly with their boss’s peers. If an employee’s supervisor cannot present that worker well enough, another’s favorite subordinate will get the promotion.(5) In terms of promotion, Amazon CEO Jeff Bezos expects the managers to set the performance bar quite high to allow only the most exceptional talent to progress.(6) Promotions are protected by well-written guidelines, which focus on delivery and impact, but not on internal politics. People spend less time campaigning for their own promotions, and top performers are highly compen- sated based upon the quality of their work.(7) Therefore, only a few promotions are available each year, and receiving positive Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu
  • 147. te Chapter 8: Performance Management and Appraisal 299 feedback from a supervisor is quite rare. The approval that employ- ees get from their supervisor is not enough to earn a promotion; employees still have to “fight” for a promotion, which may not occur immediately. References (1) Hoover’s Inc. (2014). Amazon.com, Inc. [Hoover’s Company Records—Competitive Landscape/In-Depth Records]. Retrieved July 13, 2014, from Long Island University Academic Database. (2) Ibid. (3) Stone, B, (2013, October 15). Why it’s so difficult to climb Amazon’s corporate ladder. Bloomberg BusinessWeek. Retrieved from http://www.businessweek.com/articles/ 2013-10-15/careers-at-amazon-why-its-so-hard-to-climb- jeff-bezoss-corporate-ladder/ (4) Ibid. (5) Ibid. (6) Ibid. (7) Soper, T. (2012, December 13). Here’s what employees love
  • 148. and hate about working at Amazon, Microsoft. Geek Wire. Retrieved from http://www.geekwire.com/2012/employ- ees-love-hate-working-amazon-microsoft/ Questions 1. Do you think OLRs increase employee motivation? If not, why would Amazon conduct such performance appraisals? 2. How might rater bias, stereotyping, and traits appraisal impact the accuracy of OLR? Could this be corrected? If so, how? 3. Given the differing appraisal systems described in this chap- ter, which appraisal systems most closely resemble OLR? 4. Given your answer to the above question, what appraisal system do you think would best meet Amazon’s objectives of retaining the best employees while taking corrective action with the bottom 10%? 5. Amazon is a high-technology firm. How might it use elec- tronic performance monitoring to supplement the OLR pro- cess? 6. What are the advantages and disadvantages of having per- formance reviews like OLR that involve only one-way commu- nication, rather than MBO? Case created by Herbert Sherman and Theodore Vallas, Depart- ment of Management Sciences, School of Business Brooklyn Campus, Long Island University SELF-ASSESSMENT AND SKILL BUILDER 8-1 PEER AND SELF-ASSESSMENTS
  • 149. This exercise includes the usual self-assessment for each chapter, plus an evaluation of peers and developing measures of perfor- mance. Objectives To develop your skill at assessing your performance and that of your peers, and to develop your skill at developing measures of per- formance Skills The primary skills developed through this exercise are as follows: 1. HR management skills—technical, business, and conceptual and design skills 2. SHRM 2016 Curriculum Guidebook—H: Performance management Assignment Part 1—Self-Assessment During your college courses, you most likely had to do some form of group assignments, and you’ve also done group assignments in this course. Select one group you worked with, and based on your performance in that group, do a self-evaluation using the rating scale form below. Evaluator (you) ____________________________________ (Self-Evaluation) A A− Always
  • 150. B+ B B– Usually C + C C– Frequently D+ D D– Sometimes F Rarely Did a “good” analysis of project Developed “good” questions to ask Actively participated (truly interested/involved) Made “quality” effort and contributions Got along well with group members Displayed leadership List at least three of your own measures of performance here Class attendance—number of absences 0–1 2 3 4 5+ Attendance at group meetings to prepare group project—number of absences
  • 151. 0 1 2 3 4+ Managed the group’s time well Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te 300 PART III: DEVELOPING AND MANAGING This exercise can stop with just a self-assessment, or it can continue to also include peer evaluations. Assignment Part 2—Peer Review 1. Part 2 begins by conducting a peer evaluation using the
  • 152. above form for each of the other members in your group, but using this heading for the form: Group Member ___________________________________ (Peer Evaluation) Either copy the above form for each group member, do your assessment on any sheet without using the form, or have your instructor provide you with multiple forms that you can complete for each group member. 2. Below, rank each group member (including yourself) based on their performance. The first person you list should be the best performer, and the last person you list should be the least effective performer, based on the performance appraisal above. If members are close or equal in perfor- mance, you may assign them the same rank number, but you must list the better one first. 3. To the right of each group member (including yourself), place the overall letter grade (A–F) you would assign to that mem- ber based on the performance appraisal. You may give more than one member the same grade if those individuals deserve the same grade. You may also use plus and minus grades. Rank Name Grade _______ __________________________________________ _______ _______ __________________________________________ _______ _______ __________________________________________
  • 153. _______ _______ __________________________________________ _______ _______ __________________________________________ _______ SKILL BUILDER 8-2 DEBRIEFING THE APPRAISAL Note: This exercise is designed for groups that have been working together for some time as part of the course requirements. It is a continuation of Skill Builder 8-1. Based on your peer evaluations, you will conduct performance appraisals for your group members. Objective To develop a plan to improve your team performance, and to develop your skills in conducting performance appraisals Skills The primary skills developed through this exercise are as follows: 1. HR management skills—technical, business, and conceptual and design skills 2. SHRM 2016 Curriculum Guidebook—H: Performance man- agement Assignment You will be both the evaluator and evaluatee. Get together with group members and have each member select a letter, beginning with the letter A. Pair off as follows: A and B, C and D, E and F,
  • 154. and so on. If the group consists of an odd number of people, each member will sit out one round. A should conduct the evaluation interview for B, C should conduct the evaluation interview for D, and so on, using the form in Skill Builder 8-1. The evaluators should follow up the evaluation interview with the developmental interview to give suggestions on improving B, D, and F’s performance (be sure to follow the evaluative and developmental interview steps in Models 8-2 and 8-3). Make sure you are evaluators and evaluatees; do not be peers having a discussion. When you finish, or when the instructor tells you time is up, reverse roles of evaluators and eval- uatees. B, D, and F will become the new evaluators for A, C, and E. When the instructor tells you to, or when time is up, form new groups of two and decide who will be the evaluators first. Continue changing groups of two until every group member has appraised and been appraised by every other group member. Apply It What did I learn from this experience? How will I improve my group performance in the course? How will I use this knowledge in the future? _____________________________________________________ __
  • 155. _____________________________________________________ __ Copyright ©2019 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. Do no t c op y, po st, or di str ibu te