1. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Eighth Edition
DeCenzo and Robbins
Chapter 10
Establishing the Performance Management System
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

2. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Introduction
Employees generally see performance evaluations as having a direct effect on their work lives.
The performance management systems need to include:
decisions about who should evaluate performance
what format should be used
how the results should be utilized
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

3. Performance Management Systems
Purposes of a Performance Management System
Feedback - let employees know how well they have done and allow for employee input.
Development – identify areas in which employees have deficiencies or weaknesses.
Documentation - to meet legal requirements.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

4. Performance Management Systems
Difficulties in Performance Management Systems
Focus on the individual: Discussions of performance may elicit strong emotions and may generate conflicts when subordinates and supervisors do not agree.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

5. Performance Management Systems
Difficulties in Performance Management Systems
Focus on the process: Company policies and procedures may present barriers to a properly functioning appraisal process.
Additionally, appraisers may be poorly trained.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

6. Performance Management and EEO
HRM practices must be bias free, objective and job-related.
Valid performance appraisals are conducted at established intervals and are done by trained appraisers.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

7. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
The Appraisal Process
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

8. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
The Appraisal Process
Establishment of performance standards
Derived from company’s strategic goals.
Based on job analysis and job description.
Communication of performance standards to employee.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

9. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
The Appraisal Process
Measurement of performance using information from:
personal observation
statistical reports
oral reports
written reports
Comparison of actual performance with standards.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

10. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
The Appraisal Process
Discussion of appraisal with employee.
Identification of corrective action where necessary.
Immediate action deals with symptoms.
Basic corrective action deals with causes.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

11. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Three approaches:
Absolute standards
Relative standards
Objectives
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

12. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Evaluating absolute standards:
An employee’s performance is measured against established standards.
Evaluation is independent of any other employee.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

13. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Evaluating absolute standards:
Essay Appraisal: Appraiser writes narrative describing employee performance & suggestions.
Critical Incident Appraisal: Based on key behavior anecdotes illustrating effective or ineffective job performance.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

14. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Evaluating absolute standards:
Checklist Appraisal: Appraiser checks off behaviors that apply to the employee.
Adjective Rating Scale Appraisal: Appraiser rates employee on a number of job-related factors.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

15. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Evaluating absolute standards:
Forced-Choice Appraisal: Appraisers choose from sets of statements which appear to be equally favorable, the statement which best describes the employee.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

16. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Evaluating absolute standards:
Behaviorally Anchored Rating Scales (BARS): Appraiser rates employee on factors which are defined by behavioral descriptions illustrating various dimensions along each rating scale.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

17. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Relative standards:
Employees are evaluated by comparing their performance to the performance of other employees.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

18. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Relative standards:
Group Order Ranking: Employees are placed in a classification reflecting their relative performance, such as “top one-fifth.”
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

19. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Relative standards:
Individual Ranking: Employees are ranked from highest to lowest.
Paired Comparison:
Each individual is compared to every other.
Final ranking is based on number of times the individual is preferred member in a pair.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

20. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Using Achieved Outcomes to Evaluate Employees
Management by Objectives (MBO)
includes mutual objective setting and evaluation based on the attainment of the specific objectives
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

21. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins
Appraisal Methods
Using Achieved Outcomes to Evaluate Employees
Common elements in an MBO program are:
goal specificity
participative decision making
an explicit time period
performance feedback
Effectively increases employee performance and organizational productivity.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

22. Factors that can Distort Appraisals
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

23. Factors that can Distort Appraisals
Leniency error
Each evaluator has his/her own value system.
Some evaluate high (positive leniency) and others, low (negative leniency).
Halo error: Evaluator lets an assessment of an individual on one trait influence evaluation on all traits.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

24. Factors that can Distort Appraisals
Similarity error: Evaluator rates others in the same way that the evaluator perceives him or herself.
Low appraiser motivation: Evaluators may be reluctant to be accurate if important rewards for the employee depend on the results.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

25. Factors that can Distort Appraisals
Central tendency: The reluctance to use the extremes of a rating scale and to adequately distinguish among employees being rated.
Inflationary pressures: Pressures for equality and fear of retribution for low ratings leads to less differentiation among rated employees.
Inappropriate substitutes for performance: Effort, enthusiasm, appearance, etc. are less relevant for some jobs than others.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

26. Factors that can Distort Appraisals
Attribution Theory
Evaluations are affected based on whether someone’s performance is due to
internal factors they can control
external factors which they cannot
If poor performance is attributed to internal control, the judgment is harsher than when it is attributed to external control.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

27. Factors that can Distort Appraisals
Impression management:
If employee positively influences the relationship with the supervisor, he/she is likely to receive a higher rating.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

28. Creating More Effective Performance Management Systems
Use Behavior-Based Measures:
Measures based on specific descriptions of behavior are more job-related and elicit more inter-rater agreement than traits, such as “loyalty” or “friendliness”.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

29. Creating More Effective Performance Management Systems
Combine Absolute and Relative Standards:
Absolute standards tend to be positively lenient; relative standards suffer when there is little variability.
Combining the standards tends to offset the weaknesses of each.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

30. Creating More Effective Performance Management Systems
Provide Ongoing Feedback:
Expectations and disappointments should be shared with employees on a frequent basis.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

31. Creating More Effective Performance Management Systems
Use Multiple Raters:
Increasing the number of raters leads to more reliable and valid ratings.
Use peer evaluations: Coworkers offer constructive insights and more specific evaluations.
Upward appraisals allow employees to give their managers feedback.
360-Degree appraisals: Supervisors, peers, employees, team members, customers and others with relevant information evaluate the employee.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

32. Creating More Effective Performance Management Systems
Rate Selectively
Appraisers only evaluate in those areas about which they have sufficient knowledge.
Appraisers should be organizationally as close as possible to the individual being evaluated.
More effective raters are asked to do the appraisals.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

33. Creating More Effective Performance Management Systems
Train Appraisers:
Untrained appraisers who do poor appraisals can demoralize employees and increase legal liabilities.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

34. Creating More Effective Performance Management Systems
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

35. International Performance Appraisal
Who performs the evaluation?
Different cultural perspectives and expectations between the parent and local country may make evaluation difficult.
Evaluation forms may not be translated accurately.
Quantitative measures may be misleading.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

36. International Performance Appraisal
Evaluation Formats
May make sense to use different forms for parent-country nationals and host-country nationals.
Performance criteria for a particular position should be modified to fit the overseas position and site.
Include a current expatriate’s insights as part of the evaluation.
Fundamentals of Human Resource Management 8e, DeCenzo and Robbins