1. Chapter 8
Appraising Employee Job Performance

2. Chapter 1 Objectives
Understand how effective performance appraisal systems enhance competitive advantage.
Specify the standards an effective performance appraisal must meet.
Describe the different types of appraisal rating instruments.
Explain how a firm should develop its performance appraisal system.

3. What is Performance Appraisal?
Evaluating an employee’s current and/or past performance relative to his or her performance standards.
The identification, measurement, and management of human performance in organizations.
Performance Management:
The process employers use to make sure employees are working toward organizational goals.

4. Linking Performance Appraisal to Competitive Advantage
Performance appraisals should accurately assess the quality of employee job performance.
Job performance can be improved in two ways:
Directing employee behavior towards organizational goals.
Monitoring behavior to ensure that goals are met.

5. Linking Performance Appraisal to Competitive Advantage
Performance Appraisals Can Help Assess the Quality of Employee Performance

6. Standards for Effective Performance Appraisal Systems
The quality of the rating form
Accuracy of the ratings
Legal standards

7. Standards for Effective Performance Appraisal Systems
The quality of the rating form:
Relevance:
The degree to which the rating form includes necessary information:
Criterion deficiency: Omission of pertinent performance criteria.
Criterion contamination: Inclusion of irrelevant criteria on the rating form.

8. Standards for Effective Performance Appraisal Systems
The quality of the rating form (cont.):
Clear performance standards:
Indicate the level of performance an employee is expected to achieve.
Help direct employee behavior.
Help supervisors provide more accurate ratings.

9. Standards for Effective Performance Appraisal Systems
Accuracy of the ratings:
Accurate ratings reflect the employees’ actual job performance levels.
Inaccuracy is most often attributable to the presence of rater errors.

10. Standards for Effective Performance Appraisal Systems
Some of the common rater errors:
Leniency error: Raters provide ratings that are unduly high.
Severity error: Ratings are unduly low.
Causes of leniency and severity errors:
Political reasons
Raters’ lack of conscientiousness
Personal bias

11. Standards for Effective Performance Appraisal Systems
Some of the common rater errors (cont.):
Central tendency error: Appraisers purposely avoid giving extreme ratings even when such ratings are warranted.
Causes of central tendency error:
Administrative procedures.
End points of the rating scale are unrealistically defined.

12. Standards for Effective Performance Appraisal Systems
Some of the common rater errors (cont.):
Halo effect:
Appraiser’s overall impression of an employee is based on a particular characteristic.
Acts as a barrier to accurate appraisals.
Caused due to vague rating standards and failure to conscientiously complete the rating form.

13. Standards for Effective Performance Appraisal Systems
Some of the common rater errors (cont.):
The rater’s use of implicit personality theory
Implicit personality theory: Rater’s estimation based on a personal “theory” of how different types of people behave in certain situations.
Using this theory, organizations are unable to identify employees’ specific strengths and weaknesses.

14. Standards for Effective Performance Appraisal Systems
Some of the common rater errors (cont.):
Recency error
Is a consequence of memory decay.
Ratings are heavily influenced by recent events that are more easily remembered.
Ratings that unduly reflect recent events can present a false picture of the individual’s job performance during the entire rating period.

15. Standards for Effective Performance Appraisal Systems
Legal standards
Appraisal systems must meet all the criteria imposed by EEO laws.
Specifically, a court would examine the:
Nature of the appraisal instrument.
Fairness and accuracy of the ratings.

16. Types of Rating Instruments
Employee comparison systems
Graphic rating scale (GRS)
Behaviorally anchored rating scale (BARS)
Behavior observation scale (BOS)
Management by objectives (MBO)

17. Types of Rating Instruments
Employee comparison systems:
Employee performance is evaluated relative to other employees’ performances.
Uses rankings rather than ratings.
Ranking formats:
Simple rankings: Require raters to rank-order their employees from best to worst, according to their job performance.
Paired comparison: A rater compares each possible pair of employees.
Forced distribution: Requires a rater to assign a certain percentage of employees to each category of excellence such as “best,” “average,” or “worst.”

18. Types of Rating Instruments
Employee comparison systems:
Strengths
Low cost and practical.
Take very little time and effort.
Eliminates some rating errors.
Employment decisions become much easier to make.
Weaknesses
Disrupts teamwork.
Accuracy and fairness questioned.
Fails to adequately direct employee behavior.
Performance of people from different departments cannot be compared.

19. Types of Rating Instruments
Graphic rating scales:
Presents appraisers with a list of traits assumed to be necessary to successful job performance.
A five- or seven-point rating scale accompanies each trait.
Points on the scale are defined by numbers and/or descriptive words or phrases that indicate level of performance.

20. Types of Rating Instruments
Graphic rating scales:
Strengths
Practical.
Low cost.
Can be developed quickly.
A single form is applicable to all or most jobs within an organization.
Weaknesses
Vaguely defined traits to evaluate (e.g. demeanor or attitude)
Does not effectively direct behavior.
Fails to provide specific, nonthreatening feedback.
Accurate ratings are not likely to be achieved.
Can lead to a multitude of rating errors.
Occurrence of bias.

21. Types of Rating Instruments
Behaviorally anchored rating scales (BARS):
Weaknesses
Difficult to select one behavior that is most indicative of the employee’s performance.
Time consuming to develop.
Requires a lot of effort to develop.
Strengths
Ability to direct and monitor behavior.

22. Types of Rating Instruments
Behavior observation scales (BOS):
Contains a list of desired behaviors required for the successful
performance of specific jobs.
Developed like BARS, where critical incidents are collected and
categorized into dimensions.
An appraiser rates job performance by indicating the frequency
with which the employee engages in each behavior.
A five-point scale is used ranging from “almost never” (1) to
“almost always” (5).

23. Types of Rating Instruments
Behavior observation scales (BOS):
Weaknesses
Time consuming to develop.
Not always cost-effective.
Strengths
Is more legally defensible than BARS or graphic rating scales.
Effective in directing employees’ behavior.
Used to monitor behavior and give specific feedback.

24. Types of Rating Instruments
Management by objectives (MBO):
A management system designed to achieve organizational effectiveness by steering each employee’s behavior towards the organization’s mission.
MBO process includes:
Goal setting: Establishment of the organization’s mission statement and strategic goals.
Planning: Identify potential obstacles to reaching goals and devise strategies to overcome these obstacles.
Evaluation: Success at meeting goals is evaluated against agreed-on performance standards.

25. Types of Rating Instruments
Management-by-objectives (MBO)
Strengths
Outcome-focused.
Widely practiced.
Improves job performance.
States performance standards in relatively objective terms.
Practical and cost effective.
Provides employees a greater stake in achieving their goals and more perceived control over their work environment.
Weaknesses
Behaviors required to reach goals not specified.
Success may be attributed to factors outside employee’s control.
Performance standards vary, providing no common basis for comparison.
Creates performance pressures and stress.

26. Designing an Appraisal System
Step 1: Gaining Support for the System
Gain the support of upper-level managers:
Make the performance appraisal process meaningful.
Get managers’ input in developing the system.
Train managers and help them find a way to keep track of things employees have done during the review period.
Hold managers accountable for providing accurate ratings on a timely basis.
Gain the support of employees:
Encourage both managers and workers to participate in the planning and development of the system to enhance support for it.

27. Designing an Appraisal System
Step 2: Choosing the Appropriate Rating Instrument
Three important factors to be considered are:
Practicality: The performance appraisal instrument must be practical.
Cost: Includes development costs, implementation costs, and utilization costs.
Nature of job: The choice of rating instrument depends, in part, on the type of data that can be realistically collected about a particular job.
Executive, managerial, and professional employees are usually rated based on results.
Lower-level jobs are most often rated on behavioral or trait-oriented criteria.

28. Designing an Appraisal System
Step 3: Choosing the Rater
Supervisory ratings: Serve as management tools for supervisors, giving them a means to direct and monitor employee behavior.
Peer ratings: Supplement supervisory ratings, helping develop a consensus about an individual’s performance; helps eliminate biases and leads to greater employee acceptance of appraisal systems.
Competitive nature of the organization’s reward system and friendship are potential problems limiting the usefulness of peer ratings.

29. Designing an Appraisal System
Step 3: Choosing the Rater
Self-ratings
May be used for employee development.
May not be effective as an evaluative tool.
360-degree feedback system
Appraisal system for managers , who are evaluated by a “circle” of people who frequently interact with the manager.
Evaluations are limited to job behaviors directly observed.
Primarily used as feedback devices.
Lacks accountability.

30. Designing an Appraisal System
Step 4: Determining the Appropriate Timing of Appraisal
Mostly conducted annually; frequent appraisals are considered too time-consuming.
Annual appraisals pose a problem as appraisers may have a difficult time remembering events of the past year; this can be minimized by:
Maintaining records of employee performance; record keeping also serves as documentation for EEO suits.

31. Designing an Appraisal System
Step 5: Ensuring Appraisal Fairness
Upper-level management review: Helps to ensure fairness, and may serve to keep appraisers “honest.”
Appeals system
Provides a means for employees to obtain a fair hearing if they are dissatisfied with their appraisals.
Allows employees to voice their concerns.
Fosters more accurate ratings.
Prevents the involvement of outside third parties.
Tends to undermine the authority of the supervisor and may encourage leniency error.

32. Performance AppraisalArrow Process
The Manager’s Job
Complete the Ratings
Provide Performance Feedback
Set Performance Goals

33. Performance AppraisalArrow Process
How the HRM Department Can Help
Developing the appraisal system
Providing rater training: Usually focuses on:
Establishing work expectations.
Observing and documenting behavior.
Conducting day-to-day performance feedback and coaching.
Appraising performance and avoiding rating errors.
Providing written justifications for ratings.
Conducting formal performance appraisal feedback conferences.
Identifying training needs and formulating a development plan for
employees.

34. Performance AppraisalArrow Process
How the HRM Department Can Help
Monitoring and evaluating the
appraisal system
Monitoring means taking steps
to ensure that each appraisal
has been completed on time and
that instructions have been
followed.
Evaluation consists of gauging
the users’ satisfaction with the
appraisal system.