Performance Appraisal Basics MANA 4328 Dr. George Benson benson@uta.edu 1

Why Conduct Performance Appraisals?

Developing an Appraisal System GOAL SETTING What type of work is examined? Who sets the goals? How difficult are the goals? Team vs. individual goals? What is measured? TYPE OF APPRAISAL What rating scale is used? Includes a self-appraisal? 360 degree feedback? Uses a forced ranking system? ADMINISTRATION How often? Who conducts appraisals? How frequent is feedback? Is there an appeal process? PERFORMANCE AND PAY Tied to rewards? Linked to development? How are the results used?

Legal Issues Appraisal systems are more defensible if they: Are based on job analysis (Validity) Are consistent among multiple raters (Reliability) Provide written instructions Allow employees to review appraisal results Train appraisers in the use of the system The legal implications of an employee’s performance appraisal have become a major concern for managers. Shown here are five factors that have been shown to help defend the results of an appraisal in court.

Challenges for Performance Measurement Rater errors and bias Halo Contrast effects Range restriction / Central tendency The influence of liking Organizational politics Rater errors can be addressed by training Each appraisal format has both positive and negative aspects. Most appraisal systems were developed on the premise that companies could reduce or eliminate rater errors by using the right appraisal format. However, rating formats make little difference in the actual ratings that are obtained. So, how can managers ensure accurate measurement of worker performance? The primary means is to understand the barriers that stand in the way. Shown here are five of the most important challenges in this area.

Appraisal Forms Trait Behavior Results / Outcomes Global / Essay “Least important elements of the appraisal process” Appraisal forms are most often contain various styles Performance focused vs. situation focused appraisal Approaches to Appraisal Forms Trait Behavior Results / Outcomes Global / Essay

Trait-Based Appraisals Characteristics that are enduring and general e.g. “Leadership” “Communication” “Decisiveness” Competency models vs. Trait-based appraisal Are the characteristics really related to performance? Potential Problems Focus on person rather than performance May be ambiguous or arbitrary Poor feedback and goal setting Poor reliability and validity

“An employer has no business with a man’s personality “An employer has no business with a man’s personality. Employment is a specific contract calling for specific performance and nothing else. Any attempt of an employer to go beyond this is usurpation. It is an abuse of power. An employee owes no “loyalty,” he owes no “love,” and no “attitudes” – he owes performance and nothing else.” Peter Drucker Management Tasks, Responsibilities, Practices (1974)

Behavior-Based Appraisal Focus on specific behaviors with examples Behavioral Frequency / Observation Scale (BOS) Behaviorally Anchored Rating Scales (BARS) Positives More valid and reliable Acceptable to employees Better for development and improvement

Developing Behavioral Scales Identify critical incidents and behaviors Sort similar behaviors into dimensions Validate sorting Collect data on relationship between behavior and performance Assign a rating scale Validate the scale

Behavior-Based Appraisal Potential Problems Difficult and expensive to develop Needs to match jobs closely to be effective Behaviors may be hard to develop and interpret Emphasizes behaviors (at the expense of others?) Focuses on behavior rather than results May be no more reliable and valid than simple scale Process of developing the rating system is more important than the system itself.

Results-Based Appraisal Uses future results as performance targets Challenge is setting goals and measures Can the goals be quantified? Unique goals for every individual Appraisal forms tend to be very simple Still need a rating scale

Results-Based Appraisal Focus on results compared to specific goals Should be clear and unambiguous Requires alignment of expectations May promote gaming of the system Beware of results at any cost and excessive results orientation Time consuming and needs constant updating

How to Judge Appraisal Types Leads to desired behaviors Minimizes negative behaviors Reliability and validity Perceived fairness (rater and employee) Performance improvement and employee development Flexibility and administrative cost

Comparison of Appraisal Forms Ease of Use Employee Development Legal Defensibility Traits High Low Behaviors Medium Outcomes

Performance Diagnosis