Performance Management and Appraisal 9 Performance Management and Appraisal

Human Resources Management 12e Gary Dessler LEARNING OUTCOMES Define performance management and discuss how it differs from performance appraisal. Describe the appraisal process. Set effective performance appraisal standards. Develop, evaluate, and administer at least four performance appraisal tools. Explain and illustrate the problems to avoid in appraising performance. Discuss the pros and cons of using different raters to appraise a person’s performance. Perform an effective appraisal interview. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Basic Concepts in Performance Management and Appraisal Human Resources Management 12e Gary Dessler Basic Concepts in Performance Management and Appraisal Performance Appraisal Setting work standards, Assessing performance, Providing feedback to employees to motivate, correct, and continue their performance. Performance Management An integrated approach to ensuring that an employee’s performance supports and contributes to the organization’s strategic aims. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler FIGURE 9–1 Online Faculty Evaluation Form Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Why Appraise Performance? Many employers still base pay, etc. on employee appraisals Appraisals play an integral role in the employer's performance management process The appraisal lets the boss and subordinate develop a plan for correcting any deficiencies, and reinforce those things the employee does correctly They serve a useful career planning purpose Appraisals play a role in identifying training and development needs

Performance Management Performance management is a uniquely goal-oriented and continuous way to appraise and manage employees’ performance. It is the continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organizations’ goals.

Defining the Employee’s Goals and Work Standards Human Resources Management 12e Gary Dessler Defining the Employee’s Goals and Work Standards Set SMART goals Assign challenging/ doable goals Assign specific goals Guidelines for Effective Goal Setting Assign measurable goals Encourage participation Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler Setting SMART Goals Specific, and clearly state the desired results. Measurable in answering “how much.” Attainable, and not too tough or too easy. Relevant to what’s to be achieved. Timely in reflecting deadlines and milestones. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Guidelines for Effective Goal Setting Assign Specific Goals Employees with specific goals usually perform better Assign Measurable Goals Express goals in quantitative terms and include target dates or deadlines Assign Challenging but Doable Goals Goals should be challenging, but not so difficult that they appear impossible or unrealistic Encourage Participation Participatively set goals do tend to be set higher

Employee’s Goals and Performance Standards Basing appraisal standards on required competencies The role of job descriptions

Who Should Do the Appraising? Human Resources Management 12e Gary Dessler Who Should Do the Appraising? Self-rating Subordinates 360-degree feedback Potential Appraisers Immediate supervisor Peers Rating committee Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Appraisal Methods Human Resources Management 12e Gary Dessler Performance Appraisal Methods Appraisal Methodologies 1 6 2 3 Graphic rating scale 7 8 Narrative forms 4 9 Alternation ranking Behaviorally anchored rating scales (BARS) 5 10 Paired comparison Management by objectives (MBO) Forced distribution Computerized and Web-based performance appraisal Critical incident Merged methods Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Appraisal Methods Graphic Rating Scale Method: A scale is used to list a number of traits and a range of performance for each, then the employee is rated by identifying the score that best describes his/her performance level for each trait. Managers must decide which job performance aspects to measure. Some options include generic dimensions, actual job duties, or behaviorally recognizable competencies.

Human Resources Management 12e Gary Dessler FIGURE 9–3 Sample Graphic Rating Performance Rating Form Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler FIGURE 9–3 One Item from an Appraisal Form Assessing Employee Performance on Specific Job-Related Duties Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Appraisal Methods Alternation Ranking Method is where employees are ranked from best to worst on a particular trait, choosing highest, then lowest, until all are ranked. Since it is usually easier to distinguish between the worst and best employees, an alternation ranking method is most popular. First, list all subordinates to be rated, and then cross out the name of any not known well enough to rank.

Human Resources Management 12e Gary Dessler FIGURE 9–6 Scale for Alternate Ranking of Appraisee Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Appraisal Methods Paired Comparison Method helps make the ranking method more precise. For every trait (quantity of work, quality of work, and so on), you pair and compare every subordinate with every other subordinate.

Human Resources Management 12e Gary Dessler FIGURE 9–7 Ranking Employees by the Paired Comparison Method Note: + means “better than.” - means “worse than.” For each chart, add up the number of +’s in each column to get the highest ranked employee. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Appraisal Methods Forced Distribution Method is similar to grading on a curve. With this method, you place predetermined percentages of rates into several performance categories. The proportion in each category need to be symmetrical. One practical, if low-tech, way to do this is to write each employee’s name on a separate index card. Then, for each trait (quality of work, creativity, and so on), place the employee’s card in the appropriate performance category. Role Model  Moderate Below Expectations 10 % 20 % 40 % 20 % 10 %

Performance Appraisal Methods Critical Incident Method is where a supervisor keeps a record of positive and negative examples (critical incidents) of a subordinate’s work-related behavior. Every 6 months or so, supervisor and subordinate meet to discuss the latter’s performance, using the incidents as examples. Advantages It provides examples of good and poor performance the supervisor can use to explain the person’s rating. It makes the supervisor think about the subordinate’s appraisal all during the year. The list provides examples of what specifically the subordinate can do to eliminate deficiencies.

Human Resources Management 12e Gary Dessler TABLE 9–1 Examples of Critical Incidents for Assistant Plant Manager Continuing Duties Targets Critical Incidents Schedule production for plant 90% utilization of personnel and machinery in plant; orders delivered on time Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month Supervise procurement of raw materials and on inventory control Minimize inventory costs while keeping adequate supplies on hand Let inventory storage costs rise 15% last month; over-ordered parts “A” and “B” by 20%; under-ordered part “C” by 30% Supervise machinery maintenance No shutdowns due to faulty machinery Instituted new preventative maintenance system for plant; prevented a machine breakdown by discovering faulty part Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Appraisal Methods Narrative Forms involve rating the employee’s performance for each performance factor, Writing down examples and an improvement plan, Aiding the employee in understanding where his/her performance was good or bad, Summarizing by focusing on problem solving.

Human Resources Management 12e Gary Dessler FIGURE 9–8 Appraisal-Coaching Worksheet Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Behaviorally Anchored Rating Scale (BARS) Human Resources Management 12e Gary Dessler Behaviorally Anchored Rating Scale (BARS) Developing a BARS Write critical incidents Develop performance dimensions Reallocate incidents Scale the incidents Develop a final instrument Advantages of BARS A more accurate gauge Clearer standards Feedback Independent dimensions Consistency Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler FIGURE 9–9 Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skills Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Management by Objectives (MBO) Human Resources Management 12e Gary Dessler Management by Objectives (MBO) A comprehensive and formal organizationwide goal-setting and appraisal program requiring: Setting of organization’s goals Setting of departmental goals Discussion of departmental goals Defining expected results (setting individual goals) Conducting periodic performance reviews Providing performance feedback Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler Using MBO Setting unclear objective Conflict with subordinates over objectives Potential Problems with MBO Time-consuming appraisal process Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Computerized and Web-Based Performance Appraisal Systems Human Resources Management 12e Gary Dessler Computerized and Web-Based Performance Appraisal Systems Allow managers to keep notes on subordinates. Notes can be merged with employee ratings. Software generates written text to support appraisals. Allows for employee self-monitoring and self-evaluation. Electronic Performance Monitoring (EPM) Systems Use computer network technology to allow managers access to their employees’ computers and telephones. Managers can monitor the employees’ rate, accuracy, and time spent working online. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Dealing with Performance Appraisal Problems Human Resources Management 12e Gary Dessler Dealing with Performance Appraisal Problems Unclear standards Leniency or strictness Halo effect Potential Rating Scale Appraisal Problems Central tendency Bias Recency effects Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Potential Rating Scale Appraisal Problems Unclear Standards This graphic rating scale seems objective. However, it would probably result in unfair appraisals, because the traits and degrees of merit are ambiguous. For example, different supervisors would probably define “good” performance, “fair” performance, and so on differently. The same is true of traits such as “quality of work” or “creativity”.

Human Resources Management 12e Gary Dessler TABLE 9–2 A Graphic Rating Scale with Unclear Standards Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Potential Rating Scale Appraisal Problems Halo Effect Experts define halo effect as “the influence of a rater’s general impression on ratings of specific ratee qualities. For example, supervisors often rate unfriendly employees lower on all traits, rather than just for the trait “gets along well with others”. Being aware of this problem is a big step toward avoiding it.

Potential Rating Scale Appraisal Problems Central Tendency Where supervisors stick to the middle of the rating scales, thus rating everyone average. For example, if the rating scale ranges from 1 to 7, they tend to avoid the highs (6 and 7) and lows (1 and 2) and rate most of their people between 3 and 5. Central tendency basically means rating all employees’ average. Doing so distorts the evaluations, making them less useful for promotion, salary, or counseling purposes.

Potential Rating Scale Appraisal Problems Leniency or Strictness: Supervisors have the tendency to rate everyone either high or low, just as some instructors are notoriously high or low graders. This strictness/leniency problem is especially severe with graphic rating scale. On the other hand, ranking forces supervisors to distinguish between high and low performers. Recency Effects: This involves letting what the employee has done recently blind the manager to the employee’s performance over the rest of the year. Bias: The tendency to allow individual differences such as age, race, and sex to affect the appraisal ratings employees receive, is a problem.

Guidelines for Effective Appraisals Human Resources Management 12e Gary Dessler Guidelines for Effective Appraisals Know the problems Get agreement on a plan Use the right tool How to Avoid Appraisal Problems Keep a diary Be fair Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler TABLE 9–3 Important Advantages and Disadvantages of Appraisal Tools Tool Advantages Disadvantages Graphic rating scale Simple to use; provides a quantitative rating for each employee. Standards may be unclear; halo effect, central tendency, leniency, bias can also be problems. BARS Provides behavioral “anchors.” BARS is very accurate. Difficult to develop. Alternation ranking Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales. Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent. Forced distribution method End up with a predetermined number or % of people in each group. Employees’ appraisal results depend on your choice of cutoff points. Critical incident method Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis. Difficult to rate or rank employees relative to one another. MBO Tied to jointly agreed-upon performance objectives. Time-consuming. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Choosing the Right Appraisal Tool Human Resources Management 12e Gary Dessler Choosing the Right Appraisal Tool Accessibility Accuracy Ease-of-use Employee acceptance Criteria for Choosing an Appraisal Tool Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

The Appraisal Interview Human Resources Management 12e Gary Dessler The Appraisal Interview Satisfactory—Promotable Satisfactory—Not Promotable Unsatisfactory—Correctable Unsatisfactory—Uncorrectable Types of Appraisal Interviews Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Appraisal Interview Guidelines Human Resources Management 12e Gary Dessler Appraisal Interview Guidelines Talk in terms of objective work data Get agreement Don’t get personal Encourage the person to talk Guidelines for Conducting an Interview Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler FIGURE 9–14 Checklist During Appraisal Interview Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Handling Defensive Responses Human Resources Management 12e Gary Dessler Handling Defensive Responses How to Handle a Defensive Subordinate 1 2 Recognize that defensive behavior is normal. 3 Never attack a person’s defenses. 4 Postpone action. Recognize your own limitations. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

How to Deliver Criticism Human Resources Management 12e Gary Dessler How to Deliver Criticism How to Criticize a Subordinate 1 3 2 Do it in a manner that lets the person maintain his or her dignity and sense of worth. 4 Criticize in private, and do it constructively. 5 Give daily feedback so that the review has no surprises. Never say the person is “always” wrong. Criticism should be objective and free of biases. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Formal Written Warnings Human Resources Management 12e Gary Dessler Formal Written Warnings Purposes of a Written Warning To shake your employee out of bad habits. To help you defend your rating, both to your own boss and (if needed) to the courts. A Written Warning Should: Identify standards by which employee is judged. Make clear that employee was aware of the standard. Specify deficiencies relative to the standard. Indicate employee’s prior opportunity for correction. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Performance Management Human Resources Management 12e Gary Dessler Performance Management Performance Management Is the continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organization’s goals. How Performance Management Differs From Performance Appraisal A continuous process for continuous improvement A strong linkage of individual and team goals to strategic goals A constant reevaluation and modification of work processes Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Basic Building Blocks of Performance Management Human Resources Management 12e Gary Dessler Basic Building Blocks of Performance Management Direction sharing Goal alignment Ongoing performance monitoring Ongoing feedback Coaching and development support Rewards, recognition, and compensation Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Using Information Technology to Support Performance Management Human Resources Management 12e Gary Dessler Using Information Technology to Support Performance Management Assign financial and nonfinancial goals to each team’s activities along the strategy map chain of activities leading up to the company’s overall strategic goals. Inform all employees of their goals. Use IT-supported tools like scorecard software and digital dashboards to continuously monitor and assess each team’s and employee’s performance. Take corrective action at once. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources Management 12e Gary Dessler K E Y T E R M S performance appraisal graphic rating scale alternation ranking method paired comparison method forced distribution method critical incident method behaviorally anchored rating scale (BARS) electronic performance monitoring (EPM) unclear standards halo effect central tendency strictness/leniency bias appraisal interview performance management Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall