1. © 2005 Prentice Hall Inc. All rights reserved. PowerPoint Presentation by Charlie Cook The University of West Alabama t e n t h e d i t i o n Gary Dessler Chapter 9 Part 3 Training and Development Performance Management and Appraisal

2. After studying this chapter, you should be able to: 1. Describe the appraisal process. 2. Develop, evaluate, and administer at least four performance appraisal tools. 3. Explain and illustrate the problems to avoid in appraising performance. 4. List and discuss the pros and cons of six appraisal methods. 5. Perform an effective appraisal interview. 6. Discuss the pros and cons of using different raters to appraise a person’s performance. 1. Describe the appraisal process. 2. Develop, evaluate, and administer at least four performance appraisal tools. 3. Explain and illustrate the problems to avoid in appraising performance. 4. List and discuss the pros and cons of six appraisal methods. 5. Perform an effective appraisal interview. 6. Discuss the pros and cons of using different raters to appraise a person’s performance. © 2005 Prentice Hall Inc. All rights reserved. 9–2

3. SIX STEPS of PERFORMANCE APPRAISAL 1. Establishing expected performance level, i.e. work standards that are understandable, measurable and reasonable 2. Communicating those standards to employees and how to achieve them 3. Comparing employees’ actual performance against the standards 4. Discussing the results with employees 5. Taking corrective action (if actual performance expected performance) 6. Using the results to make decisions (such as promotions, further training, pay increases or demotion/firing (if needed)

4. Performance Appraisal vs. Performance Management  Performance Appraisal –Performance appraisal includes: Setting work standards Comparing employee’s actual performance to those standards Letting the employee know about the comparison (i.e. whether his performance is above or below that standard) [If below, motivate him to improve; if above, motivate him to continue as is]

5. Performance Appraisal vs. Performance Management  Performance management –Is the overall process of setting organizational goals, performance appraisal, and training and development to achieve those goals. –The ultimate objective is to ensure that the employee’s performance is supporting the company’s strategic objectives

6. Defining the Employee’s Goals and Work Standards  Assign specific goals which are focused  Assign measurable goals that can be quantified  Assign challenging but doable goals  Include employees in formulating goals (participative goal- setting)  SMART goals: –Specific, and clearly state the desired results to be achieved –Measurable i.e. answers “how much.”; quantifiable –Attainable, i.e. not too tough and not too easy –Relevant, i.e. based on what the firm needs –Timely, i.e. should mention deadlines and milestones for completion –Ex- We aim to increase our market share by 3% this quarter, which will enable us to gain a foothold in the luxury footwear market

7. Why do Companies do Performance Appraisal? –Performance appraisal is useful in determining employee pay levels and deciding who to promote (or demote) –Performance appraisal is a key component of performance management. When company strategic objectives are translated into individual employee objectives, they have to be measured and evaluated to ensure they are being followed –Performance appraisal is a means of correcting and reinforcing employee performance (i.e. disciplinary tool), by eliminating poor performance and encouraging productive behaviour among employees –Performance appraisals can identify an employees’ strengths and weaknesses, and thus help in long term career planning (which employee is suited for which position)

8. Realistic Appraisals  Reasons for giving soft (less-than-honest) appraisals –Avoiding the work of having to hire and train someone new –The unpleasant reaction of the employee –Company culture does not support honest, straightforward appraisals (evaluations)  Dangers of giving soft appraisals –Employee will be unaware about his own weakness, and hence cannot improve his abilities

9. © 2005 Prentice Hall Inc. All rights reserved.9–9 Performance Appraisal Role: HR Department  HR department –Serves a policy-making and advisory role. –Provides advice and assistance regarding the appraisal tool to use. –Prepares forms and procedures and insists that all departments use them. –Responsible for training supervisors to improve their appraisal skills. –Responsible for monitoring the appraisal system to ensure that appraisal formats and regulations comply with Equal Employment Opportunity (EEO) laws and are up to date.

10. Performance Appraisal: Role of Supervisors  Supervisors –Usually do the actual appraising of employees, not the HR Dept –HR dept provides the tools and equipment (forms, methods, procedure etc) but the supervisor does the appraisal of an employee under him –So they must be familiar with appraisal techniques and different ways to conduct appraisals –Must understand and avoid problems that normally happen during appraisals –Should be fair in conducting performance appraisals, otherwise true picture of employee performance will not be obtained

11. Designing the Appraisal Tool  Two issues to consider: –What to measure? Work output (quality, quantity etc) Personal competencies (Knowledge, Skills, Attitudes (KSA) etc) Goal achievement performance –How to measure? Involves different tools of performance appraisal, such as: –Graphic rating scales –Alternation ranking method –MBO –Others etc –They are discussed next…..

12. Performance Appraisal Methods  Graphic Rating Scale Method –A scale that has a no. of traits or qualities listed (such as communication skill, Teamwork, time management etc) and shows an employees’ score on each quality –The scores are given by supervisors who evaluate the employee and fill out the form –The graphic rating scale can contain: General Skills (such as communication, time management etc) Competencies (such as “builds a culture that is open and receptive to improved medical care”) Actual Job Duties (such as “supervise one dozen nurses”) –The supervisor then gives a score on each criteria, which are totaled to give a final score for an employee

13. © 2005 Prentice Hall Inc. All rights reserved.9–13 Graphic Rating Scale with Space for Comments Figure 9–3

14. © 2005 Prentice Hall Inc. All rights reserved.9–14 Portion of an Administrative Secretary’s Sample Performance Appraisal Form Figure 9–4 Source: James Buford Jr., Bettye Burkhalter, and Grover Jacobs, “Link Job Description to Performance Appraisals,” Personnel Journal, June 1988, pp. 135–136.

15. © 2005 Prentice Hall Inc. All rights reserved.9–15 Performance Management Outline Figure 9–5a Source: www.cwru.edu.

16. © 2005 Prentice Hall Inc. All rights reserved.9–16 Figure 9–5b Performance Management Outline (cont’d) Source: www.cwru.edu.

17. © 2005 Prentice Hall Inc. All rights reserved.9–17 Performance Management Outline (cont’d) Figure 9–5c Source: www.cwru.edu.

18. Performance Appraisal Methods  Alternation ranking method –Creating a list of employee names arranged from best to worst on a particular quality (such as communication skill etc) –The highest-ranking employee name is put on top (No.1) and the lowest-ranking employee name is put at the bottom (No. 20). –Then the second highest-ranked employee name is put at No. 2 and the second lowest-ranked employee name is put at No. 19 –This goes on until all employee names are filled (the list is complete) –Hence, the name “Alternation” ranking method (alternating between highest-ranked and lowest-ranked)

19. © 2005 Prentice Hall Inc. All rights reserved.9–19 Alternation Ranking Scale Figure 9–6

20. Performance Appraisal Methods  Paired comparison method –Compares each employee with another employee in terms of a particular trait or quality (such as creativity or ability to work independently) –A chart is made (for a particular quality) listing all the employees to be considered, and they are placed side by side with one another (on the x and y axis), so that they can be compared –A ‘+’ is given if an employee is better than another employee, and a ‘—’ is given if an employee is worse than another employee –Finally, we identify the employee who has received the highest number of ‘+’s (pluses) –That employee is better than all other employees in that particular trait

21. © 2005 Prentice Hall Inc. All rights reserved.9–21 Ranking Employees by the Paired Comparison Method Figure 9–7 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.

22. Performance Appraisal Methods (cont’d)  Forced distribution method –Employees are put into predetermined percentage categories based on their performance –Similar to students being graded on a curve –For Example: 20% Excellent Performers (who will get an A and A-) 70% Good to Average Performers (who will get B+ to B-) 10% Low performers (who will get C+ to F (fail) etc) –The separate categories have different recommendations or suggestions, for example Top 20%- Maintain as is, Middle 70%- Maintain strengths and work on weaknesses, Bottom 10%- Training and development needed, maybe job rotation or job restructuring etc. If nothing works, have to demote or finally, fire

23. Performance Appraisal Methods (cont’d)  Critical Incident Method –Identifying and recording an employee’s best and worst performance over a time period (for example, throughout six months) –These examples are “critical incidents”, which are then discussed with the employee to encourage positive critical incidents and correct negative critical incidents –For Example: Generated $25000 extra sales in a given month above the quota (positive critical incident) Damaged a LCD control panel resulting in lost production for himself and for the entire assembly line (no one could use it) (negative critical incident) –Strengths: Good and bad examples are both highlighted, so employee knows what the correct course of action is, and what he should do regularly The supervisor has to monitor the employee’s performance throughout the year (or six month period), so evaluation is more consistent, fair and precise –Weakness: No numerical rating, only real life examples. So hard to compare between employees. Also, since numerical evaluation is not included, cannot be used to make salary or pay-based decisions (Qualitative Method)

24. © 2005 Prentice Hall Inc. All rights reserved.9–24 Examples of Critical Incidents for an Assistant Plant Manager Table 9–1

25. Performance Appraisal Methods (cont’d)  Narrative Forms –A form which a supervisor uses to evaluate an employee –Usually in the format of a mixed questionnaire (both structured and unstructured questions) –Asks various questions about an employee which the supervisor answers and puts on the form (ex- what areas does the employee need to improve in?) –After filling it out, both the supervisor and the employee sit down to discuss the form (sort out problems and highlight strengths) –In this way, performance improvement is possible

26. © 2005 Prentice Hall Inc. All rights reserved.9–26 Narrative Form Example Figure 9–8 Source: Reprinted with permission of the publisher, HRnext.com; copyright HRnext.com, 2003.

27. © 2005 Prentice Hall Inc. All rights reserved.9–27 Classroom Teaching Appraisal By Students Figure 9–1 Source: Richard I. Miller, Evaluating Faculty for Promotional and Tenure (San Francisco: Jossey-Bass Publishers, 1987), pp. 164–165. Copyright © 1987, Jossey-Bass Inc., Publishers. All rights reserved. Reprinted with permission.

28. © 2005 Prentice Hall Inc. All rights reserved.9–28 Continuous improvement  A management philosophy that requires employers to continuously set and relentlessly meet ever-higher quality, cost, delivery, and availability goals by: –Eradicating the seven wastes: overproduction, defective products, and unnecessary downtime, transportation, processing costs, motion, and inventory. –Requiring each employee to continuously improve his or her own personal performance, from one appraisal period to the next.

29. © 2005 Prentice Hall Inc. All rights reserved.9–29 The Components of an Effective Performance Management Process  Direction sharing  Role clarification  Goal alignment  Developmental goal setting  Ongoing performance monitoring  Ongoing feedback  Coaching and support  Performance assessment (appraisal)  Rewards, recognition, and compensation  Workflow and process control and return Figure 9–2

30. Performance Appraisal Methods (cont’d)  Behaviorally anchored rating scale (BARS) –An appraisal tool that uses a numerical rating scale with specific behavioural examples of good and poor performance –So it combines the critical incident method (good and bad examples) with the graphic rating scale method (use of numerical scale) –As a result, provides better, more detailed appraisals

31. © 2005 Prentice Hall Inc. All rights reserved.9–31 Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skill Figure 9–9 Source:Walter C. Borman, “Behavior Based Rating,” in Ronald A. Berk (ed.), Performance Assessment: Methods and Applications (Baltimore, MD: Johns Hopkins University Press, 1986), p. 103.

32. Performance Appraisal Methods (cont’d)  Developing a BARS: –1. Identify Critical Incidents By asking jobholders and supervisors to mention good and bad examples of work –2. Group Incidents by Skill Sort similar critical incidents into groups and name the group (for example, “related to communication skills”) –3. Verify with another Group Ask another group of knowledgeable people (jobholders, supervisors etc) to reorganize the critical incidents according to skill/effect. If they sort it the same way, then the classification is correct –4. Develop a numerical scale Rank the critical incidents under a particular skill heading on a numbered scale (from 1 to 9; 1- Poor Performance, 9- Excellent Performance) –5. Refine and Strengthen Classification Pick six or seven behaviours which are strongly related to the incident (i.e. strong examples of good or bad performance). This strengthens the scale and measurement

33. Performance Appraisal Methods (cont’d)  Advantages of BARS –Measures developed by people who actually do the job (jobholders, supervisors etc. ) So, the scale is very accurate –Since every number on the scale is represented by a critical incident (example of behaviour), it is easy to evaluate a particular candidate (know what to spot) –For the same reason as above, it is easier to explain to a candidate why his score is low (or high) etc –Better identification of separate skills (because the incidents are clustered in separate skill groups). One skill does not get confused with another –High Reliability, i.e. different evaluators give same score to one particular candidate (because scale is not confusing)

34. 9–34 Management by Objectives (MBO)  Involves setting specific measurable goals for each employee and then periodically checking progress towards those goals (i.e. Goal-Performance match) 1.Set organizational goals 2.Set departmental goals 3.Discuss departmental goals with employees 4.Define expected results for each employee 5.Performance review by Supervisor (Goal- Performance match) 6.Discussion of results with employee

35. Computerized and Web-Based Performance Appraisal  Electronic performance monitoring (EPM) –Having supervisors electronically monitor the amount of work an employee is doing per day, and thereby measure his or her performance. –Ex- Using GPS to track deliverymen, using intranet to monitor typist speed, using overhearing facility to monitor the calls of customer service agents –All are ways of measuring performance of employees

36. Common Performance Appraisal Problems  Unclear standards –Not having descriptions of numerical scores or keywords (for example, what does “excellent” performance mean?)  Halo effect –One quality influencing other qualities. (ex- assuming that a quiet, shy employee is an unproductive employee because he does not talk about his achievements. In reality, he might be very productive and efficient but just doesn’t talk as much)  Central tendency –Giving all employees average ratings. This distorts true potential identification and evaluation of employees

37. © 2005 Prentice Hall Inc. All rights reserved.9–37 A Graphic Rating Scale with Unclear Standards Table 9–2 Note: For example, what exactly is meant by “good,” “quantity of work,” and so forth?

38. Common Performance Appraisal Problems  Strictness/leniency –The problem that occurs when a supervisor has a tendency to rate all employees either high or low (extreme rating)

39. Advantages and Disadvantages of Appraisal Tools

40. © 2005 Prentice Hall Inc. All rights reserved.9–40 Who Should Do the Appraising?  The immediate supervisor  Peers (colleagues, teammates etc)  Rating committees (groups of supervisors)  Self-ratings by employees (can be higher than average)  Subordinates  360-Degree feedback (from supervisors, subordinates, peers, colleagues, customers etc)

41. The Appraisal Interview  Types of appraisal interview outcomes –Satisfactory—Promotable (easiest to conduct, tell him about new opportunity) –Satisfactory—Not promotable (No opportunities in company etc; provide incentives to maintain current performance) –Unsatisfactory—Correctable (lay out action plan to correct performance (performance contract) –Unsatisfactory—Not correctable (hardest to conduct if required, but you might not need to conduct at all if it is pointless. Just dismiss or tolerate)

42. © 2005 Prentice Hall Inc. All rights reserved.9–42 Performance Contract Figure 9–10 Source: David Antonion, “Improving the Performance Management Process Before Discontinuing Performance Appraisals,” Compensation and Benefits Review May– June 1994, p. 33, 34.

43. Guidelines for Conducting the Appraisal Interview –Talk in terms of objective work data (work standards, performance levels etc) –Don’t get personal (don’t compare to someone else) –Encourage the person to talk. –Don’t tiptoe around (get to the point, mention problems, and get improvement (or maintenance) commitment

44. © 2005 Prentice Hall Inc. All rights reserved.9–44 The Appraisal Interview (cont’d)  How to handle a defensive subordinate –Recognize that defensive behavior is normal. –Never attack a person’s defenses. –Delay taking action –Recognize your own limitations (don’t try to be a psychologist)

45. © 2005 Prentice Hall Inc. All rights reserved.9–45 The Appraisal Interview (cont’d)  How to criticize a subordinate –Do it in a manner that lets the person maintain his or her dignity and sense of worth. –Criticize in private, and do it constructively. –Avoid once-a-year “critical broadsides” by giving feedback on a daily basis, so that the formal review contains no surprises. –Never say the person is “always” wrong (no one ever is) –Criticism should be objective and free of any personal biases

46. Written Warnings –Purpose of the written warning To shake the employee out of bad habits. Help you defend your rating, both to your own boss and (if needed) to the courts. (by demonstrating that communication was clear and explicit) –Written warnings should: Mention standards by which employee is judged (expected performance level) Make sure that employee was aware of the standard (proper communication done) Specify deficiencies relative to the standard (actual performance level lower) Indicate employee’s prior opportunity for correction (mention previous warnings, verbal etc. Written warning is the last level of warning) Concept of “Straw that broke the camel’s back” (soft warning<hard warning<punishment<written warning<termination)

47. © 2005 Prentice Hall Inc. All rights reserved.9–47 Checklist During the Appraisal Interview Figure 9–11 Source: Reprinted with permission of the publisher, HRnext.com. Copyright HRnext.com, 2003.

48. 9–48 Steps Involved in Appraising Performance  Step 1: Defining the job –Making sure that you and your subordinate agree on his or her duties and job standards (i.e. setting expected performance levels)  Step 2: Comparison of Performance –Comparing your subordinate’s actual performance to the standards that have been set (i.e. performance matching) –This usually involves some type of rating form  Step 3: Providing feedback –Discussing the subordinate’s performance and progress with him (whether there are discrepancies or whether they have been exceeded), and making plans for any development required