2. PERFORMANCE APPRAISAL Pertemuan 7 & 8 Matakuliah: L0064 / Psikologi Industri & Organisasi 1 Tahun: 2007 / 2008

3. Bina Nusantara After reading this chapter, you should be able to 1.Define performance appraisal and specify the HR functions affected by it 2.Describe how to ensure appraisal systems are in compliance with EEOC guidelines 3.Understand the nature of opposition to appraisal systems from labor unions, employees, and managers 4.Explain and provide examples of the two approaches to measuring performance 5.Identify the techniques used to evaluate managerial performance 6.Describe and control for sources of rater error 7.Understand how to improve the effectiveness of performance appraisal systems and how to best conduct the post-appraisal interview Learning Objectives 3

4. Bina Nusantara The periodic, formal evaluation of employee performance for the purpose of making career decisions What Is Performance Appraisal? 4

5. Fair Employment Practices EEOC guidelines apply to any selection procedure used for making employment decisions –Hiring –Promotion –Demotion –Transfer –Layoff –Discharge –Early retirement Performance appraisal procedures must be validated Bina Nusantara

6. Protecting Against Bias Claims Personnel decisions should be based on a well-designed performance review program that includes formal appraisal interviews Examples –Racial bias –Age bias Bina Nusantara

7. Criteria For Compliance Performance appraisals should be based on job analyses to document specific critical incidents and behaviors related to job performance Appraisers should focus on actual job behaviors rather than personality characteristics Supervisors should be well trained Notes, records, and documentation should be retained Bina Nusantara

8. Reasons for Conducting Performance Appraisals Validation of selection techniques and criteria Make decisions about that person’s future with the organization Identify training requirements Employee improvement Pay, promotion, and other personnel decisions Bina Nusantara

9. Critics Of Performance Appraisal Labor unions –Represent approximately 11% of workforce –Prefer seniority rather than assessment Employees –Prefer not to be told of deficiencies Managers –Dislike playing the role of judge Professors –See “Newsbreak” on pg. 132 Bina Nusantara

10. Performance Appraisal Techniques Objective Methods –Output measuresOutput measures –Computerized performance monitoring –Job-related personal data Judgmental and qualitative measures –Written narratives –Merit rating techniques Bina Nusantara

11. Output Measures Quantity, quality, job experience, and other environmental factors must be considered Job-related personal data Computerized performance monitoring –Computers can be programmed to to monitor employee’s on the job activities –Attitudes toward computer monitoring depend on how the data are used –Found to be stressful Bina Nusantara

12. Computerized Monitoring Advantages –Immediate and objective feedback –Reduces rater bias –Helps identify training needs –Facilitates goal setting –May contribute to increases in productivity Disadvantages –May be considered an invasion of privacy –May increase stress –May reduce job satisfaction –May lead to focus on quantity at the expense of quality Bina Nusantara

13. Written Narratives Brief essays and numerical rating procedures More prone to personal bias –Merit rating is an objective rating method designed to provide an objective evaluation of work performance Bina Nusantara

14. Merit Rating Techniques Performance rating scales Ranking Paired-comparison Forced distribution Forced choice Behaviorally anchored rating scales (BARS) Behavioral observation scales (BOS) Management by objectives (MBO) Bina Nusantara

15. Performance Rating Scales –Most frequently used technique –Supervisors indicate how or to what degree a worker possesses a relevant job characteristic Bina Nusantara 1 2 3 4 5 Poor Average Excellent

16. Ranking Technique Supervisors list the workers in order from highest to lowest Simple to do Difficult when there are many employees to evaluate Provides less evaluative data than rating Doesn’t allow for listing of similarities Bina Nusantara

17. Paired-Comparison Technique Compares the performance of each worker with that of every other person in the group Number of comparisons –(N * (N - 1)) / 2 Advantage –Accurate and judgmental process is simple Disadvantage –Many comparisons when dealing with a large number of employees Bina Nusantara

18. Forced-Distribution Technique Supervisors rate employees according to a prescribed distribution of ratings, similar to grading on a curve –Superior10% –Better than average20% –Average40% –Below average20% –Poor10% Predetermined categories may not be fair Hard to compare across groups Bina Nusantara

19. Forced-Choice Technique Raters are presented with groups of descriptive statements and are asked to select the phrase in each group that is most descriptive of the worker being evaluated. E.g., choose one of the following: –Is reliable –Is agreeable One statement is desirable, but the other is disguised in its appeal More costly to develop than other merit rating methods Bina Nusantara

20. Behaviorally Anchored Rating Scales (BARS) Evaluate performance on basis of behaviors important to success or failure on job Appraisers rate critical employee behavior –Critical-incident behaviors are established –These behaviors are used as standards for appraising effectiveness –The BARS items can be scored objectively by indicating whether the employee displays that behavior Meet federal fair employment guidelines Bina Nusantara

21. Behavioral Observation Scale (BOS) Appraisers rate the frequency of critical employee behaviors –The ratings are assigned on a five point scale –The evaluation yields a total score As with BARS, BOS meets federal fair employment standards because it is based on actual behaviors required for performance Bina Nusantara

22. Management By Objective (MBO) Involves mutual agreement between employee and manager on goals to be achieved in a given period Two phases –Goal setting –Performance review Employees may feel pressured MBO technique satisfies fair employment guidelines & may increase motivation and productivity Bina Nusantara

23. Techniques for Evaluating Managers Assessment centers Evaluation by superiors Evaluation by colleagues –Peer ratings tend to be more favorable for career development than for promotion decisions Self-evaluation Self-ratings suffer from leniency Subordinate evaluation –Effective in developing leadership & leads to improved performance 360 degree feedback (multi-source) Bina Nusantara

24. Common Sources of Error Halo effect Constant or systematic bias Most-recent-performance error Inadequate information error Average rating or leniency error Rater’s cognitive processes Role conflict Bina Nusantara

25. Halo Effect The tendency to judge all aspects of a person’s behavior or character on the basis of a single attribute –Positive –Negative Solution: Use multiple raters Research indicates halo may not be as pervasive as originally thought –Does not appear to reduce overall rating –Often undetectable –May be illusory Bina Nusantara

26. Constant or Systematic Bias Based on the different standards used by raters –Hard rater –Easy rater Solution: Require distribution of ratings according to the normal curve Bina Nusantara Constant or systematic style of rating

27. Most-Recent-Performance Error A rater evaluates a worker’s most recent job behavior rather than behavior throughout the period since last appraisal –False high rating –False low rating Solution: Require more frequent performance appraisals Bina Nusantara

28. Inadequate Information Error Supervisors rate subordinates even though they don’t know enough about them to rate them fairly or accurately Solution: Train raters and allow them to decline to rate those they don’t know well Bina Nusantara

29. Average Rating or Leniency Error Average rating error –The rater is unwilling to assign a very high or very low score Leniency error –Rater is unwilling to assign other than a favorable score Solution: Maintain a record of supervisor rating tendencies Bina Nusantara

30. Rater’s Cognitive Processes Category structures –How workers are categorized - e.g., team player; similar to halo effect Beliefs about human nature Interpersonal affect –One’s feelings toward the other person –Susceptible to impression management techniques Attribution –Raters attribute positive or negative explanations of employee behavior Bina Nusantara

31. Role Conflict Disparity between job demands and the employees personal standards for right and wrong Those high in role conflict tend to rate employees higher than justified evaluations to –Establish control over work situation –Avoid confrontation with subordinates –Obtain subordinate gratitude and goodwill Bina Nusantara

32. Improving Performance Appraisals Training –Create awareness of normal distribution of abilities and skills –Develop ability to define objective criteria for work behaviors Providing feedback to raters Subordinate participation –Led to increased employee trust and perceptions of accuracy of evaluation system (Mayer & Davis, 1999) Bina Nusantara

33. Post Appraisal Interviews Offers feedback related to appraisal to help employee improve performance Provides employee opportunity to react to criticism –Negative feedback can make employees angry –Workers react to criticism differently Bina Nusantara

34. Improving Post-Appraisal Interviews Allow employees to participate actively in the appraisal process Interviewer should adopt a supportive attitude Focus on specific job problems, not personal characteristics Establish specific goals jointly Allow the employee to rebut Discussions of changes in salary and rank should be linked directly to performance criteria Bina Nusantara

35. Reasons for a Poorly Rated Performance Appraisal Program Managers –Lack the time to make other than hasty appraisals Employees –Don’t like appraisals –Uninformed about the criteria (criteria appear biased) If correlations between ratings and results-oriented criteria are low –Antithetical to purpose of appraisal Bina Nusantara

36. Key Terms Attribution Average rating (leniency) error Behavioral observation scales (BOS) Behaviorally anchored rating scales (BARS) Inadequate information error Interpersonal effect Management-by-objectives (MBO) Merit rating Most-recent-performance error Paired-comparison technique Constant (systematic) bias Forced-choice technique Forced-distribution technique Halo effect Peer rating Performance appraisal Ranking technique Rating scales Role conflict Self-ratings Bina Nusantara