1. Chapter 4 Performance Management and Appraisal

2. Basic Concepts in Performance Management and Appraisal
Performance Appraisal: Setting work standards, assessing performance, and 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.
Comparing Performance Appraisal and Performance Management

3. Performance Management
Performance management: is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization.
The communication process includes:
Setting Objectives
Discussing Expectations and Performance Standards
Identifying Goals
Providing Feedback
Evaluating Results

4. Performance Management Goals
Communication between supervisor and employee.
Feedback on performance.
Documentation.
Development Goals.
Alignment with strategic planning goals.
Performance management is not a one-time event but a continuous process. It should align with the organization’s strategic goals and require open communication among managers and staff. It provides time for formal feedback, but employees should receive continuous feedback from their supervisors and not just at review time.
©SHRM 2009

5. Performance appraisal
Performance appraisal : A formal performance review conducted by a manager to (1) examines and evaluates an employee's work behavior by comparing it with preset standards, (2) documents the results of the comparison, and (3) uses the results to provide feedback to the employee to show where improvements are needed and why.
Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.

6. Why Appraise the performance of employees?
Compensation (raises, value pay, bonuses)
Personnel Decisions (e.g., promotion, transfer,
dismissal)
Training (Identify specific requirements)
Career planning

7. Performance Management and Performance Appraisal
Dynamic, continuous process.
Improves organizational effectiveness.
Strategic goals.
Performance appraisal:
Periodic (usually annual) event.
Formal review.
Last step in performance management process.
Performance management is a goal-oriented system to ensure that organizational processes exist to maximize the productivity of employees, teams and, ultimately, the organization.
A performance appraisal is a formal system of review and evaluation of individual or team performance.
Performance management is an ongoing organizational process that is conducted to maximize the productivity of employees with the overall intention of improving the organization’s effectiveness. It is strategic in nature and involves every person and all HR processes in the organization. All are directly tied to achieving the organization’s goals.
The performance appraisal is a periodic event to reflect and evaluate past performance with the intent to identify strengths and weaknesses of an employee’s performance and to identify developmental goals. A performance appraisal is just one part of a performance management system.
Source: Mondy, R. (2008). Human resource management, 10th ed. New Jersey: Pearson Prentice Hall,

8. Performance Management and Performance Appraisal

9. HR’s Role in Performance Management
Participate in strategic planning.
Conduct job analysis.
Support performance management.
Design appraisal system.
Maintain documents.
Ensure integrity of the system.
HR plays a significant role in the performance management process, from the prerequisites and through the entire process. In the prerequisite stage, HR participates in goal setting during the strategic planning process, conducts job analyses and ensures that job analysis information is current. These are crucial steps in a successful performance management system.
Throughout the system, HR supports and trains managers in the skills necessary to execute their part of the process. HR designs and implements the performance review system and makes sure managers have the skills necessary to offer timely, unbiased employee ratings. It is HR’s responsibility to monitor the process to ensure there is documentation that accurately represents employee performance and can be used to make personnel decisions without fear of discrimination and litigation.
HR supports employees as well as the managers throughout the process by acting as an advocate for all employees. HR should establish a due process system for employees who do not agree with their performance ratings. HR acts as a sounding board for employees, allowing their issues to be heard and addressed. HR protects the integrity of the system by insisting on objective, timely reviews and addressing employee concerns with due process. In addition, HR maintains employee records and ensures employee privacy.
©SHRM 2009

10. Performance Management Process
1. Performance planning. 2. Performance implementation. 3. Performance appraisal. 4. Performance Review. 5. Performance renewal and re-contracting.
These are the steps in the performance management process.
An important concept of performance management is that it is a continuous process characterized by open communication between employees and supervisors in which feedback is exchanged and coaching is given if needed.
The second concept is a clear identification of the link between employees’ contributions and organization’s goals.
Source:
Aguinis, H. (2007). Performance management. New Jersey: Pearson Prentice Hall.

11. Meeting between employee and manager.
1. Performance Planning
Employees must have detailed knowledge of the performance management system.
Meeting between employee and manager.
Set SMART goals and measurement standards:
Once the prerequisites are in place, the next step in the process is performance planning where the organization establishes the criteria and expectations for employee performance. Supervisors must communicate this to employees in such a way that everyone understands the expectations. It would not be appropriate to expect outstanding performance from employees if they had no idea how the organization describes and measures outstanding. Clear communication is a central part of the performance management process.
In this step, the manager and employee together identify what needs to be done and how it will be accomplished. This includes consideration of results and appropriate behaviors to accomplish tasks. The supervisor and the employee must agree on the objectives to be accomplished. These are the specific outcomes the employee is expected to achieve. Outcomes must include specific, measurable performance standards.
Use the SMART acronym to write appropriate objectives. SMART stands for specific, measurable, attainable, realistic and timely.
Instructor’s Note: If students are not familiar with SMART goal setting, some additional discussion may be needed here.
Remind students that goals set using SMART guidelines are more likely to be achieved than those without SMART principles.
Example:
Poorly written objective: Increase widget production.
This objective sounds like a good goal, but it is so illusive that employees would not know how to accomplish the task and certainly no way to measure its accomplishment.
SMART objective: Control product defects to increase annual widget production by 5 percent while maintaining current budget and specification levels.
This objective fits the SMART formula. It’s specific. It tells employees what the end result should be–a 5 percent increase in production. It tells employees what to work on–product defects. It identifies the time period–one year. Finally, it gives measurable parameters for accomplishment–within budget and specifications. The objective is specific, measurable, attainable, realistic and timely.
Just as results are important to successful performance, so too are behaviors.
Results–“Did the employee accomplish the tasks?”
Behaviors–“How did they do it?”
Behaviors include competencies as well as traits like teamwork, leadership and communication. If employees accomplish their tasks but they are horrible to work with and have alienated their entire department–that’s not a good outcome! Open communication, working with a team and meeting deadlines so other staff members can accomplish their parts of the process are all areas that should be addressed in the performance review.
The last part of the performance plan is to establish employee developmental goals. If there are areas that need improvement, they should be identified and plans made to correct the deficiency. Even without needed improvement, though, employees need an opportunity to grow in their careers and to learn new skills. Improvement plans should be identified and progress toward goals measured as part of the review process. Employee growth adds value not only to the employee personally but to the employee’s manager and to the organization as a whole.
©SHRM 2009

12. 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

13. 2. Performance implementation
Shared responsibility
Employee responsibility:
Commitment to established goals.
Communication and update with manager.
Manager responsibility:
Feedback, coaching and reinforcement.
Resource support.
Accurate observation and documentation.
Accomplishing objectives is a shared responsibility between the employee and manager. It requires both to be committed to achieving the desired results. If the objectives are set by the manager only and the employee doesn’t agree, successful accomplishment is unlikely. If there is disagreement on goals, negotiation and compromise must occur; no progress can be made unless everyone is on the same page.
Success also requires open, ongoing communication between the manager and employee. A manager who sets goals for the employee and then walks away and doesn’t check to see if goals are being accomplished until the next review period is setting the employee and the organization up for failure. The manager is responsible for giving feedback to the employee, coaching and encouragement when needed and praise when things are going well. The employee is responsible for communicating progress to the manager and keeping the manager informed of any deviation from timelines, budgets or other problem areas.
The manager is responsible for providing the employee with resources needed to successfully complete the task. This is where the “R” part of the SMART acronym comes into play. It is not realistic to expect high-level performance from an employee if he or she is not given the necessary resources to make it happen. If resources are unavailable–there is simply not enough time, money or supplies–this must be taken into consideration when the objectives are set.
Because the manager plays a key role in the assessment process, the manager must be aware of the employee’s work. It is the manager’s obligation to provide accurate observation and documentation of the employee’s accomplishments. A manager should never review an employee if that employee’s work is not known to the manager.
©SHRM 2009

14. 3. Performance Appraisal
Assignment of Overall Performance Rating:
Overall performance ratings are qualified by four areas:
Exceeds Job Expectations
Meets Job Expectations
Partially Meets Job Expectations
Does Not Meet Job Expectations
This is a good time for class discussion. Ask students to suggest some advantages and disadvantage of using multiple raters. What about the possibility of skewed appraisals from co-workers? Sometimes employees give high ratings to friends and poor ratings to those they dislike. How would a manager know if peer ratings are accurate? Under what circumstances are raters likely to provide honest feedback?
In the traditional appraisal process, employees are appraised by their supervisors only. It is assumed that the supervisor is the best person to know and assess the employee’s work. This worked well when employees worked in the office with their supervisor, allowing for easy observation of performance. Technology now enables employees to work at various locations, often at sites separate from their managers. This has increased the need for evaluation from peers, customers and co-workers. Consequently, many organizations have moved away from a single-rater appraisal process to a multiple-appraisal system where employees receive feedback from a variety of sources, although supervisors are still likely to be key components of the process. In many organizations, staff members conduct appraisals for managers as well.
The most extensive appraisal results from a 360-degree feedback process. In this system employees receive an appraisal from people both in the organization and outside the organization as well. In 360-degree feedback process, a retail salesclerk would receive an appraisal from his supervisor, peers (other salesclerks), managers of other departments or inventory personnel in the organization, as well as appraisals from customers and vendors employed outside the organization. The advantage of this system is that employees receive the widest possible range of feedback and the appraisal is less likely to be skewed by one person in the event of a personality clash or favoritism. One disadvantage of this system is its scope. With many people involved, the system becomes costly and time-consuming to administer.
Most organizations have settled with systems somewhere in the middle–not as extensive as a 360-degree feedback but not simply one appraisal from the supervisor.
©SHRM 2009

15. 3. Performance Appraisal
Steps in Appraising Performance 1 2
Defining the job 3
Appraising performance
Providing feedback

16. 3.1 Performance Appraisal Roles
Who should appraise?
1. Supervisors.
2. The HR Department
1. Supervisors:
Usually do the actual appraising
Must be familiar with basic appraisal techniques
Must know how to conduct appraisals fairly

17. 2. The HR Department:
Provides advice and assistance regarding the appraisal tool to use
Trains supervisors to improve their appraisal skills
Monitors the appraisal system’s effectiveness
Corrects any deviations from procedures

18. 3.2 Performance Appraisal Problems
lack of objectivity.
Central tendency error.
Recent behavior.
Supervisor unable to observe behavior.
Employees lack motivation.
No performance documentation.
Manager and employee don’t agree on results.
Managers are not always comfortable being the appraiser. Some simply don’t like the idea of judging the work of others. Others may have an inaccurate idea of what a manager is supposed to be. Some assume that good managers are tough and may give harsh ratings because they don’t want to be seen as pushover. Others may give lenient ratings, wanting to be liked by staff or fearing hostility or backlash if ratings are less that outstanding. None of these positions provide accurate ratings of the employees involved.
Of course, managers are human; there are some people they like and some that may not like. Bias is a common problem in performance appraisals, and managers must be reminded that performance appraisals should be objective. It is NOT an affirmation of friendship nor an opportunity to get even with someone you dislike. It becomes a serious problem for the organization when a manager manipulates the appraisal process to get a disliked employee fired or a favored employee promoted. Remember, performance appraisals can be subpoenaed as evidence in litigation, and the organization may be asked to defend their accuracy.
There are other errors as well. There is the halo effect, when there is one outstanding trait of an employee that overshadows all other activities in the appraisal. Then there is the horns effect, when one negative trait overshadows all the good an employee has done and results in a negative appraisal.
Just as some managers give strict or lenient ratings, some are too timid to give much of a rating either way. Instead of making a judgment, they simply rate all employees right down the middle of the scale. If it is a one-to-three scale, everyone gets a two. If it’s a one-to-five scale, most everyone gets a three. This can also occur when organizations ask managers to justify their ratings if they are anywhere other than middle of the road. If it’s too difficult to justify, managers will just stick to the middle. Or it may simply be that the manager can’t differentiate one way or the other. Whatever the reason, some employees probably deserve middle ratings, but it is likely not a true reflection of ALL staff. Organizations can avoid this by using a scale with an even number of ratings. It’s hard to find the middle number between one and six.
Recent behavior bias may occur when a manager fails to keep records of employee performance. Rather than looking at all behavior during the performance period, the manager rates only the most recent employee behavior because it is all the manager can remember. Appraisals must rate the entire performance period since the last appraisal was done and not just the last 30 days. Good managers keep records of employee performance--not just negative performance but outstanding performance, too. If records are kept, it is much easier to write the appraisal when the time comes.
Appraisals can be inaccurate when the supervisor is unable to observe the employee’s performance. Even with good intentions, a supervisor is unlikely to be able to observe all employee behavior, and critical incidents can be missed. This is particularly a problem when the supervisor and the employee work at different locations. Sometimes a staffing change can result in the assignment of a new supervisor who has had only a short time to observe employee behavior. When observation is impossible, the supervisor must rely on results for assessment instead of behaviors.
The possibility of error reminds HR how important it is to train managers in the performance appraisal process and to be vigilant in detecting appraisal patterns from managers that may signal inaccurate ratings.
©SHRM 2009

19. Appraising Performance: Problems and Solutions (cont)
Know the Problems
Control Outside Influences
Use the Right Tool
How to Avoid Appraisal Problems
Train Supervisors
Keep a Diary

20. Results of the performance appraisal are discussed.
4. Performance Review
During the performance review:
Results of the performance appraisal are discussed.
Identify what the employee has done well and poorly.
Giving feedback
4. Discuss the suggestions of changing behaviors.

21. 5. Performance Renewal and Re-Contracting
Final step in performance management process.
Readjust based on insight from completed process.
Plan for next performance management cycle.
This is the final stage in the performance management process. It is essentially the reverse of the performance planning that occurred at the outset. It is the time to assess the activities and make adjustments to improve the process for the next cycle. For example, if objectives were set unreasonably high, readjust objectives and affirm where the process should be in the future.
Remember, performance management is an ongoing cycle. Essential to the re-contracting process is discussion of prerequisites and planning for the next cycle. One cycle merges into the next as a seamless continuing activity.
©SHRM 2009

22. Poorly Implemented PM Systems
Reasons for Poorly Implemented PM Systems:
False and misleading information.
Increased turnover.
Wasted time and money.
Damaged relationships.
Decreased motivation.
Job dissatisfaction.
Unfair standards.
When performance management systems are poorly managed and don’t work as intended, there are a number of negative consequences. It is impossible for HR to make accurate and equitable employment decisions when employee files are littered with false and misleading information. Employees know when a favored employee receives an undeserved performance rating or when a supervisor unfairly gives staff inappropriately high ratings. Decisions made on such inaccuracies result in employee cynicism, distrust in management and loss of morale. At the least we can expect lower productivity, but worse yet, poorly managed performance management systems will send the best people packing and may lead to claims of discrimination and litigation.