PERFORMANCE MANAGEMENT

WHAT IS IT?

Performance Appraisal

A process, typically performed annually by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success.

Performance Management

The process of creating a work environment in which people can perform to the best of their abilities.

PURPOSES OF PERFORMANCE APPRAISAL

Developmental Provide performance feedback Identify individual strengths and weaknesses Recognize individual performance Assist in goal identification Evaluate goal achievement Identify individual training needs Determine organizational training needs Reinforce authority structure Allow employees to discuss concerns Improve communication Provide a forum for leaders to help Administrative Document personnel decisions Determine promotion candidates Determine transfers and assignments Identify poor performance Decide termination or retention Decide on layoffs Validate selection criteria Meet legal requirements Evaluate training programs/progress Personnel planning Make reward/compensation decisions

WHY DO APPRAISALS PROGRAMS FAIL?

Inadequate preparation on the managers part. Employee is not given clear objectives at the beginning of performance period. Manager may not be able to observe performance or have all the information. Performance standards may not be clear. Inconsistency in ratings among supervisors or other raters. Rating personality rather than performance. The halo effect, contrast effect, or some other perceptual bias. Inappropriate time span (too short or too long).

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Inflated ratings because managers do not want to deal with bad news. Subjective or vague language in written appraisals. Organizational politics or personal relationships cloud judgments. No thorough discussion of causes of performance problems. Manager may not be trained at evaluation or giving feedback. No follow-up and coaching after the evaluation.

There is little face-to-face discussion between the manager and employee being appraised. Managers feel that little or no benefit will be derived from the time and energy spent in the process. Managers dislike the face-to-face confrontation of appraisal interviews. Managers are not sufficiently adept at rating employees or providing them with appraisal feedback. The appraisal is just a once-a-year event, and there is little follow-up afterward.

DEVELOPING AN EFFECTIVE
APPRAISAL PROGRAM

What are the performance standards?

Training Appraisers

Are you complying with the law?

Who should appraise performance?

RATER ERRORS
Halo error occurs when a manager focuses on one positive aspect about an employee and generalizes it into an overall good appraisal rating. Horn error occurs when a manager focuses on one negative aspect about an employee and generalizes it into an overall poor appraisal rating. Error of central tendency in which all employees are rated above average. Leniency or Strictness error in which the appraiser tends to give employees either unusually high or unusually low ratings.

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Recency error in which the appraisal is based largely on the employees most recent behavior rather than on behavior throughout the appraisal period. Contrast error in which an employees evaluation is biased either upward or downward because of comparison with another employee just previously evaluated. Similar-to-me error in which an appraiser inflates the evaluation of an employee because of a mutual personal connection. Stereotyping

PERFORMANCE APPRAISAL METHODS

Trait methods

Are designed to measure the extent to which an employee possesses certain characteristics such as dependability, creativity, initiative, and leadership that are viewed as important for the job and the organization in general Are the most popular methods primarily because of the ease with which they can be developed

They include:
Graphic rating scale method Mixed-standard scale method Forced-Choice method Essay Method

(A) GRAPHIC RATING SCALE METHOD

A trait approach to performance appraisal whereby each employee is rated according to a scale of characteristics

Graphic Rating Scale Knowledge of work: Understanding of all phases of his/her work and related matters Initiative: Ability to originate or develop ideas and get things started
Needs instruction or guidance Has required knowledge of own and related work Has exceptional knowledge of own and related work

Lacks imagination

Meets necessary requirements

Unusually resourceful

(B) MIXED-STANDARD SCALES

A trait approach to performance appraisal similar to other scale methods but based on comparison with (better than, equal to, or worse than) a standard.
Example of a Mixed-Standard Scale
DIRECTIONS: Please indicate whether the individuals performance is above (+), equal to (0) or lower than (-) each of the following standards.

_____ Employee uses good judgment when addressing problems and provides workable alternatives; however, at times does not take actions to prevent problems (medium Problem Solving)

_____ Employee lacks supervisory skills; frequently handles employees poorly and is at times argumentative (low Leadership)
_____ Employee is extremely cooperative; can be expected to take the lead in developing cooperation among employees; completes job tasks with a positive attitude (high Cooperation)

(C) FORCED-CHOICE METHOD

A trait approach to performance appraisal that requires the rater to choose from statements designed to distinguish between successful and unsuccessful performance. The statements are designed to distinguish between successful and unsuccessful performance. The rater selects one statement from the pair without knowing which statement correctly describes successful job behavior.
1(a) Works hard 2(a) Shows initiative 1(b) Works quickly 2(b) Is responsive to customers

3(a) Produces poor quality

3(b) Lacks good work habits

(D) ESSAY METHOD

A trait approach to performance appraisal that requires the rater to compose a statement describing employee behavior. It usually requires the appraiser to describe the employees strengths and weaknesses, and to make recommendations for his or her development. Is often combined with other rating methods.

BEHAVIORAL METHODS
One way to improve a rating scale is to have descriptions of behavior along a scale, or continuum. These descriptions permit the rater to readily identify the point where a particular employee falls on the scale. Behavioral methods have been developed specifically to describe which actions should (or should not) be exhibited on the job. They include:

Critical Incident method Behavioral Checklist method Behaviorally Anchored Rating Scale (BARS)

(A) CRITICAL INCIDENT METHOD

An unusual event that denotes superior or inferior employee performance in some part of the job. The manager keeps a log or diary for each employee throughout the appraisal period and notes specific critical incidents related to how well they perform. When completing the appraisal form, the manager refers to the critical incident log and uses this information to substantiate an employees rating of outstanding, satisfactory, or unsatisfactory in specific performance areas and overall.

(B) BEHAVIORAL CHECKLIST METHOD

The rater checks the statements on a list that the rater believes are characteristics of the employees performance or behavior. Example of a checklist for computer salespeople might include the following statements:

_____ Is able to explain equipment clearly _____ Keeps abreast of new developments in technology _____ Tends to be a steady worker _____ Reacts quickly to customer needs _____ Processes orders correctly

(C) BEHAVIORALLY ANCHORED RATING SCALE (BARS)

A behavioral approach to performance appraisal that consists of a series of vertical scales, one for each important dimension of job performance.
Example of BARS for the job of firefighter Firefighting strategy: Knowledge of fire characteristics. This area of performance concerns the ability of a firefighter to use his/her knowledge of fire characteristics to develop the best strategy for fighting a fire. Observe fire and smoke conditions and locate source of fire. Etc. High 7 finds the fire when no one else can 6 correctly assesses best point of entry for fighting fire uses type of smoke as indicator of type of fire 5 understands basic hydraulics 4 3 cannot tell the type of fire by observing the color of flame cannot identify location of the fire 2 will not change firefighting strategy in spite of flashbacks and other signs that accelerants are present 1

Average

Low

RESULTS METHOD
Rather than looking at the traits of employees or the behaviors they exhibit on the job, many organizations evaluate employee accomplishments the results they achieve through their work. Looking at results such as sales figures and production output involves less subjectivity and therefore may be less open to bias. Further, results appraisals often give employees responsibility for their outcomes, while giving them discretion over the methods they use to accomplish them (within limits). This is empowerment in action.

(A) PRODUCTIVITY MEASURES

These measures directly link what employees accomplish and results that benefit the organization.
Salespeople are evaluated on the basis of their sales volume (no. of units sold and the dollar amount in revenues). Executives are evaluated on the basis of company profits or growth rate. Production workers are evaluated on the basis of the no. of units they produce and the scrap rate or no. of defects that are detected.

MANAGEMENT BY OBJECTIVES (MBO)

A philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager.

Step 1: Organization goals and metrics Step 2: Department goals and metrics Step 3: Supervisor and subordinate discuss and mutually determine goals and metrics Step 4: Mutual agreement of goals and metrics Step 5: Interim review Step 6: Final review Step 7: Review of organization performance

THE BALANCED SCORECARD

Can be used to appraise individual employees, teams, business units, and the corporation itself. The appraisal takes into account 4 related categories:

Financial Customer Processes Learning

These internal processes product development, customer service, etc. are critical for creating customer satisfaction and loyalty. Customer value creation in turn is what drives financial performance and profitability.

CONDUCTING THE APPRAISAL INTERVIEW

Ask for a Self-Assessment prior to the appraisal interview Invite Participation initiate a dialogue with the employee to help them improve on their performance Express Appreciation praise is a powerful motivator. Minimize Criticism Consider whether it is really necessary Do not exaggerate Watch your timing Make improvement your goal Change the behavior, not the person do not try to play psychologist. Focus on solving problems Be supportive Establish Goals - together Follow up day to day

FACTORS INFLUENCING PERFORMANCE

MOTIVATION Career ambition Employee conflict Frustration Fairness/Satisfaction Goals/Expectations

ENVIRONMENT Equipment/materials Job design Economic conditions Unions Rules and Policies Management Support Laws & Regulations

ABILITY Technical skills Interpersonal skills Problem-solving skills Analytical skills Communication skills Physical limitations