Appraising Employees Job Performance

Chapter 8

Gaining Competitive Advantage

• Corning had inadequate performance management system—this did not provide the organization with sound bases for making decisions regarding:– Promotions– Transfers– Pay raisesContained no vehicle for providing

employee feedback on strengths and weaknesses

Corning Solution

• New performance appraisal system which consisted of 3 parts:– Rating form containing behavioral standards– Rating form containing performance

objectives– Form where supervisors made salary and

promotion recommendations

How Did the New System Enhance Competitive Advantage

• Performance profiles derived from the behavioral ratings enabled supervisors to give employees specific feedback geared to improve their performance

• Performance objectives ensured that employee efforts were consistent with company goals

• Salary and Promotion Recommendations ensured that employees selected for promotion were qualified for their new jobs and those associates receiving merit increases were truly deserving of these

Linking Performance Appraisal to Competitive Advantage

• Performance appraisal system can create competitive advantage by improving employee job performance in two ways:– Directing ee behavior toward organizational goals

(focus on their contributions toward achieving their portion of the organizational goals)

– Monitoring behavior to ensure goals are met (supervisors can monitor direct reports’ job performance and adherence to the strategic plan—Is performance on target?

Linking Performance Appraisal to Competitive Advantage

• Performance appraisal systems often yield information for making employment decisions, like pay raises, promotions, discharges, demotions, transfers, training and the completion of probationary periods

• Performance appraisal systems also ensure legal compliance—a decision on an individual’s employment status was a fair one (i.e., an accurate assessment of job performance)

• Systems must ensure accurate and fair ratings

Linking Performance Appraisal to Competitive Advantage

• Minimize job dissatisfaction and turnover if employees view ratings as accurate and fair

• Retention issue—ees will stay with the organization if they perceive the atmosphere to be fair, progressive, and dynamic and an effective performance appraisal system fosters this perception

HRM Issues & Practices

• Clear a good performance management system can greatly benefit an organization– 65% of companies are dissatisfied with their

system– 90% of HR professionals and business

executives felt their system needed reform

(Discuss Exhibit 8-1—Identify a student to discuss)

HRM Issues & Practices

• Quality of the rating form must be relevant and the rating standards must be clear

• Relevance—the degree to which the rating form includes necessary information:– Include all pertinent criteria for evaluating

performance– Exclude criteria that are irrelevant to job performance– Criterion deficiency—omission of pertinent

performance criteria (i.e., police officer—base criteria on the number of arrests made—other aspects of performance (conviction record, court performance, number of commendations)

HRM Issues & Practices

• Relevance:– Criterion contamination—employees are

evaluated on factors that are irrelevant to the job (i.e., auto mechanic evaluated on personal cleanliness—what does this have to do with job performance)

• Clear Performance Standards—level of performance an ee is expected to achieve

(load truck in one hour vs. “work quickly”

HRM Issues & Practices

• Accuracy of the ratings—reflect the employees’ actual job performance levels:– Trust is an issue when ees don’t feel ratings

accurately reflect their performance levels– Leniency error—ratings are unduly favorable—no

need for ee to improve?– Severity error—ratings are unduly unfavorable

Managers do this for political reasons—manipulate the ratings to enhance or protect their self-interests—or may result from a manager’s lack of conscientiousness (Discuss Exhibit 8-2—student)

HRM Issues & Practices

• Halo Effect—ratings on each scale are influenced by the appraiser’s overall impression of an employee (i.e., if a rater is impressed with an individual’s intelligence they may overlook some deficiencies

• Implicit personality theory—a rater’s personal theory of how different types of people behave in certain situations—(i.e., conscientious person—come into work early—may not have observed attention to detail—just what the conscientious person is like

• Recency Error—an error that occurs when ratings are heavily influenced by recent events—ee performance reviewed once a year causes this to occur

HRM Issues & Practices

• Legal standards:– Charge of disparate impact in promotions

(e.g., fewer members of a protected class are being promoted) the court could scrutinize the job-relatedness of the appraisal form and the accuracy of ratings

– Judge would look at whether appropriate safeguards were taken:

• Upper management review of ratings• Formal system that allows ees to appeal their

ratings if perceived unfair

Types of Rating Instruments

• Employee comparison systems—ee performance is evaluated relative to other employees’ performances– Ranking formats:

• Simple rankings—rank order ees from best to worst, according to job performance

• Paired comparison—compare each possible pair of employees (i.e., ee 1 is compared to ee 2 and 3, and ee 2 is compared to ee 3—the ee winning the most “contests” receives the highest ranking

• Forced distribution—assign certain percentage of ees to each category of excellence (i.e., “best,” “average,” or “worst.” (analogous to grading on a curve—(HINT HINT Professor Duchon)

Types of Rating Instruments

• Employee comparison systems– Strengths—low cost and practical; ratings take little time and

effort—eliminates some rating errors like leniency is eliminated since the rater cannot give every ee an outstanding rating—only 50% above average

• Decisions on pay raises and promotions become much easier

– Weaknesses—rating standards for judging performance are vague or nonexistent, the accuracy and fairness of ratings can be seriously questioned. Don’t state what a worker must do to get a good rating—don’t direct or monitor ee behavior—and can’t compare performance from people of different departments fairly

Types of Rating Instruments

• Graphic rating scales—present appraisers with a list of traits assumed to be necessary to successful job performance (e.g., cooperativeness, adaptability, etc..)– 5 or 7 point scale– Strengths—many use these because they are practical and

cost little to develop—HR can develop the forms quickly—traits and anchors are written at a general level—they can be used by all job levels in the organization

– Weakness—vaguely defined traits to evaluate; fail to provide specific, non-threatening feedback; and rating accuracy—two raters may interpret the word “average” differently. Courts may view as a “subjective judgment call.” (Exhibit 8-4 page 240)

Types of Rating Instruments

• Behaviorally Anchored Rating Scales—requires appraisers to rate ees on their traits—better here A BARS anchors each trait with examples of specific job behaviors that reflect varying levels of performance (Figure 8-2 page 241)– Strengths—most legally defensible; we don’t have to

choose one behavior; and effective in directing ees’ behavior because it specifies what they need to do in order to receive a high performance rating

– Weaknesses—not practical like BARS takes a lot of time to develop; need a separate instrument for each job—would work with many incumbents

Types of Rating Instruments

• Management By Objectives (MBO)—a management system designed to achieve organizational effectiveness by steering each ee’s behavior toward the organization’s mission—process includes Goal setting, Planning, and Evaluation– Strengths—improves job performance by directing

behavior; performance standards are stated in objective terms; little time to develop and low cost; ees have a say in how their performance will be measured—opens the lines of communication

Types of Rating Instruments

– Weaknesses—• Focus on attention to goals—doesn’t specify behavior

required to achieve them• Successful achievement of MBO goals may be partly a

function of factors outside the worker’s control• Performance standards vary from ee to ee—goals set for an

“average” ee may be less challenging than goals set for a “superior” ee—Who should get the bigger raise?

• Puts stress and pressure on individual

(Discuss Exhibit 8-7 page 246—good test questions)

Designing an Appraisal System

• Step 1: Gaining Support for the System– Must have support of the entire workforce (appraisers,

ees, and upper management)—”real work” significance

– Gain support of Upper-Level Managers• Make process meaningful• Input in developing the system• Train managers• Hold manager’s accountable for providing accurate ratings

on a timely basis

Designing an Appraisal System

• Step 1: Gaining Support for the System– Gain support of EES

• Encourage users to participate in the planning and development of the system (i.e., task force devise a step-by-step approach in developing, implementing, and administering the system)

• Step 2: Choosing the Appropriate Rating System– Cost for development, implementation, and utilization– Nature of Job—Probably best to utilize “How” and

“What” of performance in addition to a development plan (i.e., executives and managers and professional level are more results orientation

Designing an Appraisal System

• Step 3: Choosing the Rater(s)– Supervisory ratings—responsibility of immediate

supervisor about 98% of the time—REALLY??– Peer Ratings—supplement supervisor ones—can

develop a consensus about an individual’s performance

• Issues competitive nature of the organization’s reward system and friendship

– Self-Ratings—used for ee development– Multiple raters—360 degree feedback systems—circle

of people who frequently interact with the manager

Designing an Appraisal System

• Step 4: Determining the Appropriate Timing of Appraisals– Annually or anniversary based—(discuss impact on merit

increases and strategic intent)

• Step 5: Ensuring Appraisal Fairness– Upper level management review of appraisals—are halo or

central tendency errors occurring– Appeals System—provides a means for ees to obtain a fair

hearing if they are dissatisfied with their appraisals:• Allow ees to voice their concerns• Fosters more accurate ratings• Often prevents the involvement of outside partiesDownside may undermine the authority of the supervisor—but

then again it keeps issues internal