PERFORMANCE &

POTENTIAL APPRAISAL
 “Nurturing
turns
potential into
performance
”
What is performance appraisal?
 Employee Assessment – the assessment of an
employee's effectiveness, usually as undertaken at
regular intervals
 Performance appraisal may be defined as a
structured formal interaction between a subordinate
and supervisor in which the work performance of
the subordinate is examined and discussed
 with a view to identifying weaknesses and strengths as
well as opportunities for improvement and skills’
development
 Performance Management

Performance appraisal: the measurement and

assessment of an employee’s job performance
Performance management: the integration of
performance appraisal systems with other HRM
systems for the purpose of aligning the
employees’ work behaviors and results with the
organization’s goals
 Example: link an employee’s pay increase to the
employee’s job performance
 To do this, we have to measure the employee’s job
performance
 Goal: Improve the organization by improving the
employees’ work behaviors and results
4
 Identifying and Measuring
Employee Performance
Performance Management System
 Processes used to identify, encourage, measure,

evaluate, improve, and reward employee

performance.
Performance
 What an employee does and does not do.
 Quantity of output • Quality of output
 Timeliness of output • Presence at work
 Cooperativeness
Job Criteria
 Important elements in a given job
 Performance
Management
Linkage

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rights reserved.
 Performance Standards
Performance Standards
 Expected levels of performance
 Benchmarks
 Goals
 Targets
Characteristics of Well-defined Standards
 Realistic

 Measurable

 Clearly understood
 Performance Management
Developing Performance Goals/Objectives
Avoid Unrealistic Goals

1.Use specific examples of behaviors and of the desired

results
2.Avoid using evaluative terms which do not describe
behaviors and/or outcomes, such as "good work" and "bad
attitude"
3.Be wary of using terms such as "always" and "never." It
is not realistic to expect that a staff member will always
perform perfectly and will never make a mistake
4.Avoid using numbers in goals unless you actually intend
to count the behavior
5.Consider the cost/benefit of gathering data on
performance
 Performance Management
Developing Performance Goals/Objectives
Verifying and Recording Performance

Methods of Verifying Performance

Determined at the start of the evaluation period and
discussed with the staff member.
•Direct observation
•Reports of others' observations
•Written records such as attendance, financial, assignment
logs, and status reports
•Results in the form of tangible products
 Performance Management
Developing Performance Goals/Objectives
Verifying and Recording Performance

Record Performance
•Record only job-related performance, avoid making
statements about an individual
•Do not try to record every event; select a representative
sample of performance
•Cross validate reports from others
•Record both positive and negative performance
 Difference Between Performance
Management and Performance
Appraisals
 Performance  Performance
Management Appraisal
 Processes used to  The process of
identify, encourage, evaluating how well
measure, evaluate, employees perform their
improve, and reward jobs and then
employee communicating that
performance. information to the
employees.

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Why Have Performance Appraisal ?
 Performance Appraisal offers several
advantages at the level of the:
 Individual
 Recognition of past effort
 Developmental requirements can be uncovered
 Team
 Alignment of effort with objectives
 Motivation of team members
 Organization
 Development of staff
 Achievement of key objectives
 Best and focused utilization of human resources
 Uses of Performance Appraisal
Performance Appraisal (PA)
 The process of evaluating how well employees

perform their jobs when compared to a set of

standards, and then communicating the
information to employees.
 Informal Appraisal
 Day-to-day contacts, largely undocumented
 Systematic Appraisal
 Formal contact at regular time intervals, usually
documented
 Uses of Performance Appraisal
(cont’d)

Performance
Performance
Appraisal
Appraisal

Administering
AdministeringWages
Wages Giving
GivingPerformance
Performance Identifying
IdentifyingStrengths
Strengths
and
andSalaries
Salaries Feedback
Feedback and
andWeaknesses
Weaknesses
 Uses of Performance Appraisal (cont’d)

Criticisms of Performance Appraisal

 Focus is too much on the individual and does little

to develop employees.
 Employees and supervisors believe the appraisal

process is seriously flawed.

 Appraisals are inconsistent, short-term oriented,

subjective, and useful only at the extremes of

performance.
Conflicting Roles for Performance Appraisal
Typical Division of HR Responsibilities
for Performance Appraisal
 Who Conducts Appraisals
Supervisors who rate their subordinates
Employees who rate their supervisors
Team members who rate each other
Outside sources
Employees’ self-appraisal
Multisource (360° feedback) appraisal
 Objectives

 Compensation decisions
 Promotion decisions
 Training and development programmes
 Feedback to the employee
 Personal growth and development
 Performance Management Cycle

Development
Tool
Administrative
Tool

Source of figure: Adapted from Fisher, Schoenfeldt, & Shaw (2006), Figure 10.1, p. 421

20
The Performance Appraisal Process

Establish performance standards

Communicate the standards
Measure actual performance
Compare actual performance with standards
and discuss the appraisal
Take corrective action, if necessary
 Types of Performance to Measure

What aspects of an employee’s job

performance can we measure?
 We have 3 basic choices:
 Results produced by the employee
 Example for a salesperson: Amount of sales ($) in the

past month
 Behaviors of the employee
 Example for a salesperson: Number of sales calls in

the past month

 Traits of the employee
 Example for a salesperson: Friendliness
Types of Performance Information

Trait-based
Trait-based
Information
Information

Job
Job Behavior-based
Performance?
Behavior-based
Performance? Information
Information

Results-based
Results-based
Information
Information
 Types of Performance Information

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 Types of Performance to Measure

Results-based (results-oriented): measure

the results produced by the employee
 Examples for a retail store manager (examples of
some results for which the store manager has
responsibility and so should be held accountable):
 Sales of the store
 Profit per square foot
 Inventory shrinkage
 Customer satisfaction

 Makes sense for most jobs

 Results matter (usually)
 Types of Performance to Measure

Results-based (more)
 Challenges:
 Which results are relevant may not be obvious for all
jobs
 Some results are not under the employee’s control
 May foster a “results at all costs” mentality
 May interfere with teamwork
 May be difficult to provide effective feedback
 Types of Performance to Measure

Behavior-based (behavior-oriented): measure

the employee’s behaviors
 Examples for a retail store manager:
 Good attendance
 Completes management reports correctly & on time
 Monitors customers and employees for theft
 Coaches employees to welcome customers to the store &
offer assistance within 3 minutes, and to thank customers
as they leave
 Conducts regular sessions with employees to develop
teamwork
 Makes sense for many jobs
 Use it where how the employee produces results matters
 Types of Performance to Measure

Behavior-based (more)
 Advantage: Makes it easier to provide effective
performance feedback to employees
 Examples for a retail store manager:
 Feedback with results-oriented performance appraisal:
“You didn’t achieve your sales goal.” (Measured by
sales reports)
 Feedback with behavior-oriented performance appraisal:
“You are allowing your employees to wait too long
before offering help to customers.” (Measured by
observations of a secret shopper)
 Challenges:
 Difficult to capture the full range of relevant behaviors
 Different behaviors can lead to the same results
 We may not always care which behaviors were used
 Types of Performance to Measure

Trait-based (trait-oriented): measure the

employee’s personal characteristics
 Examples for a retail store manager:
 Ability to make decisions
 Loyalty to the company
 Communication skills
 Level of initiative
 This is usually a bad idea for several reasons:
 Poor reliability & validity of measures of traits
 Weak relationship between traits and job effectiveness
 Measurements of traits are more likely to be subject to
biases (sexism, racism, ageism, etc.)
 Hard to use traits to provide effective feedback
 Types of Performance to Measure

So, in most cases, we want to measure the

job performance of an employee in terms of
the results and behaviors of the employee
 Make a list of results & behaviors that are relevant
to the job
 Starting point: Use the job description to identify the
essential tasks of the job
 Example task statement on job description for a
Retail Store Manager: “Manage inventory shrinkage.”
 Translate the tasks into results & behaviors
 Example (continued): Measure the amount of
inventory shrinkage in the store (a result)
Characteristics of an Effective
Appraisal System
 Job-related criteria
 Performance expectations
 Standardization
 Trained appraisers
 Continuous open communication
 Performance reviews
360-Degree Feedback

 Performance information is collected from

supervisors, subordinates, peers, and
internal/external customers
 Generally done for development rather than
for pay raises
Multisource Appraisal
360-degree Feedback
 Many organizations now use some form of
360-degree feedback program
 Upward and peer feedback can have positive
effects on behavior
 These effects are sustainable over time
 Introducing a 360-degree system into a culture not
prepared for it can have disastrous effects
360-degree Feedback
 Positive features of a 360-degree system:
 Multiple perspectives of a person’s performance
 Raters base evaluations on contact and observation
 Feedback is provided from multiple directions…
above, below, peer
 Anonymous upward feedback, which results in full
participation
 Learning about weaknesses and strengths is
motivational
360-degree Feedback
 Negative features of a 360-degree system:
 Feedback from all sources can be overwhelming
 Rater can hide in a group of raters and provide
harsh evaluations
 Conflicting ratings can be confusing and frustrating
 Providing feedback that is constructive requires a
plan and well-trained raters
Selected Evaluation Techniques
 Ways of evaluating employees can generally
be divided into two categories:
 Methods that evaluate employees individually
 Multiple-person evaluations
 In a multiple-person evaluation, the supervisor
directly and intentionally compares the
performance of one employee to that of others
Performance Appraisal Methods
Individual Evaluation Methods
 Graphic rating scale
 The rater is presented with a set of traits
 The employee is rated on the traits
 Ratings are assigned points, which are then
computed
 Raters are often asked to explain each rating with a
sentence or two
Individual Evaluation Methods
 Forced choice:
 Was developed because graphic rating scales
allowed supervisors to rate everyone high
 The rater must choose from a set of descriptive
statements about employee
 Supervisors check the statements that describe the
employee, or they rank the statements from most to
least descriptive
 Forced choice can be used by superiors, peers,
subordinates, or a combination of these
Individual Evaluation Methods
 Essay Evaluation
 The rater is asked to describe the strong and weak
aspects of the employee’s behavior
 It can be used by superiors, peers, or subordinates
 Essay evaluations are flexible; an evaluator can
specifically address the ratee’s skill in any area
 Comparing essays is difficult
 Skilled writers can paint a better picture
Individual Evaluation Methods
 Critical Incident Technique
 Raters maintain a log of behavioral incidents that
represent effective and ineffective performance for
each employee
 Two factors determine the success of this technique:
 The supervisor must have enough time to observe

subordinates during the evaluation period

 The supervisor must record incidents as they are

seen
 Logs can help avoid common rating errors and
facilitate discussions about performance improvement
 TABLE 9–1 Examples of Critical Incidents for a Plant Manager

Continuing
Duties Targets Critical Incidents

Schedule 90% utilization of Instituted new production

production for personnel and scheduling system; decreased
plant machinery in plant; late orders by 10% last month;
orders delivered on increased machine utilization in
time plant by 20% last month

Supervise Minimize inventory Let inventory storage costs rise

procurement of costs while keeping 15% last month; overordered
raw materials and adequate supplies parts “A” and “B” by 20%;
inventory control on hand underordered part “C” by 30%

Supervise No shutdowns due Instituted new preventative

machinery to faulty machinery maintenance system for plant;
maintenance prevented a machine breakdown
by discovering faulty part
Individual Evaluation Methods
 Checklists
 In its simplest form, the checklist is a set of
objectives or descriptive statements
 If the rater believes that the employee possesses a
listed trait, the item is checked
 A rating score equals the number of checks
Individual Evaluation Methods
 A variation is the weighted checklist
 Supervisors and HR specialists prepare a list of
descriptive statements about behavior
 Judges who have observed behavior on the job sort
the statements into piles rated from excellent to
poor
 When there is agreement on an item, it is included
in the weighted checklist
 The employee’s evaluation is the sum of the scores
(weights) on the items checked
Checklists and weighted checklists can be used
by superiors, peers, or subordinates
Individual Evaluation Methods
 Behaviorally Anchored Rating Scales
 Smith and Kendall developed the behaviorally
anchored rating scale (BARS), or the behavioral
expectation scale (BES)
 The BARS approach uses critical incidents to
anchor statements on a scale
 The rater reads the anchors and places an X at some
point on the scale for the ratee
Individual Evaluation Methods
 A BARS usually contains these features:
 Six to 10 performance dimensions identified and
defined by raters and ratees
 The dimensions are anchored with positive and
negative critical incidents
 Each ratee is then rated on the dimensions
 Ratings are fed back using the terms on the form

It takes two to four days to construct a BARS that is

jargon free and closely related to the requirements of the job
 Behaviorally Anchored Rating Scale

Uses specific descriptions of actual behaviors to rate various levels of actual

performance
 Behaviorally-Anchored Rating Scale
for Customer Service Skills

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Multiple-Person Evaluation Methods
 Ranking
 A supervisor is asked to rank subordinates in order
on some overall criterion
 It is easier to rank the best and worst employees
than average ones
 Alternative rankings can help with this difficulty
 Pick the top employee first, then the bottom one
 The second best is chosen, then the second worst
 Follow this process until everyone has been ranked
Multiple-Person Evaluation Methods
 Paired Comparison
 The supervisor reviews a series of cards; each
contains two subordinates names
 The higher performer in each pair is chosen
 Final ranking is made by counting how many times
a given employee was chosen as the better
performer
 A major limitation is the number of paired
comparisons that must be made
 With only 10 subordinates, a supervisor would have
45 pairs of names
Paired Comparison Method
Multiple-Person Evaluation Methods
 Forced Distribution
 Employees are rated on a pre-existing distribution
of pre-determined categories
 The predetermined distribution must be followed,
regardless of how well the employees performed
 A supervisor with all exceptional subordinates will
be forced to rate some poorly
 A supervisor with mediocre subordinates must rate
some highly

This technique is similar to grading on a curve

Forced Distribution Method
 At Sun Microsystems managers appraise
employees in groups of about 30.
 There is a top 10%, a middle 70%, and a
bottom 10%.
 The bottom 10% can either take a quick exit
package or embark on a 90-day performance
improvement action plan.
Forced Distribution on a Bell-Shaped Curve

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Multiple-Person Evaluation Methods
 An MBO program follows a systematic process:
 Superior/subordinates define tasks and set objectives
 The superior, consulting with subordinates, sets criteria
for assessing objective accomplishment
 Dates to review progress are agreed upon and used
 Superior and subordinates make any required
modifications in the original objectives
 A final evaluation by the superior is made
 The superior meets with the subordinate in a
counseling, encouraging session
 Objectives for the next cycle are set
 Management by Objectives (MBO)
 A comprehensive and formal
organizationwide goal-setting and appraisal
program requiring:
1. Setting of organization’s goals.
2. Setting of departmental goals.
3. Discussion of departmental goals.
4. Defining expected results (setting individual
goals).
5. Conducting periodic performance reviews.
6. Providing performance feedback.
 TABLE 9–3 Important Advantages and Disadvantages of Appraisal
Tools
Tool Advantages Disadvantages
Graphic rating Simple to use; provides a Standards may be unclear; halo
scale quantitative rating for each effect, central tendency, leniency,
employee. bias can also be problems.

BARS Provides behavioral “anchors.” Difficult to develop.

BARS is very accurate.

Alternation ranking Simple to use (but not as simple as Can cause disagreements among
graphic rating scales). Avoids central employees and may be unfair if all
tendency and other problems of employees are, in fact, excellent.
rating scales.

Forced distribution End up with a predetermined Employees’ appraisal results depend

method number or % of people in each on your choice of cutoff points.
group.

Critical incident Helps specify what is “right” and Difficult to rate or rank employees
method “wrong” about the employee’s relative to one another.
performance; forces supervisor to
evaluate subordinates on an ongoing
basis.

MBO Tied to jointly agreed-upon Time-consuming.

performance objectives.
Performance Evaluation Problems

No technique is perfect;
they all have limitations
Opposition to Evaluation
 Most employees are wary of performance evaluation
 Subjective bias and favoritism are real problems

 Opponents of formal evaluation argue that:

 They focus too much symptoms of poor performance
rather than finding the underlying causes
 Managers and employees dislike the process
 Raters have trouble deciding performance levels
 Employees who are not placed in the top performance
category experience a reverse motivation effect
System Design and Operating Problems
 Performance evaluation systems break down
because they are poorly designed
 If the criteria focus solely on results, or on
personality traits rather than performance, the
evaluation may not be well received
 Some techniques take a long time to carry out or
require extensive written analysis, both of which
managers resist
 Some systems are not fully online
Rater Problems
 Even if a system is well designed, problems can arise if
raters are not cooperative and well trained
 Supervisors may not be comfortable “playing God”

 Inadequate training can lead to:

 Problems with standards of evaluation
 Halo effect
 Leniency or harshness
 Central tendency error
 “Recency of events” error
 Contracts effects
 Personal bias (stereotyping, similar to me)
Common Rater Errors
Standards of Evaluation
 Problems with evaluation standards arise
because of perceptual differences in the
meaning of words
 Good, adequate, satisfactory, and excellent mean
different things to different evaluators
 If only one rater is used, evaluations can be
distorted
 This arises most often in graphic rating scales
 It may also appear with essays, critical incidents,
and checklists
 Potential appraisal

 The objective of potential appraisal is to identify the

potential of a given employee to occupy higher
positions in the organizational hierarchy and
undertake higher responsibilities. It is required to:
 Inform employees about their future prospects
 Help the organization chalk out a suitable
succession plan
 Update training efforts from time to time
 Advise employees about what they must do to
improve their career prospects.
 Problem Stars
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PERFORMANCE