Week 8 - Chapter 8

Who will conduct appraisals - Customers (clients)

- In many service jobs, it is the customer who has the best opportunity to observe an employee's performance - customers doesn't always have a clear understanding of the employee's job and customers can also be biased in their ratings

Performance Appraisal Methods - Comparative Methods - Alternate Ranking

- (a.k.a. alternation ranking) - Instead of ranking from best to worst, supervisors first select their best, then their worst, then their next best, next worst, etc. - This is a little easier than straight ranking but it is still difficult to determine who should go first among a group of average performers - someone who is ranked 8 out of 20 may in reality not be very different from the person ranked 16, yet a ranking doesn't reflect that - Alternate ranking has all the same drawbacks as ranking

Performance Appraisal Methods - Behaviorally Anchored Rating Scale (BARS)

- An appraisal system that represents a combination of the graphic rating scale and the critical incident method - Consists of rating scales for multiple job dimensions each of which is "anchored" with behavioral statements at a range of performance levels - When using the BARS method, managers are instructed to choose the number that best describes the employee the manager is evaluating - This type of scale is better for providing feedback and in developing employees than the graphic rating scale or the comparison methods DISADVANTAGE - it can be time‐consuming and costly to develop and use

Performance Appraisal Methods - Behavioral Observation Scale (BOS)

- Another appraisal system that is developed from critical incidents. - Managers rate the frequency with which the employee has exhibited each behavior during the rating period - Similar to the BARS, there would be several performance dimensions for each job - Instead of using a rating scale in which managers choose only one behavior, managers instead indicate how frequently the employee does a long list of behaviors - This allows managers to provide even more specific feedback for developmental purposes than the BARS. ADVANTAGES - generally acceptable to employees and superiors - Is perceived as fair for reward and promotion decisions DISADVANTAGE - It can be time‐consuming to develop/use (but not quite as time‐consuming as BARS) - Have some potential for rating error (e.g., a manager in a hurry could simply circle the same number for the entire list)

Performance Appraisal Methods

- Comparative Methods - Rating Scales - Critical Incident - Management by Objectives

Rating Errors - Common Errors - Contrast Error

- Comparing people against one another instead of against an objective standard - Recall that contrast error also occurs in interview situations - the manager ends up giving employees ratings higher or lower than they deserve because of a contrast effect - Example: if the manager has just evaluated two or three employees that are extremely weak, and then he/she evaluates an average employee, the average employee might get higher than average ratings due to the contrast

Annual Reviews

- For organizations that still use the annual review, some do all employee performance appraisals at the same time each year - other companies, will complete an employee's performance appraisal on his or her anniversary date (i.e., the date in which he/she was hired) - advantage of the anniversary date approach is that it spreads the work load over the year so that a manager has more time to devote to each employee's review - there is evidence that individuals who have their anniversary date at the end of the year are at a disadvantage - This is because of budgets often ending at the end of the year - If there isn't any money in the budget for pay raises, a manager may end up giving an employee a lower rating than those with equivalent performance who were rated earlier in the year because there is no money in the budget for a pay raise

Rating Errors

- In some cases rating errors (or bias) is intentional, raters know they are rating employees higher or lower than they deserve - In other cases it is unconscious or unintentional, raters don't realize they are providing inaccurate ratings Intentional Rating Errors Reasons for Deflating Performance Ratings • To teach rebellious employee who is in charge • To send message that employee should leave organization • To document poor performance and build written record so that an employee can be fired • Higher ratings would lead to unaffordable pay raises Intentional Rating Errors Reasons for Inflating Performance Ratings • To avoid confrontation with employee • Low ratings may reflect badly on supervisor or unit • To reward an employee who has shown improvement • To get employee promoted out of supervisor's work unit • To maximize an employee's raise • Supervisor feels sorry for employee who has been having personal problems - It is always best to provide ACCURATE performance appraisal ratings

Performance Appraisal Methods - Comparative Methods - Paired Comparison

- In the paired comparison method, every employee is compared with every other employee - in this example, A is compared with B, then A with C, then A with D, then B with C, B with D, and C with D - The idea behind this is that by comparing only two people at a time, it allows the rater to make more precise judgments of who is better - it is easier to compare just two people at a time than 3 or 4 or more - employees may be compared with one another in terms of their overall performance - employees may be compared with one another on several different performance dimensions - paired comparison method is totally impractical for a large number of employees - While it is an effective method in differentiating higher performers from lower performers, like other comparison methods, it is not useful for feedback and developmental purposes

Performance Appraisal Methods - Management by Objectives (MBO)

- Individuals at each level of the organization set goals in a process that flows from top to bottom, so that all levels are contributing to the organization's overall goals - Employees are evaluated on the extent to which they meet their personal performance objectives - a results‐oriented method of performance appraisal DISADVANTAGE - Too much paperwork - Too much emphasis on the short term - Cost‐reduction goals have been met by deferring needed maintenance - Sales‐volume goals have been met by pushing easily sold but low‐profit items - Labor cost goals have been met by eliminating training and development

Rating Errors - Common Errors - Recency

- Managers have limited ability to remember how the employee performed throughout the rating period - This is particularly true if performance is only evaluated once a year - Managers tend to remember what happened recently as opposed to what happened a year ago - the overall evaluation might be biased in that it reflects only the employee's recent performance

Performance Appraisal Methods - Rating Scales

- Managers rate each employee on a list of performance dimensions using a rating scale - drawback of this approach is that it leaves to each individual manager's own interpretation what is "excellent knowledge" or "commendable judgment" or "poor interpersonal skills" - The result is low reliability because different managers are likely to arrive at different judgments ADVANTAGES • Are inexpensive to develop • Are easy to use DISADVANTAGES • Have high potential for rating errors • Are not useful for employee counseling - This is because there is no behavioral information provided in this format. For example, what does a "below average" attitude mean or a slightly above average rating in working with others?

Who will conduct appraisals - Self-Rating - Part 1

- Many companies have employees rate their own performance - used in addition to supervisor ratings - criteria for a good rater: employees typically have a clear understanding of their own job - opportunity to observe: employees can't observe themselves, yet they are generally (but not always) aware of whether they are meeting performance expectations - bias: self‐ratings can be very biased - If companies were to rely on self‐ratings alone, it is likely that the ratings would be very biased with employees giving themselves ratings higher than they deserve - when self‐ratings are used in combination with supervisor ratings, they can be very beneficial - self‐ratings often tend to be modest or lower than supervisor ratings if the employee knows that the supervisor will be reviewing the employee's self-ratings

Performance Appraisal System

- Many companies today have their performance appraisal system built into their HRIS system - Online performance appraisal systems can be more efficient than paper and pencil forms - Online systems are also good at keeping track of scheduling and documentation - Some performance appraisals have comment sections - In some software programs, managers can choose from a pre‐established set of comments - The manager merely has to skim through a sample list of possible feedback comments that go with each performance dimension and click on the one that they think fits best with the employee he/she is evaluating - This saves on writing time and is particularly helpful for managers whose writing skills are not the best

Who will conduct appraisals - immediate supervisors

- Most organizations have immediate supervisors conduct performance appraisals on their subordinates - In most cases supervisors do meet all 3 criteria for a good rater - Supervisors usually have an opportunity to observe their subordinates perform their jobs and they have a clear understanding of the job that their subordinates are performing - Supervisors can be biased in their appraisal ratings but careful training and careful selection of supervisors can reduce bias.

Rating Errors - Common Errors - Halo/Horn

- One positive performance characteristic causes the manager to rate all other aspects of performance positively

Who will conduct appraisals - Subordinates (direct reports)

- Some companies have employees rate the performance of their managers - do not have the opportunity to observe every aspect of their supervisor's job nor do they always have a clear understanding of all their supervisor's responsibilities and job‐related tasks - tend to be biased - tend to focus only on the interpersonal treatment they receive from their supervisor - can be useful as interpersonal skills are an important part of any supervisor's job ADVANTAGES •Helps in identifying competent managers •Serves to make managers more responsive to employees •Contributes to the career development of managers DISADVADVANTAGES •Negative reactions by managers to ratings •Subordinates' fear of reprisals may inhibit them from giving realistic negative ratings - Many, if not most, are unwilling to evaluate their supervisors unless the ratings are anonymous - research shows that managers tend to discount criticism received unless they know who said it

Performance Appraisal Methods - Critical Incident

- Supervisor keeps a record of positive and negative examples (critical incidents) of a subordinate's work‐related behavior Critical Incident Log - A supervisor would keep a log for each employee, writing down critical incidents as they occur ADVANTAGES - allows managers to provide very specific feedback that can be used for development - manager does not have to rely on his or her memory - manager has specific examples of what the employee did and when DISADVANTAGES - not without potential for bias - If a manager doesn't like an employee, he or she is unlikely to notice the employee doing anything right and the positive behavior column may end up empty whereas the negative behavior column might be full - also provides no quantifiable measure of performance so it is less useful for making administrative decisions such as how big a pay raise should be given or who should get a promotion

Decisions about the performance appraisal process

- Who will conduct appraisals - Type of appraisal system to use - Timing of the appraisals

Who will conduct appraisals - Self-Rating - Part 2

- a good way to get employees to think about their own strengths and weaknesses - Then when the performance feedback session occurs, the employee is less likely to get defensive or be surprised when his/her weaknesses are discussed - a good way for employees to remind supervisors of their accomplishments - Supervisors, like all humans, have limited information processing capabilities and because they are typically evaluating many employees at the same time, they may not remember each of their subordinate's major accomplishments during an evaluation cycle - Seeing an employee's self‐ratings can be very helpful to supervisors - Reviewing an employee's self‐ratings on a rating scale can also be helpful in determining whether the employee and employer have similar perceptions regarding the level of performance that is expected

Performance Appraisal Methods - Comparative Methods - Forced Distribution

- a.k.a. forced ranking - managers are "forced" to place only a certain percentage of employees in the various rating categories - Companies who use this method typically do so because they had problems with leniency in the past - used when managers have had a tendency to give all their employees higher ratings than they deserve DISADVANTAGES - like all other comparison methods, it is not useful for feedback and development - based on the assumption that performance is normally distributed, that there are some high and low performers, but that most are average - if HR managers are doing their jobs right, then they should be hiring the best and brightest, carefully training and developing them to enhance their performance, providing compensation and rewards that motivate them to do their best, and creating an organizational culture that keeps them engaged - If so performance would NOT be normally distributed, instead it would be skewed to the right so that there are more high performers than low performers

performance appraisal vs performance management

- major difference between the two is that performance appraisal tends to be an annual event where as performance management is continuous - There is also more focus on alignment with the strategic goals of the company in performance management. - Performance appraisal is just one part of performance management.

360 degree appraisal

- refers to an appraisal method in which ratings come from multiple sources including supervisors, peers, subordinates, and others such as clients or customers ADVANTAGES • The system is more comprehensive in that responses are gathered from multiple perspectives • It may lessen bias/prejudice since feedback comes from more people, not one individual • Feedback from peers and others may increase employee self‐development DISADVADVANTAGES • Feedback can be intimidating and cause resentment if employee feels the respondents have "ganged up." • The system requires training to work effectively • Employees may collude or "game" the system by giving invalid evaluations to one another • Appraisers may not be accountable if their evaluations are anonymous - Research shows that 360 degree appraisal is highly useful for developing employees - it only effective in workplace cultures where there is a high level of trust

Performance Appraisal Methods - Comparative Methods - Ranking

- supervisors rank order their subordinates from best to worst DISADVANTAGES to Ranking: - Does not show size of differences in performance between employees - Implies that lowest‐ranked employees are unsatisfactory performers - Becomes an unwieldy process if the group to be ranked is large - It is not useful for feedback and development - Telling an employee he/she was ranked 5 out of 10 is not helpful in terms of identifying what the employee needs to do to improve

Legal Guidelines for Appraisals - Details

- there have been many court cases regarding discrimination in the performance appraisal process - employers are more likely to prevail in a lawsuit if their performance appraisal system meets each of the guidelines listed - When any of these are absent, employers tend to lose the lawsuit - With regard to performance ratings being job‐related, behavioral performance appraisal formats (BOS, BARS, Critical Incident approach) are less likely to be criticized by the courts than graphic rating scales which include subjective characteristics such as attitude, ability to work with others, teamwork, judgment, etc. - Regarding number 2, according to the courts, you can't fire an employee for poor performance, no matter how much documentation you have, if that employee was never counseled on his or her poor performance and if he/she was never informed of the consequences of failure to improve - bottom line is that employees must be given performance feedback

Who will conduct appraisals - Peer ratings

- when employees or coworkers rate each other's performance - generally have an opportunity to observe the performance of their coworkers - generally have a good understanding of the jobs performed by their coworkers - bias can be a problem - In most cases, will be positively biased with employees tending to give their coworkers ratings higher than they deserve - In some cases, employees may make an agreement with their coworkers such as "I will rate you high, if you rate me high." - Conversely, in highly competitive work cultures, employees may intentionally rate their coworkers lower than they deserve, in an effort to make themselves look better

Requirements of Effective Performance Appraisals - Part 1

1. Consistent with business strategy - It is important that the goals and objectives of the business are incorporated in the performance appraisal system 2. Beneficial as a development tool - If the performance ratings that employees receive are vague with no clear identification of what needs to be done to improve, then the performance appraisal will not be useful as a developmental tool 3. Useful as an administrative tool - If the performance appraisals do not differentiate high performers from low performers then they are not useful as an administrative tool - If all employees get the same rating, then there would be no way to determine who should get a promotion, or pay raise, etc.

Legal Guidelines for Appraisals

1. Performance ratings must be job‐related 2. Appraisals should be discussed openly with employees and counseling or corrective guidance offered 3. Employees must be given a written copy of their job standards in advance of appraisals 4. Managers who conduct the appraisal must be able to observe the behavior they are rating 5. An appeals procedure should be established to enable employees to express disagreement with the appraisal 6. Supervisors should receive training (e.g., common rating errors, providing effective feedback)

Uses for performance appraisals - Administrative

1. Used to make decisions regarding pay raises and making decisions regarding promotions, transfers, demotions or dismissals 2. Job performance measures are typically performance appraisal ratings and are critical for validating staffing procedures 3. Performance appraisal information is also critical for evaluating HRM policies or programs - For example, if you implement a new training program, you might use performance appraisal information to evaluate the effectiveness of that training program or you might be interested in whether some other HR program, such as a reward or recognition program, had any impact on performance appraisal ratings.

Uses for performance appraisals - Developmental

1. critical for improving performance - employees need feedback on their strengths and weaknesses in order to improve 2. could indicate that there is a need for training - the manager would need to determine if the performance gap is a result of a "won't do" (i.e., motivation) issue or a "can't do" (lack of KSAs) issue 3. Determining career goals - managers discuss career goals and steps the employee will need to take in order to meet his/her career goals

Requirements of Effective Performance Appraisals - Part 2

4. Legal and job related - Just as many employers have been sued for discrimination in their hiring practices, employers have also been sued for discrimination in their performance appraisal processes 5. Viewed by employees as fair - In order for performance appraisals to be effective in motivating employees to continue to perform and to grow and develop their skills, employees must believe they are being rated fairly 6. Effective in documenting employee performance - Performance documentation is a key aspect of HR work - Documentation is important for development but, more importantly, it is important for avoiding lawsuits - Employers need to have clear and unbiased documentation that supports their employment decisions

Uses for performance appraisals

Administrative: - Linking Rewards/Discipline to performance - Validating staffing procedures - Evaluation of HRM policies and programs Developmental: - Improving performance - Determining training needs - Determining career goals

performance appraisal

Any procedure that involves - (1) setting work standards - (2) assessing the employee's actual performance relative to the standards - (3) providing feedback to the employee with the aim of motivating that person to eliminate performance deficiencies or to continue the performance above par

Performance Appraisal Methods - Comparative Methods

Examples: - Ranking - Alternate Ranking - Paired Comparison - Forced Distribution Why compare? - useful when administrative decisions such as promotions, transfers, raises or layoffs have to be made - force the evaluator to differentiate high performers from low performers - companies who use or have used comparison methods, do so because they found their supervisors were giving highly positive evaluations to all their employees - make homogeneity errors impossible - prevent leniency, strictness and central tendency

Frequency - How often should PA be done?

Expert Opinions Vary: - At the completion of projects or major achievements - At least quarterly - A minimum of twice a year - Ongoing or continuous Anniversary Date versus Annually - Some research suggests that individuals who have their anniversary date at the end of the year are at a disadvantage - expert opinions vary but all agree that once a year is not enough - Some organizations have done away with the annual performance review all together, instead focusing on ongoing or continuous feedback

A "SMART" goal is one that is straightforward, meaningful, ambitious, realistic, and tested.

False

An advantage of behaviorally anchored rating scales is that it helps reduce supervisor's tendencies to focus unduly on just the last few weeks when appraising subordinates' performance.

False

If you have six employees and you make a chart of all possible pairs of employees. Then, you indicate the better employee of the pair for each pair and finally, you add up the number of positives for each employee, you are using the alternation ranking method of performance appraisal.

False

The primary advantage of the alternation ranking method is its simplicity, but central tendency is a common problem with the method.

False

Research indicates that electronic performance monitoring improves productivity and lowers employee stress levels.

False - It raises stress

Rating Errors - Common Errors - Homogeneity

Leniency - rating all employees higher than they deserve Strictness - rating all employees lower than they deserve Central Tendency - the manager assigns medium or average ratings to all employees - referred to as homogeneity errors because all employees get very similar ratings

performance management

The continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organization's goals

360-degree feedback

The employer collects performance information all around an employee- from his or her supervisors, subordinates, peers, and internal or external customers

graphic rating scale

The graphic rating scale is a performance appraisal tool that lists several job dimensions and a range of performance values for each. The supervisor rates each subordinate by circling or checking the score that best describes the subordinate's performance for each trait or dimension.

Mary is extremely quiet while at work and doesn't seem to have any friends at work. Mary's supervisor rates her low on "gets along well with others" as well as all other performance standards. It is likely that the halo effect has biased Mary's supervisor ratings of Mary.

True

Of all the performance appraisal methods discussed in the book, MBO is the most time consuming.

True

Research on forced distribution ratings has concluded that they are counterproductive in the long term because they leave many employees feeling that their appraisals were unjust, and that they were engaged in dysfunctional competition with other employees.

True

The _____________ method of performance appraisal involves a supervisor maintaining a log of positive and negative examples of a subordinate's work-related behaviors.

critical incident

With more employees working in teams, appraisal by _______________ is popular.

peer

three criteria of a good rater (or performance appraiser)

• First, the person doing the performance appraisal must have an opportunity to observe the performance of the person he/she is evaluating • Second, he/she must have a clear understanding of the job that is being performed by the person being evaluated • Third, the rater must be unbiased. This third criteria is the toughest to satisfy as human beings make subjective judgments when evaluating others and these judgments are often biased - some raters tend to be more biased than others

Rating Errors - Common Errors

• Leniency • Strictness • Central Tendency • Halo/Horn • Recency • Contrast - these errors are usually unintentional or unconscious