PERFORMANCE APPRAISAL

BASIC CONCEPTS IN PERFORMANCE MANAGEMENT AND APPRAISAL.

Every manager needs some way to appraise employees' performance. If employees'
performance is good, you'll want to reinforce it, and if it's bad, you'll want to take cor-
rective action. Performance appraisal means evaluating an employee's current and/or past
performance relative to his or her performance standards. Stripped to its essentials,
performance appraisal always involves (1) setting work standards, (2) assess- ing the
employee's actual performance relative to those standards, and (3) providing feedback to the
employee with the aim of motivating him or her to eliminate perform- ance deficiencies or to
continue to perform above par.
For most people, "performance appraisal" brings to mind appraisal tools like the
appraisal form in Figure 9-1, but appraisal is more than forms For one thing, "appraisal" also
assumes that the employees knew what their performance standards were, and received the
feedback required to remove performance deficiencies
Defining the Employee's Goals and Work Standards
Employees should know ahead of time the basis upon which you're going to appraise
them. In practice, this means one of two things. Many managers simply use appraisal forms
with preprinted generic criteria like "quality of work" or "gets along with others." The
generic criteria become the de facto standards by which you appraise your employees.
The second basic approach is to appraise them relative to specific standards that you
expect them to achieve, such as "add 10 new customers next year." This sounds sim- ple, but
in practice, clarifying what you expect from employees is tricky. Job descrip- tions are rarely
the answer. Employers usually write job descriptions not for specific jobs, but for groups of
jobs, and the descriptions rarely include specific goals.
In brief, we said there that the guidelines for doing so include:
 Set SMART goals. These are specific, measurable, attainable, relevant, and timely.
 Assign specific goals. Employees who have specific goals usually perform better
than those who do not.
 Assign measurable goals. Always try to express the goal in terms of numbers, and
include target dates or deadlines.

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  Assign challenging but doable goals. Make them challenging, but not so difficult
that they appear impossible or unrealistic.
 Encourage participation. Participatively set goals usually produce higher
performance.
Why Appraise Performance?
There are four reasons to appraise subordinates' performance.
• First, from a practical point of view, most employers still base pay and promo-
tional decisions on the employee's appraisal.
• Second, the appraisal lets the boss and subordinate develop a plan for correcting
any deficiencies, and to reinforce the things the subordinate does right.
• Third, appraisals should serve a useful career planning purpose. They provide an
opportunity to review the employee's career plans in light of his or her exhibited
strengths and weaknesses.
• Fourth, we'll see later in this chapter that appraisals play an integral role in the
employer's performance management process. Performance manage- ment is the
continuous process of identifying, measuring, and developing the performance of
individuals and teams and aligning their performance with the organization's goals.
• Fifth, in Indian firms where HR information systems are not well evolved, the PMS
reports serve as the source of most of the current employee information.
Steps in Appraising Performance
Effective appraisals begin long before the actual appraisal.
First, make sure you define the employee's job and performance criteria. Defining the
job means making sure that you and your subordinate agree on his or her duties and job
standards and on the appraisal method you will use.
Then, some time later, appraising performance means comparing your subordi- nate's actual
performance to the standards; this usually involves some rating form.
Finally, an effective appraisal requires a feedback session. Here, you and the subor- dinate
discuss his or her performance and progress, and make plans for any devel- opment required.
The manager generally conducts the actual appraisal using a predetermined and formal tool
like one or more of those described next. The two basic questions in designing the actual
appraisal tool are what to measure and how to measure it.
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 Graphic Rating Scale Method
The graphic rating scale is the simplest and most popular method for appraising per-
formance. A graphic rating scale lists traits (such as "communication" or "teamwork") and a
range of performance values (from "unsatisfactory" to "outstanding," or "below
expectations" to "role model") for each trait. The supervisor rates each subordinate by
circling or checking the score that best describes the subordinate's performance for each trait.
The assigned values for the traits are then totaled.
What to Measure? Graphic rating-type forms typically measure one or more of four
job-relevant dimensions.
• the manager may opt to assess generic job dimensions such as communications,
teamwork, know-how, and quantity.
• Another option is to appraise the job's actual duties. For example, shows part of an
appraisal form for a pizza chef. This form assesses the job's main sets of job-
specific duties, one of which is "Maintain adequate inventory of pizza dough."
Here you would assess how well the employee did in exercis- ing each of these
duties.
• Competency-based appraisal forms are another option. Here, you focus on the
extent to which the employee exhibits the competencies essential for the job. For
example, what is one competency a nurse supervisor should bring to the job? One
might be, "builds a culture that is open and receptive to improved clinical care."
• Or, you might rate how well the employee did with respect to achieving specific
objectives, such as "sell $600,000 worth of products per year.
Alternation Ranking Method
Ranking employees from best to worst on a trait or traits is another option. Since it is
usually easier to distinguish between the worst and best employees, an alternation ranking
method is most popular. First, list all subordinates to be rated, and then cross out the names
of any not known well enough to rank. Then, on a form like that in Figure 9-5, indicate the
employee who is the highest on the characteristic being measured and the one who is the
lowest. Then choose the next highest and the next lowest, alternating between highest and
lowest until all employees have been ranked.

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Computerized and Web-Based Performance Appraisal
Employers increasingly use computerized or Web-based performance appraisal
systems. These enable managers to keep computerized notes on subordinates during the year,
and then to merge these with ratings of employees on several performance traits. The
software then generates written text to support each part of the appraisal. Most appraisal
software combines several of the basic methods we just discussed, such as graphic ratings
plus critical incidents.
Electronic Performance Monitoring
Electronic performance monitoring (EPM) systems use computer network technology
to allow managers access to their employees' computers and telephones.
Appraisal in Practice
The best appraisal forms merge several approaches. was an exam- ple. It supports a
graphic rating scale with behavioral incidents such as "Even with guidance, fails to....
This form illustrates an important point about appraisals. Even if the company uses a
graphic rating scale with traditional dimensions such as "Below Expectations," it can benefit
from anchoring the scale, as here, with behavioral descriptions. Doing so improves the
reliability and validity of the appraisal. In sum, Figure 9-2 is a graphic rating scale supported
with specific behavioral competency expectations. These expectations pinpoint what raters
should look for.

DEALING WITH PERFORMANCE APPRAISAL PROBLEMS

Recently a NASA employee smuggled a pistol into the space center. After speaking
with his supervisor for several minutes, he told him, "You're the one who's going to get me
fired" and murdered him. The supervisor had apparently given the shooter a poor appraisal,
and the person feared dismissal.27
Although that's an extreme example, few things managers do are fraught with more peril
than appraising subordinates' performance. Employees in general are overly optimistic about
what their ratings will be. You and they know their raises, careers, and peace of mind may
well hinge on how you rate them. This alone makes it difficult to rate performance.
However, of perhaps greater concern are the techni- cal problems that can cast doubt on how

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fair the whole process is. Let's turn to some of these more technical appraisal problems and
how to solve them, and to several other pertinent appraisal issues.
Potential Appraisal Problems
Graphic-type rating scales in particular are susceptible to several problems: unclear
standards, halo effect, central tendency, leniency or strictness, and bias.
Unclear Standards illustrates the unclear standards problem. This graphic rating scale
seems objective. However, it would probably result in unfair appraisals, because the traits
and degrees of merit are ambiguous. For example, different supervisors might define "good"
performance, "fair" performance, and so on differently. The same is true of traits such as
"quality of work" or "creativity.
Five Guidelines for How to Hold Effective Appraisals
It's probably safe to say that problems like these can make an appraisal worse than no
appraisal at all. Would an employee not be better off with no appraisal than with a seemingly
objective but actually biased one? However, problems like these aren't inevitable, and you
can minimize them. Do five things to have effective appraisals.
Know the Problems First, learn and understand the potential appraisal prob- lems.
Understanding and anticipating the problem can help you avoid it.
Use the Right Appraisal Tool
Second, use the right appraisal tool-or combina- tion of tools. Each has its own pros
and cons. For example, the ranking method avoids central tendency but can cause bad
feelings when employees' performances are, in fact all "high."
In practice, employers choose an appraisal tool based on several criteria. Accessi-
bility and ease-of-use is probably first. That is why graphic rating scales are still so popu-
lar, even within computerized appraisal packages. Ranking produces clearer results, but
many employers (and supervisors) prefer to avoid the push-back from employees that
ranking provokes.
Keep a Diary Third, whatever else you do, keep a diary of employees' perform- ance
over the year. One study involved 112 first-line supervisors. Some attended a special diary-
keeping training program. The conclusion of this and similar studies is that compiling critical
incidents as they occur reduces appraisal problems.

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Get Agreement on a Plan Fourth, the overriding aim of the appraisal should be to improve
unsatisfactory performance (and/or to reinforce exemplary performance), The appraisal's end
product should therefore always be a plan for what the employee must do to improve his or
her efforts.
Be Fair Fifth, but perhaps most important, make sure that every appraisal you give is fair.
One study found that a number of best practices, such as "have an appeal mechanism,"
distinguish fair appraisals. summarizes these.
Appraisals and the Law
Not effectively handling appraisals can cause legal problems for employers. In the
United States, one sure way to cause legal problems for an employer is to hold unfair and
inadequate appraisals. One interesting case in the United States involved lay- offs. 44 The
court held that the firm had violated Title VII when it laid off several His- panic-surnamed
employees based on poor performance ratings. The court concluded that the practice was
illegal because
1. The firm based the appraisals on subjective supervisory observations.
2. It did not administer and score the appraisals in a standardized fashion.
3. Two of the three supervisory evaluators did not have daily contact with the employees.
Who Should Do the Appraising?
Traditionally, the employee's direct supervisor appraises his or her performance.
However, other options are available and used. We'll look at the main ones.
The Immediate Supervisor Supervisors' ratings are the heart of most appraisals. This makes
sense: The supervisor usually is in the best position to evaluate the subordinate's
performance, and is responsible for that person's performance.
Peer Appraisals With more firms using self-managing teams, peer or "team"
appraisals-the appraisal of an employee by his or her peers-are popular. Typically, an
employee chooses an appraisal chairperson. That person then selects one supervi- sor and
three or four other peers to evaluate the employee's work.
Peer ratings have benefits. One study involved placing undergraduates into self-managing
work groups.
THE APPRAISAL INTERVIEW

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 The appraisal typically culminates in an appraisal interview. Here, you and the subor-
dinate review the appraisal and make plans to remedy deficiencies and reinforce strengths.
Interviews like these are often uncomfortable. Few people like to receive- or give-negative
feedback. Adequate preparation and effective implementation are therefore essential.
Types of Appraisal Interviews
As a supervisor you will face four types of appraisal interviews, each with its unique
objectives:
Satisfactory-Promotable is the easiest interview: The person's performance is satisfactory
and there is a promotion ahead. Your objective is to discuss the person's career plans and to
develop a specific action plan for educational and professional development.
Satisfactory-Not promotable is for employees whose performance is satisfactory but for
whom promotion is not possible. The objective here is to maintain satisfac- tory
performance. The best option is usually to find incentives that are important to the person
and sufficient to maintain performance. These might include extra time off, a small bonus,
and reinforcement, perhaps in the form of an occasional "well done!"
When the person's performance is unsatisfactory but correctable, the interview objective is to
lay out an action plan for correcting the unsatisfac- tory performance.
Finally, if the employee is unsatisfactory and the situation is uncorrectable, you can usually
skip the interview. You either tolerate the person's poor performance for now, or (more
likely) dismiss the person.
How to Conduct the Appraisal Interview
Preparation is essential. Beforehand, review the person's job description, compare
performance to the standards, and review the previous appraisals. Give the employee at least
a week's notice to review his or her work.
There are four main things to keep mind when actually conducting the interview:
1. Talk in terms of objective work data. Use examples such as absences, tardiness,
quality records, orders processed, productivity records, order processing time, accident
reports, and so on.
2. Don't get personal. Don't say, "You're too slow in producing those reports." Instead,
try to compare the person's performance to a standard. (“These reports should

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 normally be done within 10 days.") Similarly, don't compare the person's performance
to that of other people. ("He's quicker than you are.")
3. Encourage the person to talk. Stop and listen to what the person is saying; ask open-
ended questions such as, "What do you think we can do to improve the situation?" Use
a command such as "Go on." Restate the person's last point as a question, such as,
"You don't think you can get the job done?"
4. Get agreement. Make sure the person leaves knowing specifically what he or she is
doing right and doing wrong and with agreement on how things will be improved, and
by when. Write up an action plan with targets and dates.
Whether subordinates express satisfaction with their appraisal interview depends on
several things. They will prefer:
1. not feeling threatened during the interview;
2. having an opportunity to present their ideas and feelings and to influence the course of
the interview; and
3. having a helpful and constructive supervisor conduct the interview.
How to Handle a Defensive Subordinate Defenses are a familiar aspect of our lives. When
a supervisor tells someone his or her performance is poor, the first reaction is often denial.
Denial is a defense mechanism. By denying the fault, the person avoids having to question
his or her own competence. Others react with anger and aggression. This helps them let off
steam and postpones confronting the immediate problem.
In any event, understanding and dealing with defensiveness is an important appraisal skill. In
his book Effective Psychology for Managers, psychologist Mortimer Feinberg suggests the
following:
1. Recognize that defensive behavior is normal.
2. Never attack a person's defenses. Don't try to "explain someone to themselves" by
saying things like, "You know the real reason you're using that excuse is that you can't
bear to be blamed." Instead, concentrate on the fact ("sales are down”).
3. Postpone action. Sometimes it is best to do nothing. Employees may react to sudden
threats by instinctively hiding behind their defenses. But given suffi- cient time, a
more rational reaction takes over.

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4. Recognize your own limitations. The supervisor should not try to be a psychol- ogist.
Offering understanding is one thing; trying to deal with psychological problems is
another.
How to Criticize a Subordinate
When you must criticize, do so in a manner that Hets the person maintain his or her
dignity-in private, and constructively. Provide examples of critical incidents and specific
suggestions of what to do and why. Avoid once-a-year "critical broadsides" by giving
feedback periodically, so that the formal review contains no surprises. Never say the person
is "always" wrong (since no one is ever "always" wrong or right). Criticism should be
objective and free of personal bias.
How to Handle a Formal Written Warning An employee's performance may be so
weak that it requires a formal written warning. Such warnings serve two purposes: (1) They
may serve to shake your employee out of his or her bad habits, and (2) they can help you
defend your rating, both to your own boss and (if needed) to the courts.

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 Appraisals in Practice
Surveys shed light on how and why companies appraise employees.60 In one survey,
about 89% of 250 Society for Human Resource Management (SHRM) members reported
they required performance appraisals for all their employees. About 32% said they used
MBO, 24% used a graphic rating scale, 10% used "other," and about 34% used a narrative
essay format; here raters take an open-ended approach to describing their employees'
behaviors.
PERFORMANCE MANAGEMENT
What Is Performance Management?
Performance management is the continuous process of identifying, measuring, and
developing the performance of individuals and teams and aligning their performance with
the organization's goals.
Performance Appraisal Versus Performance Management
In comparing performance management and performance appraisal, "the distinc- tion is the
contrast between a year-end event-the completion of the appraisal form-and a process that
starts the year with performance planning and is integral to the way people are managed
throughout the "62 year. Three main things distin- guish performance management from
performance appraisal.
1. First, performance management never means just meeting with a subordinate once or
twice a year to "review your performance." It means continuous, daily or weekly
interactions and feedback to ensure continuous improvement. 63
2. Second, performance management is always goal-directed. The continuing
performance reviews always involve comparing the employee's or team's performance
against goals that specifically stem from and link to the company's strategic goals.
3. Third, performance management means continuously reevaluating and (if need be)
modifying how the employee and team get their work done. Depending on the issue,
this may mean additional training, changing work procedures, or instituting new
incentive plans, for instance.
Why Performance Management?
Employers are moving to performance management for three main reasons-total
quality, appraisal issues, and strategic planning.
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 Total Quality More managers are adopting the total quality management (TQM)
philosophy advocated by management gurus like W. Edwards Deming. Deming argued that
an employee's performance is more a function of things like training, communication, and
supervision than of his or her own motivation. Performance appraisals tend to focus more on
problems-what's the employee doing wrong? Deming said that is the wrong approach.
Consistent with Deming's philosophy, per- formance management puts the focus on
continuous collegial feedback, and (when necessary) on changing things like training,
incentives, and procedures.
Appraisal Issues Traditional performance appraisals are often tense and
counterproductive. 65 Indeed, there is an obvious flaw in appraising employees once or
twice per year: if things need improving, why wait 6 months to do some- thing about it?
Strategic Planning Researchers studied 1,800 large companies. About 90% had strategic
plans with strategic goals. However, only about one in eight achieved their
Using Information Technology to Support Performance Management
Performance management needn't be high-tech. For example, each day (as we noted) Toyota
work teams meet to review their performance, and to get their efforts and those of their
members aligned with their performance standards and goals.
Managements managers and employees mance management goals e go. Active Strategy, Inc.
ecently demonstrated what performance management Active Strategy Mobile TMM.
ctiveStrategy Enterprise soft- "allows business users to he strategic performance of ideal
enterprise application
On the other hand, information technology does enable management to automate
performance man- agement. We can sum up this IT-supported perform- ance management
process as follows:
• Assign financial and nonfinancial goals to each team's activities along the strategy
map chain of activities leading up to the company's overall strategic goals. (For
example, Southwest Airlines might measure ground crew aircraft turnaround time in
terms of "improve turnaround time from an average of 30 minutes per plane to 26
minutes per plane this year.")
• Inform all employees of their goals.
• Use IT-supported tools like scorecard software and digital dashboards to continuously
monitor and assess each team's and employee's performance.
• Take corrective action at once.
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