Compulsory course

Human Resource Management

MBA – II Semester

Performance Management
by
Mohammed Abdul Nayeem
 After studying this chapter, you should be able to:

1. Describe the appraisal process.

2. Develop, evaluate, and administer at least four performance
appraisal tools.
3. Explain and illustrate the problems to avoid in appraising
performance.
4. List and discuss the pros and cons of six appraisal methods.
5. Perform an effective appraisal interview.
6. Discuss the pros and cons of using different raters to
appraise a person’s performance.
 Performance Management vs.
Performance Appraisal

• Performance management
– Identifying, measuring, managing, and
developing HR performance. Serves as
systematic measurement of performance.

• Performance appraisal
– Evaluating individual employee performance.
Vital component of performance management
process.

3
 Basic Concepts in Performance
Management and Appraisal

Comparing
Performance Appraisal and
Performance Management

Performance Appraisal: Performance Management:

Setting work standards, assessing An integrated approach to ensuring that
performance, and providing feedback to an employee’s performance supports
employees to motivate, correct, and and contributes to the organization’s
continue their performance. strategic aims.
 FIGURE 9–1
Classroom Teaching
Appraisal by
Students
FIGURE 9-1 (Continued)
The Performance Appraisal Process

7
Accurate Performance Measures

Must be:
 Valid and reliable
 Acceptable and feasible
 Specific and pertinent to the job itself
 Based on the mission and objectives

8
Why Conduct Performance
Appraisals?

 To communicate employee’s strengths and needs and

to motivate performance.

 To make employment-related decisions (i.e. salaries,

promotions, demotions, training, development,
termination).

9
An Introduction to Appraising Performance
Why Appraise Performance?

1 Is basis for pay and promotion decisions.

2 Plays an integral role in performance management.

Helps in correcting deficiencies and reinforcing good

3
performance.

4 Is useful in career planning.

Two Factors of an Effective Appraisal
 Evaluate
● Avoid problems by coaching employees between
performance evaluations.
 Motivate
● Focus on positive future results by offering tools,
training, and opportunities to fix problems.
 Positive communication should prevent any surprises.

Video: Matt and Melanie

https://www.youtube.com/watch?v=gdp4sPviV74

11
 Behavioral Appraisals

• Evaluated employees should have recourse to question

outcome of their appraisals. Managers should provide
examples and transition to a coaching mode.

• The following example should never occur:

Video: George Costanza - Was that wrong?

https://www.youtube.com/watch?v=-RvNS7JfcMM

12
What Can Be Assessed?

 Traits

 Behaviors and actions

 Results and outcomes

 Direct relationship to job functions

 Accurate, reliable, and valid measures

13
What Are Traits and Behaviors?

• Traits
– Such as honesty, patience, independence, persistence,
humility, optimism, etc.

• Behaviors
– How an employee or team respond to conditions.
– For example, employees or teams who meet deadlines
and who are conscientious, well organized, and
responsible.

14
Appraising for Results and
Outcomes

• Traits are not easily measured, but behaviors and results

are easily quantified.

• Results represent a tangible confirmation of acceptable

actions.

• If employees of a department are evaluated as

“exceptional” or “outstanding,” but the results indicate
“underperforming,” then there is a detrimental disconnect.

15
 Performance Appraisal
Measurement Methods and Forms

16
Performance Appraisal Methods
Appraisal Methodologies

1 Graphic Rating Scale Method 6 Narrative Forms

Behaviorally Anchored Rating

2 Alternation Ranking Method 7
Scales (BARS)
Management by Objectives
3 Paired Comparison Method 8
(MBO)
Computerized and Web-Based
4 Forced Distribution Method 9
Performance Appraisal

5 Critical Incident Method 10 Merged Methods

11 Annual Confidential Report (ACR)

Management by Objectives (MBO)

 Managers and employees jointly set employee

objectives.

 Managers give feedback, evaluate performance, and

reward as merited.

 Not unusual to see misappropriation of resources

used to fulfill MBOs. Misuse of MBOs can foster a
“me first” mentality.

18
Management by Objectives (MBO)
• A comprehensive and formal organization wide
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.
 Using MBO
Setting unclear Time-consuming
objectives appraisal process

Problems with MBO

Conflict with
subordinates over
objectives
Narrative Method or Form

 Managers keep written records about employees’

performance.

 Used for ongoing feedback and employee development

planning.

 Narratives capture employees’ values and contributions.

21
Graphic Rating Scale Forms

 Managers use appraisal checklists to rate employee

performance, often expressed as a numerical scale.

 Typically used for evaluative decisions, but should

also steer development decisions.

 An effective rating is possible using a 1-5 Likert

Scale, but examples provide greater clarity.

22
 FIGURE 9–3
Sample
Performance
Rating Form

Source: Elaine Pulakos,

Performance Management
(SHRM Foundation, 2004) p.
16–17.

Reprinted by
permission of
Society for
Human
Resource
Management
via Copyright
Clearance
Center.
 FIGURE 9–3
Sample
Performance
Rating Form
(continued)

Source: Elaine Pulakos,

Performance Management
(SHRM Foundation, 2004) p.
16–17.
FIGURE 9–4 One Item from an Appraisal Form Assessing Employee Performance on Specific
Job-Related Duties
Behaviorally Anchored Rating
Scales (BARS)

 Managers use behaviorally-based continuum to rate

employee performance, often expressed as a numerical
scale.

 Perhaps best and most effective appraisal measurement.

 Typically used for evaluative decision making, but

should also steer development decisions.

26
Behaviorally Anchored Rating Scale (BARS)

Developing aofBARS
Advantages BARS
–
1. A
Generate
more accurate
critical gauge
incidents
–
2. Clearer
Developstandards
performance dimensions
–
3. Feedback
Reallocate incidents
–
4. Independent
Scale the incidents
dimensions
–
5. Consistency
Develop a final instrument
 FIGURE 9–8
Example of a
Behaviorally
Anchored Rating
Scale for the
Dimension
Salesmanship Skills
 Ranking

 Managers rank employees by comparing best to worst.

 Forced distribution ranking of best to worst is the

most used measure when companies resort to
downsizing and layoffs.

 Typically used for evaluative decision making and

development.

29
Who Should Assess Performance?

• While managers typically evaluate employees’

performance, they may invite peers, subordinates,
customers, and/or employees themselves to evaluate
performance.

• This reduces bias and offers a comprehensive picture of

employee’s performance (as in 360 Degree Evaluations).

30
How to Choose Who We Select
to Conduct an Evaluation

 Conduct a cost-benefit analysis.

 Do the benefits of increasing performance feedback

outweigh cost to give the organization a return on its

investment?

 Goal is to maximize performance while minimizing

appraisal cost.

31
 TABLE 9–1 Examples of Critical Incidents for Assistant Plant Manager

Continuing Duties Targets Critical Incidents

Schedule production 90% utilization of Instituted new production

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

Supervise Minimize inventory Let inventory storage costs rise 15%

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

Supervise machinery No shutdowns due to Instituted new preventative

maintenance faulty machinery maintenance system for plant;
prevented a machine breakdown by
discovering faulty part
 FIGURE 9–7
Appraisal-
Coaching
Worksheet

Source: Reprinted from www.HR.BLR.com with

permission of the publisher Business and Legal
Reports, Inc. 141 Mill Rock Road East, Old
Saybrook, CT © 2004.
 The Balanced Scorecard

• The appraisal focuses on four related categories

 Financial, customer, processes, and learning
• Ensuring the method’s success:
 Translate strategy into a scorecard of clear objectives.
 Attach measures to each objective.
 Cascade scorecards to the front line.
 Provide performance feedback based on measures.
 Empower employees to make performance
improvements.
 Reassess strategy.
 Performance Appraisal
Problems and Avoiding Them

36
How to Avoid Appraisal Process
Problems
 Develop accurate performance measures
 Use multiple criteria.

 Minimize use of trait-based evaluations.

 Give measures the OUCH and Blanchard tests.

 Train Evaluators
 Overcome common problems of assessment.

 Use measurement methods and forms.

 Use Multiple Raters

37
Debriefing the Appraisal

 Managers prepare for and communicate analysis of each

employee’s performance with the employee.
● Conduct two interviews:
1. For evaluative decisions.
2. For development.

38
 Reasons Appraisal Programs
Sometimes Fail

• Lack of top-management information and support

• Unclear performance standards
• Rater bias
• Too many forms to complete
• Use of the appraisal program for conflicting
(political) purposes.
 Appraising Performance: Problems
and Solutions

Potential Rating
Scale Appraisal
Problems

Unclear Halo Leniency or

Central Tendency Bias
Standards Effect Strictness
 TABLE 9–2 A Graphic Rating Scale with Unclear Standards

Excellent Good Fair Poor

Quality of work

Quantity of work

Creativity

Integrity

Note: For example, what exactly is meant by “good,” “quantity of work,” and so forth?
 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.
The Appraisal Interview (continued)
How to Handle a Defensive Subordinate

1 Recognize that defensive behavior is normal.

2 Never attack a person’s defenses.

3 Postpone action.

4 Recognize your own limitations.

The Appraisal Interview (continued)
How to Criticize a Subordinate

1
Do it in a manner that lets the person maintain his or
her dignity and sense of worth.

2 Criticize in private, and do it constructively.

Give daily feedback so that the review has no
3
surprises.
4 Never say the person is “always” wrong.

5 Criticism should be objective and free of biases.

FIGURE 9–13
Checklist
During the
Appraisal
Interview
 Formal Written Warnings
• Purposes of a Written Warning
– To shake your employee out of bad habits.
– To help you defend your rating, both to your own boss
and (if needed) to the courts.
• A Written Warning Should:
– Identify standards by which employee is judged.
– Make clear that employee was aware of the standard.
– Specify deficiencies relative to the standard.
– Indicate employee’s prior opportunity for correction.
 Creating the Total Performance
Management Process
• “What is our strategy and what are our
goals?”
• “What does this mean for the goals we set for
our employees, and for how we train,
appraise, promote, and reward them?”
 PMS in India
Performance evaluation has reached high maturity levels in
Indian organizations.

Successful practices like goal setting, balanced scorecard,

development orientation etc., are being introduced and it
mostly covers managerial employees and employees who are
not part of any union.

ACR system of government is being changed to PMS.

Online appraisal systems are also used.

Initiatives like training, appraisals, multiple levels appraisers,

reviews, etc. are undertaken to improve the quality of PMS.