PERFORMANCE APPRAISALS

PERFORMANCE

APPRAISALS

Chapter 6Chapter 6

Prepared by : Ly SokcheuPrepared by : Ly SokcheuUpdated : 1Updated : 1stst September, 2012 September, 2012

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Chapter Objectives

Define performance appraisal.

Identify the uses of performance appraisal.

Discuss performance appraisal environmental factors.

Explain informal and systematic performance appraisal.

Identify who may be responsible for performance appraisal and the performance period.

Identify who does the appraisal.

Identify the various performance appraisal methods used.

After studying this chapter, you should be able to:

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I. I. What is performance What is performance appraisal?appraisal? After an employee has been selected for a After an employee has been selected for a

job, has been trained to do, and has work on job, has been trained to do, and has work on its for a period of time, his or her performance its for a period of time, his or her performance should be reviewed.should be reviewed.

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It also has been called employee rating, It also has been called employee rating, employee evaluation, performance employee evaluation, performance review, performance evaluation, and review, performance evaluation, and result appraisal.result appraisal.

Performance appraisal is the process of Performance appraisal is the process of evaluation how well employees do their jobs evaluation how well employees do their jobs compared with a set of standards and compared with a set of standards and communicating that information to employees.communicating that information to employees.

I. I. What is performance What is performance appraisal? appraisal? (Cont.)(Cont.) Performance Appraisal is a formal system Performance Appraisal is a formal system

of review and evaluation of individual or of review and evaluation of individual or team task performance.team task performance.

Performance appraisal involves the Performance appraisal involves the identificationidentification, , measurementmeasurement, & , & managementmanagement of human performance in of human performance in organizations.organizations.

• Identification Identification means determining what means determining what area of work the manager should be area of work the manager should be examining when measuring performance.examining when measuring performance.

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I. I. What is performance What is performance appraisal? appraisal? (Cont.)(Cont.)

• ManagementManagement is the overriding goal of any is the overriding goal of any appraisal system. appraisal system.

Performance Mgt. : A management system Performance Mgt. : A management system consisting of all organizational processes consisting of all organizational processes that determine how well employees, teams, that determine how well employees, teams, and ultimately, the organization perform.and ultimately, the organization perform.

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• MeasurementMeasurement, the centerpiece of the , the centerpiece of the appraisal system, entails making managerial appraisal system, entails making managerial judgments of how “good” or “bad” observed judgments of how “good” or “bad” observed employee performance was.employee performance was.

II. II. Why appraise Why appraise performance?performance?There are four reasons:There are four reasons:

An appraisal provides information upon with An appraisal provides information upon with you make promotion and salary decisions.you make promotion and salary decisions.

They provides an opportunity for you and your They provides an opportunity for you and your subordinate to review his or her work-related subordinate to review his or her work-related behavior.behavior.

The appraisal is part of the firm's career plans The appraisal is part of the firm's career plans in light of his/her strengths and weaknesses.in light of his/her strengths and weaknesses.

Appraisals help you better manage and Appraisals help you better manage and improve your firm's performance.improve your firm's performance.

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III. III. Uses of Performance Uses of Performance AppraisalAppraisalThe 3 major uses of PA are for compensation The 3 major uses of PA are for compensation

administration, feedback for development, and administration, feedback for development, and various administrative decisions such as various administrative decisions such as layoffs, promotions, and transfers.layoffs, promotions, and transfers.

CompensationCompensationadministrationadministration

Other Other administrative administrative ,, decision decision

Feedback forFeedback fordevelopmentdevelopment

Uses of Performance AppraisalUses of Performance Appraisal

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1)1) Compensation administrationCompensation administration

A Performance appraisal system is link A Performance appraisal system is link between the reward that employee hope to between the reward that employee hope to receive and his or her productivity.receive and his or her productivity.

The linkage can be thought of as:The linkage can be thought of as:

ProductivityPerformance

AppraisalReward

If any link fails, the most productive If any link fails, the most productive employees will not receive the larger reward, employees will not receive the larger reward, resulting in all the problems that come from resulting in all the problems that come from perceived inequity in the workplace.perceived inequity in the workplace.

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2)2) Feedback for developmentFeedback for development

Performance appraisal is a primary source Performance appraisal is a primary source

of information and feedback, for employees of information and feedback, for employees

both on areas in which they are doing well both on areas in which they are doing well

and ones where improvement is needed. and ones where improvement is needed.

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• So performance appraisal has a So performance appraisal has a

developmental use.developmental use.

2)2) Feedback for development (Cont.)Feedback for development (Cont.)

Managers & supervisor can identify Managers & supervisor can identify employee's weakness, potentials and employee's weakness, potentials and training needs of employees through training needs of employees through performance appraisal feedback.performance appraisal feedback.

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They can inform employees about their They can inform employees about their progress and tell them what skills they progress and tell them what skills they need to develop to become eligible for need to develop to become eligible for promotion, transfers & other HR promotion, transfers & other HR activities.activities.

3)3) Other administrative decisionsOther administrative decisions

Several other uses of Several other uses of performance performance appraisal result can be classified as appraisal result can be classified as administrative decisions such as administrative decisions such as promotion, termination, layoff, and promotion, termination, layoff, and transfer assignment decisions often are transfer assignment decisions often are made on basis of performance.made on basis of performance.

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Similarly, promotion and demotion base Similarly, promotion and demotion base on differences in performance must be on differences in performance must be documented with documented with performance performance appraisal.appraisal.

Or III. Or III. Uses of Performance Uses of Performance AppraisalAppraisal1)1) Human resource planning - Data must be Human resource planning - Data must be

available to identify those who have the available to identify those who have the potential to be promoted.potential to be promoted.

2)2) Recruitment and selection - May be helpful in Recruitment and selection - May be helpful in predicting the performance of job applicants.predicting the performance of job applicants.

3)3) Training and development - Point out an Training and development - Point out an employee’s specific needs for training and employee’s specific needs for training and development.development.

4)4) Career planning and development - Essential Career planning and development - Essential in assessing an employee’s strengths and in assessing an employee’s strengths and weaknesses and in determining the person’s weaknesses and in determining the person’s potential. potential.

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Or III. Or III. Uses of P. A. Uses of P. A. (Cont.)(Cont.)5)5) Compensation programs - Provide a Compensation programs - Provide a

basis for rational decisions regarding basis for rational decisions regarding pay adjustments.pay adjustments.

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7)7) Assessment of employee potential - Assessment of employee potential - Some organizations attempt to assess Some organizations attempt to assess employee potential as they appraise employee potential as they appraise their job performance. their job performance.

6)6) Internal employee relations - Used for Internal employee relations - Used for decisions in several areas of internal decisions in several areas of internal employee relations, including promotion, employee relations, including promotion, demotion, termination, layoff, and transfer .demotion, termination, layoff, and transfer .

IV. IV. PA. Environment PA. Environment FactorsFactors1)1) External EnvironmentExternal Environment

• Legislation requiring Legislation requiring nondiscriminatory appraisal nondiscriminatory appraisal systemssystems

• Labor unionsLabor unions

2)2) Internal environmentInternal environment

• Factors within internal environment, Factors within internal environment, such as type of corporate culture.such as type of corporate culture.

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IV. IV. PA. Environment PA. Environment Factors (Cont.)Factors (Cont.) Legislation Affecting Performance AppraisalLegislation Affecting Performance Appraisal

• Mistretta v Sandia CorporationMistretta v Sandia Corporation - Federal - Federal judge ruled against company, stating, judge ruled against company, stating, “There is sufficient circumstantial “There is sufficient circumstantial evidence to indicate that age bias and evidence to indicate that age bias and age based policies appear throughout the age based policies appear throughout the performance rating process to the performance rating process to the detriment of the protected age group.” detriment of the protected age group.”

Albermarle Paper v MoodyAlbermarle Paper v Moody – Supreme – Supreme Court case supported validation Court case supported validation requirements for performance appraisalsrequirements for performance appraisals

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IV. IV. PA. Environment PA. Environment Factors (Cont.)Factors (Cont.) Labor Unions and Performance AppraisalLabor Unions and Performance Appraisal

• Have traditionally stressed seniority as Have traditionally stressed seniority as the basis for promotions and pay the basis for promotions and pay increases.increases.

• May vigorously oppose the use of a May vigorously oppose the use of a management-designed performance management-designed performance appraisal system.appraisal system.

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Identify Specific Identify Specific Performance Appraisal Performance Appraisal

GoalsGoals

Establish Performance Establish Performance Criteria (Standards) and Criteria (Standards) and Communicate Them To Communicate Them To

EmployeesEmployees

Examine Work PerformedExamine Work Performed

Appraise the ResultsAppraise the Results

Discuss Appraisal with Discuss Appraisal with EmployeeEmployee

Performance Appraisal ProcessExternal EnvironmentInternal Environment

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V. V. Informal and Informal and systematic PA.systematic PA.1)1) Systematic / Formal PA:Systematic / Formal PA: Is used when the contact between manager Is used when the contact between manager

and employee is formalized and a system is and employee is formalized and a system is established to report managerial impression established to report managerial impression and observations on employee and observations on employee performance.performance.

The day-to-day working for employee’s The day-to-day working for employee’s performance is to be judged.performance is to be judged.

2)2) Informal PA:Informal PA: Is conducted whenever the contacts Is conducted whenever the contacts

between managers and employees are not between managers and employees are not formalized periodically.formalized periodically.1818

VI.VI. PA responsibilities: PA responsibilities:1)1) HR Department:HR Department:

Designing, maintaining & establishing formal Designing, maintaining & establishing formal report system.report system.

Making sure reports are on timeMaking sure reports are on time Training rattersTraining ratters

2)2) Managers:Managers:

Rating actual performance of employeesRating actual performance of employees Making formal reportsMaking formal reports Review appraisals of employeesReview appraisals of employees

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VII.VII. Timing of PA Timing of PAn Is important. Systematic appraisals typically Is important. Systematic appraisals typically

are conducted once or twice a year:are conducted once or twice a year:

• Usually near the employee’s anniversary Usually near the employee’s anniversary date.date.

• For new employees, an appraisal 90 days For new employees, an appraisal 90 days after employment, again at six months, and after employment, again at six months, and annually thereafter is common timing.annually thereafter is common timing.

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VIII.VIII. Who does the Who does the appraisal?appraisal?1)1) Supervisor rating of subordinates:Supervisor rating of subordinates:

• Managers & supervisors in each Managers & supervisors in each department rate their employees department rate their employees performance.performance.

2)2) A group of managers rating employees:A group of managers rating employees:

• A group of managers from various A group of managers from various departments can rate the employee's departments can rate the employee's performance with different departments.performance with different departments.

3)3) Peer ratings:Peer ratings:• Use a group of peer as raters to Use a group of peer as raters to

evaluate another employees.evaluate another employees.2121

VIII.VIII. Who does the appraisal? Who does the appraisal? (Cont.)(Cont.)4)4) Subordinates rate their supervisors:Subordinates rate their supervisors:

• Used to evaluate managers & supervisors in Used to evaluate managers & supervisors in order to improve their decisions-making and order to improve their decisions-making and leadership potentials.leadership potentials.

5)5) Self ratings:Self ratings:

• It is a self-development tool that force It is a self-development tool that force employees to think about their strengths, employees to think about their strengths, weakness & opportunities for improve weakness & opportunities for improve themselves.themselves.

6)6) Outsider rating:Outsider rating:

• Rating also may be done by outsiders.Rating also may be done by outsiders.2222

IX.IX. Method of Performance Method of Performance AppraisalsAppraisals1.1. Job Ranking Method Job Ranking Method

¬viFIsaRsþerocMlMdab;fñak¬viFIsaRsþerocMlMdab;fñak;kargar¦;kargar¦• Consists of listing all employees from the Consists of listing all employees from the

highest to lowest performance.highest to lowest performance.

2)2) Paired Comparison Method Paired Comparison Method

¬viFIsaRsþeRboeFobCaKU²¦¬viFIsaRsþeRboeFobCaKU²¦• Normally compare each employee with Normally compare each employee with other employees in the groupother employees in the group and find and find out which employee is better.out which employee is better.

3)3) Management By Objective (MBO):Management By Objective (MBO):

• Management by results/ Management of Management by results/ Management of performance objectives.performance objectives.

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a)a) What is MBO ?What is MBO ?

The process by which objectives/ goals/ targets The process by which objectives/ goals/ targets are assigned through consultation to every are assigned through consultation to every department, sub-unit, and individual in an department, sub-unit, and individual in an organization in order to increase individual and organization in order to increase individual and organization performance.organization performance.

McGregor believed that, instead of creating McGregor believed that, instead of creating antagonisms because of judgments, the superior antagonisms because of judgments, the superior should work with subordinates to set goals.should work with subordinates to set goals.

MBO is more than just an evaluation program MBO is more than just an evaluation program and process. It is viewed as a philosophy of and process. It is viewed as a philosophy of managerial practice, a method by which managerial practice, a method by which managers and subordinates plan, organize, managers and subordinates plan, organize, control, communicate, and debate.control, communicate, and debate.

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a)a) What is MBO ? (Cont.)What is MBO ? (Cont.)

Usually, an MBO program follows a systematic Usually, an MBO program follows a systematic process, such as the following:process, such as the following:

! The superior & subordinate conduct meetings to The superior & subordinate conduct meetings to define key tasks of the subordinate and to set a define key tasks of the subordinate and to set a limited number of objectives (goals).limited number of objectives (goals).

! The participants set objectives that are realistic, The participants set objectives that are realistic, challenging, clear, and comprehensive.challenging, clear, and comprehensive.

! The superior, after consulting with the The superior, after consulting with the subordinate, establishes the criteria for subordinate, establishes the criteria for assessing the accomplishment of the objectives.assessing the accomplishment of the objectives.

! Dates for reviewing intermediate progress are Dates for reviewing intermediate progress are agreed upon and used.agreed upon and used.

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a)a) What is MBO ? (Cont.)What is MBO ? (Cont.)

! The superior and subordinate make any The superior and subordinate make any required modifications in the original required modifications in the original objectives.objectives.

! The final evaluation by the superior is made The final evaluation by the superior is made and a meeting is held with the subordinate in and a meeting is held with the subordinate in a counseling, encouraging session.a counseling, encouraging session.

! Objectives for the next cycle are set by the Objectives for the next cycle are set by the subordinate after consulting with the superior, subordinate after consulting with the superior, keeping in mind the previous cycle and future keeping in mind the previous cycle and future expectations.expectations.

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a)a) What is MBO ? (Cont.)What is MBO ? (Cont.) The pitfalls and problems with MBO have been The pitfalls and problems with MBO have been

identified, such as the following:identified, such as the following:

! Too much paperwork is involved.Too much paperwork is involved.! Too many objectives are set, and confusion occurs.Too many objectives are set, and confusion occurs.! MBO is forced into jobs where establishing MBO is forced into jobs where establishing

objectives is extremely difficult.objectives is extremely difficult.! There may be a failure to tie in MBO results with There may be a failure to tie in MBO results with

rewards.rewards.! There is too much emphasis on the short term.There is too much emphasis on the short term.! Superiors are not trained in the MBO process and Superiors are not trained in the MBO process and

the mechanics involved.the mechanics involved.! Original objectives are never modified.Original objectives are never modified.! MBO is used as a rigid control device that MBO is used as a rigid control device that

intimidates rather than motivates.intimidates rather than motivates.2727

b)b) MBO Approaches:MBO Approaches: Bottom-Up: performance goals are set first at the Bottom-Up: performance goals are set first at the

working unit, based on what workers & working unit, based on what workers & supervisors can achieve.supervisors can achieve.• These goals that are converted to tactical levels

by middle managers.• Finally, these goals are sent to strategic levels for

consideration by top managers. Top-Down:Top-Down:

• Top-Down: Organizational goals/strategic goals set by top managers who then consult with middle managers in order to set department goals.

• Then middle managers discuss with supervisors to set goals at working unit.

• Finally, supervisors have a meeting with their employees in order to establish individual goals.2828

c)c) MBO Process:MBO Process: Developing overall company's goals/ strategic

goals set by top managers. Establishing specific goals to various

departments and individuals. Formulating action plans:

• When goals are set, action plans must be developed.

• Action plans focus on methods or necessary activities such as.

• What, Where, When, Whom, How, to achieve particular goals.

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c)c) MBO Process (Cont.)MBO Process (Cont.) Implementing action plans:Implementing action plans:

Once goals are set, action plans are Once goals are set, action plans are determined; individuals should be given a determined; individuals should be given a consideration in carrying out activities.consideration in carrying out activities.

Reviewing progress periodicallyReviewing progress periodically

Provide a good opportunity for managers to Provide a good opportunity for managers to check employee's performance.check employee's performance.

Identify and remove obstacles, solving Identify and remove obstacles, solving problem and altering action plans that are problem and altering action plans that are not achieving the expected result.not achieving the expected result.

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c)c) MBO Process (Cont.)MBO Process (Cont.) Appraisal performance:Appraisal performance:

Usually, organizations appraise their Usually, organizations appraise their employee's performance over a period of employee's performance over a period of one year.one year.

They can compare actual performance of They can compare actual performance of their employees with established goals.their employees with established goals.

The Results Can Be:The Results Can Be:

Achieved stated goals Achieved stated goals Remaining the sameRemaining the same Not achieved stated goals Taking correction Not achieved stated goals Taking correction

as neededas needed Exceeded stated goals Exceeded stated goals rewarding rewarding

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