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Performance
Management
and Appraisal
Learning Outcomes
After studying this chapter you should be able to: 8.1 Discuss the difference between performance management and performance appraisal 8.2 Identify the necessary characteristics of accurate performance management tools 8.3 List and briefly discuss the purposes for performance appraisals 8.4 Identify and briefly discuss the options for “what” is evaluated in a performance appraisal 8.5 Briefly discuss the commonly used performance measurement methods and forms 8.6 Identify and briefly discuss available options for the rater/evaluator 8.7 Briefly discuss the value and the drawbacks of a 360° evaluation 8.8 Identify some of the common problems with the performance appraisal process 8.9 Identify the major steps we can take to avoid problems with the appraisal process 8.10 Briefly discuss the differences between evaluative performance reviews and developmental performance reviews 8.11 Define the following terms: Performance management Performance appraisal Motivation Traits Behaviors Results Critical incidents method Management by Objectives (MBO) method Narrative method or form Graphic rating scale form Behaviorally Anchored Rating Scale (BARS) form Ranking method 360° evaluation Bias Stereotyping Electronic Performance Monitoring (EPM)
Performance Management Systems Performance Management Versus Performance Appraisal The Performance Appraisal Process Accurate Performance Measures Why Do We Conduct Performance Appraisals? Communicating Decision Making (Evaluating) Motivating (Developing) Evaluating and Motivating (Development) What Do We Assess? Trait Appraisals Behavioral Appraisals Results/Outcomes Appraisals Which Option Is Best? How Do We Use Appraisal Methods and Forms? Critical Incidents Method Management by Objectives (MBO) Method Narrative Method or Form Graphic Rating Scale Form Behaviorally Anchored Rating Scale (BARS) Form Ranking Method Which Option Is Best? Who Should Assess Performance? Supervisor Peers Subordinates Self Customers 360º Evaluation Who Do We Choose? Performance Appraisal Problems to Avoid Common Problems With the Performance Appraisal Process Avoiding Performance Appraisal Process Problems Debriefing the Appraisal The Evaluative Performance Appraisal Interview The Developmental Performance Appraisal Interview Trends and Issues in HRM Is It Time to Do Away With Performance Appraisals? Technology: Electronic Performance Monitoring Competency-Based Performance Management Aligning the Appraisal Process C. Job Analysis/Job Design (required)
- Performance management (performance criteria and appraisal) F. Performance Management (required)
- Identifying and measuring employee performance
- Sources of information (e.g., managers, peers, clients)
- Rater errors in performance measurement
- Electronic monitoring
- Performance appraisals
- Appraisal feedback
- Managing performance Case 8-1. Beauty and the Beastly Situation at Aerospace Designs’ Marketing Department Case 8-2. Performance Evaluation at DHR: Building a Foundation or Crumbling Ruins?
Chapter 8 Outline
SHRM
HR CONTENT
See Appendix A: SHRM 2010 Curriculum Guidebook for the complete list
Chapter 8: Performance Management and Appraisal 285 Performance Management Systems^ LO 8. At this stage of human resource management (HRM), we now have employees in our organization who can do the work, we’ve given them at least some initial training, and they are now doing their individual jobs. What’s next? The next issue that we need to figure out is how to manage their performance over time to ensure that they remain productive, and hopefully become even more capable, as they progress in their careers. Remember our dis- cussion from Chapter 1 that our human resources are typically one of the few options avail- able to create a sustainable competitive advantage for the firm. So we need to ensure that our human resources perform at the highest possible level. To this end, in this section, we discuss the difference between performance management and performance appraisal, and present the performance appraisal process. Performance Management Versus Performance Appraisal “In a knowledge economy, organizations rely heavily on their intangible assets to build value. Consequently, performance management at the individual employee level is essen- tial and the business case for implementing a system to measure and improve employee performance is strong.”^1 Management time and effort to increase performance not only meets this goal; it also decreases turnover rates.^2 How do we manage performance within the organization? The most common part of the process, and the one with which we are most familiar, is the process of the performance appraisal, or evaluation. In this chapter, we will use the phrases performance evaluation, per- formance appraisal, and appraisal interchangeably. However, the performance appraisal process is not the only thing that’s done in performance management. Performance management is the process of identifying, measuring, managing, and developing the perfor- mance of the human resources in an organization. Basically we are trying to figure out how well employees perform and then to ultimately improve that performance level. When used correctly, performance management is a systematic analysis and measurement of worker performance ( including communication of that assessment to the individual) that we use to improve performance over time. Performance appraisal , on the other hand, is the ongoing process of evaluating employee performance. Performance appraisals are reviews of employee performance over time^3 , so appraisal is just one piece of performance management. Although we will spend most of this chapter discussing performance appraisal, there are several other significant pieces of performance management that we already covered in past chapters and will cover in future chapters. We discussed “strategic planning,” which provides inputs into what we want to evaluate in our performance management system, in Chapter 2. We also discussed the major method of identifying performance requirements in a particular job when we went through “job analysis and design” in Chapter 4. In Chapter 7, we discussed “training and development,” which obviously play a part in performance management. Additionally, we will discuss motivating employees, employee relations, compensation, and other pieces in Chapters 9–14. Now that we understand the difference between performance management and performance appraisal, let’s look at the performance appraisal process. The Performance Appraisal Process Exhibit 8-1 illustrates the performance appraisal (PA) process. Note the connection between the organization’s mission and objectives and the performance appraisal process. Here we briefly discuss each step of the process. Discuss the difference between performance management and performance appraisal. Guide – C: Performance management (performance criteria and appraisal) SHRM Video Link 8. Performance Appraisal Process
286 PART III: DEVELOPING AND MANAGING Step 1. Job analysis. This is logically our first step because if we don’t know what a job consists of, how can we possibly evaluate an employee’s performance? We already learned how to do a job analysis in Chapter 4, but as shown in Exhibit 8-1, we should realize that the job must be based on the organizational mission and objectives, the department, and the job itself. Step 2. Develop standards and measurement methods. If we don’t have standards of acceptable behavior and methods to measure performance, how can we assess perfor- mance? We will discuss performance measurement methods in the next part of this sec- tion, and in the major section “How Do We Use Appraisal Methods and Forms?” we will discuss these topics in more detail. Step 3. Informal performance appraisal—coaching and disciplining. Performance appraisal should not be simply a once- or twice-yearly formal interview. As its definition states, performance appraisal is an ongoing process. While a formal evaluation may only take place once or twice a year, people need regular feedback on their performance to know how they are doing.^4 We will briefly discuss coaching in the “Critical Incidents Method” subsection of “How Do We Use Appraisal Methods and Forms?” and in more detail along with teaching how to discipline in the next chapter. Step 4. Prepare for and conduct the formal performance appraisal. The common practice is to have a formal performance review with the boss once or sometimes twice a year using one or more of the measurement forms we will be learning about. Later in this chapter we will discuss the steps of preparing for and conducting the performance appraisal. In the major sections to come, we discuss “why” we assess performance, “what” we assess, “how” we assess, and “who” conducts the performance appraisal. Then we discuss performance appraisal problems and how to avoid them, and we end the performance appraisal process with the actual formal review session. But before we leave this section, we need to understand a critically important part of each step in the performance appraisal process—accurate performance measurement. WORK APPLICATION 8- Select a job you have or had. Did you know the organization’s mission and objectives? Briefly state the mission. If you don’t know it, find out. Did you understand how your job fits or helps to meet the mission and objectives? Explain in some detail. Exhibit 8-1 The Performance Appraisal Process Step 1: Job Analysis Organizational Mission and Objectives Step 4: Prepare for and conduct the formal PA Step 2: Develop standards and measurement methods; communicate standards to workforce Step 3: Informal PA— coaching and discipline
288 PART III: DEVELOPING AND MANAGING enough that all involved understand the issue completely. In performance appraisal, spe- cific means that the form provides enough information for everyone to understand what level of performance has been achieved by a particular employee within a well-identified job. Creating specific measures is the only way that we can use a performance appraisal to improve the performance of our employees over time. The employees have to understand what they are doing successfully and what they are not. Many times, evaluation forms may be too general in nature to be of value for modifying employee behaviors because we want the form to serve for a large number of different types of jobs. This can create significant problems in the performance appraisal process. Based on the mission and objectives. Finally, you want to make sure that your performance management system leads to accomplishment of your organiza- tional mission and objectives. As with everything else we do in HR, we need to ensure that the performance management process guides our employees toward achieve- ment of the company’s mission and objectives over time. As managers in the organiza- tion, making sure of this connection will allow us to reinforce employee behaviors that aim at achieving organizational goals and to identify for our employees things that they may be doing that actively or unintentionally harm our ability to reach those goals. Thus, stating specific objectives of exactly what each person in each job should achieve or his or her performance outcomes leads to accurate assessment that can increase perfor- mance. For some examples of inaccurate measures of performance, complete Applying the Concept 8-1. WORK APPLICATION 8- Assess the accuracy of the measurements of your performance on your last performance appraisal. Be sure to describe the measures’ validity and reliability, their acceptability and feasibility, if they were specific, and if they were based on the organization’s mission and objectives.
8-1 APPLYINGAPPLYING THE CONCEPTTHE CONCEPT
8- Measurement Accuracy Which of the following criteria for a measure to be accurate is not met in each of the given situations? a. valid b. reliable c. accepted d. feasible e. specific f. based on the mission and objectives ____ 1. My boss asked me to fill out a self-evaluation of my performance. But I refused to do it. Evaluation is her job, so let her do it. ____ 2. My boss told me that I was not doing a very good job of data entry. When I asked him what he meant, he went around in circles and never gave me a good answer. ____ 3. The boss said I’m not producing as many widgets as I used to. But it’s not my fault that the machine jams every now and then and I have to stop working to fix it. ____ 4. My boss asked to me to evaluate my employees four times a year instead of only once. I told her I don’t have the time to do it that many times. It’s just not possible to do a good review that often without cutting back other things that are more important. ____ 5. My boss said I have a bad attitude and gave me a lower overall rating. But I pointed out that I get all my work done well and by the deadline or early, and I questioned what my attitude had to do with my performance.
Chapter 8: Performance Management and Appraisal 289 Why Do We Conduct^ LO 8. Performance Appraisals? As you can begin to see already, the appraisal process gets extremely complicated very quickly. And remember, anytime a process in an organization is complicated, it costs a lot of money. So why do we even do performance appraisals? What value provided to the organization and to the individual makes the process of evaluating the performance of our workers so critical? If performance appraisals are done in the correct manner, they can provide us with a series of valuable results. However, done incorrectly, the process of evaluating employee performance can actually lead to lower levels of job satisfaction and productivity. In this section, let’s discuss three major reasons why organizations complete performance evaluations—communicating, decision making, and motivating. Communicating The first major reason for performance appraisal is to provide an opportunity for formal communication between management and the employees concerning how the organization believes each employee is performing. All of us know intuitively that successful communi- cation requires two-way interaction between people. “Organizations can prevent or rem- edy the majority of performance problems by ensuring that two-way conversation occurs between the manager and the employee, resulting in a complete understanding of what is required, when it is required and how the employee’s contribution measures up.” 8 Communication always requires that employees have the opportunity and ability to provide feedback to their bosses in order to make sure that the communication is under- stood. So, in performance appraisals the communication process requires that we as man- agers communicate with the employees to provide them information about how we believe they’re doing in their job, but the process also requires that we provide the opportunity for the employees to speak to us concerning factors that inhibit their ability to successfully per- form for the organization. Factors in a job that management may not know about can include many things, including lack of training, poorly maintained equipment, lack of tools necessary to per- form, conflict within work groups, and many other things that management may not see on a daily basis. If the communication component of the performance appraisal process does not allow for this two-way communication, managers may not know of the obsta- cles that the employees have to overcome. The only way that we can resolve problems is to know about them. So, as managers, we need to communicate with our employees to find out when issues within the work environment cause loss of productivity so we can fix them. Thus, two-way communication is a critical component of correcting problems through the performance appraisal process. Decision Making (Evaluating) The second major purpose of performance appraisals is to allow management to make decisions about employees within the organization. We need to make decisions based on information, the information we get from our communication. Accurate information is necessary for management decision making and is an absolutely critical component to allow the manager to improve organizational productivity.^9 We use information from annual per- formance appraisals to make evaluative decisions concerning our workforce including pay raises, promotions, demotions, training and development, and termination. When we have valid and reliable information concerning each individual within our division or depart- ment, this gives us the ability to make decisions that can enhance productivity for the firm. List and briefly discuss the purposes for performance appraisals.
Chapter 8: Performance Management and Appraisal 291 The appraisal debrief must be a well-rounded look at individual employees; it should identify both positive and negative factors in the employees’ behaviors and results within their job (and remember that the communication needs to be two-way). As managers, we want to tell employees what they are doing right, but also where they have room for improvement. This more balanced approach to the debriefing process will minimize the potential that the employees will raise those shields and avoid listening. Motivating development. The important part of development is the need for managers to provide motivational opportunities for employees to improve their performance over time. In other words, we need to tell them how to fix the problem. We need to provide them with tools, training, or other methods that will allow them to improve to the point where their behavior is sufficient, and we then must continually strive to get them to perform at an above-average level and ultimately to be superior through ongoing coaching between formal reviews. If we provide employees with tools to allow them to improve over time, we’re focus- ing not on the negative past results but on the positive future potential results.^12 If they are given an honest opportunity to fix something that they know is a problem and are given the necessary tools or training, most will take advantage of that opportunity. So performance appraisals can be motivational if they are properly used and debriefed. Separating evaluation and development. To improve both parts of the perfor- mance appraisal, we suggest splitting the debriefing into two separate interviews. The first meeting is to evaluate the employees’ past performance, pointing out strengths and areas for improvement; the employees are asked to think about how they can improve their per- formance. At the second meeting, manager and employee jointly come up with a develop- mental plan that should lead to increased performance that will result in a higher future evaluative rating during the next formal appraisal. We will discuss how to conduct the two separate interviews in the “Debriefing the Appraisal” major section of this chapter. What Do We Assess? Now that we know why we conduct performance appraisals, the next step is to figure out what needs to be evaluated. In other words, we have to decide what aspects of the individuals and their performance we’re going to measure. The best option for what we evaluate would come from analyzing the essential functions and qualifications required for a particular job—or, in HR terms, our job analysis. We could then use these facts to design an appraisal instrument with measurable and observable factors with which performance can be evaluated.^13 How- ever, we can’t evaluate everything that is done over the course of the year. We have to choose what we will focus on because if we can’t measure it, we can’t manage it, and what gets meas- ured and evaluated gets done.^14 Our three primary options are traits, behaviors, and results. Trait Appraisals Traits identify the physical or psychological characteristics of a person. We can evaluate the traits of an individual during the performance appraisal process. Can we accurately meas- ure traits that affect job performance, can trait measures pass the OUCH test, are traits commonly used to measure performance, and should we measure traits as part of our per- formance appraisal process? Here we answer these questions, and we will answer these same questions for our behavior and results options. Can we accurately measure traits that affect job performance? Certainly, there’s some evidence that particular types of traits are valuable in jobs that require management and leadership skills. Characteristics such as inquisitiveness, conscientiousness, and general Identify and briefly discuss the options for “what” is evaluated in a performance appraisal. WORK APPLICATION 8- Assess the effectiveness of an evaluative performance appraisal you had. Did the manager present both positive and negative performance areas? Did you “really” listen? Were there any surprises? Explain any problems and how the evaluation could be improved. LO 8.
292 PART III: DEVELOPING AND MANAGING cognitive ability have been shown to have a reasonable “link” to job performance.^15 But just how accurate is the link? Many traits that most of us would be likely to focus on, such as physical attractiveness, height, extroversion, and others, actually have been shown to have very little bearing on job performance. If we’re going to use traits in performance evaluation, we must ensure that we focus on traits that have a direct relationship to the essential functions of the job being done, and they have to be accurate measures. If we decide to use trait-based evaluations, is that a good method for judging work per- formance? How many of us would want to have judgments made about our work based on our appearance or personality? Would you consider this to be a valid and reliable measure of your work performance? In most cases, it’s very difficult to show that personal traits are valid and reliable measures of work performance. Can trait measures pass the OUCH test? Let’s take a look at trait-based measure- ments using the OUCH test. Is a physical characteristic, such as height, or a psychological characteristic, such as attitude, cheerfulness, work ethic, or enthusiasm, an objective meas- ure of an individual’s work performance? We would have great difficulty creating a quanti- fiable and factual link between height or enthusiasm and job performance. So it’s difficult when measuring traits to meet the objective requirement of the OUCH test. If we utilized these trait-based measures in all cases in employee evaluations, we would be able to meet the uniform in application requirement of the OUCH test. The third test— consistent in effect —would likely be extremely difficult to meet due to the fact that different racial, ethnic, social, and gender groups tend to have different physical and psychological characteristics. Remember, reliability is a measure of consistency. Could we meet the has job relatedness test? Is a particular trait directly related to the essential functions of the job? In a very few cases this may be true, but in most situations physical and personality charac- teristics have less to do with success in the job than certain behaviors will. So it’s very diffi- cult to meet the has job relatedness test. Finally, we need to ask whether or not different supervisors would evaluate our traits differently, based on their traits. Would their individual biases based on their personalities cause them to evaluate us differently? The answer is, of course, that different people would quite likely evaluate our traits differently. Are traits commonly used to measure performance? Surprisingly, if you go to the local office supply store and look at standard evaluation forms that are available in pre- printed pads, you will find that they usually contain many traits as part of the evaluation. Why would this be the case? The simple answer is that at least some traits, both physical and psychological, are fairly easy to identify, and we make the assumption that they are related to how the individual will perform on the job. Many of us, individually and as managers, value certain things like enthusiasm even if enthusiasm has very little to do with the ability to do a particular job or the actual results of job performance. Certainly, there are some jobs where enthusiasm is critical. However, in most jobs, being enthusiastic employees may have very little to do with job success. If we evaluated individuals based on the characteristic of enthusiasm, we might make an error in judg- ment concerning their performance. And if we make errors in analyzing the performance of our employees, the appraisal form becomes much less acceptable to both the individual employee and management. Finally, if our organization happened to be sued by a former employee who claimed that they were fired based on an appraisal process that was unreliable and not valid, it would be very difficult to defend trait-based evaluation forms due to their subjective nature. Should we measure traits? Author Ken Blanchard says that there are too many evalu- ation items that can’t be objectively measured because they attempt to measure things that no one knows how to accurately measure, such as attitude, initiative, and promotability. An
294 PART III: DEVELOPING AND MANAGING Results/Outcomes Appraisals Our final option concerning what we evaluate is the results, or outcomes, of the work pro- cess. Results are simply a measure of the goals achieved through a work process. Using results as an evaluation measure provides management of the organization with an assessment of the goals that were achieved in a particular job over time. Can we accurately measure results that affect job performance? Is measuring the outcomes of a particular individual’s job a valid and reliable measure of that person’s perfor- mance? Well, certainly results are a concrete measure of what has happened in the organiza- tion. However, could results of a job have been skewed based on factors that were outside the control of the individual who is performing that job? The answer is obviously that the results could be affected by many other factors besides the individual. For example, the goals could be set too low and be easy to achieve, or too high and be impossible to achieve. Even though this is true, the measurement of results is the final organizational measure of success. The results produced through organizational processes provide the company with its return on investment—in this case its investment in the people in the organization. So, organizations really like to measure results. Can results pass the OUCH test? Let’s take a look at the OUCH test concerning results-based evaluations. Is a result achieved in a particular job a concrete, factual measure that can easily be quantified? Obviously, it is a very objective measure of what has happened in that particular job. If we apply the same results-based measure to each similar job, then our measure is uniform in application. The measure of results would almost certainly be consistent across different groups of employees, so we would meet the consistency in effect requirement of the OUCH test. And of course, if we are measuring the results of what hap- pens in a job, we are certainly providing a measure that has job relatedness. So, with a quick scan we can see that a results-based performance appraisal meets the requirements of the OUCH test better than either of the other two options. Should we measure results? Results-based evaluations, like behavior, are also typically very acceptable to both the employee and the manager. Employees readily accept results- based appraisals because they feel that such measures are one of the fairest methods of ana- lyzing their performance. After all, results are the most concrete form of evaluation that can be performed. Either the result was achieved, or it wasn’t. We can also defend this type of appraisal much easier than the other two options in court, if necessary. It tends to be very easy for the organization to go into a courtroom and show that an individual’s results were absolutely lower than the results achieved by other people in the same or similar jobs, if such an action becomes necessary. But would a performance evaluation measured on results be valid and reliable? The results-based evaluation would most likely be highly valid and would usually be reliable, assuming that we were able to take into account factors outside of individuals’ control that nonetheless affect the performance of their job. So, like with traits and behaviors, the Blanchard test is whether everyone understands why they are assessed at a specific level (evaluation) and what it takes to get a higher rating (development).^19 Which Option Is Best? Our three options concerning what we evaluate are traits, behaviors, and results. But, which option is best? The answer’s not as easy as you might think. Certainly, results-based and behavior-based evaluations are more defensible due to the fact that they are more reliable and valid than trait-based evaluations. But we have to include a large number of factors in order to select which option is best in a particular situation. WORK APPLICATION 8- Very briefly describe a job you have or had. Describe how your performance was assessed based on traits, behavior, and/or results.
Chapter 8: Performance Management and Appraisal 295
8-2 APPLYING THE CONCEPT
For example, if we need to evaluate employees who work on the assembly line, we may need to evaluate behaviors such as punctuality—do they show up to work on time? If we have employees who, when they are there, produce at 150% of the standard, but only show up two or three days a week, that creates a problem for the whole assembly line. In that case, we may need to evaluate attendance and punctuality (behaviors) because everyone on the assembly line depends on everyone else. However, if we have individuals who don’t do their actual work where managers can measure traits and behaviors—for example, people who work from home (telecommuters) and in independent outside sales positions—we need to rely on results. Other employees are often not affected by the hours that the telecommuters and salespeople work. It will not matter when they are at the office, as long as they get the job done. The firm will be con- cerned with how much they produced or sold. So circumstances dictate which method we will use; we cannot say one method will always be superior to the other two. How Do We Use Appraisal Methods and Forms? The formal performance appraisal usually involves the use of a standard form developed by the HR department to measure employee performance. Again, “If you can’t measure it, you can’t manage it.”^20 But you must be careful how you measure success,^21 as the assessment should be as objective as possible, not subjective.^22 Employees need to know the standards and understand what good performance looks like, and they need to be able to measure their own performance. If you are stuck with a form that has subjective sections, work with your employees to develop clear accurate standards. Exhibit 8-2 lists the commonly used performance appraisal measurement methods and forms and displays them on a continuum based on their use in administrative evaluative and developmental decisions. In the following section, we discuss each of them, starting with the developmental methods and working toward the evaluative. Guide – F: Performance appraisals Assessment Options Which of the following assessment options for measuring performance is being described in each of the given situations? a. traits c. results b. behavior ____ 6. This is the second time you got upset and yelled at customers. This has to stop. ____ 7. You have produced 15 products again this week. You know the standard is 20, so I’m giving you a formal warning that if you don’t get up to standard in two weeks, you will be fired. ____ 8. When you promote one of the women from waitress to hostess, be sure she is attractive so customers have a good impression of our restaurant and want to come back. ____ 9. I’m really surprised. Since you started working from home, you have actually increased your data entry numbers by 5 percent. ____10. On item number 5, willingness to take responsibility, I’m giving you an average rating. SHRM Briefly discuss the commonly used performance measurement methods and forms. LO 8.
Chapter 8: Performance Management and Appraisal 297 a good balanced evaluation includes both positive and negative, so look for good perfor- mance, not just poor, and praise it when you see it.^25 Management by Objectives (MBO) Method The Management by Objectives (MBO) method is a process in which managers and employees jointly set objectives for the employees, periodically evaluate performance, and reward according to the results. Although it is a three-step process, no standard form is used with MBO, so it is a method. MBO is also referred to as work planning and review, goals management, goals and controls, and management by results. Why and when do we use the MBO method? The MBO method is one of the best methods of developing employees. Like critical incidents, employees get ongoing feed- back on how they are doing, usually at scheduled interval meetings. We can use the MBO method successfully with our employees if we commit to the process and truly involve employees rather than trying to make them believe that our objectives are theirs—accurate measures. On an organization-wide basis, MBO is not too commonly used as the sole assessment method. It is more commonly used based on the evaluative assessment during the develop- ment part of the performance appraisal. One difficult part of MBO is that in many situa- tions, most, if not all, employees will have different goals, making MBO more difficult and time-consuming than using a standard assessment form. How do we use the MBO method? MBO is a three-step process: Step 1. Set individual objectives and plans. The manager sets objectives jointly with each individual employee.^26 The objectives are the heart of the MBO process and should be accu- rate measures of performance results. To be accurate, objectives should be SMART.^27 They need to be Specific, Measurable, Attainable, Relevant, and Time-based. Being specific, mea- surable, and time-based is fairly easy to determine in a written goal, but being attainable and relevant is more difficult. So we developed a model based on the work of Max E. Douglas with two examples in Model 8-1 that we can use when setting objectives for ourselves or with others. Step 2. Give feedback and evaluate performance. Communication is the key factor in determining MBO’s success or failure, and employees should continually critique their own performance.^28 Thus, the manager and employee must communicate often to review progress.^29 The frequency of evaluations depends on the individual and the job performed. However, most managers do not conduct enough review sessions. Step 3. Reward according to performance. Employees’ performance should be measured against their objectives. Employees who meet their objectives should be rewarded through recognition, praise, pay raises, promotions, and so on.^30 Employees who do not meet their goals, so long as the reason is not out of their control, usually have rewards withheld and even punishment when necessary. Model 8-1 Setting Objectives Model
- To + 2. Action Verb + 3. Specific and Measureable Result + 4. Target Date To + produce + 20 units + per day To increase widget productivity 5% by December 31, 2014. WORK APPLICATION 8- Select a job you have or had. Did your boss use critical incidents? Assess how well your boss used coaching between formal performance appraisal meetings to review your performance.
298 PART III: DEVELOPING AND MANAGING Narrative Method or Form The narrative method or form requires a manager to write a statement about the employee’s performance. There often is no actual standard form used, but there can be a form, so narra- tive can be a method or a form. Why and when do we use the narrative method or form? A narrative gives managers the opportunity to give their evaluative assessment in a written form that can go beyond a simple “check of a box” to describe an assessment item. Managers can also write up a devel- opmental plan of how the employee will improve performance in the future. Narratives can be used alone, but are often combined with another method or form. Although the narra- tive is ongoing, it is commonly used during the formal review. How do we use the narrative method or form? The system can vary. Managers may be allowed to write whatever they want (method), or they may be required to answer questions with a written narrative about the employee’s performance (form). Let’s dis- cuss both here. The no-form narrative method can be the only assessment method used during the for- mal review process. But the narrative method, when used alone, is more commonly used with professionals and executives, not operative employees. How we write the formal nar- rative assessment varies, as writing content and styles are different. A narrative based on critical incidents and MBO results is clearly the best basis for the written assessment. The narrative is also often used as part of a form. For example, you have most likely seen an assessment form (such as a recommendation) that has a list of items to be checked off. Following the checklist, the form may ask one or more questions requiring a narrative writ- ten statement. Graphic Rating Scale Form The graphic rating scale form is a performance appraisal checklist on which a manager sim- ply rates performance on a continuum such as excellent, good, average, fair, and poor. The continuum often includes a numerical scale, for example from 1 ( lowest performance level ) to 5 ( highest performance level ). Self-Assessment and Skill Builder 8-1 uses a graphic rating scale form; it is found at the end of this chapter. Why and when do we use the graphic rating scale form? Graphic rating scales are probably the most commonly used form during the formal performance appraisal (pri- marily for evaluative decisions), but they should lead to development decisions as well. Why the popularity? Because graphic rating scales can be used for many different types of jobs, they are a kind of “one form fits all” form that requires minimal time, effort, cost, and training. If we walk into an office supply store, we can find pads of them. But on the negative side, graphic rating scales are not very accurate measures of performance because the selection of one rating over another, such as an excellent versus good rat- ing, is very subjective. For example, think about professors and how they measure per- formance with grades. Some give lots of work and few As, while others give less work and almost all As. How do we use the graphic rating scale form? It is very simple, and we have most likely all used one. For example, many colleges have student assessments of professors at the end of the course. All we do is check off, or usually fill in a circle for, our rating. One problem is
300 PART III: DEVELOPING AND MANAGING Ranking Method The ranking method is a performance appraisal method that is used to evaluate employee performance from best to worst. There often is no actual standard form used, and we don’t always have to rank all employees. Why and when do we use the ranking method? Managers have to make evaluative decisions, such as who is the employee of the month, who gets a raise or promotion, and who gets laid off. So when we have to make evaluative decisions, we generally have to use ranking. However, our ranking can, and when possible should, be based on other methods and forms. Ranking can also be used for developmental purposes by letting employees know where they stand in comparison to their peers—they can be motivated to improve performance. For example, when one of the authors passes back exams, he places the grade distribution on the board. It does not in any way affect the current grades—but it lets students know where they stand, and he does it to motivate improvement. How do we use the ranking method? Under the ranking method, the manager com- pares an employee to other similar employees, rather than to a standard measurement. An offshoot of ranking is the forced distribution method, which is similar to grading on a curve. Predetermined percentages of employees are placed in various performance cat- egories, for example, excellent, 5%; above average, 15%; average, 60%; below average, 15%; and poor, 5%. The employees ranked in the top group usually get the rewards (raise, bonus, promotion), those not at the top tend to have the reward withheld, and those at the bottom sometimes get punished. In Self-Assessment and Skill Builder 8-1, you are asked to rank the performance of your peers. Which Option Is Best? While this section does not contain an exhaustive list, it provides examples of each major method of performance appraisal. Determining the best appraisal method or form to use depends on the objectives of the organization. A combination of the methods and forms is usually superior to any one used by itself. For developmental objectives, the critical incidents, MBO, and narrative methods work well. For administrative decisions, a ranking method based on the evaluative methods and especially graphic rating scale or BARS forms works well. Remember that the success of the performance appraisal process does not just lie in the formal method or form used once or twice a year. It depends on the manager’s human rela- tions skills in ongoing critical incidents coaching, and on effective measures of performance that are accurate so that everyone knows why they are rated at a given level (evaluative), as well as how to improve (develop) for the next assessment.^31 PerformanceReview.com is a website that has been designed to help managers write complete and effective performance appraisals online. The site offers practical advice to guide managers through the appraisal process.^32 Who Should Assess Performance? Now that we’ve learned the why, what, and how of the performance appraisal process, the next thing we need to discuss is options for the rater, or evaluator. There are a number of different options concerning who should evaluate the individual employee, and the deci- sion needs to be based on a series of factors. Let’s take a look at our options for who should evaluate an employee. Guide – F: Sources of Information (e.g., managers, peers, clients) SHRM WORK APPLICATION 8- Select an organization, preferably one you work or have worked for. Identify and briefly describe the assessment methods and/or forms that are used to assess employee performance.
Chapter 8: Performance Management and Appraisal 301 Supervisor When we ask who should evaluate employees, the most common response is their immedi- ate supervisor. Why would the supervisor be the best person to evaluate an employee? Well, the supervisor is supposed to know what the employee should be doing, right? Certainly, supervisors are frequently one of the best and most commonly used options to choose as evaluators for the employees under their control. However, this is not always the case due to problems with supervisor performance assessments. Problems with supervisor evaluations. What if the supervisor doesn’t see the employee very frequently? This may not be all that uncommon in a modern organization. Many times today, supervisors may be in a different building or even a different city than the individuals they supervise. Virtual teams, Internet-linked offices, telecommuting, and other factors cause supervisors to not be in constant touch with their employees, unlike the situation 20 or 30 years ago. There are other problems as well. What if there’s a personality conflict? Supervisors are human, just like their employees, and may just not relate well to some of their employees. This may cause a personal bias for, or against, certain employees that may invalidate the appraisal process if it’s significant enough. What if the supervisor doesn’t know what employees are supposed to be doing in their jobs? Aren’t supervisors always supposed to know every job for which they are responsible? Again, 30 years ago this may have been true. However, in today’s work environment, with the amount of information necessary to do the complex tasks that organizations must accomplish in order to compete, nobody can know every job. There’s just too much information for any one individual to learn. So jobs have been segmented down into smaller and smaller areas, and the supervisor may not know each of those jobs in great detail. So there are certainly problems that can occur in the case of a supervisor being responsible for a subordinate employee’s evalu- ation process. This being the case, what other options do we have?
8-3 APPLYING THE CONCEPT
Appraisal Methods and Forms Which of the following assessments is being described in each of the given situations? a. critical incidents method b. MBO method c. narrative method or form d. BARS form e. graphic rating scale form f. ranking method ____ 11. One of your employees has applied for a better job at another company and asked you for a letter of recommendation. ____ 12. You are overworked, so you want to develop a performance appraisal form you can use with all 25 of your employees who do a variety of jobs. ____ 13. You have been promoted from a supervisory position to a middle management position. You have been asked to select your replacement. ____ 14. One of your employees is not performing up to standard. You decide to talk to her in order to improve her performance. ____ 15. You want to create a system for developing each of your employees individually. Identify and briefly discuss available options for the rater/evaluator. LO 8.
