Performance Evaluation and Management

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Performance Evaluation and Management
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Unit Objectives

• Define the terms performance management and
  performance evaluation.
• Discuss various types of rating errors that can
  occur in performance evaluation programs.
• Compare the advantages of various performance
  evaluation techniques.
• Discuss the 360-degree feedback systems
  potential strengths and problems.
• Describe the process of feedback review and the
  skills required for it.

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Introduction

• Performance management is
• The process by which executives, managers, and
  supervisors work to align employee performance
  with the firms goals
• An effective performance management process
• Has a precise definition of excellent performance
  
• Uses measurements of performance
• Provides feedback to employees

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Introduction

• Tips for improving a performance management
  program
• Eliminate HR-speak
• Set appropriate goals
• Make the difficult decisions
• Develop a performance culture

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Introduction

• Not all measures are easy to develop
• Measurement of tangible outcomes (television
  sets) can be done with precision
• Intangible outcomes (teaching and learning) are
  difficult to measure
• Performance evaluation determines the extent to
  which an employee performs work efficiently

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Introduction

• Other terms for performance evaluation
• Performance review
• Personnel rating
• Merit rating
• Performance appraisal
• Employee appraisal
• Employee evaluation

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Introduction

• Many organizations have two evaluation systems
  formal and informal
• Thinking about how well employees are doing is an
  informal system
• A formal system is set up by the organization to
  regularly and systematically evaluate employee
  performance
• Political and interpersonal processes influence
  the informal system
• Employees who are liked better have an advantage

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The Case for Formal Evaluation

• Purposes of a well-designed formal evaluation
  system
• Development
• Motivation
• Human resource and employment planning
• Communication
• Legal compliance
• HRM research

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The Case for Formal Evaluation

• Employees should consider an evaluation
  meaningful, helpful, fair, and honest
• This is difficult to attain because of a number
  of factors, including
• Unfairness
• Negative practices
• A short-term focus

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Performance Evaluation and the Law

• Uniform Guidelines on Employment Selection
  Procedures
• Issued by the EEOC in 1978 to explain how to
  comply with federal employment legislation
• More attention was devoted to selection than to
  performance evaluation, so requirements for
  appraisal systems are less clearly defined

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Performance Evaluation and the Law

• Most performance evaluation procedures rely on
  supervisors judgments
• Once work-related behavior has been judged, the
  supervisors ratings are used as input for human
  resource decisions
• These decisions affect promotions, pay,
  transfers, and so on
• These subjective judgments can introduce bias
  into the system

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Performance Evaluation and the Law

• Courts have focused on managements
  responsibility to develop and use a performance
  evaluation system in a legally defensible way
• In Brito v. Zia Company, the companys
  performance evaluation instrument was invalid
  because it did not relate to important elements
  in the jobs for which employees were being
  evaluated
• Other performance evaluation lawsuits have dealt
  with sex, race, and age discrimination in
  terminations, promotions, and layoffs

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Performance Evaluation and the Law

• Recommendations for a legally defensible
  appraisal system
• Procedures must not differ because of race, sex,
  national origin, religion, or age
• Use objective, non-rated, uncontaminated data
• A formal system of review or appeal should be
  available for disagreement over appraisals
• Use more than one independent evaluator
• Use a formal, standardized system for evaluation
• Avoid ratings on traits, such as dependability,
  drive, aptitude, and attitude

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Performance Evaluation and the Law

• Performance data should be empirically validated
• Communicate specific performance standards
• Provide raters with written instructions
• Evaluate employees on specific work dimensions
  rather than an overall or global measure
• Require behavioral documentation for extreme
  ratings
• Allow employees to review their appraisals

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Format of Evaluation

• The ability to provide accurate, reliable
  performance data is enhanced if a systematic
  process is followed
• Step 1 Establish performance standards for each
  position and the criteria for evaluation (job
  analysis)
• Step 2 Establish performance evaluation policies
  on when to rate, how often to rate, and who
  should rate
• Step 3 Have raters gather data on employees
  performance

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Format of Evaluation

• Step 4 Have raters (and employees in some
  systems) evaluate employees performance
• Step 5 Discuss the evaluation with the employee
  
• Step 6 Make decisions and file the evaluation

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Establish Criteria

• The dimensions of performance upon which an
  employee is evaluated are called the criteria of
  evaluation
• Examples quality, quantity, and cost of work
• A major problem with many evaluation systems
• They require supervisors to make person
  evaluations rather than performance evaluations

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Establish Criteria

• An effective criterion should possess the
  following characteristics
• Reliability
• Relevance
• Sensitivity
• Practicality
• Multiple criteria are necessary to measure
  performance completely
• One must evaluate both activities and results
• Management must weigh these criteria

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Who Evaluates, When, and How Often

• In the U.S., most organizations evaluate on an
  annual basis
• Performance evaluations are often scheduled for
  arbitrary dates, such as the date of hire
• Alternatively, all employees may be evaluated on
  or near a single calendar date
• It makes more sense to schedule the evaluation
  after a task cycle
• For those without a task cycle based on dates,
  goals should be established that allow a
  beginning and end
• The evaluation can be at the end of the task
  cycle

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Who Should Evaluate the Employee?

• The immediate supervisor conducts most appraisals
  
• Other options
• Rating by a committee of several supervisors
• Rating by the employees peers (co-workers)
• Rating by the employees subordinates
• Rating by someone outside the immediate work
  situation
• Self-evaluation
• Rating by a combination of approaches

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360-degree Feedback

• Many organizations now use some form of
  360-degree feedback program
• Upward and peer feedback can have positive
  effects on behavior
• These effects are sustainable over time
• Almost 90 percent of companies using 360-degree
  programs use the information for such decisions
  as pay increases and promotions
• Introducing a 360-degree system into a culture
  not prepared for it can have disastrous effects

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360-degree Feedback

• Positive features of a 360-degree system
• Multiple perspectives of a persons performance
• Raters base evaluations on contact and
  observation
• Feedback is provided from multiple directions
  above, below, peer
• Anonymous upward feedback, which results in full
  participation
• Learning about weaknesses and strengths is
  motivational

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360-degree Feedback

• Negative features of a 360-degree system
• Feedback from all sources can be overwhelming
• Rater can hide in a group of raters and provide
  harsh evaluations
• Conflicting ratings can be confusing and
  frustrating
• Providing feedback that is constructive requires
  a plan and well-trained raters

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Selected Evaluation Techniques

• Ways of evaluating employees can generally be
  divided into two categories
• Methods that evaluate employees individually
• Multiple-person evaluations
• In a multiple-person evaluation, the supervisor
  directly and intentionally compares the
  performance of one employee to that of others

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Individual Evaluation Methods

• Graphic rating scale
• The rater is presented with a set of traits
• The employee is rated on the traits
• Ratings are assigned points, which are then
  computed
• Raters are often asked to explain each rating
  with a sentence or two

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Individual Evaluation Methods

• Two modifications make the scale more effective
• A mixed standard scale gives the rater three
  statements describing each trait
• Operational and benchmark statements are added
  to describe different levels of performance

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Individual Evaluation Methods

• Forced choice
• Was developed because graphic rating scales
  allowed supervisors to rate everyone high
• The rater must choose from a set of descriptive
  statements about employee
• Supervisors check the statements that describe
  the employee, or they rank the statements from
  most to least descriptive
• Forced choice can be used by superiors, peers,
  subordinates, or a combination of these

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Individual Evaluation Methods

• Essay Evaluation
• The rater is asked to describe the strong and
  weak aspects of the employees behavior
• It can be used by superiors, peers, or
  subordinates
• Essay evaluations are flexible an evaluator can
  specifically address the ratees skill in any
  area
• Comparing essays is difficult
• Skilled writers can paint a better picture

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Individual Evaluation Methods

• Critical Incident Technique
• Raters maintain a log of behavioral incidents
  that represent effective and ineffective
  performance for each employee
• Two factors determine the success of this
  technique
• The supervisor must have enough time to observe
  subordinates during the evaluation period
• The supervisor must record incidents as they are
  seen
• Logs can help avoid common rating errors and
  facilitate discussions about performance
  improvement

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Individual Evaluation Methods

• Checklists
• In its simplest form, the checklist is a set of
  objectives or descriptive statements
• If the rater believes that the employee possesses
  a listed trait, the item is checked
• A rating score equals the number of checks

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Individual Evaluation Methods

• A variation is the weighted checklist
• Supervisors and HR specialists prepare a list of
  descriptive statements about behavior
• Judges who have observed behavior on the job sort
  the statements into piles rated from excellent to
  poor
• When there is agreement on an item, it is
  included in the weighted checklist
• The employees evaluation is the sum of the
  scores (weights) on the items checked

Checklists and weighted checklists can be used by
superiors, peers, or subordinates
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Individual Evaluation Methods

• Behaviorally Anchored Rating Scales
• Smith and Kendall developed the behaviorally
  anchored rating scale (BARS), or the behavioral
  expectation scale (BES)?
• The BARS approach uses critical incidents to
  anchor statements on a scale
• The rater reads the anchors and places an X at
  some point on the scale for the ratee

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Individual Evaluation Methods

• A BARS usually contains these features
• Six to 10 performance dimensions identified and
  defined by raters and ratees
• The dimensions are anchored with positive and
  negative critical incidents
• Each ratee is then rated on the dimensions
• Ratings are fed back using the terms on the form

It takes two to four days to construct a BARS
that is jargon free and closely related to the
requirements of the job
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Individual Evaluation Methods

• Behavioral Observation Scales (BOS)?
• Developed by Latham and associates
• Like BARS, the BOS uses critical incidents
• Instead of identifying which behaviors occurred,
  the rater identifies how they occurred
• The hope was that BARS and BOS would yield more
  objective ratings than other scale formats
• Most researchers find that the format of the
  rating scale has little effect on the quality of
  a performance appraisal system

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Individual Evaluation Methods

• Sample BOS Items

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Multiple-Person Evaluation Methods

• Ranking
• A supervisor is asked to rank subordinates in
  order on some overall criterion
• It is easier to rank the best and worst employees
  than average ones
• Alternative rankings can help with this
  difficulty
• Pick the top employee first, then the bottom one
• The second best is chosen, then the second worst
• Follow this process until everyone has been
  ranked

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Multiple-Person Evaluation Methods

• Paired Comparison
• The supervisor reviews a series of cards each
  contains two subordinates names
• The higher performer in each pair is chosen
• Final ranking is made by counting how many times
  a given employee was chosen as the better
  performer
• A major limitation is the number of paired
  comparisons that must be made
• With only 10 subordinates, a supervisor would
  have 45 pairs of names

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Multiple-Person Evaluation Methods

• Forced Distribution
• Employees are rated on a pre-existing
  distribution of pre-determined categories
• The predetermined distribution must be followed,
  regardless of how well the employees performed
• A supervisor with all exceptional subordinates
  will be forced to rate some poorly
• A supervisor with mediocre subordinates must rate
  some highly

This technique is similar to grading on a curve
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Multiple-Person Evaluation Methods

• Point allocation technique (PAT)?
• A variation of forced distribution
• Each rater is given a number of points per
  employee
• The points must then be allocated on a criterion
  basis
• The total number of points cannot exceed the
  number of points per employee times the number of
  employees evaluated

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Multiple-Person Evaluation Methods

• Management by Objectives (MBO)
• The MBO approach emerged from the beliefs of
  McGregor, Drucker, and Odiorne
• With MBO, managers and subordinates plan,
  organize, control, communicate, and debate
• The subordinate has a course to follow and a
  target to shoot for

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Multiple-Person Evaluation Methods

• An MBO program follows a systematic process
• Superior/subordinates define tasks and set
  objectives
• The superior, consulting with subordinates, sets
  criteria for assessing objective accomplishment
• Dates to review progress are agreed upon and used
  
• Superior and subordinates make any required
  modifications in the original objectives
• A final evaluation by the superior is made
• The superior meets with the subordinate in a
  counseling, encouraging session
• Objectives for the next cycle are set

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Multiple-Person Evaluation Methods

• For MBO and other performance management
  programs to work
• Both the manager and subordinate must be actively
  involved in objective formulation
• They must also agree on what measures will be
  used to evaluate success and failure

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Multiple-Person Evaluation Methods

• A central feature of MBO is discussion about
  subordinates performance, centered on results
• Many now find MBO programs too results-oriented
  and insufficiently process-oriented
• Deming argues that MBO places too much emphasis
  on detecting problems, too little on preventing
  them
• The manager and employee must work cooperatively
  to improve the underlying basis for productivity
• To do so, managers must be coaches and
  counselors, not judges

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Multiple-Person Evaluation Methods

• Any employees performance is affected by
• His/her ability and motivation
• The production system that is in place
• Therefore, consider an appraisal system in which
  someones merit is not tied exclusively to
  whether goals were met

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Multiple-Person Evaluation Methods

• Pitfalls and problems with MBO
• If too many objectives are set, confusion occurs
• Too much paperwork
• It is forced into jobs where setting objectives
  is difficult
• Rewards may not be tied to results
• There may be too much emphasis on the short term
• Superiors are not trained in the MBO process
• Original objectives are never modified
• It is used as a rigid control device that
  intimidates rather than motivates

In some situations MBO is very effective in
others it is costly and disruptive
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Which Technique to Use

• The most commonly used evaluation techniques
• The graphic rating scale
• The essay method
• Checklists
• Used by about 5 percent of firms
• Forced choice, critical incident, BARS, BOS,
  field review, MBO
• Used by 10 to 13 percent of firms
• Ranking, paired comparison

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Which Technique to Use

• MBO is most likely to be used for
• Managerial, professional, and technical employees
• Each technique is sometimes good and sometimes
  poor
• The problem lies with how the techniques are
  used, and by whom
• The rater is more critical than the technique

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Performance Evaluation Problems

• No technique is perfectthey all have limitations

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Rater Problems

• Even if a system is well designed, problems can
  arise if raters are not cooperative and well
  trained
• Supervisors may not be comfortable playing God
• Inadequate training can lead to
• Problems with standards of evaluation
• Halo effect
• Leniency or harshness
• Central tendency error
• Recency of events error
• Contracts effects
• Personal bias (stereotyping, similar to me)?

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Eliminating Rater Errors

• Behavior-based rating scales were created to help
  eliminate the kinds of ratings errors just
  described
• Such scales didnt demonstrate consistent
  superiority over other rating formats
• Researchers now concentrated on the rating
  process
• More effort is now placed on helping raters
  accurately observe, recall, and report behavior

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Avoiding Problems with Employees

• For an evaluation system to work well, employees
  must
• Understand it
• Feel that it is fair
• Believe it is used correctly
• The system should be
• As simple as possible
• Implemented in a way that fully informs employees
  about how it will be used

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The Feedback Interview

• An effective performance interview involves
  two-way communication
• Evaluation should be a continuing process
• Supervisors should hold evaluation interviews in
  order to
• Discuss the appraisal
• Set objectives for the upcoming appraisal period
• The employees development or salary should not
  be discussed during this interview

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The Feedback Interview

• Suggestions for effective interviews
• Prepare for the meeting
• Put the employee at ease
• Split the budgeted time with the employee
• Present facts, not opinions
• Be specific
• Discuss performance, not personal criticisms
• Include positive comments
• Dont overwhelm the ratee with information
• Encourage the ratees involvement
• Focus on the future

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The Feedback Interview

• With good interviewing skills, many problems
  related to discussing performance can be overcome
• Speak clearly
• Listen carefully
• Gather and analyze information thoroughly
• Negotiate the amount and use of resources
• A poor feedback interview is due to
• Poor preparation
• Miscalculation about the purpose of the session
• Failure of the rater and ratee to understand each
  other

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The Feedback Interview

• Sometimes there is no choice but to give negative
  feedback
• It is easier to accept criticism if the
  discussion is part of the larger topic ways to
  improve future performance
• The goal of the feedback interview is to
• Recognize and encourage superior performance
• Sustain acceptable behaviors
• Change the behavior of ratees whose performance
  is not meeting organizational standards