Performance Appraisals

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• Performance Appraisals

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You cant manage what you dont understand. You
dont understand what you dont measure. What
gets measured gets done. What gets measured gets
rewarded.
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Performance Evaluation

• Control mechanism for feedback
• Allows progress to be assessed
• Ensures strategy-consistent behavior
• Reinforces values of the organization
• Ensures alignment of individual performance and
  behavior to organization culture and work systems

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The goal of performance management is

• To make sure that employee goals, employee
  behaviors used to achieve these goals, and
  feedback of information about the processes are
  all linked to corporate strategy.

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Purposes of Performance Appraisal

• Evaluation
• Performance Measurement
• Compensation
• Motivation

• Development
• Management Development
• Identification of Potential
• Feedback
• Human Resource Planning
• Communications
• Performance Improvement
• Research on Legal Compliance

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Performance AppraisalConflicts in Goals
ORGANIZATION Seeking the development of
individuals through counseling, coaching, and
career planning.
INDIVIDUALS Seeking valid performance feedback so
they know where they stand and can develop.
MAJOR CONFLICT
CONFLICT
ORGANIZATION Seeking information from individuals
on which to base rewards and make personnel
decisions.
INDIVIDUALS Seeking important rewards and
maintenance ofself-image.
MAJOR CONFLICT
Source M. Beer, Performance Appraisal Dilemmas
and Possibilities, Organizational Dynamics
(Winter 1981) 27.
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Strategies to Better Understand and Measure Job
Performance
Improve Appraisal Formats
Select the Right Raters
Understand Why Raters Make Mistakes
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Performance Appraisal Approaches

• Comparative
• ranking
• forced distribution
• paired comparison
• Attribute
• graphic rating scales
• mixed standard scales
• Behavioral
• critical incidents
• BARS
• essay
• Results
• MBO

Show me the performance!
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An Evaluation of Performance Appraisal Formats
CRITERIA
Personnel Research
Employee Development
Format
Administration
Cost
Validity
poor
poor
average
good
average
Ranking
Standard Rating Scale
good
average
average
average
average
good
average
BARs
good
good
good
excellent
poor
MBO
poor
poor
excellent
unknown
Essay
poor
poor
average
unknown
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Select the Right Raters
Supervisors
Peers
Self
Customers
Subordinates
Vendors
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Selecting the Right Rater

• Supervisors as Rater- most common, familiar with
  the work of the employee, familiar with job
  requirements
• Peers as Raters- good for group setting, but can
  lead to group tensions or unrealistic evaluations
  if the raters are not trained or do not
  understand the purpose of the rating.
• Self as Rater- complete knowledge about
  performance, most lenient, good for developmental
  purposes.

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Understand Why RatersMake Mistakes
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Why Raters Make Mistakes

• Stages in the Rating Process
• Ratee is observed
• Behavior is encoded (stereotypes may be used)
• Information is put into memory (oops some is
  forgotten)
• Information is retrieved and reconsidered in
  light of other non-performance information

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Errors in the Rating Process

• Errors in Observation (Attention)
• examines what raters pay attention to when they
  are evaluation performance. e.g. appearance and
  race, changes in performance over time (erratic
  vs. consistent, better vs worse)
• Errors in Storage and Recall
• information is stored in the form of traits and
  retrieve in the form of trait categories.
• decay of memory

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Errors in the Rating Process Cont.

• Errors in Evaluation
• unwilling to differentiate between workers
• uneasy giving feedback
• political vs rational process

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Requirements For a Good Appraisal

• provide a sound basis for performance standards
• involve employees in developing performance
  dimensions
• train raters
• motivate raters to do an accurate job
• document employee performance to help memory

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Adjust Employees Into Structure

• Green Circle Policy - Employees under pay range
  minimums
• Red Circle Policy - Employees above pay range
  maximum
• Fit pay level policy and pay objectives
• attracting and retaining employees
• fairness perceptions
• labor cost
• legal compliance

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Green Circle Policy

• Bring pay up to minimum
• Set pay above minimum based on seniority and/or
  performance

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Red Circle Policy

• freeze salary till market catches
• promote to higher grade
• move job to higher grade
• cut pay to pay range maximum
• do nothing
• hybrid - freeze or reduce salary depending on
• how far outside of range
• performance of employee
• criticality of job/employee

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Performance-and Position-Based Guidelines

• Purpose
• Poorer performing employees will receive lower
  pay increases
• Control costs

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Designing Merit Guidelines

• Five questions must be answered in order to
  design a merit guideline
• what increase should the poorest performers
  receive?
• Sorry cannot be negative
• what increase should average performers receive?
• At least enough to keep up with COL

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Designing Merit Guidelines

• what increase should top performers receive
• how much of a differential should there be in the
  percentage rewards between performance
  categories?
• Becomes a cost issue
• how much of a differential should there be based
  upon position in pay range.
• Decisions should be consistent with pay level
  policy and pay objectives

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How to Create a Merit Pay Grid

• Merit Grids Combine 3 Variables
• Level of Performance
• Distribution of Employees Within Pay Ranges
• Merit Budget Increase Percentage

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FastCat

• Total Budget Increase 5
• Adjustments into pay structure
• Merit increases