Performance Appraisals

1. Chapter 11 Performance Appraisals

2. Nature of Performance Appraisals You can’t manage what you don’t understand. You don’t understand what you don’t measure. What gets measured gets done. What gets measured gets rewarded.

3. Steps to ImprovePerformance Appraisal Process • Recognize part of performance is influenced more by work environment and systems than by employee behaviors • Identify strategies to understand and measure job performance better

4. Exhibit 11.1: Common Errorsin Appraisal Process Halo error Leniency error Horn error Severity error First impression error Central tendency error Clone error Recency error Spillover error

5. 1 Clearly define job performance 2 Recognize definition of performance and its components is expanding 3 Improve appraisal formats 4 Select the right raters 5 Understand way raters process information and mistakes that may be made 6 Train raters to improve rating skills Strategies to Better Understandand Measure Job Performance

6. Categories of Appraisal Formats Ranking - Rater compares employees against each other Categories Rating - Rater evaluates employees on some absolute standard (measured on a continuum scale) Essay - Rater answers open-ended questions in essay form describing employee performance

7. Ranking Formats • Straight ranking • Alternation ranking • Paired-comparison ranking • Examples - Exhibit 11.3

8. Rating Formats • Two common elements • Raters evaluate employees on some absolute standard • Each standard is measured on a scale -performance variation is described along a continuum • Types of descriptors • Adjectives - Exhibit 11.4 • Behaviors - Exhibits. 11.5 & 11.6 • Outcomes - Exhibits. 11.7 & 11.8

9. Exhibit 11.9: Usage of PerformanceEvaluation Formats

10. Exhibit 11.10: An Evaluation of Performance Appraisal Formats CRITERIA Employee Development Personnel Research Format Administration Cost Validity Ranking poor poor average good average Standard Rating Scale average average average good average BARs good good good average good MBO excellent poor poor poor excellent Essay unknown poor poor average unknown

11. Training Raters to Rate More Accurately • Rater-error training • Goal is to reduce psychometric errors by familiarizing raters with their existence • Performance dimension training • Exposes supervisors toperformance dimensions used • Performance-standard training • Provides raters with a standard orframe of reference for making appraisal

12. Putting it All Together:The Performance Evaluation Process Key elements making for a good outcome 1 Need a sound basis for establishing performance appraisal dimensions and scales associated with each dimension 2 Need to involve employees in every stage of developing performance dimensions and building scales 3 Need to ensure raters are trained in use of appraisal system and that all employees understand how system operates 4 Need to ensure raters are motivated to rate accurately 5 Raters should maintain a diary of employee performance 6 Raters should attempt a performance diagnosis to determine if performance problems exist 7 Appraisal process should follow guidelines in Exhibit 11.11

13. Tips on Appraising Employee Performance 1 Establish clear sense of direction 2 Provide opportunity for employees to participate in setting goals and standards for performance 3 Provide prompt, honest, and meaningful feedback 4 Allow for immediate and sincere reinforcement 5 Provide coaching and suggestions for improving future performance 6 Provide fair and respectful treatment 7 Allow an opportunity for employees to understand and influence decisions which effect them

14. 1 Provide specific written instructions on how to complete appraisal 2 Incorporate clear criteria for evaluating performance - Performance dimensions should be written, objective, and clear 3 Provide a rational foundation for personnel decisions via adequately developed job descriptions 4 Require supervisors to provide feedback about appraisal results to employees 5 Incorporate a review of performance ratings by higher level supervisors 6 Consistent treatment across raters, regardless of race, color, religion, sex, and national origin should be evident EEO and Performance Evaluation Key Issues: Establishing a Performance Appraisal System

15. How do we get employees to view raises as a reward for performance? Tying Pay to SubjectivelyAppraised Performance Central issue involving merit pay

16. Pay Increase Guidelines withLow Motivational Impact • Provide equal increases to all employees regardless of performance • General increase • Cost-of-living adjustments • Pay increases based on a preset progression pattern based on seniority

17. Requirements to LinkPay to Performance • Define performance • Behaviors • Competencies • Traits • Specify a continuum describing different levels from low to high on performance measure • Decide how much of a merit increase is given for different levels of performance • Exhibit 11.12: Performance-based Guideline • Exhibit 11.13: Performance Rating Salary Increase Matrix

18. Requirements to Link Pay to Performance • Define performance • Behaviors • Competencies • Traits • Specify a continuum describing different levels from low to high on performance measure • Decide how much of a merit increase is given for different levels of performance • Exhibit 11.12: Performance-based Guidelines • Exhibit 11.13: Performance Rating Salary Increase Matrix

19. Exhibit 11.12: Performance-based Guidelines

20. Designing Merit Guidelines Four Questions . . . 1 What should the poorest performer be paid as an increase? 2 How much should average performers be paid as an increase? 3 How much should top performers be paid? 4 What should be the size of the percentage increase differential between different levels of performance?

21. Exhibit 11.14: Merit Pay Grid Merit grids combine 3 variables: • Level of performance • Distribution of employees within their jobs’ pay ranges • Merit budget increase percentage

22. Promotional Increases as aPay-for-Performance Tool • Promotion should be accompanied by a salary increase - 8 to 12% • Characteristics of promotional pay increases • Size of increment is approximately double a normal merit increase • Represent a reward to employees for commitment and exemplary performance