Team 9 Performance Appraisal June, 2002

1. Director: Marko Sarstedt Manager: Chong Sun Tan Miia Montonen Team 9 Performance Appraisal June, 2002

2. Agenda General Implementation Specifications Sources of Appraisal Rating Methods Bottom line

3. Agenda General Definition Purposes & Principles Problems A formal approach Cultural & Legal Considerations

4. Mutual, ongoing evaluation ofemployees in order to meet the strategic goals of the organization. A sound basis for improving, reviewing and evaluating organizational performance. 3 steps of appraisal process: Gathering the information. Evaluating information in context of organizational needs. Communicating information between employees and supervisors. Performance Appraisal

5. Administrative purposes Compensation decisions Promotion, layoff, transfer decisions HR planning “Paper trail” Developmental purposes Performance feedback Possibility to improve job performance Eliminate problems Set new goals Purposes

6. Key principles • Performance appraisal has a capability of influencing employee behavior • and therefore improve organizational performance. • Encourage continuous feedback and employee coaching. • Enhance and improve individual’s capabilities at all levels of organization: • Identifying strengths and weaknesses • Eliminating external performance obstacles • Establishing training needs

7. Lack of top-management support. Appraisal can become a source of friction for managers and employers. Unclear performance standards by which to evaluate. Rater bias. Problems

8. Problems (cont.) • Too many forms to complete becomes time and energy • consuming, and frustrating. • Employees questioning fairness of system. • Traditionally just quantitative aspects considered, • qualitative more difficult to measure.

9. A formal approach • To determine the contributions of each individual it is necessary to have • a formal appraisal program with clearly stated objectives. • Performance standards that are • Reliable. • Strategically relevant. • Free from contamination and criterion deficiency. • are essential foundations for evaluation. • Mutuality: • Employees and supervisors participate equally and actively in the process (e.g. mutual establishment of performance expectations)

10. Cultural considerations • Finnish people tend to avoid negative feedback. • Most of them also do not like to discuss their personal characteristics with others. • Russian and Baltic are slightly different from Finns??

11. Legal considerations • Appraisal systems must comply with national laws: • Appraisals subject to same validity criteria as selection procedures. • Important to have clearly defined and measurable performance standards. • Performance ratings job-related. • Appraisal should be discussed openly with employees. • Finland has strong labor unions.

12. Agenda General Implementation Specifications Sources of Appraisal Rating Methods Bottom line

13. Agenda Implementation Specifications Who is involved? What is the frequency?

14. Who is involved? CEO BP-Centro Area-specific officers Country and Regional Managers Facility Managers

15. CEO: • Annually  MBO Country and Regional Managers: • Annually  Self-Appraisal  360° Appraisal  MBO Area-specific Officers: • Annually  Self-Appraisal  MBO Facility Managers: • Annually  360° Appraisal • Semi-Annually  Self-Appraisal What is the frequency?

16. Agenda General Implementation Specifications Sources of Appraisal Rating Methods Bottom line

17. Agenda Sources of Appraisal Self-Appraisal 360° Appraisal

18. Self-Appraisal • Employees evaluate themselves on a self-appraisal form. • Performance interview to discuss job performance and agree on a final appraisal. Sample questions:  What were your most important accomplishments during the appraisal period?  What are you job-related goals for the next period?  How can the supervisor help you in meeting future goals? Source: Self-Appraisal form University of Houston / Victoria

19. Supervisor Customer Project leader Peer Peer Subordinate Subordinate Subordinate 360° Appraisal Performance feedback is received from a full circle of people around the employee: Evaluated Employee SIDELINE

20. Pros / Cons of 360° Appraisal More Comprehensive. Higher quality of information. Lessened bias / prejudice. Increased self-development. + • Administratively complex. • Conflicting opinions, which may be accurate from specific standpoints. • Possible collusion. • Appraisers may not be accountable if evaluation anonymous. - -

21. Favorable Characteristics of 360° Appraisal • Assure Anonymity • Make respondents accountable • Prevent collusion • Use statistical procedures • Identify biases

22. Agenda General Implementation Specifications Sources of Appraisal Rating Methods Bottom line

23. Agenda Rating Methods Trait Approaches Behavioral Approaches MBO

24. Trait Approaches • Trait Approaches: • Mixed-Standard Scale Method / Forced-Choice Method • Not conform with Finnish culture • Essay Method • Time-consuming to use • Costly • Quality influenced by writing-skills of appraiser • Subjective • Graphic Rating Scale • Less subjective bias • Degree of performance dimension is less offensive

25. Communication: • Listens well • Communicates effectively • Gives clear and concrete oral instructions C I N E M O       Decision Making: • Makes timely and effective decisions • Considers broader impact of alternatives • Delegates appropriately C I N E M O       Example Graphic Rating Scale C- Critically important I – Important N – Not appliable E – Exceeds requirements M – Meets requirements O – Opportunity for development

26. Behavioral Methods • Critical Incident Methods • Only considers unusual success & failure (”Black Book-Approach”) • Behaviorally Anchored Rating Scale (BARS) / Behavior Observation Scales (BOS) • Time-consuming • Costly to develop • Potential for rating errors

27. MBO Definition: Philosphy of management on the basis of employee achievement or goals set by mutual agreement of employees and managers.

28. Pros / Cons of MBO • Less subjective bias • Link individual performance to organizational performance • Mutual goal setting • Basis for reward and promotion decisions + Time consuming Costly May encourage short-term perspective Goals not always easy to measure -

29. MBO Formulation of goals Formulation of an action plan Implementation Interim Review Final Review Collectively formulate job objectives compatible with overall departmental objectives.

30. MBO (cont.) Formulation of goals Formulation of an action plan Implementation Interim Review Final Review Collectively formulate an action plan, evaluating technique and schedule.

31. MBO (cont.) Formulation of goals Formulation of an action plan Implementation Interim Review Final Review

32. MBO (cont.) Formulation of goals Formulation of an action plan Implementation Interim Review Final Review As objective data becomes available, evaluate the progress that the employee is making toward the goals – goals may be changed. Corrective measures may be taken.

33. MBO (cont.) Formulation of goals Formulation of an action plan Implementation Interim Review Final Review Evaluate performance and design corrective action if needed.

34. Definition of goals • Employee and supervisor decide mutually on expectations for the employee’s performance: • Define roles and accountabilities, including whether they are individual, joint or team. • Develop objectives that are closely tied to department goals • Clarify performance dimensions • Set interim review dates • Agree on who will provide supplemental input Questions to consider:  How can I improve my contribution to department goals? What objectives will maximize my contribution?  Who can help me achieve my objectives? Whom do I interact with?

35. Specific Results-oriented Task Effort Task Performance Challenging Commitment Participation Definition of goals (cont.) Characteristics of Effective Goal Setting: Adapted from: Mcshane; Canadian Organizational Behavior; 4th ed.; p # 79

36. Effective goal setting High Area of Optimal Goal Difficulty Task Performance Low Moderate Challenging Impossible Goal Difficulty Adapted from: Mcshane; Canadian Organizational Behavior; 4th ed.; p # 80

37. Example Goal: To deliver high standards of excellence in all services. Objectives: • To obtain a minimum score of 3.5 (out of 5) on all Customer Service Evaluation forms.

38. Agenda General Implementation Specifications Sources of Appraisal Rating Methods Bottom line

39. Bottom Line Sources: • Self-Appraisal • 360° Appraisal Methods: • Graphic Rating Scale • MBO Note: Trait methods are not useful for allocating rewards & promotion decisions due to high potential of rating errors

40. The End Thank you for your attention! Questions? Comments?