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Performance Management and the Employee Appraisal Process. The Challenges of Human Resources Management. Chapter Objectives After studying this chapter, you should be able to.

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The challenges of human resources management

Performance Managementand the Employee AppraisalProcess

The Challenges of Human Resources Management

Chapter objectives after studying this chapter you should be able to
Chapter ObjectivesAfter studying this chapter, you should be able to

Explain what performance management is and how the establishment of goals, ongoing performance feedback, and the appraisal process are part of it.

Explain the purposes of performance appraisals and the reasons they sometimes fail.

Describe the different sources of appraisal information.

Explain the various methods used to evaluate the performance of employees.

Outline the characteristics of an effective performance appraisal interview.






Performance appraisal and other hrm functions

Availability of training can aid in recruitment


Provide an additional source of trainees


Effective selection may reduce training needs

Training may permit hiring less-qualified applicants

Training aids in the achievement of performance

Performance Appraisal

A basis for assessing training needs and results

Training and development may lead to higher pay

Compensation Management

A basis for determining employee’s rate of pay

Training may include a role for the union

Labor Relations

Union cooperation can facilitate training efforts

Performance Appraisal and Other HRM Functions

Performance appraisal programs
Performance Appraisal Programs

  • Performance Appraisal

    • A process, typically performed annually by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success.

  • Performance Management

    • The process of creating a work environment in which people can perform to the best of their abilities.

Performance appraisal programs1

Appraisal Programs

Performance Appraisal Programs




Ind. Evaluation

Job Evaluation


Career Planning

EEO/AA Support

Reasons appraisal programs sometimes fail
Reasons Appraisal Programs Sometimes Fail

  • Lack of top-management information and support

  • Unclear performance standards

  • Rater bias

  • Too many forms to complete

  • Use of the appraisal program for conflicting (political) purposes.

Managerial issues concerning appraisals
Managerial Issues Concerning Appraisals

  • There is little face-to-face discussion between the manager and the employee being appraised.

  • The relationship between the employee’s job description and the criteria on the appraisal form isn’t clear.

  • Managers feel that little or no benefit will be derived from the time and energy spent in the process, or they are concerned only with bad performances.

  • Managers dislike the face-to-face confrontation of appraisal interviews.

Managerial issues concerning appraisals cont
Managerial Issues Concerning Appraisals (cont.)

  • Managers are not sufficiently adept at rating employees or providing them with appraisal feedback.

  • The judgmental role of appraisal conflicts with the helping role of developing employees.

  • The appraisal is just a once-a-year event, and there is little follow-up afterward.

Developing an effective appraisal program
Developing an Effective Appraisal Program

  • Performance Standards

    • Must be based on job-related requirements derived from job analysis and reflected in job description and job specifications.

    • Help translate an organization’s goals and objectives into job requirements that define acceptable and unacceptable performance levels.

  • Calibration

    • A process whereby managers meet to discuss the performance of individual employees to ensure their employee appraisals are in line with one another

What are the performance standards performance standards characteristics
What Are the Performance Standards?Performance Standards Characteristics

Strategic Relevance

Individual standards directly relate to strategic goals.

Criterion Deficiency

Standards capture all of an individual’s contributions.

Criterion Contamination

Performance capability is not reduced by external factors.



Standards are quantifiable, measurable, and stable.

Are you complying with the law
Are You Complying with the Law?

  • Brito v Zia

    • The Supreme Court ruled that performance appraisals were subject to the same validity criteria as selection procedures.

  • Albemarle Paper Company v Moody

    • The U.S. Supreme Court found that employees had been ranked against a vague standard, open to each supervisor’s own interpretation.

Legal guidelines for appraisals
Legal Guidelines for Appraisals

  • Performance ratings must be job-related.

  • Employees must be given a written copy of their job standards in advance of appraisals.

  • Managers who conduct the appraisal must be able to observe the behavior they are rating.

  • Supervisors must be trained to use the appraisal form correctly.

  • Appraisals should be discussed openly with employees and counseling or corrective guidance offered.

  • An appeals procedure should be established to enable employees to express disagreement with the appraisal.

Sources of performance appraisal
Sources of Performance Appraisal

  • Manager and/or Supervisor

    • Appraisal done by an employee’s manager and reviewed by a manager one level higher.

  • Self-Appraisal

    • Appraisal done by the employee being evaluated, generally on an appraisal form completed by the employee prior to the performance interview.

  • Subordinate Appraisal

    • Appraisal of a superior by an employee, which is more appropriate for developmental than for administrative purposes.

Sources of performance appraisal cont
Sources of Performance Appraisal (cont.)

  • Peer Appraisal

    • Appraisal by fellow employees, compiled into a single profile for use in an interview conducted by the employee’s manager.

    • Why peer appraisals are not used more often:

      • Peer ratings are simply a popularity contest.

      • Managers are reluctant to give up control over the appraisal process.

      • Those receiving low ratings might retaliate against their peers.

      • Peers rely on stereotypes in ratings.

Sources of performance appraisal cont1
Sources of Performance Appraisal (cont.)

  • Team Appraisal

    • Based on TQM concepts; recognizes team accomplishment rather than individual performance

  • Customer Appraisal

    • A performance appraisal that, like team appraisal, is based on TQM concepts and seeks evaluation from both external and internal customers

360 degree performance appraisal system integrity safeguards
360-Degree Performance Appraisal System Integrity Safeguards

  • Assure anonymity

  • Make respondents accountable

  • Prevent “gaming” of the system

  • Use statistical procedures

  • Identify and quantify biases

Training appraisers
Training Appraisers

  • Establishing an Appraisal Plan

    • Provide an explanation of the performance appraisal system’s objectives so that raters will understand the compensation and development purposes for which the appraisal is to be used.

    • Explain the mechanics of the rating system

      • How frequently the appraisals are to be conducted

      • Who will conduct them

      • What are the standards of performance.

    • Alert raters to the weaknesses and problems of appraisal systems so that they can be avoided.

Training performance appraisers
Training Performance Appraisers

Common rater-related errors

Error of central tendency

Leniency or strictness errors

Similar-to-me errors

Recency errors

Contrast and halo errors

Rater errors
Rater Errors

  • Error of Central Tendency

    • A rating error in which all employees are rated about average.

  • Leniency or Strictness Error

    • A rating error in which the appraiser tends to give all employees either unusually high or unusually low ratings.

  • Recency Error

    • A rating error in which appraisal is based largely on an employee’s most recent behavior rather than on behavior throughout the appraisal period.

Rater errors cont
Rater Errors (cont.)

  • Contrast Error

    • A rating error in which an employee’s evaluation is biased either upward or downward because of comparison with another employee just previously evaluated.

  • Similar-to-Me Error

    • An error in which an appraiser inflates the evaluation of an employee because of a mutual personal connection.

Rater errors training and feedback
Rater Errors: Training and Feedback

  • Rating Error Training

    • Observe other managers making errors

    • Actively participate in discovering their own errors

    • Practice job-related tasks to reduce the errors they tend to make

  • Feedback Skills Training

    • Communicating effectively

    • Diagnosing the root causes of performance problems

    • Setting goals and objectives

Performance appraisal methods

Graphic Rating Scale

Mixed Standard Scale



Performance Appraisal Methods

Trait Methods

Trait methods
Trait Methods

  • Graphic Rating-Scale Method

    • A trait approach to performance appraisal whereby each employee is rated according to a scale of individual characteristics.

  • Mixed-Standard Scale Method

    • An approach to performance appraisal similar to other scale methods but based on comparison with (better than, equal to, or worse than) a standard.

Trait methods cont
Trait Methods (cont.)

  • Forced-Choice Method

    • Requires the rater to choose from statements designed to distinguish between successful and unsuccessful performance.

      1. ______ a) Works hard _____ b) Works quickly

      2. ______ a) Shows initiative _____ b) Is responsive to customers

      3. ______ a) Produces poor quality _____ b) Lacks good work habits

  • Essay Method

    • Requires the rater to compose a statement describing employee behavior.

Trait methods1
Trait Methods

  • Forced-Choice Method

    • Requires the rater to choose from statements designed to distinguish between successful and unsuccessful performance.

      1. ______ a) Works hard _____ b) Works quickly

      2. ______ a) Shows initiative _____ b) Is responsive to customers

      3. ______ a) Produces poor quality _____ b) Lacks good work habits

  • Essay Method

    • Requires the rater to compose a statement describing employee behavior.

Behavioral methods

Critical Incident

Behavioral Checklist

Behaviorally Anchored Rating Scale (BARS)

Behavior Observation Scale (BOS)

Behavioral Methods

Behavioral Methods

Behavioral methods cont
Behavioral Methods (cont.)

  • Critical Incident Method

    • Critical incident

      • An unusual event that denotes superior or inferior employee performance in some part of the job

      • The manager keeps a log or diary for each employee throughout the appraisal period and notes specific critical incidents related to how well they perform.

  • Behavioral Checklist Method

    • The rater checks statements on a list that the rater believes are characteristic of the employee’s performance or behavior.

Behavioral methods cont1
Behavioral Methods (cont.)

  • Behaviorally Anchored Rating Scale (BARS)

    • Consists of a series of vertical scales, one for each dimension of job performance; typically developed by a committee that includes both subordinates and managers.

  • Behavior Observation Scale (BOS)

    • A performance appraisal that measures the frequency of observed behavior (critical incidents).

    • Preferred over BARS for maintaining objectivity, distinguishing good performers from poor performers, providing feedback, and identifying training needs.

Results methods
Results Methods

  • Productivity Measures

    • Appraisals based on quantitative measures (e.g., sales volume) that directly link what employees accomplish to results beneficial to the organization.

      • Criterion contamination

      • Focus on short-term results

  • Management by Objectives (MBO)

    • A philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager.

Creating an effective mbo program
Creating an Effective MBO Program

  • Managers and employees must be willing to establish goals and objectives together.

  • Objectives should be quantifiable and measurable for the long and short terms.

  • Expected results must be under the employee’s control and free from criterion contamination.

  • Goals and objectives must be consistent for each employee level (top executive, manager, and employee).

  • Managers and employees must establish specific times when the goals are to be reviewed and evaluated.

The balanced scorecard
The Balanced Scorecard

  • The appraisal focuses on four related categories

    • Financial, customer, processes, and learning

  • Ensuring the method’s success:

    • Translate strategy into a scorecard of clear objectives.

    • Attach measures to each objective.

    • Cascade scorecards to the front line.

    • Provide performance feedback based on measures.

    • Empower employees to make performance improvements.

    • Reassess strategy.

Appraisal interviews
Appraisal Interviews

Types of Appraisal Interviews

Tell and Sell - persuasion

Tell and Listen - nondirective

Problem Solving - focusing the interview on problem resolution and employee development

Appraisal interview guidelines
Appraisal Interview Guidelines

Invite Participation

Ask for a Self-Assessment

Change Behavior

Problem Solving Focus

Minimize Criticism

Express Appreciation

Establish Goals

Be Supportive

Follow Up Day by Day

Managing ineffective performance
Managing Ineffective Performance

  • Possible Courses of Action

    • Provide training to increase skills and abilities

    • Transfer employee to another job or department

    • Attention of actions to motivate employee

    • Take disciplinary action

    • Discharge the employee

  • Cautions

    • All actions taken must be objective and fair.

    • Do not treat underperformer differently, setting the employee up to fail.

Key terms
Key Terms

behavior observation scale (BOS)

behaviorally anchored

rating scale (BARS)


contrast error

critical incident

customer appraisal

error of central tendency

essay method

forced-choice method

graphic rating scale method

leniency or strictness error

management by objectives (MBO)

manager and/or supervisor appraisal

mixed-standard scale method

peer appraisal

performance appraisal

performance management

recency error


similar-to-me error

subordinate appraisal

team appraisal