After studying this chapter, students should be able to understand the following:
A. PERFORMANCE APPRAISAL
We begin this chapter by defining
performance appraisal and identifying
the uses of performance appraisal. We
then explain environmental factors affecting performance appraisal and the performance
Then, we identify the aspect of a person’s performance that should be evaluated,
who will be responsible
for appraisal, and the appraisal period. Next, we discuss the various performance
problems associated with performance appraisal, and characteristics of an effective
A. Performance Appraisal
Performance appraisal is a system of review and evaluation of an individual or
team’s job performance. An
effective system assesses accomplishments and evolves plans for development.
Performance management is
a process that significantly affects organizational success by having managers
and employees work together
to set expectations, review results, and reward performance. Its goal is to provide
an accurate picture of past
and / or future employee performance. To achieve this, performance standards
I. The Performance Appraisal Process
Many of the external and internal environmental factors previously discussed
can influence the appraisal
process. Legislation requires that the appraisal systems be nondiscriminatory.
The labor union might affect
the appraisal process by stressing seniority as the basis for promotions and
pay increases. Factors within the
internal environment can also affect the performance appraisal process. The type
of corporate culture can
serve to help or hinder the process. Identification of specific goals is the
starting point for the PA process.
After specific appraisal goals have been established, workers and teams must
understand what is expected
from them in their tasks. Informing employees of what is expected of them is
a most important employee
relations task. At the end of the appraisal period, the appraiser observes work
performance and evaluates it
against established performance standards. The evaluation results are then communicated
to the workers.
The performance evaluation discussion with the supervisor serves to reestablish
Steps in the performance appraisal process
Identify the specific performance appraisal goals.
Establish job expectations (job analysis).
Examine work performed.
Discuss appraisal with employee.
II. Uses Of Performance Appraisal
Performance appraisal serves two types of the objectives one is to make the evaluation
decisions and other
is to provide the need assessment source for the training and development if
there is a gap between actual
and expected performance. For many organizations, the primary goal of an appraisal
system is to improve
performance. A system that is properly designed and communicated can help achieve
objectives and enhance employee performance. In fact, PA data are potentially
valuable for use in numerous
human resource functional areas.
a. Human Resource Planning—In assessing a firm’s human resources,
data must be
available that describe the promotability and potential of all employees, especially
b. Recruitment And Selection—Performance evaluation ratings
may be helpful in
predicting the future performance of job applicants.
c. Training And Development—A performance appraisal should
point out an employee’s
specific needs for training and development. By identifying deficiencies that
affect performance, human resource and line managers are able to develop T&D
that permit individuals to build on their strengths and minimize their deficiencies.
d. Career Planning And Development—Career planning and development
may be viewed
from either an individual or organizational viewpoint.
e. Compensation Programs—Performance appraisal results provide
the basis for decisions
regarding pay increases.
f. Internal Employee Relations—Performance appraisal data
are also frequently used for
decisions in areas of internal employee relations including motivation, promotion,
demotion, termination, layoff, and transfer.
g. Assessment Of Employee Potential—Some organizations attempt
to assess employee
potential as they appraise job performance.
III. What to Evaluate
What aspect of a person’s performance should an organization evaluate? In practice,
the most common sets
of appraisal criteria are traits, behaviors, and task outcomes.
a. Traits—Many employees in organizations are evaluated
on the basis of certain traits such
b. Behaviors—When an individual’s task outcome is difficult
to determine, it is common to
evaluate the person’s task-related behavior.
c. Task Outcomes—If ends are considered more important than
means, task outcomes
become the most appropriate factor to evaluate.
d. Improvement Potential—Some attention must be given to
the future and the behaviors
and outcomes that are needed to not only develop the employee, but also to achieve
firm’s goals. This involves an assessment of the employee’s potential.
IV. Performance Appraisal Methods
The type of performance appraisal system utilized depends on its purpose. If
the major emphasis is on
selecting people for promotion, training, and merit pay increases, a traditional
method such as rating scales
may be most appropriate. Collaborative methods are designed to assist employees
in developing and
becoming more effective.
a. 360-Degree Feedback—Involves input from multiple levels
within the firm and external
sources as well.
b. Rating Scales—Rates employees according to defined factors.
The factors chosen for
evaluation are typically of two types: job related and personal characteristics.
c. Critical Incidents—Requires written records be kept of
highly favorable and highly
unfavorable work actions.
d. Essay—The rater simply writes a brief narrative describing
the employee’s performance.
This method tends to focus on extreme behavior in the employee’s work rather
routine day-to-day performance.
e. Work Standards—Compares each employee’s performance to
a predetermined standard,
or expected level of output.
f. Ranking—The rater simply places all employees in a given
group in rank order on the
basis of their overall performance. Paired comparison is a variation of the ranking
that involves comparing the performance of each employee with every other employee
g. Forced Distribution—An appraisal approach where the rater
is required to assign
individuals in the work group to a limited number of categories similar to a
h. Forced-Choice And Weighted Checklist Performance Reports—The
performance report is a technique in which the appraiser is given a series of
about an individual and the rater indicates which items are most or least descriptive
employee. The weighted checklist performance report is a technique whereby the
completes a form similar to the forced-choice performance report, but the various
responses have been assigned different weights.
i. Behaviorally Anchored Rating Scales—A performance appraisal
method that combines
elements of the traditional rating scales and critical incidents methods.
j. Results-Based Systems—In a result-based system the superior
and the subordinate
jointly agree on objectives for the next appraisal period.
k. Assessment Centers—Recognizing the differences in purposes,
and the difficulty that a
PA system will have in achieving both aims, some firms opt to use an assessment
an adjunct to their appraisal system
l. Management by objectives (MBO)—It is a goal-oriented
method, requires that supervisors and employees determine objectives for employees
meet during the rating period, and the employees appraise how well they have
m. The Appraisal Interview
The appraisal interview is the Achilles’ heel of the entire evaluation process.
• Scheduling the Interview—Supervisors usually conduct a
formal appraisal interview
at the end of an employee’s appraisal period.
• Interview Structure—A successful appraisal interview should
be structured in a way
that allows both the supervisor and the subordinate to view it as a problem solving
rather than a faultfinding session.
• Use of Praise and Criticism—Praise should be provided
when warranted, but it can
have only limited value if not clearly deserved. Criticism, even if warranted,
especially difficult to give.
• Employees’ Role—Two weeks or so before the review, they
should go through their
diary or files and make a note of every project worked on, regardless of whether
were successful or not.
• Use of Software—Computer software is available for recording
the appraisal data.
• Concluding the Interview—Ideally, employees will leave
the interview with positive
feelings about management, the company, the job, and themselves.
V. Responsibility For Appraisal
In most organizations, the human resource department is responsible for coordinating
the design and
implementation of performance appraisal programs. However, it is essential that
line managers play a key
role from beginning to end.
a. Immediate Supervisor—An employee’s immediate supervisor
traditionally has been the
most common choice for evaluating performance.
b. Subordinates—Some managers have concluded that evaluation
of managers by
subordinates is feasible.
c. Peers—Peer appraisal has long had proponents who believed
that such an approach is
reliable if the work group is stable over a reasonably long period of time and
tasks that require considerable interaction.
d. Self-Appraisal—If individuals understand the objectives
they are expected to achieve and
the standards by which they are to be evaluated, they are—to a great extent—in
position to appraise their own performance.
e. Customer Appraisal—The behavior of customers determines
the degree of success a
firm achieves. Therefore, some organizations believe it is important to obtain
input from this critical source.
VI. PROBLEMS IN PERFORMANCE APPRAISAL
Many performance appraisal methods have been severely criticized. Many of the
mentioned are not inherent in the method but, rather, reflect improper usage.
a. Lack of Objectivity— A potential weakness of traditional
methods of performance
appraisal is that they lack objectivity. Some subjectivity will always exist
methods. However, the use of job-related factors does increase objectivity.
b. Halo Error—Occurs when the evaluator perceives one factor
as being of paramount
importance and gives a good or bad overall rating to an employee based on this
c. Leniency/Strictness—The giving of undeserved high or
d. Central Tendency—Occurs when employees are incorrectly
rated near the average or
middle of the scale.
e. Recent Behavior Bias—It is only natural to remember recent
behavior more clearly than
actions from the more distant past. However, performance appraisals generally
specified period of time, and an individual’s performance should be considered
f. Personal Bias—Supervisors doing performance appraisals
may have biases related to their
employees’ personal characteristics such as race, religion, gender, disability,
or age group.
g. Manipulating the Evaluation—In some instances, supervisors
control virtually every
aspect of the appraisal process and are therefore in a position to manipulate
Performance: Performance appraisal is a system of review and evaluation
of an individual or team’s job
Halo Error: Occurs when the evaluator perceives one factor as being
of paramount importance and gives a
good or bad overall rating to an employee based on this factor.
MBO: It is a goal-oriented performance appraisal method, requires
that supervisors and employees
determine objectives for employees to meet during the rating period, and the
employees appraise how well
they have achieved their objectives
360-Degree Feedback: Involves input from multiple levels within the
firm and external sources as well.
Central Tendency: Occurs when employees are incorrectly rated near
the average or middle of the scale.