Chapter 11
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Chapter Overview
• Understanding Performance
• Performance Appraisal: Definition and Uses
• Performance Appraisal Methods
• Potential Errors in Performance Appraisals
• Overcoming Errors in Performance Appraisals
• Providing Feedback through the Appraisal
• Developing Performance Improvement Plans
• Performance Appraisal and the Law
• Summary of Learning Objectives
Performance Management Systems
• Performance management systems that are
directly tied to an organization’s reward system
• Provide a powerful incentive for employees to
work diligently and creatively toward
achieving organizational objectives
• When properly designed and implemented,
performance management systems let
• Know how well they are presently performing
• Clarify what needs to be done to improve
Understanding Performance
• Degree of accomplishment of the tasks that
make up an employee’s job
• Reflects how well an employee is fulfilling
requirements of a job
• Often confused with effort, which refers to
energy expended, performance is measured
in terms of results
Determinants of Performance
Job performance is net effect of an employee’s effort as
modified by abilities and role (or task) perceptions
• Performance in a given situation can be viewed as
resulting from interrelationships among effort, abilities,
and role perceptions
Effort – Results from being motivated
• Refers to amount of energy (physical and/or mental) an
individual uses in performing a task
Abilities – Are personal characteristics used in performing a
• Usually do not fluctuate widely over short periods of time
Role (task) perceptions – Refer to direction(s) in which
individuals believe they should channel their effort on their
• Activities and behaviors people believe are necessary in
the performance of their jobs define their role perceptions
Determinants of Performance
• To attain an acceptable level of performance, a
minimum level of proficiency must exist in each
of the performance components
• Level of proficiency in any one performance
component can place an upper boundary on
• If employees put forth tremendous effort and
have excellent abilities, but lack a clear
understanding of their roles, performance will
probably not be good in the eyes of their
• Much work will be produced, but it will be
Determinants of Performance
• An employee who puts forth a high degree of
effort and understands the job but lacks ability
probably will rate low on performance
• An employee who has a good ability and
understanding of the role but is lazy and
expends little effort
• Employee’s performance will likely be low
• An employee can compensate up to a point for a
weakness in one area by being above average in
one or both of the other areas
Environmental Factors as Performance
Other factors beyond the control of the employee can also stifle
Such obstacles are sometimes used merely as excuses, they
are very real and should be recognized
Common potential performance obstacles include
Employee’s lack of time or conflicting demands upon it
Inadequate work facilities and equipment
Restrictive policies that affect the job
Lack of cooperation from others
Type of supervision
Temperature, lighting, noise, machine or equipment pacing
Even luck
Environmental Factors as Performance
Environmental factors should be viewed not as direct
determinants of individual performance but as modifying
the effects of effort, ability, and direction
• Poor ventilation or worn-out equipment may well affect
the effort an individual expends
• Unclear policies or poor supervision can also produce
misdirected effort
• A lack of training can result in underutilized abilities
One of management’s greatest responsibilities is to
• Employees with adequate working conditions
• A supportive environment to eliminate or minimize
performance obstacles
Responsibilities of the Human Resource
Department in Performance Management
Responsibilities of the human resource department are
Design the performance management system and select the
methods and forms to be used for appraising employees
Train managers in conducting performance appraisals
Maintain a reporting system to ensure that appraisals are
conducted on a timely basis
Maintain performance appraisal records for individual
Responsibilities of managers in performance appraisals are to
Evaluate the performance of employees
Complete the forms used in appraising employees and return
them to the human resource department
Review appraisals with employees
Establish a plan for improvement with employees
Performance Appraisal:
Definition And Uses
Process of evaluating and communicating to an employee how
he or she is performing the job and establishing a plan for
When properly conducted
They let employees know how well they are performing
Influence their future level of effort and task direction
Effort should be enhanced if good performance is positively
Task perception of the employee should be clarified through
establishing a plan for improvement
Common uses of performance appraisals is for making
administrative decisions relating to promotions, firings, layoffs,
and merit pay increases
An employee’s present job performance is often the most
significant consideration for determining whether to promote
the person
Performance Appraisal:
Definition And Uses
Performance appraisal information can
• Provide needed input for determining both individual
and organizational training and development needs
These data can then be used to help determine the
organization’s overall training and development needs
• For individual employees, completed performance
appraisal should include a plan outlining specific
training and development needs
Performance appraisals can also be used to encourage
performance improvement
• Used as a means of communicating to employees how
they are doing
• Suggesting needed changes in behavior, attitude,
skills, or knowledge
Performance Appraisal:
Definition And Uses
Feedback clarifies for employees manager’s job expectations
Feedback must be followed by coaching and training
Information from performance appraisals can be used as
Input to validation of selection procedures
Input to human resource planning
How often to conduct performance appraisals
No real consensus on how frequently performance appraisals
should be done
In general, as often as necessary to let employees know
• What kind of job they are doing
• If performance is not satisfactory, measures that must be
taken for improvement
It is recommended that informal performance appraisals be
conducted two or three times a year in addition to an annual
formal performance appraisal
Performance Appraisal Methods
Whatever method of performance appraisal an organization uses, it must
be job related
Prior to selecting a performance appraisal method, an organization
must conduct job analyses and develop job descriptions
Methods of performance appraisals include
Management by objectives (MBO)
Multi-rater assessment (or 360-degree feedback)
Graphic rating scale
Behaviorally anchored rating scale (BARS)
Critical-incident appraisal
Essay appraisal
Forced-choice rating
Ranking methods
Work standards approach
Management by Objectives (MBO)
More commonly used with professional and managerial
Consists of
• Establishing clear and precisely defined statements of
objectives for the work to be done by an employee
• Establishing an action plan indicating how these
objectives are to be achieved
• Allowing employee to implement the action plan
• Measuring objective achievement
• Taking corrective action when necessary
• Establishing new objectives for the future
Other names for MBO include management by results,
performance management, results management, and work
planning and review program
Management by Objectives (MBO)
For this system to be successful, several requirements must be
Objectives should be quantifiable and measurable
• Objectives whose attainment cannot be measured or at
least verified should be avoided where possible
Objectives should also be challenging yet achievable, and
they should be expressed in writing and in clear, concise,
unambiguous language
Employees participate in objective-setting process
• Employee’s active participation is also essential in
developing the action plan
Objectives and action plan must serve as a basis for regular
discussions between manager and employee concerning
employee’s performance
• Provide an opportunity for manager and employee to
discuss progress and modify objectives when necessary
Examples of How to Improve Work
Typical Areas of Supervisory Objectives
Multi-Rater Assessment (or 360-Degree
• Managers, peers, customers, suppliers, or
colleagues are asked to complete questionnaires
on the employee being assessed
• Person assessed also completes a questionnaire
• Questionnaires are generally lengthy. Typical
questions are:
• “Are you crisp, clear, and articulate?
Abrasive? Spreading yourself too thin?”
• Human resources department provides results to
the employee, who in turn gets to see how his or
her opinion differs from those of the group doing
the assessment
Graphic Rating Scale
Requires rater to indicate on a scale where the employee rates on factors
such as
Quantity of work
Job knowledge
Rating scales include both numerical ranges and written descriptions
Potential weakness
Evaluators are unlikely to interpret written descriptions in the same
manner due to differences in background, experience, and
Choice of rating categories
• It is possible to choose categories that have little relationship to
job performance
• Omit categories that have a significant influence on job
Sample Items on a Graphic Rating Scale
Behaviorally Anchored
Rating Scale (BARS)
Determines an employee’s level of performance based on
whether or not certain specifically described job behaviors
are present
• Focus of BARS is not on performance outcomes but on
functional behaviors demonstrated on the job
• Assumption is that these functional behaviors will result
in effective job performance
Job dimensions – Means broad categories of duties and
responsibilities that make up a job
• Each job is likely to have several job dimensions, and
separate scales must be developed for each
Scale values – Define specific categories of performance
Anchors – Specific written statements of actual behaviors
that, when exhibited on the job, indicate the level of
performance on the scale opposite that particular anchor
Behaviorally Anchored
Rating Scale (BARS)
Rating performance using a BARS requires
Rater to read list of anchors on each scale to find the group of
anchors that best describe the employee’s job behavior during the
period being reviewed
Scale value opposite the group of anchors is then checked. Process
is followed for all the identified dimensions of the job
Total evaluation combines the scale values checked for all job
BARSs are normally developed following these steps:
Managers and job incumbents identify relevant job dimensions for
the job
Managers and job incumbents write behavioral anchors for each job
• As many anchors as possible should be written for each
Managers and job incumbents reach consensus concerning scale
values to be used and grouping of anchor statements for each scale
Behaviorally Anchored
Rating Scale (BARS)
BARSs are developed through active participation of both
managers and job incumbents
Anchors are developed from observations and experiences of
employees who actually perform the job
• Increases the likelihood that the method will be accepted
BARSs can be used to provide specific feedback concerning
an employee’s job performance
Takes considerable time and commitment to develop
Separate forms must be developed for different jobs
From a technical point of view, BARS is a graphic rating scale
that was developed to help overcome errors in performance
Example of a Behaviorally
Anchored Rating Scale
Critical-Incident Appraisal
Rater keeps a written record of incidents that illustrate both
positive and negative employee behaviors
• Rater then uses these incidents as a basis for
evaluating the employee’s performance
• Incidents recorded should involve job behaviors
illustrating both satisfactory and unsatisfactory
performance of employee being rated
• Rater is required to jot down incidents regularly, which
can be burdensome and time-consuming
• Definition of a critical incident is unclear and may be
interpreted differently by different people
• Method may lead to friction between manager and
employees when employees believe manager is
keeping a “book” on them
Essay Appraisal
Rater prepares a written statement describing an individual’s strengths,
weaknesses, and past performance
Requires that evaluation describe an employee’s performance in
written narrative form
Instructions are often provided as to the topics to be covered
Typical essay appraisal question might be
“Describe, in your own words, this employee’s performance,
including quantity and quality of work, job knowledge, and ability to
get along with other employees.”
“What are the employee’s strengths and weaknesses?”
Their length and content can vary considerably, depending on rater
Essay appraisals are difficult to compare
Writing skill of appraiser can also affect appraisal
It is possible to use a critical incident method to support essay methods
Rater answers with a yes-or-no a series of questions about the
behavior of the employee
Checklist can also assign varying weights to each question
Normally, human resource department keeps the scoring key for
the checklist method
Evaluator is generally not aware of weights associated with
each question
Raters can see positive or negative connotation of each
question, which introduces bias
It is time-consuming to assemble questions for each job
Separate listing of questions must be developed for each job
Checklist questions can have different meanings for different
Sample Checklist Questions
Forced-Choice Rating
Requires rater to rank a set of statements describing how an
employee carries out the duties and responsibilities of the job
Statements are normally weighted
Rater generally does not know the weights
After rater ranks all the forced-choice statements, human
resource department applies weights and computes a score
Attempts to eliminate evaluator bias by forcing rater to rank
statements that are seemingly indistinguishable or unrelated
Been reported to irritate raters, who feel they are not being
Results of forced-choice appraisal can be difficult to
communicate to employees
Sample Set of Forced-Choice
Ranking Methods
• Performance of an employee is ranked relative
to the performance of others
• Three of the more commonly used ranking
methods are
• Alternation
• Paired comparison
• Forced distribution
Alternation Ranking
Lists names of employees to be rated on the left side of a
sheet of paper
Rater chooses most valuable employee on the list, crosses
that name off the left-hand list, and puts it at the top of the
column on the right-hand side of the paper
Appraiser then selects and crosses off name of least
valuable employee from left-hand column and moves it to
bottom of right-hand column
Rater repeats this process for all names on the left-hand
side of the paper
Resulting list of names in right-hand column gives a
ranking of employees from most to least valuable
Paired Comparison Ranking
Best illustrated with an example
• Suppose a rater is to evaluate six employees; their
names are listed on the left side of a sheet of paper
• Evaluator then compares first employee with second
employee on a chosen performance criterion, such as
quantity of work
• If he or she believes the first employee has produced
more work than second employee, a check mark is
placed by the first employee’s name
• Rater then compares the first employee to the third,
fourth, fifth, and sixth employee on the same
performance criterion, placing a check mark by the
name of employee who produced most work in each
paired comparison
Paired Comparison Ranking
• Process is repeated until each employee has
been compared to every other employee on all of
the chosen performance criteria
• Employee with most check marks is
considered to be best performer
• Employee with fewest check marks is lowest
• Drawback
• It becomes unwieldy when comparing more
than five or six employees
Force Distribution
Requires rater to compare performance of employees and place
a certain percentage of employees at various performance levels
Assumes performance level in a group of employees will be
distributed according to a bell-shaped, or “normal,” curve
In small groups of employees, a bell-shaped distribution of
performance may not be applicable
• Even where distribution may approximate a normal curve,
it is probably not a perfect curve
• This means some employees probably will not be rated
Ranking methods differ dramatically from other methods in that
one employee’s performance evaluation is a function of
performance of other employees in the job
Civil Service Reform Act does not permit use of ranking methods
for federal employees
Forced-Distribution Curve
Work Standards
Involves setting a standard or an expected level of output and
then comparing each employee’s level to the standard
Work standards should reflect average output of a typical
Most frequently used for production employees and is a form
of goal setting for these employees
Attempt to define a fair day’s output
Performance review is based on highly objective factors
To be effective, affected employees must view standards as
being fair
Lack of comparability of standards for different job categories
Frequently Used Methods for
Setting Work Standards
Potential Errors In Performance
• Occurs when a manager’s ratings are grouped at the
positive end instead of being spread throughout the
performance scale
Central tendency
• Tendency of a manager to rate most employees’
performance near the middle of the performance scale
• Tendency of a manager to evaluate employees on work
performed most recently, usually one or two months
prior to evaluation
These errors make it difficult to compare ratings from
different raters
Potential Errors In Performance
Halo effect
Occurs when a rater allows a single prominent characteristic
of an employee to influence his or her judgment on each
separate item in the performance appraisal
Results in employee receiving approximately same rating on
every item
Personal preferences, prejudices, and biases can also cause
errors in performance appraisals
Managers with biases or prejudices tend to look for employee
behaviors that conform to their biases
Appearance, social status, dress, race, and sex have
influenced many performance appraisals
Managers have also allowed first impressions to influence later
judgments of an employee
People tend to retain these impressions even when faced
with contradictory evidence
Overcoming Errors In Performance
One approach to overcoming errors is to make
refinements in the design of appraisal methods
• One could say that forced-distribution method of
performance appraisal attempts to overcome
errors of leniency and central tendency
• Behaviorally anchored rating scales are designed
to reduce halo, leniency, and central tendency
errors as they provide managers with specific
examples of performance against which to
It does not appear likely that refining appraisal
instruments will totally overcome errors in
performance appraisals
• Since refined instruments frequently do not
overcome all the obstacles
Overcoming Errors In Performance
Another approach to overcoming errors is to improve the
skills of raters
• Suggestions on specific training to be given to
evaluators, although vague, normally emphasize that
evaluators should be trained to observe behavior more
accurately and judge it more fairly
More research is needed before a definitive set of topics
for rater training can be established
At a minimum, raters should receive training in
• Performance appraisal method(s) used by company
• Importance of rater’s role in total appraisal process
• Use of performance appraisal information
• Communication skills necessary to provide feedback to
Providing Feedback Through the
Appraisal Interview
Unless feedback interview is properly conducted, it can
and does result in an unpleasant experience for both
manager and employee
To prepare for it, the manager should answer the following
• What results should the interview achieve?
• What good contributions is the employee making?
• Is the employee working up to his or her potential?
• Is the employee clear about the manager’s
performance expectations?
• What training does the employee need to improve?
• What strengths does the employee have that can be
built on or improved?
Providing Feedback Through the
Appraisal Interview
In addition, the manager should remember several basic
guidelines in conducting the interview:
• Manager must know the employee’s job description
• Evaluation must be based on employee’s performance
and not on his or her personality
• Manager must be positive and build on the employee’s
• Manager must be candid and specific
• Manager must listen to the employee as well as
presenting her or his own views
• Manager must elicit employee feedback on how to
improve performance
Factors Influencing Success or Failure
of Appraisal Interviews
More the employees are allowed to participate in the
appraisal process, the more
• Satisfied they will be with the appraisal interview
• Satisfied they will be with the manager
• Likely they will be to accept and meet performance
improvement objectives
More a manager uses positive motivational techniques, the
more satisfied the employee is likely to be with appraisal
interview and with manager
Manager and employee mutually setting specific
performance improvement objectives results in better
performance than when managers use a general
discussion or criticism
Factors Influencing Success or Failure
of Appraisal Interviews
• Discussing and solving problems hampering
employee’s current job performance improve
employee’s performance
• More the thought and preparation that both
manager and employee devote before the
appraisal interview, greater the benefits of the
• More the employee perceives that performance
appraisal results are tied to organizational
rewards, the more beneficial the interview will be
Developing Performance Improvement
• Step of including a performance improvement
plan in a completed performance appraisal is
often ignored
• Managers must recognize that an employee’s
development is a continuous cycle of
• Setting performance goals
• Providing training necessary to achieve goals
• Assessing performance related to
accomplishing goals
• Setting new, higher goals
Developing Performance Improvement
Performance improvement plan consists of the following
Where are we now?
• Answered in the performance appraisal process
Where do we want to be?
• Requires evaluator and person being evaluated to
mutually agree on areas that can and should be improved
How does the employee get from where he or she is now to
where he or she wants to be?
• Critical to performance improvement plan
• Manager and employee must agree upon specific steps
to be taken
• May include training employee to improve his or her
• May include how evaluator will help employee achieve
performance goals
Performance Appraisal and the Law
Title VII of the Civil Rights Act permits use of a bona fide
performance appraisal system
Generally not considered to be bona fide when their
application results in adverse effects on minorities, women,
or older employees
Number of court cases have ruled that performance
appraisal systems used by organizations were
discriminatory and not job related
• Brito et al. v. Zia Company
• Mistretta v. Sandia Corporation
• Chamberlain v. Bissel, Inc.
• Price Waterhouse v. Hopkins
Performance Appraisal and the Law
Some suggestions that have been offered for making
performance appraisal systems more legally acceptable include
Deriving the content of the appraisal system from job
Emphasizing work behaviors rather than personal traits
Ensuring that the results of appraisals are communicated to
Ensuring that employees are allowed to give feedback during
the appraisal interview
Training managers in how to conduct proper evaluations
Ensuring that appraisals are written, documented, and
Ensuring that personnel decisions are consistent with the
performance appraisals
Summary of Learning Objectives
Define performance
Define performance appraisal
Explain management by objectives
Describe multi-rater assessment
Describe the graphic rating scale
Explain critical-incident appraisal
Describe essay appraisal
Describe the checklist method of performance appraisal
Explain the forced-choice method of performance appraisal
Describe the work standards approach to performance
Define leniency, central tendency, recency, and the halo effect

Human Resource Management, 8e (Byars, Rue)