Performance Management and Appraisal

Performance Management

• Performance management is more than just performance appraisal
• Individual employee performance goals contribute to organizational goals

Approaches to Aligning Goals

• Organizational and individual performance goals can be aligned through Cascading and Linking Up approaches

Balanced Scorecard

• A balanced scorecard integrates financial goals with customer satisfaction, internal processes, organizational growth, learning, and innovation

Uses of Performance Appraisals

• Performance appraisals are used for:
• Job redesign
• Training program objectives
• Administrative decisions (e.g., pay raises, promotions)
• Criteria for test validation
• Feedback and performance improvement
• Employee development and career planning

Peformance Appraisal Process

• Setting Performance Objectives: Targets should be job-related, practical, and based on performance standards (benchmarks)
• Performance Standards: These are measurable benchmarks related to quality, quantity, and time
• Measuring Performance: Measures must be easy to use and reliable, reporting on the critical behaviors that determine performance.
• HR Records and Decisions: Performance records are maintained for legal purposes and to guide HR decisions.
• Communicate Feedback: Performance ratings and/or developmental feedback should be communicated to the employee at a specified interval

Measuring Performance

• Direct: Rater directly observes the employee's performance
• Indirect: Substitutes for direct observation, like secondhand reports or customer complaints
• Objective: Verifiable by others and usually quantitative
• Subjective: Based on the rater's opinions and not easily verifiable

Comparative Evaluation Methods

• Ranking Method: Employees are ranked from best to worst, but this is subject to halo and recency effects
• Forced Distributions: Employees are sorted into categories, with a certain proportion required in each category

Noncomparative Evaluation Methods

• Rating Scale: The oldest and most widely used subjective method, and responses may be given numerical values
• BARS (Behaviorally Anchored Rating Scales): Uses descriptions of effective/ineffective performance placed along a scale and is job-related, practical, and standardized
• Tests & Observations: May include paper-and-pencil tests or an actual demonstration of skills
• Management by Objectives: Employee and supervisor jointly establish future performance goals

Multiple Sources for Performance Ratings

• Peers: Offer unique insights when the boss is absent, and provide team-based feedback on interpersonal, leadership, and networking skills
• Customers/Clients: Provide a client perspective, including complaints and comments
• Self-Appraisals: Useful for individual improvement, though ratings are often higher than others' and provide an opportunity to highlight performance
• Supervisors/Managers: Responsible for employee performance, but may only see employees at their best
• Direct Reports: Help provide feedback on leadership/management skills of the supervisor

Rater Training

• Raters are trained on the purpose of the performance appraisal process, its alignment with the organization’s strategy, and the forms themselves
• Rater error training includes:
• Halo effect
• Error of central tendency
• Leniency and strictness biases
• Personal prejudice
• Recency effect
• Contrast errors

Communicating Feedback

• Evaluation interviews should be performance review sessions that give employees feedback
• Evaluation Interview Approaches Include:
• Tell-and-sell
• Tell-and-listen
• Problem-solving
• The interview should be a positive, performance-improving dialogue
• Frequency:
• Appraisals for administrative decisions are typically annual
• Appraisals for development should be immediately after good/bad performance or regularly (e.g. quarterly)

HR Records and Decisions

• HR uses performance records to guide their HR decisions, based on the purpose of the performance appraisal and maintains employee performance records for legal reasons

Establishing a Performance Improvement Plan

• The steps for this include getting started, developing an action plan, reviewing the performance improvement plan, meeting with the employee, following up, and PIP conclusion

Human Resource Function Feedback

• The performance management process provides insight into HRM effectiveness
• Widespread poor performance indicates the HRM function may have errors like a poor selection process or inaccurate job analysis information

Legal Aspects of Performance Appraisal

• A performance appraisal form is a legal document
• Avoid non-relevant criteria
• A reasonable time must be set for performance improvement
• Well-documented shortcomings and use of feedback interviews have been viewed favourably in court and with arbitrators

Talent Management

• Is to use information about employee performance and potential to guide employee decisions