Module 4 Performance Appraisal PDF

# Module 4: Performance Appraisal ## Learning Objectives By the end of this chapter, you should be able to: - Identify the objectives of a performance appraisal process. - Explain managerial resistance to participating in the performance appraisal process. - Describe a common misconception about...

# Module 4: Performance Appraisal ## Learning Objectives By the end of this chapter, you should be able to: - Identify the objectives of a performance appraisal process. - Explain managerial resistance to participating in the performance appraisal process. - Describe a common misconception about performance appraisals. - Recognize the many benefits and uses of performance appraisals for human resources (HR) practitioners, managers, and the organization as a whole. - Articulate the elements of an effective performance appraisal system. - Differentiate among the respective performance appraisal responsibilities of managers, human resources practitioners, and employees. - Recognize obstacles to achieving performance objectives ## 1. What Is a Performance Appraisal? The term "performance appraisal" refers to the regular review of an employee's job performance and overall contribution to a company. Also known as an annual review, employee appraisal, performance review or evaluation, a performance appraisal evaluates an employee's skills, achievements, and growth, or lack thereof. ## II. Objectives of Performance Appraisal Effective performance appraisal systems go beyond their primary objective of ensuring the maximum utilization of every employee's skills, knowledge, and interests. They also serve to enhance employer-employee relations, HR development, and employee career development. ### 1. Employer-employee relations - Strengthening the overall working relationship between managers and employees - Developing a mutual understanding between managers and employees with regard to performance expectations, goals, and measurement criteria - Encouraging employees to openly express themselves with regard to performance-related issues - Encouraging managers to examine their own strengths and areas requiring improvement - Helping managers effectively coach and counsel their employees ### 2. HR development - Allowing for more productive uses of an organization's human resources - Identifying “mismatches" in hiring - Providing supportive data for decisions concerning salary increases, transfers, promotions, demotions, and disciplinary action up to and including termination - Identifying specific ways to expand beyond the existing talent pool of an organization by clearly understanding the skills of its current human resources - Identifying an organization's top employees for future human resource planning purposes ### 3. Employee career development - Providing feedback on past performance according to established standards of performance and specific job responsibilities - Planning developmental opportunities by identifying employee strengths and areas requiring improvement - Helping evaluate an individual's potential - Motivating employees to both establish and achieve personal goals that are compatible with organizational goals ## III. Types of Performance Appraisal ### 1. 360 Feedback 360 feedback involves getting broad feedback from an employee's coworkers. This can mean peer reviews, self-reviews, manager-reviews, secondary manager reviews, or upward reviews. The idea is to increase the sources of feedback in order to get a more accurate and holistic view of employee performance. 360 feedback will often be open-ended or thematic with the employee's manager reviewing and aggregating the feedback into a single more cohesive picture of performance. **When to Use 360 Feedback** 360 feedback is a great option for when employees regularly work collaboratively on different teams. When an employee's primary role is working with others outside the view of their manager, 360 reviews can bring up feedback that might not otherwise be raised. Peers are often hesitant to give negative feedback outside of a formal context, but 360 reviews provide that context. ### 2. Narrative Appraisals or Essay Appraisals As its name suggests, the narrative performance appraisal (or essay appraisal) is created when a manager writes a freeform essay about an employee's performance over a specific review period. **When to Use Narrative or Essay Appraisals** Essay appraisals are best for employees with loosely defined jobs or who do very individualized creative work. If it's hard to quantify the inputs and outputs of employees' work or you feel like every employee would need their own custom appraisal questions in order to get relevant feedback, the narrative appraisal could be right for you. ### 3. Competency Assessment Competency assessments measure an employee's capabilities against their critical job skills. These assessments show the gaps between where an employee needs to be and where they are now. Competency assessments often flow naturally into a concrete learning plan focused on the competencies with gaps. **When to Use Competency Assessments** Competency assessments are great for jobs where success is dependent on well-understood skills. It usually helps to have many employees in a similar role so that you can begin to understand the competencies that matter through experience ### 4. Project-Based Reviews Project-based reviews are unique in that they focus on the most recent work an employee has completed. These reviews include questions that are directly related to an employee's contribution to a project. **When to Use Project-Based Reviews** Project-based reviews are best for companies that work on distinct projects one at a time (or almost one a time). These reviews work best when these projects last from a few weeks to a few months. Typical examples are accounting audit teams, consulting teams, and some types of law firms. Project-based reviews are especially useful when organizations are bringing together new groups of employees for each project. ### 5. Stack Ranking Appraisals Stack rankings and forced distributions are a controversial method of performance appraisals that rely on ranking employees against each other. Sometimes this is a top to bottom list, and sometimes it's sorting employees into buckets of high-performing, low-performing, and the middle with quotas for each. **When to Use Ranking Appraisals** Ranking appraisals can work great for competitive environments like up-or-out consulting firms. In these situations, everybody knows they need to be a top performer to stay with the firm, so it's healthier to make this process transparent and open. ### 6. Grading/Rating Appraisals In a grading/rating performance appraisal, managers use a numerical (1-5) or descriptive scale to record an employee's performance in specific areas of their job. **When to Use Grading/Rating Appraisals** Rating scales work well at organizations that need to create more accountability because it's impossible to spin a low rating. ### 7. Behaviorally Anchored Rating Scales (BARS) Behaviorally Anchored Rating Scales (also known as BARS) uses behavior "statements" as a reference point for rankings. BARS measures employee performance against specific examples of behavior that are given a number ranking. **When to Use BARS** Because BARS creates the ability to design a unique performance management experience for every position within an organization, it's typically best for organizations that have groups of positions or departments made up of similar types of jobs. ### 8. External/Client Appraisals External and client appraisals involve bringing in third parties from outside the company to help with performance reviews. For employees that primarily engage with customers or clients, this can be the most important source of feedback. **When to Use External/Client Appraisals** Client appraisals are great for service roles where an employee's primary job is to interact with customers. ### 9. Management by Objectives (MBO) Management by objectives (MBO) measure employee performance by how employees achieve specific objectives. These objectives are decided on with equal input from employees and managers. **When to Use MBO** MBO can be an effective method for many organizations. ### 10. Checklist Appraisals In checklist appraisals, managers are asked to answer “yes” or “no” to a series of questions or statements about an employee. **When to Use Checklist Appraisals** Because checklist appraisals are binary, they're best used for traits where levels of gray are less important. Checklists are also great when you need to provide a lot of feedback in many areas but need to keep the appraisal easy to complete. ### 11. Critical Incident Appraisals For critical incident appraisals, managers keep a log of specific examples of both negative and positive behavior exhibited by employees. **When to Use Critical Incident Appraisals** Critical incident appraisals are simply descriptions of events and that can make it hard to compare employees or make decisions based on them. They can also be overwhelming and hard to interpret. We recommend pairing critical incident appraisals with some sort of quantitative method. ### 12. Human Resource Accounting / Cost Accounting Also called cost accounting, human resource accounting analyzes an employee's performance through the monetary gains they bring to the organization vs. the cost to retain the employee. **When to Use Human Resource Accounting** Human resource accounting is most useful when employee contributions and costs are measurable. This can happen in situations where executives are judged on their P&L, or for positions like sales where the ultimate measure of success is revenue generated. ### 13. Psychological Appraisals Psychological appraisals are unique in that they consider an employee's future performance, rather than focusing on their past. **When to Use Psychological Appraisals** Psychological appraisals can help organizations see employees' potential. ### 14. OKRs Objectives and key results (OKRs) are focused on quantifiable measures to evaluate performance, which are designed to assess the company and team's performance. **When to Use OKRS** OKRs keep planning focused on impact, so this metric is best utilized at the team level. This method works on the inverse of micromanaging because it's an effective mechanism for aligning top-down strategy with bottom-up, team-level commitments to support the processes involved. OKRs de-emphasize specific tasks and emphasize value. OKRs work best as a team-based goal rather than a particular methodology due to a shared objective and quantifiable metrics, which helps a team coordinate activity, align with stakeholders, and move with more than just immediate goals as a finish line. **Reference:** * Arthur, Diane; American Management Association. New York : AMA Self-Study. 2008. * Abraham, Akampurira. Hamburg, Germany : Anchor. 2014 Prepared by: Jasmine Evasco