Performance Appraisal

PERFORMANCE APPRAISAL

Performance appraisal is a process concerned with determining how well employees are doing their jobs, communicating that information to the employees and establishing a plan for performance improvement.

Appraisal is the judgment of an employee’s performance in a job, based on consideration other than productivity atone.  What is being assessed in appraisal is the employee’s performance in carrying out the general duties of his/her role, together with any specific targets that have been set.

Performance appraisal is the process of determining and communicating to an employee how he is performing on the job and establishing a plan of improvement.  They tell an employee how well he is performing and the future level of effort and took direction.

Reasons for Performance Appraisal

  1. For making administrative decisions relating to promotions, firings, layoffs and merit pay increases. It helps a manager decide what increases of pay shall be given on grounds of merit.
  2. For determining the future use of an employee.
  3. Appraisal can provide needed input for determining both individual and organizational training and development needs, through identifying strengths and weaknesses.
  4. Appraisal encourages performance improvement. They may motivate the employee to do better in his current job due to knowledge of results, recognition of merit and the opportunity to discuss work with his manager.
  5. Appraisals help to identify an individual’s current level of performance.
  6. Information generated by appraisal can be used as an input to the validation of selection procedures.
  7. Appraisal information is an important input to human resource planning and succession planning, career planning and so on.

By making effective use of the performance appraisal system, an organization may seek to: –

  • Improve productivity
  • Promote internal control through timely detection and feedback on actual performance
  • Create a positive work environment
  • Stimulate, recognize and reward achievements
  • Provide objective measures of performance
  • Furnish information for other HR sub-systems.

Frequency of Performance Appraisal

Despite the many potential benefits of appraisal, many organizations do not make effective use of the system.  When appraisal is infrequently used, employees voice concern about the possible abuse.  There seems to be no real consensus on how frequently performance appraisals should be done, but it is good to have them as often as in necessary to let employees know what kind of job they are doing, and measures to be taken for improvement.

An annual appraisal is not enough.  For most employees informal performance appraisals can be conducted two or three times a year in addition to an annual formal performance appraisal.

Key Principles in the design of Appraisal Schemes.

  1. Create motivation to change or improve behaviour.
  2. Provide recognition for successful performance.
  3. Provide valid and reliable information for pay decisions.
  4. Provide guidance on what skills, competences and behaviour are needed to meet expectations.
  5. Need to be simple, clear and written in accessible language.
  6. Must make realistic demands on employees and managers time and other resources.
  7. Must be perceived to be fair.

PERFORMANCE APPRAISAL METHODS

Selection of a Performance Appraisal Method

Whatever method of appraisal an organizational uses, it must be job related.  Therefore before selection of a method, an organization must conduct job analyses and develop job descriptions.

Methods of Performance Appraisal

  1. Goal setting or Management by Objectives (MBO).
  2. Multi-rater (360 – degree feedback).
  3. Ranking methods.
  4. Rating methods.
  5. Work standards approach.
  6. Essay appraisal.
  7. Critical – incident appraisal.
  8. Checklist.
  9. Assessment centre.
  10. Open –ended method.
  1. GOAL – SETTING OR MANAGEMENT BY OBJECTIVES

This is more commonly used with professional and managerial employees.  Other terminologies used for this include; management by results, performance management, results management and work planning and review programmes

The MBO process consists of the following steps:-

  1. Establishing clear and precisely defined statements of objectives for the work to be done by an employee.
  2. Developing an action plan indicating how these objectives are to be achieved.
  3. Allowing the employee to implementing the action plan
  4. Measuring objective achievement
  5. Taking corrective action when necessary
  6. Establishing objectives for the future.

 For MBO to be successful;

  • Objectives should be quantifiable and measurable
  • Objectives should be challenging yet achievable
  • Objectives should be expressed in writing and in clear, concise, unambiguous language
  • Employees should participate in the objective-setting process
  • The objectives and action plan must serve as a basis for regular discussions between manager and employee

Advantages

  • MBO is intended to encourage employee participation and increase job satisfaction by giving the employee a sense of achievement and involvement with his or her sense of achievement and involvement with his or her work.
  • Training needs may also emerge during the discussion at the beginning and end of the review period
  • Employees are forced to think hard about their roles and objectives, about why task are necessary and how best to get things done
  • Targets are clarified and the crucial elements in each job identified
  • Superiors and subordinates are obligated to communicate with each other, and there is forced co-ordination of activities between various levels of management, departments and between short and long term goals.

Disadvantages

  • Many managers and employees find the joint objective setting and performance review interviews difficult and sometimes inconsistent with the general management style of the company.
  • The system may then generate into a routine in which the manager simply instructs the employee which objectives to pursue.
  • Quite often, it is difficult to find new objectives, which offer a challenge, and the system may encourage individual, selfish effort to the detriment of the working group.
  • Attempts to quantify performance in activities that are not really quantifiable. (E.g. advisory duties or the work of a receptionist)
  • Concentration on short term measurable goals while neglecting important but less precise long term objectives
  • Difficulties arising from subordinates being given objectives but not the resources, information and authority needed to achieve them.
  • Takes a great deal of time, energy and form.
  • Some executives find it hard to even think of their own work habits.
  • Some areas of management are difficult to measure in terms of performance e.g. Employee development.
  • Possibility of a tug of war with supervisors setting high targets and the subordinates setting very low targets.

In many organisations where the objectives are pre-determined, Key Performance Areas (KPA’s) or Key Result Areas (KRA’s) are also decided in advance through joint effort. Evaluation is done in terms of the degree of achievement and non-achievement of the objectives KPA’s/KRA’s

  1. MULTI-RATER ASSESSMENT / MULTI-SOURCE ASSESSMENT

This is currently a very popular method of performance appraisal. It is also known as 360-degree feedback. 360-degree feedback is “The systematic collection and feedback of performance data on an individual or group derived from a number of the stakeholders.  With this method, managers, peers, customers, suppliers or colleagues are asked to complete questionnaires on the employee being assessed. The person being assessed also completes a questionnaire. Data on ones performance is analysed and the result shared with the employee appraised, who in turn compares the results with his assessment.

The 360-degree Feedback Model

The range of feedback, on ones performance, could be extended to include other stakeholders – external customers, clients and suppliers, (this is known as 540-degree feedback). Feedback may be presented direct to individuals, or to their managers, or both.

USE OF 360-DEGREE FEEDBACK

  • It forms part of a self-development or management development.
  • supports learning and development,
  • Supports appraisal, resourcing and succession planning.

The system is NOT used for formal performance evaluation or to support pay decisions.  The system is not to be used as a basis for reward.

To develop and implement 360-degree feedback, the following steps need to be taken.

  • Define objectives
  • Decide on recipients of the feedback
  • Decide on who will give the feedback
  • Decide on the areas of work and behaviour
  • Decide on the method of collecting the data
  • Decide on data analysis and presentation
  • Plan initial implementation programme
  • Analyse outcome of pilot scheme
  • Plan and implement full programme
  • Monitor and evaluate

Advantages and disadvantages

  • Employees get a broader perspective of how they are perceived by others than before
  • Increased awareness of and relevance of competences
  • Increased awareness by senior management that they too have development needs
  • More reliable feedback to senior managers about their performance
  • Gaining acceptance of the principle of multiple stakeholders as a measure of performance
  • Encouraging more open feedback
  • It is supporting a climate of continuous improvement
  • Perception of feedback as valid and objective, leading to acceptance of results and actions required

But there may be problems.

  • People not giving frank or honest feedback
  • People being put under stress in receiving or giving feedback
  • Lack of action following feedback
  • Over-reliance on technology
  • Too much bureaucracy

CRITERIA FOR SUCCESS

  • Active support of top management
  • Commitment everywhere on the process –briefing, training
  • Determination by all to implement the system as a basis for development
  1. RANKING METHODS.

The core element of the use of rankings is that employees are compared to each other, and given some number that supposedly indicates whether they are better than, about the same or less effective than their colleagues.  It is used to determine who will get a pay rise from a limited resource pool, or for other decision-making processes. In ranking methods, especially the simplest form, the supervisor lists all subordinates in order, from the highest to the lowest in performance.

The following methods are used in ranking: –

  1. Straight ranking
  2. Alternation ranking
  3. Paired comparison.
  4. STRAIGHT RANKING.

Here the supervisor simply ranks all members of a group from best to worst, based on some dimension of performance e.g. Best quality, most researched, sales etc.  The method is appropriate for small companies.  As the number of employees increases, it becomes gradually more difficult to discern differences between individuals performance.  The method has other drawbacks; first, the size of differences between individuals is not well defined. E.g. the differences between the individuals 2 and 3 may be little, but between 3 and 4 very huge.  This can be overcome by assigning points to indicate the size of the gaps existing among employees.  The method offers little or no feedback for improving performance.  The method assumes a normal distribution of performance.

 

  1. ALTERNATION RANKING.

Since it is easier to distinguish between the best and the worst employees, than just rank them, this method is more popular.  First, list all the subordinates to be rated and then cross out the names of any not known well enough to rank.  Then one piece of paper, indicate the employee who is the highest on the characteristics being measured and also who is the lowest.  Then choose the next highest and the next lowest, alternating between highest and lowest until all employees to be rated have been ranked.  The method suffers from the same disadvantages as straight ranking, but initially may be easier to complete.

 

  1. PAIRED COMPARISON

This helps make the ranking method more precise.  For every trait (quality of work, quantity of work etc), every subordinate is paired with and compared to every other subordinate.

Suppose there are 5 employees to be rated.  A chart of all possible pairs of employees for each trait is made.  Then for each trait, indicate with a (+ or -) who is the better employee of the pair.  Next add the number of times an employee is rated better and add then up.

For the trait

“Creativity of work”

 

 

For the trait

“Quality of work”

  Employee Rated     Employee Rated
As compared

to

             As compared

to

          
Art Mat Che Dia Jo     Art Mat Che Dia Jo
Art + + – – Art – – – –
Mat – – – – Mat + – + +
Che – + + – Che + + – +
Dia + + – + Dia + – + –
Jo + + + – Jo + – – +

Mat is a good employee under “quality of work” but Art is a good employee under “creativity”

4. RATING SCALES

  1. GRAPHIC RATING-SCALE

With this method, the rater assesses an employee on factors such as quantity of work, dependability, job knowledge, attendance, accuracy of work and cooperativeness.  Graphic rating scales include both numerical ranges and written descriptions.

The method has several weaknesses; one of them being that evaluators are unlikely to interpret written descriptions in the same manner due to differences in background, experience and personality. Another potential problem relates to the choice of rating categories.   It is possible to choose categories that have little relationship to job performance or omit categories that have a significant influence on job performance.

Example of a Graphical/Linear rating scale

The appraiser is faced with a list of  characteristics or job duties and is required to tick or circle an appropriate point on a numerical, alphabetical or other simple scale.

Example:

  A B C D E
INITIATIVE
  EXCELLENT NON-EXISTENT
INITIATIVE 1 2 3 4 5
  LOW HIGH

 

INITIATIVE EXCELLENT GOOD AVERAGE POOR
 

BEHAVIOURALLY ANCHORED RATING SCALE (BARS)

This method is designed to assess behaviour required to successfully perform a job.  The assumption is that functional behaviour will result in effective job performance.  Most BARS use the term job dimension to mean those broad categories of duties and responsibilities that make up a job.  Each job will have several job dimensions and separate scales must be developed for each.  BARS are developed through the active participation of both managers and job incumbents – increasing the likelihood of the method getting accepted.

The anchors are developed from the observations and experiences of employees who actually perform the job. BARS, can be used to provide specific feedback concerning an employee’s job performance.

BARS however take time and commitment to develop separate forms must be developed for different jobs.

 

Example of a Behaviourally Anchored Rating Scale

Scale Values              Anchors

7[ ] Excellent               Develops a comprehensive project plan, documents it well, obtains required approval, and distributes the plan to all concerned.

6 [ ] Very good              Plans, communicates, and observes milestones; states week by week where the project stands relative to plans.  Maintains up-to-date charts of project accomplishments and backlogs and uses these to optimise modifications required.  Experiences occasional minor operational problems but communicates effectively.

5[ ] Good                      Lays out all the parts of a job and schedules each part; seeks to beat schedule and will allow for slack.

Satisfies customers’ time constraints; time and cost overruns occur infrequently.

4[ ] Average                 makes a list of due dates and revises them as the project progresses, usually adding unforeseen events; instigates frequent customer complaints.

May have a sound plan, but does not keep track of milestones; does not report slippages in schedule or other problems as they occur.

3[ ] Below average       Plans are poorly defined, unrealistic time schedules are common.

Cannot plan more than a day to two ahead, has no concept of a realistic project due date.

2[ ] Very Poor               Has no plan or schedule of work segments to be performed.

Does little or no planning for project assignments.

1[ ] Unacceptable        Seldom, if ever, completes project, because of lack of planning, and does not seem to care.

Fails consistently due to lack of planning and does not inquire about how to improve.

 

  1. FORCED-CHOICE RATING

The most common practice requires the evaluator to rank a set of statements describing how an employee carries out the duties and responsibilities of the job.  The statements are normally weighted and the weights known only to the rater.  After all the items have been rated and ranked, the HR department applies the weights and computers a score.

The method seeks to eliminate bias by forcing the rater to rank the statements.  However the method is known to irritate raters who feel they are not being trusted.  The results of such an exercise may be hard to communicate to the employees.

Sample set of forced – choice statements

Rank                      Description

_____                    Is easy to get acquainted with

_____                    Places great emphasis on people

_____                    Refuses to accept criticism

_____                    Thinks generally in terms of money

 

&   What are of the weaknesses of rating scales?

&   Is it good enough to rate employees on a rating scale?

&   In what ways should performance appraisal interviews be conducted?

&   What are some of the pre-appraisal preparations one has to make?
  1. WORK STANDARDS APPRAISAL APPROACH

This approach is used most frequently for production workers, and is basically a form of goal setting for these employees. It involves setting a standard or an expected level of output and then comparing each employee’s performance to the standard. Work standards should reflect the average output of a typical employee. Work standards attempt to define a fair days work.

Several methods can be used to set work standards, the most common ones being;

  • Average production of work groups
  • Performance of specially selected employees
  • Time study
  • Work sampling
  • Expert opinion

An advantage of this method is that the performance review is based on highly objective factors.  The most serious criticism of work standards is a lack of comparability of standards for different job categories.  .

 

  1. ESSAY APPROACH

This requires that the evaluator describe an employee’s performance in written narrative form. A 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 employees strengths and weaknesses?’

The primary problems with this method include; the length and content of the essay, which may vary considerably, depending on the rater; essay appraisals are difficult to compare; the writing skill of the appraisers vary: an effective writer can make an average employee look better than the actual performance warrants.

 

  1. CRITICAL – INCIDENT APPRAISAL

This requires the evaluator to keep a written record of incidents as they occur. The incidents recorded should involve job behaviours that illustrate both satisfactory and unsatisfactory performance of the employee being rated. The recorded incidents provide a basis for evaluating performance and providing feedback to the employee. A main draw back is rater is expected to jot down incidents regularly, and can be burdensome and time consuming. Also the definition of a critical – incident may not be clear and be interpreted differently by different people. Method may lead to friction when employees believe the manager is keeping a book on them.

  1. THE CHECKLIST

In the checklist method, the rater makes yes-or-no responses to a series of questions concerning the employee’s behaviour. The checklist can also have varying weights assigned to each question.

Sample checklist questions

Does the employee lose his or her temper in public?

Does the employee play favourites?

Does the employee praise employees in public when they have done a good job?

Does the employee volunteer to do special jobs?

Because the raters can see the positive or negative connotation of each question, bias can be introduced.  Additional drawbacks to the checklist method are that it is time consuming to assemble the questions for each job category and the checklist questions can have different meanings for different raters.

  1. ASSESSMENT CENTRES

This is a special form of appraisal intended to identify potential for promotion.  An assessment centre is not a place rather a process that consists of a small group of participants who undertake a series of tests and exercises under observation, with a view to assessing their skills and competencies and suitability for particular roles and their potential for development.  It consists of a series of exercises such as leaderless group discussions, role-playing, business games and ten-minute speeches.  A group of candidates is brought together at a fairly isolated spot where they go through the exercises over a period of one to three days.  They are judged by assessors who are usually managers of the company who have received appropriate training.

 

Assessment centres are sometimes used for initial selection of supervisors, managers and sales staff.  The advantages of assessment centres are that:-

  1. They offer assessors far more information about candidates than is available from conventional interviews.
  2. They present suitable environments for the evaluation of candidate’s interpersonal skills – persuasiveness, assertiveness, ability to cope with stress, communication skills etc.
  3. Candidates have time to settle into the assessment process may not be as nervous as should be the case
  4. Attendance at an assessment centre can be a useful and interesting learning experience
  5. Has a higher probability of selecting the correct candidate than with any other selection method.

 

Problems with Assessment Centre include: –

  1. Are expensive and must be carefully designed to meet a company’s special requirements, and staffing them is expensive and time consuming.
  2. The personal characteristics examined via assessment centre exercises cannot be measured accurately since many are psychological.
  3. Assessors might not be fully familiar with the details of the work that successful candidates will have to undertake hence the wrong qualities may be assessed.
  4. Assessment of a candidate’s personality and other characteristics must inevitably depend to some degree on the assessor’s subjective value judgments.
·         What are the essential features of effective staff appraisal systems?

·         Discuss any disadvantages of appraisal systems

·         Discuss the role of the; senior management, the line manager and the employee in an appraisal process

 
  1. THE OPEN-ENDED METHOD

This is a recent innovation, introduced because of dissatisfaction with rating scales.  The method emphasizes the way the job is performed and expects the manager to write a few sentences about the subordinate rather than pick ticks in columns. The method cannot be used directly to decide pay but it fulfils the other purposes of appraisal as well.  It is more intellectually demanding and is best suited where the subordinate’s jobs are relatively unstructured.

BIASES IN PERFORMANCE APPRAISAL.

There are many possible sources of error in the performance appraisal process. One of the major sources is mistakes made by the rater. There is no simple way to eliminate these errors, but making raters aware of them is helpful. The most common errors committed in performance appraisal include: the halo effect; leniency; strictness; the central tendency error; the recency effect; and the contrast error.

The Halo Effect.

The halo effect occurs when a manager rates an employee high on all items because of one characteristic. For example, if a worker has few absences, her supervisor might give her a high rating in all other areas of work, including quantity and quality of output, because of her dependability. The manager may not really think about the employee’s other characteristics separately. The opposite of a halo error is a horn error, where negative performance in one-dimension influences any positive aspects of the employee’s performance.

An appraisal that shows the same rating on all characteristics may be evidence of the halo or horn effect. Clearly specifying the categories to be rated, rating all employees on one characteristic at a time, and training raters to recognise the problem are some means of reducing the halo and horn effects.

The Leniency Error.

A second common and often intended rating error is called leniency error – or the process of being ‘too easy’. Leniency bias may exist because supervisors are concerned about damaging a good working relationship by giving an unfavourable rating. Or they may wish to avoid giving negative feedback, which is often unpleasant, so they inflate the ratings.

The Error of Strictness.

At the opposite extreme of leniency is the error of strictness in which ratees are give unfavourable ratings regardless of performance level. Raters with low self-esteem or raters who have personally received a low rating are most likely to rate strictly. Rater training, which includes reversal of supervisor subordinate roles and confidence building, will reduce this error.

The Central Tendency Error.

Rather than using extremes in ratings, there is a tendency on the part of some raters to evaluate all ratees as average even when performance actually varies. This bias is referred to as the error of central tendency. Raters with large spans of control and little opportunity to observe behaviour are likely to rate the majority of employees in the middle of the scale, rather than too high or too low. This is a ‘play-it-safe’ strategy. Central tendency can also be a by-product of the rating method. The forced-distribution format requires the most employees be rated ‘average’.

The Recency Effect.

Recent events are weighted more heavily than they should be.  They as such influence the overall rating of an employee. As the typical appraisal period [six months to a year] is far too long for any rater to adequately remember all performance-relevant information. As the appraisal interview draws near, the rater searches for information cues as to the value of performance. Unfortunately, recent behaviours or outputs are more salient. As a result, recent events are weighted more heavily than they should be. Called the recency of events error, this bias can have serious consequences for a ratee who performs well for six months or a year but then makes a serious or costly error in the last week or two before evaluations are made.

Employees and managers can minimise this error by keeping ongoing behavioural or critical incident files in which good and poor behaviours and outputs are recorded. Although time consuming, they ensure that information for the entire period is incorporated into the appraisal.

The Contrast Error.

Tendency on the part of some raters to evaluate all ratees as average even when performance actually varies. Rating should be done on the basis of standards that are established before the rating. The contrast error is the tendency to rate people relative to other people rather than to performance standards. For example, if everyone else in a group is doing a mediocre job, a person performing somewhat better may be rated as excellent because of the contrast effect.

But in a group performing well, the same person might have received only a poor rating. Although it may be appropriate to compare people at times, the rating should reflect performance against job requirements, not against other people.

Similarity Error        

Occurs when the evaluator rates other people in the same way he perceives himself. An aggressive evaluator may evaluate others by looking at their aggressiveness.  Those with this characteristic benefit while others may suffer

Miscellaneous Error

Bias against employees on grounds of gender, religion or position.  For example, a higher rating may be assigned to a senior employee and not a junior one.

OTHER CAUSES OF BIAS IN PERFORMANCE APPRAISALS

  • Social differentiation: rating is sometimes impeded by the evaluator’s style of rating behaviour. High differentiators use all most the entire scale, while low differentiators use a limited range of the scale. Low differentiators tend to ignore or suppress differences while the high differentiators tend to utilise all available information to the utmost extent.
  • Fundamental Attribution Errors: refers to the tendency to attribute observed behaviour to the disposition of the person being observed and thereby underestimate the causal role of factors beyond the control of the performer. It is also known as the actor-observer bias.  It tends to result in people being given insufficient credit for their successes and excessive blame for their failures.  This causes perception of unfairness in appraisal decisions.
  • The Mathew Effect: Named after the Mathew of Biblical fame, ‘To him who has shall be given, and he shall have abundance: but from him who does not have, even that which he has shall be taken away’. It occurs where employees tend to keep receiving the same appraisal results year in and year out.  No matter how an employee strives, their past appraisal records will prejudice their future attempts to improve.  It talks of a group of workers known as the in-groupers – those favoured by supervisors and the out-groupers – those not favoured.  An in-grouper who fails to perform a task properly will have this shortcoming ignored by the supervisor but will get a reward when performance is OK. An out-grouper performing very well will rarely get recognition from the supervisor, but will get low ratings when performance is low.

APPRAISAL INTERVIEW APPROACHES.

Four basic approaches to conducting a performance review:

  1. Tell: In this style the manager tells the employee exactly what are the results of the appraisal and what should be done without inviting any talk from the employee. The employee just listens.
  2. Tell and sell: manager acts as a judge and tells the employee how well he/she is doing and then persuades he/she to change in the way the manager desires.
  3. Tell and listen: similar to above except the manager conveys assessments about the strengths and weaknesses in the employee’s performance and then lets the employee respond to these statements; the manager tries to understand the employee’s feelings by emphasizing active listening skills.
  4. Problem-solving approach: the manager acts as a partner and works jointly with the subordinate to develop the employee’s performance; the manager must practice both joint goal setting and active listening

THE APPRAISAL FEEDBACK INTERVIEW

Once appraisals have been made, it is important to communicate them so that employees have a clear understanding of how they stand in the eyes of their immediate superiors and the organisation. It is fairly common for organisations to require that managers discuss appraisals with employees. The appraisal feedback interview can clear up misunderstandings on both sides. In this interview, the manager should emphasize counselling and development, not just tell the employee, ‘Here is how you rate and why’. Focusing on development gives both parties an opportunity to consider the employee’s performance and its potential for improvement.

 

·         Discuss the ways in which one can avoid the problems associated with performance appraisals.

·         What are some of the factors to consider in the selection of an appraisal technique?

The appraisal interview presents both an opportunity and a danger. It is an emotional experience for the manager and the employee because the manager must communicate both praise and constructive criticism. A major concern is how to emphasize the positive aspects of the employee’s performance while still discussing ways to make needed improvements. If the interview is handled poorly, the employee may feel resentment and conflict may result, which probably will be reflected in future work.

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