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CHAPTER 8Appraising and Improving PerformanceFigure 8.2351Let Me Count the Ways . . .There are many reasons why performance appraisal systems might not beeffective. Some of the most common problems include the following: Inadequate preparation on the part of the manager. Employee is not given clear objectives at the beginning of performanceperiod. Manager may not be able to observe performance or have all the information. Performance standards may not be clear. Inconsistency in ratings among supervisors or other raters. Rating personality rather than performance. The halo effect, contrast effect, or some other perceptual bias. Inappropriate time span (either too short or too long). Overemphasis on uncharacteristic performance. Inflated ratings because managers do not want to deal with “bad news.” Subjective or vague language in written appraisals. Organizational politics or personal relationships cloud judgments. No thorough discussion of causes of performance problems. Manager may not be trained at evaluation or giving feedback. No follow-up and coaching after the evaluation.Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning,Heating & Refrigeration News 216, no. 16 (August 19, 2002): 24–26; Clinton Longnecker andDennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and Benefits 10,no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39,no. 1 (1994): 7–8.As with all HR functions, if the support of top management is lacking, theappraisal program will not be successful. Even the best-conceived program will notwork in an environment where appraisers are not encouraged by their superiors totake the program seriously. To underscore the importance of this responsibility, topmanagement should announce that effectiveness in appraising subordinates is a standard by which the appraisers themselves will be evaluated.Other reasons performance appraisal programs can fail to yield the desiredresults include the following:1.2.3.4.5.There is little face-to-face discussion between the manager and the employeebeing appraised.The relationship between the employee’s job description and the criteria on theappraisal form isn’t clear.Managers feel that little or no benefit will be derived from the time and energyspent in the process, or they are concerned only with bad performances.Managers dislike the face-to-face confrontation of appraisal interviews.Managers are not sufficiently adept at rating employees or providing them withappraisal feedback.Managing Human Resources, 14e, Bohlander/Snell - 2007 Thomson South-Western

352PART 36.7.Developing Effectiveness in Human ResourcesThe judgmental role of appraisal conflicts with the helping role of developingemployees.The appraisal is just a once-a-year event, and there is little follow-up afterward.In many organizations, performance appraisals are conducted only once ayear—but that is changing. More organizations are beginning to conduct them on asemiannual basis, and even quarterly. An important principle of performanceappraisal is that continual feedback and employee coaching must be a positive dailyactivity. The annual or semiannual performance review should simply be a logicalextension of the day-to-day supervision process.One of the main concerns of employees is the fairness of the performanceappraisal system, as the process is central to so many HRM decisions. Employeeswho believe the system is unfair may consider the appraisal interview a waste of timeand leave the interview with feelings of anxiety or frustration. Also, they may viewcompliance with the appraisal system as perfunctory and thus play only a passiverole during the interview process. By addressing these employee concerns during theplanning stage of the appraisal process, the organization will help the appraisal program succeed in reaching its goals.7Finally, organizational politics can introduce a bias even in fairly administeredemployee appraisals.8 For example, managers may inflate evaluations because theydesire higher salaries for their employees or because higher subordinate ratings makethem look good as managers. Alternatively, managers may want to get rid of troublesome employees, passing them off to another department by inflating their ratings.objectiveDeveloping an Effective Appraisal Program2The HR department ordinarily has the primary responsibility for overseeing and coordinating the appraisal program. Managers from the operating departments must alsobe actively involved, particularly in helping to establish the objectives for the program.Furthermore, employees are more likely to accept and be satisfied with the performance appraisal program when they have the chance to participate in its development.Their concerns about fairness and accuracy in determining raises, promotions, andthe like tend to be alleviated somewhat when they have been involved at the planningstage and have helped develop the performance standards themselves.What Are the Performance Standards?Before any appraisal is conducted, the standards by which performance is to be evaluated should be clearly defined and communicated to the employee. As discussed inChapter 4, these standards should be based on job-related requirements derivedfrom job analysis and reflected in an employee’s job description and job specifications. When performance standards are properly established, they help translateorganizational goals and objectives into job requirements that convey acceptable andunacceptable levels of performance to employees.As shown in Figure 8.3, there are four basic considerations in establishing performance standards: strategic relevance, criterion deficiency, criterion contamination, and reliability.Managing Human Resources, 14e, Bohlander/Snell - 2007 Thomson South-Western

CHAPTER 8Figure 8.3353Appraising and Improving PerformanceEstablishing Performance StandardsCriterion contamination:Elements that affect theappraisal measures thatare not part of the actualperformanceStrategic relevance:Performance standardslinked to organizationalgoals and competenciesPerformance measuresZone of validassessmentActual performanceReliability: Measures thatare consistent acrossraters and over timeCriterion deficiency: Aspects of actualperformance that are not measuredStrategic RelevanceStrategic relevance refers to the extent to which standards relate to the strategicobjectives of the organization. For example, if an organization has established a standard that “95 percent of all customer complaints are to be resolved in one day,” thenit is relevant for the customer service representatives to use such a standard for theirevaluations. Companies such as 3M and Buckman Laboratories have strategic objectives that 25–30 percent of their sales are to be generated from products developedwithin the past five years. These objectives are translated into performance standardsfor their employees. General Motors and Whirlpool include other objectives such ascost, quality, and speed. They develop metrics to identify and compare their performance around the world on these measures.9Criterion DeficiencyA second consideration in establishing performance standards is the extent to whichthe standards capture the entire range of an employee’s responsibilities. When performance standards focus on a single criterion (such as sales revenues) to the exclusionof other important but less quantifiable performance dimensions (such as customerservice), then the appraisal system is said to suffer from criterion deficiency.10Criterion ContaminationJust as performance criteria can be deficient, they can also be contaminated. Thereare factors outside an employee’s control that can influence his or her performance.A comparison of performance of production workers, for example, should not becontaminated by the fact that some have newer machines than others do. A comparison of the performance of traveling salespeople should not be contaminated by thefact that territories differ in sales potential.11Managing Human Resources, 14e, Bohlander/Snell - 2007 Thomson South-Western

354PART 3Developing Effectiveness in Human ResourcesReliabilityAs discussed in Chapter 6, reliability refers to the stability or consistency of a standard, or the extent to which individuals tend to maintain a certain level of performance over time. In ratings, reliability may be measured by correlating two sets of ratings made by a single rater or by two different raters. For example, two managersmay rate the same individual and estimate his or her suitability for a promotion.Their ratings could be compared to determine interrater reliability.Performance standards permit managers to specify and communicate preciseinformation to employees regarding quality and quantity of output. Therefore, whenperformance standards are written, they should be defined in quantifiable and measurable terms. For example, “ability and willingness to handle customer orders” is notas good a performance standard as “all customer orders will be filled in four hourswith a 98 percent accuracy rate.” When standards are expressed in specific, measurable terms, comparing the employee’s performance against the standard results in amore justifiable appraisal.Are You Complying with the Law?Because performance appraisals are used as one basis for HRM actions, they mustmeet certain legal requirements. In Brito v Zia, for example, the Supreme Courtruled that performance appraisals were subject to the same validity criteria as selection procedures.12 As the courts have made clear, a central issue is to have carefullydefined and measurable performance standards. In one landmark case involving testvalidation, Albemarle Paper Company v Moody (discussed in Chapter 3), the U.S.Supreme Court found that employees had been ranked against a vague standard,open to each supervisor’s own interpretation. The Court stated that “there is no wayof knowing precisely what criteria of job performance the supervisors were considering, whether each supervisor was considering the same criteria, or whether, indeed, COMSTOCK IMAGES/GETTY IMAGESSpecific, measurable jobstandards help removevagueness and subjectivity from performanceappraisals.Managing Human Resources, 14e, Bohlander/Snell - 2007 Thomson South-Western

CHAPTER 8Appraising and Improving Performance355any of the supervisors actually applied a focused and stable body of criteria of anykind.”13 This decision has prompted organizations to try to eliminate vagueness indescriptions of traits such as attitude, cooperation, dependability, initiative, and leadership. For example, the trait “dependability” can be made much less vague if it isspelled out in terms of employee tardiness and/or unexcused absences. In general,reducing room for subjective judgments will improve the entire appraisal process.Furthermore, other court decisions show that employers might face legal challenges to their appraisal systems when appraisals indicate acceptable or above-averageperformance but employees are later passed over for promotion, disciplined for poorperformance, discharged, or laid off from the organization. In these cases, the performance appraisals can undermine the legitimacy of the subsequent personnel decision. Intel, for example, was recently taken to court by a group of former employeeson grounds that the performance appraisal system (used for layoff decisions) wasunreliable and invalid. Other companies such as Goodyear and Ford have also facedlegal battles because their performance appraisals were viewed as discriminatoryagainst older workers.14 In light of court cases such as these, performance appraisalsshould meet the following legal guidelines:Performance ratings must be job-related, with performance standards developedthrough job analysis.Employees must be given a written copy of their job standards in advance ofappraisals.Managers who conduct the appraisal must be able to observe the behavior theyare rating. This implies having a measurable standard with which to compareemployee behavior.Supervisors should be trained to use the appraisal form correctly. They shouldbe instructed in how to apply appraisal standards when making judgments.Appraisals should be discussed openly with employees and counseling or corrective guidance offered to help poor performers improve their performance.An appeals procedure should be established to enable employees to expressdisagreement with the appraisal.15objectiveTo comply with the legal requirements of performance appraisals, employersmust ensure that managers and supervisors document appraisals and reasons forsubsequent HRM actions. This information may prove decisive should an employeetake legal action. An employer’s credibility is strengthened when it can support performance appraisal ratings by documenting instances of poor performance.3Who Should Appraise Performance?Just as there are multiple standards by which to evaluate performance, there are alsomultiple candidates for appraising performance. Given the complexity of today’sjobs, it is often unrealistic to presume that one person can fully observe and evaluatean employee’s performance. At IBM, employees with high potential are regularlyreviewed by a broad cross-section of the company’s leaders, not just their immediatebosses. As shown in Figure 8.4, raters may include supervisors, peers, team members,self, subordinates, customers, vendors, and suppliers. And each may be more or lessuseful for the administrative and developmental purposes we discussed earlier. Companies such as Cigna, Black & Decker, and Disney have used a multiple-raterManaging Human Resources, 14e, Bohlander/Snell - 2007 Thomson South-Western

356PART 3Developing Effectiveness in Human ResourcesFigure 8.4Alternative Sources of AppraisalSuperiorPeme TemserambersersVendorsSuppliersmSelfSubordin atesCustoapproach—or 360-degree appraisal—to evaluate employee performance.16 We willtalk more about 360-degree appraisal at the end of this section.Manager/Supervisor Appraisalmanager and/orsupervisor appraisalA performance appraisaldone by an employee’smanager and oftenreviewed by a managerone level higherManager and/or supervisor appraisal has been the traditional approach to evaluatingan employee’s performance. In most instances supervisors are in the best position toperform this function, although it may not always be possible for them to do so.Managers often complain that they do not have the time to fully observe the performance of employees. These managers must then rely on performance records toevaluate an employee’s performance. If reliable and valid measures are not available,the appraisal may be less than accurate. (Recall our earlier discussion of criteriondeficiency and contamination.)When a supervisor appraises employees independently, provision is often madefor a review of the appraisals by the supervisor’s superior. Having appraisalsreviewed by a supervisor’s superior reduces the chance of superficial or biased evaluations. Reviews by superiors generally are more objective and provide a broader perspective of employee performance than do appraisals by immediate supervisors.Self-Appraisalself-appraisalA performance appraisaldone by the employeebeing evaluated, generallyon an appraisal form completed by the employeeprior to the performanceinterviewSometimes employees are asked to evaluate themselves on a self-appraisal form. Theself-appraisal is beneficial when managers seek to increase an employee’s involvement in the review process. A self-appraisal system requires an employee to completethe appraisal form prior to the performance interview. At a minimum, this gets theemployee thinking about his or her strengths and weaknesses and may lead to discussions about barriers to effective performance. During the performance interview,Managing Human Resources, 14e, Bohlander/Snell - 2007 Thomson South-Western

CHAPTER 8Appraising and Improving Performance357the manager and the employee discuss job performance and agree on a final appraisal. Thisapproach also works well when the manager andthe employee jointly establish future performance goals or employee development plans. Critics of self-appraisal argue that self-raters aremore lenient than managers in their assessmentsand tend to present themselves in a highly favorable light. There is also evidence that selfappraisals can lead employees to believe that theywill have more influence over the appraisal’s outcome. If that expectation isn’t met, the employeecan become frustrated. For this reason, selfappraisals may be best for developmental purposes rather than for administrative decisions.Used in conjunction with other methods, selfappraisals can be a valuable source of appraisalinformation. They at least serve as a catalyst fordiscussion during the appraisal.17Source: From The Wall Street Journal—permission, Cartoon FeaturesSyndicate.subordinate appraisalA performance appraisalof a superior by anemployee, which is moreappropriate for developmental than for administrative purposespeer appraisalA performance appraisaldone by one’s fellowemployees, generally onforms that are compiledinto a single profile for usein the performance interview conducted by theemployee’s managerSubordinate AppraisalSubordinate appraisal has been used by bothlarge organizations (such as Xerox and Honeywell)and small organizations (such as Hyde Manufacturing and Alliance Funding) to give managers feedback on how their subordinatesview them.18 Subordinates are in a good position to evaluate their managers becausethey are in frequent contact with their superiors and occupy a unique position fromwhich to observe many performance-related behaviors. Subordinate appraisals havealso been shown to improve the performance of managers. The performance dimensions judged most appropriate for subordinate appraisals include leadership, oralcommunication, delegation of authority, coordination of team efforts, and interest insubordinates. However, dimensions related to managers’ specific job tasks, such asplanning and organizing, budgeting, creativity, and analytical ability, are not usuallyseen as appropriate for subordinate appraisal. Because subordinate appraisals giveemployees power over their bosses, managers may be hesitant to endorse such a system, particularly when it might be used as a basis for compensation decisions. However, when the information is used for developmental purposes, managers tend to bemore open to the idea. And available evidence suggests that when managers heed theadvice of their subordinates, their own performance can improve substantially. Nevertheless, to avoid potential problems, subordinate appraisals should be submittedanonymously and combined across several individual raters.19Peer AppraisalIndividuals of equal rank who work together are increasingly asked to evaluate eachother. A peer appraisal provides information that differs to some degree from ratings by a superior, since peers often see different dimensions

The new system, called the Career Resource System, includes a detailed job description, a performance review, and a career plan- ner to track long-term g