Performance Appraisal

• Appraisal methods


  Ways to assess employee performance in a performance evaluation
• Main types of appraisal methods

  • Trait method
  • Behavioral method
  • Comparative methods
  • Results methods
• Criteria


  Aspects the employee is being evaluated on, tied to their job description
• Rating


  The type of scale used to rate each criterion, e.g. 1-5, essay, yes/no
• Graphic rating scale


  Lists traits required for the job and asks the source to rate the individual on each attribute
• Graphic rating scale


  • Can use a discrete scale (e.g. 1-10) or a continuous scale
  • Subjectivity can be an issue
• Essay appraisal


  The source answers a series of questions about the employee's performance in essay form
• Essay appraisal


  • Can be a trait and/or behavioral method
  • Manager's writing ability can affect effectiveness
  • Less consistency between appraisals
• Checklist scale


  A series of yes/no questions about the employee's performance
• Checklist scale


  • Lessens subjectivity but still some subjectivity
  • Doesn't allow detailed analysis unless combined with another method
• Critical incident appraisal


  Manager records examples of the employee's effective and ineffective behavior during the evaluation period
• Critical incident appraisal


  • Time-consuming for manager
  • Tendency to record only negative incidents
• Work standards approach


  Employee's performance is evaluated based on meeting a minimum productivity level or quota
• Work standards approach


  • Focuses only on productivity, doesn't allow for other factors like teamwork or communication
• Ranking method


  Employees in a department are ranked based on their value to the manager
• Ranking method


  • Room for bias
  • May not work well in larger organizations
  • Need clear criteria to be legal and valid
• Many Fortune 500 companies use a forced ranking system, but it has been criticized for promoting too much individual competition
• The top 20 percent, "B" employees are the middle 70 percent, and "C" performers are the bottom 10 percent. In GE's system, the bottom 10 percent are usually either let go or put on a performance plan. The top 20 percent are given more responsibility and perhaps even promoted.
• GE has reinvented this stringent forced ranking system. In 2006, it changed the system to remove references to the 20/70/10 split, and GE now presents the curve as a guideline. This gives more freedom for managers to distribute employees in a less stringent manner.
• Advantages of a forced ranking system

  • It creates a high-performance work culture
  • It establishes well-defined consequences for not meeting performance standards
• Recent research shows that companies who use individual criteria (as opposed to overall performance) to measure performance outperform those who measure performance based on overall company success.
• To make a ranking system work, it is key to ensure managers have a firm grasp on the criteria on which employees will be ranked. Companies using forced rankings without set criteria open themselves to lawsuits, because it would appear the rankings happen based on favoritism rather than quantifiable performance data.
• Ford and Conoco have settled lawsuits over their forced ranking systems, as employees claimed the systems favored certain groups.
• To avoid issues with forced ranking systems

  Provide each employee with specific and measurable objectives, and also provide management training so the system is executed in a fair, quantifiable manner
• Trouble with forced distribution system

  It does not consider that all employees could be in the top two categories, high or average performers, and requires that some employees be put in the nonperforming category
• Paired comparison system


  The manager must compare every employee with every other employee within the department or work group. Each employee is compared with another, and out of the two, the higher performer is given a score of 1. Once all the pairs are compared, the scores are added.
• The paired comparison system takes a lot of time and must have specific criteria attached to it when comparing employees.
• Management by Objectives (MBOs)

  A concept developed by Peter Drucker where the manager and employee sit down together and develop objectives for the time period. Then when it is time for the performance evaluation, the manager and employee sit down to review the goals that were set and determine whether they were met.
• Advantages of MBOs


  • Open communication between the manager and the employee
  • The employee has "buy-in" since he or she helped set the goals
  • The evaluation can be used as a method for further skill development
• SMART objectives


  • Specific
  • Measurable
  • Attainable
  • Result oriented
  • Time limited
• Behaviorally Anchored Rating Scale (BARS)


  First determines the main performance dimensions of the job, then utilizes narrative information to assign quantified ranks to each expected behavior. There is a specific narrative outlining what exemplifies a "good" and "poor" behavior for each category.
• The US Army Research Institute developed a BARS scale to measure the abilities of tactical thinking skills for combat leaders.
• When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.
• The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.
• No one performance appraisal is best, so most companies use a variety of methods to ensure the best results.