Performance Evaluation

• Performance management


  The process by which executives, managers, and supervisors work to align employee performance with the firm's goals
• Effective performance management process


  • Has a precise definition of excellent performance
  • Uses measurements of performance
  • Provides feedback to employees
• A firm's strategy must be aligned with employees' competencies and performance if profitability, growth, effectiveness, and valuation are to be achieved
• Managers have a responsibility to develop, implement, monitor, and modify measures of performance
• Not all measures are easy to develop
• Performance evaluation


  Used to determine the extent to which an employee performs work efficiently
• Other terms for performance evaluation

  • Performance review
  • Personnel rating
  • Merit rating
  • Performance appraisal
  • Employee appraisal
  • Employee evaluation
• Formal evaluation system


  Set up by the organization to regularly and systematically evaluate employee performance
• Informal evaluation system


  Thinking about how well employees are doing, influenced by political and interpersonal processes
• Format of evaluation


  1. Establish performance standards and criteria

  2. Establish evaluation policies

  3. Gather data on employee performance

  4. Evaluate employee performance

  5. Discuss evaluation with employee

  6. Make decisions and file evaluation
• Criteria of evaluation


  The dimensions of performance upon which an employee is evaluated
• Examples of criteria


  • Quality of work
  • Quantity of work
  • Cost of work
• A major problem is that many performance evaluation systems require supervisors to make person evaluations rather than performance evaluations
• Effective criterion


  • Reliable
  • Relevant
  • Sensitive
  • Practical
• Multiple criteria are necessary to measure performance completely
• Management must weigh these criteria
• Annual performance evaluation


  Most common, but can be scheduled on arbitrary dates or a single calendar date
• Scheduling evaluations after a task cycle makes more sense
• Who should evaluate the employee

  • Immediate supervisor
  • Committee of several supervisors
  • Peers (co-workers)
  • Subordinates
  • Someone outside the immediate work situation
  • Self-evaluation
  • Combination of approaches
• 360-degree feedback system


  Upward and peer feedback can have positive effects on behavior, and is used for pay and promotion decisions
• Positive features of 360-degree feedback

  • Multiple perspectives of performance
  • Ratings based on actual contact and observation
  • Feedback from multiple directions
  • Anonymous upward feedback
  • Learning about weaknesses and strengths is motivational
• Negative features of 360-degree feedback

  • Feedback can be overwhelming
  • Raters can hide in a group and provide harsh evaluations
  • Conflicting ratings can be confusing
  • Providing constructive feedback requires a plan and well-trained raters
• There is a listening advantage provided by the 360-degree feedback approach
• Ways of evaluating employees

  • Individual evaluation methods
  • Multiple-person evaluations
• Graphic rating scale


  The most common individual rating method, where the rater is presented with a set of traits and rates the employee on each
• Mixed standard scale


  Gives the rater three statements describing each trait, and the rater places a check, plus, or minus to indicate how the employee fits the description
• Operational and benchmark statements

  Describe different levels of performance to guide the rater
• Forced choice


  Rater must choose from a set of descriptive statements about the employee, which are then scored by HR
• Essay evaluation


  Rater is asked to describe the strong and weak aspects of the employee's behavior
• Critical incident technique


  Raters maintain a log of behavioral incidents that represent effective and ineffective performance
• Checklists and weighted checklists

  Rater checks if the employee possesses listed traits, with weighted scores
• Behaviorally anchored rating scales (BARS)


  Use critical incidents to anchor statements on a scale, with 6-10 performance dimensions
• Behavioral observation scales (BOS)

  Like BARS, but the rater identifies how often behaviors occurred instead of which ones were observed
• The format of the rating scale has little effect on the quality of a performance appraisal system
• Behavior-oriented approaches are better received by raters and ratees, and help focus managers on important critical incidents
• Ranking


  Supervisor generates a list of subordinates in order on some overall criterion
• Paired comparison


  Supervisor is presented with a series of cards, each containing two subordinates' names, and must choose which one is better
• This may make the feedback more acceptable than if the supervisor talks in vague generalities
• Multiple-Person Evaluation Methods


  Methods that compare one employee's performance with others
• The methods described so far are for evaluating employees one at a time, with no direct comparison between employees