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Chapter 10&12

Chapter 10 & 12.docx

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Steve Risavy

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Performance Appraisal & Incentives Chapter 10: Performance Management Performance Management – the process encompassing all activities related to improving employee performance, productivity, and effectiveness Performance management is of considerable strategic importance to today’s organizations because the most effective way for firms to differentiate themselves in a highly competitive, service-oriented, global marketplace is through the quality of their employees Performance Management Process  STEP 1: Defining Performance Expectations and Goals – make sure that job duties and job standards are clear  STEP 2: Providing Ongoing Feedback and Coaching – achieved through open two-way communication  STEP 3: Conducting Performance Appraisal and Evaluation Discussions – done at specific intervals by comparing an employee’s actual performance to the standards that have been set (usually involving some type of rating form); the employee’s performance and progress are discussed to reinforce the things that the employee is doing well and to develop a plan for correction of any deficiencies that the appraisal might have identified  STEP 4 : Determining Performance Rewards/Consequences – ex. Promotions, salary increases, and bonuses  STEP 5 : Conducting Development and Career Opportunities Discussions – used to review each employee’s career plans in light of his/her exhibited strengths and weaknesses, and it light of the company’s strategic plans Step 3: Performance Appraisal and Evaluation Discussion Formal Appraisal Methods A. Graphic Rating Scale – a scale that lists a number of traits and a range of performance for each – the employee is then rated by identifying the score that best describes his or her level of performance for each trait (see page 269) B. Alternation Ranking Method – ranking employees from best to worst on a particular trait (pg. 271) C. Paired Comparison Method – ranking employees by making a chart of all possible pairs of employees for each trait and indicating the better employee of the pair D. Forced Distribution Method – predetermined percentages of rates are placed in various performance categories – Ex. It may be decided to distribute employees as follows: 15% high performers, 20% high-average, 30% average, 20% low-average, and 15% low performers E. Critical Incident Method – keeping a record of uncommonly good or undesirable examples of an employee’s work-related behaviour and reviewing the list with the employee at predetermined times F. Narrative Forms – Ex. Finding a performance issue and presenting a performance improvement plan G. Behaviourally Anchored Rating Scales (BARS) – an appraisal method that aims to combine the benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified scale with specific narrative examples of good and poor performance H. Management by Objectives (MBO) – involves setting specific measurable goals with each employee then periodically reviewing the progress made I. Computerized and Web-Based Performance Appraisal a. Electronic Performance Monitoring (EPM) – having supervisors electronically monitor the amount of computerized data an employee is processing per day and thereby his or her performance Developing BARS 1. Generate Critical Incidents – people who know the job being appraised are asked to describe specific illustrations (critical incidents) or effective and ineffective performance 2. Develop Performance Dimensions – these people then cluster the incidents into a smaller set of performance dimensions 3. Reallocate Incidents – another group of people reallocate the original critical incidents 4. Scale the Incidents – this group is asked to rate the behaviour described in the incident as to how effectively or ineffectively it represents performance on the appropriate dimension 5. Develop the Final Instrument – a subset of the incidents is used as behaviour anchors for each dimension Advantages and Disadvantages of BARS  A more accurate measure  Clearer standards  Feedback  Independent dimensions  Consistency Most firms combine several appraisal techniques. Appraisal systems must be based on performance criteria that are valid for the position being rated and must be reliable. Rating Scale Problems 1. Unclear Performance Standards - too open to interpretation of traits and standards 2. Halo Effect - supervisor’s rating biases the rating of them on other traits 3. Central Tendency - tendency to rate all employees in middle of the scale 4. Leniency/Strictness - supervisor has a tendency to rate all employees high or low 5. Appraisal Bias - tendency to allow individual differences (age, race, sex) to affect ratings 6. The Recency Effect - rating error that occurs when ratings are based on the employee’s most recent performance 7. Similar-to-Me Bias Advantages Disadvantages Graphic Rating Scale Simple to use; provides a Standards may be unclear; halo quantitative rating for each effect, central tendency etc. employee Alternation Ranking Simple to use Can cause disagreements among employees (or be unfair) Forced Distribution Method End up with a predetermined Appraisal results depend on the number of people in each group adequacy of the original choice of cutoff points Critical Incident Method Helps specify what is ‘right’ and Difficult to rate/rank employees ‘wrong’ about the employee’s relative to one another performance Behavioural Anchored Rating Provides behavioural ‘anchors’; Difficult to develop Scale BARS is very accurate Management by Objectives Tied to jointly agreed-upon Time consuming performance objectives The best performance appraisal systems are those in which the supervisor or manager makes an ongoing effort
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