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Chapter 8

ADMS 2600 Chapter 8 notes.docx

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York University
Administrative Studies
ADMS 2600
Sung Kwon

Chapter 8: Performance Management and the Employee Appraisal Process Performance Management Systems Performance management - process of creating a work environment in which people can perform to the best of their abilities to meet a company's goals - an entire work system that emanates from a company's goals Performance appraisals - important part of performance management systems - result of an annual or biannual process in which a manager evaluates an employee's performance relative to the requirements of his/her job and uses the information to show where improvements are needed and why - a tool organizations can use to maintain and enhance their productivity and facilitate progress toward their strategic goals Ongoing Performance Feedback - feedback is most useful when it is immediate and specific to a particular situation - ebb and flow of ideas, some with the potential to serve as catalysts for improvement within the company - ultimate purpose is to better both parties - helps employees know where they stand when they receive their formal appraisals Seven key points to address during feedback sessions:  Give specific examples of desirable and undesirable behaviours - without specific examples of real-life situations, the employee will only be confused by the vagueness of the feedback  Focus feedback on behaviour, not the person - this will help the employee “hear” the message and will defuse what could be a confrontational conversation  Frame the feedback in turns of helping the employee be successful - let the employee know that you are trying to help him or her be a successful employee within the organization  Direct the feedback toward behaviour the employee can control - employees cannot do much about things over which they have no control  The feedback should be timely - provide feedback within a reasonable amount of time  Limit feedback to the amount the employee can process - most employees are able to handle feedback on one or two issues at a time  Use active communication skills and confirm that the employee is engaged in the conversation Performance Appraisal Programs focal performance appraisal - all employees are reviewed at the same time of year rather than on the anniversary dates they were hired - can be very helpful if a company is experiencing change and must quickly alter its strategy - enables managers to compare the performance of different employees simultaneously, which can result in appraisals that are more accurate and fair - review of an employee is also less likely to be overlooked if all of an organization's managers review employees at the same time The Purposes of Performance Appraisal - good appraisal systems have the capability to influence employee behaviour and improve an organization's performance o organizations with strong performance management systems are 40 to 50 percent more likely to outperform their competitors in the areas of revenue growth, productivity, profitability, and market value o experts advise companies to continue to appraise their employees during an economic downturn even if they cannot afford to give them raises - formal appraisal processes ensure that employees receive at least some feedback from their supervisors o employees who receive no feedback from their supervisors exhibit the least amount of engagement Administrative Purposes - appraisal programs provide input that can be used for the entire range of HRM activities, such as promotions, transfers, layoffs, and pay decisions o “pay for performance” - basing employees’ pay on their achievements  employees who earn performance-based pay are more satisfied - performance appraisal data may also be used in HR planning, in determining the relative worth of jobs under a job evaluation program, and as criteria for recruiting particular types of employees and validating selection tests - performance appraisals also provide a “paper trail” for documenting HRM actions that can result in legal action o employers must maintain accurate, objective employee performance records to defend themselves against possible charges of discrimination when it comes to promotions, salaries, and terminations - important to recognize that the success of the entire HR program depends on knowing how the performance of employees compares to the goals established for them o knowledge best derived from a carefully planned and administered HR appraisal program Developmental Purposes - appraisal provides the feedback essential for discussing an employee's goals and how they align with the organization's goals - appraisal process provides managers and employees with the opportunity to discuss ways to build on their strengths, eliminate potential weaknesses, identify problems, and set new goals for achieving high performance - performance appraisals are also used to develop training and development plans for employees - managers help employees understand that the appraisals are being conducted to improve their future competencies and further their careers and are not being conducted simply to judge them based on their past performance Why Appraisal Programs Sometimes Fail - only 30 percent of employees said they thought their company's performance management process actually improved employee performance; only one in five thought it helped poorly performing employees do better - performance appraisals discourage teamwork because they frequently focus on the individual achievements of workers versus what their teams or firms accomplish - appraisals are useful only at the extremes—for highly effective or highly ineffective employees—and are not as useful for the majority of employees in the middle - appraisals often focus on short-term achievements rather than long-term improvement and learning - primary culprits include a lack of top-management information and support, unclear performance standards, biased ratings because managers lack training, too many time-consuming forms to complete, and use of the program for conflicting purposes 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 the performance period  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  Manager 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 Other reasons performance appraisal programs can fail to yield the desired results include the following:  There is little face-to-face discussion between the manager and the employee being appraised.  The relationship between the employee's job description and the criteria on the appraisal form is not clear.  Managers feel that little or no benefit will be derived from the time and energy they spend on the process or 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 with appraisal feedback.  The judgmental role of appraisal conflicts with the helping role of developing employees.  The appraisal is just a once-a-year event, and there is little follow-up afterward. Developing an Effective Appraisal Program What are the Performance Standards? Strategic Relevance - extent to w/c standards of an appraisal relate to the strategic objectives of the organization in w/c they are applied - strategy-driven performance appraisal process also provides the documentation HR managers need to justify various training expenses to close any gaps between employees’ current skills and those they will need in the future to execute the firm's strategy Criterion Deficiency - extent to which the standards capture the entire range of an employee's responsibilities Criterion Contamination - there are factors outside an employee's control that can influence his or her performance Reliability - can be measured by correlating two sets of ratings made by a single rater or by two different raters calibration meetings - a group of supervisors, led by their managers and facilitated by a HR professional, discuss the performance of individual employees to ensure that all managers apply similar standards to all of the firm's employees - can be particularly helpful after a merger or acquisition, especially one that is global o differences in the corporate cultures and the appraisal standards of the formerly separate companies can cause the same employees to be rated quite differently performance standards - permit managers to specify and communicate precise information to employees regarding quality and quantity of output Legal Issues Performance appraisals should meet the following legal guidelines:  Performance ratings must be job related, with performance standards developed through a job analysis.  Employees must be given a written copy of their job standards in advance of their appraisals.  Managers who conduct the appraisals must be able to observe the behaviour they are rating. This implies having measurable standards with which to compare employee behaviour.  Do not allow performance problems to continue unchecked. Document problems when they occur and refer to them in performance appraisals.  Supervisors should be trained to use the appraisal form correctly. They should be instructed as to how to apply the appraisal standards when making judgments.  The appraisals should be discussed openly with employees and counselling or corrective guidance offered to help poor performers improve their performance.  An appeals procedure should be established to enable employees to express their disagreement with the appraisals. Who Should Appraise Performance? Manager/Supervisor Appraisal - supervisors are in the best position to perform this function, but 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 o must then rely on performance records to evaluate an employee's performance - may be less than accurate if reliable and valid measures are unavailable o research has shown that the ratings managers give employees they have known for less than one year are less reliable - provision often made for a review of the appraisals by the supervisor's superior - reduces the chance of superficial or biased evaluations Self-Appraisal - beneficial when managers seek to increase an employee's involvement in the review process - gets the employee thinking about his or her strengths and weaknesses and may lead to discussions about barriers to effective performance - works well when the manager and the employee jointly establish future performance goals or employee development plans - critics argue that self-raters are more lenient than managers in their assessments and tend to present themselves in a highly favourable light o evidence that self-appraisals can lead employees to believe that they will have more influence over the appraisal's outcome - may be best for developmental purposes rather than for administrative decisions - serve as a catalyst for discussion during the appraisal, so best to use in conjunction with other methods Subordinate Appraisal - give managers feedback on how their subordinates view them - subordinates are in a good position to evaluate their managers because they are in frequent contact with their superiors and occupy a unique position from which to observe many performance-related behaviours - have been shown to improve the performance of managers - performance dimensions judged most appropriate for subordinates to appraise include a manager's leadership, oral communication, delegation of authority, coordination of team efforts, and interest in his or her subordinates - should be submitted anonymously and combined across several individual raters Peer Appraisal - provides information that differs to some degree from ratings by a superior because an employee's peers often see different dimensions of his or her performance - peers can readily identify leadership and interpersonal skills along with other strengths and weaknesses of their coworkers - advantage is the belief that they furnish more accurate and valid information than appraisals by superiors - provide a forum in which to address issues and resolve conflicts and can provide opportunity to hand out praise - should not be used to make administrative decisions when peers are in competition - safeguard confidentiality in handling the review forms Common reasons why they have not been used more frequently:  Peer ratings are simply a popularity contest.  Managers are reluctant to give up control over the appraisal process.  Those receiving low ratings might retaliate against their peers.  Peers rely on stereotypes in ratings. Team Appraisal - extension of the peer appraisal where performance is evaluated as a whole - can help break down barriers between individual employees and encourage a joint effort on their part - interest in team appraisals grew out of company commitments to total quality management (TQM) in the 1980s o TQM is a control system that involves setting standards (based on customer requirements), measuring a firm's performance against those standards, and identifying opportunities for continuous improvement o basic tenet of TQM is that a firm's performance is best understood at the level of the system as a whole, whereas performance appraisals traditionally focus on individual performance o system is complemented by the use of team incentives or group variable pay Customer Appraisal - driven by TQM concerns as a source of performance appraisal information - both internal and external customers Putting It All Together: 360-Degree (Multirater) Appraisal and Feedback Systems - combination of various sources of performance appraisal information - intended to provide employees with as accurate a view of their performance as possible by getting input from all angles, such as from supervisors, peers, subordinates, and customers - organizations have recently begun using performance management software to compile and aggregate the information - Workstream 7.0 developed by Workstream, Inc. gives managers a single view of all their talent management information: performance reviews, 360-degree assessments, compensation planning, development data, and succession planning, all unified in one application Safeguards to ensure its maximum quality and acceptance:  Ensure anonymity - no employee should ever know how any evaluation team member responded, except for supervisor's rating  Make respondents accountable - supervisors should discuss each evaluation team member's input, letting each member know whether he or she used the rating scales appropriately, whether his or her responses were reliable, and how other participants rated the employee  Prevent “gaming” of the system - supervisors should check for obviously invalid responses  Use statistical procedures - use weighted averages or other quantitative approaches to combining evaluations  Supervisors should be careful about using subjective combinations of data, which could undermine the system  Identify and quantify biases - check for prejudices or preferences related to age, gender, ethnicity, or other group factors PROS AND CONS OF 360-DEGREE APPRAISAL PROS CONS  more comprehensive - responses are gathered  complex in combining all the responses from multiple perspectives  feedback can be intimidating and cause resentment  better quality of information - quality of respondents if employee feels respondents have “ganged up” more important than the quantity  there may be conflicting opinions, although they  complements TQM initiatives by emphasizing may all be accurate from the respective standpoints internal/external customers and teams  requires training to work effectively  may lessen bias or prejudice because feedback  employees may collude or “game” the system by comes from more people, not one individual giving invalid evaluations to one another  feedback from peers and others may increase  appraisers may not be accountable if their employee self-development evaluations are anonymous. Training Appraisers  Establish an Appraisal Plan  Eliminating Rater Error  Feedback Training Establishing an Appraisal Plan - training program for raters is most effective when it follows a systematic process that begins with an explanation of the objectives of the firm's performance appraisal system - important for the rater to know the purpose for which the appraisal is to be used - mechanics of the rating system should also be explained, including how frequently the appraisals are to be conducted, who will conduct them, and what the standards of performance are - appraisal training should alert raters to the weaknesses and problems of appraisal systems so that they can be avoided Eliminating Rater Error - appraisal training should focus on eliminating the subjective errors made by managers in the rating process - to the degree to which a performance appraisal is biased, distorted, or inaccurate, the probability of increasing the productivity of the employee is greatly decreased - wrong decisions could be made regarding whom to promote, retain, or replace, which in turn will penalize the organization's bottom line - rating errors can justify employees in filing a discrimination charge Certain types of errors that can arise: “halo error” - common with respect to rating scales, especially those that do not include carefully developed descriptions of the employee behaviours being rated - reduced by provision for comments on the rating form “horn error” - opposite of the halo effect - occurs when a manager focuses on one negative aspect about an employee and generalizes it into an overall poor appraisal rating - increased by a personality conflict between a manager and his or her employees, which can lead to a high level of frustration on the employee's part if it is not corrected distributional errors - involve a group of ratings given across various employees  error of central tendency o raters are reluctant to assign either extremely high or extremely low ratings, causing all employees to be rated about average o prevent by explaining to such raters that, among large numbers of employees, one should expect to find significant differences in their behaviour, productivity, and other characteristics  leniency or strictness error o raters give unusually high or low ratings o reduce by clearly defining the characteristics or dimensions of performance and to provide meaningful descriptions of behaviour, known as “anchors,” on the scale o reduce by requiring ratings to conform to  forced distribution - type of system where managers are required to place a certain percentage of employees into various performance categories  peer ranking - system whereby employees in a work group are ranked against one another from best to worst  forced distribution and peer ranking can create other rating errors—particularly if most employees are performing above standard; can result in lawsuits, lower morale, decreased teamwork, and destructive employee competition ensued following their use temporal errors - performance review is biased either favourably or unfavourably, depending on the way performance information is selected, evaluated, and organized by the rater over time  recency error o appraisal based largely on the employee's recent behaviour, good or bad o managers who give higher ratings because they believe an employee is “showing improvement” o minimize by having the rater routinely document employee accomplishments and failures throughout the whole appraisal period by keeping a diary or a log o reduce by rater training contrast error - occurs when an employee's evaluation is biased either upward or downward because of another employee's performance, evaluated just previously - most likely when raters are required to rank employees in order from the best to the poorest - reduced through training that focuses on using objective standards and behavioural anchors to appraise performance similar-to-me error - occurs when appraisers inflate the evaluations of people with whom they have something in common - effects can be powerful, and when the similarity is based on race, religion, or gender, it can result in discrimination - raters should be aware of any stereotypes t
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