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II.
Performance Appraisal
A. Types of Performance Appraisal Plans
1. Trait systems
2. Comparison systems
3. Behavioral systems
4. Goal-oriented systems
B. Trait Systems
1. Are based on having raters evaluate each employees traits or
characteristics such as:
a. Quality of work
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b. Quantity of work
c. Appearance
d. Dependability
e. Cooperation
f. Initiative
g. Judgment
h. Leadership responsibility
i. Decision-making ability
j. Creativity
2. Appraisals are typically scored using descriptors ranging from
unsatisfactory to outstanding
3. They are easy to construct, use, and apply to a wide range of jobs
4. They are easy to quantify
5. They are common in companies that rely on customer service
6. Drawbacks
a. Can be highly subjective
b. These systems rate individuals on subjective personality factors rather
than objective job performance data
C. Comparison Systems
1. Types
a. Ranking
b. Forced distribution
c. Paired comparison
2. Ranking
a. Designed to evaluate an employees performance against the
performance of other employees
b. Performance ratings are then ranked from best to poorest
c. Can be based on overall performance or individual traits
d. Pay increases are based on ranking
2. Forced distribution performance appraisal systems
a. Assign employees to groups that represent the entire range of
performance (such as best, moderate, and poor performers)
b. Used to minimize the tendency for supervisors to rate most employees
as excellent performers, because of supervisors self-promotion
motives
c. Used by some supervisors to avoid alienating employees by judging
them negatively
d. Can be problematic when the actual distribution is substantially
different from the forced one
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4. Paired comparisons
a. Each employee is compared to all others
b. Each employee is ranked according to the number of times they are
identified as being the better performer
c. This method is best suited for small groups of employees who perform
the same or similar jobs
5. Drawbacks
a. These methods tend to encourage subjective judgments
b. The chance for rater errors and biases increase
c. Small differences in performance between employees may become
exaggerated if supervisors feel compelled to distinguish among levels
of employee performance
D. Behavioral Systems
1. Rate employees on the extent to which they display successful job
performance behaviors
2. These objective job behavioral methods, when developed and applied
correctly, provide results that are relatively free of rater errors and biases
3. Three main types
a. Critical incident technique (CIT)
b. Behaviorally-anchored rating scales (BARS)
c. Behavioral observation scales (BOS)
4. CIT
a. Requires job incumbents and their supervisors to identify performance
incidents that distinguish successful performance from unsuccessful
ones
i. On-the-job behaviors
ii. Behavioral outcomes
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4. Employees are expected to meet the objectives during the rating period
5. At the end of the rating period, employees will write a report explaining
their progress
6. Supervisors appraise performances based on accomplishment of the
objectives
7. Can promote effective communication between employees and
supervisors
8. Drawbacks
a. Companies generally do not fully describe the scope of managerial
positions
b. Time consuming
c. Requires extensive communication between supervisor and employee
d. Focuses on specific goals at the exclusion of other vital outcomes,
which is referred to as a results at any cost mentality
9. Often they are components of broader development programs
F.
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ii. Supervisor
iii. Coworkers
iv. Subordinates (if applicable)
v. Customers or clients (if applicable)
b. 360-degree performance appraisals
i. Are performance appraisal systems that rely on many appropriate
sources of performance related information
ii. Help companies develop a more complete understanding of current
employee performance
iii. Help companies reduce the costs of:
Recruiting
Hiring
iv. Criteria for determining appropriateness of the information source
Is the evaluator aware of the objectives of the employees job?
Has the evaluator frequently observed the employee?
Is the evaluator qualified to determine if the performance is
satisfactory?
v. The use of 360-degree performance appraisals is on the rise in the
United States because:
Downsizing - organizational structures are becoming less
hierarchical
Managers and supervisors are responsible for a larger number
of employees, affording less appraisal time for each
These instruments are more conducive to the increased
prevalence of work teams, since employees can rate each other
Companies are able to get and use feedback from customers,
which increases customer satisfaction
6. Errors in the performance appraisal process
a. Rating errors reflect differences between human judgment processes
versus objective, accurate assessments uncolored by bias, prejudice, or
other subjective, extraneous influences
b. Rating errors occur because raters must make subjective judgments
c. Most common types of raters errors include:
i. Bias errors
ii. Contrast errors
iii. Errors of central tendency
iv. Errors of leniency or strictness
d. Bias errors
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IV.
v. These errors mitigate the beliefs that effort varies positively with
performance, and that performance influences the amount of pay
raises
Strengthening the Pay-for-Performance Link
A. Activities
1. Link performance appraisals to business goals
2. Analyze jobs
3. Communicate
3. Establish effective appraisals
4. Empower employees
5. Differentiate among performers
B. Link Performance Appraisals to Business Goals
1. Employee performance should be linked to the companys competitive
strategy
2. For example, everyone in the marketing department working on a specific
product should get a merit raise if sales goal are met
C. Analyze Jobs
1. Job analysis is important for establishing internally consistent
compensation systems (more in chapter 6)
2. Supervisors should match the employees performance to the job
description
a. Descriptions are a product of job analyses
b. Descriptions note the duties, requirements, and relative importance of
a job within the company
3. May help to reduce arbitrary decisions about merit increases by clarifying
the performance standards
D. Communicate
1. Employees must clearly understand the link between performance and
merit increases
2. Employees need to trust the system and the evaluators
E. Establish Effective Appraisals
1. Should be tied to employees future performance goals and career plans
2. Deficiencies in performance should include methods to remedy
3. Performance standards should be used for establishing performance targets
F. Empower Employees
1. Encourage employee self-appraisals
2. Supervisors as coaches
a. By ensuring that employees have access to the resources to perform
their job
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V.
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