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Chapter 6:
Performance Review and Appraisal
Topic Outline:
Performance Appraisal (PA)
Why Measure Performance
Importance/Goals of PA
Performance Crtiteria
Performance Indicators/Matrix
Who Should Evaluate Performance
Sources of Data in PA
Methods of PA
PA Problems and Solutions
Tips for Creating World-class Appraisal System
Feedback Interview or Appraisal Interview

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 Performance Appraisal (PA)
refers to a systematic description and review of an
individuals job performance

assessment of employees job performance levels

during a given period on the basis of systematic uniform
performance standard

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 Why Measure Performance
1. It allows management to specify what must be done
and to combine feedback with goal setting.
2. Managers cannot manage and define what is
expected, gives feedback and recognition without
defining the basis or performance measures.
3. Employee cannot improve on what he is supposed to
do without the necessary data before and after to see
if performance is actually improving.
4. Creating high performance requires a definition or
clear goals so you will know it when you see it.
5. Pay for performance requires metrics.

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 Early Approaches to Performance Appraisal
Focusing on the employees past performance
so this is more on management of results
Focusing on the employees development. In
here results become the driving force for
management development..

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 Common Flaws Identified with Performance
Review System Design:
Organizations limit performance review to
making employees accountable for past
endeavor. This takes the view that making
people accountable for poor performance will
automatically generate improvement.
Tying performance review to employee salary
review. This is trying to reinforce the power of
management to decide who are those entitled to
receive increases, showing who is boss, with the
use of stick and carrot.
www.thehrgroup.com

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 Objectives of Performance
Appraisal
1. It provides information for promotion, transfer, demotion,
layoff, discharge, and salary decisions.
2. It identifies employees strengths and weaknesses.
3. It identifies the training needs of employees.
4. It helps in the firms career planning process.
5. It allows easy monitoring and supervision.
6. It helps evaluate the relative individual or team contributions
in achieving the organizations goals
7. It provides information to evaluate effectiveness of selection
and placement decisions.

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 Performance Criteria
Relevance
Reliability
Freedom from contamination

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 Performance Indicators/Matrix
Quantity
Quality
Timeliness
Cost-effectiveness
Absenteeism/tardiness
Creativity
Adherence to policy
Gossiping and other personal habits
Personal appearance/grooming

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 Who Should Evaluate Performance

1. Manager/Supervisor Appraisal-
Hierarchical arrangement of formal
authority in most organizations gives
the supervisor or the manager
legitimate authority to evaluate
subordinates. They are in the best
position to observe employees, and
they should have a better
understanding of the job being
performed.

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 2. Self-Appraisal: The employee appraises his or
her own performance, in many cases comparing the self-
appraisal to management's review. Often, self-appraisals
can highlight discrepancies between what the employee
and management think are important performance
factors and provide mutual feedback for meaningful
adjustment of expectations.
3. Subordinates appraisal Provides unique information
because subordinates know better than anyone else
whether leadership is good or bad.
4. Peer Appraisal: research on peer evaluation has
found them to be predictive of success and yielded good
reliability and validity. This method is based on the
assumption that co-workers are most familiar with an
employees performance

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 Customer/Supplier customers, vendors or
suppliers can be potential evaluators.
Team Appraisal: Similar to peer appraisal in
that members of a team, who may hold different
positions, are asked to appraise each others
work and work styles.
Assessment Center: The employee is
appraised by professional assessors who may
evaluate simulated or actual work activities.
360-Degree or Full-Circle Appraisal: The
employees performance is appraised by
everyone with whom he or she interacts,
including managers, peers, customers and
members of other departments.

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 The PA Process
Goal Setting

Performance Standard Setting

Information Dissemination

Actual Performance Measurement

Feedback Evaluation Results

Rewarding Exemplary Performance

Correcting Substandard Performance

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Sources of Data in Employee PA

1. Production Data evaluate the degree of

accomplishment by measuring the quantity and
quality of performance such as units produced per
hour, sales, profit

1. Personnel Data information found in individuals

personnel files, such as absenteeism, tardiness, and
training programs completed

1. Judgment of others behaviors assessed by

peers, customers, and suppliers

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 Methods of PA
A. Multiple Person Evaluation Methods
1. Ranking method ranking of employees from
best to worst, from the most efficient to the least
capable on each trait or quality to be used in
judging the employees performance
2. Paired comparison method considers only
two individuals at one time and decides who is
better
3. Forced distribution method refers to forced
ranking where the rater is asked to rate
employees in fixed distribution of categories,
such as superior, above average, average, below
average, and poor

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B. Individual Evaluation Methods
1. Critical incident method requires raters to write
down positive and negative performance behavior
of employees throughout the performance period
2. Checklist and weighted checklist method a
set of objectives or descriptive statements where
the rater checks the items if he believes that the
employee possesses a trait listed, if otherwise,
leaves it blank

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3. Graphic rating scales method the oldest and most
widely used method for PA where the rater is presented with
a set of traits and asked to rate employees on each of the
characteristics listed:
Example:
Productivity the quantity and efficiency of work produced in a
specified period of time: Outstanding (O), Very Good (VG),
Good (G), Improvement Needed (IN), Unsatisfactory (U)
( ) Does not meet the minimum requirements
( ) Does just enough to get by
( ) Volume of work is satisfactory
( ) Very industrious, does more than what is required
( ) Has a superior work production record

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4. Behaviorally anchored rating scales (BARS) method
describes a performance rating that is focused on specific
behaviors or sets as indicators of effective or ineffective
performance
5. Management by objectives (MBO) method objectives
set by managers and their subordinates for the employee
to achieve within a specific period where in reward is
given based on the result of output
6. Multi-rater assessment or the 360-degree
performance feedback method confidential,
anonymous feedback from people who work around
employees, such as their immediate superior, peers,
customers, or suppliers; a questionnaire to be completed
by raters to evaluate employees

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 PA Problems and Solutions

1. Halo effect. Manager allows a general favorable

impression of an employee to influence his judgment
on each separate factor in the PA process.
2. Recency effect. Recent events tend to have an
unusually strong influence on performance evaluation.
3. Previous performance bias. Employee who has
performed well in the distant past is assumed to be
acceptable in the recent past also.
4. Leniency/harshness/strictness error. Some
managers tend to give mostly favorable ratings while
others tend to evaluate the same performance levels
unfavorably.

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5. Central tendency. When manager rates all employees
as average by choosing the middle rating, thus, failing
to discriminate between employees.
6. Carelessness. Managers make quick guesses based
on first impressions of an employees performance.
7. Bias. Individual differences among ratees in terms of
characteristics, like age, race, sex, religious, and
political affiliations.

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 Tips for Creating a World-class
Appraisal System

1. Design the form first.

2. Build your companys values into your form.
3. Assure ongoing communication during development.
4. Train all appraisers.
5. Orient all appraises.
6. Use the results.
7. Monitor and revise the program.

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 Feedback Interview or Appraisal Interview
The supervisor and subordinates review the appraisal and
make plans to remedy deficiencies and reinforce strengths.
It includes:
1. Review of over-all progress
2. Discussion of problems that were encountered
3. Discussion of sources of ineffective performance
4. Agreement about how performance can be
improved
5. Discussions on how current performance fits with
long-range career goals
6. Specific action plans for the coming year and how
to reach short- and long-term objectives

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