Chapter Appraising Employee Job Performance © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Chapter Outline • 8-1 Gaining Competitive Advantage • 8-2 HRM Issues and Practices 8-3 The Managers Guide â 2010Cengage Learning.Atomic Dog is a trademark used herein under license All rights reserved 8-1a Opening Case: Gaining Competitive Advantage at McKesson Information Solutions • Problem: An inadequate performance appraisal system • Solution: Develop an effective performance appraisal system • How the new performance appraisal system enhanced competitive advantage    Workforce has become much more motivated Employees’ job satisfaction levels have enhanced Retention rates have increased © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-1b Linking Performance Appraisal to Competitive Advantage • Performance appraisals should accurately assess the quality of employee job performance • Job performance can be improved in two ways:   Directing employee behavior towards organizational goals Monitoring behavior to ensure that goals are met © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Figure 8-1 Performance Appraisals Can Help Assess the Quality of Employee Performance © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2a Standards for Effective Performance Appraisal Systems • The quality of the rating form • Accuracy of the ratings • Legal standards © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2a Standards for Effective Performance Appraisal Systems (cont.) • The quality of the rating form  Relevance - The degree to which the rating form includes necessary information Criterion deficiency: Omission of pertinent performance criteria Criterion contamination: Inclusion of irrelevant criteria on the rating form © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2a Standards for Effective Performance Appraisal Systems (cont.) • The quality of the rating form (cont.)  Clear performance standards - Indicate the level of performance an employee is expected to achieve Help direct employee behavior Help supervisors provide more accurate ratings © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Accuracy of the ratings   Accurate ratings reflect the employees’ actual job performance levels Inaccuracy is most often attributable to the presence of rater errors © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2a Standards for Effective Performance Appraisal Systems (cont.) • Leniency error: Raters provide ratings that are unduly high • Severity error: Ratings are unduly low • Causes of leniency and severity errors:    Political reasons Raters’ lack of conscientiousness Personal bias © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2b Types of Rating Instruments (cont.) • Behavior observation scales (BOS)     Contains a list of desired behaviors required for the successful performance of specific jobs Developed like BARS, where critical incidents are collected and categorized into dimensions An appraiser rates job performance by indicating the frequency with which the employee engages in each behavior A five-point scale is used ranging from “almost never” (1) to “almost always” (5) © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2b Types of Rating Instruments (cont.) • Behavior observation scales (BOS) • Strengths    Is more legally defensible than BARS or graphic rating scales Effective in directing employees’ behavior Used to monitor behavior and give specific feedback • Weaknesses   Time consuming to develop Not always cost-effective © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2b Types of Rating Instruments (cont.) • Management by objectives (MBO)   A management system designed to achieve organizational effectiveness by steering each employee’s behavior towards the organization’s mission MBO process includes: - Goal setting: Establishment of the organization’s mission statement and strategic goals Planning: Identify potential obstacles to reaching goals and devise strategies to overcome these obstacles Evaluation: Success at meeting goals is evaluated against agreed-on performance standards © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2b Types of Rating Instruments (cont.) • Management-by-objectives (MBO) • Strengths       • Weaknesses Outcome-focused Widely practiced Improves job performance States performance standards in relatively objective terms Practical and cost effective Provides employees a greater stake in achieving their goals and more perceived control over their work environment     Behaviors required to reach goals not specified Success may be attributed to factors outside employee’s control Performance standards vary, providing no common basis for comparison Creates performance pressures and stress © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System • Step 1: Gaining support for the system  Gain the support of upper-level managers: -  Make the performance appraisal process meaningful Get managers’ input in developing the system Train managers and help them find a way to keep track of things employees have done during the review period Hold managers accountable for providing accurate ratings on a timely basis Gain the support of employees: - Encourage both managers and workers to participate in the planning and development of the system to enhance support for it © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System (cont.) • Step 2: Choosing the appropriate rating Instrument – Three important factors to be considered are:    Practicality: The performance appraisal instrument must be practical Cost: Includes development costs, implementation costs, and utilization costs Nature of job: The choice of rating instrument depends, in part, on the type of data that can be realistically collected about a particular job - Executive, managerial, and professional employees are usually rated based on results Lower-level jobs are most often rated on behavioral or trait-oriented criteria © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System (cont.) • Step 3: Choosing the rater(s)   Supervisory ratings: Serve as management tools for supervisors, giving them a means to direct and monitor employee behavior Peer ratings: Supplement supervisory ratings, helping develop a consensus about an individual’s performance; helps eliminate biases and leads to greater employee acceptance of appraisal systems - Competitive nature of the organization’s reward system and friendship are potential problems limiting the usefulness of peer ratings © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System (cont.) • Self-ratings   • May be used for employee development May not be effective as an evaluative tool 360-degree feedback system     Appraisal system for managers , who are evaluated by a “circle” of people who frequently interact with the manager Evaluations are limited to job behaviors directly observed Primarily used as feedback devices Lacks accountability © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System (cont.) • Step 4: Determining the appropriate timing of appraisals   Mostly conducted annually; frequent appraisals are considered too time-consuming Annual appraisals pose a problem as appraisers may have a difficult time remembering events of the past year; this can be minimized by: - Maintaining records of employee performance; record keeping also serves as documentation for EEO suits © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System (cont.) • Step 5: Ensuring appraisal fairness   Upper-level management review: Helps to ensure fairness, and may serve to keep appraisers “honest.” Appeals system - Provides a means for employees to obtain a fair hearing if they are dissatisfied with their appraisals Allows employees to voice their concerns Fosters more accurate ratings Prevents the involvement of outside third parties Tends to undermine the authority of the supervisor and may encourage leniency error © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-3a Performance Appraisal and the Manager’s Job • Completing the ratings • Providing performance feedback Setting performance goals â 2010Cengage Learning.Atomic Dogis atrademark used herein under license All rights reserved 8-3b How the HRM Department Can Help • Developing the appraisal system • Providing rater training: Usually focuses on:        Establishing work expectations Observing and documenting behavior Conducting day-to-day performance feedback and coaching Appraising performance and avoiding rating errors Providing written justifications for ratings Conducting formal performance appraisal feedback conferences Identifying training needs and formulating a development plan for employees © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-3b How the HRM Department Can Help (cont.) • Monitoring and evaluating the appraisal system   Monitoring means taking steps to ensure that each appraisal has been completed on time and that instructions have been followed Evaluation consists of gauging the users’ satisfaction with the appraisal system © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-3c HRM Skill-Building for Managers • Conducting periodic performance review sessions   • Objective is to identify problems the employee is facing and to discuss solutions to these problems Should be brief, informal, and employee-centered Conducting the annual performance review conference  Objective is to inform employees of their ratings and how the information will be used, keep effective workers “on target,” and improve ineffective workers’ performance © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-3c HRM Skill-Building for Managers (cont.) • Setting goals for MBO: An individual’s goals must be:     Consistent with goals set at higher organizational levels Specific and challenging Realistic and achievable Measurable © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved ... organization s mission MBO process includes: - Goal setting: Establishment of the organization s mission statement and strategic goals Planning: Identify potential obstacles to reaching goals and devise strategies... pressures and stress © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 8-2c Designing an Appraisal System • Step 1: Gaining support for the system... All rights reserved 8-2c Designing an Appraisal System (cont.) • Step 3: Choosing the rater (s)   Supervisory ratings: Serve as management tools for supervisors, giving them a means to direct