Chapter 16 – Appraising and Rewarding Performance
16–12
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Basically, an employee’s performance is determined by a combination of three factors—
effort, ability, and direction. Effort refers to how hard a person works. Ability is concerned
with the person’s capability. Direction refers to how well the person understands what is
expected on the job. [p. 321]
3. Identify at least three uses of performance appraisal information.
Performance appraisal systems have three principal purposes:
• To improve employee performance in the present job
4. Describe the following methods used in performance appraisal:
a. Graphic rating scale
b. Essay
c. Checklist
d. Forced-choice rating
e. Critical incident
f. Work standards
g. Ranking methods
h. Management by objectives
i. Multi-rater assessment
c. Checklist—the supervisor does not actually evaluate but merely records performance.
Chapter 16 – Appraising and Rewarding Performance
16–13
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
both positive and negative actions by an employee. The employee is then evaluated based
on actual behavior. [p. 327-328]
5. Define the following types of performance appraisal errors:
a. Leniency
b. Central tendency
c. Recency
d. Halo effect
or negative, just prior to appraising the employee [p. 331]
d. Halo effect—occurs when supervisors allow a single prominent characteristic of an
6. Outline some factors that influence the success or failure of performance appraisal
interviews.
Chapter 16 – Appraising and Rewarding Performance
16–14
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
the interview. When feasible, the employee should be given at least a week’s notice of the
upcoming appraisal.
A private room or office should be used, interruptions should be held to a minimum, and
the confidential nature of the information should be explained to the employee. The
performance appraisal interview is not the time to tell the employee off. You are trying to
make the job easier for the employee and to help him or her become a happier and more
productive employee. Figure 16.8 gives some questions that the supervisor should consider
before discussing the performance appraisal with the employee. [p. 332]
7. Describe some suggestions for making performance appraisal systems more legally
acceptable.
Some of the suggestions for making performance appraisal systems more legally
acceptable include the following:
• Deriving the content of the appraisal system from job analyses
8. Identify three basic components of compensation and give examples of each.
Compensation consists of the extrinsic rewards offered by the organization and includes
9. Outline some preconditions for implementing a merit pay program.
Some of the preconditions for implementing a merit pay program include the following:
• Trust in management
Chapter 16 – Appraising and Rewarding Performance
16–15
• Good measurement systems
1. What are your thoughts on discussing salary raises and promotions during the performance
appraisal interview?
2. Which method of performance appraisal do you think is the fairest? Why? (You may have
to cite an example to explain your reason) Under which method would you like to work?
Why?
3. It has been said that incentive plans work for only a relatively short time. Do you agree or
disagree? Why?
4. Why do you think management frequently uses across-the-board pay increases?
ADDITIONAL READINGS
SKILL-BUILDING APPLICATIONS
Incident 16-1: Determining Pay Raises
This case is designed to make students think about how they would make pay raise decisions.
16–16
1. Indicate the size of the raise you would give each of these employees.
2. What criteria did you use in determining the size of the raise?
3. What do you think would be the feelings of the other people in the group if they should
find out what raises you recommend?
4. Do you think the employees would eventually find out what raises others received? Would
it matter?
Incident 16-2: Conducting a Performance Appraisal
This case illustrates a performance appraisal system that does not produce the required result,
thus requiring immediate action and changes in the method used.
1. Do you think a raise was justified in Paul’s situation? Explain
2. What could have been done differently in the performance appraisal session?
Chapter 16 – Appraising and Rewarding Performance
16–17
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
if things do not improve.
3. What can be done now to change the situation?
Exercise 16-1: Developing a Performance Appraisal System
The purpose of this exercise is to allow students to evaluate the strengths and weaknesses of an
appraisal system used by a large public utility. The students are asked to recommend some
specific improvements.
Strengths:
Weaknesses:
Recommendations:
employees they’re appraising.
Chapter 16 – Appraising and Rewarding Performance
16–18
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
o Feedback on performance should be as often as possible, not just twice a year when
it’s discussed formally.
Exercise 16-2: Who Are “Normal” Employees?
Student answers will vary. Some possibilities are included in the outline below, but each
student’s contribution should be evaluated in its own right.
Exercise 16-3
This exercise is designed to help the student gain an insight into their understanding of
performance evaluations.
1. Prepare a list of the pluses and minuses of such a system.
Chapter 16 – Appraising and Rewarding Performance
16–19
Pluses:
• Allows professors to know students’ opinions regarding their teaching style and
Minuses:
2. Suppose there are 60 students in the class and only 34 complete the form. Does this
invalidate the evaluation?
3. What does performance mean in evaluating a professor? Be prepared to discuss your
answers in class.
Chapter 16 – Appraising and Rewarding Performance
16–20
Exercise 16-4: Leadership Style Application
This exercise will help students understand how a particular leadership style impacts decision
making
1. What criteria does this leader use when evaluating his or her employees’ performance?
2. What does this leader expect to achieve from the performance appraisal?
3. How does this leader prepare for the appraisal interview?
4. How does this leader conduct the appraisal interview?
5. To what extent is the performance appraisal tied to the organization’s reward system?
SUPERVISORY ANECDOTES
The Colorado Governor’s Job Training Office (GJTO) built a new appraisal system that defines,
Chapter 16 – Appraising and Rewarding Performance
16–21
guides, and rewards good performance while discouraging poor performance. The Performance
RELATED VIDEOS
1. How Supervisors Should Appraise Employee Performance, American Management
Associations, 20 mins. This helps supervisors look for strengths and weaknesses, and
understand how important an effective evaluation can be.
2. The Legal Side of Performance Appraisal: You Be The Judge, American Management