Chapter 10: Establishing the Performance Management System
Reviewing Important Concepts
1. Explain the importance of each of the four purposes of the performance
management system. Suggest a fifth purpose and explain why you feel it is
important. (LO 1)
Feedback lets employees know how well they have done and allow for employee input.
Motivation increases when goal are clear and progress is communicated.
Employee Development Performance Management identifies areas in which employees
2. Describe the appraisal process. Explain which step in the process is most important.
(LO 2)
The six-step appraisal process is as follows:
Establish performance standards with employees.
Manager and employee set measurable goals.
Measure actual performance.
The appraisal process must be objective and job-related. Any techniques used should
3. Contrast the advantages and disadvantages of evaluating employees by absolute
standards and relative standards. (LO 3, 4)
Absolute standards refer to a method in performance management systems whereby
employees are measured against company-set performance requirements. Absolute
standard evaluation methods involve the essay appraisal, the critical incident approach,
Relative standards refer to a method in performance management systems whereby
The advantage of absolute standards is that employees can be assessed as adequate
against the external standard, but the disadvantage is that there is no indication of how
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Chapter 10: Establishing the Performance Management System
4. Explain the concept of a Behaviorally Anchored Rating Scale (BARS) and explain
how it can reduce leniency and central tendency errors. (LO 3)
A Behaviorally–anchored rating scale (BARS) is an absolute assessment technique.
Critical incidents are identified, and a range of performance possibilities (from poor to
5. Explain the advantages of using management by objective (MBO) as an appraisal
method. (LO 5)
Management by Objectives (MBO) is an approach to appraisal that makes use of
Advantages are that it uses a results-oriented emphasis. It assists the planning and control
Disadvantages are that it will not work well where management has little trust in its
6. What are some major factors that distort performance appraisals? (LO 6)
Performance appraisal might be distorted for a number of reasons, such as leniency error,
7. Identify ways to make performance evaluations more effective. Select one that you
believe is most effective and explain why. (LO 7)
More effective appraisals can be achieved with behavior-based measures, combined
Having trained appraisers is a must. All of the methods developed to make appraisals
8. What should supervisors know about conducting effective performance appraisal
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Chapter 10: Establishing the Performance Management System
meetings? (LO 8)
Prepare for and schedule the appraisal in advance.
Explain the purpose of the meeting in advance and create a supportive environment to put
the employee at ease.
9. How does the global nature of business affect performance management systems?
(LO 9)
Cultural differences among countries must be considered in international performance
appraisals. Business practices may vary. What managers consider important
Evaluating Alternatives
10. “It’s a dog eat dog world out there” according to Jackson, president of Onleo as he
defended their use of relative standards to evaluate employees. “If Onleo falls below
10% market share, we’re finished. Why shouldn’t our employees who are in the
bottom 10% lose their jobs?” Evaluate Jackson’s point of view and explain the
advantages and disadvantages of using relative standards and firing the lowest
ranked performers. How do you feel about the practice? (LO 4, 6, 7)
Group order ranking, individual ranking and paired comparison all require managers to
compare workers to each other and create a ranking from best to worst. If the appraisal
process also included adequate feedback to help struggling employees improve their
11. “Performance appraisal is more valid and reliable when many perspectives are
included. Supervisors should evaluate their employees, and employees should be
able to evaluate their supervisors. And customers should evaluate them all.” Explain
the advantages and disadvantages of including a wide variety of people, including
some outside the organization to evaluate employees. (LO 6, 7)
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Agree. The subordinate is in a unique position to evaluate the work of a supervisor. To
Disagree. The supervisor’s job is larger than the portion of it that the subordinate sees.
Research and Communication Skills
These activities require students to research a topic and report the findings to the instructor or the
class. They can be assigned to either individuals or groups and are designed to develop critical
thinking, research and presentation skills necessary for HR. Grading can be simplified by using
the grading rubric above.
Activity Summaries
12. This activity requires students to create a Behaviorally Anchored Rating Scale to evaluate
13. Students collect appraisal forms from a variety of local businesses and evaluate them.
Making a Difference: Service Learning Projects
Overview: Service Learning Projects provide students with opportunities to develop and
demonstrate HR skills and build a professional network that will assist in getting a job in HR.
The activities that relate to this chapter on performance appraisal involve assisting a non-profit
organization provide feedback. A sample assignment with requirements and grading materials is
available at the front of the Instructor’s Manual and as a download from the text website.
Case Application 10 – A: Growing Pains At Modern Office Supply
Case Summary
A young HR Generalist is frustrated when a variety of common problems in the performance
appraisal process combine to make her job difficult. Students are asked to diagnose the problems
and suggest ways to improve the process.
1. What is missing in the performance management process and what ways would
improve the performance management process help improve discipline and morale
at Modern Office Supply? (LO 2)
In the case of employees, Students might ask “what is NOT missing” from the
performance management process. Employees don’t seem to have a clear idea how to
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The poorly designed form makes it difficult to communicate expectations, accurately
measure performance or compare performance against the standards. Descriptions of job
skills and levels of performance on the form are too vague to interpret adequately. For
In measuring the actual performance, the supervisors seem rushed and do not provide a
detailed enough feedback that would be beneficial to employees. In addition, there seems
to be In the case of the performance management process for managers, Hector the owner
seems overwhelmed, reducing the likelihood that the evaluations of the managers are
Improving the performance management process with accurate feedback and
performance coaching could help improve disciple and moral, Employees are more likely
2. How does the form used for hourly employees contribute to errors and distortion in
the appraisal process? How would you revise the form or reduce them? Explain
other steps that need to be taken to further reduce distortions in the process. (LO 6)
The form lends itself to a variety of distortions including leniency error, central tendency
and inappropriate substitutes for performance. Evaluation forms that are specifically
For example, what is a “poor performance” versus “needs improvement”? What each of
the ratings means need to be carefully defined. It is also not clear what is being evaluated
In addition, to defining the categories and explaining the scale, supervisors and managers
need to be trained on how to complete the forms and encouraged to write details in the
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Chapter 10: Establishing the Performance Management System
3. What type of appraisal method would you recommend that would be more effective
for the hourly employees? Construct an appropriate form for the delivery driver
position. (LO 2, 3, 4, 5, 7)
Students answer may vary with this. A form that combines a couple of the “Absolute
For the delivery drivers, a graphic rating scale or behaviorally anchored rating scale
would provide a way to list and evaluate factors that would be relevant to the driver’s
work (customer service, punctuality, etc.). In order to address the issue of rude behavior,
It might be interesting to have students discuss the feasibility of a paired comparison
method to rank the drivers from the best to the worst (see Exhibit 10-5). This might force
4. How can the appraisal process for the manager be improved? (LO 5)
The appraisal of the managers needs to be redone so that the goals that are discussed with
each manager each period are tied to the overall goals of the organization and are based
on some benchmarking efforts. While using a MBO process is effective, specific
Case Application 10 – B Candy and Performance Management are Dandy at
Jelly Belly
Jelly Belly is a family-owned company that found during a merger that they had not only one
ineffective performance appraisal process, they had two. Revising the process involved bringing
in an HRIS provider to create an effective, easy-to-use, web-based performance appraisal
process.
Questions:
1. How do the performance management changes made at Jelly Belly address the four
purposes of performance management systems in chapter 3?(LO 1)
Student responses should include application of:
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2. Explain which of the six steps in the appraisal process seem to be addressed and how
they are affected by the new system. (LO 2)
Students may apply any of the six steps:
Establishing Performance Standards (step 1)
Communicate Expectations (step 2)
3. Research: What other companies offer performance management system software?
Research two of those systems and explain how their products seem to address the
purposes and steps of performance appraisal processes. (LO 1, 2)
Online Case Application 10 – C: TEAM FUN!
1. Evaluate how TEAM FUN! follows the six-step appraisal process. (LO 2, 3, 4, 5, 8)
2. Is an MBO plan good for the company? What could be done to improve it? Evaluate
Bobby’s goals according to MBO criteria. Suggest an alternative to their MBO exclusive
performance appraisal process. (LO 5)
3. Comment on the overall effectiveness of the performance appraisal process at TEAM
FUN! (LO 7)
4. Provide an outline for their discussion on absolute and relative measurement techniques
for “fun.” (LO 3, 4)
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