Chapter 10: Performance Management and Appraisal
B. Graphic Rating Scales
The graphic rating scale allows the rater to mark an employee’s performance on a
continuum indicating low to high levels of a particular characteristic. Because of the
straightforwardness of the process, graphic rating scales are common in performance
Concerns with Graphic Rating Scales
Graphic rating scales in many forms are widely used because they are easy to
develop and provide a uniform set of criteria to evaluate the job performance of
different employees. However, the use of scales can cause rater error because the
form might not accurately reflect the relative importance of certain job
characteristics, and some factors might need to be added to the ratings for one
An additional drawback to graphic rating scales is that separate traits or factors are
often grouped, and the rater is given only one box to check. Another drawback is that
the descriptive words sometimes used in scales may have different meanings to
different raters. Figure 10-9 shows, scale points can be defined carefully to minimize
misinterpretation.
Behavioral Rating Scales
Chapter 10: Performance Management and Appraisal
In an attempt to overcome some of the concerns with graphic rating scales,
employers may use behavioral rating scales designed to assess individual actions
instead of personal attributes and characteristics. Different approaches are used, but
Several problems are associated with the behavioral approaches:
• Creating and maintaining behaviorally anchored rating scales requires
extensive time and effort.
• Many appraisal forms are needed to accommodate different types of jobs in an
organization.
C. Comparative Methods
Ranking
The ranking method lists the individuals being rated from highest to lowest based on
their performance levels and relative contributions. One disadvantage of this process
is that the sizes of the performance differences between employees are often not fully
Forced Distribution
Chapter 10: Performance Management and Appraisal
Advantages and Disadvantages of Forced Distribution
One reason why firms have mandated the use of forced distributions for appraisal
ratings is to deal with “rater inflation.” If employers do not require a forced
distribution, performance appraisal ratings often do not match the normal distribution
of a bell-shaped curve (Figure 10-11).
But the forced distribution method suffers from several drawbacks:
• One problem is that a supervisor may resist placing any individual in the
lowest (or the highest) group.
• Difficulties also arise when the rater must explain to an employee why he or
she was placed in one group while others were placed in higher groups.
D. Narrative Methods
Managers are often required to provide written appraisal information. However, some
appraisal methods are entirely written, rather than augmenting predetermined rating
scales or ranking structures. Documentation and descriptive text are the basic
components of the critical incident method and the essay method.
Critical Incident
In the critical incident method, the manager keeps a written record of both highly
Chapter 10: Performance Management and Appraisal
Essay
The essay method requires a manager to write a short essay describing each
employee’s performance during the rating period. Some free-form essays are without
E. Management by Objectives
Management by objectives (MBO) specifies the performance goals that an individual
and manager identify together. Each manager sets objectives derived from the overall
goals and objectives of the organization; however, MBO should not be a disguised
means for a superior to dictate the objectives of individual managers or employees.
Other names for MBO include appraisal by results, target coaching, work planning and
review, performance objective setting, and mutual goal setting.
MBO Process
Implementing a guided self-appraisal system using MBO is a four-stage process. The
stages are as follows:
• Job review and agreement—the employee and the superior review the job
description and the key activities that constitute the employee’s job.
Chapter 10: Performance Management and Appraisal
The MBO process seems to be most useful with managerial personnel and employees
who have a fairly wide range of flexibility and control over their jobs. When
F. Combinations of Methods
No single appraisal method is best for all situations, so a performance measurement
system that uses a combination of methods may be sensible. Using combinations may
offset some of the advantages and disadvantages of individual methods. Category
scaling methods sometimes are easy to develop, but they usually do little to measure
strategic accomplishments. Further, they may make inter-rater reliability problems
worse. Comparative approaches help reduce leniency and other errors, which makes
them useful for administrative decisions such as determining pay raises. But
comparative approaches do a poor job of linking performance to organizational goals,
and by themselves do not provide feedback for improvement as well as other methods
do.
VI. Training Managers and Employees in Performance Appraisal
Court decisions on the legality of performance appraisals and research on appraisal
effectiveness both stress the importance of training managers and employees on
performance management and on conducting performance appraisals. Managers with
Chapter 10: Performance Management and Appraisal
documenting performance information. Training is especially essential for those who have
recently been promoted to managerial jobs and conducting performance appraisals is a new
experience for them. Some of the topics to be covered in appraisal training include:
• Appraisal process and timing
• Performance criteria and job standards that should be considered
• How to communicate positive and negative feedback
A. Rater Errors
There are many possible sources of error in the performance appraisal process. One of
the major sources is the rater. Although completely eliminating errors is impossible,
making raters aware of potential errors and biases helps.
Varying Standards
When appraising employees, a manager should avoid applying different standards
Recency and Primacy Effects
The recency effect occurs when a rater gives greater weight to recent events when
Central Tendency, Leniency, and Strictness Errors
A manager may develop certain rating patterns:
• Appraisers who rate all employees within a narrow range in the middle of the
scale (i.e., rate everyone as “average”) commit a central tendency error,
Chapter 10: Performance Management and Appraisal
Rater Bias
When a rater’s values or prejudices distort the rating, rater bias results. Such bias
may be unconscious or quite intentional. Use of age, religion, seniority, sex,
Halo and Horns Effects
The halo effect occurs when a rater scores an employee high on all job criteria
because of performance in one area. The opposite is the horns effect, which occurs
when a low rating on one characteristic leads to an overall low rating.
Contrast Error
Similar-to–Me/Different-from-Me Errors
Sometimes, raters are influenced by whether people show characteristics that are the
same as or different from their own. The error comes in measuring an individual
against another person rather than measuring how well the individual fulfills the
expectations of the job.
Sampling Error
representative sample of all the work done by the employee.
VII. Appraisal Feedback
Chapter 10: Performance Management and Appraisal
A. The Appraisal Interview
The appraisal interview presents both an opportunity and a challenge. It can be an
emotional experience for the manager and the employee because the manager must
communicate both praise and constructive criticism. A major concern for managers is
Employees usually approach an appraisal interview with some concern. They may feel
that discussions about performance are both personal and important to their continued
job success. At the same time, they want to know how their managers feel about their
performance. Figure 10-12 summarizes hints for an effective appraisal interview for
supervisors and managers.
B. Reactions of Managers and Employees
Managers who must complete appraisals of their employees often resist the appraisal
process. Many feel that their role requires them to assist, encourage, coach, and counsel
Chapter 10: Performance Management and Appraisal
Employees may well see the appraisal process as a threat and feel that the only way for
them to get a higher rating is for someone else to receive a low rating. This win-lose
perception is encouraged by comparative methods of rating. Emphasis on the self-
improvement and developmental aspects of appraisal appears to be the most effective
way to reduce this reaction.
C. Effective Performance Management
Regardless of the approach used, managers must understand the intended outcome of
performance management. When performance management is used to develop
employees as resources, it usually works. When a key part of performance management,
the performance appraisal, is used to punish employees, performance management is
less effective. In its simplest performance appraisal is a manager’s observation.
Critical Thinking Challenges
1. Describe how an organizational culture and the use of performance criteria and
standards affect the remaining components of a performance management system.
Corporate cultures vary regarding their emphasis on performance management.
Some cultures are based on entitlement, meaning that adequate performance and
Chapter 10: Performance Management and Appraisal
2. Suppose you are a supervisor. What errors might you make when preparing the
performance appraisal on a clerical employee? How might you avoid those errors?
It is incumbent on the supervisor to use extreme care in conducting each evaluation. In
the absence of such care, a variety of errors can influence the rating—positively or
negatively. Appraisal systems may include many rather nebulous personality traits that
3. Based on your experiences, as well as the chapter information, what are some good
“rules of thumb” for conducting successful performance appraisal interviews?
Students may have had different experiences to draw from, but most students will
probably refer to Figure 10-12, Appraisal Interview Hints for Appraisers that include
some of the following dos and don’ts.
Chapter 10: Performance Management and Appraisal
4. Review the performance appraisal process and appraisal form used by a current or
former employer, and compare them with those provided by other students. Also
articles on performance appraisals. Develop a report suggesting changes to make the
performance appraisal form and process you reviewed more effective.
Students’ examples of the form and the process will typically vary. One way to review
the form and process is to check them against the elements of a legally defensible
5. As the new HR Director of a company in the behavioral health industry, you have the
responsibility to develop a performance management system. You need to present a
business case to senior executives that the performance management system does not
stand alone and must be integrated into the company’s strategic plan, business needs,
and measurements. For information on performance management best practices,
A. Given several key practices for a successful performance management system,
which ones should be implemented first?
Students might recommend several of the elements of a legal performance
Chapter 10: Performance Management and Appraisal
B. Identify key measurements to transition the company from the current system of
looking at personality factors to a new system of looking at performance factors.
Students might suggest measurements of employee and supervisor evaluations
Case
Performance Management at Netflix
1. Would you find working at Netflix exciting or frightening? Why?
Students’ answers will vary. Whether students will find working at Netflix exciting or
2. Can everyone in a company be above average? If so, how can you tell if someone is
truly above average?
Students may say that everyone in a company can be above average. Companies
wouldn’t hire someone who is just average or below average.
Chapter 10: Performance Management and Appraisal
Supplemental Cases
Performance Management Improvements for Bristol-Myers Squibb
This case identifies how performance management systems might be redesigned. (For the
1. Discuss how this case illustrates the contrasts between the administrative use and
developmental use of appraisals.
The old system at Bristol-Myers Squibb (BMS) focused on the administrative use of
2. Identify some of the advantages and disadvantages of eliminating the use of appraisal
forms and ratings.
The advantages of eliminating the use of appraisal forms and ratings are that the
managers can focus more on the development of employees and goals and
expectations for the future. Also, the process and the goals can be more individualized
to the particular employee rather than being forced to use a particular form and
Chapter 10: Performance Management and Appraisal
Building Performance through Employee Participation
The case outlines what was done at Jewelers Mutual Insurance in allowing employees to
have a say in performance management. (For the case, go to
1. Discuss how this case illustrates how greater support for a performance management
system can be developed through employee participation.
In this case the company leaders decided to involve employees in the redesign efforts
2. Identify some of the ways that performance management systems can be improved
based on the experiences at JMI.
Some of the ways that performance management systems can be improved based on
the experiences at JMI would include the following:
Chapter 10: Performance Management and Appraisal
Unequal/Equal Supervisors
This case identifies the consequences of giving appraisal ratings that may not be accurate.
Questions
1. How have the inaccurate performance ratings created more problems?
To avoid facing the unpleasantness of a negative performance appraisal review,
Hubert, rated both Harriet Green and Neil White about the same. When the business
2. What HR and legal issues could be raised in this case?
This case demonstrates the importance for doing performance appraisal properly to
Comments
Hubert is facing a very common problem. Having to distinguish between dependable, loyal
service over a long period of time, and a higher quality of service from another individual
over a shorter period of time is difficult. He has further complicated the unpleasant task by
failing to face up to the differences in performance between the two earlier and
communicating his feelings to them.
Chapter 10: Performance Management and Appraisal