CHAPTER 10
Performance Appraisal and Career Management
Learning Objectives
After studying this chapter, the student should be able to:
1. Describe the purposes of performance appraisal in organizations.
2. Summarize the performance appraisal process in organizations.
Chapter Outline
Opening Case: “Investing in Talent”
Some businesses see wages and salaries as an expense. Others see employees as vital resources
that give them a real competitive advantage. Darden Restaurants falls clearly in the second set.
The firm has about 180,000 employees and owns 1,900 restaurants. It was recently named the
Introduction
Virtually all businesses must focus some degree of attention on performance management.
Performance appraisal systems are designed to provide organizations with the information to
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Chapter 10: Performance Appraisal and Career Management
Performance appraisal is the specific and formal evaluation of an employee to determine the
degree to which the employee is performing his or her job effectively. Some organizations use
the term performance appraisal for this purpose, and others prefer to use different terms such as
I. Why Organizations Conduct Performance Appraisals
Most people involved in performance appraisals tend to dissatisfied with them. This is true for
the person being rated and the person doing the rating. But the fact that performance appraisals
A. The Importance of Performance Appraisal
The results of performance appraisals serve many important functions in organizations, and
this is why they are still prevalent despite their problem.
• For example, appraisal results provide a benchmark for assessing the extent to which
recruiting and selection processes are adequate; that is, appraisal results help managers
assess the extent to which they are indeed recruiting and selecting the most appropriate
employees.
B. Goals of Performance Appraisal
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Chapter 10: Performance Appraisal and Career Management
A basic goal of any appraisal system is to provide a valid and reliable measure of employee
performance along all relevant dimensions. In other words, the appraisal results should reflect
the true picture of who is and who is not performing well, and they should indicate the areas
II. The Performance Appraisal Process
Several tasks are necessary for the performance-appraisal process to be successful. Some should
be done by the organization, some by the raters (the individuals who will be conducting the
A. The Role of the Organization
The organization, primarily through its human resource (HR) function, develops the general
performance-appraisal process for its managers and employees to use. One of the first
considerations relates to how the information gained from performance appraisal is to be
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Chapter 10: Performance Appraisal and Career Management
B. The Role of the Rater
The rater (traditionally and most typically the supervisor of the employee being appraised)
plays the largest role in the appraisal process. The organization is responsible for making sure
that all raters have clear performance standards, but raters have to help develop and learn
those performance standards. When making these decisions, the rater must consider the
context in which performance occurs so that any extenuating circumstances can be taken into
consideration.
Once the ratings have been completed, it is also usually the rater who must then communicate
the results and consequences of the appraisal to the ratee. When the results are somewhat
negative, this task may be uncomfortable, and it is often stressful for managers. This
communication process should also include goals for the future and a performance plan for
helping the employee improve, thus adding a positive element. Finally, the rater is ultimately
responsible for preparing the employee to perform at desired levels.
C. The Role of the Ratee
Although attempts to improve appraisals often focus on the organization or the rater, the rate
also has responsibilities in the appraisal process. First, for performance appraisals to work
most effectively, a ratee should have a clear and unbiased view of his or her performance.
Problems can occur during the appraisal process if there is disagreement between the rater and
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Chapter 10: Performance Appraisal and Career Management
D. Who Performs the Performance Appraisal?
Another important aspect of performance appraisal is the determination of who conducts the
appraisal and what information will be used. The most common appraisers are shown in
Figure 10.2.
Supervisors might also choose to be inaccurate in their ratings because they feel threatened by
a particular subordinate and want to prevent him or her from getting ahead, or because the
supervisor wants to get rid of a problem subordinate and tries to do so by getting him or her
promoted into a different department. In addition, supervisors may be concerned about team
member relations and decide to rate all team members the same, regardless of what they
deserve, to avoid jealousy or conflict.
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Chapter 10: Performance Appraisal and Career Management
Occasionally, appraisal information is obtained from the employee themselves. Although few
(if any) organizations rely on self-evaluations for decision-making, it is often useful for the
Organizations that use 360-degree appraisals gather performance information from people
on all sides of the manager: above, beside, and below, and so forth. This approach allows
them to match the strengths and weaknesses, the benefits and shortcomings, from each
perspective and gain a more realistic, overall view of a person’s true performance. But this
approach means that the manager has to reconcile different feedback and that the organization
E. What Gets Rated?
Many organizations choose to rate traits in conducting appraisals. Traits are abstract
properties of individuals that generally cannot be observed directly but can be inferred from
behavior. Ratings of attitudes, leadership, and initiatives are particularly popular traits for
appraisals. Rating traits allows an organization to use the same appraisal instrument for all or
most employees, and this approach is based on the assumption that similar traits underlie
effective performance for all jobs.
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Chapter 10: Performance Appraisal and Career Management
The final commonly encountered option is to rate performance based on outcomes. Focusing
on outcomes has the advantage of emphasizing the most objective measure of performance
F. Who Should be Rated?
With work teams, the organization must decide whether to evaluate individual performance or
team performance, and this issue can become quite complicated. If individuals are rated and
III. Methods for Appraising Performance
By their very nature, most appraisals are subjective—that is one must rely on a rater’s judgment
of an employee’s performance. As a result, performance appraisals are also prone to problems of
bias and rating errors. Raters tend to be uncomfortable passing judgment on employees, and
employees generally do not care to be judged in this way.
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HR in the 21st Century: When is Acceptable Unacceptable?
For year, General Electric has used a ruthlessly efficient method for evaluating the
performance of its employees. The system is widely known informally as the ABC approach.
Each year, managers are required to sort all of their subordinates into one of three categories.
The best, as much as 10 percent of the workforce, makes up the A group; the next set as much
A. Ranking Methods Versus Rating Methods
Probably the simplest method of performance appraisal is the simple ranking method, which
involves having the manager simply rank-order, from top to bottom or from best to worst,
each member of a particular work group or department. A variation on the ranking method is
the paired-comparison method of performance appraisal, which involves comparing each
individual employee with every other individual employee, one at a time.
B. Specific Rating Methods
A graphic rating scale simply consists of a statement or question about some aspect of an
individual’s job performance. For example, one common set of responses to a graphic rating
scale is strongly agree, agree, neither agree nor disagree, disagree, and strongly disagree.
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Chapter 10: Performance Appraisal and Career Management
A somewhat different type of rating instrument involves the use of the critical incident
method. A critical incident method is simply an example or instance of especially good or
poor performance on the part of the employee. Organizations that rely on this method often
require raters to recall such instances on the job and then describe what the employee did (or
did not do) that led to success or failure. Thus, this technique provides rich information for
feedback to the employee and defines performance in fairly clear behavioral terms. In other
cases, managers are asked to keep a log or diary in which they record example or critical
incidents that they believe reflect good and bad performance on the part of individual
employee.
A BARS system has the significant advantage of dramatically increasing reliability by
providing specific behavioral examples to reflect effective and less effective behaviors.
Because the managers themselves develop the scales, they tend to be more committed to using
them effectively, and the process of developing the scales helps raters develop clearer ideas
about what constitutes good performance on the job. The process of developing a truly
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Chapter 10: Performance Appraisal and Career Management
effective BARS is extremely expensive and time consuming, so these scales are rarely used in
their pure form.
A second difference between a BOS and a BARS is that a BOS allows managers to rate the
frequency with which the individual employee has exhibited each behavior during the rating
period. The manager then averages these ratings to calculate an overall performance rating for
the individual. Although, the BOS approach is an improvement over the limitations of the
BARS approach, it takes even more time and can be even more expensive to develop.
Specifically, the kinds of behaviors specified in the goal-setting process are exactly what the
employee will tend to focus on, so it is critical that the organization really wants to encourage
these particular behaviors. One relatively new innovation in performance appraisal methods is
the use of computer monitoring. Employees can now be monitored electronically to see how
they spend their time and how productive they are. These systems are now used widely with
customer-service representatives and reservations clerks.
C. Which System Is Best?
The ultimate reason for conducting performance appraisal is to improve performance.
IV. Other Issues in Performance Appraisal
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A. Rating Errors
Several rating errors have been identified that can affect performance appraisals. One such
error is known as contrast error; it occurs when one compares people against one another
instead of against an objective standard. One of the major criticisms that had been leveled
A different type of error that may occur is what is known as either halos or horns. A halo
error occurs when one positive performance characteristic causes the manager to rate all
other aspects of performance positively. The opposite of a halo error is a horns error. In this
instance, the manager tends to downgrade other aspects of an employee’s performance
because of a single performance dimension.
It is critical, therefore, that organizations do whatever they can to reward raters for doing a
good job in performance appraisal by reinforcing that these appraisals are important.
B. Contextual Performance
Contextual performance refers to tasks an employee does on the job that are not required as
part of the job but that nevertheless benefit the organization in some way. These behaviors
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C. Evaluating the Performance Appraisal Process
Clearly, the organization must monitor the extent to which it is conducting its performance
appraisals effectively, adequately, and appropriately. As with selection, performance
appraisals must be free from bias and discrimination.
D. Legal Issues in Performance Appraisal
When performance appraisals are used as the basis for human resource decisions (as in the
case of merit pay or promotion decisions), they are considered the same as any other test
under the law. Therefore, appraisals that show evidence of disparate impact must be validated
V. The Nature of Careers
A. The Meaning of Career
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Chapter 10: Performance Appraisal and Career Management
One can define a career as the set of experiences and activities in which a person engages
related to his or her job and livelihood over the course of a working life. Most people have
More and more frequently, people are taking breaks from their work. These breaks include
sabbaticals, discretionary periods of unemployment, and similar activities that make a positive
contribution to a person’s overall work life but do not involve formal employment by an
organization.
B. Traditional Career Stages
One traditional view, shown in Figure 10.5, suggests a typical individual progresses through
four career stages:
• The first stage is called exploration.
o During this period in people’s lives, they try to identify the kind of work they are
C. New Views of Career Stages
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Chapter 10: Performance Appraisal and Career Management
Of course, in the contemporary era of downsizing and layoffs, sometimes people go through
these four stages of career development in a relatively short period of time. Many experts
agree that even though the traditional model of careers summarized above still has conceptual
value, new perspectives on careers are better reflections of today’s realities. Some experts, for
instance, argue that people should think about career ages (how long a person has been on a
job) rather than career stages or even chronological age.
Once a career has been chosen and the person begins to build on that career, the issues that
emerge often deal with trying to establish the proper balance between work and family life. It
is at this point in one’s career when these issues becomes more salient and the individual must
D. Issues Facing Older Workers and the Decision to Retire
Persons age forty and older are protected by the Age Discrimination in Employment Act, but
the fact remains that many people assume that job performance decline with age. In fact, the
evidence regarding such declines is rather mixed and generally weak. In any event, eventually
older workers must confront the decision to retire.
• In truth, however, the decision is not to retire is not as simple as it once was. The person