Management Chapter 10 Performance Appraisal And Career Management Performance Appraisal And Career Management

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Chapter 10: Performance Appraisal and Career Management

Chapter 10

Performance Appraisal and Career Management

Learning Objectives

Opening Case: Counting Seconds, Measuring Scans

Chapter Outline

Closing Case: Investing in Talent

Discussion Questions

Additional Resource: Employee Performance Evaluation – What You’re Not Doing

Learning Objectives

After studying this chapter, students should be able to accomplish the following objectives.

1. Describe the purposes of performance appraisal in organizations

3. Identify and describe the most common methods that managers use for performance

appraisal

5. Describe the nature of careers in organizations

7. Identify and discuss basic career-development issues and challenges

Opening Case: Counting Seconds, Measuring Scans

Case Summary

One of the most important jobs in retailing is the person who takes the customer’s money, in

part because paying for their items is about the last thing customers do before leaving. An

efficient and pleasant experience can leave a customer walking out of the store with a smile,

Meijer, a family-owned discounting chain, operates 235 huge megastores in Michigan, Illinois,

Chapter 10: Performance Appraisal and Career Management

Indiana, Wisconsin, Kentucky, and Ohio. The company has recently installed a new

performance-measurement system for its checkout operators that might potentially

revolutionize those jobs. Essentially, the system works like this:

1. Meijer has established minimum baseline performance metrics for the job based on the

number of units a person should reasonably be able to scan and bag in a specified amount

of time.

Think It Over

1. How would you feel about working under the Meijer system?

2. What other kinds of jobs might be amenable to this sort of performance-measurement

technology?

Chapter Outline

Introduction

Chapter 10: Performance Appraisal and Career Management

Virtually all businesses must focus some degree of attention on performance management.

Performance-appraisal systems are designed to provide organizations with the information to

manage performance improvement. To develop employees to their full potential, however,

organizations also must help employees manage their careers. Further, performance appraisals

I. Why Organizations Conduct Performance Appraisals

Most people involved in performance appraisals tend to be dissatisfied with them. This is true

for the person being rated and the person doing the rating. But the fact that performance

appraisals are so widely used in spite of this dissatisfaction is a strong indicator that managers

believe performance appraisals are important and have a meaningful role to play in

organizations. Organizations also hope to achieve several goals with performance appraisals.

A. The Importance of Performance Appraisals

The results of performance appraisals serve many important functions in organizations, and

this is why they are still prevalent despite their problems.

• 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

Chapter 10: Performance Appraisal and Career Management

deficiencies, capitalize on their strengths, and improve their overall contributions to

their jobs.

• Finally, performance-appraisal information should be the basis of incentive pay

systems and other performance-management interventions designed to improve

motivation and performance.

B. Goals of Performance Appraisal

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

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 raters (the individuals who will be conducting the

performance appraisal), and in many organizations by the ratee (the individual whose

performance is evaluated). In addition, follow-up and discussion should accompany the process.

Figure 10.1 illustrates the actual performance-management system of one major corporation.

Although some firms might make minor modifications to reflect their philosophies more

closely, these general steps are almost always followed.

A. The Role of the Organization

The organization, primarily through the work of 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 used. For example, will it be used for developmental feedback only? Or will decisions

about merit pay or other outcomes be based on these ratings as well? The organization also

Chapter 10: Performance Appraisal and Career Management

generally determines the timing of the performance appraisals. Most organizations conduct

formal appraisals once a year, although some organizations conduct appraisals twice a year

or even more frequently for new employees. The most common alternatives are for

appraisals to be done on the anniversary date of each individual employee’s hiring (which

spreads out the need to do appraisals throughout the year but makes budgeting for raises

more problematic) or for all appraisals throughout the organization to be conducted during a

specified period of time each year (which makes budgeting and comparisons easier but

requires a great deal of work during a short period of time).

The organization is also responsible for ensuring that clear and specific performance

standards are available to managers. The organization should also ensure that these standards

are communicated carefully to the employees.

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 standards. When making these decisions, the rater must consider the context in

C. The Role of the Ratee

Although attempts to improve appraisals often focus on the organization or the rater, the

ratee also has responsibilities in the appraisal process. First, for performance appraisals to

Chapter 10: Performance Appraisal and Career Management

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

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 are perhaps the most frequently used source of information in performance

appraisal. The assumption underlying this approach is that supervisors usually have the most

knowledge of the job requirements and the most opportunities to observe employees

performing their jobs.

Chapter 10: Performance Appraisal and Career Management

Subordinates are an especially important source of information when the performance of

their own manager is being evaluated, and this information is perhaps most useful when the

appraisal is focused on the manager’s leadership potential. Of course, a major problem with

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 attitude, leadership, and initiative 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

Chapter 10: Performance Appraisal and Career Management

effective performance for all jobs.

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

III. Methods for Appraising Performance

Chapter 10: Performance Appraisal and Career Management

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

Contemporary Challenges in HR: When Is Acceptable Unacceptable?

For years, General Electric had used a ruthlessly efficient method for evaluating the

performance of its employees. The system was widely known informally as the ABC

approach. Each year, managers were required to sort all of their subordinates into one of three

categories. The best, as much as 10 percent of the workforce, made up the A group; the next

set, as much as 80 percent, included those in the middle and was called the B group (this large

group subsequently were broken down into smaller groups). The lowest 10 percent, though,

was called the C group—and these workers lost their jobs even if they were generally seen as

exhibiting acceptable performance!

Students’ answers will vary. Some may say that it is not a fair system as the percentage

distribution between the three groups seems skewed. Additionally, the practice of letting

go of the workers that fall in Group C, despite the fact that they exhibit acceptable

performance, seems unethical. Others may say that having a system that categorizes

employees based on their performance may motivate them to work toward progressing

to Group B or Group A.

Chapter 10: Performance Appraisal and Career Management

Students’ answers will vary. Some may say that they would prefer using the system as it

is a good motivator that helps ensure that employees are not complacent and it helps

create a competitive work environment.

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

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.

A somewhat different type of rating instrument involves the use of the critical incident

Chapter 10: Performance Appraisal and Career Management

method. A critical incident is 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

Another method for appraising performance involves the use of a behaviorally anchored

rating scale (BARS). BARS appraisal systems (also known as behavioral expectation

scales) represent a combination of the graphic rating scale and the critical incident method.

They specify performance dimensions based on behavioral anchors associated with different

levels of performance. Figure 10.4: presents an example of a BARS developed by one of the

authors to measure one dimension of teacher performance: interpersonal skills.

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.

Chapter 10: Performance Appraisal and Career Management

C. Which System Is Best?

The ultimate reason for conducting performance appraisal is to improve performance.

IV. Other Issues in Performance-Appraisal

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

against graphic rating scales is that they were especially prone to a series of distributional

errors. A distributional error occurs when the rater tends to use only one part of the rating

scale.

• Sometimes the distributional error may be severity, which occurs when the manager

gives low ratings to all employees by holding them to an unreasonably high standard.

Chapter 10: Performance Appraisal and Career Management

employees as average, using only the middle part of a rating scale.

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.

Organizations often do work to reduce rating error. One method for error reduction is to train

managers to overcome these weaknesses, even when that means nothing more than pointing

out to managers their tendency to commit distributional errors or contrast errors. Rater

accuracy training is usually more involved than that, however. Specifically, an approach

known as “frame of reference training” attempts to emphasize for managers the fact that

performance is multidimensional in nature and to train those managers with actual content of

various performance dimensions. It is critical, therefore, that organizations do whatever they

can to reward raters for doing a good job in performance appraisal by reinforcing the fact

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

might include willingly staying late at work to meet deadlines, helping coworkers get their

C. Evaluating the Performance-Appraisal Process

Several firms have claimed to have dropped performance appraisals completely and focused

entirely upon performance management. These systems, say expert consultants, lead to

backstabbing, low levels of teamwork, and feelings of frustration as someone must always

Chapter 10: Performance Appraisal and Career Management

be rated as a poor performer. The same experts also argue that performance appraisals are

too infrequent to really address performance problems.

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

V. The Nature of Careers

A. The Meaning of Career

One can define a career as the set of experiences and activities in which a person engages