CH-8 Appraising Employee Job Performance – Human Resource Management: A Managerial Tool for Competitive Advantage : Book Guide

Chapter 8 APPRAISING EMPLOYEE JOB PERFORMANCE LEARNING OBJECTIVES After reading this chapter, students should be able to: • Understand how effective performance appraisal systems enhance competitive advantage. • Specify the standards an effective performance appraisal system must meet. • Describe the different types of appraisal rating instruments. • Explain how a firm should develop its performance appraisal system. CHAPTER OUTLINE AND LECTURE 8-1 Gaining Competitive Advantage Although studies have shown that most managers do not like to “judge” other people, performance appraisals are a necessary and vitally important part of their jobs. We will explore the numerous uses of employee evaluations in this chapter. 8-1a Opening Case: Gaining Competitive Advantage at McKesson Information Solutions After 20 acquisitions, McKesson Information Solutions, the largest healthcare software company in the industry, had numerous performance appraisal systems in place. One single cohesive performance appraisal system was needed in order to improve employee morale, and reduce turnover rates and customer service problems. The solution was to create a new appraisal system, where the employee and manager together decide on 3 or 4 top job objectives for the employee that would lead to the greatest impact on employee and company success. Managers would monitor the progress over a year, along with providing coaching. At the year end, each employee is rated on a scale of 1–5. However, the system did not run smoothly as managers over rated the success of employee job objectives, which was not evidenced by business results. McKesson smoothed out the system by requiring managers to place a certain percentage of their employees in each rating category, and requiring them to attend training sessions on providing constructive feedback to their employees. Since improving their system, McKesson has enhanced employee job satisfaction, resulting in lower turnover rates. Employees now have a better idea of what is expected of them, and also receive feedback on how to perform their jobs effectively. The company now ranks #52 in Computerworld’s top 100 places to work in IT. 8-1b Linking Performance Appraisal to Competitive Advantage Performance appraisals should accurately assess the quality of employee job performance. There is a relationship between effective appraisals and a firm’s overall competitive position. An effective system directs employee behavior towards organizational goals and monitors their behaviors to ensure that goals are met. It reinforces the strategic business plan by focusing attention on employees’ progress towards meeting their part of the plan. Monitoring performance is a good way to motivate workers toward goal attainment. A good system often yields information for making important employment decisions. Organizations can minimize costly performance appraisal-related litigation by using performance appraisal systems that result in accurate and fair ratings. An effective system can help retain employees by minimizing job dissatisfaction and turnover. 8-2 HRM Issues and Practices Standards and rating instruments must be properly chosen and matched to the performance appraisal system to produce the desired results. How both of these will be used to develop a system will be examined in the sections that follow. 8-2a Standards for Effective Performance Appraisal Systems In actual practice, it is difficult to set effective standards and achieve the success that McKesson Information Solutions enjoyed. To help overcome the problems associated with poor or faulty systems, these guidelines are issued. • To be effective, the rating form must by relevant, and must include all pertinent criteria for evaluating performance, excluding criteria that are irrelevant. Performance standards must be clear so that both the rater and the employee understand them the same way. • The ratings must be as accurate as possible or they may cause morale or legal problems. To help ensure this, leniency errors involving high ratings and severity errors involving low ratings should be avoided. Managers must not be guilty of giving everyone an average rating (central tendency error) or giving individuals a rating based on one particular character or behavior (halo effect). Managers should also avoid making assumptions based on implicit personality theories or giving ratings based solely on recent events (recency error). • Legal standards must be learned and applied. The appraisal system must meet all criteria imposed by EEO laws, especially with regard to the nature of the appraisal instrument and the fairness and accuracy of the ratings. Ask students to give their opinions on Exhibit 8-1 in the text. Analyze the reasons for the problems identified in these studies. How can they be remedied? Do they exist where you work? 8-2b Types of Rating Instruments A firm must use an effective rating form. A brief description of the most common instruments along with some strengths and weaknesses are presented here. • Employee comparison systems evaluate employee performance relative to other employees’ performances. These rankings take the form of simple ranking, paired comparison, and force distribution. A simple ranking ranks everyone from best to worst. Paired comparison compares each possible pair of workers. A forced distribution assigns a certain percentage of employees to each category of excellence. These systems are low cost, practical, quick, and eliminate some of the rating errors. At the same time the rating standards are vague and results can be challenged. Additionally, they fail to adequately direct employee behavior. • Graphic rating scales (GRS) list traits assumed to be necessary for successful job performance. For each trait, points are assigned to the rating scale. They are practical, cost effective, and easy to use across the organization. Problems occur because traits are often vaguely defined, a good mechanism for specific, nonthreatening feedback is not provided, and it is difficult to give accurate ratings. The courts frown on them and call them “subjective.” • Behaviorally Anchored Rating Scales (BARS) also rate employee traits anchored to behaviors or dimensions that reflect varying levels of performance. BARS have the ability to direct and monitor behavior. Feedback can be given to let workers know what types of behaviors are expected of them. They are complex and require much time and effort to develop. It is difficult for raters to select the one behavior that is most indicative of each employee’s performance. • Behavior Observation Scales (BOS) contain a list of desired behaviors required for the successful performance of specific jobs. Each behavior is rated separately according to the engagement frequency of that behavior. Strengths include the fact that employers, employees, and the EEO attorneys like BOS better than BARS. It is easier for raters to use and for employees to understand what is expected of them. It is however, time-consuming to develop and is only cost-efficient if the job has many incumbents. • Management by objectives (MBO) allows supervisors and employees to mutually set goals, performance standards, and how goal attainment will be achieved. The two parties periodically meet to discuss the employee’s progress and identify any changes needed. Findings show that MBO improves job performance by directing behavior. It tends to be fair because standards are stated in relatively objective terms. It is also quick, practical, low cost, and motivates workers by giving them the opportunity to cooperatively set their own goals. Problems with its use include not specifying behaviors to reach goals, may be partly a function of factors outside the worker’s control, there is no common basis for comparison to other employees, and MBO places pressures and stresses on employees. Ask students to rate the rating instruments. Let them develop their own forms during class to see if the systems achieve the general purpose of effective performance appraisal. Let them compare in teams and allow each spokesperson to summarize their ratings. 8-2c Designing an Appraisal System The designers of an effective system must determine how it will be developed and administered. Here we discuss the steps an HR professional should take to develop such a system. • Step 1 Gaining Support for the System: Supervisors, employees, and upper-level managers must support the system to make it work correctly. All parties need to provide input, the process should be meaningful, and managers must be trained and held accountable for providing accurate ratings. • Sept 2 Choosing the Appropriate Rating Instrument: The HR department may choose from a variety of instruments. Three of the most important factors include practicality, cost, and the nature of job. It must be practical in terms of time and effort to develop and use. The choice of rating instrument depends, in part, on the type of data that can be realistically collected about a particular job. If behavior can be appraised, use a behaviorally based method. If valid output measures are available, use a results-oriented method. If both exist, use either or both approaches; if neither exists, use a graphic rating scale. • Step 3 Choosing the Rater(s): Supervisors, peers, and employees themselves may provide performance ratings. Supervisors fall naturally in line to appraise employees. Peer rating can supplement those of supervisors; two potential problems may limit their usefulness: if the organization’s reward system is competitive, and if employees are afraid of losing friendships. Self-ratings can also be used to supplement supervisory ratings. They tend to be self-biased and may not be effective. The advantage of the 360-degree feedback system is that a circle of people who frequently interact with the manager are used to give a more well-rounded rating. Some companies use 360-degree feedback systems for evaluative, as well as feedback, purposes. Companies that are considering the use of 360-degree ratings for evaluative purposes should proceed cautiously. • Step 4 Determining the Appropriate Timing of Appraisals: Most organizations use an annual evaluation. Frequent appraisals are seen as too time-consuming or costly. To improve the rater’s memory of relevant events in the one-year interval, adequate records of performance must be kept, which also serves as documentation for EEO suits. • Step 5 Ensuring Appraisal Fairness: An organization must take steps to ensure that the appraisal process is a fair one. In addition to supervisory ratings, upper-level management should also review the result. Both should review the process periodically to keep it fair and the raters “honest.” An appeals system should be present to allow employees to voice their concerns. It can foster more accurate ratings as well as minimize the involvement of outside third parties. Send students out to interview HR professionals on designing an effective system. Tell them to be discrete in telling the HR people how this information will be used in class. Determine which businesses do the best jobs. If it is more appropriate, use the Internet. 8-3 The Manager’s Guide The manager’s guide will increase student’s knowledge of and skills in performance appraisal and how the HRM department can help make the experiences more successful. 8-3a Performance Appraisal and the Manager’s Job Without proper implementation, evaluations will prove very ineffective. Often managers do not give accurate and fair ratings on a consistent basis. Managers need training in the areas of awareness of accurate ratings and their impact, observational, and evaluation skills. They need to provide adequate performance feedback in the form of constructive criticism. They need to lessen the use of negative feedback in inappropriate ways and learn how to set performance goals. Generate a discussion on why it would be personally difficult to evaluate or appraise the performance of other people: Of friends or relatives who work with you, of “problem” employees, or of peers. 8-3b How the HRM Department Can Help HRM departments provide help with development of the appraisal system, appraiser training, and monitoring and evaluation of the implementation of the system. An effective system is needed to provide meaningful ratings. Training raters help them understand why accurate ratings and effective feedback are important and how these outcomes can be achieved. The HR professionals take steps to ensure appraisals have been completed on time and that instructions have been followed. User and employee satisfaction can be measured to get a good cross understanding of the system’s effectiveness. 8-3c HRM Skill-Building for Managers Feedback conferences and goal setting are two important management duties related to performance appraisal. Periodic performance review sessions should be brief, informal, and employee-centered. Their purpose is to identify problems the employee is facing and to discuss solutions that might otherwise be overlooked. These meetings should be short (10–30 minutes) and informal. Management should encourage the workers to do most of the talking about their progress, problems, and concerns. Annual conferences should inform employees of their ratings, how the information will be used, keep effective workers on target, and improve ineffective workers’ performance. These conferences should be conducted in the following sequence: 1. Inform employees in advance. 2. Arrange a time and place that is appropriate. 3. Review information before the interview. 4. Start the interview by making it seem important. Do not argue or be defensive. 5. Discuss the worker’s performance in specific areas. Give praise and listen. 6. Discuss how the employee’s ratings will affect employment decisions. 7. Set goals for improvement and establish the steps needed to accomplish them. Set a follow-up date to check the progress made. Ask students to pretend as managers rating an employee. Ask how they would deal with frequent interruptions, problems in the production department, an air conditioner system malfunction, fatigue, and illness (all at the same time). The success of an MBO system greatly depends on the relevance and clarity of the goal statements. Goals should be consistent with the organization, specific and challenging, realistic and achievable, and measurable. KEY TERMS 360-degree feedback: An appraisal system for managers, who are rated by subordinates, peers, superiors, customers, and themselves. Behavior observation scale (BOS): A rating instrument comprised of traits anchored by behaviors. Raters evaluate worker performance on each behavior. Behaviorally anchored rating scale (BARS): A rating instrument comprised of traits anchored by job behaviors. Raters select the behavior that best describes the worker’s performance level. Central tendency error: Rating employees in the middle of the rating scale when more extreme ratings are warranted. Criterion contamination: The inclusion of irrelevant performance criteria on a rating form. Criterion deficiency: The omission of pertinent performance criteria on a rating form. Employee comparison systems: Appraisal instruments that require raters to evaluate employees in relation to other employees. Forced distribution: Appraisal instrument that requires raters to assign a certain percentage of employees to each category of excellence. Graphic rating scale (GRS): A rating instrument comprised of traits anchored by adjectives descriptive of job performance levels. Halo effect: Ratings on each scale are influenced by the appraiser’s overall impression of an employee. Implicit personality theory: A rater’s personal theory of how different types of people behave in certain situations. Leniency errors: Ratings that are unduly favorable. Management by objectives (MBO): A rating instrument comprised of objectives and performance standards for meeting them. Paired comparison: Appraisal instrument that requires raters to compare each possible pair of employees in terms of their job performance. Performance appraisals: Assessments of employees’ job performance levels. Performance standards: The level of performance that an employee is expected to achieve. Recency error: An error that occurs when ratings are heavily influenced by recent events. Relevance: The degree to which the rating form includes necessary information. Severity errors: Ratings that are unduly unfavorable. Simple rankings: Appraisal instruments that require raters to rank-order their employees from best to worst, according to their job performance. REVIEW QUESTIONS 1. An employee, Joe Smith, performed at the “2” level (needs improvement) during the past year. His boss gave him a “3,” however, on his performance evaluation because he wanted to avoid a big confrontation. This rating error is called a. recency. b. halo. c. central tendency. d. leniency. Answer: d Rationale: Leniency errors occur when raters provide ratings that are unduly high. 2. Jill Jones is an extremely intelligent employee. Her boss is so impressed by her intelligence that he rated her high on all aspects of her job performance (even those that she was weak on). This error is called a. recency. b. halo. c. central tendency. d. leniency. Answer: b Rationale: Appraisals are also subject to the halo effect, which occurs when an appraiser’s overall impression of an employee is based on a particular characteristic, such as intelligence or appearance. When rating each aspect of employees’ work, raters may be unduly influenced by their overall impression. 3. Which of the following rating instruments is not an employee comparison system? a. simple ranking b. paired comparisons c. graphic rating scale d. forced distribution Answer: c Rationale: Employee comparison systems use rankings, rather than ratings. Any of a number of formats can be used to rank employees, such as simple rankings, paired comparisons, or forced distributions. 4. An advantage of using employee comparison systems to evaluate performance is that such systems a. are usually approved by the courts in a discrimination case. b. do a good job of directing and monitoring employee behavior. c. minimize leniency errors. d. All of the above Answer: c Rationale: This approach to performance appraisal efficiency eliminates some of the ratings errors. Leniency is eliminated, for instance, because the rater cannot give every employee an outstanding rating. 5. Which of the following conclusions was drawn from the research study that compared BARS, BOS, and graphic rating scales? a. Employees and managers prefer graphic rating scales; EEO attorneys prefer BARS. b. Employees and managers prefer BARS; EEO attorneys prefer BOS. c. Employees and managers prefer BOS; EEO attorneys prefer graphic rating scales. d. All groups prefer BOS. Answer: d Rationale: One study found that both managers and subordinates preferred appraisals based on BOS to both BARS and graphic rating scales. The same study found that EEO attorneys believed BOS is more legally defensible than the other two approaches. 6. The main difference between BOS and BARS is that a. BOS is trait-based; BARS is behaviorally based. b. the appraiser rates each behavior on BOS, but rates one behavior per dimension on BARS. c. the appraiser rates each behavior on BARS, but rates one behavior per dimension on BOS. d. BOS requires peer ratings; BARS requires supervisory ratings. Answer: b Rationale: In BARS, the incidents or behaviors are then categorized by dimension. A rating scale is then developed for each dimension, using these behaviors as “anchors” to define points along the scale. In BOS, the appraiser rates each behavior. 7. Most firms evaluate employee performance __________ time(s) per year. a. one b. two c. three d. four Answer: a Rationale: Most firms appraise employee performance annually. Some evaluate all employees at about the same time of year; others evaluate on a staggered schedule based on their anniversary date of hire. 8. A favorable characteristic of peer ratings, compared to supervisory ratings, is that a. peer ratings are usually less biased. b. peer ratings are usually more valid. c. peer ratings often reflect a more realistic view of the employee’s job performance. d. all of the above. Answer: c Rationale: Peers often see a different, more realistic view of the employee’s job performance because people often behave differently when the boss is present. 9. When choosing an appraisal form, the organization should consider the following three factors: a. validity, reliability, and precision b. practicality, cost, and nature of job c. validity, precision, and cost d. validity, practicality, and nature of job Answer: b Rationale: The organization must consider many factors when choosing an appraisal form. Three of the most important factors are practicality, cost, and nature of the job. 10. As a general rule, executive, managerial, and professional employees are usually rated on the basis of a. employee comparisons. b. traits. c. behaviors. d. results. Answer: d Rationale: As a general rule, executive, managerial, and professional employees are usually rated based on results; employees occupying lower-level jobs are most often rated on behavioral or trait-oriented criteria. DISCUSSION QUESTIONS 1. How can the use of an effective performance appraisal system improve employee job performance? An effective performance appraisal system can create competitive advantage by improving employee job performance in two ways: by directing employee behavior toward organizational goals and by monitoring that behavior to ensure that goals are met. 2. Discuss the impact of a performance appraisal system on employee satisfaction and retention. • Employees can get quite emotional and discouraged if they receive ratings that they perceive as being inaccurate of unfair. • Most employees believe that rewards such as pay raises and promotions should be given on the basis of merit or past performance. Individuals may become quite upset when some other basis (e.g., favoritism) is used, and they may begin to look elsewhere for employment. • An effective appraisal system can help employers retain their employees, especially the best ones. Such employees desire to work in an atmosphere they perceive as being fair, progressive, and dynamic, and an effective performance appraisal system fosters this perception. 3. What is meant by the term relevance in the context of performance appraisal? What can an organization do to ensure its rating instruments are relevant? • Relevance is the degree is which the rating form includes necessary information. • To be relevant, the form must: ○ Include all the pertinent criteria for evaluating performance. ○ Exclude criteria that are irrelevant to job performance. 4. What are some of the causes of inaccurate ratings? How can ratings be made more accurate? • Leniency & Severity Errors ○ Leniency error—ratings that are unduly favorable. ○ Severity error—ratings that are unduly unfavorable. ○ These errors can be reduced by clearly defining the performance standards. • Central Tendency ○ Central tendency—rating employees in the middle of the rating scale when more extreme ratings are warranted. ○ This error can be reduced by not requiring the appraiser to provide extensive documentation to support extreme ratings. The extra paperwork often discourages appraisers from assigning high or low ratings. In addition, the end points of the rating scale must be realistically defined. • Halo Effect ○ Halo effect—ratings on each scale are influenced by the appraiser’s overall impression of an employee. ○ This error can be reduced by providing ratings that are clear and making sure the rater conscientiously completes the ratings form. • Implicit Personality Theory ○ Implicit personality theory—a rater’s estimation, based on personal theory of how different types of people behave in certain situations. ○ This error can be reduced by ensuring that raters only rate employee performance on aspects of the job that the rater can observe. • Recency Error ○ Recency error—an error that occurs when ratings are heavily influenced by recent events. ○ This error can be reduced by maintaining accurate records of the employee’s job performance. 5. Why are graphic rating scales so frequently used? What are the major problems associated with their use? • Many organizations use graphic rating scales because they are practical and cost little to develop. HR professionals can develop such forms quickly, and because the traits and anchors are written at a general level, a single form is applicable to all of most jobs within an organization. • Problems associated with their use: ○ Raters are often given vaguely defined traits to evaluate, such as demeanor or attitude. Such instruments do not effectively direct behavior; that is, employees do not know what to do to achieve a favorable rating. ○ They also fail to provide a good mechanism for providing specific, nonthreatening feedback. ○ Accurate ratings are not likely to be achieved because the points on the rating scale are not clearly defined. 6. Summarize the steps involved in the development of a BOS. What are the advantages and disadvantages associated with its use? • BOS is developed like BARS—critical incidents are collected and categorized into dimensions. The key difference between the two methods is that with BOS, the appraiser rates each behavior. • Advantages ○ BOS is effective in directing employees’ behavior because it specifies what they need to do in order to receive high performance ratings. ○ Managers can also effectively use BOS to monitor behavior and give feedback in specific behavioral terms so that the employees know what they are doing right and what behavior needs to be corrected. ○ EEO attorneys believe that BOS is more legally defensible than BARS and graphic rating scales. • Disadvantages ○ A BOS instrument takes a great deal of time to develop. ○ A separate instrument is needed for each job because different jobs call for different behaviors. ○ Developing a BOS for a particular job would not be cost-efficient unless the job had many incumbents. 7. Discuss the advantages and disadvantages associated with the use of MBO as a performance appraisal technique. • Advantages ○ MBO systems are outcome-focused. ○ MBO improves job performance by directing behavior. Employees perform best when goals are specific and challenging. ○ MBO fares well because the performance standards are stated in relatively objective terms. ○ An MBO system is practical and cost efficient. The development of objectives does not require as much effort as does the development of a BARS or BOS. ○ Allowing employees to have a say in how their performance will be measured gives them a greater stake in achieving their goals and more perceived control over their work environment. ○ Fosters better communication between employees and supervisors. • Disadvantages ○ MBO does not specify the behaviors needed to reach the objectives. ○ The successful achievement of MBO goals may be partly a function of factors outside the worker’s control. ○ Performance standards vary from employee to employee and, thus, MBO provides no common basis for comparison. ○ Some employees dislike MBO because of the performance pressures it places on them and the stress that it creates. 8. Why is gaining user acceptance an important issue? Describe what can be done to help ensure that user acceptance is gained? • An appraisal system cannot be fully successful unless it has the support of the entire workforce; it must be acceptable to appraisers, employees, and upper management. • If appraisers do not approve of the system, they may respond with direct resistance of sabotage. • If employees do not trust the system or feel it is invalid, morale and motivation will drop, and the possibility of a lawsuit will increase. • High-level managers must agree to endorse the system publicly, devote sufficient resources to it, and model appropriate behavior by complying with the procedures that everyone else must follow. • Encouraging users (both managers and workers) to participate in the planning and development of the system will enhance support for it. 9. Why are peer ratings sometimes used to supplement supervisory ratings? What are some problems associated with their use? • Peers and supervisors view an individual’s performance from different perspectives. Supervisors usually possess greater information about job requirements and performance outcomes. On the other hand, peers often see a different, more realistic view of the employee’s job performance because people often behave differently when the boss is present. • Using peer ratings to supplement supervisory ratings may thus help to develop a consensus about an individual’s performance. It may also help eliminate biases and lead to greater employee acceptance of appraisal systems. • Potential problems ○ Peers may perceive a conflict of interest. High ratings given to a peer may be perceived as harming the individual’s own chances for advancement. ○ A peer may fear that low ratings given to a colleague will harm their friendship or hurt the cohesiveness of the work group. On the other hand, some peer ratings may be influenced by dislike for the employee being rated. 10. What steps may an organization take to help ensure that its appraisal system is a fair one? • To ensure fairness, most organizations require an upper-level management review of the completed appraisals. Typically, the supervisor’s boss checks for rating errors. • An appeals system provides a means for employees to obtain a fair hearing if they are dissatisfied with their appraisals. 11. Describe how performance appraisal systems may be evaluated. • Evaluation consists of gauging the users’ satisfaction with the appraisal system. If employees are displeased with the system, there is probably something wrong with it. • User satisfaction can be gleaned from organizational records (e.g., number of grievances or EEO charges filed against the system) or from attitude surveys in which appraisers and appraisees are asked whether they think they system has been appropriately designed and used. 12. Compare and contrast the annual performance review conference with a periodic performance review session? • The objective of periodic performance review sessions is to identify problems the employee is facing and to discuss solutions to these problems. • The objective of annual conferences should be to: ○ Inform employees of their ratings and how the information will be used (e.g., pay raises, promotions). ○ Keep effective workers “on target.” ○ Improve ineffective workers’ performance. EXPERIENTIAL EXERCISES Can This Appraisal System Be Legally Defended? Overview The students will be examining the legality of the performance appraisal system used by the university to evaluate the performance of faculty. Half of the students should be asked to attack the system legally; the other half, to defend it legally. Steps 1. The instructor will explain the faculty performance appraisal system at your university, describing the five-step design described in this chapter (i.e., gaining support, choosing the instrument and rater, timing issues, and fairness procedures). Your instructor will also describe the role played by the appraisals in the promotion process. Feel free to ask questions. Make sure you understand how the process works. 2. Let’s assume (hypothetically) that the promotion rate of female faculty is less than four-fifths the rate of male faculty. That is, the promotion system has a disparate impact against women. As you may recall from Chapter 2, when a selection (e.g., promotion) system produces a disparate impact, the employer must produce evidence of job-relatedness. Taking a Closer Look 8-1 presents the type of evidence needed to support the job relatedness of a performance appraisal system. 3. The instructor will divide the class into teams of about four or five students each---half the teams will act as defendants (representatives of the university administration) and the other half as plaintiffs (a group of female faculty claiming sex discrimination in the promotion process). 4. Each team must now prepare its case for court. The defendants must assemble evidence that the system is job-related; the plaintiffs are to demonstrate the opposite (i.e., the system is not job-related). 5. A spokesperson for each group will present its case to the class; the plaintiff groups will present first. 6. After the final presentation, the instructor will act as judge and make a ruling. (There is no court of appeals!) Developing a Performance Appraisal System Overview: The students should divide themselves into groups of 4 or 5. Each group should analyze the case mentioned below and derive answers to each of the questions. ABC University recently conducted a student survey to determine how students felt about their instructors. The university was surprised to learn that most professors were viewed in a negative light. Overall, the students did not enjoy their classes and felt the professors were uncaring. Some of the specific problems identified by the survey are as follows: 1. Many professors did not come to class prepared. They just seemed to “wing it.” 2. Most professors were unwilling to help students with their course-related problems. 3. Professors were perceived as mean-spirited. When students questioned their grade, for instance, most professors would get mad and refuse to discuss the problem. 4. Classes were pretty boring, for the most part. Professors limited their teaching to lectures. There was very little class participation. The president of the university believes that part of the problem might be the fact that there is no formal performance evaluation of faculty. She then hires a team of HR consultants (i.e., you) to study the problem and give her some recommendations. She is considering implementing a performance appraisal system and would use the results to make decisions regarding pay raises, promotions, and retention of faculty. She asks you to address the following questions: 1. Do you think the implementation of a formal appraisal system for faculty would help eliminate or minimize these problems? Explain. If we do develop an appraisal system, how can we deal with the following questions? 2. How can we ensure that professors and department heads will support the system? 3. What kind of rating instrument should we use? Explain how the instrument will be relevant and contain clear performance standards. Give a sample of some of the rating scales so we can see what the instrument would look like. 4. What party or parties should actually conduct the ratings? Why? 5. How can we assure that the raters will provide accurate (error-free) ratings? 6. How often should the ratings be made? 7. How can we assure the ratings will be fair? CASE Is a “Satisfactory” Rating Satisfactory? Objective: Make students aware of the issues in the performance appraisal system. What to do: Cover this case after discussing performance appraisals. 1. Why do you think Ted Simpson gave everyone a satisfactory rating? This is clearly an example of central tendency error. This error typically occurs when an organization requires appraises to provide extensive documentation to support extreme ratings. 2. Do you agree with Andrew that the performance appraisals may be contributing to the problem? Explain. • Yes, it seems that the performance appraisal system is contributing to the problems with the employees. The dimensions on which they are rated are somewhat ambiguous and the performance standards are unclear. • In addition, employees are not motivated because no matter how hard they try and work they can only score a “satisfactory” rating. 3. If Andrew chooses to give employees the ratings they deserve, do you think there will be a backlash, making many of the workers even more unhappy? At first there will be a backlash, especially from the employees who have already been getting less than satisfactory ratings. 4. How should Andrew handle this situation? • Andrew should hold a meeting with the entire team, and then individually, explaining how things are going to change with regard to performance appraisals. • Andrew should start appraisals on a “clean slate,” which will help morale since past performance will not be considered. • He also needs to lay out clear performance standards and meet with employees periodically to keep them up-do-date on their progress. • Lastly, Andrew needs to assign accurate ratings, and keep them well-documented. CRITICAL THINKING EXERCISES 1. Ask students to give their opinions on Exhibit 8-1 in the text. Analyze the reasons for the problems identified in these studies. How can they be remedied? Do they exist where you work? 2. Ask students to rate the rating instruments. Let them develop their own forms during class to see if the systems achieve the general purpose of effective performance appraisal. Let them compare in teams and allow each team’s spokesperson to summarize their ratings. 3. Send students out to interview HR professionals on designing an effective system. Tell them to be discrete in telling the HR people how this information will be used in the class. Determine which businesses do the best jobs. If it is more appropriate, use the Internet. 4. Generate a discussion of why it would be personally difficult to evaluate or appraise the performance of other people: of friends or relatives who work with you, of “problem” employees, or of peers. 5. Divide the class into teams and have them pretend they are managers rating an employee. Ask how they would deal with frequent interruptions, problems in the production department, an air conditioner system malfunction, fatigue, and illness (all at the same time). Appoint a spokesperson to summarize the thoughts of each team. ESSAY QUESTIONS 1. How did McKesson Information Solutions solve its performance appraisal problems? McKesson Information Solutions addressed its performance appraisal problems by implementing a more structured and consistent evaluation process. They incorporated clear performance metrics, enhanced employee feedback mechanisms, and provided training for managers to improve appraisal accuracy and fairness. This approach helped align individual goals with organizational objectives and fostered a culture of continuous improvement. 2. Explain the three standards for effective performance appraisal systems. The three standards for effective performance appraisal systems are: 1. Validity: The appraisal should accurately measure job performance and reflect the actual skills and contributions of the employee. 2. Reliability: The system should produce consistent results over time, ensuring that different evaluators would reach similar conclusions about an employee’s performance. 3. Fairness: The process must be unbiased and equitable, providing all employees with an equal opportunity for assessment and feedback, and addressing any potential discrimination or favoritism. 3. Elaborate upon the five rating instruments giving two strengths and two weaknesses for each one. Here’s a brief overview of five rating instruments for performance appraisals, along with their strengths and weaknesses: 1. Graphic Rating Scale Strengths: • Easy to use and understand. • Allows for quick comparisons. Weaknesses: • May lack specificity and clarity. • Can lead to central tendency bias. 2. Behaviorally Anchored Rating Scale (BARS) Strengths: • Provides clear, observable behavior examples. • Reduces ambiguity in ratings. Weaknesses: • Time-consuming to develop. • May not cover all performance aspects. 3. 360-Degree Feedback Strengths: • Offers a well-rounded perspective from various sources. • Highlights strengths and improvement areas. Weaknesses: • Complex to administer and analyze. • Potential for biased feedback due to relationships. 4. Forced Ranking Strengths: • Differentiates performance levels effectively. • Can motivate competition among employees. Weaknesses: • May create unhealthy competition and resentment. • Risks lowering morale for lower-ranked employees. 5. Management by Objectives (MBO) Strengths: • Aligns individual and organizational goals. • Encourages employee participation in goal setting. Weaknesses: • Focus on measurable goals may overlook qualitative performance. • Can promote short-term thinking over long-term development. 4. Outline the five steps to effectively design an evaluation system. Here are five steps to effectively design an evaluation system: 1. Define Objectives • Clearly outline the purpose of the evaluation and what you aim to achieve. 2. Identify Criteria • Establish specific, measurable criteria that reflect desired performance outcomes. 3. Select Evaluation Methods • Choose appropriate methods and tools for assessing performance (e.g., surveys, interviews, rating scales). 4. Develop a Communication Plan • Create a strategy for informing employees about the evaluation process, criteria, and how feedback will be used. 5. Implement and Review • Conduct the evaluations, gather feedback, and regularly review and adjust the system based on effectiveness and changing needs. 5. How can the HR department help in performance appraisals? The HR department can help in performance appraisals by: 1. Establishing Standards: Developing clear performance criteria and guidelines to ensure consistency and fairness. 2. Training Managers: Providing training for managers on effective appraisal techniques and objective evaluation. 3. Facilitating the Process: Streamlining the appraisal process through tools and resources, making it easier for managers and employees. 4. Gathering Feedback: Collecting and analyzing feedback to improve the appraisal system and address any issues. 5. Ensuring Compliance: Monitoring adherence to policies and legal requirements to reduce bias and discrimination in evaluations. 6. Point out how feedback conferences and annual conferences should be held. Feedback Conferences 1. Schedule Regularly: Hold them frequently (e.g., quarterly) to discuss performance and progress. 2. Create a Safe Environment: Ensure a supportive atmosphere for open dialogue. 3. Focus on Specifics: Discuss concrete examples of performance, strengths, and areas for improvement. 4. Encourage Two-Way Communication: Allow employees to share their perspectives and ask questions. 5. Set Actionable Goals: Collaboratively establish clear objectives for future performance. Annual Conferences 1. Comprehensive Review: Summarize overall performance, achievements, and challenges from the year. 2. Prepare in Advance: Both managers and employees should review performance data and goals beforehand. 3. Recognize Achievements: Celebrate successes and contributions to boost morale. 4. Discuss Career Development: Explore long-term goals, aspirations, and development opportunities. 5. Document Outcomes: Ensure that feedback and agreed-upon goals are recorded for future reference. 7. Describe how effective performance appraisal systems enhance competitive advantage. Effective performance appraisal systems enhance competitive advantage by: 1. Aligning Goals: Ensuring individual and team objectives are aligned with organizational goals, driving overall performance. 2. Identifying Talent: Recognizing high performers and potential leaders, allowing for targeted development and succession planning. 3. Improving Employee Engagement: Providing constructive feedback and recognition, which boosts morale and motivation. 4. Enhancing Skills: Identifying training needs leads to a more skilled workforce, increasing productivity and innovation. 5. Facilitating Adaptability: Regular evaluations allow organizations to respond quickly to changing market conditions and employee needs, maintaining agility in a competitive landscape. OTHER RESOURCES I. Websites http://iso9k1.home.att.net/pa/performance_appraisal.html. This is a Performance Appraisal Help Page with general information on performance appraisal and tips for supervisors and managers. www.work911.com/performance. This is a performance management and performance appraisal help center. II. Articles “Performance Appraisal,” Harvard Business Review (Journal), Reference Number HF5001.H3. A scholarly treatise on conducting performance appraisals. III. Books 7 Stupid Things Employees Do To Screw Up Performance Appraisals, R. Bacal, Publisher: Bacal & Associates. A different kind of book from the employees’ side of the table. IV. Forms Download 10 different types of appraisal forms written by HR experts for $39.95. Check www.performance-appraisal-form.com. V. Software Halogen eAppraisal is a software program that allows you to conduct web-based employee appraisal by automating the process. Check www.halogensoftware.com. Solution Manual for Human Resource Management: A Managerial Tool for Competitive Advantage Lawrence S. Kleiman 9781426649189