PERFORMANCE APPRAISAL
DEFINITIONS:
Performance appraisal has been defined by different scholars in various ways. Some of the important definitions are as
follows:
- Dale S. Beach, "Performance appraisal is systematic evaluation of the individual with respect to his or her
performance on the job and his or her potential for development".
- Randall S. Schuler, "Performance appraisal is a formal, structured system of measuring and evaluating an
employee’s job, related behaviour and outcomes to discover how and why the employee is presently performing on
the job and how the employee can perform more effectively in the future so that the employee, organisation, and
society all benefit."
- Heyel, "It is the process of evaluating the performance and qualifications of the employees in terms of the
requirements of the job for which he is employed, for purposes of administration including placement, selection for
promotions, providing financial rewards and other actions which require differential treatment among the members
of a group as distinguished from actions affecting all members equally."
- Dale Yoder, ''Performance appraisal includes all formal procedures used to evaluated personalities and contributions
and potentials of group members in a working organisation. It is a continuous process to secure information
necessary for making correct and objective decisions on employees."
OBJECTIVES:
a. To provide employees feedback on their performance.
b. Identify employee training needs.
c. Document criteria used to allocate organisational rewards.
d. A basis for decisions relating to salary increases, promotions, disciplinary actions, bonuses, etc.
e. Provide the opportunity for organisational diagnosis and development.
f. Facilitate communication between employee and employer.
g. Validate selection techniques and human resource policies to meet regulatory requirements.
h. To improve performance through counseling, coaching and development.
i. To motivate employees through recognition and support.
METHODS:
Graphic Rating Scale
The graphic rating scale, a behavioral method, is perhaps the most popular choice for performance evaluations. This type
of evaluation lists traits required for the job and asks the source to rate the individual on each attribute. A discrete scale is
one that shows a number of different points. The ratings can include a scale of 1–10; excellent, average, or poor; or meets,
exceeds, or doesn’t meet expectations, for example. A continuous scale shows a scale and the manager puts a mark on the
continuum scale that best represents the employee’s performance. For example:
Poor — — — — — — — — Excellent
The disadvantage of this type of scale is the subjectivity that can occur. This type of scale focuses on behavioral traits and
is not specific enough to some jobs. Development of specific criteria can save an organization in legal costs. For example,
in Thomas v. IBM, IBM was able to successfully defend accusations of age discrimination because of the objective criteria
the employee (Thomas) had been rated on.
Many organizations use a graphic rating scale in conjunction with other appraisal methods to further solidify the tool’s
validity. For example, some organizations use a mixed standard scale, which is similar to a graphic rating scale. This scale
includes a series of mixed statements representing excellent, average, and poor performance, and the manager is asked to
rate a “+” (performance is better than stated), “0” (performance is at stated level), or “−” (performance is below stated level).
Mixed standard statements might include the following:
The employee gets along with most coworkers and has had only a few interpersonal issues.
This employee takes initiative.
The employee consistently turns in below-average work.
The employee always meets established deadlines.
An example of a graphic rating scale is shown in Figure 11.1 “Example of Graphic Rating Scale”.
Essay Appraisal
In an essay appraisal, the source answers a series of questions about the employee’s performance in essay form. This can
be a trait method and/or a behavioral method, depending on how the manager writes the essay. These statements may include
strengths and weaknesses about the employee or statements about past performance. They can also include specific
examples of past performance. The disadvantage of this type of method (when not combined with other rating systems) is
that the manager’s writing ability can contribute to the effectiveness of the evaluation. Also, managers may write less or
more, which means less consistency between performance appraisals by various managers.
Checklist Scale
A checklist method for performance evaluations lessens the subjectivity, although subjectivity will still be present in this
type of rating system. With a checklist scale, a series of questions is asked and the manager simply responds yes or no to
the questions, which can fall into either the behavioral or the trait method, or both. Another variation to this scale is a check
mark in the criteria the employee meets, and a blank in the areas the employee does not meet. The challenge with this format
is that it doesn’t allow more detailed answers and analysis of the performance criteria, unless combined with another method,
such as essay ratings. A sample of a checklist scale is provided in Figure 11.3 “Example of Checklist Scale”.
Critical Incident Appraisals
This method of appraisal, while more time-consuming for the manager, can be effective at providing specific examples of
behavior. With a critical incident appraisal, the manager records examples of the employee’s effective and ineffective
behavior during the time period between evaluations, which is in the behavioral category. When it is time for the employee
to be reviewed, the manager will pull out this file and formally record the incidents that occurred over the time period. The
disadvantage of this method is the tendency to record only negative incidents instead of positive ones. However, this method
can work well if the manager has the proper training to record incidents (perhaps by keeping a weekly diary) in a fair
manner. This approach can also work well when specific jobs vary greatly from week to week, unlike, for example, a factory
worker who routinely performs the same weekly tasks.
Work Standards Approach
For certain jobs in which productivity is most important, a work standards approach could be the more effective way of
evaluating employees. With this results-focused approach, a minimum level is set and the employee’s performance
evaluation is based on this level. For example, if a sales person does not meet a quota of $1 million, this would be recorded
as nonperforming. The downside is that this method does not allow for reasonable deviations. For example, if the quota
isn’t made, perhaps the employee just had a bad month but normally performs well. This approach works best in long-term
situations, in which a reasonable measure of performance can be over a certain period of time. This method is also used in
manufacturing situations where production is extremely important.
Ranking Methods
In a ranking method system (also called stack ranking), employees in a particular department are ranked based on their value
to the manager or supervisor. This system is a comparative method for performance evaluations.The manager will have a
list of all employees and will first choose the most valuable employee and put that name at the top. Then he or she will
choose the least valuable employee and put that name at the bottom of the list. With the remaining employees, this process
would be repeated. Obviously, there is room for bias with this method, and it may not work well in a larger organization,
where managers may not interact with each employee on a day-to-day basis.
To make this type of evaluation most valuable (and legal), each supervisor should use the same criteria to rank each
individual. Otherwise, if criteria are not clearly developed, validity and halo effects could be present. The Roper v. Exxon
Corp case illustrates the need for clear guidelines when using a ranking system. At Exxon, the legal department attorneys
were annually evaluated and then ranked based on input from attorneys, supervisors, and clients. Based on the feedback,
each attorney for Exxon was ranked based on their relative contribution and performance. Each attorney was given a group
percentile rank (i.e., 99 percent was the best-performing attorney). When Roper was in the bottom 10 percent for three years
and was informed of his separation with the company, he filed an age discrimination lawsuit. The courts found no correlation
between age and the lowest-ranking individuals, and because Exxon had a set of established ranking criteria, they won the
case (Grote, 2005).
Another consideration is the effect on employee morale should the rankings be made public. If they are not made public,
morale issues may still exist, as the perception might be that management has “secret” documents.
Management by Objectives (MBO)
Management by objectives (MBOs) is a concept developed by Peter Drucker in his 1954 book The Practice of
Management (Drucker, 2006). This method is results oriented and similar to the work standards approach, with a few
differences. First, the manager and employee sit down together and develop objectives for the time period. Then when it is
time for the performance evaluation, the manager and employee sit down to review the goals that were set and determine
whether they were met. The advantage of this is the open communication between the manager and the employee. The
employee also has “buy-in” since he or she helped set the goals, and the evaluation can be used as a method for further skill
development. This method is best applied for positions that are not routine and require a higher level of thinking to perform
the job. To be efficient at MBOs, the managers and employee should be able to write strong objectives. To write objectives,
they should be SMART (Doran, 1981):
1. Specific. There should be one key result for each MBO. What is the result that should be achieved?
2. Measurable. At the end of the time period, it should be clear if the goal was met or not. Usually a number can be
attached to an objective to make it measurable, for example “sell $1,000,000 of new business in the third quarter.”
3. Attainable. The objective should not be impossible to attain. It should be challenging, but not impossible.
4. Result oriented. The objective should be tied to the company’s mission and values. Once the objective is made, it
should make a difference in the organization as a whole.
5. Time limited. The objective should have a reasonable time to be accomplished, but not too much time.
Behaviorally Anchored Rating Scale (BARS)
A BARS method first determines the main performance dimensions of the job, for example, interpersonal relationships.
Then the tool utilizes narrative information, such as from a critical incidents file, and assigns quantified ranks to each
expected behavior. In this system, there is a specific narrative outlining what exemplifies a “good” and “poor” behavior for
each category. The advantage of this type of system is that it focuses on the desired behaviors that are important to complete
a task or perform a specific job. This method combines a graphic rating scale with a critical incidents system. The US Army
Research Institute (Phillips, et. al., 2006) developed a BARS scale to measure the abilities of tactical thinking skills for
combat leaders. Figure 11.4 “Example of BARS” provides an example of how the Army measures these skills
Figure 11.4 Example of BARS
Figure 11.5 More Examples of Performance Appraisal Types
Table 11.3 Advantages and Disadvantages of Each Performance Appraisal Method
Type of Performance
Appraisal Method Advantages Disadvantages
Inexpensive to develop Subjectivity
Graphic Rating Scale
Easily understood by employees and Can be difficult to use in making compensation and
managers promotion decisions
Subjectivity
Can easily provide feedback on the positive Writing ability of reviewer impacts validity
Essay
abilities of the employee
Time consuming (if not combined with other
methods)
Measurable traits can point out specific Does not allow for detailed answers or explanations
Checklist scale
behavioral expectations (unless combined with another method)
Provides specific examples
Critical Incidents Tendency to report negative incidents
Time consuming for manager
Ability to measure specific components of the
Work Standards Approach Does not allow for deviations
job
Can create a high-performance work culture
Validity depends on the amount of interaction
Ranking Possible bias
between employees and manager
Can negatively affect teamwork
Open communication
MBOs Many only work for some types of job titles
Employee may have more “buy-in”
Focus is on desired behaviors
BARS Scale is for each specific job Time consuming to set up
Desired behaviors are clearly outlined
No one performance appraisal is best, so most companies use a variety of methods to ensure the best results.
References:
Doran, G. T., “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives,” Management Review 70, no. 11 (1981): 35.
Drucker, P., The Practice of Management (New York: Harper, 2006).
Grote, R., Forced Ranking: Making Performance Management Work (Boston: Harvard Business School Press, 2005).
Lowery, M., “Forcing the Issue,” Human Resource Executive Online, n.d., accessed August 15, 2011,
http://www.hrexecutive.com/HRE/story.jsp?storyId=4222111&query=ranks.
Phillips, J., Jennifer Shafter, Karol Ross, Donald Cox, and Scott Shadrick, Behaviorally Anchored Rating Scales for the Assessment of
Tactical Thinking Mental Models(Research Report 1854), June 2006, US Army Research Institute for the Behavioral and Social
Sciences, accessed August 15, 2011, http://www.hqda.army.mil/ari/pdf/RR1854.pdf.
Sprenkel, L., “Forced Ranking: A Good Thing for Business?” Workforce Management, n.d., accessed August 15, 2011,
http://homepages.uwp.edu/crooker/790-iep-pm/Articles/meth-fd-workforce.pdf.
