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After this session, you should be able to:


Explain the purposes of and criteria for effective performance

Explain potential errors in appraising performance.
Explain three approaches to performance appraisal interview
and how to conduct it effectively.
Compare and contrast different sources of performance
Explain, compare and contrast different performance appraisal

Performance Appraisal and Its Purposes

Performance appraisal (PA) process involves:
- Setting work standards
- Assessing performance relative work standards
- Providing feedback and training to employees.

Purposes of PA
- Administrative purpose
- Developmental purpose
- Strategic purpose

Criteria for Effective Performance Appraisal

Fit with the strategy

Acceptable to stakeholders
Specific feedback
Reliability (inter-rater reliability)
- covers all the relevant aspects of performance (i.e.,
no deficiencies)
- does not include irrelevant aspects (i.e., no

Criteria for Effective Performance

Appraisal - Validity

Performance Appraisal

Actual Job Performance

Contamination Validity Deficiency

PRS Question
Martin is a computer programmer whose job mainly
consists of independently coding software. If
teamwork skills were weighted heavily on his job
performance measure it would suffer from:
1. Contamination
2. Deficiency
3. Unreliability
4. Non-specific feedback

Performance Rating Errors

Leniency or strictness error


The tendency to rate all subordinates high (leniency) or low


Performance Rating Errors

Central tendency
A tendency to rate all subordinates at or near the
middle of a rating scale.
Similar-to-me error
- Give higher rating to those who are similar to

Performance Rating Errors

Dating video (238-908):
- http://www.youtube.com/watch?v=ZuometYfMTk

Halo effect
Positive rating of a subordinate on one aspect (e.g.,
energy) biases the rating of other aspects upward.
Horn effect
Respond to one negative aspect (e.g., unenthusiastic)
by rating a subordinate low in other aspects.

PRS Question
Bill rates all of his employees very low except for Jan.
Jan gets above average ratings because she
consistently comes to work on time. The rating errors
Bill makes are _______ and _______, respectively.
1. Leniency; Horn
2. Strictness; Halo
3. Similar-to-me; Central Tendency
4. Horn; Strictness

What is Performance Appraisal Interview?

Appraisal Interview
- Supervisor and subordinate review the appraisal and make
plans to remedy deficiencies and reinforce strengths.
- May feel uncomfortable when giving negative feedback.

Jokes about Real Meanings

Behind Performance Appraisal
Great presentation skills (Able to bullshit)
Good communication skills (spends lots of time on
Active socially (drinks a lot)
Independent worker (nobody knows what he/she does)
Careful thinker (won't make a decision)

How to Conduct Performance Appraisal Interview?

Three general approaches:
1. Tell-and-sell: tell employee the rating and justify the
2. Tell-and-listen: tell employee the rating and let
employee explain his/her side of the story
3. Problem solving: work together to solve performance
problem in an atmosphere of respect and
PRS: Managers rely mainly on which of the three
1. Tell-and-sell; 2. tell-and-listen; 3. problem solving

How to Conduct Performance Appraisal Interview?


Find a private place for the meeting.

No more than 1 hour for lower level employees; 2-3 hours for
management employees.

Start with positives, and balance praise and criticism.

Encourage the employee to talk.
Focus on the issue, not the person, and talk in terms of objective
Dont attack; focus on problem solving.
End with goal setting and a specific improvement plan.

Who Does the Performance Rating?



Often in the best position to appraise

(due to knowledge of requirements and
enough opportunity to observe);
motivated to provide accurate and
helpful feedbacks.
Many peers have opportunity to observe
and expert knowledge of job
Subordinates In the best position to see how
managers treat employees (e.g.,
management styles).

For employees in certain positions

(e.g., salesperson working in the
field), supervisors may not have
enough opportunity to observe.


Tendency to inflate especially when

rating is used for thepurpose(s);
blame outside circumstances.

No one has greater chance to observe

the employees behavior than the
employee himself or herself.

Friendship or rivalry may bias

ratings; peers feel uncomfortable
providing rating for thepurpose(s).
Reluctant to say negative things;
managers may emphasize employee
satisfaction when rating is used for

Joke about how performance ratings are made


How to Appraise Performance?

Making comparisons (simple ranking)
- Alternation ranking
- Paired comparison
- Forced distribution

Rating individuals on attributes/traits

- Graphic rating scale

Rating individuals on behaviors

- Critical incident method
- Behaviorally anchored rating scale (BARS)

Scale for Alternation Ranking

How to Appraise Performance?

Alternation ranking
- Ranking employees from the best/highest to the
worst/lowest, choosing the highest, then the lowest, until
all are ranked.
- Reduces central tendency, leniency, strictness errors.
- What exactly is best or worst?
- Maybe unfair if employees are indeed all excellent.

Note: + means better than. means worse than. For each chart, add up the number
of +s in each column to get the highest-ranked employee.

How to Appraise Performance?

Paired comparison
- Making a chart of all possible pairs of the employees for
each trait and indicating which is the better employee of
the pair.
- Reduces central tendency, leniency, strictness error.
- Time consuming if a group has more than a handful
For 15 subordinates, need to do 105 [15 x (15-1)/2]

How to Appraise Performance?

Forced distribution
- Predetermined percentages of employees are placed in various
performance categories.
Exceptional 5%; exceeds standards 25%; meet standards
55%; room for improvement 10%; and not acceptable 5%.
General electric: the bottom 10% are fired!
- Result depends on the choice of cut-off points; difficult to do if
employees are indeed all excellent.

How to Appraise Performance?

Graphic rating scale (attributes)
- Performance dimensions (individual attributes) and a range
of performance for each dimension (e.g., 1 = below
expectations; 2 = meet expectations; 3 = Role model).
- The simplest and most popular method.
- Provides a quantitative rating for each employee.
- Standards may be unclear; central tendency, leniency or
strictness, halo error, and other biases.
- Does not tell employees how to improve.

How to Appraise Performance?

Critical Incident method (behaviors)
- Supervisor keeps a record of effective and ineffective work
behavior examples (critical incidents) of an employee.

Critical incident example: Appliance repair

A customer called in about a refrigerator that was not
cooling and was making a clicking noise every few minutes.
The technician pre-diagnosed the cause of the problem and
checked his truck for the necessary parts. When he found he
did not have them, he checked the parts out from inventory
so that the customers refrigerator would be repaired on his
first visit and the customer would be satisfied promptly.

How to Appraise Performance?

Advantages of critical incident method
- Actual examples of good and poor performance and thus
provide specific feedback
- Record subordinates performance in an ongoing basis.

Disadvantages of critical incident method

- Critical incidents may be unique and thus direct comparison
among employees may be difficult.
- The lack of numerical rating also makes the comparison
- Keeping a log of critical incidents takes time and efforts.

How to Appraise Performance?

Behaviorally anchored rating scale (BARS)
An appraisal method that aims at combining the
benefits of critical incident and quantified
ratings (in graphic rating scale).
It anchors a quantified scale with specific
examples of good and poor performance (i.e.,
behavioral anchors or critical incidents).

BARS Example: Patrol


How to Appraise Performance?

Advantages of BARS
Clearer standards (behavioral anchors)
More accurate (valid)
Consistency (reliability)
Specific feedback

Disadvantage of BARS
It is more time consuming than other methods
Costly to develop


Performance appraisal serves the strategic,

administrative, and developmental purposes.
Effective performance appraisal meets five criteria.
Performance rating suffers from potential errors.
Take the problem solving approach to performance
appraisal interview.
Supervisor, subordinates, peers, and self are among the
sources of rating, each with its advantages and
Six different performance appraisal methods.