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All appraisal systems build on the assumption that employees need feedback about their performance (a basic element of the communication model described in Chapter 3). Feedback helps them know what to do and how well they are meeting their goals. It shows that others are interested in what they are doing. Assuming that performance is satisfactory, feedback enhances an employee's self-image and feeling of competence. Generally, performance feedback leads to both improved performance and improved attitudesif handled properly by the manager. Giving feedback is a challenging task for managers, however. Feedback is more likely to be accepted and cause some improvement when it is properly presented (see the guidelines for effective feedback in Figure 6.5). In general, it should focus on specific job behaviors, rely on objective data rather than subjective opinions and inferences, be welltimed by being given soon after a critical event, and be checked for understanding by the receiver. Overall, it has the greatest chance for inducing a behavioral change if it is genuinely desired by the employee, is connected to job tasks, and if the receiver is allowed to choose a new behavior from alternative recommendations offered. In spite of the importance of performance feedback, many managers fail to provide enough of it on an ongoing basis. They may feel too busy, they may assume that employees are already aware of their performance level, or they may be reluctant to share bad news because of the negative reaction they expect it to generate. Another possible reasonnot having enough valid information to create a substantive conclusioncan be overcome by the use of 360-degree feedback. This is the process of systematically gathering data on a person's skills, abilities, and behaviors from a variety of sourcesthe manager, peers, subordinates, and even customers or clients.10 These perspectives are examined to see where problems exist in the eyes of one or more groups. The results can also be compared across time to see if improvements have been made or compared with organizational norms to see if a person is better or worse than others. The 360-degree feedback system works best if individuals match the data gathered with their

FIGURE 6.5 Guidelines for Effective Performance Feedback

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Chapter 6 Appraising and Rewarding Performance 141

own self-assessments, for this approach encourages candid confrontation of one's need for change. The product of this multidirectional appraisal approach is rich feedback (both positive and negative) that, if used properly, can aid in performance improvements. To provide honest feedback, assurances that the data will remain confidential, and skilled facilitators to help recipients understand the complex information and develop useful action plans for improvement requires the cooperation of others. However, 360-degree feedback programs can be time-consuming, intimidating to the recipients, and expensive (development and administration of rating forms and training in how to use them). Appraisal Problems The need to perform the multiple functions in the appraisal process makes the appraisal interview difficult and even threatening for many managers. In addition, several behavioral problems are inherent in the process." It can be confrontational, because each party is trying to convince the other that her or his view is more accurate. (These views are distorted by attributional tendencies, as we discuss later in this chapter.) It is typically emotional, since the manager's role calls for a critical perspective, while the employee's desire to save face easily leads to defensiveness. It is judgmental, because the manager must evaluate the employee's behavior and results, and this aspect places the employee in a clearly subordinate position. Further, performance appraisals are complex tasks for managers, requiring job understanding, careful observation of performance, and sensitivity to the needs of employees. Managers are also called upon to handle the issues that arise spontaneously within the discussion itself. Managers sometimes fail to conduct effective appraisal interviews because they lack vital skills. Perhaps they failed to gather data systematically. Maybe they weren't specific on the expected performance improvements in the previous appraisal. They could be reluc tant to address difficult or sensitive topics, or they could fail to involve the employee in the assessment process and discussion. Some managers may have grown cynical about the probability that attitudinal or behavioral changes will occur in their employees. A few may see appraisals as a meaningless game and even intentionally distort the ratings and feed back given. All these factors can place powerful limits on the usefulness of the appraisal interview, unless it is conducted properly or modified through the use of other inputs. Nature of Attributions Attribution theory has provided an intriguing contribution to the appraisal literature. Attribution is the process by which people interpret and assign causesfor their own and others' behavior. It stems from the work of Fritz Heider and has been expanded and refined by Harold Kelley and others.'2 The attribution process closely parallels the four basic goals of organizational behavior outlined in Chapter 1. As shown in Figure 6.6, a manager observes some employee's behavior or its consequences and often describes it as functional or dysfunctional for the work unit. Seeking to understand and diagnose the behavior, the manager makes a causal

FIGURE 6.6 The Process of Making and Using Attributions

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142 Part Two Motivation and Reward Systems

Personal versus situational attributions

attribution (tentative explanation) for it. Then the manager tries to predict and control (influence) future employee behaviors as a product of that attribution. The assessment of functionality results in several potential explanations for an employee's performance on a task. It could be attributed to high or low ability, to greater or lesser effort, to a difficult or an easy task, or to good or poor luck. Ability and effort are personal attributions; they tend to be given as explanations when there is a judgment of high consistency and low distinctiveness and low consensus. Task difficulty and luck are situational attributions; they tend to be used as explanations when the behavior stands out as distinctive and different from that of peers, while also being inconsistent. Following is an example of how the attribution process can be used: After each professional football game, the head coach sits down with the assistant coaches and grades each player's performance. Did the athlete play better or worse than normal? Did the player perform better or worse than teammates? Did the player excel at some tasks and not at others? After appraising the athlete's conduct, the coach must also determine whether the strong or weak performance was the result of superior or inferior ability, greater or lesser effort, an experienced or inexperienced opponent, or good or bad luck (attributions). Then the coach will likely give some praise and constructive feedback to the players. Since attributions are subjective assessments, we are interested in what affects the choice of explanations. One important factor is whether we are evaluating our own behavior or interpreting another's. In general, people tend to exhibit a self-serving bias, claiming undue credit for success and minimizing their own responsibility for problems. This tendency is seen when they overestimate the influence of internal factors (personal traits) when assessing their own successes and assign external (situational) causes for their own less successful outcomes (Figure 6.7). The opposite patterna fundamental attribution biasis often exhibited when judging others. People tend to attribute others' achievements to good luck or easy tasks, and they assume that others failed to try hard enough or simply lacked the appropriate personal characteristics or overall ability if they failed. The interpersonal comparison process is at work, with each party trying to improve his or her own relative self-image by manipulating assessments and attributions. Attributional tendencies accent the existing role differences between managers and employees, and these biases emerge clearly during managerial appraisals of employees. Related Ideas Attributions illustrate the effects of perceptual set; that is, people tend to perceive what they expect to perceive. The relatively passive idea of perceptual set extends into the behavior of individuals when we witness the power of the self-fulfilling prophecy, or the Pygmalion effect. The self-fulfilling prophecy suggests that a manager's

Self-serving bias

Fundamental attribution bias

Perceptual set Self-fulfilling prophecy

FIGURE 6.7 Different Attributions for an Employee's Behavior

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Chapter 6 Appraising and Rewarding Performance 143

expectations for an employee will cause the manager to treat the employee differently and that the employee will respond in a way that confirms the initial expectations.13 For example, if a supervisor is told that a new employee is competent, the supervisor is more likely not only to perceive that competence but also to provide opportunities for the employee to demonstrate competence on the job. The supervisor then attributes the successful task performance to the employee's ability. Applications of Attribution The attributional model can be easily integrated with our earlier discussion (see Chapter 5) of other motivational approaches. For example, achievement-oriented people may claim that their accomplishments are the direct result of their high level of effort. Although goals are most motivational when they are challenging, employees will examine them closely to determine if they are too difficult to attain. In conjunction with the expectancy model, an employee who fails on a task may feel that the environment prevents success and, therefore, may reduce the level of future effort. Users of behavior modification are cautioned to consider carefully their response to an employee's successful performance. A manager may assume it was due to luck or an easy task and withhold appropriate recognition. The employee, who believes that success was the result of ability or effort, may experience a decline in motivation for the lack of a reward. Managers benefit from greater awareness of their own attributional processes and how those processes affect their behavior toward employees. They could also seek to reinforce among subordinates the belief that success is due to the workers' own efforts (effortperformance expectancies) and abilities, while discouraging the employee attribution that failure is due to task difficulty or bad luck. This psychological process is known as the Self-expectations Galatea effect, in which high expectations by employees themselves lead to high performance. The Galatea effect stems from employee perceptions of self-efficacy on the task, as well as general self-confidence. Both the Pygmalion effect and the Galatea effect rest on the underlying belief that people's behaviors tend to be consistent with (someone's) expectations (either their own or another's).14 Simple attributions by managers should be avoided, since employee behavior is also partly determined by the task, social context, and environment, as outlined in Chapter 1. Managerial Effects Conducting performance appraisals also has substantial impact on the appraiser. On the positive side, a formal appraisal system encourages managers to do more analytical and constructive thinking about their employees. The requirement of a face-to-face interview encourages managers to be more specific about identifying each employee's abilities, interests, and motivation. Managers often begin to perceive that each

An Ethics Question
Managers^are often caught in a bind between conflicting ^ essu e w th no api it perfect solufio/1 For example consider a behaviorally aw roar lqe wl o acce ts lie need to provide performance feedback to employees Whil pnrt r j the guidelfi far effective feedback. howevefithe manager discovers that emf lu ee often pxpenen a i D found fyce-sjWing issuethey hear that their actual performc e is i ot is good i thry I id perceive8 jft, be. Upon Rearing this some become stoic ar d quirt ott or* cry tind j tov become overfly angfyrhpsfile and verbally abusive Affef rWlic^g^mhis Situation the manager poses^a gei e a\ q lest JQ Is-il e I cil tDf ma^ge^^har^eTrihonesf perceptions^ employee perf rmarTr at the- r k of I u t i\g

144 Part I wo Motivation ana Keward Systems

employee is truly different and must be treated that way. For example, greater participation may be more appropriate when an employee is knowledgeable, has a strong independence need, and has demonstrated acceptable performance in the past. Realistically, however, managers sometimes avoid giving appraisals because they do not want to disrupt an existing smooth relationship with an employee by providing negative feedback. Low-performing employees, who may require more frequent monitpring and reviews, are particularly difficult to deal with. In other cases, managers simply do not see any organizational rewards coming to them from the appraisal process..With no extrinsic or intrinsic incentive to perform the task, managers may neglect it entirely, as in this example: Gordy, an employee in a utility, reported that for many years his supervisor would simply hand him a folded slip of paper with his next year's salary written on it. This was the sum total of his "performance appraisal"! Only recently did the utility become concerned about effective organizational behavior practices and begin training and rewarding its managers for appraising employees. Now Gordy enjoys the benefits of open discussion of his performance and mutual goal setting. Even when appraisal interviews are capably conducted by managers, whether they will produce long-term performance changes by themselves is doubtful. The appraisal acts only as a source of feedback and a psychic reward, and economic incentives are still needed to obtain employee motivation. Various economic incentive approaches are described next, along with assessments of their advantages and disadvantages.

ECONOMIC INCENTIVE SYSTEMS

Purposes and Types
Many firms today, fighting for their very existence, have turned their attention to a- focus on performance management. This stems from a belief that employee performance can be managed and improved, whether it comes about through goal setting, a streamlined organizational structure, better technology, new arrangements of working schedules, high involvement of employees, or better motivation of employees. One component of performance management is the use of various systems of rewards and incentives to encourage better productivity. An economic incentive system of some type can be applied to almost any job. The basic idea of such systems is to induce a high level of individual, group, or organizational performance by making an employee's pay contingent on one or more of those dimensions. Additional objectives include facilitating recruitment and retention of good employees, stimulating desirable role behaviors such as creativity, encouraging the development of valued skills, and satisfying key employee needs. The criteria for these incentives could include employee output, company profit, cost savings, units shipped, level of customer service, or the ratio of labor cost to total sales. Evaluation of performance may be individual or collective, and the payment may be immediate (e.g., cash awards) or delayed, as in a profit-sharing plan. The discussion of economic incentives focuses on their overall nature, purpose, and behavior implications. Not all types of incentives or all details about them will be discussed. Those selected for presentation are wage incentives, which are a widely used individual incentive, and profit sharing and gain sharing, which are popular group incentives. Skilly based pay systems are increasing in popularity, especially in new industrial operations. Readers are urged to review Figure 6.1 to see how incentives are combined with other parts of wage administration to make a complete pay program.

Chapter 6 Appraising and Rewarding Performance 145

Temporary incentives also have a role to play in compensation. Sometimes they provide just the right amount of added motivation to cause a desired increase in performance. Here is an example: A manufacturer of specialized business equipment experienced a substantial decline in sales for one of its models. The decline was so severe that it had scheduled a one-month closing of this model's production line during the Christmas season. At the sales manager's suggestion, the company offered to give its salespeople a new $ 10 bill for each item of this model sold during the month of December. The offer was made in the context of an extra Christmas bonus opportunity. The response was so great that the production line was kept operating, and some salespeople earned over $4,000 in bonus money paid in $10 bills. A $4,000 bonus amounted to 10 to 20 percent of a typical salesperson's annual income.