WELCOME TO THE CLASS OF HRM Performance Management

WELCOME TO THE CLASS OF HRM

Performance Management and Appraisal Prof. Hiteshwari Jadeja

Performance Management A process of goal-setting, communication, observation and evaluation to support, retain and develop exceptional employees for organizational success. Set Goals Communicate Evaluate Observe

Why Performance Management? Total Quality The Performance Management Approach Appraisal Issues Strategic Focus

Basic Concepts in Performance Management and Appraisal Comparing Performance Appraisal and Performance Management Performance Appraisal: Setting work standards, assessing performance, and providing feedback to employees to motivate, correct, and continue their performance. Performance Management: An integrated approach to ensuring that an employee’s performance supports and contributes to the organization’s strategic aims.

Performance Management and Performance Appraisal • Performance management: Ø Dynamic, continuous process. Ø Improves organizational effectiveness. Ø Strategic goals. • Performance appraisal: Ø Periodic (usually annual) event. Ø Formal review. Ø Last step in performance management process.

Defining the Employee’s Goals and Work Standards Guidelines for Effective Goal Setting Assign Specific Goals Assign Measurable Goals Assign Challenging but Doable Goals Encourage Participation

Setting Goals • SMART Goals: Ø Specific, and clearly state the desired results. Ø Measurable in answering “how much. ” Ø Attainable, and not too tough or too easy. Ø Relevant to what’s to be achieved. Ø Timely in reflecting deadlines and milestones.

An Introduction to Appraising Performance Appraisal is an objective assessment of an individual’s performance against well defined benchmarks.

Definitions According to Edwin Flippo, "Performance Appraisal is the systematic, periodic and impartial rating of an employee's excellence, in matters pertaining to his present job and his potential for a better job. “ According to Dale Beach, "Performance Appraisal is the systematic evaluation of the individual with regards to his or her performance on the job and his potential for development. "

An Introduction to Appraising Performance Why Appraise Performance? 1 Is basis for pay and promotion decisions. 2 Plays an integral role in performance management. 3 Helps in correcting deficiencies and reinforcing good performance. 4 Is useful in career planning.

Objectives of Appraisal • To effect promotions based on competence and performance. • To confirm the services of probationary employees upon their completing the probationary period satisfactorily. • To assess the training and development needs of employees. • To decide upon a pay raise where (as in the unorganised sector) regular pay scales have not been fixed.

Objectives of Appraisal (contd. . ) • To let the employees know where they stand insofar as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. • To improve communication. Performance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. • Finally, performance appraisal can be used to determine whether HR programmes such as selection, training, and transfers have been effective or not.

Classroom Teaching Appraisal by Students

FIGURE 9 -1 (Continued)

The Performance Appraisal Process Objectives of Performance Appraisal Establish Job Expectations Design an Appraisal Programme Appraise Performance Interview Use Appraisal Data for Appropriate Purposes

Design an Appraisal Programme

Performance Appraisal Methods Traditional Methods (Past. Oriented) Modern Methods ( Future. Oriented) 1. 2. 3. 4. 5. 6. 7. 1. Behaviorally Anchored Rating Scales (BARS) 2. Management by Objectives (MBO) 3. Computerized and Web. Based Performance Appraisal 4. Merged Methods 5. Assessment Centres 6. 360 - Degree Feedback Graphic Rating Scale Method Alternation Ranking Method Paired Comparison Method Forced Distribution Method Critical Incident Method Narrative Forms Annual Confidential Report (ACR)

Graphic Rating Scale Method • A scale that lists a number of traits and a range of performance for each. The employee is then rated by identifying the score that best describes his or her level of performance for each trait.

Sample Graphic Rating Performance Rating Form

Sample Performance Rating Form (continued)

Alternation ranking Method • Ranking employees from best to worst on a particular trait, choosing the highest, then lowest, until all are ranked.

Scale for alternate ranking of Appraiser

Paired Comparison Method : In this method, each employee is compared with the other on one-to-one basis. This method makes judgement easier as compared to ranking method. . The total number of comparison can be ascertained by the following formula : Maximum no. of pairs = [n(n-1)]/2 • where N stands for number of employees to be evaluated. Example: If the following five students Ashok (A), Bina (B), Chitra (C), Dinesh (D), Eillen (E) have to be evaluated for the best student award, the total number of comparison would be = 10 • A with B • A with C B with C • A with D B with D C with D • A with E B with E C with E D with E • The number of times a student gets a better score, would be the basis for selecting the Best Student. This method is not appropriate if a large number of students are required to be evaluated. 24

FIGURE 9– 6 Ranking Employees by the Paired Comparison Method 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.

Forced Distribution Method Ø Similar to grading on a curve; predetermined percentages of ratees are placed in various performance categories. Ø Example: v 15% high performers v 20% high-average performers v 30% average performers v 20% low-average performers v 15% low performers 26

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Critical Incident Method • This method evaluates an employee on the basis of certain `events' or `episodes' known as critical incident. • The underlying principle of this method is "there are certain significant acts in each employee's behavior and performance, which can make all the difference between success and failure on the job. “ • Thus, in this method the rater focuses his attention on all those factors, that can make a difference between performing a job in a noteworthy manner. 28

Examples of Critical Incidents for an Assistant Plant Manager

Narrative Forms • All or part of the written appraisal may be in narrative form. • Here, the person’s supervisor is responsible for providing an assessment of the employee’s past performance and required areas of improvement.

Appraisal. Coaching Worksheet

Annual Confidential Report (ACR) • This is a traditional method of evaluating an employee's performance. It is normally used in Government departments and small business units. Here, the evaluation is done by the immediate boss or supervisor. • The main limitation of this method is the ratings are generally not discussed with the ratee (only in case of adverse remark). 32

BARS (Behaviourally Anchored Rating Scale) • In order to overcome the problem of judgmental evaluation, this method was conceived by some organisations. This method combines the benefits of Essay Method, Critical Incident and Rating scales. • In this method the employee's behaviour and performance dimensions are analysed and used for evaluating the performance of the employee. The HR department is involved in the process of preparing the BARS. Based on the Employee's performance and behaviour, employees are anchored in different slots of good, average and poor. The rater is required to give corresponding ratings to the employee. 33

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Behaviorally Anchored Rating Scale (BARS) Developing a BARS 1. Generate critical incidents 2. Develop performance dimensions 3. Reallocate incidents 4. Scale the incidents 5. Develop a final instrument Advantages of BARS Ø A more accurate gauge Ø Clearer standards Ø Feedback Ø Independent dimensions Ø Consistency

Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skills

Management by Objectives (MBO) • A comprehensive and formal organizationwide goal-setting and appraisal program requiring: 1. Setting of organization’s goals. 2. Setting of departmental goals. 3. Discussion of departmental goals. 4. Defining expected results (setting individual goals). 5. Conducting periodic performance reviews. 6. Providing performance feedback.

Using MBO Setting unclear objectives Time-consuming appraisal process Problems with MBO Conflict with subordinates over objectives

Computerized and Web-Based Performance Appraisal • Performance appraisal software programs Ø Keep notes on subordinates during the year. Ø Electronically rate employees on a series of performance traits. Ø Generate written text to support each part of the appraisal. • Electronic performance monitoring (EPM) Ø Having supervisors electronically monitor the amount of computerized data an employee is processing per day, and thereby his or her performance.

Assessment Centres : • This method was used to appraise army officers in Germany way back in 1930 s. The concept was adapted from army to business arena in 1960 s. In India, the concept has been adopted by organisations such as Crompton Greaves, Eicher, Hindustan Lever and Modi Xerox recently. • This method is mainly used to evaluate executive and supervisory potential. Here employees are taken to a place away from work and a series of tests and exercises are administered. For example, assesses are asked to participate in; in-basket exercise, simulations, group exercise and role plays. Performance of the employee is evaluated in each of these tests and feedback is provided to the ratee, in terms of strengths and weaknesses. 40

360 o Appraisal Method : • Where multiple raters are involved in evaluating performance, the technique is called 360 -degree appraisal. • The 360 -degree technique is understood as systematic collection of performance data on an individual or a, group derived from a number of stakeholders—the stakeholders being the immediate, team members customers peers and self. • In this method an employee's performance is evaluated by his supervisor, subordinates, peers and customers (or an outside expert). • All these appraisers provide information or feedback by completing a questionnaire designed for this purpose. 41

• The 360 -degree appraisal provides a broader perspective about an employee’s performance. • In addition, the technique facilitates greater selfdevelopment of the employee. • It enables an employee to compare his evaluation about self with perceptions of others • Though this method was developed to bring about a degree of objectivity, it still suffers from subjectivity. 42

Appraising Performance: Problems and Solutions Potential Rating Scale Appraisal Problems Unclear Standards Halo Effect Central Tendency Leniency or Strictness Bias

TABLE 9– 2 A Graphic Rating Scale with Unclear Standards Excellent Good Fair Quality of work Quantity of work Creativity Integrity Note: For example, what exactly is meant by “good, ” “quantity of work, ” and so forth? Poor

Appraising Performance: Problems and Solutions (continued) How to Avoid Appraisal Problems Know Problems Use the Right Tool Train Supervisors Control Outside Influences Keep a Diary

TABLE 9– 3 Important Advantages and Disadvantages of Appraisal Tools Tool Advantages Disadvantages Graphic rating scale Simple to use; provides a Standards may be unclear; halo quantitative rating for each employee. effect, central tendency, leniency, bias can also be problems. BARS Provides behavioral “anchors. ” BARS is very accurate. Difficult to develop. Alternation ranking Simple to use (but not as simple as graphic rating scales). Avoids central tendency and other problems of rating scales. Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent. Forced distribution method End up with a predetermined number or % of people in each group. Employees’ appraisal results depend on your choice of cutoff points. Critical incident method Helps specify what is “right” and “wrong” about the employee’s performance; forces supervisor to evaluate subordinates on an ongoing basis. Difficult to rate or rank employees relative to one another. MBO Tied to jointly agreed-upon performance objectives. Time-consuming.

Who Should Do the Appraising? Immediate Supervisor Peers Rating Committee Self-Rating Potential Appraisers Subordinates 360 -Degree Feedback

The Appraisal Interview Satisfactory—Promotable Satisfactory—Not Promotable Types of Appraisal Interviews Unsatisfactory—Correctable Unsatisfactory—Uncorrectable

The Appraisal Interview (continued) Guidelines for Conducting an Interview Talk in terms of objective work data. Don’t get personal. Encourage the person to talk. Don’t tiptoe around.

The Appraisal Interview (continued) How to Handle a Defensive Subordinate 1 Recognize that defensive behavior is normal. 2 Never attack a person’s defenses. 3 Postpone action. 4 Recognize your own limitations.

The Appraisal Interview (continued) How to Criticize a Subordinate 1 Do it in a manner that lets the person maintain his or her dignity and sense of worth. 2 Criticize in private, and do it constructively. 3 Give daily feedback so that the review has no surprises. 4 Never say the person is “always” wrong. 5 Criticism should be objective and free of biases.

Checklist During the Appraisal Interview

Formal Written Warnings • Purposes of a Written Warning Ø To shake your employee out of bad habits. Ø To help you defend your rating, both to your own boss and (if needed) to the courts. • A Written Warning Should: Ø Identify standards by which employee is judged. Ø Make clear that employee was aware of the standard. Ø Specify deficiencies relative to the standard. Ø Indicate employee’s prior opportunity for correction.

Creating the Total Performance Management Process • “What is our strategy and what are our goals? ” • “What does this mean for the goals we set for our employees, and for how we train, appraise, promote, and reward them? ”

PMS in India Performance evaluation has reached high maturity levels in Indian organizations. Successful practices like goal setting, balanced scorecard, development orientation etc. , are being introduced and it mostly covers managerial employees and employees who are not part of any union. ACR system of government is being changed to PMS. Online appraisal systems are also used. Initiatives like training, appraisals, multiple levels appraisers, reviews, etc. are undertaken to improve the quality of PMS.

Let’s Practice Your Performance Appraisal Skills

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