BUS603: Managing People

Chapter Summary

• A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job.
• The use of the term systematic implies the process should be planned.
• Depending on which research you read, some believe the performance evaluation system is one of the most important to consider in HRM, but others view it as a flawed process, which makes it less valuable and therefore ineffective.
• The first step in designing a performance appraisal process is to determine how often the appraisals will be given. Consideration of time and effort to administer the evaluation should be a deciding factor.
• Many companies offer pay increases as part of the system, while some companies prefer to separate the process. Determining how this will be handled is the next step in the performance appraisal development process.
• Goals of the performance evaluation should be discussed before the process is developed. In other words, what does the company hope to gain from this process? Asking managers and employees for their feedback on this is an important part of this consideration.
• After determining how often the evaluations should be given, and if pay will be tied to the evaluations and goals, you can now sit down and develop the process. First, determine what forms will be used to administer the process.
• After you have determined what forms will be used (or developed), determine who will be the source for the information. Managers, peers, and customers are options. A 360 review process combines several sources for a more thorough review.
• There are some errors that can occur in the process. These include halo effects or comparing an employee to another as opposed to rating them only on the objectives.
• Performance evaluations should always be based on the actual job description.
• Our last step in the development of this process is to communicate the process and train our employees and managers on the process. Also, training on how best to use feedback is the final and perhaps most important step of the process.
• When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.
• The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.
• The rating is the scale that will be used to evaluate each criteria item. There are a number of different rating methods, including scales of 1–5, yes or no questions, and essay.
• In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.
• An essay performance evaluation will ask the manager to provide commentary on specific aspects of the employee's job performance.
• A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the employee's job.
• Some managers keep a critical incidents file. These incidents serve as specific examples to be written about in a performance appraisal. The downside is the tendency to record only negative incidents and the time it can take to record this.
• The work standards performance appraisal approach looks at minimum standards of productivity and rates the employee performance based on minimum expectations. This method is often used for sales forces or manufacturing settings where productivity is an important aspect.
• In a ranking performance evaluation system, the manager ranks each employee from most valuable to least valuable. This can create morale issues within the workplace.
• An MBO or management by objectives system is where the manager and employee sit down together, determine objectives, then after a period of time, the manager assesses whether those objectives have been met. This can create great development opportunities for the employee and a good working relationship between the employee and manager.
• An MBO's objectives should be SMART: specific, measurable, attainable, results oriented, and time limited.
• A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor performance.
• There are many best practices to consider when developing, implementing, and managing a performance appraisal system. First, the appraisal system must always tie into organization goals and the individual employee's job description.
• Involvement of managers in the process can initiate buy-in for the process.
• Consider using self-evaluation tools as a method to create a two-way conversation between the manager and the employee.
• Use a variety of rating methods to ensure a more unbiased result. For example, using peer evaluations in conjunction with self and manager evaluations can create a clearer picture of employee performance.
• Be aware of bias that can occur with performance appraisal systems.
• Feedback should be given throughout the year, not just at performance appraisal time.
• The goals of a performance evaluation system should tie into the organization's strategic plan, and the goals for employees should tie into the organization's strategic plan as well.
• The process for managing performance evaluations should include goal setting, monitoring and coaching, and doing the formal evaluation process. The evaluation process should involve rewards or improvement plans where necessary. At the end of the evaluation period, new goals should be developed and the process started over again.
• It is the HR professional's job to make sure managers and employees are trained on the performance evaluation process.
• Standards should be developed for filling out employee evaluations, to ensure consistency and avoid bias.
• The HR professional can assist managers by providing best practices information on how to discuss the evaluation with the employee.
• Sometimes when performance is not up to standard, an improvement plan may be necessary. The improvement plan identifies the problem, the expected behavior, and the strategies needed to meet the expected behavior. The improvement plan should also address goals, time lines to meet the goals, and check-in dates for status on the goals.
• It is the job of the HR professional to organize the process for the organization. HR should provide the manager with training, necessary documents (such as criteria and job descriptions), instructions, pay increase information, and coaching, should the manager have to develop improvement plans.
• Some HR professionals organize the performance evaluation information in an Excel spreadsheet that lists all employees, job descriptions, and due dates for performance evaluations.
• There are many types of software available to manage the process. This software can manage complicated 360 review processes, self-evaluations, and manager's evaluations. Some software can also provide timeline information and even send out email reminders.
• The performance evaluation process should be constantly updated and managed to ensure the results contribute to the success of the organization.