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Human Resource Management

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Human Resource Management (MGT501)
Lesson 26
After studying this chapter, students should be able to understand the following:
We begin this chapter by defining performance appraisal and identifying the uses of performance appraisal. We
then explain environmental factors affecting performance appraisal and the performance appraisal process.
Then, we identify the aspect of a person's performance that should be evaluated, who will be responsible
for appraisal, and the appraisal period. Next, we discuss the various performance appraisal methods,
problems associated with performance appraisal, and characteristics of an effective appraisal system.
A. Performance Appraisal
Performance appraisal is a system of review and evaluation of an individual or team's job performance. An
effective system assesses accomplishments and evolves plans for development. Performance management is
a process that significantly affects organizational success by having managers and employees work together
to set expectations, review results, and reward performance. Its goal is to provide an accurate picture of past
and / or future employee performance. To achieve this, performance standards are established.
I. The Performance Appraisal Process
Many of the external and internal environmental factors previously discussed can influence the appraisal
process. Legislation requires that the appraisal systems be nondiscriminatory. The labor union might affect
the appraisal process by stressing seniority as the basis for promotions and pay increases. Factors within the
internal environment can also affect the performance appraisal process. The type of corporate culture can
serve to help or hinder the process. Identification of specific goals is the starting point for the PA process.
After specific appraisal goals have been established, workers and teams must understand what is expected
from them in their tasks. Informing employees of what is expected of them is a most important employee
relations task. At the end of the appraisal period, the appraiser observes work performance and evaluates it
against established performance standards. The evaluation results are then communicated to the workers.
The performance evaluation discussion with the supervisor serves to reestablish job requirements.
Steps in the performance appraisal process
Identify the specific performance appraisal goals.
Establish job expectations (job analysis).
Examine work performed.
Appraise performance.
Discuss appraisal with employee.
II. Uses Of Performance Appraisal
Performance appraisal serves two types of the objectives one is to make the evaluation decisions and other
is to provide the need assessment source for the training and development if there is a gap between actual
and expected performance. For many organizations, the primary goal of an appraisal system is to improve
performance. A system that is properly designed and communicated can help achieve organizational
objectives and enhance employee performance. In fact, PA data are potentially valuable for use in numerous
human resource functional areas.
a.  Human Resource Planning--In assessing a firm's human resources, data must be
available that describe the promotability and potential of all employees, especially key
b. Recruitment And Selection--Performance evaluation ratings may be helpful in
predicting the future performance of job applicants.
c.  Training And Development--A performance appraisal should point out an employee's
specific needs for training and development. By identifying deficiencies that adversely
Human Resource Management (MGT501)
affect performance, human resource and line managers are able to develop T&D programs
that permit individuals to build on their strengths and minimize their deficiencies.
d. Career Planning And Development--Career planning and development may be viewed
from either an individual or organizational viewpoint.
e.  Compensation Programs--Performance appraisal results provide the basis for decisions
regarding pay increases.
f.  Internal Employee Relations--Performance appraisal data are also frequently used for
decisions in areas of internal employee relations including motivation, promotion,
demotion, termination, layoff, and transfer.
g. Assessment Of Employee Potential--Some organizations attempt to assess employee
potential as they appraise job performance.
III. What to Evaluate
What aspect of a person's performance should an organization evaluate? In practice, the most common sets
of appraisal criteria are traits, behaviors, and task outcomes.
a.  Traits--Many employees in organizations are evaluated on the basis of certain traits such
as attitude, appearance, initiative, etc.
b. Behaviors--When an individual's task outcome is difficult to determine, it is common to
evaluate the person's task-related behavior.
c.  Task Outcomes--If ends are considered more important than means, task outcomes
become the most appropriate factor to evaluate.
d. Improvement Potential--Some attention must be given to the future and the behaviors
and outcomes that are needed to not only develop the employee, but also to achieve the
firm's goals. This involves an assessment of the employee's potential.
IV. Performance Appraisal Methods
The type of performance appraisal system utilized depends on its purpose. If the major emphasis is on
selecting people for promotion, training, and merit pay increases, a traditional method such as rating scales
may be most appropriate. Collaborative methods are designed to assist employees in developing and
becoming more effective.
a.  360-Degree Feedback--Involves input from multiple levels within the firm and external
sources as well.
b. Rating Scales--Rates employees according to defined factors. The factors chosen for
evaluation are typically of two types: job related and personal characteristics.
c.  Critical Incidents--Requires written records be kept of highly favorable and highly
unfavorable work actions.
d. Essay--The rater simply writes a brief narrative describing the employee's performance.
This method tends to focus on extreme behavior in the employee's work rather than
routine day-to-day performance.
e.  Work Standards--Compares each employee's performance to a predetermined standard,
or expected level of output.
f.  Ranking--The rater simply places all employees in a given group in rank order on the
basis of their overall performance. Paired comparison is a variation of the ranking method
that involves comparing the performance of each employee with every other employee in
the group.
g. Forced Distribution--An appraisal approach where the rater is required to assign
individuals in the work group to a limited number of categories similar to a normal
frequency distribution.
h. Forced-Choice And Weighted Checklist Performance Reports--The forced-choice
performance report is a technique in which the appraiser is given a series of statements
about an individual and the rater indicates which items are most or least descriptive of the
employee. The weighted checklist performance report is a technique whereby the rater
completes a form similar to the forced-choice performance report, but the various
responses have been assigned different weights.
i.  Behaviorally Anchored Rating Scales--A performance appraisal method that combines
Human Resource Management (MGT501)
elements of the traditional rating scales and critical incidents methods.
j.  Results-Based Systems--In a result-based system the superior and the subordinate
jointly agree on objectives for the next appraisal period.
k. Assessment Centers--Recognizing the differences in purposes, and the difficulty that a
PA system will have in achieving both aims, some firms opt to use an assessment center as
an adjunct to their appraisal system
l.  Management by objectives (MBO)--It is a goal-oriented performance appraisal
method, requires that supervisors and employees determine objectives for employees to
meet during the rating period, and the employees appraise how well they have achieved
their objectives
m. The Appraisal Interview
The appraisal interview is the Achilles' heel of the entire evaluation process.
 Scheduling the Interview--Supervisors usually conduct a formal appraisal interview
at the end of an employee's appraisal period.
 Interview Structure--A successful appraisal interview should be structured in a way
that allows both the supervisor and the subordinate to view it as a problem solving
rather than a faultfinding session.
 Use of Praise and Criticism--Praise should be provided when warranted, but it can
have only limited value if not clearly deserved. Criticism, even if warranted, is
especially difficult to give.
 Employees' Role--Two weeks or so before the review, they should go through their
diary or files and make a note of every project worked on, regardless of whether they
were successful or not.
 Use of Software--Computer software is available for recording the appraisal data.
 Concluding the Interview--Ideally, employees will leave the interview with positive
feelings about management, the company, the job, and themselves.
V. Responsibility For Appraisal
In most organizations, the human resource department is responsible for coordinating the design and
implementation of performance appraisal programs. However, it is essential that line managers play a key
role from beginning to end.
Immediate Supervisor--An employee's immediate supervisor traditionally has been the
most common choice for evaluating performance.
b. Subordinates--Some managers have concluded that evaluation of managers by
subordinates is feasible.
c.  Peers--Peer appraisal has long had proponents who believed that such an approach is
reliable if the work group is stable over a reasonably long period of time and performs
tasks that require considerable interaction.
d. Self-Appraisal--If individuals understand the objectives they are expected to achieve and
the standards by which they are to be evaluated, they are--to a great extent--in the best
position to appraise their own performance.
e.  Customer Appraisal--The behavior of customers determines the degree of success a
firm achieves. Therefore, some organizations believe it is important to obtain performance
input from this critical source.
Many performance appraisal methods have been severely criticized. Many of the problems commonly
mentioned are not inherent in the method but, rather, reflect improper usage.
Lack of Objectivity-- A potential weakness of traditional methods of performance
appraisal is that they lack objectivity. Some subjectivity will always exist in appraisal
methods. However, the use of job-related factors does increase objectivity.
b. Halo Error--Occurs when the evaluator perceives one factor as being of paramount
importance and gives a good or bad overall rating to an employee based on this factor.
Human Resource Management (MGT501)
c.  Leniency/Strictness--The giving of undeserved high or low ratings.
d. Central Tendency--Occurs when employees are incorrectly rated near the average or
middle of the scale.
e.  Recent Behavior Bias--It is only natural to remember recent behavior more clearly than
actions from the more distant past. However, performance appraisals generally cover a
specified period of time, and an individual's performance should be considered for the
entire period.
f.  Personal Bias--Supervisors doing performance appraisals may have biases related to their
employees' personal characteristics such as race, religion, gender, disability, or age group.
g. Manipulating the Evaluation--In some instances, supervisors control virtually every
aspect of the appraisal process and are therefore in a position to manipulate the system.
Key Terms
Performance: Performance appraisal is a system of review and evaluation of an individual or team's job
Halo Error: Occurs when the evaluator perceives one factor as being of paramount importance and gives a
good or bad overall rating to an employee based on this factor.
MBO: It is a goal-oriented performance appraisal method, requires that supervisors and employees
determine objectives for employees to meet during the rating period, and the employees appraise how well
they have achieved their objectives
360-Degree Feedback: Involves input from multiple levels within the firm and external sources as well.
Central Tendency: Occurs when employees are incorrectly rated near the average or middle of the scale.
Table of Contents:
  1. INTRODUCTION TO HRM:Growing Importance of HRM, Road Map of the Course
  2. ESSENTIALS OF MANAGEMENT:Concepts and Essential of Management, Managerís Roles
  3. ORGANIZATION AND COMPONENTS OF ORGANIZATION:Open versus Closed Systems, The Hawthorne Studies
  4. PEOPLE AND THEIR BEHAVIOR:Why to work in organizations?, The Goals of Organizational Behavior
  5. INDIVIDUAL VS. GROUP BEHAVIOR:What Are Roles?, Problem solving Team
  6. PERSONNEL MANAGEMENT TO HUMAN RESOURCE MANAGEMENT:Records and Administration, Competitive Advantage
  7. HRM IN A CHANGING ENVIRONMENT:Productivity, New Trends at Work Place
  8. How organization Cultivate a Diverse Workforce, STEPS TOWARD MANAGEMENT OF DIVERSITY
  9. FUNCTIONS AND ENVIRONMENT OF HRM:Compensation and Benefits, Safety And Health, Interrelationships of HRM Functions
  10. LINE AND STAFF ASPECTS OF HRM:Authority, Line versus Staff Authority, Staff Manager
  11. LEGAL CONTEXT OF HR DECISIONS:Doing the Right Thing, Affirmative Action, Unintended Consequences
  12. HUMAN RESOURCE PLANNING (HRP):Benefits of HR Planning, Forecasting Human Resource Availability
  13. STRATEGIC PLANNING AND HRIS:HRís Strategic Role, Human Resource Information System, Common HRIS Functions
  14. JOB ANALYSIS:Purposes of the job Analysis, Questions Job Analysis Should Answer
  15. JOB ANALYSIS:Methods of Collecting Job Analysis Information, Observation, Source of Data
  16. JOB ANALYSIS (CONTD.):SURPLUS OF EMPLOYEES FORECASTED, Diversity through Recruiting Efforts
  17. SOURCES OF RECRUITMENT:ALTERNATIVES TO RECRUITMENT, Quantity of the Applicants, Quality of the Applicants
  18. SELECTION:Initial Screening, Advantages of Successful Screening
  19. SELECTION TESTS:Characteristics of Properly Designed Selection Tests, Guidelines for Conducting an Interview
  20. SELECTION PROCESSÖ CONTD:Background Investigations, Physical Exam, Selecting Managers
  21. SOCIALIZATION:Compensation and Benefits, Team Membership, Stages in socialization Process, Training and Development Trends
  22. TRAINING AND DEVELOPMENT:Learning, Phases of Training, Why Transfer of Training Fails
  23. MAXIMIZING LEARNING:Following up on Training, Repetition, Feedback, Purposes of T & D
  24. CAREER MANAGEMENT:Individual career planning, Career Planning and Development Methods
  25. PERFORMANCE:Determinants of Job Performance, Why is performance measured?, Performance Management
  28. COMPENSATION SYSTEM:Pay, Job Pricing, Compensation: An Overview, Compensation Surveys
  29. BENEFITS:Total Compensation, Discretionary Benefits (Voluntary), Workplace Flexibility
  30. ROLE OF MONEY IN PERFORMANCE OF EMPLOYEES:Types of Pay-for-Performance Plans, Empower Employees
  31. MOTIVATION:The Motivation Process, Motivational Theories, Challenges of motivating employees
  32. OCCUPATION, HEALTH & SAFETY:Physical Conditions, Accident Investigation, Smoking in The work place
  33. STRESS MANAGEMENT:Symptoms of Stress, Managing Stress,
  34. COMMUNICATION IN ORGANIZATION:Burnout, Social Support at Work & Home, Communication in organization, Meetings
  35. TRADE UNIONS:Collective Bargaining, The HRM Department in a Nonunion Setting, Phases of Labor Relations
  36. CONFLICT AND NEGOTIATION:Transitions in Conflict Thought, Individual Conflict Management Styles
  37. POWER AND POLITICS:Sources of Power, Advantages and Disadvantages of PowerPower and Politics in Context
  38. EMPLOYEE RIGHTS AND DISCIPLINE:Contractual Rights, Management Rights, Disciplining Employees,
  39. DISCIPLINE (CONT...):Factors to Consider when Disciplining, Disciplinary Guidelines, Employee Separations
  40. LEADERSHIP:The Leaderís Behavior, Situational Theories of Leadership, Becoming a Leader
  41. REVISION (LESSON 12-21):Plans, Job Specification, Human resource planning, Selection Process, Corporate Culture
  42. REVISION (LESSON 22-26):Training, Case Study Method, Training, Performance
  43. REVISION (LESSON 27-35):Classification Method, Compensation, Empowerment, Mediation
  44. INTERNATIONAL DIMENSIONS OF HRM:Global Corporation, Type of staff members, Approaches to Global Staffing
  45. CONCLUSION & REVIEW:Strategies for Gaining Competitive Advantage, High-performance Work System