5
Conduct Performance Appraisals to Improve Individual and Firm Performance
MARIA ROTUNDO
A performance appraisal is an evaluation of how well an individual achieves job-related duties and responsibilities. It can be used to make administrative decisions about promotions, terminations, and monetary/non-monetary incentives. Strengths and weaknesses are assessed in the process, and this information can be used to establish training and development needs. Performance appraisals have been applied in the court of law to justify employee terminations and to validate selection methods. Given the important functions that a performance appraisal serves, it is not surprising to find that it is held to such high psychometric standards and is scrutinized repeatedly by employers, employees, researchers, the media, and even the courts when these standards are not met. This chapter outlines basic principles that can be followed to improve the effectiveness of performance appraisals, especially with respect to improving an employee’s future performance.
The process of conducting a performance appraisal includes two main stages: obtaining accurate information about the individual’s performance and communicating the performance appraisal to the individual in a manner that maintains a high-performance work culture. The chapter is organized according to these two stages. Key principles to follow during each stage are offered.
The quest for accurate job-related information about individuals has plagued researchers and managers for years, dating back to the early 1900s (Farr and Levy, 2007). The body of knowledge that has been generated from years of research on accuracy can be summarized by several key principles. It requires that performance in the workplace is clearly defined and aligned with the organization’s strategy (Wright, Dunford, and Snell, 2001). Managers need to be cognizant of rater biases that distort performance ratings and to recognize the importance of observing and recording performance-related information on a continuous basis to reduce these errors. Multiple rating sources such as the self, peers, subordinates, or customers in some instances can provide additional performance-related information but are subject to the same information-processing limitations (e.g. biases) as ratings by managers. Behaviorally based performance appraisal instruments with clearly defined scale anchors and job-related dimensions can be useful tools for documenting performance appraisals. Training managers on the key principles involved in performance appraisal can increase the accuracy of these ratings.
Accurate performance information is necessary but not sufficient for maintaining and improving performance. The manner in which the performance appraisal is delivered to the individual is equally important for achieving desired outcomes. Key principles for managing the delivery process include goal setting, participative two-way communication, coaching, and managing terminations. Following these principles can result in improved performance and more favorable reactions to the appraisal and the appraisal process.
Define job performance
The strategic planning process establishes a firm’s medium and long-term goals. The top management team must translate these goals into individual level actions, behaviors, and outputs that support the strategic plan (Wright et al., 2001). How job performance is conceptualized in the workplace stems in part from this planning process. Historically, job performance was defined by a series of task statements that were derived from job descriptions. Individuals were rated solely on the basis of the extent to which they carried out these tasks (Fleishman and Quaintance, 1984). The workplace was considered to be relatively static, and job descriptions were dusted off periodically, as they typically withstood the test of time. The workplace in this new millennium is characterized by constant change. Success requires communication, ongoing learning, teamwork, effective relationships, and sharing knowledge. Ethical standards discourage harmful behaviors and hold individuals and the firm even more accountable for their actions.
Consequently, job performance is more than completing task requirements. It incorporates organizational citizenship behaviors (OCB) and counterproductive work behaviors (CWB) (Rotundo and Sackett, 2002; Rotundo and Xie, 2008). Organizational citizenship behavior (also referred to as contextual performance, extra-role behavior, etc.) includes actions that go beyond task or technical performance. They facilitate the attainment of organizational goals by contributing in a positive way to its social and psychological environment (Organ, 1997). OCB includes helping, protecting the organization from undeserved harm, making constructive suggestions, and spreading goodwill (e.g. Podsakoff, MacKenzie, Paine, and Bachrach, 2000). Counterproductive work behavior is an intentional act that harms the well-being of the organization or its members (also referred to as deviance). It includes absenteeism, production deviance, workplace aggression, theft, sabotage, and fraud (Berry, Ones, and Sackett, 2007; Bennett and Robinson, 2000). OCB and CWB are not opposite ends of a continuum. They can vary independently of one another (Dalal, 2005).
Criterion deficiency occurs when a performance appraisal is based upon incomplete information. The appraisal does not take into consideration all job-relevant facets of a person’s performance. Thus, defining performance is important for protecting against criterion deficiency. In addition, firms need to decide on the relative importance of these three sets of behaviors (Rotundo and Sackett, 2002). To what extent does a firm value OCBs in relation to task performance? To what extent are CWBs explicitly discouraged or penalized? A firm’s values are useful here because they signal to the employees the preferred actions and behaviors, and they make clear how employees should perform their jobs. Examples of such values include acting with integrity, and producing quality products (or providing quality services) in an environment that respects diversity and teamwork. Hence, the first step in obtaining accurate performance information is to define job performance in line with a firm’s strategy and values and to communicate this information to all stakeholders. The focus in this chapter is on a firm’s subordinates.
Observe and record performance frequently
Ideally, managers form impressions about their employees based on the behaviors or outputs they observe. If someone asks you for your opinion about a movie, it is difficult to give an answer if you have not seen or heard the movie. Likewise, it should be difficult to give your appraisal of an individual if you have not observed a representative sample of the person’s performance behaviors or outputs. Unfortunately, there are competing demands on managers’ time. Their span of control is often quite large. Remote work is becoming increasingly common making it increasingly difficult for managers to obtain adequate performance samples for each employee. Thus, it becomes even more important for managers to adopt a mindset of observing performance whenever the opportunities arise.
Criterion contamination occurs when information other than performance is reflected in the performance appraisal. Raters’ impressions about employee performance are frequently influenced by their biases (e.g. halo error). Raters’ general beliefs and assumptions about an employee, their likeability for the individual, and stereotypes about an employee based on age, race and gender can contaminate a performance appraisal (Latham and Mann, 2006). Continuously observing and recording performance behaviors can reduce the extent to which these biases influence a rating.
Rating accuracy is affected by the delay between when an employee’s behavior is observed and when performance is actually rated (DeNisi and Peters, 1996). Performance information is often acquired on an ad hoc basis, and in contexts not necessarily related to performance evaluation. Keeping track of this information and documenting is as important as frequent observations of an employee. Fortunately, there are tools that can help managers organize performance information in a manner that makes it more accessible. Performance categories help managers organize and structure their observations (Foti and Lord, 1987). Examples of performance categories can include the three broad groups of behaviors mentioned earlier (i.e. task performance, OCB, and CWB) as well as a firm’s values (e.g. honesty). These category schemes can aid recognition and be recalled by managers when they observe an employee.
Raters who keep performance logs or diaries of critical incidents and events organized by a person can store and recall performance information more effectively and provide more accurate ratings (DeNisi, Robbins, and Cafferty, 1989). Only the pertinent information pertaining to who, what, where, when, and why needs to be recorded. There are numerous electronic means available to managers that can make this process easier (e.g. handheld devices).
Utilize multiple sources of feedback
A boss is not the only source of performance information. Other internal and external individuals who interact with and observe employees’ performance from a different perspective can provide meaningful information. These individuals typically include peers, self, subordinates, and customers. Systems that use ratings from these additional sources are referred to as multisource systems or 360 degree feedback. Multisource feedback systems can be traced back to the 1950s. It has been estimated that today about 40% of organizations use some form of multisource feedback (Bracken, Timmreck, and Church, 2001).
Since raters from various perspectives have access to and observe diverse examples of performance behaviors, they accumulate different knowledge about the individual, and thus have the potential to contribute unique and valuable information to the performance appraisal. However, it is not always the case that this information is consistent with what is observed or reported by the manager. Raters observe an employee from different perspectives. Thus, they may not necessarily agree in their performance ratings (Harris and Schaubroeck, 1988). Peer and self raters typically emphasize different dimensions of performance when appraising an individual (Murphy, Cleveland, and Mohler, 2001; Smither, London, and Reilly, 2005). Furthermore, regardless of the perspective of the rater, variation in performance ratings is associated more strongly with explicit or implicit standards of the individual raters than with the perspective of the rater (Mount, Judge, Scullen, Sytsma, and Hezlett, 1998). In fact, 20 to 30% of the variation in performance ratings has been found to be specific to the individual rater (Viswesvaran, Ones, and Schmidt, 1996). All the more reason to have multiple raters.
Peers, subordinates, and customers should comment on only those dimensions of performance to which they have access, which is not necessarily all dimensions. Peers may have more opportunities to interact with co-workers in person or via email and to observe them working with customers than a supervisor. Thus, they may have a more representative sample of these types of behaviors to draw from when appraising interpersonal or communication skills compared to other dimensions of performance. In contrast, managers often have direct access to written reports that individuals have prepared as well as documents that summarize various objective outcomes (e.g. absenteeism, meeting deadlines, work quality). This information is not usually available to peers. Hence, managers may be in a better position to appraise certain dimensions of performance more accurately than peers.
For managers with a large span of control, there may be too many peers in the group from which to gather input. In these circumstances, a subsample of peers can be identified who work closely with the individual who is being rated. Nurses or retail sales staff who work on the same shift or sales agents who are on the same team are reasonable choices. They are able to comment on each other’s performance more accurately than individuals who work in different shifts or on different teams. Sometimes the individual is asked to nominate two to three peers who are then later asked to provide appraisals. This approach has serious risks because of obvious concerns about selecting only those peers who will provide a favorable rating.
Customer feedback can uncover strengths and weaknesses in the product, service, or supply chain. Technological advancements make it easier and more cost effective to gather customer feedback electronically instead of relying on paper surveys (e.g. Atwater, Brett, and Charles, 2007). When the customer pool is large, feedback systems can be designed to select customers at random.
Regardless of the perspective that is sought, building trust and acceptance of the multisource feedback system is also important. Anonymity among raters can reduce concerns that the source of the rating might be revealed. This makes raters comfortable providing honest feedback instead of inflated ratings (Atwater et al., 2007). In groups where there are fewer than three raters, it is difficult to assure anonymity. Firms that are undergoing significant restructuring or change might hold off on implementing a multisource feedback system because concerns around job insecurity or other consequences of restructuring make it more difficult for individuals to trust the firm or its systems (Atwater et al., 2007). An organizational culture that supports learning and development is important for acceptance of a multisource feedback system (Atwater et al., 2007). Thus, information provided by alternative sources can provide useful information.
Incorporating ratings from these other sources can improve performance (Atwater et al., 2007; Smither et al., 2005). Individuals who either give or receive feedback from peers display effective team behavior more often than individuals who do not either give or receive peer feedback (Dominick, Reilly, and McGourty, 1997). Structured, face-to-face developmental peer appraisals can have a positive impact on group member perceptions of open communication, group task focus, group viability, and member relationships (Druskat and Wolff, 1999). Managers who receive feedback from subordinates and who meet with the subordinates to discuss the previous year’s feedback improve more than managers who do not (Walker and Smither, 1999). Furthermore, managers who participate in a leadership development program and who received evaluations from superiors, peers, subordinates, and the self report that the most important rating sources were subordinates, peers, then self, respectively, rather than superiors (Brutus, London, and Martineau, 1999). In other research, managers showed improved performance six months after an upward feedback program was implemented and feedback about leaders’ behavior from followers tended to promote generally positive changes in leaders’ behaviors (Atwater, Roush, and Fischthal, 1995; Smither, London, Vasilopoulos, Reilly, Millsap, and Salvemini, 1995).
Develop behaviorally based performance appraisal instruments
The accuracy of a performance appraisal is influenced by the instrument that is used to make the appraisal. This section describes both less effective methods and, more importantly, highlights the features of those that are effective. These features include behaviorally based measurement, job-related performance dimensions, and clearly defined scale anchors. Although these features may appear straightforward and easy to implement, few things are that easy and no appraisal instrument is without its limitations.
The comparative approach requires the rater to judge each individual against all others in the group and then make an overall ranking across all individuals. This method is not only cumbersome, it does not facilitate feedback. Employees respond negatively because their ranking depends entirely on who else is in the group at the time of the rating instead of on an absolute standard of performance. It is not always clear what performance criteria managers use in their ranking, which can pose legal problems when a performance appraisal is challenged in the courts.
The Graphic Rating Scale consists of job-related traits (e.g. knowledge, teamwork, communication) listed next to a 5-point rating scale (for example), where a 5 represents excellent or superior performance and a 1 represents poor or unsatisfactory performance. Although this approach is popular and easy to develop, it does not indicate what the employee needs to do to improve performance (e.g. teamwork).
The behavioral approach has the greatest research support of all of the appraisal methods. The most well-known examples of a behaviorally based instrument are the Behaviorally Anchored Rating Scale (BARS) (Smith and Kendall, 1963) and the Behavioral Observation Scale (BOS) (Latham and Wexley, 1994) (see Tables 5.1 and 5.2 for examples). Typical characteristics of methods that fall under this approach include a clearly defined set of performance dimensions that are job related and linked to the firm’s strategy. Managers, job incumbents, and experts participate in all stages of its development making users more comfortable with the terminology because they understand it. Any discrepancies in what is considered to be important, or in what the standards of performance are, can be resolved in the development stage. The rating scale includes information that brings meaning to the numbers ranging from 1 to 5 or 7 reflecting poor or exceptional performance. Rather, the scale anchors are defined in behavioral terms and represent critical incidents of effective or ineffective performance derived from a job analysis.
The behavioral approach minimizes concerns about criterion deficiency or contamination that were discussed earlier. The detailed job-related information in the instrument guides managers and increases their understanding of which behaviors are important and what the standards of performance are. Thus, there is greater standardization across raters and less ambiguity and inconsistency in their ratings. Furthermore, it is conducive to providing feedback to individuals that they can understand because the feedback is about observable job behaviors. Hence, individuals react favorably to these instruments (Tziner and Kopelman, 2002). Given the prevalence of rater errors, the bias in observation, recall, and the evaluation of performance, the importance of features like these cannot be overemphasized.
Table 5.1 Example of a behavior-anchored rating scale for the job of a manager: the performance dimension is crisis management
Performance dimension: crisis management
5 Responds immediately. Is aware of the needs of relevant individuals and proactive in addressing the needs. Communication is ongoing and frequent. Provides vision, leadership, direction, and reassurance.
4 Response is quick. Takes charge of the situation. Ensures all necessary individuals are in place. Provides direction.
3 Response is well organized and thorough. Contacts relevant individuals immediately. Provides direction in some aspects of the crisis.
2 Response is adequate and within acceptable time frame. Contacts most individuals who need to be informed. Provides some direction but still relies heavily on others’ leadership.
1 Fails to recognize the nature/magnitude of the crisis. Does not appreciate the potential implications of the crisis. Relies on others to show direction and leadership.
Table 5.2 Example of a behavior observation scale for the job of a manager: the performance dimension is problem solving
Performance dimension: problem solving
Almost Never 1 2 3 4 5 Almost Always
_____ Analyzes complex problems.
_____ Persists even when the solution is not clear or obvious.
_____ Develops new methods for solving problems.
_____ Implements innovative solutions.
_____ Takes responsibility for difficulties in the group.
_____ Addresses difficulties in the group.
_____ Seeks advice of team members and others when needed and appropriate.
One other approach that should be mentioned is the traditional results-based method of rating individuals. The emphasis here is on whether the individual achieves the objective output that is established at the onset of the rating period (e.g. total sales per month). Although results-based measures are objective indicators of an employee’s performance, and are less susceptible to the rater biases noted above, they are not without their drawbacks. Individuals may fail to meet the objectives as a result of factors beyond their control (e.g. poor economy, organizational constraints). However, these constraints are not always apparent to all stakeholders, nor are they agreed upon. It can be demotivating to receive less favorable appraisals in these circumstances. This approach makes it difficult for a manager to provide developmental feedback because it is not always clear why the objective or target was not met and managers and employees may have different explanations.
Although some firms still use the results-based approach in performance appraisal, it is often combined with a behavioral component. Lincoln Electric has one of the most talked about piece rate systems where individuals are evaluated and paid on the basis of objective/ quantifiable output (Hastings, 1999). However, this system also includes a behavioral component in which individuals are rated on the job dimensions of dependability, quality, ideas, and cooperation in addition to output. A more recent example of a results-oriented appraisal system can be found at Best Buy’s corporate headquarters, where it implemented a Results Oriented Work Environment in 2003 (Conlin, 2006). In this system, there are no schedules and very few mandatory meetings. Individuals are free to work wherever they want, whenever they want, as long as they achieve the results they agree to. Best Buy indicates that productivity has increased and voluntary turnover has decreased (Conlin, 2006).
Train raters
The effectiveness of any performance appraisal instrument also depends upon how well managers understand it, buy into it, and use it (Tziner, Murphy, and Cleveland, 2001). Rating employee performance is one of the most important responsibilities of managers. It is also among the most dreaded tasks. More often than not, this skill is developed by trial and error. Managers learn how to rate performance from the mistakes they make along the way rather than by any systematic attempt to improve their skill at observation, recall, and evaluation, and thus their self-efficacy as a rater. Even the courts recommend that raters receive training on the principles for conducting accurate and effective performance appraisals (Latham and Wexley, 1994).
Training managers can increase the accuracy of their ratings. But, the extent to which their accuracy increases depends on the content of the training and the characteristics of the training process. Highly structured and interactive workshops that provide participants with the opportunity for practice and feedback regarding their own rating patterns tend to be more effective than lecture-style information-only programs that simply describe how to rate performance more effectively (Latham and Wexley, 1994).
Programs in which norms for desired behaviors and effective performance are developed on site and used in the training to provide a common frame-of-reference have also shown favorable results (McIntyre, Smith, and Hassett, 1984). This style of training, labeled frame-of-reference, has the objective of standardizing raters’ perceptions of the relevant job behaviors and standards of effective and ineffective performance (Bernardin and Buckley, 1981). Although most BARS and BOS instruments facilitate this standardization, it is also important to train the managers to be aware of these processes.
Training designed to improve raters’ observational skills or decision-making skills related to performance appraisal has increased rater accuracy when delivered in the interactive workshop format (Hedge and Kavanagh, 1988). Training designed to reduce the classic rating errors (i.e. halo or leniency) has also been shown to be effective at decreasing these errors (Latham, Wexley, and Pursell, 1975).
In summary, the key elements of training programs that improve accuracy and reduce rater errors include (a) establish as part of the training job-relevant performance dimensions that are defined in behavioral terms, (b) establish examples of effective/ineffective performance with specific behaviors that reflect a 7 out of 7 compared to a 3 out of 7, etc., (c) provide an interactive session in which participants observe, evaluate, and discuss individuals who are presented on videotape performing at different levels, and (d) provide the participants with feedback on the accuracy of their ratings and provide them with additional opportunities to practice.
Accurate information is essential but not sufficient for appraising performance effectively. The manner in which the performance appraisal is communicated to the individual and how it is used for long-term planning are equally important for improving employee performance. The significance of this step is often underestimated. Hence, it can be the source of perceptions of unfairness, cause misunderstandings between the manager and employee, and lead to job dissatisfaction. This step is not the easiest part for managers especially when the performance appraisal that the manager has to communicate is negative, or when the employee has to be terminated (Tziner, 1999). However, the principles of goal setting, two-way communication, and coaching can make this process easier for both parties while maintaining the desired performance culture.
Goal setting
A performance appraisal, whether positive or negative, can be more effective when it is followed by goal setting (Locke and Latham, 1990). The body of research on the role of goal setting in improving performance, largely conducted by Latham and colleagues, can be summarized by several fundamentals. Goals that are specific and challenging yield greater improvement in performance than goals that are easy or moderate. These effects have been demonstrated in laboratory and field settings and in various jobs (Latham and Locke, 2007). Goals help individuals decide where to direct their effort or on which tasks to focus their attention. Setting specific goals can reduce ambiguity in what is expected from the individual and make something that seems abstract or unachievable more concrete. The amount of effort to exert on tasks and the persistence of that effort is guided by how challenging the goals are (Latham and Wexley, 1994). Challenging goals can be more motivating because they provide a sense of accomplishment when achieved. Goals that are defined in behavioral terms make it easier to provide action-oriented feedback when goals are not attained and to establish the reason why (Latham, Locke, and Fassina, 2002). A longitudinal study of executives revealed that leading firms develop specific action plans for individuals at all levels of performance regardless of whether they are high potential, average, or poor performing individuals (Michaels, Handfield-Jones, and Axelrod, 2001).
The motivating potential of goal setting depends upon how committed employees are to the goals. A large part of goal commitment rests upon basic principles of learning and coaching (Latham and Wexley, 1994). Employees need to believe that they can achieve the goals, even if they know that doing so will be difficult. Involving employees in the process and setting a reasonable number of goals (e.g. three to seven goals) can increase their self-efficacy, namely their belief that the goals are attainable. Individuals should perceive that goal achievement will lead to positive outcomes, that the positive outcomes will be realized after goal attainment, and that the outcomes are actually valued (Latham, 2001). The outcome can be a favorable performance appraisal, positive feedback, monetary rewards, or other intrinsic or extrinsic rewards. Regardless of the type of consequence, the employee needs to believe that the performance-outcome link exists. These conditions explain in part why setting goals can improve performance.
Two-way communication
One of the more difficult parts of the performance appraisal process is delivering the performance evaluation to the individual. Traditionally, managers filled out an appraisal form for each individual and shared the rating with the employee in a meeting. Rarely was the employee given any input or voice in the appraisal process. It is not surprising to find that this approach can lead to perceptions of bias and unfairness, and is unsuccessful when challenged in the courts.
Performance appraisals that are based upon elements of due process are perceived to be fairer (Taylor, Tracy, Renard, Harrison, and Carroll, 1995). These elements include knowledge of job-relevant performance dimensions (i.e. define job performance in line with the organization’s strategy and values and train raters), judgment based on a representative sample of behaviors (i.e. observe and record performance frequently and document using a behavioral performance appraisal instrument), and meetings that invite input from the individual (Folger, Konovsky, Cropanzano, 1992). The first two elements were covered in the section on accuracy and the third element will be discussed below.
The performance appraisal meeting is an essential part of communicating the performance appraisal. However, the thought of having to convey a less than favorable evaluation face to face can leave managers feeling uncomfortable and preferring to schedule a phone or lunch conversation or combining it with a meeting about something else altogether. But, the meeting should take place in person. The manager should be attentive during the meeting. Answering telephone calls or checking email sends conflicting messages. Setting aside time to meet and discuss performance signals the importance the firm places on the performance appraisal process and how much the firm values that individual.
The manager should recognize employees for goal attainment and explain how the goal helps the group, the firm, and the individual’s career development. Managers should focus the discussion around the individual’s actions and behaviors and not their personality. In circumstances when the goals are not attained, the manager should solicit input from the individual as to why. The meeting should not be the first time that the individual or manager is learning about a performance problem. If an employee is repeatedly late, this problem should be addressed immediately instead of waiting until the formal performance appraisal interview. If this pattern of behavior continues, even after repeated attempts to correct it, the performance appraisal meeting can be used to provide quantitative information on lateness frequency. During the meeting, the manager is advised to focus on the act of being late rather than on labeling the individual unreliable or lazy. The manager should focus on trying to solve the problem and be supportive, as the two parties try to reach an agreement on a remedy. This process of two-way communication is central to the success of the meeting. Research indicates that when these steps are followed, individuals perceive the process to be fairer (Taylor et al., 1995).
Ask for self-assessment
Managers should ask the employee for a self-assessment prior to the performance meeting. The self-assessment helps individuals reflect on their performance throughout the year and to justify their self-rating. The self-appraisal can be completed with the same instrument and language that the manager uses to make the appraisal (e.g. job relevant performance dimensions and anchors defined in behavioral terms), thereby further reducing ambiguity in what behaviors are being evaluated. Both parties should be prepared to discuss any discrepancies between the two appraisals. Although research suggests that there isn’t always agreement between self-appraisals and appraisals from other sources, when a behaviorally oriented appraisal instrument is used, there is greater agreement between the individual and supervisor (Schrader and Steiner, 1996). Furthermore, the exercise of going through a self-evaluation can pinpoint the sources of some misunderstandings and facilitate the discussion. When the individual’s input is factored into the appraisal, they perceive that they have been treated fairer than when it is not and report higher motivation to improve performance and greater satisfaction with the process (e.g. Cawley, Keeping, and Levy, 1998; Erdogan, Kraimer, and Liden, 2001).
Coach employees
Coaching as discussed here refers to the role of a “manager as coach” and not the coach as a third party who has been hired by the firm to help the employee develop specific skills. The formal performance appraisal may take place once a year. However, a manager should be coaching employees and providing feedback on an ongoing basis throughout the year. Historically, the manager’s role was perceived to be one of “command and control.” The manager derived power from the knowledge or information that he or she possessed and control from deciding when to disseminate it to the group. This style has become outdated and replaced by the “manager as coach” model. Year-round coaching that includes goal setting, participative communication, and problem solving improves productivity (Olivero, Bane, and Kopelman, 1997).
The foundation to effective coaching is the working relationship that a manager establishes with each individual. Although a manager may interact with some individuals more often than others, and may even feel a more positive affect toward some of them (Varma, DeNisi, and Peters, 1996), it is the responsibility of the manager to know each person and to be as objective as possible in making assessments. Mutual trust and respect are an important part of the coaching relationship (see Chapter 21). Not only do subordinates need to trust their manager and believe that the manager wants them to succeed, managers also need to trust their subordinates’ motivations and intentions. By focusing on common goals, both parties can learn to accept each other for who they are even though they may not always agree on an appraisal.
An essential part of the “manager as coach” is to address performance incidents directly and immediately (e.g. Campbell and Garfinkel, 1996). When a manager observes or learns that an employee has a performance problem, the manager should gather information from all the relevant parties about the specifics of an incident instead of assuming a set of circumstances, over-reacting, or laying blame. Their goal is to remedy the problem and remind the parties of the proper procedures/behaviors that are to be followed, why they matter, and then to ask for a justification as to why the procedures were not followed. Gathering input about “why” it happened is important because this information may reveal or uncover a flaw or breakdown in systems, a deeper problem, or training needs. As indicated earlier, managers should focus on the actions of individuals involved in the incident instead of criticizing the person. If managers ignore these incidents instead of addressing them directly when they occur or shortly after, employees may conclude that the incident did not represent a transgression, even if it was a transgression, that it is not that important or doesn’t really matter. If managers wait until the formal performance appraisal to address the behavior, the causes of the problems may have escalated and become so severe or relationships may be permanently damaged.
Examples of exceptional performance should also be rewarded even if simply with “praise” or verbal recognition. Acknowledging good performance sends the message that good things also get noticed, not just the bad things. Regardless of the positive or negative circumstances, managers should follow up with the employees to see if performance has improved or if any problems persist.
Managers should use a common language around job performance when coaching individuals. The first half of the chapter detailed the importance of defining job performance and designing an instrument around job relevant performance dimensions. Managers should use the same language when coaching individuals. Ambiguity in what is expected is reduced when individuals hear and see managers using this performance language repeatedly in their daily or weekly interactions. This consistency in language also reinforces the performance and feedback culture of the department and more broadly of the firm.
Manage the separation process of poor performers
Not everyone succeeds. Even valid selection systems are imperfect. Some individuals are assessed as having a high likelihood of performing well when in fact they do not. There will be occasions when the requisite ability and motivation is lacking; hence, these individuals should be terminated. However, the separation process needs to be handled carefully because perceptions of injustice can have psychological, not to mention physiological, consequences on the individual and increase the risk of litigation for the firm (Latham and Wexley, 1994; Roehling and Wright, 2006).
The assumption is that employees want to perform their job at least to an average level. If they are not performing there must be an explanation. For example, it may be the case that an employee is unaware of the poor performance, has different standards for what is considered to be an acceptable level of performance, argues that the poor performance is beyond their control and due to on-the-job constraints such as defective equipment, argues that they did not receive adequate training, believes that the manager holds a grudge against the employee, or is experiencing personal problems outside of work that are impeding the performance.
Before it is decided that termination is the answer, the manager should gather information and work with the individual to determine the underlying cause of the poor performance. This approach seeks to remedy the problem if possible and gives the employee an opportunity to improve. All possible alternative explanations, other than the employee does not have the ability or motivation to perform, should be ruled out before it is concluded that the employee should be terminated. The firm will be expected to provide strong documented evidence of poor performance and that the performance deficiency is dimensionally related to the job. Some firms have a policy of progressive discipline that must be followed before terminations are made. This process typically includes verbal warnings followed by written warnings and then termination.
The two cases described below are based upon true stories of employees’ experiences with the performance appraisal processes at firms. The first case illustrates a less effective style of managing performance problems. The second case illustrates how a manager can help an employee improve on certain dimensions of performance by applying some of the principles outlined in this chapter.
The case of Peter
Tom Ross leads a group of electrical engineers who work in research and development. Although Tom is satisfied with the performance of the group, the behavior of one of its members, Peter, is posing problems for the team. Peter also happens to be one of the stars. Unfortunately, Tom has not spoken to Peter about the behavior because he is afraid that it will create tension and that Peter might threaten to leave the firm in the middle of the project. Tom prefers to ignore the problem and to focus on meeting the project deadlines.
Tom keeps written records of all team members’ achievements and performance problems. He reviews his record of Peter:• Is late or misses meetings and expects to be briefed when he arrives, disrupting the flow of the meeting (e.g. missed meetings in September and November and was 20 minutes late for all other meetings).
• Is often impatient and interrupts team members who take a little longer to get to the point (e.g. interrupts members repeatedly and has sighed when some members speak).
• Appears headstrong and inflexible in his opinion even when evidence supports an alternative (e.g. decision to switch suppliers and cost-cutting strategy).
• Says what comes to his mind even if it offends team members (e.g. told a member that her report was elementary and shouted at a member when he suggested an extension on the deadline).
• Helps team members prepare their presentations (e.g. spent all day one Saturday helping a member with his presentation).
• Has a wide network of contacts that he shares with the team.
• Introduces team members to potential mentors (e.g. had members contact Peter’s former colleague about suppliers).
Tom lacks the self-efficacy to handle this problem and believes that if he just ignores Peter’s quirks the group will finish the project on time without upsetting the flow. He tells the other team members to be patient and to focus on Peter’s strengths. However, the problems intensify and two team members quit, leaving Tom short staffed and behind schedule.
The case of Sue
John Lee is a division engineer for a large aerospace firm. As division manager he is in charge of a staff of over 50 professional and technical personnel. Five of these professionals are designated as project engineers responsible for specific contracts. John has been busier than usual lately taking care of last minute details on a new contract and has left the project engineers on their own.
One of the project engineers is giving him reason to worry. John has heard rumors that Sue Wells (who joined the firm six months ago) is extremely aggressive with co-workers and difficult to work with. Others say that Sue does not always follow the rules and procedures but rather acts quickly before getting answers or consensus from her team. Sue is one of the strongest and most knowledgeable performers.
More specifically, John learned the following about Sue’s performance over the last few months:• Clients indicate that she is extremely knowledgeable about the project and willing to respond to their requests for modifications.
• Has good awareness of “problem clients” in the industry and has advised the firm wisely to avoid certain deals.
• Always blames others when things do not work out. A month ago a client backed down on a contract. Sue returned to the office and yelled at the administrator and team member who helped her manage the contract. She blamed them for the client’s decision and accused them of sloppy and slow work. In reality, the client’s decision had nothing to do with sloppy work. More recently, Sue noticed an error on a client report during the middle of her meeting with a client. She went back to the office and yelled at the team for their failure to notice the error. In reality, the team did notice the error and warned Sue about it but she did not respond.
John decided that he needs to meet with Sue to discuss these concerns and other things. It has been about two months since their last discussion. Below are the details of that meeting.
JOHN: Hi, Sue, how do you feel the last few months have been going for you here.
SUE: There have been ups and downs. I get frustrated by how slow people are in giving me the information that I need. If I wait for answers, I am afraid that the clients will get impatient and go elsewhere. We lost a client because of this.
JOHN: I remember that client. What happened?
SUE: I went to visit the client expecting that we were ready to close on the contract but the client pulled out. They told me that they received a better response and service from one of our competitors. I knew that this would happen. So, I went back to the office and made sure everyone on the team knew about this and that they could have prevented it from happening if they just listened to me and worked faster and better.
JOHN: I see - but I think everyone here is working really long hours just to keep up. With respect to that contract that we lost, most of the team worked overtime and took work home on weekends in an effort to turn it around quickly. I am not sure that we can expect more of them. The team felt very bad when they were blamed and told that they worked too slow and were sloppy. It is easy for us to get frustrated about a lot of things but we cannot take out these frustrations on the group. We are a team and need to work together on projects and respect each other. They know that you work hard too and want to help you.
SUE: Oh - I didn’t mean to offend anyone - I was just so disappointed that we lost the contract and probably over-reacted. What bothers me is that if processing contracts quicker gives us an edge over competitors, I just don’t see why people can’t work faster so that we get the contracts done sooner or why there are so many steps in the process anyway. We could have a much quicker turnaround if we removed even just two steps.
JOHN: Times are changing and there are more checks and balances today than ever . . . we need to manage our own expectations around timing of contracts and the expectations of the clients. There are ways to do this. How about giving Pam in Division II a call - she has a few strategies that might help. Most firms face the same constraints and legal obligations as we do with respect to approving contracts. Perhaps we can revisit the approval process during our planning meeting next month. We can also review the workload of our support staff to see if we need to expand the group or if there are any redundancies in procedures. How about keeping track of the situations when you feel that things are going too slow and talking to me about them to see if/where we can modify things.
SUE: I can do that.
Sue learned a lot from that discussion. She apologized to the team and thanked them for all of their hard work. She explained her concerns and asked for their input on the procedures. Together they prepared a plan for modifying approval procedures that conformed to legal requirements. They presented the plan to the manager at the next planning meeting and he agreed to circulate it to managers in other departments for their input.
CONCLUSION
The performance appraisal process has been criticized by employees, managers, and the courts as being biased, unfair, difficult to conduct, and invalid. Despite these concerns, the performance appraisal serves a necessary function in the workplace, and is not likely to go away. The principles of effective performance appraisal discussed throughout this chapter alleviate the criticisms noted above and can help managers realize the positive outcomes that are possible with an effective performance appraisal system.
To summarize, one step to achieving performance gains from this process is to make sure that the appraisal is based upon accurate performance information. Adopting a mindset of observing and recording performance as frequently as possible provides managers with the opportunity to deliver feedback about effective or ineffective performance immediately (as opposed to waiting until the end of the performance cycle). It also supplies them with a representative sample of behaviors that they can refer to when conducting and delivering the formal appraisal. Training managers on the performance appraisal process and using a performance appraisal instrument in which job-related performance dimensions and anchors are clearly defined can facilitate the process of documenting accurate information and delivering feedback that is developmental. Gathering input from alternative sources such as peers or customers can supplement the manager’s perspective.
Another important step involves how the performance appraisal is communicated to the employee and used to set objectives and employee development. Performance appraisal meetings that invite input from the individual and that focus on job-related behaviors create an environment that is supportive, where both parties can reach solutions to any potential problems. The process of setting challenging and specific goals that are to be achieved during the next performance cycle help the individuals know where they need to focus their effort. Although the formal appraisal meeting may take place once per year, ongoing feedback and coaching by the manager facilitates the learning and development process. The application of these principles has been shown to improve performance.
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Develop a performance appraisal instrument
Individuals and/or groups can learn a lot from going through the process of developing a performance appraisal instrument for their current job or for one of their group projects (if they are taking a course). Individuals/groups can apply the principles described in the section on accuracy (summarized below).
1. Reach agreement on what the deliverable is. For example, if the assignment is to conduct a “case analysis of an assigned case,” a deliverable can be a “written report that analyzes an assigned case.” More specifically, it can be a written report that identifies the strengths and problems inherent in the case, analyzes the problems using theories and concepts covered in the course, and provides recommendations.
2. Establish the group’s goal with respect to the quality and standards of the written report. For example, is the group’s goal to obtain an A grade on the assignment or to learn from the project, both, or something else altogether.
3. Establish the major responsibilities of each group member and translate these responsibilities into specific goals or actions.
4. Establish dimensions of performance and define them in behavioral terms. Dimensions can be grouped according to task dimensions, OCBs, and CWBs. Task dimensions can include timely submission of material to group members, depth of analysis of problems indentified in the case, appropriate use of theories, etc. OCBs can include reviews team members’ submission, respects team members, shares important information, etc. CWBs can include conforms to university policy and procedures regarding code of conduct, is not late or absent from meetings, etc.
5. Establish standards of performance for each dimension using clearly defined anchors on the rating scale. For example, on the job dimension “attendance” (7 = attends all meetings, 2 = missed half of the meetings).
Conduct a self-appraisal
Another useful exercise is to ask individuals to rate their own performance. Using the performance appraisal instrument at your current employer (or former place of employment, or the instrument developed in the above exercise), conduct a self-appraisal and be prepared to deliver your self-appraisal to your boss, a peer, or the group. Remember to keep in mind the principles outlined in this chapter when appraising your own performance and delivering the appraisal. This exercise can help individuals appreciate the difficulty of this process.
Evaluating a performance appraisal process
A valuable exercise is to ask individuals to evaluate a performance appraisal they experienced personally (or the performance appraisal process) at their current employer or their former place of employment against the principles outlined in this chapter. They are asked to consider the following information in their evaluation:1. What are the dimensions of performance on which they were rated? Were these dimensions defined?
2. Were the standards of performance made clear to them and were they defined?
3. Did their boss only provide the appraisal or were alternative sources also considered?
4. Describe the performance appraisal instrument.
5. Describe the process of how the performance appraisal was communicated to them.