Performance Management

Learning Outcomes
After studying this chapter, you should be able to
CHAPTER 8
Performance Management
LO 1 Explain what performance management is and how the
establishment of goals, ongoing performance feedback,
and the evaluation process are part of it.
LO 2 Describe the different sources of performance management information.
LO 3 Explain the various methods used to evaluate the performance of employees.
LO 4 Outline the characteristics of effective performance
review meetings and feedback sessions and ways in
which the performance of employees can be improved.
NEL
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NEL CHAPTER 8: Performance management 285
PERFORMANCE MANAGEMENT SYSTEMS
We have discussed some of the ways that you as a manager can acquire top-notch
employees and train and develop them. But how do you know if your efforts are really
paying off in terms of what the employees are contributing once they are on the job?
Performance management is the process of creating a work environment
in which people can perform to the best of their abilities in order to meet a
company’s goals. It is an entire work system that flows from a company’s goals.
Figure 8.1 shows the elements of a performance management process.
Performance reviews are the result of a process by which a manager evaluates an employee’s performance relative to the requirements of his or her job,
the goals set with his or her manager, and then uses the information to show the
person where improvements can be made and how. The reviews are a tool organizations can use to develop employees. Performance reviews are also referred
to as
performance appraisals and performance evaluations.
Typically, performance reviews are delivered annually, biannually, or sometimes on a quarterly basis. However, firms are finding that more frequent short
reviews that provide employees with feedback regularly are more effective. At
Achievers, a hiring startup that develops social applications, all employees have
quarterly reviews, or “feedback sessions,” that last just 20 minutes. “My job here
isn’t just to make sure everyone is crossing their T’s and dotting their I’s,” says
Brent Daily, cofounder and chief operating officer. “My job is to remove the
obstacles they face and allow them to do what they do best.”
1
In Figure 8.1, the performance review is just part of the performance management process. Aligning the goals of employees with those of the firm, providing
performance management
The process of creating a work
environment in which people can
perform to the best of their abilities
LEARNING OUTCOME 1
Does your school have a performance
management system in place to help
students succeed? If so, how do you
think the system might be similar or
different to performance management
systems in the workplace?
performance review
A process in which a manager
evaluates an employee’s performance
relative to the requirements of his
or her job and uses the information
to show the person where and how
improvements can be made
© 2019 Cengage Learning
FIGURE 8.1
STEPS IN THE PERFORMANCE MANAGEMENT PROCESS
STEP 3:
Ongoing
performance
feedback provided
during cycle
STEP 2:
Behavioural expectations
and standards set and
then aligned with employee
and organizational goals
STEP 1:
Goals set to
align with higher
level goals
STEP 6:
HR decision
making (e.g.,
pay, promotion,
etc.)
STEP 5:
Formal review
session
conducted
STEP 4:
Performance
appraised by
manager
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286 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
workers with continual on-the-job feedback, and encouraging and rewarding them
for a job done well are critical, too.
You might compare a performance review to taking a test in school. Do tests
motivate you? Do they make you want to truly excel, or do you just want to get
through them? Now compare your test-taking experience with an experience in
which your instructor talked to you about your career plans, complimented you
on your performance, and offered you suggestions for improving it. That probably
motivated you more.
We hope you can see the analogy we are making. Employers have to appraise
you, just as your university has to test you to be sure you graduate with the
qualifications people in society expect. But your performance in either scenario
consists of so much more than that. That is why organizations need to look at
the performance management system as a whole rather than just evaluations.
Evaluations are simply a logical extension of the day-to-day performance management process.
2
THE PURPOSES OF PERFORMANCE MANAGEMENT
It has been said that “what gets measured gets done.” Good performance management systems have the capability to influence employee behaviour and improve
an organization’s performance. One study showed that organizations with strong
performance management systems are 40 to 50 percent more likely to outperform
their competitors in the areas of revenue growth, productivity, profitability, and
market value.
3 In addition to improving a firm’s overall performance and profitability, Figure 8.2 shows the other two most common purposes of performance
management programs, which are developmental and administrative.
Developmental Purposes
A performance management system gives managers a concrete framework
they can use to gather information about an employee’s performance, provide
employees with feedback, and discuss an employee’s goals and how they align
with the organization’s goals. The goal is to build on a person’s strengths, eliminate potential weaknesses, and further his or her career while improving the
performance of the organization as well. By taking a developmental approach
to the performance management process, managers help employees understand
FIGURE 8.2
PURPOSES OF A PERFORMANCE REVIEW
DEVELOPMENTAL
Provide performance feedback
Identify individual strengths and weaknesses
Recognize individual performance
achievements
Help employees identify goals
Evaluate goal achievement of employees
Identify individual training needs
Determine organizational training needs
Reinforce authority structure
Allow employees to discuss concerns
Improve communication
Provide a forum for leaders to help
employees
Document personnel decisions
Promote employees
Determine transfers and assignments
Identify performance problems and
develop ways to correct them
Make retention, termination, and layoff
decisions
Validate selection criteria
Meet legal requirements
Evaluate training programs/progress
Assist with human resources planning
Make reward and compensation decisions
ADMINISTRATIVE
© 2019 Cengage Learning
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NEL CHAPTER 8: Performance management 287
that the feedback they are getting is designed to improve their future competencies and further their careers and are not being conducted simply to judge
them.
Many companies have redesigned their performance management programs
to focus more on employee development and learning. For example, a company
could integrate its system to work in concert with the company’s learning and
career management objectives. For each position in the firm, this system could
include a detailed job description, performance review information, and a career
planner to track employees’ long-term goals as well as access to the company’s
automated career library. The system would be ultimately linked to the company’s
succession policies. By creating this overall system, the role of the manager shifts
from that of “judge” to one of “coach.”
4
Administrative Purposes
Performance management programs provide input that can be used for the entire
range of HRM activities, such as promotions, transfers, layoffs, and pay decisions. The practice of “pay for performance”—basing employees’ pay on their
achievements—is found in all types of organizations. Studies have shown that
employees who earn performance-based pay are more satisfied.
5 Performance
data can also be used for HRP, to determine the relative worth of jobs, and as
criteria for recruiting particular types of employees and validating selection tests.
Yet another purpose of having a performance management system in place
along with performance reviews is to document HRM actions that can result in
legal action. Because of the government’s equal employment opportunity directives, employers need to maintain accurate, objective employee performance
records in order to defend themselves against possible charges of discrimination
when it comes to promotions, salaries, and terminations. Finally, the success of
the entire HR program depends on knowing how the performance of employees
compares to the goals established for them.
WHY PERFORMANCE MANAGEMENT SYSTEMS
SOMETIMES FAIL
Performance reviews often fall short of their potential. But why? According to a
survey by the Society for Human Resource Management, only half of HR professionals say annual performance reviews are an accurate appraisal of an employee’s
performance. Forty-nine percent believe their firms’ performance-review process
needs to be reevaluated.
6 Employees and managers alike often dread appraisals,
and complain that they are time consuming and ineffective.
Many people fault the formal review process. They believe it discourages
teamwork by focusing on workers’ individual achievements rather than what their
teams or firms accomplish. (Who gets the best rating and the biggest raise? Who
does not?) Others contend that evaluations are useful only at the extremes—for
highly effective or highly ineffective employees—and are not as useful for the
majority of employees in the middle. Other people point out that evaluations
often focus on short-term achievements rather than long-term improvement and
learning. Still others complain that the only feedback they get is during formal
evaluations, or they aren’t done at all. This can especially be a problem in small
businesses, as this chapter’s small business feature shows. It’s not uncommon for
managers to show new employees to their workstations and leave them on their
own or to assign tasks to employees on a routine basis with little or no feedback
on the tasks they have already completed. A more complete list of the reasons
why formal reviews fail is shown in Figure 8.3.
For reasons such as these, a substantial number of organizations no longer
conduct formal evaluations but use ongoing coaching, individual development
plans, or other feedback systems instead. Adobe has an ongoing “check-in” system
employees and their managers use to give each other feedback.
7 Written reviews
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288 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
aren’t required. (See Case Study 2 at the end of the chapter). Other organizations,
including Xerox, Motorola, and Procter & Gamble, have modified their performance evaluations to try to improve them.
8
DEVELOPING AN EFFECTIVE PERFORMANCE
MANAGEMENT SYSTEM
A firm’s HR department ordinarily has the primary responsibility for overseeing
and coordinating its performance management system. However, managers from
the company’s operating departments must also be actively involved, particularly
when it comes to helping establish the objectives for the program, to ensure
that they are aligned with a company’s strategic goals and translate to on-the-job
efforts and behaviours. Employees are also more likely to accept and be satisfied
with a performance management system when they have the chance to participate
in its development. Asking experienced employees to help identify important job
behaviours also helps ensure that the system takes into account all of the tasks
that need to be done in an organization, especially when major changes in the
firm and its jobs are taking place.
9
WHAT ARE THE PERFORMANCE STANDARDS?
Performance standards should be based on job-related requirements derived from
a job analysis and reflected in an employee’s job description and job specifications.
Establishing SMART goals can be very helpful for this purpose.
SMART goals are
goals that are
specific, measurable, attainable, realistic, and time-based—hence,
the abbreviation
SMART. Realistic and specific performance standards that are
actually attainable in a certain amount of time (given the firm’s current resources
and employee’s abilities), measurable, and written down communicate precise
information to employees. For example, “the ability and willingness to handle
LEARNING OUTCOME 2
As an employee, do you think you would
be in a good position to appraise your
boss? What aspects of his or her performance might you be in a good position
to appraise?
SMART goals
Goals that are specific, measurable,
achievable, realistic, and time-based
FIGURE 8.3
LET ME COUNT THE WAYS … REASONS WHY PERFORMANCE REVIEWS CAN FAIL
• The manager has prepared inadequately.
• The employee is not given clear objectives at the beginning of the performance period.
• The manager may not be able to observe performance or have all the information.
• The performance standards may not be clear.
• Ratings are inconsistent among supervisors or other raters.
• The manager rates the employee’s personality rather than performance.
• Raters may be subject to perceptual biases such as the halo and/or contrast effect.
• The time span for evaluation is inappropriate (either too short or too long).
• There is an overemphasis on uncharacteristic performance.
• Ratings are inflated because managers do not want to deal with “bad news.”
• The language in written evaluations is subjective or vague.
• Organizational politics or personal relationships could cloud judgments.
• There is no thorough discussion of the causes of performance problems.
• The manager may not be trained in evaluation or giving feedback.
• No follow-up and coaching after the evaluation.
Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no. 16 (August 19, 2002):
24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,”
Journal of Compensation and Benefits 10, no. 2 (1994): 5–11; “Seven Deadly
Sins of Performance Appraisals,”
Supervisory Management 39, no. 1 (1994): 7–8.
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NEL CHAPTER 8: Performance management 289
customer orders” is not as good a performance standard as “all customer orders
will be filled in 4 hours with a 98 percent accuracy rate.” When the standard is
expressed in specific, measurable terms, comparing an employee’s performance
against it results in more accurate feedback.
As Figure 8.4 shows, there are four basic elements that must be considered
when establishing performance standards: strategic relevance, criterion deficiency,
criterion contamination, and reliability.
Strategic Relevance
Strategic relevance refers to the extent to which the performance standards relate
to the strategic objectives of the organization in which they are applied. For
example, if an organization has established a standard that “95 percent of all
FIGURE 8.4
ESTABLISHING PERFORMANCE STANDARDS
Reliability: Measures that
are consistent across
raters and over time
Criterion deficiency: Aspects of actual
performance that are not measured
Actual performance
Strategic relevance:
Performance standards
linked to organizational
goals and competencies
Zone of valid
assessment
Performance measures
Criterion contamination:
Elements that affect the
appraisal measures that
are not part of the actual
performance
© 2019 Cengage Learning
SMART goals can help improve the
performance of employees as well
as remove the vagueness and subjectivity of performance reviews.
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290 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
customer complaints are to be resolved in one day,” then it is relevant for the
customer service representatives to be held to this standard when they are evaluated. Companies such as 3M have strategic objectives to the effect that a certain
percentage of their sales is to be generated from products developed within
the past five years. These objectives are then translated into performance standards for their employees. General Motors and Whirlpool’s strategic objectives
include cost, quality, and speed, and the two companies have developed metrics
to identify and compare their performance around the world on these measures.
A strategy-driven performance review process also provides the documentation
HR managers need to justify training expenses in order to close any gaps between
employees’ current skills and those they will need in the future to execute the
firm’s strategy. Moreover, because they provide evidence of a person’s performance, review metrics based on a firm’s strategy are more defensible in court.
10
Criterion Deficiency
The performance standards should capture the entire range of an employee’s
performance. When they focus on a single criterion (such as sales revenues) to
the exclusion of other important but less quantifiable performance dimensions
(such as customer service), then the performance management system is said to
suffer from criterion deficiency.
11
Criterion Contamination
Just as performance criteria can be deficient, they can also be contaminated.
There are factors outside an employee’s control that can influence his or her
performance. A comparison of performance of production workers, for example,
should not be contaminated by the fact that some work with newer machines
than others do. A comparison of the performance of travelling salespeople should
not be contaminated by the fact that territories differ in terms of their sales
potential.
12
Reliability
As we discussed in Chapter 6, reliability refers to the stability or consistency of
a standard or the extent to which individuals tend to maintain a certain level
of performance over time. Reliability can be measured by correlating two sets of
ratings made by a single rater or by two different raters. For example, two managers would rate the same individual. Their ratings would then be compared to
determine interrater reliability.
To make sure managers are rating employees consistently, some companies
use a process called
calibration. During calibration meetings, a group of supervisors, led by their managers and facilitated by an HR professional, discuss the
performance of individual employees to ensure that all managers apply similar
standards to all of the firm’s employees. The supervisors begin the process by
rating employees whose performances are especially good or especially poor.
They then attempt to rate employees who lie more in the middle and try to
achieve a consensus on their performance. Initially, the ratings are likely to vary
considerably simply because some managers are hard raters and others are not.
Over subsequent evaluation periods and calibration meetings, however, the ratings should begin to converge, or become more similar.
As we will discuss, calibration meetings can be particularly helpful when it
comes to training new managers to appraise employees. The meetings can also
be very useful after a merger or acquisition—especially one that is global. Why?
Because differences in the corporate cultures and performance standards of the
formerly separate companies can cause the same employees to be rated quite
differently. When Lawson Software grew from 1,400 employees in 3 countries to
calibration
A process whereby managers meet to
discuss the performance of individual
employees to ensure that their
employee evaluations are in line with
one another
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NEL CHAPTER 8: Performance management 291
4,000 employees in 30 countries, it successfully used calibration to be sure its
managers across the globe were assessing employees accurately.
13
Fairness and Acceptability
One of the main concerns employees have about performance management systems in general and reviews in particular is fairness. Organizational politics, a
firm’s culture, the orientation of its managers, history, and current competitive
conditions can all affect how managers view how well their employees are doing
on the job as well as rate them.
14 Sometimes managers inflate reviews because
they want to obtain higher salaries for their employees or because higher ratings
for their subordinates make them look good as supervisors.
Even when reviews are supposed to be confidential, employees often have a
keen sense about whether the process is fair or not, or at least they think they do.
Employees who believe the system is unfair are likely to consider the process a
waste of time or feel frustrated and cynical. As we discussed earlier, in the section
on developing a performance management system, if employees are allowed input
as to what constitutes a good performance and how the performance management
system operates, they are more likely to believe that it’s fair, and the program is
more likely to be successful.
Acceptability relates to how difficult it is to administer and use the performance management system. If using it is time consuming or difficult or if it’s hard
to see how it’s really helping the organization, the system is likely to fail.
LEGAL ISSUES
Because performance reviews are used to make many personnel decisions, they
must meet certain legal requirements. Employers might face legal challenges
when reviews indicate that an employee’s performance is acceptable or above
average but then the person is later passed over for promotion, disciplined for
poor performance, discharged, or laid off from the organization. Companies such
as Goodyear and Ford have also faced legal battles in the United States because
their performance reviews were viewed as discriminatory against older workers.
15
So, from a legal perspective, performance reviews can be a double-edged
sword. You need them to help employees perform better and document your
actions as a manager, but if they are poorly done or inaccurate, or you don’t make
decisions based on them, you can find yourself in legal trouble. To avoid problems
such as these, performance reviews should meet the following legal guidelines:
• Performance ratings must be job related, with performance standards developed through a job analysis. Only evaluate those areas that are necessary for
effective job performance.
• Employees must be provided with clear, written job standards in advance of
their evaluations so they understand what they need to do to get top ratings.
• Managers who conduct the reviews must be able to observe the behaviour
they are rating. This implies having measurable standards with which to compare employee behaviour.
• Do not allow performance problems to continue unchecked. Document problems when they occur and refer to them in employees’ reviews. This information may prove decisive should an employee take legal action. An employer’s
credibility is strengthened when it can support performance evaluation ratings by documenting instances of poor performance.
• Supervisors should be trained to use review forms correctly and apply the
evaluation standards when making judgments.
• A firm’s HR department should review the evaluations to see if minority
groups are being adversely impacted. Having evaluations reviewed by a supervisor’s superior can also reduce the chance of biased reviews and reviews that
could be legally problematic.
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• The reviews should be discussed openly with employees and counselling
or corrective guidance offered to help poor performers improve their performance. Be open to the possibility that employees could be transferred to
other positions that better suit their abilities.
• An appeals procedure should be established to enable employees to express
their disagreement with the reviews.
16
SOURCES OF PERFORMANCE REVIEW INFORMATION
Given the complexity of today’s jobs, it is often unrealistic to presume that one
person can fully observe and evaluate an employee’s performance. At IBM,
employees are regularly reviewed by a broad cross-section of the company’s
leaders, not just their immediate bosses. As shown in Figure 8.5, the raters can
include supervisors, peers, team members, employees themselves, their subordinates, customers, vendors, and suppliers.
Manager/Supervisor
The manager and/or supervisor review has been the traditional approach to
evaluating an employee’s performance. In most instances, supervisors are in the
best position to perform this function, although it may not always be possible for
them to do so. Managers with many subordinates often complain that they do not
have the time to fully observe the performance of each of them. These managers
must then rely on performance records to evaluate an employee’s performance. If
reliable and valid measures are not available, the review is likely to be less than
accurate as a result. (Recall our earlier discussion of criterion deficiency and criterion contamination.) In addition, research has shown that the ratings managers
give employees they have known for less than one year are less reliable, which
can be a drawback of relying solely on information from managers.
17
The Employee
In many firms, employees are asked to evaluate themselves on self-review forms.
A
self-evaluation can increase an employee’s involvement in the review process
and get the employee thinking about his or her strengths and weaknesses. In other
self-evaluation
A performance evaluation done by the
employee being evaluated, generally
on an evaluation form completed
by the employee prior to the review
meeting
FIGURE 8.5
ALTERNATIVE SOURCES OF REVIEWS
Superior
Team
Vendors
Peers
Suppliers
Subord
inates
Self
Customers
members
© 2019 Cengage Learning
manager and/or supervisor
review
A performance evaluation done by
an employee’s manager and often
reviewed by a manager one level
higher
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NEL CHAPTER 8: Performance management 293
words, they serve as a catalyst for discussion. The employee and his or her manager then discuss the employee’s job performance and agree on a final evaluation.
It’s not uncommon for employees to present themselves in a highly favourable
light in self-evaluations or believe they will have more influence over the outcome
of a performance review. If that expectation is not met, the employee can become
frustrated. For this reason, self-evaluations are often best used for developmental
purposes rather than for administrative decisions.
18
Subordinates
Subordinate evaluations have been used by both large and small organizations
to give managers feedback on how their subordinates view them.
19 Subordinates
are in a good position to evaluate their managers because they are in frequent
contact with their superiors and occupy a unique position from which to observe
many performance-related behaviours, such as their leadership ability, ability to
delegate, employee supportiveness, and so on. Managers are often hesitant to be
evaluated by the people they supervise, particularly when it might be used as
a basis for compensation decisions. However, when the information is used for
developmental purposes, managers tend to be more open to the idea. Evidence
suggests that when managers heed the advice of their subordinates, their own
performance can improve substantially. To avoid any problems with retaliation,
subordinate reviews should be submitted anonymously, and the results of the
individuals combined in a single report.
20 The manager’s supervisor then uses the
information as part of the person’s final review.
Peers
Individuals of equal rank who work together are increasingly asked to evaluate
each other using a
peer evaluation. With peer evaluations, coworkers complete
an evaluation on the employee. The information is then usually compiled into
a single profile, which is given to the supervisor for use in the final review.
One advantage of peer evaluations is the belief that they furnish more accurate and valid information than evaluations by superiors. Supervisors often see
employees putting their best foot forward, whereas those who work with their
fellow employees on a regular basis may see a more realistic picture. Peers can
readily identify leadership and interpersonal skills along with other strengths and
weaknesses of their coworkers. For example, a superior asked to rate a patrol
officer on a dimension such as “dealing with the public” might not have had much
opportunity to observe it. Fellow officers, on the other hand, likely would have.
For employees who have trouble confronting their coworkers about problems,
the reviews provide a forum in which to address issues and resolve conflicts. They
also provide an opportunity to hand out praise.
21 However, peer evaluations alone
should not be used to make administrative decisions related to salaries, bonuses,
promotions, and other major decisions about an employee. They should also be
kept confidential so that interpersonal rivalries or hurt feelings don’t result among
coworkers. Instead of listing individual comments and ratings from an employee’s
peers, the ratings should be tallied to arrive at a composite score and the comments summarized by the worker’s supervisor.
Team Members
An extension of the peer evaluation is the team evaluation. In a team setting,
it may be nearly impossible to separate an individual’s contribution. To address
this issue, organizations have used team evaluations to evaluate the performance
of their teams as a whole.
22 These companies believe that team evaluations can
help break down barriers between individual employees and encourage a joint
effort on their part. Frequently, the system is complemented by the use of team
incentives or group variable pay (see Chapter 10).
subordinate evaluation
A performance review of a superior
by an employee, which is more
appropriate for developmental than for
administrative purposes
peer evaluation
A performance evaluation done by
one’s fellow employees, generally on
forms compiled into a single profile
for use in the evaluation meeting
conducted by the employee’s manager
team evaluation
A performance evaluation that
recognizes team accomplishment
rather than individual performance
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Customers
Customer evaluations are another source of performance evaluation information. External customers’ evaluations, of course, have been used for some time
to appraise restaurant personnel. However, companies such as FedEx and BMW
Canada are among the companies that have utilized external customers as well. To
provide feedback to its technicians and see how well they have performed, Sears
routinely calls customers after the technicians have serviced their appliances.
Other companies survey their vendors and suppliers as part of the evaluation
process. By including the firm’s business partners in the performance reviews,
managers hope to produce more objective evaluations, more effective employees,
more satisfied customers, and better business performance.
23
In contrast to external customers, internal customers include anyone inside
the organization who depends on an employee’s work output. For example, managers who rely on the HR department for selecting and training employees would
be candidates for conducting internal customer evaluations of employees in the
department or the department as a whole. For both developmental and administrative purposes, internal customers can provide extremely useful feedback about
the value added by an employee or team of employees.
PUTTING IT ALL TOGETHER:
360-DEGREE EVALUATIONS
Companies such as Intel and Disney are among the many organizations that have
used a multiple-rater approach—or
360-degree evaluation—that combines various sources of performance evaluation information.24 Jobs are multifaceted, and
different people see different things. As the name implies, 360-degree feedback
is intended to provide employees with as accurate a view of their performance
as possible by getting input from all angles: supervisors, peers, subordinates,
customers, and the like. The information is then compiled into a single document, which is synthesized by the employee’s manager as part of the overall
review.
Figure 8.6 shows a list of pros and cons of 360-degree evaluation. When Intel
established a 360-degree system, the company observed the following safeguards
to ensure its maximum quality and acceptance:
Ensure anonymity. Make certain that no employee ever knows how any
evaluation team member responded. (The supervisor’s rating is an exception
to this rule.)
Make respondents accountable. Supervisors should discuss each evaluation
team member’s input, letting each member know whether he or she used the
rating scales appropriately, whether his or her responses were reliable, and
how other participants rated the employee.
Prevent “gaming” of the system. Some individuals may try to help or hurt
an employee by giving either too high or too low an evaluation. Team
members may try to collude with one another by agreeing to give each
other uniformly high ratings. Supervisors should check for obviously invalid
responses.
Use statistical procedures. Use weighted averages or other quantitative approaches to combine evaluations. Supervisors should be careful
about using subjective combinations of data, which could undermine the
system.
Identify and quantify biases. Check for prejudices or preferences related to
age, gender, ethnicity, or other group factors.
25
Based on the experiences of companies such as Canadian Tire, described in
the Reality Check, it appears that 360-degree feedback can be a valuable approach
to performance appraisal. As with any appraisal technique, its success depends on
how managers use the information and how fairly employees are treated.
customer evaluation
A performance evaluation that includes
evaluation from both a firm’s external
and internal customers
360-degree evaluation
A performance evaluation done by
different people who interact with the
employee, generally on forms compiled
into a single profile for use in the
evaluation meeting conducted by the
employee’s manager
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NEL CHAPTER 8: Performance management 295
TRAINING APPRAISERS
Training appraisers can vastly improve the performance review process. A weakness of many performance evaluation programs is that raters are not adequately
trained for the task, and so the feedback they provide their subordinates is not
as accurate or useful as it might be or is actually destructive. Training appraisers
can vastly improve the performance evaluation process, however. According to
one HR manager: “What’s not important is the (evaluation) form or the (measuring) scale. What’s important is that managers can objectively observe people’s
performance and objectively give feedback on that performance.” Nonetheless, in
a survey of 55 HR managers from medium and large companies, more than half
said their companies did either little or no evaluation of how well their supervisors do evaluations.
26 In addition to providing supervisors with training, firms
should make accurately evaluating and developing their subordinates a standard
by which the supervisors themselves will be evaluated.
Establishing a Review Plan
A training program for raters is most effective when it follows a systematic process that begins by explaining the objectives of the firm’s performance management
system and its philosophy on reviews. For example, the rater needs to know the purpose for which the review is to be used. Using the review for compensation decisions
rather than development purposes can affect how the rater evaluates the employee
and may change the rater’s opinion of how the review form should be completed. The
mechanics of the rating system should also be explained, including how managers
should keep performance records and review them, how frequently the reviews are
to be conducted, who will conduct them, what the standards of performance are, and
how to go about preparing for reviews. In addition, evaluation training should alert
raters to the weaknesses and problems of evaluations so that they can be avoided.
Eliminating Rating Errors
Eliminating the subjective errors made by managers in the rating process is an
extremely important part of evaluating the performance of an employee. The
“halo error” we discussed in Chapter 6, when we looked at selecting employees,
Pros

• The system is more comprehensive because feedback is gathered from multiple perspectives.
• It may lessen bias and prejudice because feedback comes from more people, not one individual.
• The feedback from peers and others may improve an employee’s self-development.
• The system is complex in combining all the responses.
• The feedback can be intimidating and cause resentment if employees feel the respondents have “ganged up” on them.
• There may be conflicting opinions, although they may all be accurate from the respective standpoints.
• Raters must undergo some training.
• Employees may collude or “game” the system by giving invalid evaluations to one another.
• Raters may not feel accountable if their evaluations are anonymous.

Cons
FIGURE 8.6
PROS AND CONS OF A 360-DEGREE EVALUATION
Sources: Compiled from David A. Waldman, Leanne E. Atwater, and David Antonioni, “Has 360-Degree Feedback Gone Amok?” Academy of Management
Executive
12, no. 2 (May 1998): 86-94; Bruce Pfau, Ira Kay, Kenneth Nowak, and Jai Ghorpade, “Does 360-Degree Feedback Negatively Affect Company
Performance?”
HR Magazine 47, no. 6 (June 2002): 54-59; Maury Peiperl, “Getting 360-Degree Feedback Right,” Harvard Business Review 79, no. 1 (January
2001): 142-47; Joyce E. Bono and Amy E. Colbert, “Understanding Responses to Multi-Source Feedback: The Role of Core Self-Evaluations,”
Personnel
Psychology
58, no. 1 (Spring 2005): 171-205.
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296 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
“Accentuate the positive; build on leadership strengths” is
the principal theme of leadership performance evaluation and
development conducted by the Canadian Tire Corporation as
described by Janice Wismer, vice president of HR. Canadian Tire
is a network of interrelated businesses with retail, financial, and
petroleum interests. About 45,000 employees work in 1,000
retail stores across Canada.
The customized 360-degree feedback process used at
Canadian Tire is research based and designed to build a cadre
of great leaders. The first step in the design of the 360-degree
feedback instrument was to benchmark other organizations that
had effective 360-degree feedback processes. Twenty-seven
key employees at Canadian Tire were interviewed to identify the
attributes of their great leaders as measured by the standards of
the organization. These key leadership attributes were then discussed and evaluated in workshops with important stakeholders.
A total of 16 competencies were identified. Seven related to
“who one is”—characteristics such as
trustworthy, passionate,
and
curious. Nine others focused on “what one can do for the
team, business, and enterprise,” such as
make strategic choices,
motivate and celebrate, and communicate authentically.
To date, about 170 managers have been assessed by an
average of 9 colleagues, including peers, subordinates, and
bosses. Colleagues complete a self-survey, and all feedback
assessment is analyzed relative to their own organization and to
industry standards, which are maintained in a database. A confidential feedback report is given to each individual.
In addition to the generation of individual reports, an aggregate one-page executive summary is produced. The report,
presented as a matrix, provides a visual summary colour-coded
under each competency comparing aggregate feedback data for
all individuals in a defined business unit. The sample
360-degree matrix shown below lists key attributes across
the horizontal axis and the employee’s feedback along the
vertical axis. To maintain confidentiality, identifiers are assigned
to the supervisors and managers so that they can see their
relative standing but without knowing the identity of the other
employees. In the colour coding, red signifies a weak performance, yellow is an average performance, and green indicates
exceptional strengths. By using this 360-degree matrix, HR can
identify areas where groups of employees need professional
development, thus investing training dollars where it matters
most. In the example, Executives A, B, and C are perceived as
generally excellent across most of the eight areas of interest,
Reality Check
Canadian Tire 360-Degree Matrix
whereas Executives M, N, and O are experiencing considerable
difficulty. In addition, most of the executive team performed well
in areas 1, 2, and 3, having the most difficulty in area 8. In this
case, individual development plans may work well for executives having problems in areas 1, 2, and 3, whereas a group
development solution may be best designed for area 8.
According to Ed Haltrecht, PhD, CHRP, who specializes in
measurement and organizational leadership development, in
most organizations when performance feedback is presented,
both the employee and the manager focus on the reds—the
weaknesses—and try to work out methods of development to
improve this area. What is unique about Canadian Tire is that
the focus is on the positive. It has found that improvements in
weak areas (provided that they are not fundamental flaws) do
not affect overall performance, whereas improvements in areas
of strength bring managers from good to extraordinary. The
goal is to identify and strengthen attributes so employees will
distinguish and present themselves as extraordinary. Individuals
first address any “fundamental flaws,” either a very weak attribute of the individual or, more importantly, elements regarded
as critical to the organization. In the sample 360-degree matrix,
Executives I, L, N, and O have potential fundamental flaws in
areas 1 and 2. If there are no fundamental flaws, then development focuses on building strengths. This combination has
resulted in measurable gains in performance.
This approach is research based. One book,
The
Extraordinary Leader: Turning Good Managers into Great Leaders
,
by John Zenger and Joseph Folkman (New York: McGraw-Hill,
2002), presents several significant findings based on 225,000
evaluations of 20,000 people. Poor leaders were identified as
those scoring in the bottom 10 percent; extraordinary leaders
scored in the top 10 percent. Employee turnover in a call centre
was 19 percent for the units managed by the poor managers,
14 percent for the middle group, and 9 percent for the extraordinary leaders. In another case that looked at a bank, net incomes
for the bank generated by those groups whose managers were
extraordinary, average, and poor were $7 million, $3.7 million,
and $1.9 million, respectively. Employee satisfaction indices
were at the 80th percentile for top managers compared to the
18th percentile for the bottom-scoring managers. Likewise,
union vulnerability indices, which measure how attractive the
organization is to a union’s membership drive, reflected the 91st
percentile for the top-scoring managers compared to the 10th
percentile for the poor managers—that is, poorer managers are
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NEL CHAPTER 8: Performance management 297
more likely to attract union interest. Although the pay structure
was the same across different departments, those led by the
top-scoring managers had employees who were at the 65th
percentile in satisfaction with company pay and job security; the
employees of average managers were in the 50th percentile;
and poor managers’ employees scored at the 37th percentile for
satisfaction with company pay and job security.
Canadian Tire’s leadership development system also
recognizes two other significant research findings: first, extraordinary leaders have about three competencies at which they
excel, and developing a few strengths to very high performance
levels has a greater impact than improving several competencies from poor to average. Second, competencies travel
together, and improvement in one leads to significant progress
Source: Interview with Janice Wismer and Ed Haltrecht.
in others. Identifying these companion competencies has proven
to be extremely worthwhile. In a nutshell, these are the findings:
start with the right set of competencies or attributes, focus on
strengths, eliminate any fundamental flaws, and pay attention to
companion attributes.
The assessment feedback process at Canadian Tire is seen
as a tool for dialogue and for focusing on what makes a great
company and what matters in leadership. Those employees
who try to improve are given a developmental opportunities
guidebook. Canadian Tire has discovered that the best development methods are challenging stretch assignments, coaching
and mentoring, personal feedback, talks with consultants, and
training programs.
Source: Interview with Janice Wismer and Ed Haltrecht.

4.3 4.4 4.2 4.2 4.2 4.1
3.9
4.5
4.2 Mean
2002
A B C D E F G H I J K L M N O
4.4
4.4
4.2
4.2
4.2
4.2
4.2
4.1
4.1
4.1
3.9
3.6
4.4
4.4
3.8
4.4
4.3
3.3
4.3
4.2
4.4
3.8
4.3
4.2
4.4
4.2
3.8
4.1
4.2
4.3
4.2
4.1
4.0
4.3
4.4
4.1
4.0
3.7
4.4
4.2
4.3
4.0
4.1
3.7
4.2
4.0
3.8
4.3
4.0
4.3
4.1
4.3
4.2
4.2
4.1
4.0
4.0
3.8
3.7
4.2
4.1
4.3
3.2
3.9
4.1
3.7
4.0
4.3
3.9
4.2
2.9
3.3
4.3
4.3
4.1
4.2
3.9
3.6
4.0
3.5
3.9
4.0
4.2
4.2
4.3
4.2
4.0
4.3
4.1
3.9
3.6
3.9 3.9
Executive Mean
1. Treats others with respect.
2. Gives credit to others who
have contributed or performed
well.
3. Shows consistency
between words and action.
4. Models the core values
of the corporation; leads
by example.
5. Treats team members
as individuals based on
knowledge of their strengths
and development needs.
6. Takes actions that build a
high level of commitment to
work group goals and
objectives.
7. Obtains resources so that
the team has the knowledge,
skills, and experience required
to deliver results.
8. Where there is underlying
conflict, helps parties involved
bring up their issues and get
to the heart of the problem.

4.7
4.7
4.6
5.0
5.0
5.0
4.8
4.7
4.8
4.6
4.5
4.6
4.9
4.8
4.7
4.6
5.0
4.9
4.9
4.5
4.7
4.5
4.5
4.8
4.9
4.7
4.3
4.5
4.6
4.8
4.7
4.5
4.6
4.5
4.6
4.5
4.5
4.6
4.9
4.7
4.7
4.5
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298 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
can occur during the evaluation process if raters do not have carefully developed
descriptions of the employee behaviours being rated. The “horn error” is the
opposite of the halo effect. It occurs when a manager focuses on one negative
aspect about an employee and generalizes it into an overall poor evaluation rating.
A personality conflict between a manager and his or her employees increases the
probability of the horn effect, which can lead to a high level of frustration on the
employee’s part if it is not corrected.
27
Distributional Error
A distributional rating error occurs when a single rating is skewed toward an
entire group of employees. For example, raters who are reluctant to assign
either extremely high or extremely low ratings commit the
error of central
tendency
. In this case, all employees are rated about average. It is also common
for some raters to give unusually high or low ratings. For example, a manager
might erroneously assert, “All my employees are excellent” or “None of my
people are good enough.” These beliefs give rise to what is called
leniency or
strictness error
.28
One way to reduce distributional errors is to explain to raters that when
you are looking at large groups of employees, you should generally expect to
find significant differences among them. Using clearly defined characteristics or
dimensions of performance and providing meaningful descriptions of behaviour, known as “anchors,” on the scale can help raters determine how individual
employees should be rated. Another approach is to require ratings to conform
to a
forced distribution, which is also sometimes referred to as forced ranking.
Managers appraising employees under a forced distribution system are required to
place a certain percentage of employees into various performance categories. For
example, it may be required that 10 percent of ratings be poor (or excellent). This
is similar to the requirement in some schools that instructors grade on a curve. A
variation of this is peer ranking, whereby employees in a work group are ranked
against one another from best to worst.
Although forced distribution and peer ranking may solve leniency and strictness errors, they can create other rating errors—particularly if most employees are
performing above the standard, in the middle, or below the standard. Similarly,
with peer ranking, three employees all performing nearly at the same level would
have to be ranked 1, 2, and 3. That creates a misleading picture of how well the
individuals are performing, which in turn affects their pay, promotability, and so
forth. Companies, including Ford, Goodyear (described in the Business Case), and
Microsoft, abandoned their forced ranking systems after lawsuits, lower morale,
decreased teamwork, and destructive employee competition ensued following
their use. In addition, not all corporate cultures are conducive to forced ranking
systems. For example, at Starbucks, which fosters a corporate climate based on
teamwork, using a forced ranking system would probably be counterproductive.
Because of the legal issues related to forced ranking, companies that use it obviously need to carefully train their appraisers.
29
Temporal (Recency) Error
Some rating errors are temporal in that the performance review is biased either
favourably or unfavourably depending on the way performance information is
selected, evaluated, and organized by the rater over time. For example, when
the evaluation is based largely on the employee’s recent behaviour, good or
bad, the rater has committed the
temporal (recency) error. Managers who give
higher ratings because they believe an employee is “showing improvement” may
unwittingly be committing recency error. Having the rater routinely document
employee accomplishments and failures throughout the whole evaluation period
can minimize the recency error. One way for managers to do this is by keeping
a diary or a log.
error of central tendency
A performance rating error in which all
employees are rated about average
leniency or strictness error
A performance rating error in which
the appraiser tends to give employees
either unusually high or unusually low
ratings
forced distribution
A performance ranking system
whereby raters are required to place a
certain percentage of employees into
various performance categories
temporal (recency) error
A performance rating error in which
the evaluation is based largely on the
employee’s most recent behaviour
rather than on behaviour throughout
the evaluation period
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NEL CHAPTER 8: Performance management 299
Contrast Error
Contrast error occurs when an employee’s evaluation is biased either upward or
downward because of another employee’s performance. For example, an average
employee may appear very productive when compared with a poor performer.
However, that same employee could appear unproductive when compared with
a star performer. Contrast errors are most likely when raters are required to rank
employees in order from the best to the poorest.
30
Similar-to-Me Error
The similar-to-me error occurs when a supervisor inflates the evaluations of
people with whom they have something in common. For example, if both the
manager and the employee are from the same town or went to the same schools,
the manager may unwittingly have a more favourable impression of the employee.
The similar-to-me error can be powerful, and when the similarity is based on race,
religion, or gender, it can result in discrimination.
Research shows that performance appraisals can have a positive financial impact, but there is the potential to lose money
if the wrong system is chosen. Goodyear Tire & Rubber Co.
abandoned a performance rating system for salaried employees
just as discrimination attorneys were planning to file a classaction lawsuit over it. Goodyear said it was dropping major parts
of its program, including its so-called 10-80-10 feature, which
essentially graded all salaried employees on a curve. The top
10 percent were rated A, the middle 80 percent were rated B,
and the bottom 10 percent were rated C. Those falling in the
bottom 10 percent weren’t eligible for raises or bonuses and
were warned that they might lose their jobs.
The lawsuit alleged that the workers who got C ratings were humiliated and stigmatized among their peers and
managers. The legal arm of the AARP, formerly known as the
American Association of Retired Persons, joined the lawsuit
as co-counsel. Most of the plaintiffs who got C rankings in the
case were Goodyear employees who were over 50 years old.
“This case will send a clear message that performance rating
schemes that target older workers for unfair treatment are
illegal and will not be tolerated,” said Laurie McCann of AARP.
Jack McGilvrey, a 59-year-old salaried employee, was one
of those named in the suit. He claimed that he always received
ratings of at least “good/effective performer” in his formal
performance reviews up through the late 1990s. In 2000, he
was ranked “highly effective.” But in February 2001, he was
transferred to a new department and shortly thereafter was
given a C rating in his performance review. The suit asserted
that Mr. McGilvrey didn’t deserve the rating and received it as
part of Goodyear’s plan to discriminate against older employees.
He was later dismissed.
The lawsuit against Goodyear has many parallels to one
filed in 2001 against Ford Motor Co. In that case, also joined by
AARP, the company modified its plans in the face of a legal challenge. The Ford case was eventually settled.
In modifying its white-collar ranking system, Goodyear
said it would replace those A, B, and C rankings with the terms
exceeds expectations, meets expectations, and unsatisfactory.
There will be no requirement to assign those ratings to set
percentages of employees. The company also said it was stepping up training for managers so they learn to do a better job of
conducting performance reviews.
Ranking employees is also demotivating. Dr. Dunning, a
Cornell psychologist identified a concept which he labelled “illusory
superiority,” the assumption that people think that they are actually
better than their peers in most tasks. So if employees approach a
performance review thinking that they are above average, but are
actually ranking lower, they leave the interview demotivated.
The Business Case
Rank and Yank
Sources: “What Are Some Better Alternatives to Bell Curve Rank and Yank,” https://www.quora.com/What-are-some-better-alternatives-to-Bell-Curve-Rankand-Yank-Performance-Appraisal, retrieved June 13, 2018; Timothy Aeppel, “Goodyear Ends Ratings System Ahead of Discrimination Suit,” The Wall Street
Journal Online
(September 12, 2002): B8. Copyright © 2002 Dow Jones & Company, Inc. Reprinted with permission of Dow Jones & Company, Inc. in the format
Textbook, via Copyright Clearance Center.
contrast error
A performance rating error in which
an employee’s evaluation is biased
either upward or downward because
of comparison with another employee
just previously evaluated
similar-to-me error
A performance rating error in which
an appraiser inflates the evaluation
of an employee because of a mutual
personal connection
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300 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
Furthermore, raters should be aware of any stereotypes they may hold toward
particular groups. For example, one study found that men who experience conflicts between family and work received lower overall performance ratings than
men who did not experience such conflicts. Women, on the other hand, were
judged no differently whether they experienced family–work conflicts or not.
31
Holding “mock” calibration meetings can help trainers improve the accuracy of their ratings. The training can pay off, particularly when participants
have the opportunity to (1) observe other managers making errors, (2) actively
participate in discovering their own errors, and (3) practise job-related tasks to
reduce the errors they tend to make.
32 Google, which often conducts performance
reviews with input from employee groups, has compiled a “cognitive biases” list
for employees to refer to as they discuss ratings.
33
Other companies, including the consulting firm Accenture and the software
developer SAP, are experimenting with
machine learning to collect data on
employees’ work and analyze it to get an unbiased picture of a person’s performance. Machine learning is a type of artificial intelligence that allows computers
to discover new insights in data without being programmed where to look for it.
34
Feedback Training
A training program for raters should provide some pointers managers can use to
provide performance feedback to employees on an ongoing basis and during formal
reviews and feedback sessions. During formal reviews in particular, many managers
are as nervous about giving feedback as employees are about receiving it. Often they
just want them to be over. When this happens, managers do not engage employees
in much of a conversation during the reviews, which is a major drawback.
Managers need to understand that employees want to know how they are doing
and how they can improve. They are less eager to be appraised or judged. This is
why it is important for their managers to provide them with ongoing feedback and
not just “dump on them” during a formal performance evaluation. If an employee
is doing something wrong, waiting for a formal evaluation later in the year to communicate that information is the wrong approach. The person needs to be corrected
immediately.
Even when appraising an outstanding employee, managers often are reluctant
to evaluate an employee’s performance. Sometimes it is as simple as the manager
lacks the skills to execute an effective performance review session; sometimes
there is never enough money to recognize even the top performer. So reviews
Performance evaluation programs
are most effective when managers
have been properly trained to adequately observe and give feedback
to their employees.
Andrey_Popov/Shutterstock.com
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NEL CHAPTER 8: Performance management 301
are postponed or handled poorly, and the result is that the organization’s best
performers are left frustrated, angry, disillusioned, and demotivated.
Conflicting purposes of the review can also hamper the effectiveness of the
feedback employees receive. For example, if a review program is used to determine an employee’s future pay and at the same time to motivate the person to
perform better, the two purposes can end up conflicting with one another. Often
when salary decisions are discussed during a performance review, they tend to
become the dominant topic of conversation, and managers spend a lot of time
justifying their pay decisions. As a result, ways to improve the employee’s future
job performance get less discussion.
Feedback training should cover at least three basic areas: (1) communicating
effectively so as to gain the employee’s support, (2) diagnosing the root causes
of performance problems, and (3) setting goals and objectives for the employee
to achieve in conjunction with the feedback. A checklist such as the one in
Highlights in HRM 8.1 can be used to help supervisors prepare for performance
review meetings so that their subordinates get the best information as possible
from the result.
PERFORMANCE REVIEW METHODS
Now that you understand more about performance management, the question is how do you go about measuring, or appraising, it? Performance review
methods can be broadly classified as measuring traits, behaviours, or results. Trait
approaches based on people’s characteristics continue to be used despite their
subjectivity. Behavioural approaches provide more action-oriented information
to employees and therefore may be best for development. The results-oriented
approach has become more popular because it focuses on the measurable contributions that employees make to the organization.
Scheduling
1. Schedule the meeting and notify the employee 10 days to
2 weeks in advance.
2. Ask the employee to prepare for the session by reviewing
his or her performance, job objectives, and development
goals.
Preparing
1. Review the performance documentation collected throughout
the year. Concentrate on work patterns that have developed.
2. Be prepared to give specific examples of above- or
below-average performance.
3. If the performance meets or exceeds expectations,
discuss this and plan how to reinforce it. Where the
performance falls short of expectations, determine what
changes need to be made.
Highlights in HRM 8.1
Supervisor’s Checklist for the Performance Review Meeting
4. After the evaluation is written, set it aside for a few days
and then review it again.
Conducting the Review
1. Select a private location that is comfortable and free of
distractions.
2. Discuss each area of performance one at a time and
address both the employee’s strengths and shortcomings
in that area.
3. Be specific and descriptive, not general and judgmental.
Report occurrences rather than evaluating them.
4. Discuss your differences and resolve them.
5. Jointly discuss and design plans for taking corrective
action for growth and development.
6. Maintain a professional and supportive approach to the
discussion.
LEARNING OUTCOME 3
As an employee, would you rather be
evaluated on your personality traits, your
on-the-job behaviours, or the results that
you get?
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302 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
graphic rating scale method
A trait approach to performance rating
whereby each employee is rated
according to a scale of characteristics
TRAIT METHODS
Trait approaches are designed to measure the extent to which an employee possesses certain characteristics—such as dependability, reactivity, initiative, and
leadership—that are viewed as important for the job and the organization in general. Trait methods became popular because they are easy to develop. However,
if not designed carefully on the basis of job analysis, trait evaluations can be
notoriously biased and subjective.
Graphic Rating Scale Method
In the graphic rating scale method, each trait or characteristic to be rated is represented by a scale on which a rater indicates the degree to which an employee
possesses that trait or characteristic. In Highlights in HRM 8.2, the dimensions
Highlights in HRM 8.2
Graphic Rating Scale with Provision for Comments
© 2019 Cengage Learning

Appraise employee’s performance in PRESENT ASSIGNMENT. Check ( ) most
appropriate square. Appraisers are
urged to freely use the “Remarks” sections for
significant comments descriptive of the individual.
1. KNOWLEDGE OF
WORK:
Understanding of all
phases of his/her
work and related
matters
Needs instruction Has required knowledge Has exceptional knowledge
or guidance of own and related work of own and related work
2. INITIATIVE:
Ability to originate
or develop ideas
and to get things
started
Lacks imagination Meets necessary requirements Unusually resourceful
3. APPLICATION:
Attention and
application to
his/her work
Wastes time Steady and willing worker Exceptionally industrious
Needs close supervision
4. QUALITY OF
WORK:
Thoroughness,
neatness, and
accuracy of work
Needs improvement Regularly meets Consistently maintains
recognized standards highest quality
5. VOLUME OF
WORK:
Quantity of
acceptable work
Should be increased Regularly meets Unusually high output
recognized standards
Remarks:
Remarks:
Remarks:
Remarks:
Remarks:

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NEL CHAPTER 8: Performance management 303
mixed-standard scale method
A trait approach to performance rating
similar to other scale methods but
based on comparison with (better than,
equal to, or worse than) a standard
forced-choice method
A trait approach to performance rating
that requires the rater to choose from
statements designed to distinguish
between successful and unsuccessful
performance
are defined briefly, and some attempt is made to define the points on the scale.
Subjectivity bias is reduced when the dimensions on the scale and the scale points
are defined as precisely as possible.
35
Mixed-Standard Scale Method
The mixed-standard scale method is a modification of the basic rating scale
method. Rather than evaluating traits according to a single scale, the rater is given
three specific descriptions of each trait. These descriptions reflect three levels of
performance: superior, average, and inferior. As Highlights in HRM 8.3 discusses,
supervisors evaluate employees by indicating whether their performance is better
than, equal to, or worse than the standard for each behaviour.
Forced-Choice Method
The forced-choice method requires the rater to choose from statements, often
in pairs, that appear equally favourable or equally unfavourable but are designed
to distinguish between successful and unsuccessful performance. For example,
forced-choice pairs might include the following:
1. _____ a) Works hard _____ b) Works quickly
2. _____ a) Shows initiative _____ b) Is responsive to customers
3. _____ a) Work is reliable _____ b) Performance is good
The rater then selects one statement from the pair without knowing which
statement correctly describes successful job behaviour. Because it’s not immediately clear which response results in a higher rating, less bias results.
DIRECTIONS: Indicate whether the individual’s performance is
above (1), equal to (0), or lower than (2) each of the following
standards.
1.
_______ Employee uses good judgment when
addressing problems and provides workable alternatives;
however, at times does not take actions to prevent problems. (medium PROBLEM SOLVING)
2.
_______ Employee lacks supervisory skills, frequently
handles employees poorly, and is at times argumentative.
(low LEADERSHIP)
3.
_______ Employee is extremely cooperative, can be
expected to take the lead in developing cooperation
among employees, and completes job tasks with a positive attitude. (high COOPERATION)
4.
_______ Employee has effective supervision skills; and
encourages productivity, quality, and employee development. (medium LEADERSHIP)
Highlights in HRM 8.3
Example of a Mixed-Standard Scale
5. _______ Employee normally displays an argumentative
or defensive attitude toward fellow employees and job
assignments. (low COOPERATION)
6.
_______ Employee is generally agreeable but becomes
argumentative at times when given job assignments;
cooperates with other employees as expected. (medium
COOPERATION)
7.
_______ Employee is not good at solving problems, uses
poor judgment, and does not anticipate potential difficulties. (low PROBLEM SOLVING)
8.
_______ Employee anticipates potential problems and
provides creative, proactive alternative solutions; has
good attention to follow-up. (high PROBLEM SOLVING)
9.
_______ Employee displays skilled direction, effectively
coordinates unit activities, is generally a dynamic leader,
and motivates employees to high performance. (high
LEADERSHIP)
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304 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
behaviour observation scale
(BOS)
A behavioural approach to
performance rating that measures the
frequency of observed behaviour
Essay Method
The essay method requires the appraiser to compose a statement that best
describes the employee’s strengths and weaknesses and make recommendations
for his or her development. Often the essay method is combined with other rating
methods because it provides additional descriptive information about an employee’s performance that cannot be generated with a structured rating scale. Essays
also provide an excellent opportunity for supervisors to point out the unique
characteristics of the employee being appraised, including specific points about
the employee’s promotability, special talents, skills, strengths, and weaknesses.
A limitation of the essay method is that it can be subjective.
BEHAVIOURAL METHODS
As we mentioned, trait-oriented performance reviews can be vague and subjective. In contrast, behavioural methods specifically describe which actions should
(or should not) be exhibited on the job. Let’s look at some behavioural methods.
Critical Incident Method
Recall from Chapter 4 that a critical incident occurs when employee behaviour
results in unusual success or unusual failure. The manager keeps a log or diary
for each employee throughout the evaluation period and notes specific critical
incidents related to how well they perform.
The critical incident method can also help a manager counsel employees when
they are having performance problems. It also increases the objectivity of the evaluation by requiring the rater to use job performance criteria to justify the ratings.
36
Behavioural Checklist Method
The behavioural checklist method requires the rater to check statements on a list
that describe characteristics of the employee’s behaviour. A checklist developed
for salespeople who sell electronic products might include a number of statements, such as the following:
_______ Questions customers about their needs
_______ Identifies products that meet customers’ needs
_______ Keeps current about new developments in technology
_______ Processes orders correctly
Behaviourally Anchored Rating Scale (BARS)
A behaviourally anchored rating scale (BARS) consists of a series of 5 to 10
vertical scales—one for each important dimension of performance identified
through job analysis. These dimensions are “anchored” by behaviours identified
through a critical incident job analysis. The critical incidents are placed along the
scale and are assigned point values according to the opinions of experts. A BARS
for the job of firefighter is shown in the upper portion of Highlights in HRM 8.4.
A BARS is typically developed by a committee that includes both subordinates and managers. Employee participation can lead to greater acceptance of the
performance review process and of the performance measures that it uses. The
procedures followed in developing a BARS also result in scales that have a high
degree of content validity.
Behaviour Observation Scale (BOS)
A behaviour observation scale (BOS) is similar to a BARS in that they are both
based on critical incidents. However, the lower portion of Highlights in HRM 8.4
shows that rather than asking the evaluator to choose the most representative
behaviourally anchored rating
scale (BARS)
A behavioural approach to
performance rating that consists of
a series of vertical scales, one for
each important dimension of job
performance
essay method
A trait approach to performance rating
that requires the rater to compose
a statement describing employee
behaviour
critical incident
An unusual event that denotes superior
or inferior employee performance in
some part of the job
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NEL CHAPTER 8: Performance management 305
behavioural anchor, a BOS is designed to measure how frequently each behaviour
has been observed.
A BOS allows the appraiser to play the role of observer rather than of judge,
which makes it easier to provide constructive feedback to the employee, who will
be more willing to accept it. Research shows that users of the system frequently
prefer it over the BARS or trait scales for (1) maintaining objectivity, (2) distinguishing good performers from poor performers, (3) providing feedback, and
(4) identifying training needs.
37
RESULTS METHODS
Rather than looking at employees’ traits or on-the-job behaviours, many organizations evaluate employees’ accomplishments—such as the sales and output
results they achieve. Employees are responsible for their outcomes along with
discretion over the way they accomplish them (within limits). Advocates of
results-based reviews argue that they are more objective and empowering for
employees.
Example of a BARS for Firefighters
FIREFIGHTING STRATEGY: Knowledge of Fire
Characteristics. This area of performance concerns the
ability of a firefighter to understand fire characteristics
to develop the best strategy for fighting a fire.

HIGH 7 — Finds the fire when no one
else can
— Correctly assesses best
point of entry for fighting fire
6

 

5 — Uses type of smoke as indi
cator of type of fire
— Understands basic
AVERAGE
hydraulics
4

3 — Cannot tell the type of fire
by observing the colour of
flame

2 — Cannot identify the location
of the fire
— Will not change the fire
fighting strategy in spite of
LOW
1

flashbacks and other signs
that accelerants present
Highlights in HRM 8.4
BARS and BOS Examples
Source: Adapted from Landy, Jacobs, and Associates. Reprinted with permission.
Sales Productivity Never Always
1. Reviews individual productivity results with
manager
1 2 3 4 5
2. Suggests to peers
ways of building sales
1 2 3 4 5
3. Uncovers specific
needs for each contact
1 2 3 4 5
4. Keeps account plans
updated
1 2 3 4 5
5. Follows up on
customer leads
1 2 3 4 5
Sample Items from Behaviour Observation Scales
For each behaviour observed, use the following scale:
5 represents
almost always 95–100% of the time
4 represents
frequently 85–94% of the time
3 represents
sometimes 75–84% of the time
2 represents
seldom 65–74% of the time
1 represents
almost never 0–64% of the time
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306 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
Productivity Measures
A number of results measures are available to evaluate performance. Salespeople
are evaluated on the basis of their sales volume (both the number of units sold
and the dollar amount in revenues). Production workers are evaluated on the
basis of the number of units they produce and perhaps the scrap rate or number
of defects detected in their work. Executives are frequently evaluated on the basis
of a company’s profits or growth rate. Each of these measures directly links what
employees accomplish to results that benefit the organization. In this way, results
evaluations can directly align employee and organizational goals.
For jobs that are more service oriented, it is not enough to simply look at production or sales figures. Factors such as cooperation, adaptability, initiative, and
concern for human relations are important to the job success of employees too. If
these factors are important job standards, they should be added to the evaluation
review. Thus, to be realistic, both the results and the methods or processes used
to achieve them should be considered.
38
Management by Objectives
One method that attempts to overcome some of the limitations of results evaluations is management by objectives (MBO). Employees establish objectives
(such as production costs, sales per product, quality standards, and profits) by
consulting with their superiors. Employees are then evaluated based on these
objectives.
39 An MBO system (see Figure 8.7) consists of a cycle that begins with
setting the organization’s common goals and objectives and ultimately returns
to that step. The system acts as a goal-setting process whereby objectives are
established for the organization (Step 1), departments (Step 2), and individual
managers and employees (Step 3).
management by objectives
(MBO)
A results review process that rates the
performance of employees based on
their achievement of goals set mutually
by them and their manager
FIGURE 8.7
PERFORMANCE APPRAISAL UNDER AN MBO PROGRAM
Step 5B:
New inputs
are then
provided
Step 7:
Review of
organization
performance
Step 6:
Final
review
Step 5A:
Inappropriate
goals/metrics
deleted
Step 2:
Department
goals and
metrics
Step 1:
Organization
goals and
metrics

Step 3B:
Subordinate
proposes
goals and
metrics
Step 3A:
Supervisor
lists goals and
metrics for
subordinate
Step 4:
Mutual
agreement of
goals and
metrics

Step 5:
Interim
review
MANAGEMENT BY OBJECTIVES
© 2019 Cengage Learning
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NEL CHAPTER 8: Performance management 307
As Figure 8.7 shows, employees help establish specific goals, but those goals
are based on a broad statement of an employee’s responsibilities prepared by the
person’s supervisor. The employee-established goals are then discussed with the
supervisor and jointly reviewed and modified until both parties are satisfied with
them (Step 4). The goal statements are accompanied by a detailed account of the
actions the employee proposes to take to reach the goals and how they will be
measured (the metrics).
During periodic reviews, the progress the employee makes toward the goals is
then assessed (Step 5). The goals and metrics may be changed at this time as new
or additional information is received. After a period of time, the employee makes a
self-evaluation of what he or she has accomplished. Step 6 is an examination of the
employee’s self-evaluation by the supervisor and the employee together. The final
step (Step 7) is reviewing the connection between the employee’s performance
and the organization’s. Notice how the steps in an MBO program are similar to the
steps in Figure 8.1 at the beginning of the chapter but are more specific.
The Balanced Scorecard
The balanced scorecard (BSC), which we first discussed in Chapter 2, can be
used to appraise individual employees, teams, business units, and the corporation itself. A BSC evaluation takes into account four related categories: (1) financial measures, (2) customer measures, (3) process measures, and (4) learning
measures. Highlights in HRM 8.5 shows how a BSC in the financial category
Highlights in HRM 8.5
Personal Scorecard
Source: Reprinted by permission of Harvard Business Review. [Excerpt]. From Robert Kaplan and David Norton, “Using the Balanced Scorecard as a Strategic
Management System,”
Harvard Business Review (January-February 1996): 75–85. Copyright © 1996 by the Harvard Business School Publishing Corporation; all
rights reserved.

Team/Individual Objectives
2018 2019 2020 2021 2014 2015 2016 2017 1.
100 120 160 180 Earnings
35 55 85 100 Net profits
15 35 65 75 Net cash flow 2.
35 35 40 50 Production and development costs
30 30 35 30 Overhead and operating costs
100 105 108 110 Total annual production (million units) 3.
Targ ets
1.
.2 .4
3.
4.

CORPORATE OBJECTIVES
• Double our corporate value in 7 years.
• Increase our earnings by an average of 20% per year.
• Achieve an internal rate of return 2% above the cost of capital.
• Increase both production by 20% in the next decade.
Corporate Targets and Business-Unit Targets
Financial (millions of dollars)
Operating (millions of dollars)
Team/Individual Measures
Corporate
Business Unit
Team/Individual
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308 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
translates to a personal scorecard for an employee. The corporation’s financial
objectives have already been spelled out on the top of the scorecard. Then the
various business unit targets are added, followed by the target objectives of the
firm’s teams and individual employees. The scorecard allows each individual to
see clearly how his or her performance ties into the overall performance of the
firm.
The BSC evaluation method is similar to an MBO system in that it translates
broad corporate goals into divisional, departmental, team, and individual goals
in a cascading way. This ensures that implementing the firm’s strategy becomes
“everyone’s” job.
WHICH PERFORMANCE EVALUATION METHOD
SHOULD YOU USE?
Figure 8.8 lists some of the strengths and weaknesses of trait, behaviour, and
results approaches to appraising employees. Although researchers and HR managers generally believe that the more sophisticated and time-consuming methods
offer more useful information, this may not always be the case. Ronald Gross,
an industrial psychologist and HR consultant, states: “I’ve seen many systems fail
miserably because they’re too complex, too time-consuming, and too burdensome.
I’ve never seen a system fail because it was too simple.”
40
The accounting firm Deloitte uses a form with only four measures that it
administers quarterly. For example, one measure asks evaluators to use a fivepoint scale to answer the following question: “Given what I know of this person’s
performance, I would always want him or her on my team.”
41 One way to assess
whether an organization’s evaluation system is effective is by doing an annual, or
at least periodic, audit of the process using a survey instrument that both managers and employees complete on a periodic basis. This should give HR a better
sense of whether the evaluation process is improving.
FIGURE 8.8
A SUMMARY OF VARIOUS EVALUATION METHODS
© 2019 Cengage Learning

Advantages Disadvantages
Trait methods 1. Are inexpensive to develop
2. Use meaningful dimensions
3. Are easy to use
1. Have high potential for rating errors
2. Are not useful for employee counselling
3. Are not useful for allocating rewards
4. Are not useful for promotion decisions
Behavioural methods 1. Use specific performance dimensions
2. Are acceptable to employees and superiors
3. Are useful for providing feedback
4. Are fair for reward and promotion decisions
1. Can be time consuming to develop/use
2. Can be costly to develop
3. Have some potential for rating error
Results methods 1. Have less subjectivity bias
2. Are acceptable to employees and superiors
3. Link individual performance to organizational
performance
4. Encourage mutual goal setting
5. Are good for reward and promotion decisions
1. Are time consuming to develop/use
2. May encourage a short-term perspective
3. May use contaminated criteria
4. May use deficient criteria

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NEL CHAPTER 8: Performance management 309
PERFORMANCE REVIEW MEETINGS AND FEEDBACK
SESSIONS
After you have evaluated how well your employees are doing using one or more
evaluation methods, how should you begin to present the information to them in
an evaluation meeting or feedback session? The format for the meeting or session
will be determined in large part by its purpose, type of performance management
system used, and organization of a firm’s evaluation form. The meetings and sessions should be scheduled far enough in advance to allow the subordinate and
manager to prepare for the discussion. Usually, 10 days to 2 weeks is a sufficient
amount of lead time.
Sometimes discussing an employee’s past performance and future development goals can make for a meeting or feedback session that is too long. It can also
be difficult for a supervisor to perform the role of both evaluator and counsellor in
the same review period. Dividing the meeting into two sessions, one for the performance review and the other for the employee’s growth plans, can be helpful.
TYPES OF PERFORMANCE REVIEW MEETINGS
AND FEEDBACK SESSIONS
There are three basic types of formats for providing feedback during a performance evaluation meeting or feedback session: tell-and-sell, tell-and-listen, and
problem solving. No one format is best for every review session. Rather, managers
can use one or more of the formats depending on the purpose of the session, the
topic being discussed, and the receptiveness of the employee.
Tell-and-sell. The skills required in the tell-and-sell format include the ability
to persuade an employee to change his or her behaviour in a certain way. This
requires a manager to skillfully use motivational and persuasive techniques
to try to change the behaviour. But because there is less communication on
the part of the employee, this format is less than ideal. However, it may be
used if other formats haven’t worked, the employee is resistant to change, or
the employee is reluctant to participate in the discussion.
Tell-and-listen. In the tell-and-listen format, the appraiser or supervisor communicates the strong and weak points of an employee’s job performance
during the first part of the session. During the second part of the session,
the employee’s feelings about the evaluation are thoroughly explored. The
tell-and-listen method gives both managers and employees the opportunity to
release and work through any frustrating feelings they might have.
Problem solving. This format is the most proactive. Listening, accepting, and
responding to feelings are essential elements of it. However, the format goes
beyond an interest in the employee’s feelings. It seeks to obtain the employee’s
buy-in for a mutually agreed-upon way to overcome obstacles and improve
the person’s performance. One of the ways in which a problem-solving format
is accomplished is by beginning with the employee’s self-evaluation. That
way, the manager and employee can compare where they agree and disagree,
and focus on problem-solving instead of the manager trying to convince the
employee he or she is right.
Interestingly, Canadian researchers are suggesting that a fourth method, the
feed forward interview, may be the most effective way to ensure changes in behaviour. The feed forward method is described in Highlights in HRM 8.6.
CONDUCTING THE PERFORMANCE REVIEW MEETING
OR FEEDBACK SESSION
There are no hard-and-fast rules for how to conduct a review, but the guidelines
that follow can increase the willingness of employees to accept feedback, discuss
their performance and improve it, and increase their overall satisfaction with the
feedback process.
LEARNING OUTCOME 4
Imagine that you are a manager (or a
friend) trying to get someone to talk
about a performance problem. What
techniques would you use to facilitate
the discussion?
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310 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
Ask for a Self-Evaluation
Research shows that employees are more satisfied and view evaluation systems
as more fair when they have input into the process. A self-evaluation can be used
to discuss areas in which the manager and the employee have reached different
conclusions—not so much to resolve the “truth” as to work toward the resolution
of problems. A self-evaluation also ensures that the employee knows against what
criteria he or she is being evaluated, eliminating any potential surprises.
Invite Participation
Communication is a two-way street. Most experts advise supervisors to encourage
their employees to speak freely and listen closely to what they have to say. The
more likely that an employee is an active participant in that discussion, the more
likely it is that the root causes and obstacles to his or her performance will be
uncovered and that constructive ideas for improvement will be developed. In addition, research suggests that an employee’s participation is strongly related to the
person’s satisfaction with the feedback delivered, the extent to which the person
believes it is fair and useful, and the desire to improve his or her performance.
As a rule of thumb, supervisors should spend only about 30 to 35 percent of the
time talking. They should spend the rest of the time listening to the information
their employees volunteer and their responses to questions.
Express Appreciation
Because praise is a powerful motivator and employees are seeking positive feedback, it is frequently beneficial to start the session by expressing appreciation for
what the employee has done well. Surprisingly, not all supervisors think to do
this. They should. A performance review is the perfect time to tell people they
Critics of performance evaluation interviews claim that the
interviews do not result in positive performance change; that
employees become demotivated, not motivated; and most interviews are subject to “recency” effects, which do not capture
annual performance. But the majority of HR professionals and
some managers are reluctant to abolish performance evaluation
because of the need for employees to receive feedback. The
quest for a mechanism to provide feedback that results in motivated employees willing to change behaviour may have moved
a step forward.
Canadian researchers at York University and the University
of Toronto have developed an interview protocol that focuses
on the positive aspects of employee experiences instead of on
“what is wrong.” The theory, based on positive psychology, is
Highlights in HRM 8.6
The Feed Forward Performance Evaluation Interview
Sources: Budworth, M. H., Latham, G.P., and Manroop, L. “Looking Forward to Performance Improvement: A Field Test of the Feedforward Interview for
Performance Management,”
Human Resources Management 54, 1 (January–February 2015): 45–54; Humber, T. “Fixing the Broken Performance Review,”
Canadian HR Reporter 28, 5 (March 23, 2015): 6.
that the interview should focus on strengths, successes, and
values. By focusing on the positive, managers and employees
can identify the conditions under which success occurs.
It works like this. Managers are trained, for 2.5 hours, to
ask employees questions, paraphrased here, such as “Please
tell me about an incident where you felt especially good about
achieving a goal” and “What were the circumstances that
enabled you to be effective?” and “What can you do in this
coming year to create the conditions that will enable you to
be successful?” The results show that this interview process
increased performance four months later (compared to the
standard performance appraisal, where the emphasis was on
feedback regarding past performance). The manager was no
longer a judge or critic but an enabler of appreciative inquiry.
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NEL CHAPTER 8: Performance management 311
are valued, top performers in particular, so they feel encouraged and motivated
to continue to come to work day after day and remain with the firm.
Starting the meeting by talking about what the employee is doing well will
also make the person less defensive and more likely to talk about aspects of the
job that are not going so well. Don’t, however, deliberately “sandwich” positive
statements followed by negative ones, which are then followed by positive statements. If you do, the individual will be less likely to take the praise seriously and
view it instead as a way to soften the bad news. Furthermore, if employees are
given feedback on their performance on a regular basis, there will be no need to
sandwich bad news between good news.
Be Supportive and Demonstrate That You Care
One of the better techniques for engaging an employee in the problem-solving
process is for the manager to ask: “What can I do to help?” Employees frequently
attribute performance problems to either real or perceived obstacles (such as
bureaucratic procedures or inadequate resources). By being open and supportive,
the manager conveys to the employee that he or she will try to eliminate roadblocks and will work with the employee to achieve a higher standard of performance. Good managers also demonstrate during evaluations and on the job that
not only do they support their employees’ work efforts and ways to improve them,
they also care about them personally and want to help them get what they want
out of life. No one wants to be just a “cog in the machine.”
Minimize Criticism
Even the most stoic employees can absorb only so much criticism before they
start to get defensive. If an employee has many areas in need of improvement,
managers should focus on the issues that are most problematic or most important
to the job. In other words, criticism should be given in small doses.
Some tips for using criticism constructively include the following:
Consider whether it is really necessary. Sometimes a manager’s frustration
with a performance problem is little more than “letting off steam.” Be sure
that the criticism focuses on a recurrent problem or a consistent pattern of
behaviour over which the employee has control.
The purpose of a performance
appraisal interview is to initiate a
dialogue that will help an employee
improve his or her performance,
making the employee an active
participant in the discussion. Such
participation is strongly related to
an employee’s satisfaction with
appraisal feedback.
Alina Solovyova-Vincent/Getty Images
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312 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
Consider the person’s ability to handle it. Everyone handles criticism differently. Some people are able to handle it well. Others react very negatively to
even the slightest criticism.
Be specific and do not exaggerate. Sometimes we overstate problems in order to
be convincing or to demonstrate our concern. Try to keep criticism simple, factual, and to the point. Avoid using terms such as
always, completely, and never.
Watch your timing. Properly timed criticism can often mean the difference
between success and failure. Even good criticism given late in the day, for
example, can touch a raw nerve if the employee is tired. Take a break or save
it for another day.
Make improvement your goal. Frankly, it is hard to change a person’s behaviour with a single conversation, so “laying it on the line” is probably not a
good idea. Instead of getting into a “blame game” in which both manager and
employee enter into a potentially endless discussion of why a situation has
occurred, focus on the problem and devise a solution to it.
42
Establish Goals
The final step is establishing goals for the next performance-management cycle.
Jointly establishing goals and then revisiting and revising them at the end of the
cycle is a critical part of the review process. Revisiting goals during a performance
review also emphasizes the ongoing nature of the process. Because one of the
major purposes of the evaluation meeting or feedback session is to improve an
employee’s future performance, his or her manager should focus the person’s
attention on the future rather than the past:
• Emphasize strengths on which the employee can build rather than weaknesses to overcome.
• Drop unproductive tasks.
• Limit improvement plans to a few important items that can be accomplished
within a reasonable period of time and spell out how they will be achieved.
The plans might also include a list of resources, contact information for
people who can help the employee achieve the goals, and timetables for following up to ensure that they are met.
• Highlight how both the employee and the firm will excel if the goals are
achieved. Some supervisors will be tempted to establish difficult goals with
their employees, thinking that these will “motivate” them to achieve more. The
ethical issues surrounding unreasonable goals are discussed in Ethics in HRM.
Follow Up Day to Day
Often both managers and employees are frequently happy to finish formal performance reviews and file away the evaluation form. As we have emphasized, a
better approach is to have informal talks periodically, perhaps quarterly, to follow
up on the issues that were discussed. This puts managers in more of a coaching
role versus that of a judge. For example, as a sales manager, should you wait to
appraise your employees once or twice a year? Probably not. Most likely you
would want to monitor their sales on a weekly and monthly basis. Has a particular
salesperson met his or her customer contact numbers this week? Why or why not?
Is the salesperson closing deals with the people he or she does contact? If at the
six-month mark the salesperson isn’t making his or her goals, how can you help
the person if you haven’t provided ongoing feedback? The lack of sales will be
hard to make up at this point.
It’s not just salespeople who need continual feedback. All types of employees
can benefit from ongoing performance conversations with their managers.
“Millennials and Gen Z-ers don’t want hierarchy, formal feedback processes and
appraisals,” says Nicholas Greschner, the Canadian director of human resources
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NEL CHAPTER 8: Performance management 313
Employees are being asked to set performance goals, labelled
“stretch goals,” that ask them to do such things as double their
sales or increase response time to customers threefold. Stretch
goals are characterized by two attributes: extreme difficulty (for
example, Southwest Airlines had a stretch goal of a ten-minute
turn-around at airport gates when the industry standard was
close to one hour.) and extreme novelty (using new employee
work practices and changing the behaviour of customers,
Southwest Airlines did achieve their ten-minute turnaround
goal).
Research has shown that the establishment of goals
results in higher productivity. So if goals are good, are supergoals better? Research has shown that stretch goals result in
employees exhibiting three types of concerning behaviour:
1.
Burnout. Companies set ambitious goals for their
employees but fail to provide them with the resources
they need to achieve them. They are saying, in effect,
“We aren’t going to give you any more people or money,
so your solution is to work smarter and be creative.” The
only resource left to employees is their personal time, so
North Americans are working harder than employees in
any other developed country. They are working evenings
and weekends, with fewer vacations. “That’s immoral,”
says Kerr. “Companies have a moral obligation to provide
the tools to meet tough goals.”
2.
Risk taking. Stretch goals may lead to risk-taking behaviour on the part of employees. For instance, U.S. banks
set numerical goals for mortgages that resulted in selling
mortgages to high-risk customers, who subsequently
defaulted, causing a massive meltdown in the home real
estate market.
3.
Unethical behaviour. In 2013, Wells Fargo set a goal of
selling eight financial products per household, about five
times the industry average. As a result, sales associates, facing an impossible task, engaged in unethical
behaviour and opened $3.5 million fraudulent accounts.
Wells Fargo then faced more than 300 million in fines and
class-action lawsuits.
How should stretch goals be managed? The goal must be
seen as achievable and not provoke a reaction of “You’ve got to
be kidding.” People must also realize that creative energy can
be increased. For example, in one innovation training program,
teams are given an orange and told that each person must
handle the orange, but the orange must end up in the hands of
the person who started with it. All teams start by throwing the
orange to team members; this takes nine seconds. They try
to reduce the time to seven seconds by throwing faster or in
tighter circles. When told that it is possible to do this task in one
second, they get creative: they stack their hands, and the first
person drops the orange through the stacked but open hands
and catches it at the bottom.
If the stretch goals are not achieved, then punishment
should not be used. Be careful with high achievers who are
already stretching or these winners will feel like losers if they
cannot meet impossible goals. Provide the tools; asking people
to double their quota without ensuring backup is demoralizing.
Finally, share the wealth. If the achievement results in additional
funds flowing to the organization, split the incremental savings
or gains.
Some employees, masters at the politics of organizations,
play games with stretch goals. They negotiate hard for modest,
achievable goals while arguing that these are stretch targets.
Others, with high needs for achievement, accept the stretch
targets. At bonus time, the modest goal setters have met or
surpassed their goals and receive merit increases. Having failed
to achieve impossible targets, the less Machiavellian employees
receive nothing.
Ethics in HRM
Stretch Goals
Sources: Adapted from S. G. Shorr, “Stretch Goals: Motivating, Inspiring and Wildly Misused,” Uppercase HR (September 19, 2017), https://www.uppercasehr
.com/blog/setting-stretch-goals-for-employees; S. Sitkin, C. C. Miller, and K. E. See, “The Stretch Goal Paradox,”
Harvard Business Review (January–February,
2017), https://hbr.org/2017/01/the-stretch-goal-paradox, accessed June 14, 2018; S. Sherman, “Stretch Goals: The Dark Side of Asking for Miracles,”
Fortune
(November 13, 1995): 231; W. Immen, “The Goal: To Set Goals That Really Can Be Met,” The Globe and Mail (March 20, 2009): B12.
for the consulting firm Accenture. “They demand real-time, in-person feedback,
forward-looking conversations and support to grow their careers.”
43 Managers
need to constantly engage in a dialogue with their subordinates. Once the manager
and employees have a series of discussions, there is an ebb and flow of ideas, some
with the potential to serve as catalysts for improvement within the company.
44
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314 PART 3: DeVeLoPIng effectIVeneSS In HUman reSoUrceS NEL
The ultimate purpose is to better both parties. Of course, there is an app to help
supervisors provide feedback more often. Using an app called 15five, each week
managers at several companies in Western Canada asked employees a few questions that took 15 minutes to answer. Managers then spent five minutes with each
employee responding to feedback, discussing issues, and reinforcing successes.
Providing employees with feedback on a continual basis also helps them
know where they stand when they receive their formal evaluations. As a result,
the anxiety they experience during formal evaluations is often alleviated, and a
more meaningful conversation with them and their supervisors can take place.
If employees are surprised by their reviews, it is probably safe to say that their
supervisors have not been providing them with much ongoing feedback. Many
organizations are adopting a model of continuous feedback, as discussed in
Highlights in HRM 8.7.
IMPROVING PERFORMANCE
What if one of your employees is performing poorly? What can you do to help the
person perform better? This requires some diagnosis of the situation. But although
performance management systems can often tell us who is not performing well,
they typically cannot reveal why.
Identifying the Sources of Ineffective Performance
A person’s performance is a function of several factors, but perhaps it can be
boiled down to three primary concerns: ability, motivation, and environment. Each
individual has a unique pattern of strengths and weaknesses that play a part. But
Millennials want feedback often and consistently. It should be
done daily and not annually. But their bosses are uncomfortable with giving feedback, and this belief has to be changed.
The responsibility of the manger is to motivate and develop
employees. Short, consistent, and frequent mini meetings are
more effective and less difficult than the annual review. About
10 percent of global companies—including Adobe, Deloitte,
and Netflix—are favouring a culture heavier on continuous
feedback.
Accenture CEO Pierre Nanterme is a believer in continuous
feedback—so much so that his firm eliminated annual performance appraisals. “Performance is an ongoing activity. It’s
every day, after any client interaction or business interaction or
corporate interaction,” Mr. Nanterme said. “It’s much more fluid.
People want to know on an ongoing basis, ‘Am I doing right? Am
I moving in the right direction? Do you think I’m progressing?’
Highlights in HRM 8.7
Continuous Feedback, Please
Sources: V. Galt, “Annual Performance Reviews Getting the Axe from Some Companies,” The Globe and Mail (May 15, 2018), https://www.theglobeandmail.com/
report-on-business/careers/career-advice/life-at-work/annual-performance-reviews-getting-the-axe-from-some-companies/article27048834/, accessed
June 9, 2018; M. Vander Wier, “Perfecting Performance Reviews,”
Canadian HR Reporter (June 7, 2017), http://www.hrreporter.com/hr-trends/34177-perfectingperformance-reviews, accessed June 10, 2018; S. Burney and K. Moore, “Not Giving Regular Feedback? No Wonder You’re Losing Talent,” The Globe and Mail
(May 12, 2018), https://www.theglobeandmail.com/report-on-business/careers/leadership-lab/not-giving-regular-feedback-no-, accessed June 8, 2018.
Nobody’s going to wait for an annual cycle to get that feedback.
Now it’s all about instant performance management.” This type
of feedback is more natural and collaborative.
Because teamwork is so important in organizations today,
companies are starting to use crowdsourcing as part of their
performance management systems. In an HR context,
crowdsourcing involves continually gathering feedback, compliments,
and suggestions from the different people who work with an
employee using “social recognition” software and mobile apps.
(You can think of the applications as being somewhat analogous
to “liking” something someone posts on Facebook.) Achievers
and Globoforce are two such brands. Hey Taco and Growbot are
two crowdsourcing add-ons that can be used with the popular
chat platform Slack. When employees are recognized by other
workers for doing a good job, they get points that translate into
monetary and other rewards, such as time off or gift cards.
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NEL CHAPTER 8: Performance management 315
talented employees with low motivation are not likely to succeed. In addition,
other factors in the work environment—or even in the external environment,
which includes personal, family, and community concerns—can affect a person’s
performance either positively or negatively. To diagnose a poor performance,
managers should focus on these three interactive elements. Figure 8.9 provides
a better picture of how these three factors (ability, motivation, and environment)
can influence people’s performance.
As Figure 8.10 shows, if an employee’s performance is not up to standards,
the cause could be a skill problem (knowledge, abilities, technical competencies), an effort problem (motivation to get the job done), or some problem in the
external conditions of work (poor economic conditions, worker shortages due
to downsizing, difficult sales territories). Any one of these problem areas could
cause performance to suffer.
FIGURE 8.9
FACTORS THAT AFFECT AN EMPLOYEE’S PERFORMANCE
MOTIVATION
• Career ambition
• Goals and expectations
• Job satisfaction and
frustrations
• Fairness perceptions
• Relations with
coworkers
ENVIRONMENT
• Equipment/materials
• Job design
• Economic conditions
• Unions
• Rules and policies
• Managerial support
• Laws and regulations
ABILITY
• Technical skills
• Interpersonal skills
• Problem-solving skills
• Analytical skills
• Communication skills
• Physical limitations
© 2019 Cengage Learning
FIGURE 8.10
PERFORMANCE DIAGNOSIS
FACTORS AFFECTING PERFORMANCE
Ability
Results Behaviour Competency
Motivation Environment
PERFORMANCE METRIC
ACTION
If an employee demonstrates low
competency, training and
development are needed.
If an employee demonstrates
desired behaviour, but does not
achieve results, situational factors
may be affecting performance.
Changing the context, job design,
etc. may be most helpful.
If an employee has necessary
competencies but does not exhibit
desired behaviours, there may be a
motivational problem. Coaching
and/or reward incentives may be
helpful.

Competency
measures only
show “can do”
factors such as
knowledge, skill,
and/or ability.
Behavioural measu
both ability and mo
and “will do”). Beh
less contaminated
factors.
res are affected by
tivation (“can do”
aviours tend to be
by environmental
Results measures a
external environme
re affected by abilit
nt.
y, motivation, and

© 2019 Cengage Learning
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Too often, however, managers assume that poor performance is due first to
a lack of ability, second to poor motivation, and third to external conditions an
employee faces. Ironically, research also suggests that we tend to make just the
opposite attributions about our own performance. We first attribute poor performance to external constraints such as bad luck or factors out of our control. If
the problem is internal, then we typically attribute it to temporary factors such
as motivation or energy (“I had a bad day”) and only as a last resort admit that it
might be due to our abilities or lack of them. This difference in opinion between
the two parties can result in a negative feedback cycle if it’s not handled properly.
Managers who assume that employees are not motivated or not capable may begin
to treat them differently (perhaps supervising them too closely or watching for
their next mistake). This can decrease an employee’s motivation and cause him
or her to withdraw. Seeing this might confirm the manager’s initial belief that the
employee does not “measure up.” As you can probably tell, this “set-up-to-fail”
syndrome can be self-fulfilling and self-reinforcing.
45
Performance Diagnosis
So what can be done to diagnose the real reasons for poor performance? More
specifically, how can managers identify the root causes and get to work on a
solution that improves performance? By comparing different performance measures, managers can begin to get an idea of the underlying causes of performance
problems.
For example, as Figure 8.10 shows, results measures cannot distinguish
between ability, motivation, and situational determinants of performance. So if
someone is not achieving desired results, it could be due to ability, motivation, or
external constraints. On the other hand, behavioural measures are less affected by
external constraints. So if someone is demonstrating all the desired behaviours but
is not achieving the desired results, logic suggests that it might be due to factors
beyond his or her control. Other kinds of diagnoses are possible by comparing
different measures of performance. Only by correctly diagnosing the causes of
performance problems can managers—and employees—hope to improve them.
Managing Ineffective Performance
Once the sources of performance problems are known, a course of action can
be planned. This might involve providing training in areas that would increase
the knowledge and skills the employee needs to perform effectively. A transfer to
another job or department might give an employee a chance to become a more
effective member of the organization. In other instances, different ways to motivate the individual might have to be found. Sometimes underperformers do not
understand exactly what is expected of them. However, once their responsibilities
are clarified, they are in a position to take the corrective action needed to improve
their performance.
Focus on Changing the Behaviour, Not the Person
A bad performance on the part of an employee is likely to make his or her
supervisor’s job harder. As hard as it might be to do, the supervisor has to try to
separate the employee from the behaviour—it is not the employee who is bad,
but his or her actions exhibited on the job. One way to communicate this to
employees is not to make suggestions about personal traits they should change
but instead to suggest more acceptable ways of performing. For example, instead
of focusing on a person’s “unreliability,” a manager might focus on the fact that
the employee “has been late to work seven times this month.” It is difficult for
employees to change who they are; it is usually much easier for them to change
how they act.
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NEL CHAPTER 8: Performance management 317
If the ineffective performance persists, it may be necessary to transfer the
employee, take disciplinary action, or discharge the person from the organization. Not only is the ineffective behaviour likely affecting the manager and the
organization as a whole, but it is also probably affecting the person’s coworkers.
Whatever action is taken, however, should be done legally, fairly, and with an
understanding of the feelings of the individual involved. A new manager is likely
to need training in this area because it is one of the most difficult aspects of
supervising people.
So now you have your own business. That means you can dispense with those pesky, time-consuming performance reviews
everyone dreads, right? You never liked them as an employee. In
fact, maybe they helped solidify your desire to work for yourself.
Why would you like them any more as a manager, entrepreneur,
or small business owner?
Do not be so fast to dump formal performance evaluations.
Without them, you might end up “flying blind” when it comes
to some important performance metrics. “In a small business
in particular, the performance review is like a dashboard—it
gives you all kinds of gauges about quality, job knowledge, and
customer service,” says Robert Chanin, the director of client
services for the Alcott HR Group. “If there isn’t any gauge, you
don’t know if your business is doing well or not.”
Evaluating your employees also lets them know they are
not just human cogs in the production process—that you care
about them, their involvement in the firm, and their personal
goals. This can help a small business retain its top employees
rather than losing them to big companies, where they are often
treated more impersonally. The feedback can be verbal if the
reviews are for development purposes only. However, if the
evaluations are used in conjunction with raises and promotions,
they should be written.
In this chapter, we have covered many appraisal methods
under the broad categories of trait, behavioural, and results
models. Depending on the context, any of these may be suitable for a small business. However, in a small business, where
one’s role is unique, a results-based model is likely going to
be the most suitable model. For clarity, a results-based model
considers the employee’s objective outcomes against preestablished objectives. Let’s use the example of a carpenter named
John working for a small contracting company. Although there
are periods when there is enough carpentry work for him to
be occupied for the full day, the company regularly also turns
to John for assistance on client calls, as well as other miscellaneous work, such as painting. So how does one evaluate
John’s performance? In essence, John’s core responsibility is
carpentry, so John will be evaluated based on the effectiveness
of his carpentry in terms of quantity, quality, and the manner
in which it was delivered. This is a results-based assessment.
The other components of John’s role fall into the category of
“other duties as required.” Recognizing that these, even though
they are unstructured, form a regular part of John’s role, John’s
manager will likely speak to John regarding his performance
in these areas, drawing on the behavioural methods we have
reviewed, likely the critical incident method.
Small companies looking for assistance in training in or
development of effective performance appraisal may consider
working with outside training companies or HR consultants to
effectively establish performance appraisal processes. Small
businesses with few employees or that are just launching
their performance management systems can utilize off-theshelf systems consisting of either printed forms or software.
Popular software brands include Success Factors’ Performance
Management system, Featherlight Software, and Halogen’s
evaluation product—the latter two are Web based. Generally, a
manager can customize evaluation forms in software packages
by selecting elements from a list of attributes and behaviours
that describe on-the-job success for a position.
Keep in mind that performance reviews are not about
the forms, however. They are a two-way discussion designed
to benefit both parties. In addition to your employees learning
about how they can improve their performance, the evaluations
can help you learn how to improve yours as well.
Small Business Application
Does a Small Business Need to Formally Evaluate Its Employees?
Sources: Leanne Hoaglund-Smith, “Small Business Roles and Responsibilities, Require Clarity, Documentation,” Chicago Tribune (February 10, 2017),
http://www.chicagotribune.com; Amy Linn, “Boost Performance with Performance Reviews,”
Small Business Review, http://smallbusinessreview.com;
David Javitch, “How to Survive Employee Appraisals,”
Entrepreneur.com, http://www.entrepreneur.com.
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