Performance Management Analysis: Best Practices in Performance Appraisal Systems

A survey of the landscape in the area of performance appraisal and management reveals a number of scholars and practitioners attempting to grapple with and address the inherent complexities arising when trying to capture the meaning of performance management and its ultimate measure and criterion validity. Without a clear definition of what is meant by performance management, the validity of the tools used – rating formats, appraisal processes, and interviews becomes questionable. A streamlined and unified definition of performance management is needed – performance management is a system that requires supervisors and employees to work together to set performance expectations, review results, assess individual and organizational needs, and plan for the future.

Setting Performance Expectations

Relationships Matter

There are three cogent relationships that ought to be considered in setting performance expectations, which include the relationships between:

(a) employees’ performance and organizational strategy

(b) individual performance and work team performance, and

(c) Performance assessments and employee satisfaction.

Moreover, performance expectations and their subsequent assessments should add organizational value. A direct correlation between individual performance and organizational culture and strategy should be apparent in the goals and objectives set for employees. Organizations that wish to promote and enhance teamwork should include work team assessments as a part of individual performance assessments when setting performance expectations.

Another consideration is for organizations to be cognizant when creating performance expectations of the impact the relationship between performance assessments has with employee satisfaction; thereby affecting the morale of the employees and ultimately the culture of the organization. It is further asserted that not only are performance expectations oftentimes not directly linked to organizational goals, but also unrealistic expectations are set for employees. Consequently negative feedback is given to employees on their failure to meet expectations that were impractical and improbable.

Setting a Criterion

The true goal of performance management is employee development and organizational improvement and as such the focus is placed on what the organization wishes to create for its future. A performance management system will include as its first step, the setting of performance expectations and outlines steps which begin with providing structure and defining performance, explicating the following:

(a) define the purpose of the job within the broader scope of the organization’s mission/goals, essential job duties, and responsibilities;

(b) define performance goals with measurable outcomes;

(c) define the priority of each job responsibility and goal;

(d) define performance standards for key components or accountabilities of the job – look at each job function to determine what the employee must do to exceed, meet or fail to meet expectations;

(e) conduct interim discussions and provide feedback on employee performance, preferably daily, summarized and discussed, at least, quarterly, and ensure that feedback is both positive and constructive.

Reviewing Results

Measurement and Assessment

There are three areas that must be considered within the process of reviewing results:

(a) what to evaluate,

(b) how to evaluate, and

(c) what measurements to use in evaluating.

In exploring what to evaluate, let’s examine rating formats used in employee evaluations that are based on behaviors or traits, describing the differences between the two, and between absolute and comparative judgments. Fundamentally, the behaviorally-based scales require the rater to judge either the frequency or quality of specific employee work activities; whereas trait-based scales require the rater to evaluate the employee on traits that are observed as the employee performs their job. Trait-based rating scales require the rater to evaluate the employee’s traits as broad competencies that are determined by a job analysis that focuses on tacit skills, abilities, and characteristics deemed important for successful job performance. The inherent challenge with this approach is that the rater is required to make inferences about the behaviors observed and link these to abstract underlying traits, and this may not be easy to accomplish, nor does it look at the work actually performed by the employee. Behaviorally-based approaches are viewed as superior to trait-based formats due to their legal defensibility, and because the link between behaviorally-based formats and on-the-job behaviors is conspicuous and direct.

The second important decision in rating formats that addresses how to evaluate is between absolute and comparative or relative judgment rating scales. In the aforementioned rating scales/formats, the rater is required to express an absolute performance judgment, whereas comparative or relative ranking scales ask that the rater to make relative comparisons amongst employees. Both the absolute and comparative/relative formats can skew results and provide misleading data. It is suggested that relative measurements be used to identify top performers within an organization, with the caveat that some ancillary absolute rating scales also be used.

The third facet to address in reviewing the result is to look at what measurements to use in evaluating. There are a plethora of tools and formats to use in evaluating performance; i.e., the performance appraisal form. The most popular are graphic rating scales, weighted checklists, behaviorally anchored rating scales, behavioral observation scales, critical incident measures, and objectives-based measures. There are two rating formats and three training approaches for what we posit as superior quality psychometric systems. Two examples of a behaviorally-based scale are the Behavioral Observation Scale (BOS) and the Behaviorally-Anchored Rating Scale (BARS). The BOS requires raters to assess the frequency of specific employee behaviors that they observe, while the BARS provide raters with behavioral expectations that are associated with behavioral anchors. With BARS the rater is required to observe employee performance and choose an anchor that best exemplifies the employee’s observable behavior.

Rater Training

Hureco Maverick’s consultants understand the importance of rater training and share three training approaches:

(a) rater errors training (RET),

(b) behavioral observation training (BOT), and

(c) frame-of-references training (FOR.)

The goal of RET is to teach raters about the common errors that can occur when assessing and rating, including the tendencies to base ratings on general impressions, or produce ratings across the entire spectrum of employees that rates them all as high-performers, or concentrating ratings on a narrow scope of the rating scale. In BOT the goal is to ensure raters understanding that the quality and accuracy of their ratings matter, so they are cognizant of the processing errors that can be made, including selective or incomplete observations of performance. Lastly, FOR’s goal is to train raters to ensure ratings are based on correct impressions, even if raters do not remember specific details of what a particular employee did or did not do, did or did not do well, they are basing their ratings on accurate recollection of their impressions concerning the employees work.

The Assessment Interview

Only the assessment interview can give insight into the employee’s voice and provide valuable information. Do not underestimate the importance of the supervisor’s role in the assessment interview for employee job satisfaction; studies show the existence of best practice guidelines that outline what should happen before and after the performance assessment interview, but few that specifically address the communication and setting of the actual assessment interview.

We suggest that the employee should be given the opportunity to talk most of the time, but in reality it is the supervisor who talks the most. With regard to the disadvantages of this uneven distribution of talking-time, it is noted that it appears in all areas of the performance assessment; however, the monopoly of expression occurs most often in the review of future plans for competency development. This is problematic, in that the employee is not allowed ample time for reflection, or an opportunity to define their own interest in self-development. Best practices arise from research that dictates a strategic approach to the assessment interview, with emphasis on the contextual variables having great influence on the outcomes of the interview. It is suggested that the context of the interview shapes interactions by providing a specific setting, sets of norms, and cultural features and that these affect employee morale and motivation.

Planning for the Future

An effective performance management system – specifically appraisal programs should not necessarily link job performance to salary increases and promotion decisions, but should do more to aid in the development of the competencies of individual employees that furthers the mission of the organization.  The emphasis should be placed on organizations developing performance improvement plans that utilize coaching from direct supervisors to increase job specific skills development. There should be direct linkage between performance management and training, which is about looking into the future and developing practical programs that result in improved performance that aids in increasing an organization’s market share, value proposition and competitive advantage. Organizations that integrate the two concepts of workplace training and performance assessments are aiming at the same outcomes – behavioral changes that garner the intended results for both individual and organization.

Insights of General Electric’s former CEO, Jack Welch, who in an executive symposium stated, with concern to planning for the future that “the biggest competitive advantage that a company can have is creating an environment where people can learn from each other.” An organization that engages its employees by asking for them to exchange knowledge with other employees in exchange for their reward – whether it is a raise, a bonus or stock options; and delivers clear, candid feedback on a consistent basis is one that will build the model for a learning organization.

There is a linkage between training and performance management; it is one that relies on managers/supervisors working with employees to obtain maximum performance and as such the use of self-appraisals are key. We recommend for supervisors, peers, subordinates, and self-appraisals to be conducted in order to reach an acceptable level of accuracy in assessment. Feedback gathered from multiple sources leads to more specificity and is generally directed toward the work itself with less generalizations and opinions based on the political climate of the organization.

Working Together

As a final consideration we address the need for supervisors and employees to work together in the creation of an effective performance management system. Employees should have a role in the creation of the performance appraisal process, including the dimensions that comprise the topic areas of their assessments. Employees’ contributions to the organizational goals cannot be complete without their perceptions and evaluations of their individual performance as it affects the organization’s performance. Thus organizations that move away from a top-down process to a bottom-up (inverted hierarchy pyramid) with concern to performance management processes and incorporate employees’ ideas, methods, and perceptions will fare better in achieving the organization’s goals, objectives and mission.

Hureco Maverick can help with the creation of best practices for performance management, performance appraisal systems, appraisal and rating formats, and performance feedback systems. Call us today to get started working together!

About the author

Regina Jones and Rashied K. Sharrieff-Al-Bey are the principals at Hureco Maverick; they enjoy co-authoring blogs, journal articles, case studies and white papers about various human resource, organization development and business topics.

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