384 Section 3 Training and Developing Human Resources

Standards are often set by someone external to the job, such as a supervisor or
a quality control inspector, but they can be written effectively by employees as
well. Experienced employees usually know what constitutes satisfactory perfor-
mance of tasks in their job descriptions, and so do their supervisors.4 Therefore,
these individuals often can collaborate effectively on setting standards.

Performance appraisal
Uses of Performance Appraisal
(PA) Performance appraisal (PA) is the process of evaluating how well employees
The process of evaluating
perform their jobs when compared to a set of standards, and then communicat-
how well employees
ing that information to those employees. Such appraisal also has been called
perform their jobs when
employee rating, employee evaluation, performance review, performance evaluation, and
compared to a set of
results appraisal.5
standards, and then
Performance appraisal sounds simple enough; and research shows that it is
communicating that
widely used for administering wages and salaries, giving performance feedback,
information.
and identifying individual employee strengths and weaknesses. Most U.S. com-
panies have performance appraisal systems for office, professional, technical, su-
pervisory, middle management, and nonunion production workers.
For situations in which an employer deals with a strong union, performance
appraisals are usually conducted only on the salaried, nonunion employees. Gen-
erally, unions emphasize seniority over merit, which precludes the use of perfor-
mance appraisal. Because unions officially view all members as equal in ability,
the worker with the most experience is considered the most qualified, and a per-
formance appraisal is unnecessary.
Performance appraisal often is many managers’ least-favored activity, and
there may be good reasons for that feeling. Not all performance appraisals are
positive, and discussing ratings with poorly performing employees may not be
pleasant. Also, it may be difficult to differentiate among employees if sufficient
performance data are not available.6 Further, some supervisors are uncomfortable
“playing God” with employees’ raises and careers, which they may feel is a result
of conducting performance appraisals.
Performance appraisal has two general uses in organizations, and these roles
often are potential conflicts. One role is to measure performance for the purpose
of rewarding or otherwise making administrative decisions about employees. Pro-
motions or layoffs might hinge on these ratings, often making them difficult for
managers to do. Another role is development of individual potential. In that role,
the manager is featured more as a counselor than as a judge, and the atmosphere
is often different. Emphasis is on identifying potential and planning employees’
growth opportunities and direction. Figure 12—3 shows the two potentially con-
flicting roles for performance appraisal.

Administrative Uses
A performance appraisal system is often the link between the rewards employees
hope to receive and their productivity. The linkage can be thought of as follows:
productivity → performance appraisal → rewards
Compensation based on performance appraisal is at the heart of the idea that
raises should be given for performance accomplishments rather than for senior-
ity. Under performance-oriented systems, employees receive raises based on how
well they perform their jobs. The manager’s role historically has been as an eval-
uator of a subordinate’s performance, which then leads to managers making
 Chapter 12 Performance Management and Appraisal 385

FIGURE 12—3 Conflicting Roles for Performance Appraisal?

ADMINISTRATIVE USES DEVELOPMENT USES

• Compensation • Identifying strengths

• Promotion • Identifying areas for growth
• Dismissal • Development planning
• Downsizing • Coaching and career
• Layoffs planning

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PERFORMANCE APPRAISAL

compensation recommendations or decisions for employees. If any part of the

process fails, the most productive employees do not receive the larger rewards,
resulting in perceived inequity in compensation.
Many U.S. workers see little connection between the levels of their efforts and
the sizes of their paychecks. However, the use of performance appraisal to deter-
mine pay is very common. Other administrative uses of performance appraisal,
such as decisions on promotion, termination, layoff, and transfer assignments,
are very important to employees. For example, the order of layoffs can be justi-
fied by performance appraisals. For this reason, if an employer claims that the de-
cision was performance-based, the performance appraisals must document clearly
the differences in employee performance. Similarly, promotion or demotion
based on performance must be documented with performance appraisals.
Performance appraisals are essential when organizations terminate, promote,
or pay people differently, because they are a crucial defense if employees sue over
such decisions. Thus, necessity likely accounts for the widespread administrative
use of performance appraisals. But certain problems, including leniency, are com-
mon when ratings are to be used for administrative purposes.

Development Uses
Performance appraisal can be a primary source of information and feedback for
employees, which is key to their future development. When supervisors identify
the weaknesses, potentials, and training needs of employees through perfor-
mance appraisal feedback, they can inform employees about their progress, dis-
cuss what skills they need to develop, and work out development plans.
The manager’s role in such a situation is like that of a coach. The coach’s job
is to reward good performance with recognition, explain what improvement is
necessary, and show employees how to improve. After all, people do not always
know where they could improve, and managers really cannot expect improve-
ment if they are unwilling to explain where and how improvement can occur.
The purpose of developmental feedback is to change or reinforce individual
behavior, rather than to compare individuals—as in the case of administrative
uses of performance appraisal. Positive reinforcement for the behaviors the orga-
nization wants is an important part of development.
386 Section 3 Training and Developing Human Resources

The development function of performance appraisal also can identify areas in

which the employee might wish to grow. For example, in a performance appraisal
interview that was targeted exclusively to development, an employee found out
that the only factor keeping her from being considered for a management job in
her firm was a working knowledge of cost accounting. Her supervisor suggested
that she consider taking such a course at night at the local college.
The use of teams provides a different set of circumstances for developmental
appraisal. The manager may not see all of the employee’s work, but team mem-
bers do. Teams can provide developmental feedback, as we noted earlier in the
feature on 360° appraisal. However, it is still an open question whether teams can
handle administrative appraisal. When teams are allowed to design appraisal sys-
tems, they prefer to “get rid of judgment,” and they apparently have a very hard
time dealing with differential rewards. Perhaps, then, group appraisal is best used
for developmental purposes.

Informal vs. Systematic Appraisal

Performance appraisal can occur in two ways, informally or systematically. The
informal appraisal is conducted whenever the supervisor feels it necessary. The
day-to-day working relationship between a manager and an employee offers an
opportunity for the employee’s performance to be judged. This judgment is com-
municated through conversation on the job, over coffee, or by on-the-spot ex-
BNA: 1020.10.10– amination of a particular piece of work. Informal appraisal is especially
1020.20 appropriate when time is an issue. The longer feedback is delayed, the less likely
Performance Appraisal it is to motivate behavior change. Frequent informal feedback to employees can
Process also prevent surprises when the formal evaluation is communicated. However, in-
Compare the steps in the formal appraisal can become too informal:7
performance appraisal A senior executive at a big auto maker so dreaded face-to-face evaluations that
process discussed here he recently delivered one manager’s review while both sat in adjoining stalls in
with those used at your the men’s room. The boss told the startled subordinate: “I haven’t had a chance
current employer. to give you a performance appraisal this year. Your bonus is going to be 20%. I
am really happy with your performance.”

Dilbert reprinted by permission of United Feature Syndicate, Inc.