387

HR PERSPECTIVE
The CEO’s Performance Review
Performance reviews are routine at they are conducting executive per- that Loarie had not demanded
the lower levels in corporations, but formance reviews. For example, enough from the European man-
they are somewhat less frequent at Thomas Loarie, Chairman of Kera agers. This observation led to the
the top. Some CEOs do not want Vision Inc., a start-up vision care criticism of Loarie about making
them, and often when boards of company, was told at one of his last subordinates accountable.
directors do review the chief execu- appraisals that he needed to The Kera Vision board uses spe-
tive, the focus is on pay rather than demand more accountability from cially designed evaluation forms for
leadership or effectiveness. subordinates and be more realistic evaluating the CEO, and the per-
But that approach can lead to about his sales plans. By nature, Mr. spective is forward looking rather
very poor communications. For Loarie is open and forthright; he was than only retrospective. The past
example, when Gilbert Amelio was also well liked by the directors. Still, year’s performance is assessed, but
fired as Apple Computer CEO, he Loarie admitted to feeling some —unlike evaluations for lower-level
said his dismissal came as a total concern before a review, even employees—the outlook for the
surprise. Not a single board member though negative feedback can be medium- and long-term future also
felt comfortable telling him he was seen as positive because it provides is evaluated. For Kera Vision and
in trouble. He indicated that CEOs additional information. other firms, organizational perfor-
really do want the feedback on how When a new Kera Vision product mance is a key factor considered in
they are doing, so that they can was introduced in Europe, Mr. a CEO’s performance appraisal. It is
adjust their performance. Loarie had projected a sales likely that more boards of directors
More boards of directors are increase—but it did not happen. In of other firms will adopt a formal
starting to recognize that CEO per- fact, sales were nonexistent. The process for appraising the perfor-
formance should be appraised, and board was very critical, suggesting mance of CEOs.8

A systematic appraisal is used when the contact between manager and employee
is formal, and a system is in place to report managerial impressions and observa-
tions on employee performance. Although informal appraisal is useful, it should
not take the place of formal appraisal. Even some Chief Executive Officers receive
and indeed often want formal appraisal. For an example, see the HR Perspective.

Appraisal Responsibilities
The appraisal process can be quite beneficial to the organization and to the indi- LOGGING ON . . .
viduals involved if done properly. It also can be the source of a great deal of dis- Performance Appraisal
content. Policies and Procedures
Figure 12—4 shows that the HR unit typically designs a systematic appraisal sys- This website contains an
tem. The manager does the actual appraising of the employee, using the proce- example of the perfor-
dures developed by the HR unit. As the formal system is being developed, the mance appraisal policies
manager usually offers input on how the final system will work. Only rarely does and procedures followed by
an HR specialist actually rate a manager’s employees. the human resource man-
agement of an educational
TIMING OF APPRAISALS Appraisals typically are conducted once or twice a year, institution.
most often annually, near the employee’s anniversary date. For new employees, http://www.hr.rpi.edu/
common timing is to conduct an appraisal 90 days after employment, again at six hartford/policies/
months, and annually thereafter. “Probationary” or new employees, or those who rhpman8.htm
388 Section 3 Training and Developing Human Resources

FIGURE 12—4 Typical Appraisal Responsibilities

HR Unit Managers

● Designs and maintains formal ● Typically rate performance of

system employees
● Establishes formal report system ● Prepare formal appraisal documents
● Makes sure reports are on time ● Review appraisals with employees
● Trains raters

are new and in a trial period, should be evaluated frequently—perhaps weekly for
the first month and monthly thereafter until the end of the introductory period
for new employees. After that, annual reviews may be sufficient. Indeed, some ar-
gue that performance can be appraised too often.9
Some companies in high-technology fields are promising accelerated ap-
praisals—six months instead of a year—so that employees receive more frequent
raises. The result for some companies has been a reduction in turnover among
these very turnover-prone employees.10
A regular time interval is a feature of systematic appraisals that distinguishes
them from informal appraisals. Both employees and managers are aware that per-
formance will be reviewed on a regular basis, and they can plan for performance
discussions. In addition, informal appraisals should be conducted whenever a
manager feels they are desirable.

APPRAISALS AND PAY DISCUSSIONS Many experts argue that the timing of per-
formance appraisals and pay discussions should be different. The major reason
for this view is that employees often focus more on the pay amount than on what
they have done well or need to improve. Sometimes managers may manipulate
performance appraisal ratings to justify the desired pay treatment for a given in-
dividual.

Who Conducts Appraisals?

Performance appraisal can be done by anyone familiar with the performance of
individual employees. Possibilities include the following:

● Supervisors who rate their employees

● Employees who rate their superiors
● Team members who rate each other
● Outside sources
BNA ● Employee self-appraisal
● Multisource (360°) appraisal
1020.20– 1020.50
Appraisal Approaches and The first method is the most common. The immediate superior has the sole re-
Methods sponsibility for appraisal in most organizations, although it is common practice
Review additional details to have the appraisal reviewed and approved by the supervisor’s boss. Any system
on appraisal methods here should include a face-to-face discussion between rater and ratee.
to expand the considera- Because of the growing use of teams and a concern with customer input, two
tions discussed in the text. fast-growing sources of appraisal information are team members and sources out-
 Chapter 12 Performance Management and Appraisal 389

side the organization. Also, as highlighted in the chapter opening discussion,

multisource appraisal (or 360° appraisal) is a combination of all the methods and
has grown in usage recently.

Supervisory Rating of Subordinates

Traditional rating of employees by supervisors is based on the assumption that
the immediate supervisor is the person most qualified to evaluate the employee’s
performance realistically, objectively, and fairly. Toward this end, some supervi-
sors keep performance logs noting what their employees have done. These logs
provide specific examples to use when doing ratings. They also serve to jog their
memory, because supervisors cannot be expected to remember every detail of per-
formance over a six-month or one-year period. A supervisor’s appraisal typically
is reviewed by the manager’s boss to make sure that a proper job of appraisal has
been done. Figure 12—5 shows the traditional review process by which supervisors
conduct performance appraisals on employees.

Employee Rating of Managers

The concept of having supervisors and managers rated by employees or group
members is being used in a number of organizations today. A prime example of
this type of rating takes place in colleges and universities, where students evalu-
ate the performance of professors in the classroom. Industry also uses employee
ratings for management development purposes.

FIGURE 12—5 Traditional Performance Appraisal: Logic and Process

Who designs
Human Designs
the evaluation Trains Supervisors
Resources evaluation
process?

Who
Direct-Report
appraises Supervisor Appraises
Employees
whom?

What should Feedback on Problem

Goal Setting
happen? Performance Solving

Who reviews All supervisory

appraisal Managers Read and check ratings of their
results? direct reports