Agenda

– Introduction

– Setting the Stage: Performance Management vs. Performance Appraisal

– Elements of an Effective Performance Appraisal Process

– Capturing Performance objectives (job analysis vs. job dimensions and competencies vs. tasks)

– Integrating and Incorporating Organizational Requirements

– Incorporating Shared Goal Setting within the Performance Appraisal Process

– Role of Ethics in the Performance Appraisal Process

– Choosing the Right Methodology for Your Organization

Presentation Focus

Evaluation of Performance Management and Performance Appraisal process with focus on Performance Appraisal This is a research and practitioner presentation with a goal of distinguishing key facts from beliefs or intuition Focus on process not methodologies and format – though we will discuss pros(s) and con(s) of both Note: Understand that designing and administering effective performance appraisals is not easy but it does not have to be extremely difficult. My goal is to provide you advanced researched-based facts, practitioner best practices, and my own consulting advise and experience. It is up to you decide what is the right approach for you and your organization.

Setting the Stage

Performance Management • Encompasses all systems and process

utilized to evaluate employee performance against organizational objectives

• Sources requirements based upon organizational strategy

• Goal is to align employee behavior, goals, and objectives with goals, objectives, and requirements of organization

• Metric-driven process in organizations that focus/view on alignment of individual behavior to bottom-line profits and/or readiness

Performance Appraisal

• Component of Performance Management that provides direct feedback to employee

• Measures behaviors, traits, and competencies of employee’s performance based upon defined scales, continuum, narratives, or combination of all components

• Often utilized as basis for promotion, demotion, pay increases , and internal transfers

• Can serve as legal source document on behalf of employer or employee

Key Differences

Performance Management

• Focuses on continuous and persistent performance improvement and development

• Effectively integrates individual performance and sets expectations with context of organizational goals

• Provides continuous feedback to employees via formal and informal sessions

• Produces essential documentation required for performance appraisal, pay raises, and negative and positive employer actions

Performance Appraisal • Provides feedback to employee on

performance over a defined, specific period of time

• Utilized to provide in-depth feedback to employees on performance, career goals, training and development, and pay*

• Ideally is interactive with clear expectations on behalf of interviewer and interviewee

• Sets the stage for future performance and should directly link to performance management systems and tools, creating a cohesive whole.

Performance Management – A Dynamic Process

Performance Management

Performance Appraisal

Training and Education

Coaching and Mentoring

Performance Standards

Perceptions and Reality - Perception: Performance appraisal are no longer needed in

today’s business environment - Reality: Performance appraisals are still needed in today’s

competitive business environment - Perception: Performance interviews are a waste of time, causing

anxiety, confusion, and reduced morale - Reality: Organizational processes, design, and method of

administering and conducting performance appraisals contribute to supervisor-employee tension, confusion, and reduced morale

- Perception: Performance Management and Performance Appraisal are on in the same

- Reality: Performance Management and Performance Appraisal are two distinct processes

- Perception: Performance Appraisals are an HR function and responsibility

- Reality: Performance Appraisals are a line management function with design and expertise support provided by human resources.

Organizational Strategy

Organizational Goals and Objectives

Performance Management

Performance Appraisal

Elements of An Effective Performance Appraisal

Performance Appraisal

Organization, Department, and Division

Requirements

Job Analysis

Career Planning

Compensation and Rewards

System

Legal Requirements

Job Analysis Capturing Behaviors, Activities, and Outcomes

Key component of appraisal process Captures job requirements, behaviors (tasks), activities, and outcomes of job and work performed – framework for performance appraisal dimensions Positions that require multiple “jobs” may require the development of a dimension set – strongly recommended for supervisor to senior management positions Developed and implemented with rigor and thorough analysis with subject matter experts, senior leadership, and employees Consistently evaluates desired outcomes that will influence behavior and performance that link directly to department-division-organizational requirements – the measurement of activities Reviews requirements (knowledge, skills, attributes, behaviors, duties, and responsibilities) of position with incumbent prior to and separate from the appraisal process – goal is to impact subconscious behavior, provide employee with a scientifically developed frame of reference in which work can be measured and found relevant to organization requirements

Job Analysis Capturing Traits, Behaviors, Activities, and Outcomes

Analysis Key objective of job analysis: Define the specific needs, requirements, skills, of a job

Requirements of the job to include skill level, cognitive ability, training, education, and behaviors Can be skilled based or competency based: Important thing to remember is that methodology must be directly related to optimal job performance Should be built around the “normative” or “nominal” employee to ensure that requirements are based on standard of “what is” not “what feels” - evaluation of employee performance is against a job standard/requirement not a person Our role as HR professionals is to effectively capture requirements of positions, rank desirable and undesirable traits, behaviors, activities, and outcomes and develop job-task statements that accurately capture performance requirements

Job Analysis process is the anchor of developing a validated, well-defined performance appraisal process

Step 1 – Conduct, Develop, or Review Job Analysis

Activities Within Steps: Decide on the type of job analysis methodology that you will utilize Avoid advanced (and hard-to-define) differences between traits, behaviors, outcomes, activities yet ensure that an agreed upon definition exists within organization Establish a method of review to observe job activities and behaviors and define output measures that define standards Conduct, supervisor-employee review discussing key activities, optimal output, behaviors under ideal and adverse environmental conditions, and defined outcomes – adjust/capture employee input (diary, interview log, questionnaire log, etc.) Conduct a review of job analysis data with subject-matter-expert and senior leadership, revalidate requirements if needed based upon review of employee feedback Communicate purpose, scope, and utility of job analysis to employees; ensure employee buy-in and understanding

Rigorous and Thorough Job Analysis is Essential to the

Performance Appraisal Design Process

Sample Supervisory Scale – Based on Dimension (Set) Job Analysis

6

5

4

3

2

1

Provides subordinates with highly useful guidance to enhance to improve professional development; clearly defines expectations, provides feedback to subordinates and team members, actively participates in subordinates growth and career

Typically provides subordinates with direction and guidance regarding professional development; advice not always constructive. Usually provides subordinates with clear expectations regarding performance; expectations are not always relevant. Provides some developmental opportunities and shows modest interest in professional growth and career

7

Does not provide guidance or provides too much guidance on subordinates career assignments resulting in decreased performance; poorly defines expectations to subordinates and offers very little to no feedback. Does not provide developmental opportunities and shows little interest in subordinates professional growth and career.

7

Capturing Organizational, Department, Divisional Requirements and Goals

Organizational requirements add context to technical and functional job requirements from job analysis related to present-day targets and goals Ensures performance appraisal remains dynamic without requiring readjustment and revision of forms Carefully sourced from organizational and department/division goals , business plans, policies, and objectives RELEVANT to the position Wording must be behavior and/or task specific When capturing organizational requirements, keep language specific yet encompassing to withstand iterative /subsequent changes to organizational goals, plans, and policies,

Step 2 – Ensure Alignment of Organizational Goals and Employee

Behavior Activities Within Steps: Review organizational, business unit, and divisional-departmental goals and objectives against job analysis (Note: Steps 1 and 2 are interchangeable depending on organizational practices and methodologies) Refine output and behaviors of job analysis based upon organizational requirements to job specific levels (organizational requirements aligned to job incumbent output) Conduct a review of job analysis data with subject-matter-expert and senior leadership, revalidate requirements if needed Communicate purpose, scope, and utility of job analysis to employees; ensure employee buy-in and understanding

Remember: Primary goal of performance appraisal is to align employee behavior to accomplish organizational goals and

mission

Sample Leadership Dimension - Organizational Readiness

6

5

4

3

2

1

Significantly improves customers relations through consistent timely consultation, cooperation, and communication with internal and external customers. Proactively reviews internal and external feedback forms and survey results to seek improvement,. Demonstrates ability to manage programs with defined fiscal targets and conducts work aligned with cost targets

Measurably improves customer relations by offering consultation that is often timely; usually cooperates and communicates with internal and external customers. Reviews internal and external feedback when prompted . Majority of programs managed are within defined fiscal targets and reviewed work aligned with cost.

7

Does not improve customer relations or foster cooperation. Communication skills with internal and external customers frequently causes confusion or misunderstanding resulting in delays or lost relations. Does not review internal and external feedback forms and survey results. Does not demonstrate an ability to manage programs, frequently coming in over defined fiscal targets and costs .

7

Performance Appraisal: Cooperative Goal Setting

Cooperative goal setting makes performance expectations real for employees. Goal of cooperative goal setting is to promote dialogue between employee and supervisor regarding job role, performance expectations, build trust, and set performance goals. Cooperative goal setting is an open discussion allowing employees to provide perspective on job performance, work environment, organizational goals and objectives, and accomplished and plan career path Additional benefit of shared goal setting:

•Employee empowered to provide tangible input into performance goals at the individual and department/divisional levels •Experience increased trust and perception of fairness , and increase trust in performance appraisal process.

Performance Appraisal: Shared Goal Setting

Forming Realistic Expectations – Key Research Findings You Should Know

• Advanced research has proven that shared goal setting does not necessarily correlate to increased or decreased workplace performance • Negative and positive feedback should be required and expected • The goal should be to increase understanding of performance appraisal on behalf of supervisor and provide insight on behalf of employee • Should not be viewed as a “cure all” to performance, but rather as a “buy-in” of the process

Performance Appraisal: Shared Goal Setting

Elements of Shared – Cooperative Goal Sharing

• Workplace issues, concerns, and problems are openly discussed in a productive manner • Opposing viewpoints are explored and discussed • Joint planning occurs when and where practical in context of job role • Result in a successful performance review session

Benefits of Shared – Cooperative Goal Setting

• Build Trust • Promote Dialogue • Develop Expectations • Provide two-way feedback

Step 3: Conduct a Cooperative Goal Setting Session with

Employees

Activities within Steps: Goal Setting session is separate and apart from job analysis and performance review sessions Review all organizational documents that impact employee’s performance and career: Relevant strategic organizational objectives and goals, unit-department-divisional goals and objectives, job description, training plan and career path documentation , and blank copy of performance appraisal Engage employee to express views, opinions, systems, and processes that relate to job, performance on the job, and achievement of organizational objectives Take notes and provide follow-up on recommendations to measures-metrics, processes, job description- analysis process Schedule follow-up sessions separate and apart from performance review session/interview Developing Trust and Effective Performance Appraisal Processes Requires Persistent and Consistent Communication

Performance Appraisals: Role in Career Planning

• Performance Appraisals should provide a bottom-line career recommendation consistent with career path of employee (i.e. front-line operations supervisor recommended for operations manager or quality control specialist or production supervisor)

• Recommendations must be based upon outcomes and behaviors of current performance and requirements and competencies for lateral and vertical positions within organization – resulting from shared goal setting

• Performance Appraisals is ONE of the tools that should be utilized in career planning – a robust performance management process allows performance to be put into holistic context – (i.e., some companies follow the “best practice” of developing a ‘Performance Index”

Performance Appraisals: Role in Career Planning

Performance appraisals from employee viewpoint should be forward-looking

based upon current performance

During performance appraisal feedback-interview session it is important for rater to

discover the goals of employee and provide feedback on where the employee stands

Performance Appraisals

Step 4

Develop validated performance dimensions and accompanying performance standards based upon the job definition developed during the job analysis process. Check for the following: - Dimensions are directly related to the job - Dimensions are free of extraneous factors not critical for overall success job performance - Dimensions are properly weighted placing proper emphasis - Standards are defined in quantitative and qualitative terms - Rater and Ratee are in agreement as to acceptable and non-acceptable levels of performance defined by performance standards - Be specific, measurable, and/or recognizable After validation of performance dimensions and standards and well-defined, (ideally occurring during job analysis and/or initial appraisal design, integration of this appraisal dimensions and standards should be accomplished. Common instruments include pay adjustment matrix and salary guide charts.

Well Designed and Validated Performance Appraisals Instruments = Bridge to Effective Compensation Systems

Performance Management – A Dynamic Process Remember This Chart?

Performance Management

Performance Appraisal

Training and Education

Coaching and Mentoring

Performance Standards

Career Planning: Is a product of a rigorous, holistic performance management system

Performance Appraisal: Pay Design • Performance Appraisal design, validity, and consistent employment is critical in

determining merit-pay/pay-for-performance and short term incentive programs

• Perceived lack of rigor and subjective nature of ob appraisals and performance reviews by employees and employers are leading to several researchers, practitioners, and senior executives debating the validity and usefulness of performance appraisals as the basis for making pay decisions

• Performance appraisals should be designed to answer the following questions:

– Who is eligible for a pay increase and why?

– How much should an employee’s pay increase be?

– Is the merit pay and performance appraisal processes fair, objective, and consistent? Are they linked?

– Does our performance appraisal process include performance goals and measures that tie directly into organization, business unit, and departmental-divisional goals

– Are the drivers of performance appraisal linked and consistent with the drivers of pay?

– Ate the drivers of performance appraisals and pay known by employees

Step 5

Develop validated performance dimensions and accompanying performance standards based upon the job definition developed during the job analysis process. Check for the following: - Dimensions are directly related to the job - Dimensions are free of extraneous factors not critical for overall success job performance - Dimensions are properly weighted placing proper emphasis - Standards are defined in quantitative and qualitative terms - Rater and Ratee are in agreement as to acceptable and non-acceptable levels of performance defined by performance standards - Be specific, measurable, and/or recognizable After validation of performance dimensions and standards and well-defined, (ideally occurring during job analysis and/or initial appraisal design, integration of this appraisal dimensions and standards should be accomplished. Common instruments include pay adjustment matrix and salary guide charts.

Well Designed and Validated Performance Appraisals Instruments = Bridge to Effective Compensation Systems

Performance Appraisals: Legal Implications

• The courts have considerable influence in how performance appraisals are designed and implemented.

• Title VII of the Civil Rights Act of 1974 and Equal Employment Opportunity Commission have two important criteria that weigh heavily on how organizational performance appraisals are designed:

– Any paper-and-pencil or performance measure used in making employment decisions is a test

– A test must be fairly administered and empirically validated

• Taking into considerations the EEOC guidelines and landmark court cases setting key precedent, the following are considerations that must be taken into account:

– Rating performance on job requirements

– Mutually developed and clear communication of performance standards between employee and supervisor

– First hand knowledge of employee performance by rater and standardized appraisal process

– Appraisal methodologies should be supported based on a rigorous job analysis process

– Criterions should not cause disparate impact

Performance Appraisal: Ethical Implications and Responsibilities

Ethical in Performance Appraisals Play Two Roles Ethical Measures and Ethical Decision-Making

•Ethics in business receiving increased attention due to recent scandals such as recent crisis in mortgage, auto, and insurance industries, and Enron and Tyco Scandals

• Most appraisal systems and forms focus on performance measurement and performance outcomes absent of ethical process and consideration – how measurements and outcomes are derived • Increased emphasis on cognitive information processing over format leading to some organizations focusing on ethical performance cues – how is work being accomplished; does means justify the end • Early incorporation and experiments focusing on incorporating ethical and legal implications in existing performance dimensions

Performance Appraisal: Ethical Implications and Responsibilities

Ethical in Performance Appraisals Play Two Roles Ethical Measures and Ethical Decision-Making

Ethical implications must be considered during performance appraisal rating and subsequent interview

Ethical rating considerations:

• Manipulation of performance measures to support pay increases, promotion, and assignments •Manipulation of performance measures to hold true to employee perception held by rater (i.e., measuring employees high on all dimensions as a result of the halo effect) •Manipulation of performance measures due to surface performance (i.e., strong performer unethical behavior is ignored due to her hitting financial targets)

•Advanced studies have shown that underperformers generally receive “benefit of the doubt” while high performers are graded more accurately

Step 6 Incorporating and Promoting Ethics and Legal Compliance in

Performance Appraisal Train raters on the process (means) of achieving a specific target, outcome, or accomplishment of key activities – this is a senior leadership-line manager with HR professionals providing expertise and guidance

Beware of personal bias that may impact your rating of an employee

Focus on consistency of employee job performance and self-evaluate your perception of employees Measures should focus on performance requirements that are in control of the employee; be aware of external factors that impact performance not in control of employee

For multisource appraisals look for consistency of employee’s performance among peers, supervisors-managers, and external-internal customers – validation Behaviors, outcomes, and activities directly tied to financial performance and pay should be closely evaluated – the means to the outcome is just as important as the outcome

Incorporating Ethical Process Dimensions = New and Critical Component of Performance Appraisals

Performance Appraisal: Closing Thoughts/Summary

Developing effective performance appraisals is hard work, but critical to successful performance management and aligning employee behavior to accomplish organizational goals Performance appraisal is a single tool and does not define the entire performance management process – strive to provide employee feedback that contributes to development and is consistent with organizational goal and objectives Do not underestimate the value of rigorous job analysis – the foundation of measuring the right activities, task, behaviors, and outcomes Focus on feedback that fosters goal setting and development – be objective, fair, and hones t and focus on behaviors; focus on connection of current performance and future goals Pay reviews and shared-goal setting are components of the performance appraisal process and should be provided in separate settings/sessions