Page 607 - Encyclopedia of Business and Finance

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Performance Appraisal

reliable and valid results. Measurement items in the per- large-volume customers and to ignore many smaller buy-
formance appraisal system must be designed in such a way ers. This may result in poor customer service on the floor.
that the results of rating are consistent regardless of the
raters and the timing of the assessment.
WHO EVALUATES?
Another critical criterion in developing a PA system is The most common raters of performance are employees’
the validity of the measurements. It is important to make immediate supervisors, who are usually in the best posi-
sure that the appraisal items are really measuring the tion to know and observe the employees’ job performance.
intended performance or target behavior. If they are not, They are also responsible for employees’ work. Their eval-
the PA system encourages the wrong kind of work behav- uation is a powerful tool in motivating employees to
iors and produces unintended, frequently negative, orga- achieve successful and timely completion of tasks. How-
nizational outcomes. For instance, if the number of traffic ever, as a result of working together over a long time with
violation tickets issued is an item in performance appraisal the same employees, the immediate supervisor may build
of police officers, it encourages them to sit on a corner of up a fixed impression about each employee and use it
a street and pull over as many violators as possible during every time he or she has to evaluate performance.
heavy traffic hours. The true purpose of a police force,
Some companies find that subordinates are in an
which is public safety, may become secondary to issuing a excellent position to observe and evaluate their managers’
large number of tickets for many officers.
performance, especially when it comes to measuring effec-
tive management of their department. While there is
WHAT TO EVALUATE merit in asking subordinates to evaluate how they are
The first important step in developing a PA system is to managed, such evaluation may turn into a popularity con-
determine which aspects of performance to evaluate. The test. Accurate and objective assessment may not be
most frequently used appraisal criteria are traits, behav- obtained if employees are fearful of possible retaliation
iors, and task outcomes. from their supervisors. Anonymity of the evaluators is key
to the successful use of subordinates for objective evalua-
tion.
Traits. Many employees are assessed according to their
traits, such as personality, aptitudes, attitudes, skills, and Other raters who are frequently used in some compa-
abilities. Traits are relatively easy to assess once a rater gets nies include peers, customers, and the employees them-
to know ratees. But traits are not always directly related to selves. Peer evaluation is particularly useful when
job performance. Trait-based assessment lacks validity and teamwork and collegiality are important to successful task
thus frequently raises legal questions. performance. Peer pressure is sometimes a powerful moti-
vator in encouraging teamwork among members. Cus-
tomer satisfaction is vital to a company’s success and can
Behaviors. For many jobs, performance is so broadly
be used in performance appraisal. Many companies sys-
defined or so conceptual in nature—such as ensuring
public safety in the police department—that it is hard to tematically collect performance information from cus-
come up with reliable performance measures. In such tomers, typically through anonymous surveys and
cases, desirable behaviors can be identified and assessed in interviews. Self-assessment is also a useful means, espe-
cially when the performance appraisal is intended to iden-
the belief that such behaviors lead to successful perform-
tify the training and development needs of potential
ance. Such behavior-focused assessment encourages
employees.
employees to adopt desirable behavioral patterns in the
workplace. Each of these raters contributes to assessing certain
aspects of performance. Since job performance is multidi-
mensional in nature, it is important to use different raters
Task Outcomes. When information about task outcomes
or a combination of multiple raters depending on the goal
is readily available, it is the most appropriate factor to use
of a performance appraisal system. This multirater evalu-
in evaluating performance. When an organization has a
ation, or so-called 360-degree feedback system, is becom-
clear and measurable goal as in the case of a sales force,
ing increasingly popular among many American
this approach is recommended. However, it has its own
pitfalls. There is a problem if employee behaviors are not corporations, including General Electric, AT&T, Warner
Lambert, and Mobil Oil.
directly related to the task outcome. Too narrow a focus
on measuring outcome only sometimes results in unin-
tended negative consequences. When sales staff narrowly PA METHODS
focus on target sales figures to increase their performance To ensure the reliability and validity of a PA system, a
measure, for example, they are encouraged to help a few company must design the evaluation process carefully and

584 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION