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1. Choice of Appraisal System Appraisal systems can be categorized by what they assume and on what they focus measurement. These include: Trait-based — Assumption that certain traits drive performance; measures personal characteristics of the position incumbent . Behavior-based — Assumption that certain behaviors drive performance; measures what the position incumbent does. Knowledge/skill-based — Assumption that certain knowledge/skills drive performance; measures what the position incumbent knows/ applies . When traits, behaviors, skills, and knowledge are linked to organization success expectations, they are sometimes called competencies . Results-based — Assumption that achievement of objectives equals performance ; measures what the position incumbent achieves.

2. Choice of Appraisal System Determining which type of appraisal system best fits your organizational and business needs depends primarily on your objectives, i.e., what you are trying to accomplish with the system. Other important factors to be considered are: Business environment, Strategy and objectives of the business , Organization size and the management levels considered, Corporate climate, Values and style of the senior management group, and Available resources.

3. Choice of Appraisal System N ot all appraisal systems can be utilized effectively with all types of employees. Appraisal systems are best suited to employee types as follows : Trait-based — all employees Behavior-based — supervisors and below Knowledge/skill-based — production workers, clerical workers, and some professionals Results-based — administrators/managers , most professionals, and executives.

4. Choice of Appraisal System Figure 7-1. Comparison of performance measurement systems Figure 7-1 presents a comparison of the general characteristics, advantages, and disadvantages of the four systems.

5. Choice of Appraisal System Figure 7-1. Comparison of performance measurement systems Figure 7-1 presents a comparison of the general characteristics, advantages, and disadvantages of the four systems.

6. Designing a Performance Appraisal Program 1. Choice of Appraiser The Appraiser must have the opportunity to observe the employee’s performance on an ongoing basis. The most obvious choice as the appraiser is the employee’s immediate superior ( EIS). Many times the EIS does not have the opportunity to observe the employee during the most important aspects of performance . In such cases, evaluation by the EIS alone is inadequate. For example, a maintenance supervisor may have infrequent contact with maintenance personnel when they are performing repairs at various locations . Systems analysts may spend much of their time with users, far from where the EIS is working. Sales reps may be several states away from the EIS most of the time.

7. Designing a Performance Appraisal Program In Figure 7-2, an X in the box indicates that that type of measurement has utility for that objective, two X’s in the box indicates a high degree of utility for that objective, and a blank box indicates that type of measurement lacks utility for that objective Figure 7-2 presents a different type of comparison of the four types of performance appraisal systems, focusing on the utility of each for different performance appraisal program objectives.

8. Designing a Performance Appraisal Program Additional inputs are required to fully and fairly evaluate the employee . Several solutions are possible: peer ratings, evaluation by subordinates, client/customer/supplier ratings, use of outside experts, or some combination of these raters (Figure 7-3 ). Careful consideration must be given to the advantages and disadvantages of each alternative in each specific instance where the EIS needs assistance. Particularly in the case of peer ratings or evaluation by subordinates, care must be taken to keep the focus on performance and to avoid a “popularity contest.”

9. Designing a Performance Appraisal Program

10. Designing a Performance Appraisal Program 2. Method of Measurement There are four types of performance measurement. While each is different, they share one common feature. Each trait, behavior, skill, or result must be weighted specifically for the job at hand. Weighting may be as simple as high, medium , or low relative importance, or it may utilize percentages for each factor . This weighting factor reflects the relative importance of the traits, behaviors , skills, or results to one another and to the job; it is not simply an indication of time spent by the incumbent in these areas. When assigning percentage weighting factors, the following rules should be applied:

11. Designing a Performance Appraisal Program 1. No single trait, behavior, skill, or result can be weighted more than 20 %. If a trait, behavior, skill, or result warrants more than 20%, this indicates that it is complex enough to be broken apart into more specific aspects . For example, if sales is touched to be 70% to 80% of the performance of a sales rep , then sales should be broken apart into four or more aspects. These might be: i ) repeat sales of existing products to old accounts, ii) sales of existing products to new accounts, iii) sales of new products to existing accounts, iv) sales of new products to new account, average margin on sales.

12. Designing a Performance Appraisal Program 2. No single trait, behavior, skill, or result can be weighted less than 5 %. If a trait, behavior, skill, or result is less than 5%, then it should be incorporated as a sub-part of another trait, behavior, skill, or result. 3. Many organizations prefer to stick to three or four weights—5 %, 10%, 15%, and 20%, for example. These then would correspond to important, quite important, extremely important, and critically important. 4. The total of all percentages must equal at least 95% and must not exceed 100%. (The use of less than 100% is allowed to indicate that there are other small but important elements to the job.)

13. The Trait-Based Performance Appraisal Process There are two possible approaches. One is to select different traits for different jobs from a “pool,” based on those characteristics considered to be important for that job . It allows for the best fit between the selected traits and the job requirements. However, it is time-consuming to develop . The other is to use a common set of traits for all positions, weighting them differently for each position based on their relative importance to each position. This is not only is quicker and easier to develop, but it has the advantage in human resources planning as it allows any employee to be compared with any job.

14. The Trait-Based Performance Appraisal Process The following are illustrative traits: Relationships with others— works in cooperation with others to achieve result. Communication— transfers ideas and thoughts by speech and writing. Planning/organizing tasks— develops and arranges activity to achieve a result. Judgment— evaluates job situation to arrive at sound decisions. Autonomy— works with minimal supervision required by job. Work accuracy— works within error standards. Work quantity— meets work volume required within designated time-frames .

15. The Behavior-Based Performance Appraisal Process T he first step in developing a behavior-based appraisal process is identifying the behaviors to be measured, selecting different behaviors for different jobs from a “pool,” based on those characteristics considered to be important for that job . The use of behaviorally anchored rating scales offers several options as to the number of rating levels and as to whether or not a middle point is available (i.e., an odd or even number of levels). Typically , four to seven levels are used. Many behaviorists feel that seven to nine levels represent the maximum number of distinctions that can be reliably made, but it is not unknown for some organizations to use a 100-point scale.

16. The Behavior-Based Performance Appraisal Process Figure 7-4 illustrates one type of behavioral anchoring. Selected points on the scale are explicitly defined; points in between on the scale are defined by implication.

17. The Behavior-Based Performance Appraisal Process Figure 7-5 shows Other approaches to behavioral anchoring explicitly define every point on the scale

18. The Knowledge/Skills-Based Performance Appraisal Process T he first step in developing a knowledge/skills-based process is identifying the knowledge/skills to be measured, selecting different knowledge/skills for different jobs from a “pool,” based on those considered to be important for that job . The first challenge is to define the level of specificity to be used when defining knowledge/skills . Is leadership skill to be measured? Or is it to be broken down into more specific skills ? The positive value of such a breakdown is that it allows for a much more exact assessment of leadership than is possible if it is measured as a single skill .

19. The Knowledge/Skills-Based Performance Appraisal Process For example, a given individual may have average leadership skill if it is evaluated as a single entity. However, if evaluated on the components of leadership , the individual may be excellent in some and deficient in others . This more precise assessment has obviously greater utility for performance enhancement and career development . Depending on the skill involved, this may require special skill tests or even getting into the individual’s psyche .

20. The Knowledge/Skills-Based Performance Appraisal Process For example, look at sensitivity, one of the components of leadership in Figure 7-6. An individual may appear to be “alert to the motivations, attitudes, and feelings of subordinates,” but it is impossible to know if he/she really is “ alert ” except by actions that demonstrate this (“using this knowledge positively to direct behavior and achieve desired results”). Even if one treats leadership as a unitary skill, how do you assess it except by either its application (which is behavior) or its outcome (which is results)?

21. The Knowledge/Skills-Based Performance Appraisal Process Figure 7-6 presents one approach to defining the component skills involved in leadership.

22. The Results-Based Performance Appraisal Process In any sound management system, an important element is some procedure, preferably quantitative, to determine the degree to which results are being achieved. For example, a budget is a plan for spending money over a period of time . Periodic review of actual against planned expenditures provides an important check to control and correct negative variances or permit reallocation of resources in the event of an unpredictable event . Indeed, most people equate performance with results: good performance is that which leads to desired results; poor performance is that which does not . The first step in results-based performance appraisal is to determine what results are going to be tracked for a particular position.

23. The Results-Based Performance Appraisal Process P erformance elements are the dimensions of performance for that job. Dimensions communicate what results the organization considers to be the most important. Not all dimensions are created equal; some clearly are more important than others. Each dimension of performance must be assigned a percentage weighting factor .

24. The Results-Based Performance Appraisal Process Dimensions may be permanent aspects of the position (i.e., making sales), specific one-time objectives, or a mixture of the two. Organizations that use a management by objectives (MBO) approach can fit these objectives into the performance appraisal process as dimensions if they so choose . The term “measure” refers to an index against which performance can be assessed ; it does not specify the desired level of accomplishment (i.e., how much is “good,” how much is “excellent,” etc.). For each measure, standards, the definition of the levels of accomplishment against the index of expected results, must be developed .

25. The Results-Based Performance Appraisal Process Measurement of Results A ll performance measurement is subjective; there is no such thing as objective performance measurement. O bjective measurement (sales volume, number of units produced, percent of products meeting quality standards, etc.) is just as subjective as what those same people would call subjective measurement (customer relationships, communication , product knowledge, etc.). The differences between the two categories are in the degree of quantification and when the subjective judgments are made. So-called objective measurements are those that are highly quantifiable and that allow for putting the subjectivity at the beginning of the measurement period rather than at the end of it.

26. The Results-Based Performance Appraisal Process It is necessary to develop standards for every measure. These are usually developed at several levels— acceptable (just enough to get by), good ( target or expected), very good (clearly better than expected), and outstanding . ( Feel free to pick your favorite term for each of these four conceptual levels of performance .) The process of using results for performance appraisal requires all three elements if it is to be successful: dimensions— what aspect of performance you want to measure measures— what indicator(s) you are going to use to assess each dimension standards— the meaning of the level of results achieved on each of the measures

27. The Results-Based Performance Appraisal Process 2. Comparison of Types of Results Measures I n establishing indicators, we need to direct our efforts toward finding the most quantifiable measures of performance . It will increase the chances that, regardless of who makes a performance assessment, the judgment will be the same . In those cases where measures must be less quantifiable (and these are common ), it is possible to increase accuracy by using either more than one measure or more than one observer or evaluator . T he use of multiple observers is limited, multiple measures are often used. As a rule of thumb, no more than four indicators should be used to measure achievement against any one dimension of performance .

28. The Results-Based Performance Appraisal Process

29. The Results-Based Performance Appraisal Process 3. Developing Results Measures In some cases, measures are directly suggested by the dimension of performance and they are fairly easily specified and quantified. Two basic types of questions about the job must be asked: i ) What are the concrete signs of outstanding performance on this dimension? ii) What are the concrete signs of poor performance on this dimension ? The task is to identify the possible measures and narrow the choice to a few that capture most directly the nature of any end result that the position is to achieve.

30. The Results-Based Performance Appraisal Process The selected measures should meet the following criteria: Relevant — They should relate directly to the major results, rather than activities or less important results. Measures should focus on the result , rather than divert attention from it. Specific — They should accurately reflect performance the employee can control or directly affect with his/her job or organizational unit. For example, a manager of manufacturing might be measured on production costs or “value added,” but not on profit, since he/she has no control over the material costs or the selling price per unit, both of which also impact directly on profit. Obtainable — Wherever possible, use measures that now are or can easily become available; avoid the need for major new and/or complex tracking mechanisms .

31. The Results-Based Performance Appraisal Process Practical — In most performance areas, many measures are already in use as common means of setting goals, controlling operations, and reporting results. Use these whenever possible, because they represent the organization’s business focus. Reliable — Other raters will come to the same conclusions about level of performance from the measurement data. Timely — Data must be available soon enough after the end of the performance period to affect most of the following performance period.

32. Appendix B presents some sample measures for line and staff jobs. This list is not all-inclusive, but it should provide further clarification of the types of measures that can be used to assess performance.

33. The Results-Based Performance Appraisal Process Working with a Results-Based Performance Appraisal Process Once the dimensions are identified and weighted, and the associated measures and standards are developed, results-based performance appraisal is simple. Performance is defined as the attainment of the specified results as defined by the standards. Performance appraisal is simply the comparison of the results achieved versus these specified results.

34. Sample Measures for “Staff ” Jobs Some performance dimensions, such as those found in certain staff positions, are difficult to review. In some cases, it is best to use a measure that indicates what has not occurred rather than what has. The reviewer can assume that the most likely thing is for the end result ( effective utilization of equipment) to occur. So rather than counting or describing what has happened, he/she focuses effort by considering only those times when the desired result was not achieved. Measures for staff positions must deal with end results that are to be achieved by the staff unit. The vital question is “What is the output of the position ?”

35. Sample Measures for “Staff ” Jobs Some common measurements are: Number of occasions on which schedules were missed Number of proposals implemented per number of proposals made Quality of service as rated or described by “client” or user Number of complaints (or commendations) regarding services provided Audits of effectiveness of services provided (internal or external) Number of “exceptions” found by outside sources—e.g., customer complaints , outside audit

36. Sample Measures for “ Staff”Jobs Number of person-hours (or budget) spent per service area vs. plan Number of units of output per employee Descriptions of kinds of service provided relative to kinds of service requested The organization’s record in an area (e.g., accident frequency, EEO data, workers’ compensation rates) compared with industry average Descriptions or ratings of the relevance and quality of innovations or new services developed