Employee Evaluation and Performance Appraisals

AuthorLawrence Kleiman, Marcia Simmering

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Most companies have a formal performance appraisal system in which employee job performance is rated on a regular basis, usually once a year. A good performance appraisal system can greatly benefit an organization. It helps direct employee behavior toward organizational goals by letting employees know what is expected of them, and it yields information for making employment decisions, such as those regarding pay raises, promotions, and discharges.

Developing and implementing an effective system is no easy task, however. For instance, one study found that a majority of companies—65 percent—are dissatisfied with their performance appraisal systems. Analysts have found that a fairly low degree of reliability and validity remains a major bug in most appraisal systems. Many such systems are met with considerable resistance by those whose performance is being appraised, thus hampering the possibilities for effectiveness. While accurate and informative appraisal systems can be a major asset to a business, they are too often an unrealized goal.

There are three major steps in the performance appraisal process: identification, measurement, and management. With identification, the behaviors necessary for successful performance are determined. Measurement involves choosing the appropriate instrument for appraisal and assessing performance. Management, which is the ultimate goal, is the reinforcing of good performance and the correction of poor performance. Each step is described below. Additionally, management by objectives, which involves evaluating performance without a traditional performance appraisal, is described.


The organization must determine for each job family the skills and behaviors that are necessary to achieve effective performance. The organization should identify dimensions, which are broad aspects of performance. For instance, "quality of work" is a dimension required in many jobs. To determine which dimensions are important to job performance, the organization should rely on an accurate and up-to-date job analysis. Job descriptions written from job analyses should offer a detailed and valid picture of which job behaviors are necessary for successful performance.

In the identification stage, the company must also choose who will rate employee performance. Supervisors, peers, and the employees themselves may provide performance ratings. In most instances, performance appraisals are the responsibility of the immediate supervisor of an employee. Supervisors rate performance because they are usually the ones most familiar with the employee's work. Additionally, appraisals serve as management tools for supervisors, giving them a means to direct and monitor employee behavior. Indeed, if supervisors are not allowed to make the appraisals, their authority and control over their subordinates could be diminished.

While supervisory ratings can be quite valuable, some companies have added peer appraisals to replace or supplement those given by the supervisor. Naturally, peers and supervisors each view an individual's performance from different perspectives. Supervisors usually possess greater information about job requirements and performance outcomes. On the other hand, peers often see a different, more realistic view of the employee's job performance because people often behave differently when the boss is present. Using peer ratings to supplement supervisory ratings may thus help to develop a consensus about an individual's performance. It may also help eliminate biases and lead to greater employee acceptance of appraisal systems.

Potential problems may limit the usefulness of peer ratings, however, especially if they are used in lieu of supervisory ratings. First, the company must consider the nature of its reward system. If the system is highly competitive, peers may perceive a conflict of interest. High ratings given to a peer may be perceived as harming an individual's own chances for advancement. Second, friendships may influence peer ratings. A peer may fear that low ratings given to a colleague will harm their friendship or hurt the cohesiveness of the work group. On the other hand, some peer ratings may be influenced by a dislike for the employee being rated.

Some organizations use self-ratings to supplement supervisory ratings. As one might expect, self-ratings are generally more favorable than those made by supervisors and peers and therefore may not be effective as an evaluative tool. However, self-ratings may be used for employee development. Their use may uncover areas of subordinate-supervisor disagreement,

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encourage employees to reflect on their strengths and weaknesses, lead to more constructive appraisal interviews, and make employees more receptive to suggestions.


Once the appropriate performance dimensions have been established for jobs, the organization must determine how best to measure the performance of employees. This raises the critical issue of which rating form to use. In the vast majority of organizations, managers rate employee job performance on a standardized form. A variety of forms exist, but they are not equally effective. To be effective, the form must be relevant and the rating standards must be clear. Relevance refers to the degree to which the rating form includes necessary information, that is, information that indicates the level or merit of a person's job performance. To be relevant, the form must include all the pertinent criteria for evaluating performance and exclude criteria that are irrelevant to job performance.

The omission of pertinent performance criteria is referred to as criterion deficiency. For example, an appraisal form that rates the performance of police officers solely on the basis of the number of arrests made is deficient because it fails to include other aspects of job performance, such as conviction record, court performance, number of commendations, and so on. Such a deficient form may steer employee behavior away from organizational goals; imagine if police officers focused only on arrests and neglected their other important duties.

When irrelevant criteria are included on the rating form, criterion contamination occurs, causing employees to be unfairly evaluated on factors that are irrelevant to the job. For example, criterion contamination would occur if an auto mechanic were evaluated on the basis of personal cleanliness, despite the fact that this characteristic has nothing to do with effective job performance.

Performance standards indicate the level of performance an employee is expected to achieve. Such standards should be clearly defined so that employees know exactly what the company expects of them. For instance, the standard "load a truck within one hour" is much clearer than "work quickly." Not only does the use of clear performance standards help direct employee behavior, it also helps supervisors provide more accurate ratings; two supervisors may disagree on what the term "quickly" means, but both...

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