Errors in Performance Appraisal Manpower Planning and Performance Appraisal

Submitted To:Dr. Rupinder Kaur

Submitted By:Nimisha Gupta

MBA-HR (09-11)University Business School

Table of Contents

Introduction.................................................................................................................................................3

Why does the Performance Appraisal System Fail?....................................................................................4

Errors in Performance Appraisal.................................................................................................................6

What Increases Biases?...............................................................................................................................9

Consequences of Inaccurate Ratings.........................................................................................................10

How to Reduce Errors in Performance Appraisals?...................................................................................11

References.................................................................................................................................................13

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Introduction

A performance appraisal is a method by which the job performance of an employee is evaluated.

Performance appraisal is a part of guiding and managing career development. It is the process of

obtaining, analyzing, and recording information about the relative worth of an employee to the

organization. Performance appraisal is an analysis of an employee's recent successes and failures,

personal strengths and weaknesses, and suitability for promotion or further training. It is also the

judgment of an employee's performance in a job based on considerations other than productivity

alone.

Generally, the aims of a performance appraisal are to:

Give employees feedback on performance

Identify employee training needs

Document criteria used to allocate organizational rewards

Form a basis for personnel decisions: salary increases, promotions, disciplinary actions,

bonuses, etc.

Provide the opportunity for organizational diagnosis and development

Facilitate communication between employee and administration

Validate selection techniques and human resource policies to meet federal Equal

Employment Opportunity requirements.

To improve performance through counseling, coaching and development.

A common approach to assessing performance is to use a numerical or scalar rating system

whereby managers are asked to score an individual against a number of objectives/attributes. In

some companies, employees receive assessments from their manager, peers, subordinates, and

customers, while also performing a self assessment. This is known as a 360-degree appraisal and

forms good communication patterns.

People differ in their abilities and their aptitudes. There is always some difference between the

quality and quantity of the same work on the same job being done by two different people.

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Performance appraisals of Employees are necessary to understand each employee’s abilities,

competencies and relative merit and worth for the organization

Why does the Performance Appraisal System Fail?

In recent years, performance linked reward management system is seen as a holistic approach to

a manager’s function. It is not only a random collection of activities which are cyclical and

sequential, but also important for accomplishment of work & source for high performance and

excellence.

Varda Pendse, Director, Cerebrus Consultants prefers a performance ‘management’ system and

says appraisals have become common tools to give increments rather than tools to build a culture

(of openness, transparency etc.) Also appraisals do not capture the extent of coaching and

support that the manager has given to the employee. Another flaw in most systems is that giving

feedback on employee performance becomes a one-time event. Giving feedback should be a

continuous process in companies and should not be relegated only to the year end. Appraisal

systems also fail as goals and performance metrics are often not clearly defined. If goals are not

aligned to all the departments and functions of an organization, this will result in lack of

ownership of crucial goals across departments. Companies in such situations would not have

information on its people for assigning more challenging tasks and new businesses.

Developing an appraisal system that accurately reflects employee performance is a difficult task.

Performance appraisal systems are not generic or easily passed from one company to another;

their design and administration must be tailor-made to match employee and organizational

characteristics and qualities.

There can be various constraints in the way of an effective performance appraisal system like:

Situational constraints ‐ o Tools/Equipment

o Physical environment

o Working conditions

o Complexity of job/Interdependence

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Lack  of financial/human  resources

Lack  of raters/ ratees training

Rating  Inflation/deflation

Unclear Purpose

Lack of proper Feedback

Improper Reward  system

Lack of Appraisal  instruments

No set Performance  Standards

Lack of Rating  accuracy

Lack of Accountability  of  raters

Lack of Management  Commitment

Lack of trust, participation, and acceptance on the part of employees.

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Errors in Performance Appraisal

Majorly errors in Performance appraisal arises due to various biases while rating the employees’

performance. A few common errors are:

Error Definition Example

Contrast Effect Tendency of a rater to

evaluate people in comparison

with other individuals rather

than against the standards for

the job

Think of the most attractive

person you know and rate this

person on a scale of 1 to 10.

Now think of your favorite

glamorous Movie star. Rerate

your Acquaintance. If you

rated your friend lower the

second time, contrast effect is

at work.

First impression

error

Tendency of a rater to make

an initial positive or negative

judgment of an employee and

allow that first impression to

color or distort later

information

A new supervisor noticed an

employee who was going

through a divorce performing

poorly. Within a month the

employee’s performance

returned to its previous high

level, but the supervisor’s

opinion of the individual’s

performance was affected by

the initial negative impression.

Halo/horns effect Inappropriate generalizations

from one aspect of an

individual’s performance to all

George’s outstanding writing

ability caused his supervisor to

rate him highly in unrelated

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areas of that person’s

performance

areas where his performance

was actually mediocre.

Similar-to-me

effect

The tendency of individuals to

rate people who resemble

themselves more highly than

they rate others

Carol was a single mother

with four children and was

promoted to supervisor.

Unknowingly she rated

several other women who

were also single mothers

higher than their performance

warranted

Central tendency The inclination to rate people

in the middle scale even when

their performance clearly

warrants a substantially higher

or lower rating

Because Harold had a

concern that he would not be

able to deal with confrontation

during an appraisal session, he

rated all of his employees as

“Meets Expectations.”

Negative and

positive skew

The opposite of central

tendency:

the rating of all individuals as

higher or lower than their

performance warrants

Susan rates all of her

employees higher than she

feels they actually deserve, in

the hope that this will cause

them to live up to the high

rating. While Carl sets

impossibly high standards and

is proud of never having met

an employee who deserved a

superior rating.

Attribution bias The tendency to attribute

performance failings to factors

under the control of the

Harriet, attributes the

successes of her work group to

the quality of her leadership

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individual and performance

successes to external causes

and the failings to their bad

attitudes and inherent laziness

Recency effect The tendency of minor events

that have happened recently to

have more influence on the

rating than major events of

many months ago

Victoria kept no records of

critical incidents. When she

began writing the appraisals

for her employees she

discovered that she could only

recall examples of either

positive or negative

performance for the last two

months.

Stereotyping The tendency to generalize

across groups and ignore

individual differences

Waldo was quiet and reserved;

however, he is well liked and

respected by both internal and

external customers. His boss

rated him lower than the other

customer service personnel

Since he didn’t “fit the mold.”

Forcing  Information  To

Match   Non-Performance

Criteria

adjusting   performance

appraisal  to  bring  it  in   line

with employee’s  ranking

Seniority

Differential  Effects Tendency  to  like  the

different

Jack brought about a new

system in his department and

inspite of not having

contributing considerably

other than this, his different

contribution got him good

ratings.

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What Increases Biases?

There are various reasons due to which the biases get enhanced:

Rater’s perceptions of constraints

Rater’s experience of the job

Education, background

Importance of Appraisal

Acceptance

Practicability/Compatibility- Too complex/right timing

Stigma

Linkage with Rewards

Absence of Monitoring

Linkage with Training

Absence  of  Participation

Organizational  Culture

Low  Self  Worth

High  Expectations

All the above mentioned factors lead to increase in different type of biases as mentioned in the

errors in performance appraisals.

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Consequences of Inaccurate Ratings

Due to various biases and inaccurate rating a number of consequences which can lower the

morale of an employee and affect his performance adversely can happen. Also an organizational

loss in terms of time, cost, effectiveness and efficiency is at stake.

Rewarding poor performances: major drawback of inaccurate rating is rewarding poor

performances which may lead to dire consequences in future as an inefficient and

incompetent person when promoted or rewarded shall consider his/ her below average

performance to be good.

De-motivating good performers: this is the consequence of wrong performance

appraisals. Good people if not given recognition tend to get de-motivated and not work

further in future.

Not giving proper feedback, re-training and improvement of performance: In

performance appraisals proper feedback is of a lot of importance and re-training of

employees who lack in their performance in the area identified during appraisals should

be given in order to improve their performances in future.

Peter’s Principle: It holds that in a hierarchy, members are promoted so long as they

work competently. Sooner or later they are promoted to a position at which they are no

longer competent (their "level of incompetence"), and there they remain, being unable to

earn further promotions. Hence, due to inaccurate performance ratings peter’s principle

comes into existence.

False sense of security: the poor performers develop a sense security about their job and

performance which is not right for the organization as well as the individual.

Lawsuit in case of non‐promotion/dismissal: Also an organization may have to face a

law-suit due to inaccurate performance appraisal in case an aggrieved employee files a

case against the organization as there are various legal issues involved in performance

appraisals.

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How to Reduce Errors in Performance Appraisals?

As managers, we are still common people that tend to be subjective in our judgment. But we

understand, the impact if we cannot be objective in performance appraisal. Employee who be

treated unfair, tend to be difficult to be managed next year. So it’s very important for all

managers to know the technique to increase objectivity in performance appraisal. Here some tips

and guidelines:

Make job objective and target agreement at the beginning of the year

Make regular note to subordinate’s performance for the whole year.

Participation

Ownership –Joint (appraisee to  own  more)

Tasks Targets and KPAs

Encourage Qualitative  Assessment

Do Not Go Blindly by Ratings

Introspection

Periodic Feedback

Training of  Appraisers

Monitoring

Well Defined Criteria  for  Assessment – Behaviorally Anchored Rating Scales

Introduce Review Mechanisms

More Opportunities to Observe the appraisee

Closer the Rater is to the  appraisee in  Organization Hierarchy,  higher  the

correspondence  between  the  Qualities  in  the  Instrument,  More  the  Linkage

Between  Ratee performance  and  organizations  outcomes

Use  MBO

o Specific  timeframes  for  each  task

o Set  benchmarks

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Use  multiple appraisals

o Peers

o Subordinates

o Clients

o Supervisors

o Criterion for  doing  a  job  well  identified ‐ More complex  job/more  criteria

o Critical activities  to  be  assessed

Do  not  communicate  standards  at  the  time  of  review

Don’t  do  not  let prejudices affect your  ratings

Do  not  analyze personality instead of  performance  

Consider  factors  beyond  employees’ control

Hence the errors in performance appraisals need to be minimized and a proper feedback and

accurate evaluation system should be developed by every organization for an effective

performance appraisal of their employees.

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References

agtraining.tamu.edu/handouts/appraisal-errors

www.performance-appraisal.com/bias.htm

www.capam.org/_documents/luckheenarain.nalini

en.wikipedia.org/wiki/Performance_appraisal

hubpages.com/.../how-to-reduce-Bias-in-Performance-Appraisal

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