PERFORMANCE
EVALUATION SYSTEM
Performance Evaluation Definition
• A performance evaluation system is a systematic way
to examine how well an employee is performing in
his/her job.
• It is also called as Performance Appraisal,
Performance Assessment and Employee Assessment.
• It is a subjective analysis of individuals strength,
weakness and area of improvement and their value to
the organization and their potential for further growth
and development.
4 Reasons why Performance Evaluation
System should be implemented
1. Evaluation process should encourage the
positive performance and behavior.
2. Satisfy employee curiosity on job performance.
3. Tool for Employee Development .
4. Basis for Pay Raises, Promotions and
Disciplinary Actions.
Designing a Performance Appraisal
System
PRE REQUIREMENTS/CONSIDERATIONS TO BE SATISFIED
1. FREQUENCY
It is the process to determine how often performance
appraisal should be given.
ESTIMATING THE COST OF PERFORMANCE EVALUATION
TYPES:
• Narrow span of control
• Wider span of control
• Calculation:
• Total time per employee = 2 hours (written + discussion) + 0.5 hours
administrative time = 2.5 hours
• For 8 employees: 8 employees×2 hours=16 hours+0.5 hour admin=16.5 hours
• Cost estimation: 16.5 hours×$50/hour=$825
PRE REQUIREMENTS/CONSIDERATIONS TO BE SATISFIED
2. REWARDS
Should pay increases be tied to performance evaluation.
(i.e.,) When there is a link to reward the employee tends to work
better.
3. GOAL
What goals does the organization expect from the employee
who is employed.
Designing the Performance
Appraisal System
STEP 1: To develop actual form to evaluate each job within the
organization.
STEP 2: Determining who should evaluate performance of the employee
(Direct Manager, Subordinates, Customers, Self Evaluation)
360 Degree Performance Appraisal: Involves collecting feedback on
an employee's performance from a variety of sources, including
supervisors, peers, subordinates, and sometimes even clients. The goal is to
provide a well-rounded view of the employee’s strengths and areas for
improvement. However, there are potential risks if not handled carefully,
particularly when peer feedback is involved.
Performance Appraisal Systems
Errors
1. HALO EFFECTS: The halo effect occurs when the rater allows
one positive aspect of an employee’s performance to influence
the overall rating in other areas. This can result in an
inaccurately high appraisal across all performance factors.
2. COMPARING EMPLOYEES TO EACH OTHER INSTEAD OF
JOB STANDARDS: This error occurs when a rater evaluates
an employee in comparison to another employee, rather than
against the specific job standards or responsibilities.
Performance Appraisal Systems
Errors
3. RELIABILITY ISSUES: Reliability refers to how consistent the
performance appraisal tool is when used by different raters or
for different employees. If the ratings are inconsistent, the
system has reliability problems.
4. VALIDITY ISSUES: Validity is the extent to which the
performance appraisal measures what it is supposed to
measure. The tool should focus on the key skills and
responsibilities of the job.
Performance Appraisal Systems
Errors
5. ACCEPTABILITY: Acceptability refers to how well the
managers and employees accept the performance evaluation
tool. If they do not see it as useful or fair, they might not put
effort into the evaluation process, leading to incomplete or
inaccurate assessments.
6. TRAINING ON PERFORMANCE APPRAISAL PROCESS:
After developing the performance appraisal process, it is
crucial to train both managers and employees on how to use it
effectively.
Performance Appraisal Legal
Considerations
The Civil Service Reform Act of 1978 was pivotal in setting legal
standards for performance evaluations, initially applying to public sector
employees. Criteria for performance appraisal
➢Mandatory Performance Review Systems
➢Employee Participation in Setting Standards
➢Written Job Critical Elements
➢Notification of Critical Elements at Hiring
➢Performance-Based Evaluations Only
➢Annual Appraisal Requirement
➢Training for Evaluators
➢Decision-Making Utility
Performance Appraisal Legal
Considerations
Considerations highlight how legally sound performance appraisal
processes can be implemented, protecting both employees and
organizations from bias and potential legal issues.
• Developing Performance Standards Using Job Analysis
• Providing Employees a Copy of the Evaluation
• Training for Raters and Appraisers
• Using Observable Behavior Examples for Ratings
• Creating a Formal Disagreement Process
Advantage and Disadvantage
