Chapter 4C: Performance Appraisals

Question 1

Reasons for motivational purposes:

3 reasons!

Answer 1

1. Motivational: ensuring link between effort and rewards (performance evaluation)
2. Administrative: determine performance to make decisions on raise, promotion, type of jobs assigned
3. Developmental purpose: helps employees identify where to improve and where they’re doing well

Question 2

Two things to measure for performance evaluation?

Answer 2

1. Controllables
   employee’s effects of effort on company values
   - it improves value congruence
2. UNcontrollables:
   Effects of other factors
   I.e. Stock prices as a measure for CEO performance (not good!)

HINT: IDEAL PERFORMANCE MEASURE REFLECTS EMPLOYEES TOTAL IMPACT ON FIRM VALUE & NOTHING ELSE

Question 3

3 Controllables to measure?

Answer 3

1. Task outcomes
   I.e. Produces, sales (not possible for all jobs)
2. Behaviours
   Behaviours associated with success on the job
   (Meeting deadlines, coming to meetings on time)
3. Trait s
   Good attitude, being co-operative, etc

Question 4

Problems with Appraisal systems?

3 things!

Answer 4

1. Demotivating effects (if not done right)
   - gives unclear link between effort ands reward.
2. Influence costs
   People spend more time lobby than working, importantly during when promotions are flying around.
3. Appraisal systems distort incentives
   I.e. Coaches say they want teamwork but rewards the stars.
   I.e. We want students to become innovative, independent, but test & penalize them all the same linearly.;

Question 5

4 issues (biases) DURING appraisals?

Answer 5

1. Halo effect
2. Recency effect
3. Contrast Effects
4. Similarity Errors
   (When you give more credit to skills that you also posses) (congruence bias?)

Question 6

3 errors (criteria errors) DURING appraisals?

Answer 6

1. Single criterion (evaluation only a few of your activities)
2. Low differentiation (using a very limited range of performance scales)
3. Leniency errors
   Inflation and compression of performance value based on each marker - not rlly a problem with just one marker.

Question 7

People that should evaluate - PROS AND CONS

1) Manager
2) peers
3) Self
4) Immediate subordinates
5) 360 Evals. (What is it?)

Answer 7

1) Con: can’t really evaluate everyone, not really close to action

2) pro: closer to action, multiple judges
Con: reluctant to give neg.feedback due to friendship, also can be super biased

3) pro: more willingness for an appraisal system
Con: self serving bias

4) pro: enhances employee empowerment
Con: scared to give neg,feedback to someone higher up than you!

5) Manager of employees & employees of managers & peers, and direct reports

Question 8

Advantages and problems with 360 Evals?

Answer 8

1) more likely yo capture more behaviours, reduces errors (you can look for consistencies)

2) Costly ($$$ and time)
Hard for employees to rate their bosses
Competition and co-operation (fine line if you want to get promoted, raise, etc)

Question 9

Ways to improves appraisals?

5, but aim for 3

Answer 9

1. Performance metric
   - precise as possible (clear link between goals/performance/rewards)
   - performance with what’s good for company
   - focus only on Controllables!
2. Reduce the stakes of appraisals!
3. Different evaluators (360, training, incentives, evaluating only areas of expertise)
4. Multiple Different evaluations for different purposes (raise, promotion, development, firing, etc)
5. Look to do day-to-day coaching than one big annual appraisal

Question 10

2 final/main points about measuring performance?

Answer 10

1) simply just measuring performance can have a powerful effect on productivity
2) must be done RIGHT!!! (Especially for cognitively complex jobs)