Perfecting performance appraisals.

Companies that hope to succeed in today's competitive business environment must learn to identify their most capable employees for placement in key organizational appointments. To do this, managers should devote more attention to maximizing the effectiveness of performance appraisal systems.

Many managers see performance appraisals as a nuisance to be faced every year. Upper management should make effective performance appraisals a condition of successful managerial performance. Rewarding managers for conducting timely and thorough performance appraisals will help them recognize the importance of this responsibility.

Training. Managers should be trained in interviewing, counseling, and performance appraisal techniques before they are required to use these skills. A typical training program should cover rating standards and performance appraisal methods. Training sessions should concentrate on teaching effective communication skills and interviewing techniques. It is recommended that role-playing and video-recorded interviews be employed and that sessions be conducted away from the office.

There are various possible appraisal techniques.

Absolute performance methods. With this style of appraisal, managers use written, absolute standards. Reviews are not based upon relative standing of the employee in a specific work group. Absolute methods facilitate intergroup comparison of employees in an organization.

The most common absolute style is referred to as the traditional or graphic rating scale. This method uses very general personal characteristics such as cooperation and loyalty as a basis for evaluating the employee. The main problem associated with this type of rating scale is that it does not provide helpful feedback or guidance to an employee concerning specific behaviors and the ways in which he or she might improve future performance. Additionally, managers may not agree on the meaning of general terms that are used as a basis for individual assessments.

Several absolute rating methods minimize these flaws. Some of these methods are the behaviorally anchored rating scale (BARS), the behavioral observation scale (BOS), and the critical incidents method (CIM).

Behaviorally anchored rating scale. BARS uses expected performance levels as a basis for the appraisal. Behavior is judged by a job analysis and comments from those in the same or similar jobs. Behavioral statements are developed for each job in the organization and are anchored by numerical scales.

There are many benefits attributed to use of the BARS rating method. Apart from describing real-life behaviors associated with a specific job, the BARS system reduces the chance of errors in personnel ratings because it is based on the job analysis.

As with any performance appraisal method, there may be some difficulties associated with this type of comparative performance rating. Although BARS provides excellent specific behavioral guidance for employees, it is among the most complex and difficult performance appraisal system that can be introduced, especially for smaller organizations without significant human resource staff capabilities. Development of the BARS system is costly and time intensive, because of the job analysis, interviewing, observation, and development of behavioral expectation statements. However, companies that develop the system can expect impressive results.

Behavioral observation scale. BOS is a variation on the BARS method that uses actual instead of expected behavior as a basis.

With the BARS system, managers tell employees what will be expected of them in the future. The BOS system observes past performance as the standard for appraisal. BOS offers many of the same benefits as BARS, most notably concrete examples to guide employee behavior and developmental difficulty. While basic scales should be observed with both systems, BOS ties in concrete examples from the past to motivate in the future.

Critical incident. This method entails the use of journal entries to record the dates and specific details of positive and negative job-related behaviors over the entire period of assessment. The benefit of this method is that it provides an evaluation of specific instances and gives concrete examples of employee performance.

Despite the attractiveness of this absolute rating method, there are problems. Managers differ as to what constitutes a critical incident to be recorded in the journal. The method emphasizes the extremes of employee behavior over the more commonly observed average. The manager must also devote a considerable amount of time to logging the details of critical incidents in the evaluation journal.

Errors. Whatever the method used, the integrity of the process must be ensured. Even when all personnel associated with the appraisal process are attempting to minimize error, it may still enter into the interview in several forms.

Halo or horns. These two types of interview errors occur when the evaluator ascribes either a positive (halo) or a negative (horns) attribute to an individual. A halo or horns error is often associated with extraneous factors such as appearance and gender. These errors can be minimized by using specific appraisal techniques such as BARS and BOS. Using multiple-raters can also combat these problems.

Initial impression and recency. Initial impression error occurs when the appraised individual's early performance level is noted in the appraisal rating rather than the observed performance over the entire period of assessment. The opposite problem arises when an individual's appraisal rating reflects only his or her latest behaviors and does not consider performance demonstrated in the early or middle portion of the evaluation period. To address these problems, the critical incident method is strongly advocated.

Spillover. Spillover error occurs when performance appraisals from a previous period, such as those held in an individual's personnel file, unduly bias the evaluator's assessment of current performance. It has been suggested that evaluators not be permitted to obtain access to past performance records at the time of the current appraisal in order to minimize this type of error. Also, emphasis upon observation-based information can help focus attention on relevant behaviors.

Central tendency. Central tendency error occurs if an evaluator classifies a disproportionate number of employees within a group of his or her subordinates as being average. The supervisor may do so for reporting ease and convenience. Forced distribution appraisal methods address this problem by forcing a certain proportion of the evaluated group into each assessment category. Another option is to use the field review method of performance appraisal where the line manager provides information to a human resources specialist who writes the actual performance appraisals.

Rater bias and characteristics. The evaluator's personal characteristics and biases may affect the performance appraisal process. Examples of this type of error include gender bias and the tendency of people to unintentionally favor subordinates who are similar to them in education, upbringing, and appearance. The best way to rectify the problem of personal bias is to use a review process for all evaluators. By means of a higher level review process, all performance appraisals are examined for any indications of bias or irrelevant factors in evaluation. Multiple raters may also be used to guard against rarer bias.

System selection. The following guidelines can assist those responsible for instituting or revising their organization's performance appraisal system.

The focus should be on individual performance and the frequency of positive or negative occurrences. The evaluator should avoid consideration of the individual's personality or nonwork-related dimensions.

A reviewer should give specific feedback during the performance appraisal interview. Use of the critical incident method is highly recommended because it concentrates on specific examples.

A supervisor should provide positive and negative observations during the evaluation. Most individuals demonstrate both strong and weak aspects of their performance in the organizational context. A disproportionate concentration on negative behaviors may cause the employee to become defensive, argumentative, or noncommunicative.

The manager should determine causes of suboptimal work behavior and performance. Is the evaluated individual being held accountable for group processes or equipment problems that are beyond his or her control?

The company should conduct periodic reviews of performance standards to ensure that they are explicit and achievable by those who will perform them. Unrealistic performance standards diminish individual motivation.

The organization should make the performance appraisal a two-way process. The formal interview should not come as a surprise to the evaluator or the employee. Each party must be given time to review specific incidents and to reflect on future training and development needs.

Special cases. Employees who are members of task forces or who report to two supervisors require different treatment. One means of addressing this problem is to conduct multiple appraisals for those individuals. In order to minimize undue bias and error, each evaluator should fill out a separate review form without consulting the other rater.

Since performance appraisals are strongly linked to compensation and succession planning, some thought should be given to the relative weighting of each separate performance appraisal. If the employee was a member of two task forces over the period of a year and performed similar duties, then the two performance appraisals should be equally weighted. If one project was longer or had priority, the evaluations should reflect that difference.

Results. Many times, employees do not perceive any link between their performance evaluations and rewards. This common problem can have damaging effects if superior performers leave the organization for a competitor or remain and reduce the level of performance they believe equitable to the rewards received. Employees must have confidence that management will recognize and reward a job well done.

Effective performance appraisal is an ongoing process that requires informal and formal feedback. Open lines of communication between supervisor and worker must complement appraisal interviews for the system to be successful.

Kenneth McBey is a professor of administrative studies at York University in Ontario, Canada. He is a member of ASIS.