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Chapter 8 Evaluating performance and employee retention.


JEANNE MICHALSKI, Assistant Vice President of Employee Development, Burlington Northern Santa Fe Railway Company

"We are what we repeatedly do. Excellence then, is not an ad, but a habit."


"There is something that is much more scarce, something rarer than ability. It is the ability to recognize ability."



Now that you have recruited, hired, oriented, trained, and initiated a development program for each of your employees, you must evaluate the performance of each. Evaluating the performance of your people is a very powerful tool that serves both the needs of your hospitality organization and the needs of your employees. If properly implemented and performed, the performance evaluation can assist in assuring that each employee is successful in his or her job. This personal success leads to high retention rates that become critical to the success of the hospitality organization. The primary goals of human resources management, to attract and retain, continue in their importance as we discuss evaluating performance.

At the conclusion of this chapter you will be able to:

1. Identify the purpose of performance appraisal as a human resources management tool.

2. Describe where performance appraisal fits into the human resources management process.

3. Discuss how performance appraisal information is used.

4. Describe the conflicting roles of judge and coach in the performance appraisal process.

5. Identify the basics of "how to" appraise all employee's performance.

6. Define the different methods of evaluating performance.

7. Identify the most common mistakes evaluators make when conducting a performance appraisal, and how to avoid them.

8. Increase your effectiveness when appraising the performance of your employees.

9. Understand different ways to improve the longevity of your work force through various retention methods.


Performance reviews, assessments, evaluations, ratings, and appraisals are all terms that refer to the task of assessing the progress of our people. Think of it as a feedback system that provides you with information relating to the successful achievement of your manpower plan. Performance appraisals (the term we have elected to use) tell you how well each of your employees is progressing in his or her individual development as well as how each is progressing in meeting the goals of the business plan. We define performance appraisal process as a means for determining how well each of your employees is doing in achieving the criteria considered essential for success in his or her job position. The term performance appraisal is generic--that is, it is used to describe a variety of types and methods of evaluating the performance of your human resources. This can be done only after an inventory of human resources skills has been conducted and a plan for improvement developed. Progress can then be assessed.


Think for a moment about a useful analogy that each of you can identify with. In the classroom, professors assess students by testing their performance in a wide variety of subject matters such as accounting, menu planning, food production, and computers (Figure 8-1). This assessment leads them to an appraisal of the student's growth and knowledge levels that eventually translates into a grade given for the student's performance level in a particular subject matter.

In the hospitality workplace, as managers, you will assess employees by conducting performance appraisals of their work behaviors and skills. This appraisal will be used to make a number of human resources management decisions regarding wage increases, promotions, and training/development needs for your hospitality operation. Just as in academia, appraisals may be conducted on any type of employee, from hourly wage earners to salaried managers. In all situations, the process of appraising performance is for the purpose of distinguishing among levels of performance.

The Purpose of Performance Appraisals

Performance appraisals let you and your employees know how well they are doing their jobs and what steps should be taken if performance improvement is needed (Figure 8-2). Everyone has a need and desire to know how well they are doing their job. Remember as a student how much better you felt when your professor provided you with frequent feedback so that you knew how you were doing, as opposed to professors who provided minimal feedback so that you didn't know how you performed until you received your grade card in the mail?


There are many purposes for the appraisal process:

* To assess the quality of job performance.

* To provide feedback to your employees regarding job performance.

--Feedback consists of either recognition of good performance or notification of performance deficiencies.

--Feedback could also indicate the need for training.

* To plan future performance goals and objectives.

* To improve job performance through recognition and coaching.

* To establish a better knowledge of the employee so as to understand what motivates him or her.

* To document unsatisfactory performances for possible use in the court systems and arbitration in wrongful termination cases.

* To serve as a basis for compensation distribution in some organizations.

Importance of Appraisal Process

Everyone likes to know where they stand with respect to their performance, even when that information might indicate that improvement is needed. Have you ever worked for a manager who never let you know how you were doing? Did you ever feel unsure of what management's expectations were of you? Fortunately, most hospitality organizations have begun to recognize the importance of letting their employees know where they stand and, as you later learn in our discussions about compensation, rewarding people as performance improves (pay-for-performance).

The appraisal process, when conducted effectively and fairly, yields many benefits to human resources managers. These benefits include the following:

* An open two-way system of communication between management and each employee

* An objective set of criteria to measure job performance

* Improved job performance

* A basis for modifying poor work habits

* A means of gathering employee suggestions for improving performance, methods, or morale

* A more immediate awareness of problems

* A stronger commitment to the organization

* Improved job satisfaction

* An effective motivational tool

* A way of demonstrating concern

* A source of documentation in the event of litigation

* A basis on which to determine promotions and wage increases

* A means to seek alternatives to termination

* Future direction for employee improvement and development

* Focus on continuous improvement

* A means to building a high-performance work force

* Increased productivity

These benefits are based upon the assumptions that your employees have a desire to improve their performance, that feedback regarding job performance can affect performance levels, and that job satisfaction (and a happier work force) stem from improved job performance.


Where does the performance appraisal process fit into the human resources management system? Figure 8-3 illustrates the relationship of performance appraisal to the other human resources function activities. As you can see, the information obtained from performance appraisals serves multiple purpose, for you the manager with human resources responsibilities in the hospitality industry.

Relationship to Performance

We appraise our employees in terms of the results and performance levels we expect them to accomplish. Our strategic human resources plans (Chapter 2) become the basis for our appraisal system as they define accountability. We said earlier that our manpower plans could be used as motivators and agreed that all of our operational objectives would need to be supported by performance standards. It is the performance standards that we previously established as an integral component of our human resources plan that become the basis for performance appraisals. The performance standards are what you use to differentiate between good and poor performance, as well as among various levels of performance. Performance levels can range from poor performance to adequate or average performance to good or outstanding performance. It is not always as simple as "good" or "poor."


Relationship to Communication

We also said that our human resources strategic plan would be a communication device. And no where is it more important to communicate clearly than in the process of performance appraisal. Misunderstandings are prevented when the performance standards are clearly communicated to the employees that are accountable for the results defined by your manpower plan. As your hospitality organization grows and your people develop, planning evolves.

Relationship to Development

Your performance appraisal process should emphasize the development of qualified people from within your hospitality organization to fill the opportunities that are constantly generated by a growing organization. A successful development plan integrates the needs and goals of the individual with the needs and goals of the hospitality operation. Just as your development plan provided for lateral and/or vertical career changes, the appraisal process sets behavioral change goals for either improving current job performance or to make career changes. Appraisals assist in linking the individual's goals with the organizational goals.

When appraisals are used for making transfer and promotion decisions, care must be taken that the information on file is only reviewed as it relates to the duties and responsibilities in the new job position (be it vertical or lateral). A person who performs highly in one job position may not necessarily perform at the same level in a different job position that requires different qualifications. Transfer and promotion decisions have to take into account an appraisal of the employees abilities in performing job activities that are part of the new job assignment, not just current job activities.

Relationship to Training

Performance appraisals identify deficiencies in job performance or identify areas of improvement. Identified deficiencies can frequently be traced to the individual's inability to perform the job according to standards. In these situations training needs are identified and training sessions can be scheduled to correct the performance problem. When areas of improvement are identified, it could be for growth opportunities, not just correcting "bad" behavior. The appraisal could identify that the employee wants to improve average, or even good, behavior through the acquisition of new skills or improvement of current skills. Once properly identified and agreed upon, the employee could be sent for the necessary training.

In training, we view appraisal as a needs assessment tool. It can also be used after the training program is completed to assess the level of skill development and learning that has occurred. In other words, what behavior change has occurred as a result of the training?

Relationship to Compensation

Performance appraisals have long been used as a basis for wage determination and wage increases. Unfortunately, some managers view this activity as the sole purpose of performance appraisals. Though the level of performance should certainly have some relationship to the amount of compensation received, you are overlooking a valuable tool if this is the only reason you conduct appraisal activities. The relationship of compensation to performance is of particular concern in the pay-for-performance and merit compensation plans.

When used for compensation decisions, the performance appraisal is used to discriminate between high and low performers based upon established criteria. Compensation scales are established that are commensurate to each performance level. A further discussion of job grading and pay-for-performance can be found in Chapter 10.

When using the performance appraisal for compensation purposes, make sure that the criteria are based on measurable outcomes achieved on the current job. Your employees will be quick to lay blame on management or company weaknesses over which they had no control if they feel that their paycheck is in jeopardy. Measurable work outcomes must be identified that are viewed by your employees as fair and equitable.

When selecting which appraisal process to use in your hospitality organization, it is essential that you have a clear understanding of the mission of the hospitality enterprise. The roles of the performance appraisal will be clearly indicated to you by the organizational goals that stem from the mission statement. You can then develop appropriate operational objectives for appraising performance that are in keeping with the needs of the enterprise.


As we have seen, there are numerous roles that performance appraisals assume. One of the major problems with performance appraisals is the inherent conflict among those roles. The primary conflict lies between the appraisal's role as a determinant of compensation decisions, and the appraisal's role in improving job performance and developing employees. In the first situation, the appraiser must act as judge and in the latter as the coach. Even though this dual conflict has been identified for over twenty-five years, (1) the problem still exists. We discuss ways to avoid this problem later in this chapter.

Let's look at how these dual roles can create a conflict in practice. We have an employee, Beth Doolittle, who has been with our l00-room lodging facility for two years. The time is approaching for Beth's performance appraisal meeting, at which time you will discuss with her (1) how she is performing her job, and what needs you mutually see for training and development; (2) what her goals may be and whether they have changed; (3) how you can assist her in satisfying those needs and goals; and (4) what her wage increase, if any, will be.

If you provide Beth with a list of training and development needs and then give her a wage increase, she is likely to be confused. Why must she undergo more training if you are satisfied enough with her present job performance to give her a raise? If, on the other hand, you tell Beth that she will not be receiving an increase because of unsatisfactory job performance, then she is not likely to hear what plans you have for her development and training.

One solution you can institute is a system that provides two different appraisal sessions. In one, called the development appraisal, you wear your coach hat and let your employee know how much you value his or her contributions to the organization. You mutually agree upon training and development needs that assist the employee in achieving the goals that are most important to him or her. The decisions made in this interview become the basis for the retraining that we discussed in Chapter 6 and for the individual development programs we discussed in Chapter 7.

In the second appraisal session, called the performance evaluation, you wear your judge hat and provide the employee with information on his or her successes and failures in the hospitality organization. Has the employee met the operational objectives based upon the business plan of the organization? What have been the individual's accomplishments? This information then relates to decisions pertaining to wage adjustments and promotions.

Obviously, these two roles have to be connected to be effective for both the hospitality organization and the employee. Whereas the performance evaluation is controlled primarily by the needs of the organization, the development appraisal is a process controlled by the employee. In a dual review system, the performance evaluation provides the employee with a means of achieving the extrinsic rewards the organization has to offer. The development appraisal then provides the employee with a means of achieving the intrinsic rewards: challenging work, opportunity for growth, and being recognized for a job well done.

Jeanne Michalski points out that although this may be the ideal situation, in reality it is hard to separate out these two roles. In practice, many companies will not want to take the time to sit down with employees twice. Additionally, the reality of heavy workloads and customer counts in the hospitality industry makes it difficult as a practical matter to separate these. It is important for you recognize and understand the conflict that can potentially exist for your employees in these dual roles. Dr. Michalski recommends that you use what fits the situation and your organization. You might find yourself working for a hospitality organization that does not even use rating systems of any type. The role of coaching, as we saw in Chapter 7, is taking on an increasingly important role in human resources management. Some hospitality companies, along with other industries, are moving away from appraisals and more to coaching. An effective performance appraisal process provides a method for satisfying the needs of everyone involved in the hospitality organization.


Performance appraisal is a term either dreaded or loved by management and employees alike. For each, it can be either a painful or rewarding experience. It is not pleasant to tell or be told that you are not doing a good job and improvements need to be made. On the other hand, many employees look forward to their appraisals, especially if they respect the manager giving it. Have you ever been the recipient of a performance appraisal? If so, we are sure that you can identify with some of these feelings.

The last thing we want the performance appraisal to do is to demotivate our people. When a problem with performance or behavior exists, it is our job as an appraiser to convince that individual that (1) a problem does exist, (2) he or she needs to improve, and (3) that you are available to assist the individual in becoming the best that he or she can be.

We now turn our attention to the elements that make up an effective performance appraisal process.

Our industry advisor Jeanne Michalski takes
this opportunity to relate a performance
appraisal strategy to you: "Whenever I have a
performance review to give an individual, I
always tell him or her a few days in advance
that the individual will be receiving it. T     his
allows the employee time to collect his or her
thoughts relative to the review and to form
well-defined questions if desired. Besides, this
permits the employee to become emotionally
prepared for the process, if it is anticipated to
be strenuous.

"I recall one case in particular with a long
service employee who aspired to become a
manager. This individual's comfort level with
delegation was not strong and had the desire
to keep tight control upon all responsibilities.
I felt that a promotion into management
would 'rob' the company of a very good individual
contribution and leave us with a rather
poor manager.

"The strategy that I had mapped out was to
discuss organizational goals, then the individual's
performance as it related to the goals as
an introduction to this person's level of performance.
I felt that this would, as amicably as
possible, illustrate the employees strengths
and shortcomings and lead into a discussion
of 'Where do we go from here?' My opinion
had already been formed based on the
employees skills and attitude that this person
was not fit for management.

"To my delight and surprise when we came
to the point of deciding 'where to go,' the
employee suggested continued growth at the
individual contribution level. This only served
to reinforce in my mind the value of searching
for the most appropriate niche for each
employee within our company. The challenge
to me is to find a job that allows for personal
satisfaction by the employee while maximizing
the company's productivity."

Goal Setting

The first statement we make about the design of a performance appraisal process is Keep it simple! The process we design will be used to both develop and evaluate performance. It logically follows then that the best place to start is by identifying the job standards and responsibilities. If our employees know what is expected of them in the performance of their jobs, they are more likely to be successful.

For an employee to know what is expected of him or her, the employee must understand the functions and responsibilities of the job as well as how he or she should go about achieving those functions and responsibilities. These elements are contained in the goals that are jointly developed by the manager and the employee together (Figure 8-4).


Goal setting occurs for new employees after their orientation and training period, and for current employees at the conclusion of their performance evaluation. The goals become the criteria for determining the acceptable quality and quantity of work levels. They are based on both the business needs, as identified in the business plan, and on the employees' career aspirations, strengths, and weaknesses. Thus, they serve as performance criteria for both the development appraisal and the performance evaluation.

Goals are based upon your job descriptions and are the starting point for an effective performance appraisal process. We recommend that they meet the following criteria for maximum effectiveness:

* Logical. They evolve from an accurate job description and job specification that indicate duties, responsibilities, and accountability.

* Specific. The goals cannot be stated in vague or general terms.

* Realistic. The goals must be clearly achievable. This does not mean that they should not be challenging, but they must be attainable.

* Measurable. The employee must be able to ascertain his or her progress toward the goal and know when the results have been obtained. This keeps the appraisal process objective as opposed to subjective.

* Time sensitive. The employee should clearly understand when this goal is to be achieved.

* Results oriented. This is not the time to discuss the method or activities used to complete the goal, but the time to define the results to be accomplished. The results should be observable by others.

* Mutually committed. The goals should be committed to by every person who has an effect on the employee's performance.

Performance goals include the performance expected of the human resources in your hospitality organization. A performance planning guide will provide you with a written record of the performance expectations that you and the employee agreed upon. This record can be used throughout the appraisal process when conducting either development appraisals or performance evaluations.

The Appraisal Instrument

Remember that the performance appraisal should be based on the employee's job performance related to the job description. The appraisal instrument should contain certain basic information, such as the employee's name, job position, date of the interview, period covered by the appraisal, and who is conducting the appraisal interview. Table 8-1 is an example of a performance appraisal rating form used in the appraisal of hourly employees.

The specific type of information you include on the appraisal instrument is highly dependent upon the method of performance appraisal used by your hospitality organization. These specific methods are discussed later in this chapter, but there are certain elements that all appraisal instruments must contain, regardless of the particular method.

First, and foremost, you can stay out of costly litigation resulting from discriminatory appraisal methods by using an instrument based upon a job analysis. Management must be trained to use this instrument. The results of the job analysis must then be used to develop an instrument that is both valid and reliable. The appraisal instrument typically contains some type of rating system that permits you to rate each employee with as much objectivity as possible.

Consideration must be given to the number of levels you will use to rate your people. The difficulty in using a limited number of rating categories is that most managers are uncomfortable being forced to distinguish among employees in such a restrictive way and tend to rate most employees as average. How would you like to be told you were average? There is no agreement as to the optimum number of rating levels, although most hospitality organizations use between four and seven levels, and most industry advisors concur that three is not enough. The trend towards a more developmental approach in conducting performance appraisals is moving us away from a limited rating approach.


Defining the criteria for each level is the important aspect of the appraisal instrument. Care must be taken to develop performance criteria that allow the appraiser to distinguish between levels of performance. Wording must be clear and unambiguous to be of value. If you are working for a hospitality organization that does not have rating forms already developed, be sure and get plenty of input from the line supervisors. They will be able to tell you if the instrument you develop will assist or hinder their own job performance.

Keep the forms clear, so that the person doing the appraisal does not have a lot of writing to do on the form. Too much written text can be confusing and should be used only to support or clarify the appraisal form. If you have done your homework, you should be able to state the performance standards and objectives precisely. With a well-developed rating scale, the appraiser should not have to do extensive writing on the appraisal instrument. This means that the form will have numbers or letters to insert or boxes to check. And as Dr. Jeanne Michalski points out, once the form is designed, be sure that management is trained to use it properly and consistently.

So far in the appraisal process we have established the employee goals, determined the performance standards against which the goals will be measured, and through the development of a rating scale, we now have our definition of what constitutes superior performance. We are now ready for the appraisal interview. Having discussed the development appraisal in Chapter 7, we focus on the performance evaluation here.

The Appraisal Session

You should give the employee plenty of advance notice before the appraisal session so that the individual can prepare a self-evaluation of his or her performance to bring to the session. You, as the appraiser, also have much to do before actually conducting the session.

As the appraiser, you must carefully review the employee's job description and specification so that you are familiar with the individual's job function. A review of the performance standards, employee achievements, and the performance planning guide is also necessary. You should have been keeping a file or journal on the employee's accomplishments during the review period. These files are oftentimes referred to as critical incident files. Critical incident files contain a written message for each accomplishment or failure that an employee has had. Before the appraisal session these should be reviewed.

If you are anxious about conducting an appraisal interview, it is important that you work through these feelings before confronting the employee. The person might perceive your anxieties as an indication that the review he or she is about to receive is going to be negative. Care must be taken not to bring into the appraisal session any feelings of anger or hostility that you might have toward a particular individual. This assessment must be kept objective and fair.

"I keep a file for every employee. Every time I
observe behavior that is either exceptionally
good or less than I expected I both recognize
the behavior at that time, but I also write it on
my file. Later, when I am sitting down to
review employee performance, I have my
notes on specific behaviors that the employee
has performed. These notes help me decide
the appropriate rating and ensure that I use
the whole rating period in establishing that
rating, not just the last few weeks or months.
These notes also help me in explaining my
rating to the employee. I can remind the
employees of the behaviors we have discussed
previously and by discussing events as
they occur, I ensure that there are no surprises
during the appraisal review (performance

At the beginning of the appraisal session you need to establish a positive and comfortable atmosphere that is conducive to honest, two-way communication. Explain to the employee immediately what the procedure is for conducting the appraisal. If this is his or her first appraisal, the employee is likely to be nervous and have no way of knowing what to expect.

Remember that this session is for two-way communication (Figure 8-5), which means that you and the employee should each talk about half of the time. Introverted individuals might have a hard time talking about themselves. The self-appraisal they filled out before the session will be useful in drawing the person into the conversation. The focus of the discussion should be on the goals and results. Pull out the performance planning guide and discuss each goal separately.


Criticisms that need to be made should be specific and performance related. Do not focus on personality or character traits, but on the goals and the reasons why they were not achieved. Give specific examples instead of generalities. Stay calm and do not get into an argument with the employee. Your focus should be on providing feedback to assist the employee in improving his or her performance, not on the actual rating itself.

Jeanne Michalski says, "I try to approach all
appraisal reviews as a coaching opportunity.
I do need to evaluate and provide a rating,
but that is not my main focus. As I prepare
for the appraisal session, I think about each
employee and their relative skill strengths and
areas for development. For each employee I
try to identify two to three things that he or
she could improve upon, even if he/she is my
top performer. This establishes an environment
of continuous improvement. A true
coach acknowledges the strengths but also
pushes for improvement."

Take as much time as you feel is necessary. Do not plan a tight schedule into which you will attempt to work in an appraisal session. Depending upon the individual, the length of the session will vary. Seek employee feedback especially on projected goals. It is important that the employee feel that he or she is an integral part of the process and can key in to the ideas. Before concluding the session, summarize the employee's strengths and the areas in which improvement is needed. Provide solutions and guidance on how he or she can improve in these areas. Emphasize your commitment to assisting the employee in reaching higher levels of performance. Work with the individual to establish new goals for the next review period. You will continue to use the performance planning guide for this purpose. The focus at the conclusion of the session should be on future performance, not past.

Documentation is an essential part of this process. Feel free to take notes during the session and complete the file shortly after the appraisal session ends, while the discussions you have had are still fresh in your mind. Have the employee sign the appraisal forms and provide him or her with a copy.


There is no one method of appraising performance that is suitable to all organizations. The particular method used in your hospitality organization will be dependent upon the mission statement of the enterprise and the existing corporate culture. We will now discuss some of the more frequently used appraisal methods.

Critical Incident Method

The critical incident method focuses on the behavior of the employee that is to be evaluated. As we have discussed, the two of you have already met to mutually agree upon the goals that the employee would work on attaining during this review period. During the course of the review period it will be up to you, the manager with human resources responsibilities, to maintain an incident file. An incident file is an ongoing record of the employee's behaviors, both positive and negative, during a specified review period.

When it is time for the appraisal interview, you have a file of both poor and outstanding performance for each of your employees. For this type of appraisal to be successful, it is important that you give the employee feedback continuously on their critical incidents. That means when an employee does something outstanding, you immediately tell the person verbally to reinforce that behavior, as well as making a note in the employee's file. Additionally, poor performance should be discussed soon after the occurrence so that the employee can immediately correct the behavior. Remember, your role as a coach is more important than your role as judge when you want to reinforce positive behavior and eliminate poor performance. You are not sitting on the sidelines just waiting for your employees to do something wrong. But when they do, they need to know that you are there and are willing to assist them in getting back on the right track.

It is equally important to remember that performance appraisals are not used just to identify "good" and "poor" performance. Even if an employee's performance is not "poor," we want to use the appraisal session as an opportunity to assist the employee in improving his or her performance levels. How does the employee make an average, or standard, performance outstanding?

Behaviorally Anchored Rating Scales

Behaviorally Anchored Rating Scales--BARS, as they are more commonly called--require that a job analysis has been conducted that has identified the types of behavior that are appropriate for various levels of performance. For example, a Level I behavior might be an extremely accurate worker, rarely makes mistakes; a Level II behavior might be consistently accurate, makes few errors that are seldom repeated; a Level III behavior might be work is consistent with job standards, errors are infrequent and so forth.

The BARS method has the advantage of being objective as each human resource is rated against a predetermined specific set of behaviors that have been identified on a job-by-job basis. The BARS instrument is highly reliable, but it is time-consuming to develop. Oftentimes, the expense required to perform a detailed job analysis to determine the behavior criteria is too great for some hospitality organizations. Additionally it is hard to develop behaviors that relate across all jobs. BARS measures performance levels within a job, it does not provide common measures across jobs. What is more effective in performance appraisals is to use a tool that consistently measures performance across all jobs.

Competency Approach

A competency assessment focuses on the knowledge and sets of skills an employee needs to know to be successful. In this approach the emphasis shifts from being task-focused to being competency-focused. What competencies are needed for superior performance in this job? This approach works well for jobs that are knowledge-intensive and decision-oriented such as those found in leadership and management positions. The largest advantage to using this approach is that you can identify commonality across jobs. For example, the competencies for superior performance in "leadership" would be the same regardless if you were working in a food and beverage operation or a lodging property. This advantage makes competency assessments particularly useful for large hospitality organizations that have a number of different brands.

360-Degree Appraisals

360-degree appraisals are designed to provide feedback from all sources, including supervisors, peers, subordinates, self, and customers (Figure 8-6). This feedback process can be used not only for performance appraisals but for career development as well. Once employees get used to the process of receiving feedback from all the people with whom they interact, they generally value the feedback. 360-degree feedback does provide the employee with a perspective of how they are seen by others. Supervisors usually like it because it may lessen any feeling of bias or prejudice as the feedback comes from a variety of people and not just themselves. Care does have to be taken to make sure that the person receiving the feedback understands the process and is not made to feel as though everyone is "ganging up" on him or her. It is better to initiate the 360-degree process as a developmental tool first before using it as a performance assessment tool. If performance is tied to compensation, employees may resent that individuals other than their boss is having an effect on their paycheck and possible advancement opportunities.


Management by Objectives

First proposed by Douglas McGregor in the 1950s, management by objectives focuses on the results of the behavior, not on the behavior itself. Specific, written goals are developed by the subordinate and supervisor at the beginning of the review period. At the end of the period, the performance is evaluated based on how many of the goals the employee has achieved. This method is more commonly referred to as goal setting in modern day human resources management.

Although this approach is supposedly more objective than some of the other methods of performance appraisal, many people believe that this method can be abused by unfairness, just like any other method. The primary weakness in the process is the ability to establish realistic, yet challenging goals. Many supervisors, upon knowing that their own evaluations will be based upon how well their employees meet their goals, will establish more-obtainable and less-challenging goals for their subordinates. Why establish a difficult goal if you know that your evaluation will suffer if you don't achieve the goal? Management By Objectives (MBOs) or goal setting can usually support other appraisal systems as opposed to being used as a stand-alone system.

Best Approach

There is no one perfect system. The best approach is the one that works for your particular situation. It is much more important that your people receive consistent, objective feedback, that communication channels are open, and that the method is understood by all who will be using it, than it is that you stick with one particular method and not waiver from it. Many hospitality organizations use a combination of approaches. It is important that you find the appraisal process that works for you, your employees, and your company. We now look at some things to avoid in evaluating performance.


One of the major problems in assessing an individual's performance is the bias of the appraiser. Either negative or positive biases can result in a nonobjective and unfair performance appraisal. A variety of factors can affect even the most well-intentioned appraiser's judgment about the performance of one of his or her employees.

The halo effect is one of these conditions that can cloud appraiser judgment. The halo effect results when limited information about an event influences the interpretation of subsequent events. For example, a positive halo may occur if the employee scored very high on a pre-employment skills test. Employees come into the workplace with the manager expecting great things of them because of their high test score. Everything they do in the performance of their job is weighed against these high expectations. If a poor performance is seen by management, the manager might assume that this person is just having a bad day, that this performance is not typical. No consultation about the poor performance is held. This reinforces the idea in the employee's mind that this performance is acceptable. As you can imagine, the longer this occurs, the lower the performance. If this positive halo carries over into the performance appraisal, then the evaluation of this employee's performance will be elevated to meet the high expectations of the appraiser. The opposite result occurs when a negative halo surrounds an employee. This is sometimes referred to as the horn effect or horn error. No matter what performance levels the individual achieves, the performance will probably not be good enough. High standards of information gathering before the appraisal can reduce these effects.

Recent behavior bias is a by-product of the time frame that precedes the performance appraisal. All of us tend to remember the most recent behavior of the individuals we know. In the workplace, our employees tend to be evaluated on their behavior in the past several weeks, rather than on their average behavior over the appraisal period. If employees are aware of this, they will strive to improve their performance just before the appraisal session. These biases in appraisal given to an employee are known as primary bias and recency bias. This points out the great need for management education and training in the appraisal process.

Another bias to avoid is comparing the employee to yourself and weighing the person's performance against what you would do if you were working in the individual's job position. It is natural for each of us to favor those people who remind us most of ourselves, but to do so in the performance appraisal results in an unfair evaluation. This could also cause a problem from a discrimination perspective.

The development of an appraisal system that none of your people understands can create problems of job dissatisfaction. For the process and method you select to be effective, it must be clearly communicated and understood by all who will be affected by it.

Jeanne Michalski recalls a negative experience
she had with a performance appraisal that was
being done on her when she was an hourly
employee. "When I first began working, performing
an hourly job, the company had a
detailed performance evaluation form based on
a long list of tasks and duties. The manager
used a 5 point rating scale on how well an
employee performed these various tasks and
duties. These numbers were then totaled to
arrive at a point system that had pre-established
merit increase amounts tied to
them; the higher the total score the higher the
increase. The problem, from my perspective,
was that because of the hours I was assigned
to work, I was not expected or required to perform
some of the tasks on the list. Because I
did not perform these tasks, I was rated low on
them which also lowered my total score and
my next increase. To this day I still feel I was
unfairly treated." Jeanne states further, "This
example points out how important it is to make
sure you establish goals, expectations and
assignment of duties and measure against
these. Make sure your appraisal process never
measures employees against duties or assignments
that you do not require them to perform.
This of course does not mean you shouldn't
take into account duties that the employee is
not performing if it is part of their assigned job."

We are sure that many of your professors have already cautioned you against the dangers of making personal friends with your subordinates. We point it out here because it will directly affect your ability to objectively and fairly evaluate your employees. If your employee/ friend is not doing a good job, will you be able to tell the person so?

Other problems with evaluating performance are:

* Insufficient time to properly review materials and documentation.

* The appraiser's inability to rate people as outstanding or poor, but rather evaluating all employees as average. This is sometimes called nondifferentiation, where the rater only uses a portion of the rating scale.

* Performance goals that are either vague or conflict with one another.

* Performance appraisals that are used only as a control mechanism rather than also as a development tool as well.

* An organizational structure that does not reward management for the development of their people.


We want to take this opportunity to summarize what you, as the human resources manager, can do to assure that your hospitality organization has an effective performance appraisal process:

* Performance expectations must be clearly identified and communicated to all individuals involved in the process.

* Although the appraisal process is ongoing with continuous feedback, periodic systematic performance evaluations are held with each employee.

* There is a method by which the employee can respond to his or her performance evaluation as well as a formal system of appeals.

* Performance appraisals evaluate the individual's behavior, not the person.

* The hospitality enterprise provides a supportive organizational structure.

* Performance evaluations are candid and specific.

* Appraisers have the training necessary to conduct appraisal interviews. This is a skill and can be taught and learned.

* The performance appraisal process provides for both individual development and sound human resources management decision making.

* Your employees should know specifically what the consequences are of a poor performance evaluation.

* Use the appraisal session as a tool to find out how well you are doing your job.

According to Dr. Michalski, "One thing I
always do as a part of the appraisal process is
to ask my employees to tell me one or two
things I can do to help them be more effective
on the job. Usually I will ask them to think
about the following:

   things I should do more of
   things I should do less of and
   things I should continue to do the same

This helps the dialog and discussions so that
the employee and I can focus on how to
improve his or her performance even if that
means changing my behavior."


The word "retention" has been brought up repeatedly throughout this text because every human resources function that we have discussed so far impacts upon the retention of your employees. We define retention as the maintenance of a high-quality work force through programs that seek to decrease turnover and thereby maximize the longevity of the hospitality organization's people. Our ability, or lack of it, to retain our employees has a direct impact on human resources planning and recruitment. Labor shortages and the current low rate of unemployment have changed the nature of human resources management and the face of hospitality organizations. For the past decade, hospitality managers have identified retention and recruitment as the two most important resources activities. As early as the late 1980s managers were identifying retaining key people as their priority. (2)

Turnover rates in the hospitality industry have always been notoriously high, with some segments and geographic regions of the country reporting as high as 200-300 percent! By this time, you have a full understanding of the labor market and demographic changes that make the continuation of these percent figures not just unacceptable, but impossible, if you hope to have people to staff your hospitality operation when you graduate. What can you, as future hospitality human resources managers, do when you are out in industry?

To begin with, you will have to be receptive to innovative and nontraditional approaches to human resources management in the hospitality industry. Too frequently we hear students, upon learning about new human resources management methods, say that it won't work; the industry just isn't set up to work that way; "You wouldn't get management to buy into that where I work"; and endless other reasons why the new method will fail. Creativity and adaptability have to become part of your management style if you are to be successful in facing the challenges "the next chapter" will be bringing to you. So keep your minds open while we present some of the innovative approaches planned with retention as their goal that are working in the hospitality industry today!


It is true that turnover is inevitable. Employees come and leave organizations for a variety of reasons. People move away, they retire. Turnover is the movement of your employees out of the hospitality organization. As such, it is one of the major factors in determining your labor supply. When turnover is effectively managed, it can be positive as it allows for new people with fresh ideas and energy to join your company. With unemployment rates at a twenty-four-year low as we enter the new millennium, the balance of power has shifted from employer to employee. In the 1980s no one in our industry was too concerned when annual turnover rates were calculated at 60 percent or more. Turnover rates of 100 percent and higher were almost routinely accepted. (3) By the late 1990s the National Restaurant Association in its 1996 Restaurant Operations Report stated the turnover rate for salaried employees of full-service operations with a check average under $10 to be 50 percent and hourly workers in full-service operations to be an alarming 100 percent! (4) In the food service industry alone, it is predicted that 1.3 million new jobs will be created by the year 2005. When adding in managed turnover figures for retiring employees, it is estimated that 3.9 million job openings will occur between 1996 and 2005. These figures do not take into account unmanaged turnover. (5) It is this unmanaged turnover that bleeds a hospitality organization of its talent, its knowledge base, and its positive customer relations along with profits and its competitive edge in the marketplace.

A good place to begin discussing how to improve retention is to examine some of the reasons that high turnover exists in the hospitality industry. One of the realities in our industry is that it is not always seen as an attractive place to work. Let's face it, the work is physical, the hours long, the working conditions are not always the best, the times we're busiest are weekends and holidays when the rest of the world is off, and our pay scales stay pretty close to minimum wage (Figure 8-7). Sometimes it seems as if we are almost boastful of the sacrifices it takes to work in a food service operation or lodging property. How many times have you heard it said that everyone must "pay their dues" in hospitality? At this point, you are probably wondering what you are doing working on a degree in hospitality administration! The point we are trying to make is that this thinking is very outdated. Working within a sector of the hospitality industry does not have to be, and should not be, like the scenario we just described.

Cost of Turnover

Employee turnover is a direct drain on the bottom line. The U.S. Department of Labor estimates that it costs a company about 33 percent of a new hire's annual salary to replace a lost employee. (6) This includes the direct costs of replacement such as recruitment and advertising, clerical time to process paperwork, managerial time to oversee the employment process, orientation and training, possible overtime for other employees, along with uniform supply. You also have to take into account the indirect costs associated with employee turnover such as reduced productivity, lower employee morale, loss of customer goodwill and possible loss of sales. It is hard to come up with an exact dollar figure for some of these costs, yet we know that they exist. So much of our reputation in the hospitality industry is based upon the relationships our employees develop with our customers. How can we accurately place a dollar figure on those precious relationships?


Retention Methods and Programs

The number of hours worked, wages, the scheduling of work hours, training, promotions, physical job demands, benefits package, treatment by management, job challenge, work environment: each of these job-related concerns can be the reason our human resources stay with our hospitality operation, or it can be the reason they leave. A human resources tool frequently used to determine the reasons why people leave our organizations is the exit interview. Upon termination, either voluntary or involuntarily, an interview is conducted to determine the specific causes that resulted in losing an employee. A turnover report is then compiled with this information, and management then seeks to eliminate the reasons why these individuals left.

The problem with this logic is twofold: First, it assumes that the reasons people stay are the opposite of why people leave, and second, it assumes that the people who stay do so because there is a high degree of job satisfaction. (7) In either case, the assumption is likely to be invalid. A more innovative approach would be to study why the employees in your hospitality organization are staying, and if they are happy working in your operation or if they remain because there is no opportunity for them elsewhere.

Turnover is not a problem unique to the hospitality industry. Companies in many industries have needed to become more creative when looking at retention tools and methods. The following is a list of just some of the things you can do, as a manager with human resources responsibilities, to improve the retention rate at your company:

* Hire only the best people. Resist the urge to simply fill the vacancy. Look for the people who fit in with your company's philosophy about work. Everyone needs to be able to work together in the same direction.

* Make sure that the job fits the job description and job specification that the employee was hired to perform. Are the job duties and responsibilities realistic in the course of a work shift?

* Meaningful new hire orientation can help create loyalty. Have new employees spend ten minutes with the General Manager, company President, or even CEO if possible.

* Provide effective training. Follow up and evaluate the effectiveness of your standard training programs. Make sure that you are training for both horizontal and vertical growth.

* Be known as a people-oriented company whose managers set clear expectations for their employees. Give lots of praise and recognition when your people excel, correct them immediately when they do not.

* Treat your people with dignity and respect. Don't forget the Golden Rule--treat others as you would like to be treated. After all, isn't that how we want our employees to treat our guests?

* Review your compensation and benefits packages to ensure that your employees' needs are being met. Remember that what your employees need in the year 2000 is a lot different than in the 1980s, 1970s, or even 1990s. As a general rule, people do not leave just because of money issues unless they feel they are being underpaid and that the company is taking advantage of them. We discuss this is greater detail in Chapters 10 and 11.

* Improved quality of work life. Sure our employees must work when others are playing, but this does not have to mean all the time. Be flexible with your scheduling and sensitive to your employees' needs for their "special" times off.

* Make work fun! Develop a sense of community and a place where your employees want to be.

Recall that our definition of retention includes "a high-quality work force." This means that your people are with you for a long period of time because that is where they want to be. Your job, as human resources manager, is to find out what causes people to want to stay with your hospitality organization and then institute retention programs that reinforce those reasons.

Job Previews

Job previews are a procedure in which new employees are told about all aspects of the job, including the undesirable, before they are made a job offer. The preview is given to the new employee before he or she actually begins working in the job position. The logic behind job previews is that turnover will be reduced if employees are given a realistic picture of all aspects of their job, both the positive and the negative.

They can be used either at the time of recruitment or at the time of orientation when employees are gaining familiarity with the hospitality organization and specific operation that they will be working in. As you might note, job previews represent a very different approach from traditional recruitment and orientation methods. Why do they work in reducing turnover? Research provides us with a number of reasons. (8)

Haven't you dreaded going someplace or doing some activity (maybe giving a presentation in front of the class) only to discover that once you were doing it, it wasn't nearly as bad as you had thought it was going to be? The same psychology plays in presenting employees with a realistic job preview. Once they are actually performing the job tasks, they find that they aren't really as bad as they had imagined.

Another reason job previews reduce turnover is that some people leave the job position at the recruitment or orientation stage when they hear the negatives. Others who stay and experience the negative aspects of the job are more comfortable with them because they knew what to expect ahead of time. They did not feel that management deceived them just so that they would accept the job.

All these reasons for the success of realistic job previews make a lot of sense, so why are they not used more frequently? Sometimes job previews can increase turnover rather than reduce it. Particularly in industries such as hospitality where some entry-level job positions pay minimum wage, there is a tight labor market, and the industry is perceived negatively as a place to work.

Research shows that a critical factor in the successful use of job previews is to ensure that a strong binding occurs between the individual and the organization. (9) We talked about the importance of socializing when we discussed orientation procedures in Chapter 6. The more loyalty you can create in the individual, the more likely the success of job previews as a retention tool.

Jeanne Michalski states, "We routinely conduct
realistic job previews for our hourly positions.
Our operation runs 24-hours-a-day, seven-days-a-week.
We also have many employees
who routinely work on-call. This means they
may not know that they need to be on duty
until a half hour before they must report. In
addition, some of our jobs require extensive
manual labor, operating heavy equipment and
working outdoors in all types of weather.

"We often hire fifteen or more employees at
one time to fill up training classes so we hold
large "employment:" sessions. We begin each
session (40-100 applicants) with a briefing
where we share information on the company
and most importantly on the realities of the
job duties, schedule and working conditions.
Invariably a number of applicants leave before
the interview process begins and that is good.
We want people who understand and will
accept the conditions of the job. If they do not
we will only be hiring more people the next
month. Of course, we also communicate the
benefits of our company during that information

Employee Incentives

Many hospitality organizations are using incentive programs with great success as both retention tools and as performance motivators. Actually, high motivation levels in your human resources staff will translate into strong retention and reduced turnover.

What kinds of incentives could you use in your operation? Cash awards, trips, small gifts (such as watches), seminars for which expenses and wages are compensated, and company outings. The key to using incentives as retention tools is that they need to be tied to longevity. The longer a human resource is with your organization, the more the individual stands to lose by leaving your organization. Many companies have done a good job of rewarding service and creating loyalty in their staff.


The process of evaluation is summarized for you in Figure 8-8. After you identify which people are to be evaluated, the process begins by formulating achievable goals and determining the appropriate behaviors based on job competencies to observe to effectively measure job performance levels. It is critical that each stage in this process is communicated to all involved. Information then needs to be collected on the appropriate employee behaviors and competencies. During the appraisal session the extent to which the goals have been attained are mutually agreed upon by the employee being evaluated and the appraiser. The decisions made in the interview are implemented, and feedback is supplied to the employee on his or her job performance. The cycle then begins again with the feedback assisting in the formulation of achievable goals.


At its best, the performance appraisal is a difficult process. Some human resources managers are never completely comfortable with discussing negative and positive aspects of performance with the employee on a one-on-one basis. Remember, however, that people do respond to constructive criticism, just as you as a student perform better when you receive feedback as to your progress in the classroom before you receive your final grade! One of the most important aspects of the performance appraisal is that it shows your people that you care about them. What an effective motivator this can be!

Performance appraisals can be one of your most valuable tools in the management of your employees. They tie many of our human resources functions together with the mission statement and goals of the hospitality organization. As we continue to reduce turnover and improve the longevity of our work force, the benefits of a good performance appraisal process will allow both management and its employees to spend their time working together in improving both themselves and the hospitality organization.

If properly implemented, performance appraisals lead to increased productivity, higher job satisfaction, and an improved work environment. All activities, plans, and programs associated with the performance appraisal process must be directed towards operational needs. The dollars spent on these programs must make a visible difference in the operation of the hospitality property, be it in the lodging or food service sector of the industry.

You have been the Human Resources Manager of
an all-suite, independent hotel located on the outskirts
of Nashville for the past year. You have not
been happy with the performance appraisal system
at this property since you arrived. Employees
seem intimidated by upcoming reviews, and managers
seem unsure of their role in the process and
uneasy about conducting the reviews. You are
determined to devote your energies to improving
this critical and valuable human resources tool.

Identify what specific steps you will take to
improve the performance appraisal system. What
items do you feel are important to include in the
review form for all hourly employees? Why are
these important to you and your management
style? What bothers you the most about the way
the performance appraisals are currently being
conducted? How will you ensure that these things
do not happen in the future?


In reviewing the current performance appraisal
system at your property you decided to interview
the hourly employees and get their feedback.
These are some of their comments:

"My managers do not know what I do.
They have no basis on which to evaluate me.
They couldn't do my job if they had to."

"If there was a problem with the way I do my
job, why wasn't I told right away? Why do I
have to wait for some crazy performance
review to find out I am doing something

"The ratings on these forms don't make any
sense to my particular job. I don't even
understand what they mean."

"If the manager likes you, you know you are
going to get a good review. If the manager
doesn't like you it doesn't matter how good
you do your job, your evaluation is going to
be bad!"

"My manager is the one who needs to be
evaluated ... by his staff."

Take each of these statements and write a
plan for overcoming these criticisms in the new
performance appraisal system you are developing.
How will your performance appraisal system
guarantee that employees will not be making
these same comments?


Your location, right outside of Nashville, means
that retaining your employees is critical for success.
There is virtually no unemployment in this
area and heavy competition for a quality hospitality
work force. Though some turnover is
inevitable, as the Human Resources Manager
you recognize that it is in everyone's best interest
to minimize turnover and improve retention

Prepare a three-page plan of what you
intend to do to improve your retention rates. Be
specific. Remember that by definition retention
calls for a "high-quality work force." How do job
previews fit into your plan?


appraisal instrument

appraisal session

Behaviorally Anchored Rating Scales (BARS)

competency assessment

critical incident files

critical incident method

development appraisal

goal setting

halo effect

horn error

incentive programs

job previews

management by objectives

performance appraisal process

performance evaluation

performance planning guide

primary bias

recent behavior bias


360-degree appraisals



Bailey, D. 1992. "Coping with Employee Turnover." Restaurant USA 12(5): 18-20.

Branch, S. 1998. "You Hired 'Em. But Can You Keep 'Em?" Fortune, November 9, p. 247.

Dienhart, J. 1993. "Retention of Fast-Food Restaurant Employees." Hospitality & Tourism Educator 5(3): 31-35.

Gilbert, R. A. "When Business is Good, It's Because of the Economy." Lodging Magazine, 1997. (13 July 1998).

Losyk, B. 1995. "How To Improve Employee Work Performance." Restaurant USA 15(2): 12-14.

--. 1995. "Turning Around Turnover: How to Keep the Best Employees." Restaurant USA 15(5): 34-35.

--. 1995. "Weighing Employee Performance: How to Conduct an Appraisal." Restaurant USA 15(9): 23-25.

Meyer, H. H., E. Kay, and J. R. P. French. 1965. "Split Roles in Performance Appraisal." Harvard Business Review (Jan.-Feb.): 123.

Morey, R. C. and D. A. Dittman. "Evaluating a Hotel GM's Performance: A Case Study in Benchmarking." The Cornell Quarterly 36(5): 30-35.

Stone, A. 1997. "Retention Span." Restaurant & Institutions, August 1.


1. Software-Aided Performance Management:



4. PerformanZone Navigator:

5. The Common-Metric System: Performance Appraisal:


1. What are some of the reasons why many human resources managers dislike performance appraisals?

2. Explain the differences between the development appraisal and the performance appraisal.

3. How much impact should the employee have in setting his or her performance goals? Discuss the reasons why.

4. Discuss what activities need to take place and what information you need to collect to prepare for the appraisal session.

5. What information should be on the performance planning guide?

6. Identify the steps in the appraisal session.

7. Describe three different methods of performance appraisals. Which do you prefer? Explain why, and be specific.

8. Explain the benefits of a 360-degree performance appraisal when used in the hospitality industry.

9. Discuss three mistakes that you might make in conducting performance appraisals and how each could be avoided.

10. Explain how job previews might be used as a retention tool. What are their advantages and disadvantages?

11. Think of eight different incentive programs you might use in the hospitality operation you are managing. List them and tell why each would help increase the longevity of your work force.


(1.) See H. H. Meyer, E. Kay, and J. R. P. French, "Split Roles in Performance Appraisal," Harvard Business Review (Jan.-Feb. 1965): 123, for this classic article.

(2.) Hay Group, "Facts and Figures," Human Resource Executive 2, no. 8 (1988): 58.

(3.) Robert H. Woods and James F. Macaulay, "Rx for Turnover: Retention Programs that Work," The Cornell H.R.A. Quarterly 30, no. 1 (1989): 79.

(4.) Nicole G. Castagna, "Help Wanted," Restaurants and Institutions. May 1, 1997. (10 April 1998).

(5.) Ibid.

(6.) Linda Micco, "Retaining Core Workers Challenges Many U.S. Employers," HR News Online. June 19, 1998. (23 June 1998).

(7.) C. L. Hughes, "Why Employees Stay Is More Critical Than Why They Leave," Personnel Journal 66, no. 10 (1987): 19, 22, 24, 28.

(8.) B. M. Meglino and A. S. DeNisi, "Realistic Job Previews: Some Thoughts on Their More Effective Use in Managing the Flow of Human Resources," Human Resource Planning 10, no. 3 (1987): 157-166.

(9.) Ibid.

Mary L. Tanke, Ph.D

Florida International University
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Title Annotation:Section 3 Human Resources Training, Development, and Evaluation
Author:Tanke, Mary L.
Publication:Human Resources Management for the Hospitality Industry, 2nd ed.
Geographic Code:1USA
Date:Jan 1, 2001
Previous Article:Chapter 7 Development programs, coaching, and team building.
Next Article:Chapter 9 Discipline, counseling, and exiting the organization.

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