Errors in Performance

Appraisal
Manpo
wer 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
Contrast Effect Tendency of a rater to
evaluate people in comparison
with other individuals rather
than against the standards for
the job
First impression Tendency of a rater to make
error an initial positive or negative
judgment of an employee and
allow that first impression to
color or distort later
information
Halo/horns effect Inappropriate generalizations
from one aspect of an
individual’s performance to all rate him highly in unrelated
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Example
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.
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.
George’s outstanding writing
ability caused his supervisor to
 areas of that person’s
performance
Similar-to-me The tendency of individuals to
effect rate people who resemble
themselves more highly than
they rate others
Central tendency The inclination to rate people
in the middle scale even when
their performance clearly
warrants a substantially higher
or lower rating
Negative and The opposite of central
positive skew tendency:
the rating of all individuals as
higher or lower than their
performance warrants
Attribution bias The tendency to attribute
performance failings to factors
under the control of the
individual and performance
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areas where his performance
was actually mediocre.
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
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.”
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.
Harriet, attributes the
successes of her work group to
the quality of her leadership
and the failings to their bad
 successes to external causes
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
Stereotyping The tendency to generalize
across groups and ignore
individual differences
Forcing  Information  To adjusting   performance
Match   Non-Performance appraisal  to  bring  it  in   line
Criteria with employee’s  ranking
Differential  Effects Tendency  to  like  the
different
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attitudes and inherent laziness
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.
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.”
Seniority
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.
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
 Use  multiple appraisals
o Peers

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 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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