The legality of performance appraisals was questioned in 1973 in Brito v. Zia, in which an employee was terminated based on a subjective performance evaluation. Following this important case, employers began to rethink their performance evaluation system and the legality of it.
The Civil Service Reform Act of 1978 set new standards for performance evaluation. Although these standards related only to public sector employees, the Reform Act began an important trend toward making certain performance evaluations were legal. The Reform Act created the following criteria for performance appraisals in government agencies:
- All agencies were required to create performance review systems.
- Appraisal systems would encourage employee participation in establishing the performance standards they will be rated against.
- The critical elements of the job must be in writing.
- Employees must be advised of the critical elements when hired.
- The system must be based exclusively on the actual performance and critical elements of the job. They cannot be based on a curve, for example.
- They must be conducted and recorded at least once per year.
- Training must be offered for all persons giving performance evaluations.
- The appraisals must provide information that can be used for decision making, such as pay decisions and promotion decisions.
Early performance appraisal research can provide us a good example as to why we should be concerned with the legality of the performance appraisal process. Holley and Field 1 analyzed sixty-six legal cases that involved discrimination and performance evaluation. Of the cases, defendants won thirty-five of the cases. The authors of the study determined that the cases that were won by the defendant had similar characteristics:
- Appraisers were given written instructions on how to complete the appraisal for employees.
- Job analysis was used to develop the performance measures of the evaluation.
- The focus of the appraisal was actual behaviors instead of personality traits.
- Upper management reviewed the ratings before the performance appraisal interview was conducted.
This tells us that the following considerations should be met when developing our performance appraisal process:
- Performance standards should be developed using the job analysis and should change as the job changes.
- Provide the employees with a copy of the evaluation when they begin working for the organization, and even consider having the employees sign off, saying they have received it.
- All raters and appraisers should be trained.
- When rating, examples of observable behavior (rather than personality characteristics) should be given.
- A formal process should be developed in the event an employee disagrees with a performance review.
Now that we have discussed some of the pitfalls of performance appraisals, we can begin to discuss how to develop the process of performance evaluations.
|
Source |
Advantages |
Disadvantages |
|
Manager/Supervisor |
Usually has extensive knowledge of the employee’s performance and abilities |
Bias |
|
Favoritism |
||
|
Self |
Self-analysis can help with employee growth |
In the employee’s interest to inflate his or her own ratings |
|
Peer |
Works well when the supervisor doesn’t always directly observe the employee |
Relationships can create bias in the review |
|
Can bring a different perspective, since peers know the job well |
If evaluations are tied to pay, this can put both the employee and the peer in an awkward situation |
|
|
If confidential, may create mistrust within the organization |
||
|
Customer/Client |
Customers often have the best view of employee behavior |
Can be expensive to obtain this feedback |
|
Can enhance long-term relationships with the customer by asking for feedback |
Possible bias |
|
|
Subordinate |
Data garnered can include how well the manager treats employees |
Possible retaliation if results are not favorable |
|
Can determine if employees feel there is favoritism within their department |
Rating inflation |
|
|
Subordinates may not understand the “big picture” and rate low as a result |
||
|
Can be used as a self-development tool for managers |
If confidential, may create mistrust within the organization |
|
|
If nothing changes despite the evaluation, could create motivational issues among employees |
Human Resource Recall
What are the steps we should take when developing a performance review process?
Key Takeaways
- A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job.
- The use of the term systematic implies the process should be planned.
- Depending on which research you read, some believe the performance evaluation system is one of the most important to consider in HRM, but others view it as a flawed process, which makes it less valuable and therefore ineffective.
- The first step in designing a performance appraisal process is to determine how often the appraisals will be given. Consideration of time and effort to administer the evaluation should be a deciding factor.
- Many companies offer pay increases as part of the system, while some companies prefer to separate the process. Determine how this will be handled in the next step in the performance appraisal development process.
- Goals of the performance evaluation should be discussed before the process is developed. In other words, what does the company hope to gain from this process? Asking managers and employees for their feedback on this is an important part of this consideration.
- After determining how often the evaluations should be given, if pay will be tied to the evaluations and goals, you can now sit down and develop the process. First, determine what forms will be used to administer the process.
- After you have determined what forms will be used (or developed), determine who will be the source for the information. Perhaps managers, peers, or customers would be an option. A 360 review process combines several sources for a more thorough review.
- There are some errors that can occur in the process. These include halo effects or comparing an employee to another as opposed to rating employees only on the objectives. Other errors might include validity, reliability, acceptability, and specificity.
- Performance evaluations should always be based on the actual job description.
- Our last step in development of this process is to communicate the process and train employees and managers on the process. Also, training on how best to use feedback is the final and perhaps most important step of the process.
Exercises
- Perform an Internet search on 360 review software. Compare at least two types of software and discuss advantages and disadvantages of each.
- Discuss the advantages and disadvantages of each type of performance evaluation source.
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