Page 140 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Unit 8: Performance Management System

The performance management system comprises of: Notes
1. Identifying and stating the parameters of performance
2. Setting performance standards
3. Planning in participation with employees

4. Identifying competencies and competency gaps that contribute/hinder to performance
5. Planning performance development activities.

Task You are heading a 250-member medium-sized company that has just had a fantastic
year. Everyone pulled together and worked hard to give a big boost to company profits.
Unfortunately, due to rise in input costs, you are forced to offer only a 3 per cent rise in
salaries across the board. At appraisal time, how would you communicate praise for a job
well done coupled with your limited ability to reward such outstanding performance?
Now assume you can afford to hand out some handsome bonuses or raises. What would
be the best way to evaluate employees when everyone has done exceptional Recognizing
and promoting performance culture.

8.5 Problems and Challenges in Performance Appraisal

8.5.1 Problems with Performance Appraisal

The problems inherent in performance appraisal may be listed thus (Teel; Gioia and Sims)

1. Judgement Errors: People commit mistakes while evaluating people and their performance.
Biases and judgement errors of various kinds may spoil the show. Bias here refers to
distortion of a measurement. These are of various types:
(i) First impressions (primacy effect): The appraiser's first impression of a candidate may
colour his evaluation of all subsequent behaviour. In the case of negative primacy
effect, the employee may seem to do nothing right; in the case of a positive primacy
effect, the employee can do no wrong (Harris, p.192).

(ii) Halo: The Halo error occurs when one aspect of the subordinate's performance affects
the rater's evaluation of other performance dimensions. If a worker has few absences,
his supervisor might give the worker a high rating in all other areas of work.
Similarly, an employee might be rated high on performance simply because he has
a good dress sense and comes to office punctually!
(iii) Horn effect: The rater's bias is in the other direction, where one negative quality of
the employee is being rated harshly. For example, the ratee rarely smiles, so he
cannot get along with people!
(iv) Leniency: Depending on rater's own mental make-up at the time of appraisal, raters
may be rated very strictly or very leniently. Appraisers generally find evaluating
others difficult, especially where negative ratings have to be given. A professor
might hesitate to fail a candidate when all other students have cleared the
examination. The leniency error can render an appraisal system ineffective. If
everyone is to be rated high, the system has not done anything to differentiate
among employees.

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