Performance Measures

Transcription

1 Last updated: May 4, 2017 Performance Measures COMM 203 Flex at the Sauder School of Business, University of British Columbia W:\Learning Services\Courses\COMM 203\Siobhan Flex Work with Brian

2 Performance Measures This video will cover how performance is measured. I will discuss the commonly used measures and methods and some of the advantages and disadvantages of each. A first consideration is the unit level at which performance appraisal will be done. Most frequently, this is at the individual level and each employee s performance is measured. However, the nature of the work often makes this inappropriate or difficult, such as when work is done collectively through teams or some other work unit. Then team level performance would be appropriate. In smaller organizations, the focus may be at the organization level. Most of the following discussion will focus on performance appraisal or individuals, but some of the methods work for teams or groups as well. A second consideration is the sources of information for performance appraisal. In most cases this is the employee s supervisor. But it may also include peers, subordinates in the case of measuring the performance of supervisors and managers, the person being evaluated, or customers and clients. So how is performance measured? One possible measure is output or results, both quantity and quality. This might include sales volume for people working in sales. Or numbers of defect free units produced in a manufacturing job. Many believe output measures are the best. They appear objective, accurate, reliable and free from any personal bias. However, there are generally many issues with using output as performance measures. For example, if a businessto-business company assigns sales representatives each to one sales region, output would be a good indicator of relative performance only if all sales regions were miraculously identical. But some regions will always be a larger market and others smaller, and output could reflect mostly the region a representative is assigned to rather than their actual performance in sales. For production jobs, machines may breakdown, or the quality of inputs may change, all affecting output but not related to job performance. These are all sources of contamination with output measures used as job performance measures. Output measures may also suffer from deficiency. In addition to sales volume, the organization may be very concerned about customer relations, customer service, timely follow-up or other things not reflected in sales volume for the period. For production jobs, organizations may need information on scrap rates, or wastage of input materials, or performance of routine machine maintenance and cleanup. Acceptability of output performance measures may also be low among employees. The common disputes among sales representatives about who gets which region, or which clients, are evidence of low acceptability of sales output as a measure of job performance. So while they may sound like the perfect measures of job performance, even when individual output measures are available, they generally have many problems and limitations. Furthermore, for most jobs there simply are no individual output measures available. UBC SAUDER SCHOOL OF BUSINESS PAGE 2

3 So performance appraisal for most employees involves subjective ratings by supervisors or other evaluators. There are many ways of doing this. But there are also numerous sources of error in subjective performance evaluations and I will discuss these sources of error next. Then I will discuss the various methods. One source of error in subjective performance evaluations is what is called the halo effect, or its opposite, the horns effect. The halo effect occurs when an evaluator feels confident that an employee has done very well on one aspect of job performance and therefore gives that employee a high evaluation on all other aspects. The horns effect is just the opposite when an employee is rated low on all aspects of job performance because the evaluator knows this employee was low on one aspect. Both of these are an unreal consistency across the different aspects of job performance for each employee, and does not reflect a true independent evaluation on each aspect of job performance. Central tendency is one of three errors of distribution across employees. With central tendency the evaluator rates all employees as average, or in the middle of the scale. There is little or no differentiation in performance across employees. This could reflect evaluators who simply do not have the information they need to make individual evaluations, someone who doesn t like to make decisions, or evaluators who don t have the time or motivation to do it right. Central tendency is a very common problem. A second distribution error is leniency error, which is when all employees are rated very highly. The third, strictness error is when all employees are rated very low. All three reflect an unreal consistency in evaluations across all the employees. Recency bias is when the evaluator focuses only on recent performance and ignores performance from longer ago. This can be a real problem with annual performance evaluations, which is what most organizations do. The evaluator may not recall how the employee was performing close to a year ago so only considers recent performance. A lazy but clever employee may game the system by working extra hard for several weeks prior to the annual performance evaluations, but coast for the rest of the year. Personal bias could introduce unfair discrimination on the basis of protected categories under the human rights legislation, or it could introduce contamination that is not illegal but still unrelated to job performance, such as similar political beliefs, attitudes or physical characteristics. Generally this is a bias in favor of employees similar to the evaluator. Activity bias is when an evaluator focuses on how busy the employee seems to be rather than whether they are actually getting their job done. Some employees are very skilled at appearing busy whenever their supervisor is present, but don t actually perform their job well. So the bottom line is that the subjective performance evaluation methods commonly used for most jobs are all subject to numerous sources of error and bias. All of these errors and biases are sources of low inter-rater reliability as different evaluators will be affected by different biases, or different degrees of bias. Most also introduce contamination or deficiency, and if employees know the evaluators are victims of these biases, this would lead to low acceptability by the employees. UBC SAUDER SCHOOL OF BUSINESS PAGE 3

4 There are several methods for conducting subjective performance appraisals, and some of these methods were developed specifically to address the sources of bias just mentioned. There are several comparison, or ranking methods. These methods are simple and easy to develop and use, and they avoid central tendency error. However, these are not good methods as they have very low inter-rater reliability. Also, they force a ranking among employees when in fact many, or even all of them in the unit, could have the same actual performance, so the ranking ends up being arbitrary and not reflecting true performance differences. Also, ranking may tell employees how they are ranked, but provides little feedback on why they may be ranked at the bottom and what they need to do to improve. One comparison method is simple ranking, were the supervisor or other evaluator simply ranks all the employees in the unit from best performer to worst performer. Very simple and easy, but also very subjective and very low reliability. A better ranking method is alternate ranking, or paired comparisons. In this method the evaluator looks at all possible pairs of employees in the unit and chooses the best from each pair. Then a count of how many times each employee was chosen as the best gives a numerical score for each employee. This is slightly more reliable than simple ranking. A final ranking method is forced-distribution. With this method the evaluator must follow a prescribed distribution, such as 5% of employees are outstanding, 20% exceed expectations and so on down to 5% are below expectations. This forces a nice neat distribution, but a key problem is that the employees actual performance may not fit that distribution. What if all employees are doing very well and none of them are below expectations? The evaluator is forced to put 5% in that category anyway. One of the most common methods of subjective evaluations is graphic rating scales, as shown in this example. The best answer would be strongly agree. The response descriptors may be agreement or disagreement, range from outstanding to below expectations, the frequency of something happening, or others. A key advantage is that they are fairly easy to develop and use, which is why they are so widely used. However, graphic rating scales are prone to all the sources of error mentioned above, and inter-rater reliability tends to be low. They can be improved by developing different questions or scales for each job, and carefully focusing the required behaviors for good job performance. But, as I noted earlier, they are often used with generic attributes, or worse personal characteristics or traits, which have little or no relationship with actual job performance. UBC SAUDER SCHOOL OF BUSINESS PAGE 4

5 A much better rating scale is Behaviorally Anchored Rating Scales, or BARS. This focuses on the behaviors required for good job performance, and instead of short descriptors for the rating responses, such as agree or disagree, provide detailed examples of behaviors to anchor each response level. The inter-rater reliability of BARS is very high, and provided the appropriate behaviors are chosen for evaluation for each job, they can also have very high validity. BARS are one of the very best methods for subjective performance evaluations. So why isn t every organization using them? They are difficult and expensive to develop as they must be unique for each job, or at lease unique for small groups of very similar jobs. As jobs change over time, they are also difficult to update and maintain. They are much more complicated and time consuming to use for the evaluator leading to low acceptability by supervisors under time pressure. However, if done correctly, they should have high acceptability among the employees being evaluated. UBC SAUDER SCHOOL OF BUSINESS PAGE 5

6 Management by objectives or MBO, is a system for setting performance goals at each level of the organization, and these performance objectives then become the basis for performance appraisal. The performance objectives should be mutually agreed to by the supervisors and employees. If done carefully, this is a very effecting system with highly valid performance appraisals. This works well for evaluating the performance of teams or other work units, but is also effective for individuals. Several other methods are discussed in the readings. Everyone who will be supervising employees will be required to conduct performance appraisals, and this is sure to include you throughout your career. So be sure you are familiar with the methods and processes for performance appraisal, as well as providing performance feedback to employees. UBC SAUDER SCHOOL OF BUSINESS PAGE 6