(A Learning Guide)

JESUSA L. LUDA, EdD

Course Facilitator
 INDUSTRIAL PSYCHOLOGY with WORK ETHICS

Module Title: Module 3 Performance Appraisal

Course Title: Industrial Psychology with Work Ethics

Course Number: ITM 321

Course Description:

Industrial Psychology with Work Ethics deals with the study of approaches to help problems affecting
employment in the industry. It emphasizes the importance of work ethics in achieving industry goals. The
importance of industrial psychology is largely rooted in the practitioners' ability to quickly assess a
company, identify barriers to productivity and efficiency, and develop a plan to remedy those
problems. The specialty of Industrial Psychology addresses issues of recruitment, selection and placement,
training and development, performance measurement, workplace motivation and reward systems, quality of
work life, structure of work and human factors, organizational development, and consumer behavior.

OVERVIEW

This module consists of Chapter 3, Performance Appraisal which covers the Purpose of Performance
Appraisal, the Tools and Techniques of Performance Appraisal, and the Elements and Ethics of Performance
Appraisal.

LEARNING OUTCOMES

At the end of this chapter, students should be able to

• discuss the purpose of performance appraisal;
• enumerate and discuss the elements of performance appraisal; and
• reflect on the ethical considerations in appraising employees’ performance.

INDICATIVE CONTENT

1.0 Performance Appraisal

Lesson 1. Purpose of Performance Appraisal

Lesson 2. Elements and Ethics of Performance Appraisal

DISSCUSSION

Lesson 1. Purpose of Performance Appraisal

What is Performance Appraisal?

The term performance appraisal refers to the regular review of an employee's job performance and
overall contribution to a company. Also known as an annual review, performance review or evaluation, or
employee appraisal, a performance appraisal evaluates an employee’s skills, achievements, and growth, or
lack thereof.

Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.| 1

Companies use performance appraisals to give employees big-picture feedback on their work and to justify
pay increases and bonuses, as well as termination decisions. They can be conducted at any given time but
tend to be annual, semi-annual, or quarterly.
A performance appraisal is a regular review of an employee's job performance and contribution to a
company.
Companies use performance appraisals to determine which employees have contributed the most to
the company’s growth, review progress, and reward high-achieving workers.
Although there are many different kinds of performance reviews, the most common is a top-down
review in which a manager reviews their direct report.
Employees who believe the evaluation's construction isn't reflective of their company's culture may
feel dissatisfied with the appraisal process.
Performance appraisals are also called annual reviews, performance reviews or evaluations, or
employee appraisals.

Purpose of Performance Appraisal

Purpose: Performance appraisals are used to review the job performance of an employee over some period
of time. These reviews are used to highlight both strengths and weaknesses in order to improve future
performance.
Performance appraisals are usually designed by human resources (HR) departments as a way for
employees to develop in their careers. They provide individuals with feedback on their job performance. It
ensures that employees are managing and meeting the goals expected of them, giving them guidance on
how to reach them if they fall short, because companies have a limited pool of funds from which to award
incentives, such as raises and bonuses, performance appraisals help determine how to allocate those funds.
They provide a way for companies to determine which employees have contributed the most to the
company’s growth so companies can reward their top-performing employees accordingly.
Performance appraisals also help employees and their managers create a plan for employee
development through additional training and increased responsibilities, as well as to identify ways the
employee can improve and move forward in their career.
Ideally, the performance appraisal is not the only time during the year that managers and employees
communicate about the employee’s contributions. More frequent conversations help keep everyone on the
same page, develop stronger relationships between employees and managers, and make annual reviews
less stressful.

Lesson 2. Elements and Ethics of Performance Appraisal

Elements of a Good Performance Appraisal System

Neil Kokemuller
Updated July 05, 2017

An employee performance appraisal system is a formal structure by which managers review the work
of the employees they supervise. While employees sometimes get nervous about feedback on their

Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.

performance, a good evaluation system is useful in learning the skills and competencies you need to develop
to earn more money or get a job promotion.

Linking of Assessment to Expectations

Effective appraisals link an employee's performance to her job description, expectations and goals. The
appraisal should serve as a way to motivate the employee to improve her performance. This only works if the
employee has clear goals. For example, if a salesperson is expected to close 20 sales a month, her appraisal
should mention this metric. If she met or exceeded the goal, then the appraisal should note as much. If she fell
short, the appraisal should offer constructive guidance and training options to help her improve her
performance.
1. Objectivity
A good performance appraisal is one that is fair, objective and easy to understand. Formal evaluations
usually include specific evaluation criteria that connect to the job. Supervisors should be given guidance on
how to score each employee's performance, whether it's on a scale of 1 to 10 or A to F. These criteria promote
a fair assessment and allow the employee to more easily understand what each score means.
2. Consistent
Evaluation systems should be consistent. This means that each employee in a particular department gets
the same basic evaluation criteria. In addition, all employees should be evaluated over the same time frame,
whether it's once a quarter or once a year. Employees also shouldn't face any major positive or negative
surprises if the manager has communicated well during the evaluation period.
3. Forward-Looking
Since appraisals should tell employees how to improve their performances, they must have a forward-
looking focus. Supervisors should approach each assessment as an opportunity to motivate -- not condemn or
punish. With high performers, the evaluation is an opportunity for formal recognition and positive
reinforcement. For low-performers, the appraisal is a chance to improve deficiencies inhibiting progress toward
job and career goals.

Objective Vs. Subjective Performance Evaluations

Audra Bianca
Updated July 05, 2017

Conducting a job evaluation is a challenging task for most bosses. You have to fight the employee's
tendency to believe that the evaluation is subjective rather than based on his actual results. Following an
established system for measuring and interpreting employee performance is the best strategy. If each
employee knows what to expect, and you follow the system, there should be fewer questions about your
objectivity.

Sticking to Now
Evaluators begin to lose objectivity if they let different rating tendencies affect the ratings they assign to
employees. For example, they might give employees inflated ratings based on past performance or overly
poor ratings because of personal prejudices against that person. To avoid unnecessary biases, compare an
individual's performance to each assigned performance objective. An objective might be for an employee to
Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.
submit a resolution log showing the outcome of all client contacts for the week by Friday close of business. Or,
an objective might be to sell 120 new subscriptions for cable service each month. An employee will perform
some aspects of the job better than others, so give individual ratings on different objectives to get a more
complete view of his performance.

Ratings and Scales

Many bosses think if they are using a systematic method, such as rating an employee on a scale of
one to five on a list of tasks or characteristics, they are giving a more objective evaluation. However, in each
rating you make -- one through five -- you could be letting your personal biases affect the score. Look for ways
to measure employee performance that are not subjective, such as the average number of assigned tasks
completed per day, or the amount of new business the employee generated during the evaluation period. In
many databases, reporting tools help you measure the productivity and accuracy of employees. As long as
you are choosing measures relevant to an employee's objectives, these kinds of measures will help you
evaluate with more objectivity.

Relevance and Consistency

The evaluation process is only useful if measures data relevant to the specific employee, so make sure
it includes the employee's daily responsibilities and goals. Also, make sure individual managers use similar
performance criteria to ensure consistency and objectivity across the organization. If everyone uses the same
model, human resources can train managers how to deliver consistent ratings. HR can also audit a percentage
of performance evaluations to see if managers are using objective measurements.

Making Comments
Some performance appraisals call for writing descriptive comments about employee performance,
including what she's done very well, at a satisfactory level and below expectations. For example, you might
have to explain why an employee should get personal development opportunities, including coaching and
training, to improve weak areas. Keep notes throughout the year about strengths and weaknesses so you can
write detailed comments specific to certain areas of the employee's performance. Without notes and examples
to back up your comments, you will have to rely on your own perceptions when evaluating the employee,
which makes it more likely that subjective measures will creep in.

10 Key Components of Successful Performance Appraisals

Indeed Employer Content Team
Updated October 28, 2024

Performance appraisals play a pivotal role in shaping a company’s culture, offering employees the
recognition they deserve for their diligence and excellence.
Employees often perceive appraisals as overly subjective, failing to reflect their true performance and
growth accurately. Meanwhile, management may feel overwhelmed by the time-consuming nature of the
process, which can consume a lot of a manager’s time
What is a performance appraisal?

Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.

 A performance appraisal, often referred to as a performance review, is a thoughtful evaluation process
that allows employers to assess an employee’s contributions to their organization. This assessment can take
place whenever an employer feels it’s appropriate, ensuring that employees receive timely feedback on their
work.
The primary goal of a performance appraisal is to celebrate an employee’s achievements and identify
growth opportunities. Through open communication and constructive feedback, employers can help their team
members reach their full potential.
Performance appraisals can also serve as a basis for making informed decisions regarding pay raises,
promotions, or, in some cases, termination.

Ethics of Performance Appraisal

Training managers on the ethics of just and God-honoring performance appraisal stressing the moral
obligation for honesty and truth telling is an essential trust building component. The foundational element is
emphasizing that accurate performance appraisal is another manifestation of agape employee love that
balances support and accountability in order to promote the best interests of the employee and the
organization.
An honest assessment of capabilities makes it less likely that employees will think more or less highly
of themselves (in relation to their job performance) than they should. Managers have a moral obligation to
avoid withholding recognition (a form of theft, as noted in Proverbs 3:27) or corrective feedback (as referenced
in Proverbs 29:21). Both recognition and corrective feedback are necessary to the employee development
process. Scripture tells us that the Lord disciplines those he loves (Hebrews 12:6).
Furthermore, research clearly shows that a major contributing factor to employee incompetence is
ambiguous performance feedback. When managers fail to provide honest corrective feedback,
underperforming employees impose costs on coworkers through higher error rates and elevated work
demands, thereby increasing resentment and job stress.
When managers withhold praise, it demoralizes, discourages and frustrates employees, leading to ill
will and rebellion. A realistic performance appraisal preview should emphasize that accurate appraisals may
increase short-term resistance and conflict but eliminate the bitter fruit of biased appraisals. To develop
appraisal skills, provide foundational and ongoing training of managers in the basics of performance appraisal
including identification of rating errors (halo, central tendency, harshness, etc.). Also, develop strategies for
overcoming rater errors including coaching, performance feedback skill development, documentation tools
(diaries, critical incident systems), employee input initiatives and interviewing skill development.
For example, the Rehabilitation Institute of Chicago instituted a two-day performance appraisal training
program to remedy the serious deficiencies in their existing system. The result was a dramatic increase in user
acceptance and adherence to administrative requirements.

EMPLOYEE FRIENDLY APPRAISAL ATTRIBUTE – PARTICIPATION

Research clearly demonstrates that a transparent and verifiable performance management system in
which employees understand the criteria, standards and process is imperative. Vigorous and sustained
employee participation in the development and administration of the appraisal system facilitates transparency.

Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.

This only enhances employee acceptance and commitment to the appraisal process while lowering their stress
and apprehension. Participation is promoted by self-appraisals, joint development of performance goals and
standards, and active solicitation of employee input in performance appraisal counseling and interview
sessions. Self-appraisals are themselves problematic, as employees do have a tendency to inflate
performance, especially if used for administrative purposes, but they are critical for enhancing appraisal
system acceptance and satisfaction given that they provide a means for interjecting employee voice into the
appraisal process. For example, at General Electric Corporation, what began as a successfully pioneered
initiative in the late 1960s to implement the use of self-appraisals, led to the now standard practice across the
private, public and nonprofit employment sectors.

EMPLOYEE FRIENDLY APPRAISAL ATTRIBUTE –COACHING

Another key element is the adoption of a performance coaching model in which managers help
employees develop present and future job skills and employ a joint problem-solving approach to performance
problems. A very powerful coaching tool is the adoption of a 360-degree appraisal system, which provides a
balanced assessment of employee performance. The use of multiple sources enhances reliability and reduces
the negative influence of biased raters. Performance coaching entails ample formal and informal performance
feedback that is specific, behavioral, timely and from an accepted and credible source. Ongoing
communication is the key to successful appraisal. Men’s Wearhouse is a best-practice performance coaching
company that holds managers accountable for subordinate development. There is little outside training.
Instead, managers use coaching as an opportunity to communicate key company values and provide clear
and specific performance feedback to increase employee self-esteem and competence.

EMPLOYEE FRIENDLY APPRAISAL ATTRIBUTE – FAIR TREATMENT

To avoid discouraging employees, avoid penalizing employees for factors beyond their control by
taking into consideration contextual factors that impede performance. Strive to encourage motivation,
innovation and creativity, by avoiding penalizing employees for good faith mistakes and stressing the necessity
of learning through trial and error. AES Corporation drives fear out of the workplace by forgiving good-faith
mistakes, even errors that cost the company a considerable sum of money. For example, an operative made a
$150,000 contracting error, but was not fired and subsequently rewarded the company for their patience and
grace by designing a company-wide safeguard to prevent repeating the error. Another important element is to
enable an independent appeals process to provide an avenue for addressing biased appraisals. Or, create a
formal documentation process (e.g., a performance diary or critical incident system) to provide detailed
information to support ratings.

ACTIVITY

Activity 1. Answer the following questions:

1. What is the purpose of performance appraisal? Discuss its significance in an organization or

institution.
2. What are the elements of performance appraisal?

Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.

EVALUATION/ASSESSMENT

Answer comprehensively:
1. Explain how important is performance appraisal to an organization.
2. Discuss the purpose of performance appraisal.
3. Do employees really need performance appraisal? Support your answer.
4. Enumerate and discuss the ethical considerations in appraising employees’ performance.

REFERENCES

De Leon, Emmanuel B. (2002). Industrial Psychology, Rex Printing Company Inc.

Florencio St., Quezon City

Articulo, Archimedes. and Florendo, Gloria G. (2003). Values and Work Ethics, Trinitas Publishing, Inc.
Meycauayan, Bulacan

Kokemuller, N. (2017). Elements of a Good Performance Appraisal System. Retrieved from

https://careertrend.com/create-performance-appraisal-instrument-18244.html on December 19, 2024

Bianca, A. (2017). Indeed Employer Content Team (2024). 10 Key Components of Successful Performance
Appraisals. Retrieved from https://www.indeed.com/recruitment/c/info/performance-appraisal-factors on
December 19, 2024

Industrial Psychology with Work Ethics (A Learning Guide) Luda, J.L.