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35 Cards in this Set

  • Front
  • Back

Define Performance Appraisal

The process of assessing the overall performance levels of individual employees

Two reasons why companies have a hard time establishing good appraisal systems

Many companies can't seem to find a performance appraisal system they are happy with

Despite their lack of success, they keep trying to make performance appraisals work

Four categories of performance appraisal reasons





Administrative reasons

Identify under-performing employees

Identify employees for promotion

Monitor overall quality of performance of the firm

Developmental reasons

Help employee's understand expectations

Provides useful feedback

Supervisory reasons

Improves supervisor's performance, encouraging them to think systematically

Symbolic reasons

Creating the perception that management cares about good employee performance

Define Performance Appraisal Reliability

Occurs when a performance appraisal system produces the same scores even when applied by different appraisers

Define Performance Appraisal Validity

Occurs when employees who receive the highest scores in a performance appraisal system are in fact the highest performers

Pitfalls of Performance Appraisals

Intentional inaccuracies in appraisals (supervisor bias, make decisions for own gain)

Unintentional inaccuracies in appraisals (problems within the system itself)

System inaccuracies

Central tendency error

Halo error

Recency effect

Contrast effect

Similarity effect

Leniency effect

Harshness effect

Beauty effect

Define central tendency error

Occurs when appraisers rate all employees as 'average' in everything

Define halo error

Appraisers rate an individual either high or low on all characteristics because one characteristic is either high or low (generalizing)

Define Recency Effect

Overweighting recent events

Define Contrast Effect

Influencing set of appraisals by one low or high performer

Define Similarity Effect

Seeing appraisees as similar to themselves

Define Leniency Effect

Tend to provide unduly high appraisals

Define Harshness Effect

Tend to provide unduly low appraisals

Define Beauty Effect

Tendency for the physical attractiveness of a rate to affect their performance appraisal

Methods for Appraisals

Ranking & Forced Distribution

Graphic Rating Scale

Behaviourally Anchored Rating Scales

Behavioural Observation Scales

Objectives and Results Based Systems

Field Review

Combination Approaches

Two types of Ranking & Forced Distribution

Paired Comparison Method

Forced Distribution Method

Define Paired Comparison Method

Determines the rank order of all employees in a unit by comparing each employee with each of the other employees in the unit

Define Forced Distribution Method

A performance appraisal method that stipulates the distribution of employees across the performance categories

Define Graphic Rating Scale

An appraisal method in which appraisers use a numerical scale to rate employees on a series of characteristics (Likert)

One of the most widely used

Pro: Simple

Con: Vaguely defined traits; traits can be hard to observe leaving to guessing; opinion-based; doesn't provide useful feedback

Define Behaviourally Anchored Rating Scales (BARS)

Appraisal method that provides specific descriptors for each point on the rating scale

Pro: Provides more guidance for appraiser; better reliability and validity results

Con: Time consuming; different scales need to be produced for each job aspect; may be more than one choice in given options

Define Behavioural Observation Scale (BOS)

Appraisal method under which appraisers rate the frequency of occurrence of different employee behaviours

Pro: Less detailed definitions needed; frequency of behaviour ensures one answer; best for smaller firms

Con: Frequency can be hard to judge

Define Management by Objectives (MBO)

An approach to management that involves setting employee goals and providing feedback on goal accomplishment

Define Field Review

Involves a short period of direct observation of the job performance of the individual being rated (ex. mystery shoppers)

Who conducts performance appraisals?






360-Degree Feedback

Define 360-Degree Feedback

An appraisal system that uses feedback from superiors, peers, subordinates, and possibly customers

Define Performance Management

Method for improving employee performance based on goal-setting, feedback, encouragement and support, and rewards for success

Key elements of Performance Management

1. Goals are tied to strategy

2. Measures are the primary indicators of success

3. Feedback is the data used to determine progress towards goals

4. Reinforcement is the active encouragement and support for action

5. Rewards are what the individual or team receives for achieving desired results

Three considerations when linking pay to appraisals

1. Should the link be fixed or discretionary?

2. Should amount of merit money be fixed or discretionary?

3. How should total amount of money towards merit pay be determined?

Define Merit Pay Grid/Matrix

A tool for allocating merit raises, based on the performance level of the employee and the pay range quartile in which they fall.


Excellent performance level:

Fourth quartile employee: 5%

Third quartile employee: 6%

Second quartile employee: 7%

First quartile employee: 8%

Issues with Designing an Effective Merit Pay System

Define the purpose of merit pay and objectives

Determine performance measurement system

Determine frequency of appraisals

Determine how pay is linked to appraisals

Determine how feedback will be provided

Determine mechanisms for procedural justice

Determine procedures for rater training and eval.

Develop procedures to evaluate merit system