CanGo's Performance Appraisal System - Essay Example

CANGO’S WEEK 5 Introduction: Effectively managing the "people side" of an organization is as important to its success as is the effective management of traditional business areas such as finance and marketing. The "people side" of an organization is typically referred to as human resources management. It encompasses several important functions that include: recruitment and selection of new employees, employee training and development, performance appraisal systems, and compliance with fair employment practices laws. This episode is focused on CanGos performance appraisal system. One of the most important and most difficult managerial activities is providing meaningful and candid feedback to subordinates. It can be especially difficult to provide direct feedback to an under-performing subordinate in a face-to-face meeting. Managers are well aware that reactions to negative feedback are hard to predict. Some employees may realize the need for improvement while others may get very upset when they hear that their job performance is considered to be unsatisfactory. Imagine you are a manager and you are faced with the prospect of telling a poorly performing subordinate that he or she must improve. How would you go about doing this? What if your subordinate reacts badly and blames you for his or her poor performance? What if he or she refuses to sign the performance appraisal form leading to a review from the director of human resources management department? You could give this person a good rating, but then what would the rest of your subordinates think of your abilities as a manager? Heres another possibility: suppose you are a manager and you have developed a friendly relationship with your employees. How easy do you suppose it would be to sit down with one of these employees and tell them that they are performing poorly? Warren is faced with this very problem in the Introductory Video. He must appraise the performance of a poorly performing subordinate, a task with which he is clearly uncomfortable. Watch the video now and consider what you would do in this situation. Click on the camera to view the Introductory Video. Transcript week 5- 1 Concepts Before we consider the problem facing Warren, lets briefly review how the performance appraisal process works. There are two basic performance appraisal methods: Objective Measures of Performance. Objective measures of performance focus on quantitative measures of an employees performance. Such measures might include dollar sales generated, error rate per day, unit output per hour, number of absences, and so forth.   Subjective Measures of Performance. Subjective measures of an employees performance include the more qualitative factors such as the employees attitude or their ability to work well in a team setting. These measures are usually made on a scale from 1 (Poor) to 5 (Excellent). Objective measures are sometimes hard to obtain. For example, a receptionists job might be hard to quantify. Subjective measures, on the other hand, are prone to several types of errors. These include: Leniency and Strictness Errors. Leniency errors refer to the tendency managers have to assign high performance ratings to all or most employees, regardless of their actual job performance. Managers may do this because they dont take the time to think carefully about each aspect of a persons performance, or because they want to avoid any uneasiness between themselves and the employee. A strictness error is the opposite bias, so that even good performers receive low ratings. Some managers are tough to please and they simply tend to give most employees moderate to low ratings.   Halo Effects. Halo effects occur when the rating on one aspect of job performance influences ratings on other aspects of performance. For example, a manager may rate a cashier very highly on "friendliness" and then may also rate this person highly on "knowledge of how to work a cash register" without giving this other dimension much thought. It might be that the employees knowledge in this area could use some improvement. Once again, managers need to think carefully about each specific dimension of an employees performance. Performance appraisals influence many important aspects of employees lives. For example, on the basis of a performance appraisal an employee can be given a raise, a larger office, a bonus, travel opportunities, a promotion, etc. Because of this, employees pay particular attention to whether or not the appraisal process is fair. Perceptions of fairness are extremely important to employee motivation and organizational commitment. There are two kinds of judgements that employees make: distributive justice and procedural justice. Distributive Justice. Some employees simply have more than others - larger salaries, bigger offices, etc. Thus, the rewards that an organization has to offer are distributed unevenly, but if employees believe that they are distributed fairly, then we have distributive justice. If the person with the bigger salary also works harder than the others, then this is just. Procedural Justice. It is also important that employees perceive the performance appraisal process to be a fair one. The factors that employees are rated on should be those that are important to effective performance on the job. If they are, then we have procedural justice. If the job involves sales and if the sales people are given bonuses due to the amount of sales theyve made in the past quarter, then this seems to be a fair procedure. If, however, different sales people have advantages over others (a more dense population in their sales territory, for example) and the performance appraisal process did not take this into account, then employees might feel that there is procedural injustice in the appraisal system. Lets see how all these ideas apply to Nicks situation. Part 1: Solution Ok. Lets apply what weve learned to Warrens appraisal of Nick. Lets see how well you answered the questions. 1. Warren gives Nick high marks on "Ability to Get Along with Others" because he seems to get along well with his co-workers. On the very next factor, "Knowledge of Order Fulfillment Procedures" Warren also gives him a high rating, because he assumes that Nick is probably doing well on this factor as well. This is an example of     a. leniency error.     b. strictness error.     c. attribution error.     d. halo effects.     Your Answer:     Correct Answer: d     This is a halo effect. It might sound like a leniency error, but the key here is that Warrens assessment on one dimension affects his rating on another. Thats a halo effect.       2. As Warren conducts the performance appraisal interview with Nick, it is clear that he is very uncomfortable. Warren is basically a nice guy and hes not sure how he would handle a confrontation with Nick if he were to give him a low rating on one of the job skills. So he decides to just give him high ratings on most of the job skills. This is an example of     a. leniency error.     b. strictness error.     c. attribution error.     d. halo effects.     Your Answer:     Correct Answer: a     Leniency error occurs when the rater is not willing to give candid feedback about performance problems to the person whose performance is being evaluated. The leniency error in this situation is driven by Warrens tendency to be a nice guy and over his embarrassment about giving negative feedback to Nick.       3. Based on what youve seen, it appears that Warrens performance appraisal of Nick is based primarily on     a. objective measures of performance.     b. subjective measures of performance.     c. both objective and subjective measures of performance.     d. neither objective nor subjective measures of performance.     Your Answer:     Correct Answer: b     Warren uses a system primarily based on casual observation and impressions rather than on hard performance criteria such as the number of errors per day. This is typical of subjective measures of performance.       4. We get a sense from the beginning of the video that Gail feels that Nick is not such a good employee. Suppose that she is upset that he gets paid the same as her, has the same size office, etc. Thus, she might feel that there is _______ injustice at CanGo.     a. procedural     b. distributive     c. both procedural and distributive     Your Answer:     Correct Answer: b     Gail is upset because the way the rewards are given out around CanGo seems to be unfair. Some have the same rewards as others, even though they dont seem to be as valuable to the company. Thats distributive injustice.       5. Weve seen that Gail is pretty upset when she hears that Nicks appraisal went well. She knows that the appraisal forms that Warren uses contain no space for the ratings of the activities that she knows are important to the job - keeping the computer servers from crashing and getting the orders filled correctly. Thus, she probably feels that there is _____ injustice at CanGo.     a. procedural     b. distributive     c. both procedural and distributive     Your Answer:     Correct Answer: a     This is a good example of procedural injustice. Gail knows that the procedure used for informing employees of their strengths and their weaknesses is inadequate. This could lead to decreased morale and commitment to the organization. Part 2: Solution There were several factors that led to Nicks inaccurate performance appraisal. A good performance appraisal instrument would have provided Warren with a more effective tool for evaluating Nicks performance. Take a look at three performance appraisal forms below and evaluate their likely effectiveness. Choose the one that you think is best. Keep these criteria in mind as you look at each form. How well does the appraisal form meet these criteria? Use of Subjective and Objective Factors Susceptibility to Leniency Errors Susceptibility to Halo Errors Lets see how well you answered the questions. 1. Which performance appraisal form do you think is best? Click the links below to view the performance appraisals.     a. Performance Appraisal #1     b. Performance Appraisal #2     c. Performance Appraisal #3     Your Answer:     Correct Answer: b     Notice that in addition to somewhat vague terms such as "Attitude" and "Job Knowledge," (both of which are susceptible to leniency, strictness and halo errors), it includes some objectives measures such as server and order fulfillment errors. The scales for these two factors are composed of actual numbers as opposed to rough judgements such as "sometimes" and "often." Measure number three is an improvement over number one, in that it at least tries to define the vague terms. However, measure number three still contains no objective measures.       Part 3: Solution Now lets see if you can think of some ways that Warren could have conducted the performance appraisal interview with Nick in a more professional and effective manner. The exercises below include a box for your answers. When you have typed in your answers, click "How did I do?" and well show you our ideas about how to provide employees with performance feedback. Lets see how well you answered the questions. 1. Warren is unprepared for the meeting with Nick. What steps could he have taken to prepare properly for this meeting?   Your Answer:     Our Answer:   Warren should have reviewed all aspects of Nicks performance over the past year so that he was aware of areas where Nick was doing well and areas where he needs to improve. It would have been very helpful if Warren had written a list of issues he wanted to discuss with Nick in order to add structure to the interview. He could also have included some concrete examples of areas where Nick was doing well and areas where he needs to improve.     2. Warren ends the feedback interview with Nick by telling him he has done a good job. Can you think of a better way to end a performance appraisal interview?   Your Answer:     Our Answer:   Telling someone he/she is doing a good job is not concrete or meaningful feedback. Warren should have identified specific areas for improvement accompanied by a set of goals and a timeline for meeting them. This approach would have tempered Nicks perception that all was well and that he did not need to improve his performance. Part 4: Solution Finally, lets explore a slightly different approach to performance appraisal. Suppose Warren replaces his existing technique with the one below. Look at the example of this tool as it is applied to Nick and then answer the questions. Performance Appraisal Form Employee: Nick Evaluation Period: 6 months Situation Goal Average Employee Nick Server Errors (average number per month) 0 2 12 Input Errors (number per 100 inputs) 0 5 20 Average Time to Recovery (in minutes) 5 12 35 Days Late to Work 0 2 10 Time Between Server Errors (in days) 60 48 14 System Failures 0 2 10 Lets see how well you answered the questions. 1. This new performance appraisal system is likely increase feelings of procedural justice.     Your Answer:     Correct Answer: True     Each dimension of job performance is linked to work-related activities and it is clear where one stands in relation to fellow employees in the new system. These procedures are clear and equitable so that they should increase feelings of procedural justice. It is possible, however, that someone could rightfully argue that this form contains no way to rate someone on what could be important job skills, such as the ability to get along well with others. If indeed this is an important skill, then it should be included in the form in some way.       2. This new performance appraisal system will reduce halo error.     Your Answer:     Correct Answer: True     These new objective measures should reduce halo error because each employees performance is compared to the performance of the average employee. It is difficult to argue that someone who has 20 input errors is a good performer if the average employee makes five such errors.       3. This new performance appraisal system will reduce leniency error.     Your Answer:     Correct Answer: True     Appraising performance within the context of CanGos goals and the average performance of all employees should reduce leniency error because poor performance should be more obvious. It would be very difficult to rate Nick as a good performer using this system RESOLUTION In the Resolution Video we see that Warren has made major changes to how performance will be appraised in his department. There is a new form and a new way of measuring employee performance so that it will now be very closely tied to raises and promotions. Watch the video now and pay careful attention to how Warren has changed how performance is evaluated at CanGo. Will his new method have the desired effect? What new problems do you foresee? Click on the camera to view the Resolution Video. Click the camera again or the "x" to make the video disappear. If nothing appears after a few seconds, please click here to Play Video or View Transcript week 5-1 In the Case Video, CanGos senior management team addresses the problem of the companys performance appraisal system. What kind of error does Clark admit to making? What is the financial impact of making such errors? Finally, consider the alternatives that are brought up. Will they solve the problem? Click on the camera to view the Case Video. Click the camera again or the "x" to make the video disappear. If nothing appears after a few seconds, please click here to Play Video or View Transcript. Week 5 - 2 DISCUSION Now that youve seen the problem, its time to make some concrete suggestions. Top of Form 1. Clark is clearly having a problem with the present system. What kind of error is he making? What can be done to lessen or eliminate this problem?     2. Evaluate Clarks suggestion that employees should be ranked and not rated. Do you think that ranking generally works well? Will it work well at CanGo?     3. Lets take a look at how CanGos management team can approach performance appraisal differently. Go to the following Web sites: Society for Human Resource Management, The Society for Industrial and Organizational Psychology, and Fast Company and find information on 360-degree feedback. How does this system work?     Bottom of Form Congratulations, youve come to the end of this episode! WEEK 6 The ingredients of an economic way of thinking include a healthy dose of common sense and a pinch or two of more formal tools and concepts. In this episode, well focus on two key components of the economic way of thinking: scarcity and opportunity cost. When it comes to our everyday decision making, many of us use these ideas, but we often dont realize it. Even though we all know the expression "theres no such thing as a free lunch," we can forget that scarcity is a fundamental feature of the world we live in. Because resources are limited, every decision we make involves opportunity costs. When we make a decision to do one thing, we give up the opportunity to do something else. Thus, there are tradeoffs in every decision we make. In the Introductory Video, youll see that the decision at CanGo to launch an initial public offering (IPO) demands extra time and efforts on the part of key staff members. That means that those staff members have less time and energy available for other projects. As important as the IPO is for the future of CanGo, the company must still "take care of business." Forgetting about opportunity costs could be very costly for CanGo. By evaluating the tradeoffs involved, the managers at CanGo are able to make better decisions about what resources to devote to each of CanGos projects. As you watch, think about the opportunity cost of each decision the management team makes. Are there "hidden" opportunity costs the team is not taking into account? Click on the camera to view the Introductory Video. Click the camera again or the "x" to make the video disappear. If nothing appears after a few seconds, please click here to Play video or View Transcript.week 6 Economic analysis is often viewed as the science of rational decision making in a world of scarce resources. We need to think rationally because we live in a world where resources are limited but where peoples wants are unlimited. There is not enough money, time, or things to completely satisfy everybody. What can we do to get the most satisfaction out of our limited resources? We cannot have everything we want. We must decide what goods and services to produce and what goods and services we are willing to give up. This is a complex problem because the economy is so complex. We produce many different things with many different resources. Even a single firm must consider how to combine its limited resources to produce the best mix of goods and services. Rational decision-making requires the firm to engage in two types of analysis. Marginal Analysis. The world is very complex, and we cant start from scratch every morning and decide how to recreate everything in our lives. To simplify the decision-making process we usually consider only incremental or marginal changes.  Cost-Benefit Analysis. A change should be implemented if the benefits of that change are greater than the costs. If the benefits outweigh the costs then the person or firm will be better off after the change is implemented. Once you understand the above concepts you have taken a giant leap in understanding rational decision-making. There is, however, one additional lesson that you need to learn. Cost-Benefit Analysis assumes that you measure the costs and the benefits correctly. This normally requires you to convert all costs and benefits into a monetary value. The following example will give you an idea of what to watch out for. How much does it cost you to see a movie whose ticket price is $7? Lets examine all the components of cost. $7. This is the direct out of pocket expense of buying the ticket. $3. This is the cost of the train ticket to get to the theatre. $20. This is the value of your time. From door to door you spend four hours going to the movie, watching it, and coming home. In that amount of time you could have earned $20 from babysitting. The total cost is $30 dollars. This is what you actually give up when you go to the movies! Because this total cost is often different from your out of pocket expense, we give it a different name. We call this cost, opportunity cost. It measures the value of the opportunity that you give up when you go to the movies. You actually are $30 poorer after going to the movies. There is no simple rule for calculating opportunity costs. You must consider each case separately and think about what you actually give up when you do something. Now lets apply some of these ideas to the situation at CanGo. Click "next" to proceed. Part 1: Solution Lets see how well you answered the questions. Now that you have had a chance to view the Introductory Video you should be familiar with the basic economic problem faced by CanGo. Before you move on to see how CanGo dealt with its problem, try doing the following exercises. The exercises are divided into parts. Some of the questions are more definitional and some ask you to work through problems that could be faced by any firm, including CanGo. After completing each part, it might help to return to the video to reacquaint yourself with the basic problems faced by CanGo. Make sure that you understand the answers to the questions before you view the Resolution Video. Then see if the employees at CanGo understand the material as well as you do. The first four questions concern Project Black Bear. Proceed to the Memorandums page located at the CanGo Intranet to find more information on Project Black Bear. 1. Clark is studying some of CanGos revenue and cost figures. He sees that revenues exceed costs. As he knows that the revenues represent benefits to the firm, he concludes that CanGo has been operating optimally. After all, if total benefits exceed total costs, CanGo is maximizing its profits and operating optimally.     a. True     b. False     Your Answer:     Correct Answer: b     Though it is good that revenues exceed costs, CanGo is only maximizing its profits if it is undertaking all possible activities where benefits exceed costs. If not, it may be making profits, but not maximizing them.       2. Even before commissioning the initial study, Clark decides that if his high projection is correct, he should go ahead with the project.     a. True     b. False     Your Answer:     Correct Answer: a     Benefits are greater than costs, so it will make economic profit.       3. Now suppose that Clark has already paid for the study, but has not ordered the materials. He finds out that he was wrong and that the middle estimate is actually the best one. He should now cancel the project.     a. True     b. False     Your Answer:     Correct Answer: b     The opportunity costs only include avoidable expenses. If he has already sunk the first $10,000, the opportunity costs of the project now are only $20,000! Since this is less than $25,000, he should go ahead with the project.       4. Suppose that the materials have already been ordered. Clark now gets some bad news, convincing him that the low estimate of $17,500 is the best estimate for revenues. He sees the project costing $30,000, but elects to go ahead with the project anyway. Clark is making the correct economic decision.     a. True     b. False     Your Answer:     Correct Answer: a     If he cancels the project now, CanGo is out the $10,000 for the study and the $5,000 cancellation penalty for returning the materials. He would only save the difference between these figures and the $30,000 total cost. This amounts to $15,000. As $15,000 is less than $17,500, CanGo would still make an economic profit on the project.       5. Andrew is trying to decide whether or not to accept an invitation to speak at a local college. The college has offered to pay him $200 for the one hour talk. Initially he declines, but when they up the offer to $250, he accepts. It will mean that he cant attend his sons piano recital that is scheduled for the same time. Nevertheless, Andrew decides to give the talk. This means that Andrew:     a. does not think his son is a good pianist.     b. values the recital at less than $200.     c. values the recital at more than $250.     d. values the recital at between $200 and $250.     Your Answer:     Correct Answer: d     When going to the recital would cost him $200 he chooses the recital. This means that the benefit is greater than $200. When going to the recital would cost him $250, he skips the recital. This means that the benefit is less than $250.       6. Andrew and Maria go out to a fast food place for lunch. Despite the fact that the food is relatively expensive, they go there because the service is fast. This highlights the fact that:     a. Andrew and Maria are making a mistake.     b. the opportunity cost of eating includes the out of pocket expense plus the benefits of eating the food.     c. people dont like to admit just how much they like fast food.     d. for high wage workers, the most important component of cost may be the time it takes to eat.     Your Answer:     Correct Answer: d     When your wage is effectively upwards of $100 per hour, the most important component of lunch cost may be time. If fast service allows you to save 15 minutes, this amounts to $25 of your time! Part 2: Solution Lets see how well you answered the questions. 1. Andrew is watching the news. He learns that the nations passenger rail service is losing lots of money. Despite this news, an economist is quoted arguing for new routes to be opened up with additional service. This must be bad economic analysis. After all, costs are already greater than benefits.     a. True     b. False     Your Answer:     Correct Answer: b     Existing total costs may exceed total benefits. These losses could be reduced if a new route is added that generates greater marginal benefits than marginal costs. It is always important to look at marginal changes.       2. Clark is always talking about economic tradeoffs. One of his employees objects. She sees the U.S. production figures and notes that each year we produce more than the year before. We are getting something for nothing, arent we? There is no tradeoff when we can produce more and more.     a. True     b. False     Your Answer:     Correct Answer: b     The only way we can produce more in the future is to invest more today. Investing today means that we spend less on producing goods that we can immediately consume and enjoy. We trade consuming less today in order to consume more in the future!       Now that youve thought about how these ideas apply to the crisis in the Introductory Video, proceed to the next page to see how things turned out at CanGo. Introduction | Concepts | Exercises | Resolution | Case | Discussion Andrew, Elizabeth, and Clark see rapid growth as the key to CanGos future. Warren, on the other hand, is concerned about the implications of this growth for CanGos ongoing operations. As Ethel notes, resources are tight at CanGo right now. Before informed decisions can be made about the future direction and use of resources at CanGo, a better understanding of both the benefits and the costs of their plans for future growth is necessary. In the next video, Maria, Warren, and some of the CanGo staff discuss the option of shifting people around at CanGo. They quickly get the idea that there arent any "idle" resources at CanGo. Lets see how the problem becomes clearer when they get together with Warren and begin to recognize the importance of weighing marginal benefits against the marginal costs. Click on the camera to view the Resolution Video. Click the camera again or the "x" to make the video disappear. If nothing appears after a few seconds, please click here to Play Video or View Transcript. CanGo is continually starting new ventures. In order to move ahead on some of the new ventures that are key to CanGos future, some of CanGos ongoing projects and operations will need to be de-emphasized and resources re-directed. In the Case Video, well see what this means in terms of real people doing real work at CanGo. Warren and Maria talk to Whitney about shifting Whitney from one project to another. Click on the camera to view the Case Video. Click the camera again or the "x" to make the video disappear. If nothing appears after a few seconds, please click here to Play Video or View Transcript. Now that youve watched the Case Video, below youll find a number of discussion questions. Some of these questions ask you to reflect on what youve seen in this video. Others may provide links to Web sites for further exploration. Economics can be viewed as the science of optimal decision-making. We assume that rational individuals routinely balance the costs and benefits of economic decisions. Yet, as is the case at CanGo, the very act of balancing costs and benefits entails costs. It takes time to make a decision, and time is valuable. Top of Form 1. In your own life, how do you decide how much time to spend making a decision? Does it depend on the decision? Or the magnitude of the expected costs and benefits? Do you follow a "rule of thumb"? For example, when you go to a restaurant, do you spend a lot of time ordering your food? Do you carefully examine the entire menu or do you quickly identify the food you want?     2. CanGo is a small company that is getting bigger. Its employees are doing a lot of traveling. One way to buy airplane tickets is by going to a free Web site like lowestfare.com and buying online. Suppose you are thinking of a vacation and wish to fly from New York City to San Francisco. Go to a travel site on the Web, such as lowestfare.com, and compare different flights. Most flights involve stopovers. Compare the time for a nonstop flight to a flight that requires a stopover. How much more would you be willing to pay for the nonstop flight? What does this say about how you value your time?     Bottom of Form Congratulations! Youve come to the end of this episode. Bottom of Form Read More