What are the legal requirements for a performance appraisal system?

First, there is no legal requirement that a company must have a performance appraisal system. No law compels an organization to review the performance of its members, just as no law requires a company to produce annual budgets or provide good customer service. Conducting performance reviews, creating budgets, and giving good service are simply accepted management practices and very good ideas.

If a company does choose to have a performance appraisal system, it must be sure that the system complies with the laws. In the eyes of the law a performance appraisal is an employment test. It is thus scrutinized in a manner similar to that of other aspects of the employment process: initial recruitment, selection and hiring, promotion, compensation, and termination. As a result, the legal requirements for performance appraisal systems are similar to those for other selection tests.

How do I make sure that our performance appraisal system is legally defensible?

No appraisal system is immune to legal challenge. Nonetheless, the risk of legal difficulties can be minimized if seven basic good management practices are followed.

1. Base the performance appraisal on an analysis of the job.

2. Define your performance dimensions in behavioral terms and support assessments with observable, objective evidence.

3. Keep things simple.

4. Monitor and audit for discrimination.

5. Train raters to assess performance accurately and to conduct effective appraisal discussions.

6. Provide for upper-management review before the appraisal is reviewed with the individual.

7. Provide some appeal mechanism.

Tell Me More

Base the performance appraisal on an analysis of the job. Courts are skeptical of subjective, trait-based rating systems for two reasons: They leave an enormous amount of room for the biases of raters to influence the outcomes, and they are not directly related to specific job responsibilities. Organizations, however, are not required to conduct exhaustive analyses of each job in the company as a condition of doing performance appraisal. A job analysis can be built directly into the appraisal process itself.

When an individual and manager discuss the important goals and objectives that the individual will address during the course of the year and against which his performance will be appraised, that's a job analysis. If a manager evaluates the specific behaviors and expected conduct and demeanor required to perform according to the company's expectations, and then discusses these expectations and their importance with each subordinate, that's a job analysis.

When a supervisor and subordinate together determine what results the subordinate should concentrate on producing over the upcoming year, and they also discuss how the subordinate will go about generating those resultsthe behaviors and competencies that must be demonstrateda legitimate job analysis has been conducted.

Define your performance dimensions in behavioral terms and support assessments with observable, objective evidence. Not every job is amenable to results-based, quantitative measurement. For many jobs, success depends on such attributes as cooperation, dependability, customer relations, attitude, and other even more abstract attributes.

Are these attributes important? Of courseno one would argue that they are not critically important. Who would want an employee who is uncooperative, undependable, hostile with customers, and surly toward everyone else? Can they be measured and described? Of course they can. The challenge comes in finding a way to measure and evaluate these critical but intangible attributes.

Completely quantifiable measures of performance do not always exist. If they did, everyone would use them. In fact, if there were complete numerical measures for every aspect of every job, performance appraisal systems themselves would probably not be necessarythe data would speak for themselves. But with most jobs, there are few absolutely direct and impartial measures of an individual's performance, particularly when successful performance is less dependent on performing countable acts than it is on such vital but elusive responsibilities as the ability to recognize and take advantage of opportunities, the ability to build a committed work team, or the ability to recognize obstacles before they become serious interferences.

The answer is to describe the performance in behavioral terms. Write a description of what a master performer in each of these areas would be likely to do. Provide this description to the appraiser and ask the appraiser to assess how often the individual performed in the way described.

By changing the rating scale to eliminate the requirement that raters evaluate the goodness or badness of performance (e.g., unsatisfactory/ fair/competent/superior) and replacing it with a scale that reflects how often the individual performs as a true master might (e.g., rarely/sometimes/frequently/always), the organization reduces the possibility of legal challenge and increase the ability of the rater to conduct a more meaningful discussion.

Keep things simple. Complex forms that attempt to provide a total and complete evaluation of every aspect of the individual's performance only frustrate managers and allow their biases to overcome their objectivity. The ideal performance appraisal form (discussed in detail in Chapter 6) asks the appraiser to evaluate the individual in five areas:

1. Organizational Core Competencies. These are the skills, attributes, traits, or behaviors that are expected of everyone in the organization, regardless of job or organizational level. "Ethics and integrity" and "customer focus" might be core competencies that everyone in the company will be expected to demonstrate.

2. Job Family Competencies. These are the competencies that apply to major job families. "Job family" is a convenient way to think about groupings of individual jobs that share characteristics. Some typical job families are managerial/supervisor, sales, professional/technical, and operations. "Planning and organizing" and "conceptual thinking" might be competencies assessed of everyone whose job is in the professional/technical job family, whereas "safety" may only show up on the form used for employees whose job falls into the operations job family.

3. Key Job Responsibilities. These are the major responsibilities or duties of the individual's position. An ideal job description would specify exactly what the key job responsibilities are.

4. Projects and Goals. These are the individual's activities that go beyond the specific tasks and duties outlined in a job description.

5. Major Achievements. Every performance appraisal form should require the manager to identify a small number of major accomplishments of the individual over the course of the year.

Monitor and audit for discrimination. Two areas need to be monitored to make sure that the organization faces the least amount of risk from legal challenge: first, the company's performance appraisal procedures themselves; second, the personnel decisions that are based on performance appraisal data.

The first area involves determining whether the average appraisal results of members of a protected class are significantly different from the results of the majority. However, if a complete statistical analysis of a large organization were made, it's unlikely that there would be no departments or other organizational units where the average evaluation of one group of employees (e.g., black female employees) was not significantly lower than the average rating given another group of employees (e.g., white males). Does this mean that the company is discriminating against black females in favor of white males? No. These are normal and expected variations. Even if the average appraisal results of a protected class are significantly different from those of the majority, it does not follow that the appraisals are biased or that the appraisal system is automatically illegal.

Hot Tip

If the company's performance appraisal system ends up with the assignment of each individual to a specific rating category (e.g., marginal, fair, competent, superior, and distinguished), an analysis should be made to determine whether there is any significant difference in the ratings given to minority group members versus the ratings of organization members as a whole.

The second area to monitor is the way decisions that are based on performance appraisal are made. In addition to making sure that the performance appraisals themselves are not discriminatory, it is equally important to make sure that personnel decisions that are based on data that the appraisals providecompensation, promotion, selection for special training programs, terminationare also nondiscriminatory.

Monitoring and auditing cannot solve problems. They can bring troublesome situations to light. Once the organization knows where it stands, corrective action can be taken where the need is greatest.

Train raters to assess performance accurately and to conduct effective appraisal discussions. Ideally, every organization should conduct a formal and comprehensive training program that all managers are required to attend as a precondition for their conducting performance appraisals. They should also conduct annual refresher training for all appraisers just before they begin the annual task of assessing performance and discussing the results.

In the absence of this ideal, virtually every organization can afford to conduct a one-hour briefing session to help raters carry out their responsibility with some minimal degree of confidence. Just providing this minimal level of training alone, in addition to the actual benefits it provides in assuring more accurate appraisals, also is useful in case the organization is charged with discrimination growing out of performance appraisal.

Even if training raters is not possible at all, there is probably no reason why raters cannot be provided with a page or two of instructions covering the most important aspects of the performance evaluation process with some basic suggestions for discussing performance reviews that will reduce the organization's exposure to legal challenge. At a minimum, all appraisers need to be told to:

- Be prepared to provide specific examples to support performance ratings, particularly those where the employee is rated as less than satisfactory.

- Avoid any discussion that refers to a person's membership in a protected group.

- Maintain rapport and a positive atmosphere during the discussion, even when discussing problem areas and the consequences of failure to improve. Many discrimination complaints result not from direct acts of discriminating but from an individual's belief that he was treated unfairly or caught off guard by an unexpectedly low rating that was not fully explained and justified.

Finally, just giving appraisers a few examples of well-completed appraisal forms can increase their ability to do a good job.

Provide for upper-management review before the appraisal is discussed with the individual. Most organizations require the manager who completes the appraisal form to have it reviewed and approved by his boss before it is given to the employee. This is a good idea. Managers who might be capricious or arbitrary (let alone directly discriminatory) in their appraisal assessments may tend to be a tad more cautious knowing that their direct supervisor must review and approve what they have written first.

Upper managers should be encouraged to do more than rubber-stamp the appraisals that are sent up to them for review. Most of the time, senior managers have a reasonably good idea of the overall quality of performance of the people in their department, even though the individuals may be two or three organizational levels down. If the vice president who's reviewing a bunch of performance appraisals simply takes one appraisal and says to the appraiser, "I was surprised to see that you ended up rating Patty as superior (or distinguished or unsatisfactory). Tell me about how you came up with that rating," this question alone will encourage increased diligence in performance assessment in the future.

Provide some appeal mechanism. Today, virtually every employee of every organization has an appeal mechanism he can use to contest a perceived unfair appraisalthe legal system. Since employees do in fact have a way to challenge unfair appraisals, providing them with an internal means to appeal what they believe to be an unfair performance appraisal without having to go outside the organization can be a cheap form of insurance against unnecessary lawsuits.

One immediate appeal mechanism simply involves allowing the individual who believes himself to be the victim of an inaccurate appraisal to state his side of the story as a formal part of the record. Most appraisal forms contain a space for employee comments. Employees should be encouraged to use it.

Hot Tip

If the employee wants to submit a statement to be appended to the appraisal to provide a counterbalancing argument to assessments made in the formal appraisal itself, don't deny the person the right to do so. Frequently serious problems can be headed off completely if the manager says, "I'm sorry we don't see eye to eye about this, Jack, even though we've now discussed it in some detail. While I won't change the way I have written your appraisal, I certainly want to encourage you to write a statement to be attached to my appraisal if you genuinely feel that what I have written is not correct."

< Prev   CONTENTS   Next >