9 Performance Management and Job Evaluation: Appraisal Methods (Ranking, BARS, MBO, 360°), Rating Errors, and Job-Evaluation Systems (Ranking, Classification, Point and Factor-Comparison)

9.1 Two Sister Decisions

Performance management answers the question “how well is this person doing the job?” — the basis for pay-for-performance, training and promotion. Job evaluation answers the prior question “how much is this job worth, relative to others, regardless of who is in it?” — the basis for the wage structure. The two together set what each individual is paid: job evaluation fixes the grade, performance appraisal fixes the position within the grade.

9.2 A · Performance Management

9.2.1 From Appraisal to Performance Management

The shift from performance appraisal (an annual event) to performance management (a continuous, strategy-linked process) is one of the defining trends of modern HRM.

Appraisal vs Performance Management

Dimension	Appraisal	Performance Management
Frequency	Annual / half-yearly	Continuous
Focus	Past performance	Past + present + future
Linkage	Often isolated	Linked to strategy, training, reward
Owner	HR	Line manager + employee
Outcome	Rating	Development plus rating

9.2.2 The Performance Management Cycle

flowchart LR
  A[Goal setting<br/>SMART, cascaded] --> B[Continuous<br/>review]
  B --> C[Mid-year<br/>review]
  C --> D[Year-end<br/>appraisal]
  D --> E[Reward &<br/>development]
  E --> A
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

9.2.3 Objectives of Appraisal

Six Objectives of Performance Appraisal

Purpose	Use
Administrative	Pay, promotion, transfer, separation
Developmental	Training needs, coaching, career planning
Validation	Test selection and training effectiveness
Motivational	Feedback, recognition, goal alignment
Documentation	Legal record, performance improvement plan
Strategic	Cascade business goals downward

9.3 Methods of Appraisal

9.3.1 Traditional Methods

Traditional Appraisal Methods

Method	What it does
Ranking	Employees ranked from best to worst
Paired comparison	Each employee compared with every other
Forced distribution (bell-curve)	Fixed percentage in each rating band
Graphic rating scale	Traits rated on a continuous scale
Checklist	Yes/no statements rated by appraiser
Forced-choice method	Appraiser picks from equally favourable statements (reduces bias)
Critical incident method	Documenting especially effective / ineffective behaviour
Essay / free-form	Narrative description
Confidential reports	Single-rater confidential, traditional in public sector

9.3.2 Modern Methods

Modern Appraisal Methods

Method	What it does
Management by Objectives (MBO)	Joint goal setting, periodic review (Drucker, 1954)
Behaviourally Anchored Rating Scale (BARS)	Each rating point anchored by a specific behaviour (Smith & Kendall, 1963)
Behavioural Observation Scale (BOS)	Frequency of observed behaviours rated
Assessment centre	Multiple methods over multiple days, multiple assessors
360° feedback	Multi-source: superior, peer, subordinate, self, customer
Balanced Scorecard	Four perspectives — financial, customer, internal process, learning & growth (Kaplan & Norton, 1992)
Psychological appraisal	Deep assessment of intellectual, emotional, motivational profile
HR accounting	Costs of acquiring, developing and retaining the human asset

9.3.3 MBO — The Drucker Framework

Peter Drucker’s The Practice of Management (1954) introduced Management by Objectives. Its five steps:

MBO — Five-Step Cycle

#	Step
1	Set organisational goals
2	Cascade and jointly set individual goals
3	Performance standards agreed
4	Periodic review of progress
5	Final appraisal and reward

PYQ trap — MBO is JOINT goal-setting

MBO is joint — manager and subordinate agree the goals together. NTA stems often pose unilateral goal-setting as a distractor.

9.3.4 BARS — How It Works

A BARS scale for a customer-service representative might read:

BARS Illustration

Score	Anchor behaviour
7 — Excellent	Handles upset customer calmly, finds solution, follows up next day
5 — Good	Listens, acknowledges, finds solution within call
3 — Adequate	Reads script, escalates without trying
1 — Poor	Argues with customer, hangs up

9.3.5 360° Feedback

Multi-source feedback from superior, peer, subordinate, self, customer (sometimes 720° if external + internal).

360° Feedback Sources

Source	What they see
Superior	Strategic delivery
Peer	Collaboration, fairness
Subordinate	Leadership, support
Self	Self-awareness
Customer	External impact

9.4 Rating Errors

Common Rating Errors

Error	Description
Halo	One strong positive trait shapes all ratings
Horn	One strong negative trait shapes all ratings
Central tendency	Everyone rated in the middle
Leniency	All ratings inflated
Strictness	All ratings deflated
Recency	Recent events overweight
Primacy	Early impressions overweight
Contrast	Comparison with prior ratee distorts
Similar-to-me	Bias toward those like the appraiser
Stereotyping	Bias from group membership
Personal bias	Like/dislike
Spillover	Past ratings carry forward

Distractor warning — Halo vs Horn

Halo = one positive trait inflates all ratings. Horn = one negative trait deflates all ratings. NTA often pairs these.

9.5 B · Job Evaluation

9.5.1 What is Job Evaluation?

ILO (1986): “Job evaluation is an attempt to determine and compare the demands which the normal performance of a particular job makes on normal workers without taking account of the individual abilities or performance of the workers concerned.”

Key point: job evaluation rates the job, not the person. Performance appraisal rates the person in the job.

9.5.2 Six Principles

Rates the job, not the job-holder.
Concerns the job content, not market wages directly.
Outcome is a hierarchy of jobs for wage purposes.
Should be transparent to be acceptable.
Should involve employee representatives.
Must be reviewed when job content changes.

9.5.3 Four Classical Methods of Job Evaluation

Four Methods of Job Evaluation

Method	Type	How it works
Ranking	Non-quantitative	Jobs ranked whole-to-whole, simplest to highest
Job classification (grading)	Non-quantitative	Pre-defined grades; jobs slotted into grades
Point method	Quantitative	Compensable factors broken into degrees; points assigned and summed
Factor comparison	Quantitative	Jobs compared factor-by-factor against benchmark jobs in monetary units

9.5.4 Ranking vs Classification vs Point vs Factor — A Comparison

Four Methods — Comparison

Feature	Ranking	Classification	Point	Factor comparison
Simplicity	Highest	High	Moderate	Lowest
Quantitative	No	No	Yes	Yes
Best for	Small firms, few jobs	Government, many jobs	Large industrial	Large industrial
Output	Order list	Grade structure	Point total → grade	Monetary value
Subjectivity	High	Moderate	Low	Low

9.5.5 Compensable Factors (Point Method)

Typical Compensable Factors

Factor	Sub-factor
Skill	Education, experience, ingenuity
Effort	Physical, mental
Responsibility	For money, equipment, people, safety
Working conditions	Environment, hazards

These four factors — skill, effort, responsibility and working conditions — are the heart of the classical National Electrical Manufacturers Association (NEMA) point plan and remain standard.

9.5.6 Advantages and Limitations

Advantages vs Limitations

Advantages	Limitations
Rational, transparent basis for wages	Job content changes rapidly; plans age
Reduces wage disputes	Subjective at the edges
Helps internal equity	Cost and time of full point plan
Useful for compensation surveys	Resistance from unions if perceived as imposed
Supports legal compliance (equal pay)	Cannot replace market data

9.6 Practice Questions

Q 01 Job evaluation focus Easy

Job evaluation evaluates:

AThe person doing the job
BThe job itself, irrespective of who holds it
CThe supervisor
DThe customer

View solution

Correct Option: B

Job evaluation values the job; appraisal values the person.

Q 02 MBO author Medium

Management by Objectives (MBO) was introduced by:

AF.W. Taylor
BPeter Drucker (1954)
CHenri Fayol
DEdgar Schein

View solution

Correct Option: B

Drucker, The Practice of Management, 1954.

Q 03 BARS author Hard

The Behaviourally Anchored Rating Scale (BARS) is associated with:

ADrucker
BSmith and Kendall (1963)
CKaplan and Norton
DHackman and Oldham

View solution

Correct Option: B

P. C. Smith and L. M. Kendall, 1963.

Q 04 Halo error Easy

An appraiser who lets the ratee's punctuality inflate his ratings on quality, teamwork and initiative is making which error?

AHorn
BHalo
CRecency
DCentral tendency

View solution

Correct Option: B

One positive trait inflating all others = halo.

Q 05 360 feedback Medium

The defining feature of 360° feedback is:

AAnnual frequency
BMulti-source feedback from supervisor, peer, subordinate, self and customer
CUse of computers
DConfidentiality

View solution

Correct Option: B

Multi-source perspective is the defining feature.

Q 06 Quantitative methods Medium

Which two job-evaluation methods are quantitative?

ARanking and classification
BPoint and factor comparison
CRanking and point
DClassification and factor comparison

View solution

Correct Option: B

Point and factor-comparison are quantitative; ranking and classification are non-quantitative.

Q 07 Compensable factors Hard

The classical NEMA point plan uses four compensable factors. Which is not one of them?

ASkill
BEffort
CJob-holder seniority
DWorking conditions

View solution

Correct Option: C

Four factors: Skill, Effort, Responsibility, Working conditions. Seniority is a person attribute.

Q 08 Forced distribution Medium

A "bell-curve" appraisal in which a fixed percentage must fall in each band is:

ACritical incident method
BForced distribution
CBARS
DMBO

View solution

Correct Option: B

Forced distribution = fixed percentage in each band.

Q 09 Central tendency Medium

An appraiser who rates everyone "average" to avoid conflict is committing:

ALeniency error
BStrictness error
CCentral tendency error
DRecency error

View solution

Correct Option: C

Central tendency = bunching ratings in the middle.

Q 10 Balanced Scorecard Hard

The Balanced Scorecard was developed by:

ADrucker and Levitt
BKaplan and Norton (1992)
CSmith and Kendall
DUlrich and Brockbank

View solution

Correct Option: B

Four perspectives: financial, customer, internal process, learning & growth.

Q 11 Job evaluation method Medium

A method that compares jobs factor-by-factor against benchmark jobs in monetary units is:

ARanking
BClassification
CPoint method
DFactor comparison

View solution

Correct Option: D

Factor comparison expresses each factor in monetary value.

Q 12 MBO step Medium

In MBO, individual goals are best described as:

ASet unilaterally by the manager
BSet jointly by manager and subordinate
CImposed by HR
DDetermined by the union

View solution

Correct Option: B

Joint goal-setting is the defining feature of MBO.

Q 13 Forced choice Hard

The forced-choice method requires the appraiser to:

APick the most descriptive among equally favourable statements
BForce the ratee into a fixed band
CChoose between dismissing or promoting
DRate without anchors

View solution

Correct Option: A

Designed to reduce conscious bias.

Q 14 ILO definition Hard

The ILO definition of job evaluation explicitly excludes:

AJob content
BIndividual abilities and performance
CComparisons between jobs
DWage structure

View solution

Correct Option: B

"Without taking account of the individual abilities or performance of the workers concerned."

Q 15 Assessment centre Medium

The defining feature of an assessment centre is:

AUse of computers
BMultiple methods and assessors over multiple days
CSingle interviewer
DOff-line questionnaires only

View solution

Correct Option: B

Multiple instruments + multiple assessors + multiple candidates over multiple days.

Q 16 Methods match Hard

Match the appraisal method with its key feature:

(i)	BARS	(a)	Joint goal-setting
(ii)	MBO	(b)	Each rating point anchored by a behaviour
(iii)	360° feedback	(c)	Four perspectives
(iv)	Balanced Scorecard	(d)	Multi-source feedback

A(i)-(b), (ii)-(a), (iii)-(d), (iv)-(c)
B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
C(i)-(c), (ii)-(b), (iii)-(a), (iv)-(d)
D(i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)

View solution

Correct Option: A

BARS = behaviour anchors; MBO = joint goals; 360 = multi-source; Scorecard = four perspectives.

Q 17 Performance management Easy

Performance management differs from performance appraisal mainly in being:

AContinuous, strategy-linked and forward-looking
BA once-a-year HR ritual
CPurely backward-looking
DConfidential to HR

View solution

Correct Option: A

Continuous, strategic, future-oriented.

Q 18 Ranking method Easy

The simplest method of job evaluation is:

APoint method
BFactor comparison
CRanking
DClassification

View solution

Correct Option: C

Ranking — whole-to-whole job comparison.

Q 19 Recency error Medium

An appraiser who weighs the last week's events more than the prior eleven months commits:

AHalo error
BPrimacy error
CRecency error
DContrast error

View solution

Correct Option: C

Recency = overweighting recent events; Primacy = overweighting early ones.

Q 20 Classification Medium

The job-evaluation method most commonly used by governments is:

ARanking
BClassification / grading
CFactor comparison
DHay plan only

View solution

Correct Option: B

Classification — defined grades with jobs slotted in — is the dominant public-sector method.

9.7 Quick Recall

Quick recall

Performance management = continuous, strategic, future-oriented; appraisal = annual, retrospective.
Traditional methods: ranking, paired comparison, forced distribution, graphic rating, checklist, forced-choice, critical incident, essay.
Modern methods: MBO (Drucker 1954), BARS (Smith & Kendall 1963), BOS, assessment centre, 360°, Balanced Scorecard (Kaplan & Norton 1992), psychological appraisal, HR accounting.
MBO = joint goal setting; not unilateral.
Rating errors: halo (one positive trait inflates all), horn (one negative trait deflates all), central tendency, leniency, strictness, recency, primacy, contrast, similar-to-me, stereotyping, spillover.
Job evaluation rates the JOB, not the person (ILO definition).
Four methods: Ranking, Classification (non-quantitative); Point, Factor-comparison (quantitative).
Compensable factors (NEMA): Skill, Effort, Responsibility, Working conditions — S-E-R-W.
Government typically uses classification / grading.
Balanced Scorecard — four perspectives: financial, customer, internal process, learning & growth.