These materials have been prepared to address the critical mistakes that are made in the formulation and implementation of performance appraisals. Emphasis is on practical considerations concerning issues raised in determining the type of performance appraisal to be used and the process of rating employees using this tool. The materials were prepared as a collaboration between an employment law attorney who regularly consults with employers about legal considerations raised by the performance appraisal process and an industrial and organizational psychologist who develops employee rating systems and is knowledgeable in the reliability and validity of these tools. First, critical mistakes in the development and use of performance appraisals will be briefly addressed, followed by an analysis of how the performance appraisal system is developed and implemented. Last, legal considerations will be examined to show how a properly developed system can make performance appraisals a significant tool in risk management for employers.

II. CRITICAL MISTAKES MADE IN THE DEVELOPMENT AND USE OF PERFORMANCE APPRAISALS

A. No Defined Purpose or Goal for the Evaluation

If a performance appraisal system is going to be effective, everyone involved must understand the intended goals and objectives underlying the evaluation process. Why is it being conducted? Often each party to the process has their own agenda.  A common problem is that management sees the appraisal process as a motivational tool and way to improve performance while the employees view it as an opportunity to get a raise or a promotion

B. Appraisal Forms Use Inadequate Definitions of Performance Criteria

Defining performance criteria is the most difficult and time-consuming aspect of constructing a performance appraisal system. What are the expected behaviors of an employee who is considered by management to be competent?  This question is more easily answered in some jobs than in others.  Production jobs may rely heavily on concrete issues such as attendance and amount of work completed.  More complex jobs can be more difficult.  For example, managerial employees are often evaluated on abstract concepts such as “teamwork” or “Leadership.”  What exactly does that mean? Does it mean the same thing to both the employee and the appraiser?

C. Performance Information Comes from the Wrong People

The most common source of performance information is the employee’s direct supervisor.  The supervisor, however, may or may not be the person most familiar with the employee’s performance.  Co-workers, subordinates, clients/customers, or the employees themselves may have the most relevant information regarding performance. Deciding who are the evaluators and how often information on the employee should be obtained is critical. Over emphasis on recent performance because of a lack of ongoing documentation often causes appraisals to be skewed.

D. The Evaluation is not Properly Documented

There are two issues to be addressed here.  One is the lack of any documentation.  The second is inadequate or inappropriate documentation. When performance is used as the basis of an employment decision (i.e. promotion or termination), and that decision is questioned, the documentation of performance will be used as evidence to support or attack that decision.  What is recorded and how it is recorded are essential components of risk management.

E. Evaluators are not Properly Trained

Often evaluators do not spend enough time preparing the performance appraisal and just as often, ratings are based on “gut feelings” instead of actual analysis. During the implementation process, the evaluator may not spend enough time with the employee or engage in meaningful dialogue. There are steps that can be taken to improve the accuracy of performance appraisal ratings.  With proper training, performance ratings can be more accurate, effective and legally defensible.

F. No Set Follow-up Plan

Unless there is a plan formalized for improving the employee’s performance, including specific objectives that must be met, the employee is often left feeling dejected and unmotivated. There needs to be clear communication between the evaluator and the employee not only as to the performance deficiencies but also to the precise steps that need to be taken to improve performance.

III. THE PURPOSE OF THE PERFORMANCE APPRAISAL

The performance appraisal should always have a purpose or goal. The purpose can dictate the form the appraisal takes. Often the purpose will differ between entities. To articulate the purpose forces the employer to focus on legitimate business interests. However, the purpose should not only serve the interests of the employer, but also the interests of the employee being evaluated and the supervisor performing the evaluation who, in most cases, is the person responsible for managing the employee. The employer will need performance appraisals to make important employment decisions about individual employees and to maintain a high level of performance within the company. The supervisor will use the performance appraisal to assist in managing and mentoring the employee for the supervisor has a certain amount of ownership in the employee’s success or failure. The individual employee can measure his or her actual performance against the employer’s expectations and sees it as a way to get meaningful feedback. In most cases, the employee relies on performance appraisals as a vehicle with which to receive raises or promotions.

A.  Employee Development

The employer’s primary purpose in evaluating an employee is to test competency and to prod excellent performance. It gives the employer the opportunity to recognize talent and potential. It is also a way of assessing developmental needs or to weed out poor performers. Performance appraisals, when properly developed and used in a meaningful way, can be excellent tools for mentoring. The entire evaluation process gives the employer a meaningful forum to give the employee constructive criticism and feedback to enable the employee to correct deficiencies and grow in their job. There should be a uniform standard of expectations for every employee in each job classification.

B.  Assist in Determining Compensation

Often compensation is related to performance. If the employer has a salary range for each job class, placement within the range may depend on levels of competency in the job. The development of good performance dimensions is essential when performance appraisals are used for this purpose. Most employers use appraisals to determine amount of raises, bonuses or other forms of additional compensation. Again, this is best served by having clear objectives that must be met in order to receive a merit raise or bonus.

C.  Promotions

The performance appraisal is a useful tool in recognizing talent and potential. This information often forms the basis for decisions about promotion, advancement within the company or placement in a position for which the employee has special talent. The appraisal is best used to justify such decisions to the employee or third parties questioning the promotion or change in position.

D. Terminations/Reductions in Force

Employers are often faced with the difficult task of terminating employees, either for performance problems or because there are economic factors requiring a reduction in force. When it is a matter of performance problems, the appraisals, both past and present, generally form the underlying documentation for the decision. The performance appraisal is particularly important as a form of documentation supporting a termination when there is no set procedure for termination (i.e. a progressive discipline policy) and termination is left to the discretion of the employer. In situations where the employer is laying off employees or permanently reducing the workforce, it must apply objective criteria in deciding whom to lay off or terminate or else be faced with claims of discrimination if the terminated employee believes neutral factors were not used. The employer that can justify it’s decision in terms of retaining the best performers and those that best meet the needs of the job will be able to successfully defend any claims of discrimination. This is where the defining and developing of good performance criteria and performance dimensions is most critical and essential to risk management.

E. Personnel Research

Often, performance appraisals are used as criteria in determining the effectiveness of some organizational intervention.  For example, a company may want to know if changing shift schedules has affected employees’ performance levels.  Analyzing performance appraisal data from before and after the change may provide the answer.  Similar questions regarding hiring practices, employee attitudes, compensation plans, and other organizational activities could be researched using performance appraisal data.

IV. Defining and Developing Performance Criteria for Performance Appraisal

For performance appraisal to be effective, the performance must be properly defined.  Well-defined performance dimensions are achieved by conducting a thorough job analysis.  The performance dimensions can then be incorporated into creating clear and understandable rating forms designed to reduce rating error and increase accuracy.

A. Job Analysis

The following is a simple overview of job analysis approaches and methods.  More information on job analysis can be found in the literature.

1. Job Analysis Approaches

a. Job-Centered – Job-centered approaches focus on the elements of the job.  In other words, a job-centered approach examines the tasks and activities that occur in the course of performing the job.  The outcome is a listing of tasks, functions, and activities that are required to successfully perform the job.  A job-centered approach is best for jobs of relatively low complexity.  The strength of a job-centered approach comes from the fact that it is objective and clearly understood.  Its weakness is that it can be inadequate in capturing the true essence of the job.  Some jobs are greater than the sum of their parts.

b. Person-Centered – Person-centered approaches focus on the traits, abilities, and other characteristics that a person must have to be successful in the job.  It is often used in more complex jobs that are difficult to describe in terms of actual behavior.  Its strength comes from being more descriptive of the job experience.  Its weakness is a result of the necessary subjectivity it entails.

2. Job Analysis Methods

There are many ways to collect job information.  The following briefly describes some of the most common.  There is no single, best method to use.  Each varies in ease of use, quality of information, legal acceptance, cost, and practicality.  The best recommendation is to use a combination of methods that is best for the constraints of a particular situation.

a. Observation – This method refers to watching someone perform the job and recording the important elements.

b.  Participation – This refers to actually performing the job yourself.

c. Interview – This refers to talking to job incumbents regarding job requirements.

d.  Critical Incidents – This entails asking job incumbents to give examples of incidents that separate excellent performers from poor performers.  The incident is then examined to determine what behaviors or characteristics made the difference for success.

e. Focus Group – This refers to forming groups of subject matter experts (SMEs) to discuss and reach consensus on job requirements.  This method is a specific situation in which other methods such as the interview or critical incidents can be combined.

f. Questionnaire – This is the most rigorous method of collection job analysis data.  If designed appropriately, a questionnaire method can produce strong empirical data that is valid and difficult to challenge.

B. Competency Modeling

Competency modeling has gained popularity as a way to gather and organize job information.  Although it is often presented as a totally new concept, its practice is very similar to job analysis.  Therefore, competency modeling will not be elaborated upon here.  When done properly, the results of both job analysis and competency modeling are very similar.  The most significant difference between the two approaches is the intended output.  The goal of competency modeling is to create a conceptual model of what ideal job performance looks like.  Therefore, the model will likely contain the knowledge, skills, abilities required in the job, but will also contain things like attitudes, experiences, and behaviors.  In other words, everything an employee should know, have, or do to be competent in a specific job.  As such, the outcomes of competency modeling can often be more meaningful and more easily understood to members of the organization.  The key to creating valid and effective competency models, however, is using reliable methods to collect information about what makes an employee competent.  The most reliable methods are those traditionally used in job analysis.

V. Creating and Developing Performance Dimensions

After the job analysis (or competency modeling) is completed, the collected information is organized into performance dimensions or competencies (for the purposes here, the terms performance dimension and competency can be used interchangeably).  Consider the dimension of Interpersonal Skill as an example.  If the job analysis determined that relating to others, communicating clearly, and having a positive outlook were key elements of the job, they might be combined into a performance dimension called interpersonal skill. This performance dimension can then be incorporated into the performance appraisal rating form.  The rating form is typically organized around a subset of the most important performance dimensions or competencies.  If there are too many dimensions, the process will be cumbersome.  If there are too few, the process will be ineffective.  Having between five and 15 dimensions is probably appropriate.  It is upon this subset of performance dimensions that the evaluators will rate each employee.  How this is done is presented in the next section.

VI. How to Use Performance Dimensions to Rate Employees

Identifying the performance dimensions on which the ratings are based is just the first step.  There are several options for how the ratings will actually be conducted.  Descriptions of the options are presented below.

A. Norm-Referenced

Norm-referenced means that each employee is compared to other employees on the same performance dimensions.  This is different from Criterion-Referenced methods in which an employee is compared to some conceptual ideal.  A drawback of  Norm-referenced approaches is that it forces a “best” and “worst” categorization.  This can be seen as unfair in a work group in which all employees are performing well.

1. Paired-Comparisons – In this approach, all employees are compared by considering all possible pairs and determining who is best and who is worst.  For example, if there are three employees A, B, and C, the following comparisons would be made: AB, AC, and BC.  Although the procedure is straight-forward, it can become very complex and cumbersome if there are more than a small number of employees.  As a result, it is not used very frequently.
2. Ranking – This approach is as simple as it sounds.  Employees are ranked in order based on their performance.  However, it is only suitable for ranking on a single dimension (e.g., overall performance).  Therefore, it is of limited usefulness in some performance appraisal contexts such as employee development.  It is not very helpful to an employee to know that she is third out of seven because it does not tell her what she needs to do to improve.
3. Forced-Distribution – In this approach, the evaluators are forced to assign employees to a pre-determined number of categories such as High, Medium, or Low.  Typically, the proportion in each category is also predetermined.  For example, 25% Highs, 50% Mediums, and 25% Lows.  This approach can be very useful in the context of making decisions (e.g., compensation) but can be perceived as particularly unfair if everyone in the work group is performing equally well.

B. Criterion-Referenced

As mentioned earlier, Criterion-referenced approaches are different from Norm-referenced approaches because they compare an employee’s performance against a conceptual ideal instead of other employees.  These approaches are generally perceived as being more fair and can provide more useful feedback to the employees being assessed.  The challenge of using these approaches is accurately describing the conceptual ideal.  This is where the effort of conducting a thorough job analysis really pays off.  The more specifically the ideal behavior can be described, the more accurate and more useful the appraisal will be.

1. Graphic Rating Scales – see appendix A
   This approach is the simplest of the Criterion-referenced approaches.  It uses a numerical scale with generic descriptors of performance.  For example, it may use a five-point scale with the following descriptors: 1 = poor, 2 = below average, 3 = average, 4 = above average, and 5 = excellent.  The main drawback of this approach is the lack of consistency across raters on what each of the descriptors means.  That is, one rater’s idea of excellent may be different than another’s.  That is why it is better to actually include examples of what kinds of behavior should be displayed to get a particular rating (see BARS).
2. Behaviorally Anchored Rating Scales (BARS) – see appendix B
   The BARS approach will be more accurate than simple graphic rating scales because it provides behavioral examples of what is expected at each level of the rating scale.  For example, appendix B illustrates exactly what type of behavior is expected if someone is to receive a rating of 7.  The behavior anchors at each point of the scale provides all raters with the same criteria against which employees will be compared.
3. Behavioral Observation Scales (BOS) – see appendix C
   Like the BARS approach, the BOS approach tries to increase the accuracy of the ratings by describing each level of performance in behavioral terms.  The main difference from the BARS approach is that the ratings actually refer to the frequency a particular behavior occurs.  For example, instead of listing a behavior that represents the type of performance that is expected a certain level, it actually lists the behavior that should be occurring and asks for a rating of how frequently it occurs.  This can increase the accuracy of the measure because it limits the ratings to behavior that has actually occurred.  The drawback of this approach is that it requires the rater to have observed the employee enough to correctly rate how frequently the behavior of interest has occurred.  This is becoming less and less feasible in today’s workplace.

C. Considerations for Choosing the Appropriate Rating Method

What determines the right method to use can vary from situation to situation.  For example, if the purpose of the appraisal is to distribute a departmental bonus, a norm-referenced approach such as ranking or forced-distribution is probably most proficient.  If the purpose of the appraisal is employee development, a behaviorally-specific, criterion-referenced approach such as the BARS method is probably most proficient.  The size of the organization, the number of employees to be rated, the type of industry, and level of job are all things to be considered when choosing a method of appraisal.  Overall, however, when considering all of the approaches, the BARS method stands out as offering the greatest number of benefits for the greatest number of situations.  It is accurate and meaningful while being perceived as fair.  It is easily administered with both small and large groups of employees of all levels.  It is also relatively straight-forward and easy to manage.

VII. Providing Performance Information: Who Conducts the Appraisal?

Generally, the performance appraisal is conducted by the supervisor of the employee being rated. It is presumed that this is the person who has the most knowledge of the employee’s performance and has been in a position of being able to directly observe the work. This is not always the case. Particularly, in situations where the supervisor has a large segment of the workforce to manage or spends a great deal of time off the floor and away from the area where the work is being performed, he or she may not always have direct knowledge and must depend on other sources for information about the employee’s work.

A. Supervisors

As stated above the supervisor is usually in the best position to evaluate the employee. The supervisor must be careful to consider the quality of the work performed during the entire period of time since the last rating and not only the few months prior to the review. Employees who know they are up for review will often take great care to perform efficiently, be on time and  be on their best behavior. The supervisor will tend to forget earlier performance problems or will be under the illusion that any performance problems that existed have now been solved. Conversely, by giving the period of time just prior to the appraisal undue emphasis, an employee that performed well earlier in the year but has some problems during the time just prior to the appraisal can be unfairly rated. The danger of focusing only on the few months prior to the appraisal is the chance it will lead to an inaccurate appraisal. This potential problem can be solved by having supervisors conscientiously record data throughout the year and rely on the entire packet of information in performing appraisals.

If more than one person supervises the employee, input for the performance appraisal should come from both supervisors. If one supervisor works more closely with the employee, it should be noted in the weight to give each supervisor’s assessment. Having at least two people provide information for the appraisal will ensure that personal bias of one supervisor will not distort the rating process. It is also a good idea to have the human resources manager review the appraisals to see if two people have given opposite opinions on the same employee. This is also a way to be sure supervisors are taking their role in this process seriously and are doing meaningful performance appraisals.

B. Peers and Subordinates

It can be particularly meaningful to have assessments by peers and subordinates when employees are working in a team setting. In that context, employees often have to rely on each other to complete their part of the task timely, efficiently and up to standards in order for the team performance to be successful. Peer or subordinate assessment is usually most successful when there is some anonymity for the peer or subordinate. The information obtained should be treated confidentially in order to encourage frank and honest comments. There are risks inherent in having appraisals done by peers or subordinates. If the appraisals are used as a basis for promotion, a co-worker may be more reluctant to praise another co-worker, especially if the two are competing for a promotion. A subordinate may have difficulty criticizing a superior, particularly if the comments will be shown to the superior.

C. Customers

This can be a very important source of information about the employee. If customers are used as a source of data for performance appraisals, the customer should be given specific performance criteria to evaluate. This can occur after each job done for the customer or at period intervals during the year.

D. Self-appraisal

An employee’s self evaluation is an important part of a comprehensive appraisal process. It can tell whether the employee’s perception of his or her performance differs from that of the supervisor and in which areas there are differences. It gives the employee an opportunity to ask for help in areas there are problems as well as the opportunity to highlight successes which may have gone unnoticed by the supervisor. The self-evaluation process should occur prior to the supervisor’s appraisal. There is an issue of how much weight should be given to the self-evaluation. It may be instructive to a third party who is reviewing both the supervisor’s and the employee’s appraisals in that there is a conflict between the supervisor and the employee or that the supervisor is not performing his or her duties.

E. 360-degree Feedback

This term, also known as multi-source feedback, means collecting information about the employee from all possible sources: supervisors, peers, subordinates, customers, self appraisals and all documentation about the employee collected over the period of time since the last appraisal. While this may seem burdensome, if the performance appraisal process is importance to the employer, it will want all the data on the employee it can obtain. It also goes beyond just being an additional source of performance information.  It is considered a different philosophy on the entire appraisal-feedback-development process.  It is tied to the ideas of open, honest feedback and constant improvement.  It is a strong trend and continues to grow in popularity.

F. Documentation

Documentation refers to both documenting the employees’ behavior and documenting the appraisal process.  People will often draw erroneous conclusions about others based on inadequate data.  This can occur as a result of judging too soon, over-emphasizing a particular incident, simply forgetting, and other reasons.  Proper documentation of employee behavior is the best way to avoid these errors.  If regular documentation is infeasible, the design of the appraisal form can greatly improve the likelihood of accurate ratings.

VIII. Reliability and Validity of Ratings

The reliability and validity of the ratings refers to the accuracy and relevance of the given ratings.  To be reliable, a rating should be consistent across raters and across time (assuming the level of performance remains the same).  In other words, if an employee is given a rating of superior by one evaluator, that employee should also be given rating superior by another evaluator who has observed the same performance.  And, based on the same performance, an evaluator should give the same rating one day as the next (consistency over time).  To be valid, an employee who is given a rating of excellent, should actually be performing at an excellent level in the job, not just performing in a way that will get him or her excellent ratings.  In other words, the ratings on the form need to be related to behavior in the real world.

A. Rating errors

There are several common errors that people inadvertently make when conducting ratings.  Research has shown that being aware of these sources of error can improve the accuracy of ratings.

1. Leniency/Severity error – This error results from a consistent bias one way or the other.  An example of leniency error is the evaluator rates all employees higher than their true level of performance.  This error can reduce the usefulness of the performance appraisal because in creates the perception that everyone’s performance is pretty much the same.
2. Halo error – This error occurs when a single attribute or achievement affects all other ratings of an individual.  For example, rating an employee good in all areas of performance just because she is exceptional at closing a sale.
3. Central tendency error – This error results from consistently rating everyone as medium and avoiding using either end of the scale.  Again, this results in not being able differentiate between good and bad performers.
4. Proximity errors – Dimensions of performance that appear near each other on the rating form are sometimes affected by the ratings of other performance dimensions.  For example, an evaluator may rate an employee lower on one dimension simply because of rating him as average on the previous dimension.
5. Contrast error – This error occurs if the evaluator, after rating an employee with extremely high performance, rates another employee lower than his or her true performance just because he or she does not perform at the extreme level of the previous employee.  The contrast between the two employees causes the evaluator to be too harsh on the second person rated.

B. Behavior sampling problems

This refers to making judgements based on inaccurate samples of behavior.  When ratings are made, it is impossible to fully consider all relevant behavior performed by the employee.  Instead the evaluator is forced to make ratings based the “samples” of behavior he or she has observed.  The following illustrates some sampling errors that can lead to inaccurate ratings.

1. First impressions – Making judgments before seeing a representative sample of behavior.  This is simply a case of making a judgment too soon.
2. Recent behaviors – Only remembering an employee’s latest performance.
3. Unusual or extreme behaviors – Only remembering those situations that stand out because they were unusual.
4. Behavior consistent with the evaluator’s opinions – Some evaluators tend to only remember instances where the employee was doing work that agreed with evaluator’s way of doing things.  Therefore, they are rated more positively than they should be.
5. Infrequent observation – Having no knowledge upon which to base the ratings.  This is simply a case of having too little information.

C. Cognitive processing – Errors that occur simply because the evaluator has forgotten examples of true behavior.

D. Emotional state

Research has shown that a person’s emotional state can affect what he or she remembers about an incident.  This same effect can result in faulty recall and incorrect ratings.

1. Stress – If the evaluator is under unusual stress, it can effect the accuracy of his or her recall.
2. Racial/gender bias – How an evaluator feels about a particular group of people can affect how she remembers things and how she makes her ratings.

E. Maintaining the reliability and validity of ratings

There are several ways to keep ratings reliable and valid.  Many of them have been outlined above.  Here are a few more suggestions.

1. Start with a thorough job analysis.  You must know what aspects of performance you are evaluating before you can make accurate ratings.
2. Keep a log of critical incidents involving each employee.  This is very difficult in today’s workplace.  Nonetheless, it is the best way to avoid errors of recall.
3. Use Behaviorally Anchored Rating Scales or Behavioral Observation Scales
4. Train the raters on how to avoid errors.

IX. Training Performance Appraisal Evaluators

Once an employer has developed a good appraisal format with defined performance criteria and uniform performance dimensions, it then becomes necessary to train the evaluators who will implement the appraisal process. This is often the most neglected part of the process. The appraisal form is only a tool which has to be used by people. As discussed above, people come to the process with human traits that may obstruct the process or at a minimum, affect the validity and reliability of the process. A well developed training program for supervisors administering performance appraisals is essential.

A. Training for Completing the Appraisal Form

1. Awareness of the sources of rating errors – ( See VIII-A) When supervisors are made cognizant of the behavior that can cause rating errors, they can be careful to avoid it.
2. Familiarity with performance dimensions – ( See  V-VI )
3. Review best practices for record keeping and documentation

B. Training for Meeting with Employee to Discuss Appraisal

1. Allot an adequate period of time – The supervisor should set aside a period of time to meet with the employee to discuss the appraisal. This should be uninterrupted time in a quiet place where the employee will feel comfortable. This will not only allow dialogue about the appraisal, but will also send the message to the employee that this performance appraisal is important.
2. Maximize the discussion – In order for both parties to get the most out of the discussion, the employee must also be given the opportunity to talk and the supervisor must listen. Although the written appraisal has already been completed, there are many things a supervisor can still learn. It is an opportunity to get to the root of performance problems, and to understand what the employee is thinking. Good interviewing and discussion skills are essential.
3. Provide examples of performance deficiencies – Often employees do not perceive they have performance problems let alone understand the problem. Concrete examples are the most instructive way to illustrate a problem. If the supervisor has been diligent in collecting information about the employee, there should be specific examples available.
4. Problem solve together- A very important goal of the appraisal process is to motivate the employee to change negative behavior. Presentation of an example of a performance problem is only helpful if the employee is told how the job should have been done and what steps can be taken to improve.
5. Provide recognition for good work – The purpose of the performance appraisal is to assess the employee’s total performance. Therefore, supervisors must learn to acknowledge strengths in performance and provide recognition for work done well along with pointing out deficiencies. Examples of good performance should also be used to provide encouragement and motivation.
6. Set out a plan for specific action – The appraisal discussion is the perfect time to not only point out and acknowledge performance problems but also to work out an agreed upon plan for improving performance. When the supervisor and employee, together, work out a plan for future action, there is joint ownership of the plan.
7. Don’t save up problems for this meeting- An employee that has been counseled throughout the year about his or her performance will not be surprised to learn there are problems. This meeting should not substitute for day-to-day mentoring.
8. Express confidence- If the employee has performed well during the past year, use this meeting to express confidence in the employee’s ability to continue to perform well in the coming year. For the employee that has been counseled on performance problems, an expression of confidence by the supervisor that the employee can and will be able to improve is a great motivational tool. This expression of confidence is a good way of ending the appraisal meeting on a positive note.

X. Legal Considerations

The performance appraisal is one of the most critical tools of risk management for the employer. An employer will make most of its decisions about its employees based on performance. Therefore, an accurate and objective assessment of employee performance is essential. So very often, this is an area neglected by the employer or at best, done in a hurried and haphazard manner. When this is the case, the employer is put in a very vulnerable position trying to defend its decisions using performance as a defense. Set forth below are some legal consequences of having inadequate performance appraisal systems.

A. Claims of Discrimination

Employees are not often willing to accept performance problems as a reason for termination, and when this is the case will look to other reasons such as protected class status. An employee that believes he or she has been discriminatorily terminated must show that he or she was a member of a protected class, was performing satisfactorily, was terminated, and was replaced by an individual outside of the protected class. This is called making a prima facie case of discrimination. This is not difficult for a terminated employee to do when all of their performance appraisals have been good because they have not been conducted properly. Performance problems may have been left undocumented for any number of reasons. It is then incumbent upon the employer to show that the termination was based on a legitimate non-discriminatory reason such as poor performance. If the documentation (i.e. performance appraisals) does not reflect poor performance, there can be an inference drawn that the reason given by the employer, poor performance, is pretextual, or a cover-up for the real reason which is discrimination. Also, when performance appraisals are purely subjective and not based on objective performance criteria , there can also be inferences of discrimination. Finally, when performance appraisals are used as motivational tools and only contain positive comments and ratings, they will be of no use defending a termination based on performance problems.

B. Claims of Defamation

There can also be legal problems for an employer when the information on the performance  appraisal is not true and casts the employee in a negative light. The employee may claim the appraisal is defamatory. This will occur when the employee is terminated for performance problems based on the appraisals.

C. Is There a Right to a Performance Appraisal ?

Employers that do not have a system set up for regular performance appraisals may find that there are certain expectations about performance appraisals that employees have based on the conduct of or representations made by the employer. For example, an employee handbook may represent that every employee will receive an annual performance appraisal, thereby creating an expectation that it will be done. Whether this rises to the level of a contractual right will be determined by the specificity of the language in the handbook. Precedent, or the employer’s habit of performing annual performance appraisals, can also create an expectation.

D.  The Value of Performance Appraisals

Performance appraisals can serve many purposes for both the employer and the employee. They are effective risk management tools as discussed above. They also increase the efficiency and productivity of employees, and keep employees on notice of performance problems. They can be a basis for meaningful dialogue between employees and management. Employers are encouraged to develop a system for performance appraisals, which satisfies the needs of both the employer and the employee.

A mediator is truly a neutral. Unlike other forms of ADR such as arbitration, where the arbitrator makes findings of fact and reaches a decision or early neutral evaluation where the neutral expresses a belief as to the merits of the matter, the mediator does neither. The only job of the mediator is to facilitate or bring about settlement. The mediator should only interject himself or herself in the process to assist the parties in reaching a settlement. The mediator’s agenda should not be the terms of the settlement or the amount of the settlement, but only the fact that the matter is resolved.

To many, the role of the mediator appears to be simple. However, an effective mediator needs many skills. The mediator must control the impulse to judge, to evaluate, and to decide. The mediator must use skills to promote settlement without becoming invested in the actual terms of the settlement. A skillful mediator will facilitate a settlement acceptable to all parties and will have the parties walk away believing that settlement was the best option and the result was within their control.

The role of the mediator is very different from that of advocate. While this is a simple fact, the role is often misunderstood by those individuals trying to be mediators as well as by participants in a mediation. The mediator is not a trier of fact. It does not matter whether the mediator believes one side over the other or whether the mediator would find for one of the parties. The mediator is only a facilitator and must, at all times, remind the parties of this fact.

The purpose of these materials is to identify and focus on those skills that are essential for becoming an effective mediator. Not all individuals are suited for this role. Some of the skills are innate and part of one’s personality. Many of the skills can be developed with careful attention to the goals.

II. PREPARATORY SKILLS

A. Recognition of the Process

ADR is meant to be an alternative way of resolving legal disputes short of going through the legal system to trial. It should be a cost-effective way to resolve issues.

An effective mediator will use all means to assure the parties a cost-effective process. The mediator will make sure there is sufficient time allotted for the mediation. While many think a case can be mediated in a half-day or a few hours, the skilled mediator knows it is a process, which requires time and focus. The mediator should assert control over the process by requiring a time commitment of at least one full day, requiring that the parties remain at the mediation so the process can proceed smoothly, and should hold the mediation in a place free from distractions and disruptions.

The mediator should require that all parties that are essential to resolution and who have the ultimate authority to settle are present. It is a monumental waste of everyone’s time if the person who must sign off on the settlement is not present at the mediation or is otherwise unavailable. This requirement should be stated upfront.

B. Preparation by the Mediator

A mediator should have a general knowledge of the subject matter of the dispute, if not an expertise in the area. The most effective tool a mediator has is the ability to challenge and play “devil’s advocate”. This does require knowledge of the subject matter as well as practical experience in the area of law. It never hurts to tell some war stories about litigation in order to scare parties toward settlement. A mediator who has been an experienced litigator will have credibility. However, a mediator must not forget the role he or she has is that of a neutral. The “devil’s advocate” routine is only effective if it is used with both sides. It is very easy for as mediator to slip back into the advocacy role and this must be carefully avoided.

A mediator with a working knowledge of the subject matter will also allow the parties to submit materials in a less formal and more cost effective manner. Often copies of relevant pleading along with a brief statement of the issues in dispute, settlement negotiations to date, and a statement of the respective strengths and weaknesses of each side’s positions will suffice. The mediation process requires listening to the parties state their claims and positions and have their “day in court”.

C. Commitment to Settlement

This sounds like an overstated goal. However, there are many times in a mediation when it appears the parties want to quit and walk away. The mediator must use all of his or her skills to convince the parties to complete the process. Often this is best done by reinforcing the fact that the parties are in greater control of their fate during the mediation than they will ever be in the legal system. A mediator should be tenacious toward settlement and toward helping the parties work toward their goal of mutual resolution. A mediator who feels he or she put in their day’s work regardless of whether the case settles does not have a commitment to settlement.

III. SKILLS REQUIRED DURING THE MEDIATION

A. Good Communication Skills

A mediator must be a good communicator since he or she acts as a messenger, carrying the positions, offers, and other communications between the parties. An atmosphere conducive to settlement can be created by the way in which the mediator carries the messages. A skilled mediator will be able to explain the position of the opposing party objectively, omitting any hostility that the opposing party may have voiced. The skilled mediator will carefully choose words, understanding that all impressions of the process and the likelihood of settlement are being formed from the mediator’s communications.

B. Good Listening Skills

As skilled as the mediator should be communicating with the parties, it is equally important that the mediator be a good listener. Allowing the parties to voice their complaints, concerns, hurts, and expectations is an essential part of the mediation process. To many, it is equal to having a “day in court.” Besides being cathartic for the parties, it is also valuable to the mediator to hear what the parties have to say. A skilled mediator will learn about the motivations of the parties and often, about what is really driving the conflict. That information is critical in helping to formulate a settlement that meets the parties’ needs. It is also important for the mediator to understand the dynamics of the relationship between the parties and their attorneys as well as the relationship between co-plaintiffs or co-defendants. It is not always easy to listen to people rehashing their complaints, their hurts, and their anger, but the mediator must understand the importance of this “venting” to the process and should actively listen.

C. Patience

There are many timed during the mediation process that the mediator will have to exert great patience. The mediator must be patient listening to the parties. Many individuals will be inarticulate, redundant and irrelevant as they verbalize their positions. The skilled mediator will patiently listen and when necessary bring the individual back on track in a direct but kind manner. There will be times when participants in the mediation will exhibit bad behavior, often out of frustration and anger. The mediator must understand this and refocus the individuals toward constructive efforts to resolve the dispute. Often, the attorneys will act in a way obstructive to the process. The mediator must understand that the attorney is an advocate and often will flaunt that role during the mediation. This is all part of the process, and it is the role of the mediator, the neutral, to patiently bring the individuals back to the real agenda- settlement. The skill of patience, which a mediator exhibits during the mediation, will greatly reinforce the neutral role the mediator plays.

D. Attuned to Needs of the Parties

Each participant comes to the mediation with certain needs that have to be met. They can be the need to tell their story, the need to walk away with a certain amount of money, or often, the need to validate their self-worth. It is an important part of the role of the mediator to ascertain and understand these needs in order to facilitate settlement. This is done through active listening and the ability to understand people. A mediator must be intuitive and attuned to the psychological factors underlying the participants’ words and conduct A successful mediation occurs when the parties have reached settlement and the participants feel good about the process. In these mediations, the needs have been met.

E. Ability to Put People at Ease

The mediator must be comfortable with the process as well as his or her role. While mediation is a very informal process, many participants come to the mediation not understanding this. They are concerned about when they should talk, if they might say the wrong thing or just general anxiety about the process. The mediator should make the participants feel comfortable from the start. This can happen when the mediator initially talks to the parties, explaining the process. The mediator should act relaxed, explain the role of mediator, and let the parties know how the day will proceed. The mediator should fully explain confidentiality. The demeanor of the mediator will set the tone for the mediation.

F. Straightforward

The mediator must be direct. The mediator is the facilitator, and in order to keep the process moving, the mediator must clearly convey the positions of the parties, the proposals for settlement and the concerns. The mediator must not be afraid to confront the parties, to challenge, and to discuss weaknesses of the cases. However, this must be done in a manner that preserves the neutrality of the mediator role. The mediator should be careful when challenging a party, not to appear as if he or she is judging the party’s position or has come to a conclusion about the merits of the case. The mediator should tell the parties again and again that he or she will be playing “devil’s advocate” to all sides because that is the value of having a neutral facilitate settlement. Also, when a party is being unreasonable or inappropriate, the mediator should deal directly with the problem in order to maintain control over the process. However, this should be done tactfully and without embarrassing any individual.

G. Perspective

The mediator must be able to have perspective with regard to the specifics of each mediation as well as to the mediation process. While most cases will settle in mediation, there are some cases that must go to trial. Often this is because of the desire of one of the parties and their attorneys to show they can “win” or more often because one side does have a strong case and the other side is being unreasonable in its settlement demand. The perspective that the mediator must keep is to use all efforts to bring the parties to settlement, but also to know when it just won’t happen. There is a time when all efforts have been exhausted without reaching settlement. At that point, the mediator should leave the door open to the parties, to come back at a time when settlement talks will be more favorable. This can be after a summary judgment decision or right before trial.

H. Ability to Give Feedback Without Being Judgmental

A mediator must be objective for the role is one of a neutral. This is a given for mediators, but what can a mediator do to reinforce this neutrality when the role often calls for the mediator to be confrontive, challenging, and be a sounding board? With experience, a skilled mediator learns to manipulate the process without interjecting his or her personal feelings into the mediation. This occurs when the mediator truly adopts the single agenda of settlement and does not adopt the agenda of any of the parties. The amount of the settlement or the specific terms should not matter to the mediator if the parties are content The mediator should use all of his or her skills to persuade the parties that settlement is the best alternative for it is the one time the parties will have control over their fates.

I. Ability to Encourage and Aid in Resolution

The mediator must work at moving the parties toward settlement. This requires not only the ability to encourage settlement by reinforcing all the reasons the parties should take control and settle, but also by determining the needs of the parties and helping to craft a settlement that meets those needs. The mediator is the coach, assisting the parties with the “plays” or moves toward settlement. However, at all times, the mediator must keep the parties’ agendas. The only agenda the mediator should have is reaching a settlement.

J. Creativity

Every mediation will be different because in each case, the needs of the parties will vary. The mediator should be able to help propose creative ways to resolve the dispute without becoming vested in the actual outcome. The mediator is in a unique position to know not only the position of each party but also the motivation, which underlies each position. The mediator should not be afraid to suggest creative ways to craft a settlement, not only with regard to monetary terms but also non-monetary relief. Also, the mediator may be called upon to use creative ways to conduct the mediation when there are problems with the traditional method. The mediator should always be flexible and responsive to the needs of the parties.

K. Empathetic

Empathy is a trait, which mediators should have but it should be used skillfully. The mediator should be sympathetic to the concerns of each party but should also retain his or her objectivity and perspective. Too much empathy can polarize a party back to its original position and away from a settlement mode. Not enough empathic can cause a party to view the mediator as partial to the opposite side. The mediator gives the reality check. He or she must be empathetic while driving the parties toward settlement.

L. Reinforce the Result

Once the parties have reached a settlement, the mediator can serve an important role by reinforcing the fact that resolution at this point in time is in the best interests of the parties. The mediator should congratulate the parties and their attorneys on working so hard to achieve resolution. The parties should be told that they now can move forward with their lives and focus on positive ventures. The parties should be encouraged that there is an intangible benefit to moving forward. In the ideal mediation, the parties will be able to come together and give closure to the relationship. Obviously, this is not always possible but should be attempted when the climate is right.

IV. CONCLUSION

While many of the skills discussed above may seem obvious to the mediator that is already skilled, they pose areas that should be developed in those individuals that do not innately possess these skills. The mediator should use these skills as a checklist after each mediation to determine the areas in which he or she needs work and those areas in which he or she is already successful.