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Performance Appraisal
Performance appraisal systems are designed to serve the company's and
employee's interests. They are used to inventory the abilities and resources of
employees and to let an employee know where he stands so that he will be
stimulated to improve his performance. Employee motivation can be enhanced
and performance improved with the monitoring of employees' performance level
and the use of feedback to advise those employees about their effectiveness.
Performance feedback exchanges can be ongoing and informal, on a day-to-day
coaching basis or on a formal basis, annually or biannually. This chapter covers
the fundamental concepts of performance appraisal. The practice of performance
appraisal is described in this chapter and its process and its features along with
the differences between performance management and appraisal.
Introduction
Performance appraisal is a universal phenomenon in which the organization is
making judgment about one is working with and about oneself. It serves as a
basic element of effective work performance. Performance appraisal is essential
for the effective management and evaluation of staff. It aims to improve the
organizational performance as well as individual development.
The history of performance appraisal is quite brief. Its roots in the early 20th
century can be traced to Taylor's pioneering Time and Motion studies. But this is
not very helpful, for the same may be said about almost everything in the field of
modern human resources management.
As a distinct and formal management procedure used in the evaluation of work
performance, appraisal really dates from the time of the Second World War - not
more than 60 years ago. Performance appraisals have been increasingly
implemented by most modern organization as a tool for employee assess.
The meaning of the word “appraisal” is “to fix a price or value for something”.
This is used in finance in terms such as project appraisal or financial appraisal
where a value is attached to a project. Similarly performance appraisal is a
process in which one values the employee contribution and worth to the
organisation.
Objectives
Performance appraisals provide a means for informing employees of the quality
of their work and identifying areas of performance that may need improvement.
Performance appraisals consist of assessing the staff member's adequacy to
perform tasks, to fulfill responsibilities, to meet behavioral and conduct
standards, and to perform other job requirements at desired levels of
competence. Performance appraisals help supervisors maintain control of the
work and make the most effective use of their staff resources. Further,
performance appraisal documents provide a supportable basis for making
personnel decisions including, but not limited to, training needs, merit pay
adjustments, promotions, transfers, continued employment, or terminations.
The objectives of performance appraisal are:
1. To help better current performances
2. To help in development of the employee.
3. To determine training and development needs.
4. To give employee feedback and counsel them
5. To review performance for salary purposes.
Employees across the entire organisation are apprised of their performance. This
could be done annually, twice a year, periodically depending on the need of the
organization.
Types of Appraisal Systems
The various kinds of performance appraisal systems are:
Personality based performance appraisal system:
Here the appraiser is supposed to rate the personality traits of the person
being appraised.
This is not in much in organisations as it very subjective and judgmental. It
could also be biased and prejudiced.
Competence based performance appraisal system:
Here the job analysis is used and the employee is appraised for the skills he
exhibits. For e.g. if his job entails dealing with the clients then he is judged
foe his effectiveness in dealing with them. This enables both the organisation
and the employee as to what deficiencies are to be overcome and can be
useful in providing training to the employee to better his performance.
Result based performance appraisal system:
This system concentrates on the final results achieved by the employee
irrespective of his personality or deficiencies. This is totally related to the job
and concentrates on the end results that are more important to the
organisation.
The performance appraisal system has to be transparent and the employee
should be taken into full confidence. In many cases employees themselves
are given a chance to conduct a self-appraisal. Performance appraisal is a
case of joint problem solving by the organisation and the employee. However
the organisation must also take care of future potential and not get bogged
down by current performance.
Normally the immediate supervisor does the appraisal. Some organisations
also have a peer group performance appraisal where colleagues rate the
performance.
The HR person must also ensure that line managers are properly trained for
carrying out the appraisal including interviewing techniques and on how to
give feedback. The managers must also be trained to look at the cases
objectively outside of their personal opinion of the candidate.
Elements in the Performance Appraisal Process
At one stage performance appraisal relied mainly on assessment of personality
characteristics. Subordinates were being appraised by their superiors on the
extent to which they exhibited characteristics like tact, willingness, enthusiasm,
and maturity. Managers were being put in the position of psychologists and
required to make subjective ratings without any point of reference except their
own opinion. More recent thinking has resulted in an approach which says that
there are two important aspects in performance appraisal namely inputs and
outputs
Inputs: What the individual brings to the job in terms of attributes, behavior,
skills and knowledge are inputs.
Outputs: The results achieved in terms of outputs or outcomes are referred to
as outputs.
Expectations are expressed in terms of objectives, standards, standards,
targets or competence and appraisal is made on the basis of inputs and
outputs.
Types of Appraisal Systems
Performance is an employee's accomplishment of assigned work as specified in
the critical elements and as measured against standards of the employee's
position. The term “Performance Appraisal” is concerned with the process of
valuing a person’s worth to an organization with a view to increasing it.
Traditional Appraisal system
Performance appraisal is developed as a simple method of income justification.
Appraisal used to decide whether the salary of an individual was justified or not.
The decrease or increase in pay depends upon employee’s performance.
Modern Appraisal System
Performance appraisal is defined as a structured formal interaction between a
subordinate and a supervisor that usually takes the form of a periodic interview,
in which the work performance of the subordinate is examined and discussed
with a view to identify weakness, strength and opportunities for improvement
and skills development.
Performance-Based Actions are the reduction in grade or removal of an
employee based solely on performance at the unacceptable level. Performance
Plans are the documentation of performance expectations communicated to
employees from supervisors. Plans define the critical elements and the
performance standards by which an employee's performance will be evaluated.
Performance Standards are statements of the expectations or requirements
established by management for a critical element at a particular rating level. A
performance standard may include, but is not limited to, factors such as quality,
quantity, timeliness, and manner of performance.
Performance Award is a one-time cash payment to recognize the contributions of
an employee and is based on the rating of record. A performance award does not
increase basic pay. Performance Improvement Plans (PIP) are developed for
employees at any point in the appraisal cycle when performance becomes Level
1 (unacceptable) in one or more critical elements. This plan affords an employee
the opportunity to demonstrate acceptable performance and it is developed with
specific guidance provided by a servicing human resources office. Performance
Management is the integrated process by which an agency involves its
employees in improving organizational effectiveness in the accomplishment of
agency mission and strategic goals. Performance Management consists of:
performance planning, monitoring employee performance, employee
development, evaluating employee performance, and recognition.
Performance appraisal system describes how agency will identify performance
standards and core competencies and communicate them to employees.
Periodical appraisal helps the company to compare employee’s performance and
to take apt decisions for further improvement. A structured business planning
depends on the performance of the employee and it will be successful only when
the employees are analyzing their work performance individually. The formal
performance appraisal in a company is conducted annually for all staff and each
staff member is appraised by their line manager. Generally employees are
appraised based on the structure of the company
Annual performance appraisals evaluate the role of the employee in the
organizational development and also monitoring the standard, expectations,
objectives, efficiency in handling task and responsibilities in a period of time.
Appraisal also helps to analyze the individual training needs of the employee and
planning of future job allocation. It also help to adopt appropriate strategy based
on organizational training needs. Performance appraisal analyzes employee’s
performance and which utilize to review the grades and modify the annual pay. It
generally reviews each individual performance against the objectives and
standard of the organization. Performance management creating a work
environment and it is enabling the employees to perform best of their abilities.
Through performance management companies are hiring efficient people .Then
the company building up their skills and talents through employee development
programmes. The tools like performance appraisal, performance review, and
appraisal forms create the process of nurturing employee developments.
Effective appraisal considers increase in staff productivity, knowledge and
contribution. Formal management procedure used the evaluation of work
performance. Effective appraisal helps the employer in providing increased
productivity, knowledge and contribution from the staff. These resources
increase the ability to do performance consulting, measure performance
improvement, and provide resultant training using internal staff, which increases
self-sufficiency in performance consulting and improvement. Providing feed back
about employee’s job performance and the contribution of reward for their work
is very essential in the smooth functioning of an organization.
Performance appraisal tries to:
Give feedback to employees to improve subsequent performance.
Identify employee-training needs.
Document criteria used to allocate organizational rewards.
Form a basis for personnel decisions-salary (merit) increases, disciplinary
actions, etc.
Provide the opportunity for organizational diagnosis and development.
Facilitate communication between employee and administrator.
Performance Feed Back
The human resource objective of a dairy manager should be to maintain a
productive, stable, and committed workforce. Performance feedback to
employees is one of the essential keys to making that elusive objective a reality.
Most people are uncomfortable with uncertainty. When employees are uncertain
about their work performance and job security, they cannot be as satisfied and
productive as possible. Feedback reduces employee uncertainty and provides
direction about how well an individual is performing and how he or she can
improve.
Being motivated to do a “good job” is hard if you don’t know what “good” is or
what the expectations are. Employees appreciate feedback on their performance
and constructive criticism that helps them to gain success. If coaches never
offered any advice on how to hit the ball, run faster, or jump higher, think how
frustrated players would be in trying to improve their performance. Your
employees feel the same way when they get little to no feedback about how they
are performing.
Six Characteristics of Useful Feedback
■ Specific Feedback should be specifically related to recognizable elements of
performance or particular incidents that can be easily understood by both the
employee and supervisor. Whenever possible, feedback should include
objective information.
■ Relevant Feedback should focus on behaviors or attitudes that have a direct
impact on performance. Issues or opinions unrelated to job performance have
no place in job feedback
■ Credible Feedback should come from a trusted source that has a developed
rapport with the employee. The source of feedback needs to be in a position to
observe employee performance. In other words, a milking supervisor who
never visits the night crew cannot credibly provide them with feedback.
■ Frequent Feedback needs to be frequent enough to provide direction that
helps employees shape their performance. Limiting feedback to formal
reviews once or twice a year is not enough to help employees improve. Less-
experienced employees need feedback more frequently, but even experienced
people need to hear it often enough to stay motivated and feel valued.
■ Timely Feedback need to occur close enough in time to performance so that it
has meaning. Feedback about a critical incident in particular needs to come
almost immediately after the incident takes place. Otherwise, the meaning
and importance of the incident for learning begins to decline rapidly. One
should never wait for a formal review to provide feedback on a critical incident
—and should provide informal feedback right away.
■ Linked to a Source of Help Feedback should not end with the employee
wondering what to do next. Negative feedback, especially, should always
conclude with a series of positive steps that the employee can take toward
improvement. The steps might be some specific recommendations (like from a
coach), direction toward a source of further training, or plans for a change in
the work system that limits performance.
Feed back of Performance provides an opportunity to discuss strength and
resolution of performance deficiencies of an employee, which also encouraged
preparing ratings of their supervisors. Performance appraisal allows a person to
grow in whatever the direction he wants to move. Employers promote positive
attitude, advancement, and motivation to make the employee to understand
their own special potential, and find roles that really fit well. Developing the
whole-person is also an important aspect of modern corporate responsibility, and
separately whole-person development is a crucial advantage in the employment
market; in which all employers compete to attract the best recruits, and to retain
the best staff.
Usually performance appraisal used for developmental purpose which also helps
to identify the eligible person for reward. It stimulates the performance and
making promotions, transfer and discharge decisions.
Formal Performance Feedback
Periodic, formal feedback about performance for individuals is known by many
names: performance review, annual evaluation, performance appraisal, and so
forth. It’s usually carried out on an annual or twice-yearly basis and is often
associated with pay adjustments. The purpose of the performance review is to
help employees improve their work and develop a plan for gaining new skills.
Although the documentation needed to terminate an employee with chronic
performance problems may start here, the goal of the review process is not
discipline or punishment, but rather constructive feedback for improvement.
Employees appreciate formal feedback on their performance and constructive
criticism that helps them to succeed.
Informal Feedback
In order for feedback to help improve group or individual performance, it must be
received on a regular and frequent basis. Informal feedback fills this need.
Informal feedback might simply be a pat on the back when the supervisor
notices that a job was particularly well done. It might be a problem solving
session for the herdsperson and breeder when the records indicate that
reproductive efficiency is declining. Any communication about performance that
is carried out in an informal setting is informal feedback.
When a dairy farm manager is carrying out the role of supervisor, informal
feedback and coaching make up the largest and most important parts of that
role. Good supervisors maintain open communication with their subordinates.
They listen closely to their ideas and concerns and are always offering feedback
on their performances. By offering ideas and direction toward improvement
whenever feedback is negative, supervisors act as a coach to help their
subordinates grow and improve.
Providing feedback, both positive and negative, is an important part of every
manager’s responsibility. People need to know specifically what parts of the job
they do well and what parts they need to improve. A yearly or twice-yearly
performance review that may be linked to pay raises is a good way to provide
formal feedback and help employees to develop but does not replace the daily
communication about work performance. An incentive program can be a useful
tool for motivating and rewarding key employees, but it should be used in
combination with both informal and formal feedback for the best overall
outcome.
Performance Appraisal and Performance Management
It is sometimes assumed that performance appraisal is the same thing as
performance management. But there are significant differences. Performance
appraisal can be defined as the formal assessment and rating of individuals by
their managers at, usually, an annual review meeting. In contrast, performance
management is a continuous and much wider, more comprehensive and more
natural process of management that clarifies mutual expectations, emphasizes
the support role of managers who are expected to act as coaches rather than
judges, and focuses on the future. Performance appraisal has been discredited
because too often it has been operated as a top-down and largely bureaucratic
system owned by the Human Resource department rather than by line
managers. It has been perceived by many commentators such as Townley as
solely a means of exercising managerial control.
Performance appraisal tended to be backward looking, concentrating on what
had gone wrong, rather than looking forward to future development needs.
Performance appraisal schemes existed in isolation. There was little or no link
between them and the needs of the business. Line managers have frequently
rejected performance appraisal schemes as being time-consuming and
irrelevant. Employees have resented the superficial nature with which appraisals
have been conducted by managers who lack the skills required, tend to be
biased and are simply going through the motions. As Armstrong and Murlis
assert, performance appraisal too often degenerated into ‘a dishonest annual
ritual’. The differences between them as summed up by Armstrong and Baron
are set out in the following table:
Performance Appraisal Performance Management
Top down assessment Joint process through dialogue
Annual appraisal meeting Continuous review with one or two formal
reviews
Use of ratings Ratings less common
Monolithic system Flexible process
Focus on quantified objectives Focus on values and behaviours as well as
objectives
Often linked to pay Less likely to be a direct link to pay
Bureaucratic – complex paperwork Documentation kept to minimum
Owned by HR managers Owned by line managers
Performance management systems, including performance appraisals or
evaluations are critical linchpins for human resources management. Appraisal
ratings may be criteria in decisions to retain employees during layoffs, to assess
the quality of training programs, to measure equitable treatment of different
groups of employees, to increase employees' pay, and to promote or terminate
employees. Appraisals may help poor performers improve performance by giving
specific feedback about needs for development and appraisals may help
employees who excel continue to excel by giving positive reinforcement. This
type of feedback is essential to improve performance of employees at all levels
and to assess the accomplishments of the organisation overall.
Employee performance and productivity data are becoming more important as
more government agencies; federal, state, and local ; engage in strategic
planning and try to meet accountability standards of statutes like the
Government Performance and Results Act. Governments at all levels are trying
to verify that their agencies and departments are doing more with less. If a
smaller number of employees will be expected to accomplish more, then it is
critical to use all available tools and techniques for maximizing each employee's
productivity. Effective performance management systems are among the tools
for measuring and improving productivity.
The costs of failing to develop adequate performance appraisal systems, though
difficult to measure, would surely exceed the benefits of developing and
implementing an effective system. Organisations lacking performance appraisal
systems risk costly litigation when they are unable to support decisions to
terminate or lay off employees. In the absence of a valid system for assessing
the performance of all employees, managers risk suboptimum promotion
decisions and they may promote one employee and increase his or her pay when
another employee's performance would be superior and give a higher return on
the salary investment. Employees who excel and who do not receive positive
feedback may become frustrated and leave, resulting in recruitment costs for the
employer. The performance gap that is the gap between desired performance
and actual performance also increases costs. Some organisations overspend,
trying to close the performance gap by investing in advanced technology, by
redesigning the workplace, and by improving job efficiency rather than focusing
on human performance systems that determine productivity.
Many elected officials believe pay-for-performance, based on appraisal ratings,
will give employees incentives to improve productivity. One problem in federal,
state, and local government is insufficient funding for such systems. Even when
appropriations are adequate, a successful pay-for-performance system must be
carefully designed and implemented by well-trained managers in an organisation
with sound management practices and policies.
Aspects of Job Analysis
Job Analysis is a process to identify and determine in detail the particular job
duties and requirements and the relative importance of these duties for a given
job. Job Analysis is a process where judgments are made about data collected on
a job. Information regarding duties and tasks, Environment, tools and
equipments, external and internal relationships and the minimum requirements
to perform the job are considered under job analysis.
Modern Appraisal
The human inclination to judge can create serious motivational, ethical and legal
problems in the workplace. Without a structured appraisal system, there is little
chance of ensuring that the judgments made will be lawful, fair, defensible and
accurate.
Performance appraisal systems began as simple methods of income justification.
That is, appraisal was used to decide whether or not the salary or wage of an
individual employee was justified.
The process was firmly linked to material outcomes. If an employee's
performance was found to be less than ideal, a cut in pay would follow. On the
other hand, if their performance was better than the supervisor expected, a pay
rise was in order. Little consideration, if any, was given to the developmental
possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the
only required impetus for an employee to either improve or continue to perform
well.
Sometimes this basic system succeeded in getting the results that were
intended; but more often than not, it failed. For example, early motivational
researchers were aware that different people with roughly equal work abilities
could be paid the same amount of money and yet have quite different levels of
motivation and performance.
These observations were confirmed in empirical studies. Pay rates were
important, yes; but they were not the only element that had an impact on
employee performance. It was found that other issues, such as morale and self-
esteem, could also have a major influence. As a result, the traditional emphasis
on reward outcomes was progressively rejected. In the 1950s in the United
States, the potential usefulness of appraisal as tool for motivation and
development was gradually recognized. The general model of performance
appraisal, as it is known today, began from that time.
Performance appraisal may be defined as a structured formal interaction
between a subordinate and supervisor, that usually takes the form of a periodic
interview (annual or semi-annual), in which the work performance of the
subordinate is examined and discussed, with a view to identifying weaknesses
and strengths as well as opportunities for improvement and skills development.
In many organizations - but not all - appraisal results are used, either directly or
indirectly, to help determine reward outcomes. That is, the appraisal results are
used to identify the better performing employees who should get the majority of
available merit pay increases, bonuses, and promotions.
By the same token, appraisal results are used to identify the poorer performers
who may require some form of counseling, or in extreme cases, demotion,
dismissal or decreases in pay. (Organizations need to be aware of laws in their
country that might restrict their capacity to dismiss employees or decrease pay.)
Whether this is an appropriate use of performance appraisal - the assignment
and justification of rewards and penalties - is a very uncertain and contentious
matter.
Basic Purposes of Appraisal
Effective performance appraisal systems contain two basic systems operating in
conjunction: an evaluation system and a feedback system. The main aim of the
evaluation system is to identify the performance gap (if any). This gap is the
shortfall that occurs when performance does not meet the standard set by the
organization as acceptable. The main aim of the feedback system is to inform
the employee about the quality of his or her performance. (However, the
information flow is not exclusively one way. The appraisers also receive feedback
from the employee about job problems, etc.)
One of the best ways to appreciate the purposes of performance appraisal is to
look at it from the different viewpoints of the main stakeholders: the employee
and the organization.
Employee Viewpoint
From the employee viewpoint, the purpose of performance appraisal is four-fold:
Tell me what you want me to do
Tell me how well I have done it,
Help me improve my performance
Reward me for doing well.
Organizational Viewpoint
From the organization's viewpoint, one of the most important reasons for having
a system of performance appraisal is to establish and uphold the principle of
accountability.
For decades it has been known to researchers that one of the chief causes of
organizational failure is "non-alignment of responsibility and accountability."
Non-alignment occurs where employees are given responsibilities and duties, but
are not held accountable for the way in which those responsibilities and duties
are performed. What typically happens is that several individuals or work units
appear to have overlapping roles.
The overlap allows - indeed actively encourages - each individual or business unit
to "pass the buck" to the others. Ultimately, in the severely non-aligned system,
no one is accountable for anything. In this event, the principle of accountability
breaks down completely. Organizational failure is the only possible outcome. In
cases where the non-alignment is not so severe, the organization may continue
to function, albeit inefficiently. Like a poorly made or badly tuned engine, the
non-aligned organization may run, but it will be sluggish, costly and unreliable.
One of the principal aims of performance appraisal is to make people
accountable. The objective is to align responsibility and accountability at every
organizational level.
Appraisal Methods
In a landmark study, Locher & Teel found that the three most common appraisal
methods in general use are rating scales (56%), essay methods (25%) and
results- oriented or MBO methods (13%). For a description of each, follow the
button links on the left.
Certain techniques in performance appraisal have been thoroughly investigated,
and some have been found to yield better results than others.
Encourage Discussion: Research studies show that employees are likely to
feel more satisfied with their appraisal result if they have the chance to talk
freely and discuss their performance. It is also more likely that such
employees will be better able to meet future performance goals. Employees
are also more likely to feel that the appraisal process is fair if they are given
a chance to talk about their performance. This especially so when they are
permitted to challenge and appeal against their evaluation.
Constructive Intention: It is very important that employees recognize that
negative appraisal feedback is provided with a constructive intention, i.e., to
help them overcome present difficulties and to improve their future
performance. Employees will be less anxious about criticism, and more likely
to find it useful, when they believe that the appraiser's intentions are helpful
and constructive. In contrast, other studies have reported that "destructive
criticism" - which is vague, ill-informed, unfair or harshly presented - will lead
to problems such as anger, resentment, tension and workplace conflict, as
well as increased resistance to improvement, denial of problems, and poorer
performance.
Set Performance Goals: It has been shown in numerous studies that goal-
setting is an important element in employee motivation. Goals can stimulate
employee effort, focus attention, increase persistence, and encourage
employees to find new and better ways to work. The useful of goals as a
stimulus to human motivation is one of the best supported theories in
management. It is also quite clear that goals which are "...specific, difficult
and accepted by employees will lead to higher levels of performance than
easy, vague goals (such as do your best) or no goals at all."
Appraiser Credibility: It is important that the appraiser (usually the
employee's supervisor) be well-informed and credible. Appraisers should feel
comfortable with the techniques of appraisal, and should be knowledgeable
about the employee's job and performance. When these conditions exist,
employees are more likely to view the appraisal process as accurate and fair.
They also express more acceptances of the appraiser's feedback and a
greater willingness to change.
Rating Methods
The rating scale method offers a high degree of structure for appraisals. Each
employee trait or characteristic is rated on a bipolar scale that usually has
several points ranging from "poor" to "excellent" (or some similar arrangement).
The traits assessed on these scales include employee attributes such as
cooperation, communications ability, initiative, punctuality and technical (work
skills) competence. The nature and scope of the traits selected for inclusion is
limited only by the imagination of the scale's designer, or by the organization's
need to know. The one major provision in selecting traits is that they should be in
some way relevant to the appraisee's job. The traits selected by some
organizations have been unwise and have resulted in legal action on the grounds
of discrimination.
Advantages
The greatest advantage of rating scales is that they are structured and
standardised. This allows ratings to be easily compared and contrasted - even for
entire workforces. Each employee is subjected to the same basic appraisal
process and rating criteria, with the same range of responses. This encourages
equality in treatment for all appraisees and imposes standard measures of
performance across all parts of the organization.
Rating scale methods are easy to use and understand. The concept of the rating
scale makes obvious sense; both appraisers and appraisees have an intuitive
appreciation for the simple and efficient logic of the bipolar scale. The result is
widespread acceptance and popularity for this approach.
Disadvantages
Trait Relevance
Are the selected rating-scale traits clearly relevant to the jobs of all the
appraisees? It is inevitable that with a standardised and fixed system of appraisal
that certain traits will have a greater relevance in some jobs than in others.
For example, the trait "initiative" might not be very important in a job that is
tightly defined and rigidly structured. In such cases, a low appraisal rating for
initiative may not mean that an employee lacks initiative. Rather, it may reflect
that fact that an employee has few opportunities to use and display that
particular trait. The relevance of rating scales is therefore said to be context-
sensitive. Job and workplace circumstances must be taken into account.
Systemic Disadvantage
Rating scales, and the traits they purport to measure, generally attempt to
encapsulate all the relevant indicators of employee performance. There is an
assumption that all the true and best indicators of performance are included, and
all false and irrelevant indicators are excluded.
This is an assumption very difficult to prove in practice. It is possible that an
employee's performance may depend on factors that have not been included in
the selected traits. Such employees may end up with ratings that do not truly or
fairly reflect their effort or value to the organization. Employees in this class are
systemically disadvantaged by the rating scale method.
Perceptual Errors
This includes various well-known problems of selective perception (such as the
horns and halos effect) as well as problems of perceived meaning. Selective
perception is the human tendency to make private and highly subjective
assessments of what a person is "really like", and then seek evidence to support
that view (while ignoring or downplaying evidence that might contradict it).
This is a common and normal psychological phenomenon. All human beings are
affected by it. In other words, we see in others what we want to see in them. An
example is the supervisor who believes that an employee is inherently good
(halo effect) and so ignores evidence that might suggest otherwise. Instead of
correcting the slackening employee, the supervisor covers for them and may
even offer excuses for their declining performance.
On the other hand, a supervisor may have formed the impression that an
employee is bad (horns effect). The supervisor becomes unreasonably harsh in
their assessment of the employee, and always ready to criticize and undermine
them. The horns and halo effect is rarely seen in its extreme and obvious forms.
But in its more subtle manifestations, it can be a significant threat to the
effectiveness and credibility of performance appraisal.
Perceived Meaning
Problems of perceived meaning occur when appraisers do not share the same
opinion about the meaning of the selected traits and the language used on the
rating scales.
For example, to one appraiser, an employee may demonstrate the trait of
initiative by reporting work problems to a supervisor. To another appraiser, this
might suggest an excessive dependence on supervisory assistance - and thus a
lack of initiative. As well, the language and terms used to construct a scale -
such as "Performance exceeds expectations" or "Below average skill" - may
mean different things to different appraisers.
Rating Errors
The problem here is not so much errors in perception as errors in appraiser
judgement and motive. Unlike perceptual errors, these errors may be (at times)
deliberate.
The most common rating error is central tendency. Busy appraisers, or those
wary of confrontations and repercussions, may be tempted to dole out too many
passive, middle-of-the-road ratings (e.g., "satisfactory" or "adequate"),
regardless of the actual performance of a subordinate. Thus the spread of ratings
tends to clump excessively around the middle of the scale.
This problem is worsened in organizations where the appraisal process does not
enjoy strong management support, or where the appraisers do not feel confident
with the task of appraisal.
Essay Method
In the essay method approach, the appraiser prepares a written statement about
the employee being appraised. The statement usually concentrates on
describing specific strengths and weaknesses in job performance. It also
suggests courses of action to remedy the identified problem areas.
The statement may be written and edited by the appraiser alone, or it be
composed in collaboration with the appraisee.
Advantages
The essay method is far less structured and confining than the rating scale
method. It permits the appraiser to examine almost any relevant issue or
attribute of performance. This contrasts sharply with methods where the
appraisal criteria are rigidly defined. Appraisers may place whatever degree of
emphasis on issues or attributes that they feel appropriate. Thus the process is
open-ended and very flexible. The appraiser is not locked into an appraisal
system the limits expression or assumes that employee traits can be neatly
dissected and scaled.
Disadvantages
Essay methods are time-consuming and difficult to administer. Appraisers often
find the essay technique more demanding than methods such as rating scales.
The techniques greatest advantage - freedom of expression - is also its greatest
handicap. The varying writing skills of appraisers can upset and distort the whole
process. The process is subjective and, in consequence, it is difficult to compare
and contrast the results of individuals or to draw any broad conclusions about
organizational needs.
Result Method – Management By Objectives (MBO)
The use of management objectives was first widely advocated in the 1950s by
the noted management theorist Peter Drucker. MBO (management by objectives)
methods of performance appraisal are results-oriented. That is, they seek to
measure employee performance by examining the extent to which
predetermined work objectives have been met.
Usually the objectives are established jointly by the supervisor and subordinate.
An example of an objective for a sales manager might be: Increase the gross
monthly sales volume to $250,000 by 30 June.
Once an objective is agreed, the employee is usually expected to self-audit; that
is, to identify the skills needed to achieve the objective. Typically they do not
rely on others to locate and specify their strengths and weaknesses. They are
expected to monitor their own development and progress.
Advantages
The MBO approach overcomes some of the problems that arise as a result of
assuming that the employee traits needed for job success can be reliably
identified and measured.
Instead of assuming traits, the MBO method concentrates on actual outcomes. If
the employee meets or exceeds the set objectives, then he or she has
demonstrated an acceptable level of job performance. Employees are judged
according to real outcomes, and not on their potential for success, or on
someone's subjective opinion of their abilities.
The guiding principle of the MBO approach is that direct results can be observed,
whereas the traits and attributes of employees (which may or may not contribute
to performance) must be guessed at or inferred. The MBO method recognizes the
fact that it is difficult to neatly dissect all the complex and varied elements that
go to make up employee performance.
MBO advocates claim that the performance of employees cannot be broken up
into so many constituent parts - as one might take apart an engine to study it.
But put all the parts together and the performance may be directly observed and
measured.
Disadvantages
MBO methods of performance appraisal can give employees a satisfying sense of
autonomy and achievement. But on the downside, they can lead to unrealistic
expectations about what can and cannot be reasonably accomplished.
Supervisors and subordinates must have very good "reality checking" skills to
use MBO appraisal methods. They will need these skills during the initial stage of
objective setting, and for the purposes of self-auditing and self-monitoring.
Unfortunately, research studies have shown repeatedly that human beings tend
to lack the skills needed to do their own "reality checking". Nor are these skills
easily conveyed by training. Reality itself is an intensely personal experience,
prone to all forms of perceptual bias.
One of the strengths of the MBO method is the clarity of purpose that flows from
a set of well-articulated objectives. But this can be a source of weakness also. It
has become very apparent that the modern organization must be flexible to
survive. Objectives, by their very nature, tend to impose certain rigidity.
Of course, the obvious answer is to make the objectives more fluid and yielding.
But the penalty for fluidity is loss of clarity. Variable objectives may cause
employee confusion. It is also possible that fluid objectives may be distorted to
disguise or justify failures in performance.
360 DEGREE FEEDBACK
360-Degree Feedback is also known as full-circle feedback, multirater feedback,
multi-level feedback, upward appraisal, and peer review.
Where 'regular' performance appraisals provide 'single-source' (top-down)
feedback, i.e. normally from an employee's direct line manager only, 360-degree
feedback appraisals are 'multi-source' - involving behavioral feedback from a
variety of sources such as Peers, Direct Reports ('subordinates'), Customers
(internal and/or external) as well as Managers. These are called Rater Groups,
consisting of three or more Raters per Rater Group (except for the Rater Group
'Manager/s' where an employee may only have one line manager).
The employee receiving the feedback (called 'Appraisee'), gets rated by 360
Raters (also called 'Multiraters'). Only Raters having worked with the Appraisee
for a period of minimum three months should be asked to provide behavioral
feedback to the Appraisee.
The Appraisee also fills out a self-rating that includes the same questions that
Rater Groups receive in their questionnaires.
Need
It is harder to discount the views of several of your colleagues or customers than
the views of just one person. The 360 process also provides a much more
complete and richer picture of an employee's performance. In addition, it gives
people an opportunity to provide anonymous feedback to a colleague, which
they might otherwise be uncomfortable to give face-to-face.
Some of the benefits of receiving 360-degree feedback from others are:
Increased self-awareness, by understanding how your behavior is perceived by
others, and comparing this perception with your own self-assessment of your
own work behavior.
To identify and build upon the strengths that you are currently exhibiting.
To identify priority areas where you might change your behavior in order to
improve your work performance and organizational effectiveness.
More focused learning and development activities, and increased individual
ownership for self-development. Feedback is essential in facilitating performance
improvement. It informs employees of their actions that create problems for
others, and what behavioral changes may be necessary to improve working
relationships, team synergy, performance outputs and customer service.
Received in a positive, open-minded, non-defensive spirit, 360-feedback can play
a major role in employees' personal and professional growth, and job
satisfaction. It can serve as a strong spur for personal development and behavior
change.
360 feedback from peers and direct reports is frequently the only way that senior
executives can get feedback on their performance, as there may just not be
anybody else to do it.
When managers are new to the organization, and especially if they have many
direct reports, it will normally take a while to get to know them well. 360
feedback could be the ideal process to use to gather behavioral information on
them very fast and effectively.
The data gathered from 360-degree feedback throughout the organization can
be very useful in providing insight into organization-wide behaviors and
competency (or the lack thereof), and what development and other interventions
may be necessary to address weaknesses.
NOTE: Because of its very power as a behavior modification tool, 360-degree
feedback - if not implemented sensitively and professionally - can do a lot of
harm to both individuals and the organization. For it to be successful there must
be a mature organizational culture of openness, honesty, and mutual trust.
Balance Scorecard
The balanced scorecard is a strategic planning and management system that is
used extensively in business and industry, government, and nonprofit
organizations worldwide to align business activities to the vision and strategy of
the organization, improve internal and external communications, and monitor
organization performance against strategic goals. It was originated by Drs.
Robert Kaplan (Harvard Business School) and David Norton as a performance
measurement framework that added strategic non-financial performance
measures to traditional financial metrics to give managers and executives a
more 'balanced' view of organizational performance. While the phrase balanced
scorecard was coined in the early 1990s, the roots of the this type of approach
are deep, and include the pioneering work of General Electric on performance
measurement reporting in the 1950’s and the work of French process engineers
(who created the Tableau de Bord – literally, a " dashboard" of performance
measures) in the early part of the 20th century.
The balanced scorecard has evolved from its early use as a simple performance
measurement framework to a full strategic planning and management system.
The “new” balanced scorecard transforms an organization’s strategic plan from
an attractive but passive document into the "marching orders" for the
organization on a daily basis. It provides a framework that not only provides
performance measurements, but helps planners identify what should be done
and measured. It enables executives to truly execute their strategies.
This new approach to strategic management was first detailed in a series of
articles and books by Drs. Kaplan and Norton. Recognizing some of the
weaknesses and vagueness of previous management approaches, the balanced
scorecard approach provides a clear prescription as to what companies should
measure in order to 'balance' the financial perspective. The balanced scorecard
is a management system (not only a measurement system) that enables
organizations to clarify their vision and strategy and translate them into action. It
provides feedback around both the internal business processes and external
outcomes in order to continuously improve strategic performance and results.
When fully deployed, the balanced scorecard transforms strategic planning from
an academic exercise into the nerve center of an enterprise.
Kaplan and Norton describe the innovation of the balanced scorecard as follows:
"The balanced scorecard retains traditional financial measures. But financial
measures tell the story of past events, an adequate story for industrial age
companies for which investments in long-term capabilities and customer
relationships were not critical for success. These financial measures are
inadequate, however, for guiding and evaluating the journey that information
age companies must make to create future value through investment in
customers, suppliers, employees, processes, technology, and innovation."
Adapted from The Balanced Scorecard by Kaplan & Norton
Perspective
The balanced scorecard suggests that we view the organization from four
perspectives, and to develop metrics, collect data and analyze it relative to each
of these perspectives:
The Learning & Growth Perspective
This perspective includes employee training and corporate cultural attitudes
related to both individual and corporate self-improvement. In a knowledge-
worker organization, people -- the only repository of knowledge -- are the main
resource. In the current climate of rapid technological change, it is becoming
necessary for knowledge workers to be in a continuous learning mode. Metrics
can be put into place to guide managers in focusing training funds where they
can help the most. In any case, learning and growth constitute the essential
foundation for success of any knowledge-worker organization.
Kaplan and Norton emphasize that 'learning' is more than 'training'; it also
includes things like mentors and tutors within the organization, as well as that
ease of communication among workers that allows them to readily get help on a
problem when it is needed. It also includes technological tools; what the Baldrige
criteria call "high performance work systems."
The Business Process Perspective
This perspective refers to internal business processes. Metrics based on this
perspective allow the managers to know how well their business is running, and
whether its products and services conform to customer requirements (the
mission). These metrics have to be carefully designed by those who know these
processes most intimately; with our unique missions these are not something
that can be developed by outside consultants.
The Customer Perspective
Recent management philosophy has shown an increasing realization of the
importance of customer focus and customer satisfaction in any business. These
are leading indicators: if customers are not satisfied, they will eventually find
other suppliers that will meet their needs. Poor performance from this
perspective is thus a leading indicator of future decline, even though the current
financial picture may look good.
In developing metrics for satisfaction, customers should be analyzed in terms of
kinds of customers and the kinds of processes for which we are providing a
product or service to those customer groups.
The Financial Perspective
Kaplan and Norton do not disregard the traditional need for financial data. Timely
and accurate funding data will always be a priority, and managers will do
whatever necessary to provide it. In fact, often there is more than enough
handling and processing of financial data. With the implementation of a
corporate database, it is hoped that more of the processing can be centralized
and automated. But the point is that the current emphasis on financials leads to
the "unbalanced" situation with regard to other perspectives. There is perhaps a
need to include additional financial-related data, such as risk assessment and
cost-benefit data, in this category.
Strategy Mapping
Strategy maps are communication tools used to tell a story of how value is
created for the organization. They show a logical, step-by-step connection
between strategic objectives (shown as ovals on the map) in the form of a cause-
and-effect chain. Generally speaking, improving performance in the objectives
found in the Learning & Growth perspective (the bottom row) enables the
organization to improve its Internal Process perspective Objectives (the next row
up), which in turn enables the organization to create desirable results in the
Customer and Financial perspectives (the top two rows).
Performance Appraisal Preparation
Appraisal systems should be job-related, have standards, be practical, and use
dependable measures. Considering that progression along pay scales might be
effected by appraisal outcomes, any such system must be perceived to be (and
actually be) fair and objective.
Some characteristics to look for in an appraisal process are:
Objectivity / measurability
Work relatedness of measures
Measures are within the appraisee's control
Measures are attainable
Contains an appeal mechanism
Management commitment to the entire process -- training provided where
necessary
Be simple and not take appraisers nor appraisees unduly away from their
core tasks
Be sophisticated enough to ensure appraisees' perceptions of fairness
Measuring clear competencies only
Provides a feedback mechanism with a link to training and development
Problems in Performance Appraisal
The problem with subjective measure is the rating which is not verifiable by
others and has the opportunity for bias. The rate biases include: (a) halo effect
(b) the error of central tendency, (c) the leniency and strictness biases (d)
personal prejudice, and (e) the recent performance effect
(a) Halo Effect: It is the tendency of the raters to depend excessively on the
rating of one trait or behavioral consideration in rating all others traits or
behavioral considerations. One way of minimizing the halo effect is
appraising all the employees by one trait before going to rate on the basis of
another trait.
(b) The error of Central Tendency: Some raters follow play safe policy in rating
by rating all the employees around the middle point of the rating scale and
they avoid rating the people at both the extremes of the scale. They follow
play safe policy because of answerability to management or lack of
knowledge about the job and person he is rating or least interest in his job.
(c) The Leniency and Strictness: The leniency bias crops when some raters have
a tendency to be liberal in their rating by assigning higher rates consistently.
Such ratings do not serve any purpose. Equally damaging one is assigning
consistently low rates.
(d) Personal Prejudice: If the rater dislikes any employee or any group, he may
rate them at the lower end, which may distort the rating purpose and affect
the career of these employees.
(e) The Recent performance Effect: The raters generally remember the recent
actions, of the employee at the time of rating and rate on the basis of these
recent actions favorable or unfavorable than on the whole activities.
Other factors that are considered as problems are:
Failure of the superiors in conducting performance appraisal and post
performance appraisal interview.
Most part of the appraisal is based on subjectivity.
Less reliability and validity of the performance appraisal techniques.
Negative ratings affect interpersonal relations and industrial relations system.
Influence of external environmental factors and uncontrollable internal
factors.
Feedback and post appraisal interview may have a setback on production.
Management emphasizes on punishment rather than development of an
employee in performance appraisal.
Some ratings particularly about the potential appraisal are purely based on
guess work.
The other problems of performance appraisal reported by various studies are:
Relationship between appraisal rates and performances after promotions was
not significant.
Some superiors completed appraisal reports within a few minutes.
Absence of inter-rater reliability.
The situation was unpleasant in feedback interview.
Superiors lack that tact of offering the suggestions constructively to
subordinates.
Supervisors were often confused due to too many objectives of performance
appraisal.
Performance Appraisal – A Case Study
Carter Cleaning Company
After spending several weeks on the job, Jennifer was surprised to discover that
her father had not formally evaluated any employee’s performance for all the
years that he had owned the business. Jack’s position was that he had “hundred
higher-priority things to attend to,” such as boosting sales and lowering costs,
and, in any case, many employees didn’t stick around long enough to be
appraisable any way. Furthermore, contended jack, manual workers such as
those doing the pressing and the cleaning did periodically get positive feedback
in terms of praise from Jack for a job well done, or criticism, also from Jack, if
things did not look right during one of his swings through the stores. Similarly,
Jack was never shy about telling his managers about store problems so that they,
too, got some feed-back on where they stood.
This informal feedback notwithstanding, Jennifer believes that a more formal
appraisal approach is required. She believes that there are criteria such as
quality, quantity, attendance, and punctuality that should be evaluated
periodically even if a worker is paid on piece rate. Furthermore, she feels quite
strongly that the managers need to have a list of quality standards for matters
such as store cleanliness, efficiency, safety and adherence to budget on which
they know they are to be formally evaluated.
Questions
1. Is Jennifer right about the need to evaluate the workers formally? The
managers? Why or why not?
2. Develop a performance appraisal method for the workers and managers in
each store.
Appraising the Secretaries At Sweetwater U
Rob Winchester, newly appointed vice president for administrative affairs at
sweet water State University, faced a tough problem shortly after his university
career began. Three weeks after he came on board in September, Sweetwater’s
president, Rob’s boss, told Rob that one of his first tasks was to improve the
appraisal systems used to evaluate secretarial and clerical performance at
Sweetwater U. Apparently, the main difficulty was that the performance
appraisal was traditionally tied directly to salary increases given at the end of
the year. So, most administrators were less than accurate when they used the
graphic rating forms that wee the basis of the clerical staff evaluation. In fact,
what usually happened was that each administrator simply rated his or her clerk
or secretary as “excellent”. This cleared the way for all support staff to receive a
maximum pay increase every year.
But the current university budget simply did not include enough money to fund
another “maximum” annual increase for every staffer. Furthermore,
Sweetwater’s president felt that the custom of providing invalid feedback to each
secretary on his or her year’s performance was not productive, so he had asked
the new vice president to revise the system. In October, Rob sent a memo to all
administrators telling them that in the future no more than half the secretaries
reporting to any particular administrator could be appraised as “excellent”. This
move, in effect, forced each supervisor to begin ranking his or her secretaries for
quality of performance. The Vice President’s memo met widespread resistance
immediately – from administrators, who were afraid that many met widespread
resistance immediately – from administrators, who were afraid that many of their
secretaries would begin leaving for more lucrative jobs in private industry; and
from secretaries, who felt that the new system was unfair and reduced each
secretary’s chance of receiving a maximum salary increase. A handful of
secretaries had begun quietly picketing outside the president’s home on the
university campus. The picketing, caustic remarks by disgruntled administrators
and rumors of an impending slowdown by the secretaries (there were about 250
on campus) made Rob Winchester wonder whether he had made the right
decision by setting up forced ranking. He knew, however, that there were a few
performance appraisal experts in the school of business, so he decided to set up
an appointment with them to discuss the matter.
He met with them the next morning. He explained the situation as he had found
it: The present appraisal system had been set up when the university first
opened 10 years earlier, and the appraisal form had been developed primarily by
a committee of secretaries. Under that system, Sweetwater’s administrators
filled out forms of appraisal. This once a year appraisal (in March) had run into
problems almost immediately, since it was apparent from the start that
administrators varied widely in their interpretations of job standards, as well as
in ho conscientiously they filled out the forms and supervised their secretaries.
Moreover, at the end of the first year it became obvious to everyone that each
secretary’s salary increase was tied directly to the March appraisal. For example,
those rated “excellent” received the maximum increases, those rated “good”
received smaller increases, and those given rather rating received only the
standard across the – board past – of –living increase. Since university in general
– and Sweetwater in particular – have paid secretaries somewhat lower salaries
than those prevailing in private industry, some secretaries left in a huff that first
year. From that time on, more administrators simply waited all secretaries
excellent in order to reduce staff turnover, thus ensuring each a maximum
increase. In the process, they also avoided the hard feeling aroused by the
significant performances differences otherwise highlighted by the administrators.
To Sweetwater experts agreed to consider the problem and in two weeks they
came back to the Vice president with the following recommendations. First, the
form used to rate the secretaries was grossly insufficient. It was unclear what
“Excellent” or “Quality of work” meant, for example. They recommended instead
a form of sample graphic rating method. In addition, they recommend that the
vice president rescind his earlier memo and no longer attempt to force university
administrators to arbitrarily rate at least half the secretaries as something less
than excellent. The two consultants pointed out that this was, in fact, an unfair
procedure since it was quite possible that any particular administrator might
have staffers who were all or virtually all excellent - or conceivable, although less
likely, all below standard, The experts said that the way to get all the
administrators to take the appraisal process more seriously was to stop trying it
to salary increases. In other words, they recommended that every administrator
fill out a form of sample graphic rating method for each secretary at least once a
year and then use this form as the basis of a counseling session. Salary increases
would have to be made on some basis other than the performance appraisal, so
that administrators would no longer hesitate to fill out the rating forms honestly.
Rob thanked the two experts and went back to his office to ponder their
recommendations. Some of the recommendations such as substituting the new
rating form for the old) seemed to make sense. Nevertheless, he still had serious
doubts as to the efficacy of any graphic rating form, particularly if he were to
decide in favour of his original forced ranking salary increases – made sense but
raised at least one very practical problem: If salary increases were not to be
based on performance appraisals, on what were they to be based? He began
wondering whether the expert’s recommendations weren’t simply based on ivory
tower theorizing.
Questions
Do you think that the expert’s recommendations will be sufficient to get most
of the administrators to fill out the rating form properly? Why? Why not? What
additional actions (if any) do you think will be necessary?
Do you think that Vice president Winchester would be better off dropping
graphic rating forms, substituting instead one of the other techniques we
discussed in this chapter, such as a ranking method? Why?
What performance appraisal system would you develop for the secretaries if
you were Rob Winchester? Defend your answer.
Key Terms
Performance Appraisal: This means evaluating an employee’s current and/or
past performance relative to his or her performance standards.
Performance Management: This is a process that consolidates goal setting,
performance appraisal and development into a single common system, the
aim of which is to ensure that the employee’s performance is supporting the
company’s strategic aims.
Graphic Rating Scale Method: This is the simplest and most popular method
for appraising performance.
Paired Comparison Method: This method helps in making the ranking method
more precise.
Forced Distribution Method: This is similar to grading on a curve. With this
method you place pre-determined percentages of rates into several
performance categories.
MBO: Management set specific measurable goals with each employee and
then periodically discuss the latter’s progress toward these goals.
Balance Score Card: The balanced scorecard is a strategic planning and
management system that is used extensively in business and industry,
government, and nonprofit organizations worldwide to align business
activities to the vision and strategy of the organization, improve internal and
external communications, and monitor organization performance against
strategic goals.
Halo Effect: It is the influence of a rater’s general impression on ratings of
specific qualities.
Appraisal Interview: Here, supervisor and sub-ordinates review the appraisal
and make plans to remedy deficiencies and reinforce strengths.
Rating Methods: The rating scale method offers a high degree of structure for
appraisals. Each employee trait or characteristic is rated on a bipolar scale
that usually has several points ranging from "poor" to "excellent" (or some
similar arrangement).
Essay Methods: In the essay method approach, the appraiser prepares a
written statement about the employee being appraised. The statement
usually concentrates on describing specific strengths and weaknesses in job
performance.
360 degree Feedback: Here ratings are collected “all around” an employee,
from supervisors, subordinates, peers and internal or external customers.
This method is used for development rather than for pay increases.
Further Reading
o Strebler, M. (2004) Tackling Poor Performance. IES Report 406.
o For a detailed discussion of the role of competencies in performance
management and a large number of examples, see Chapter 5 of Williams, R.
(1998) Performance Management: Perspectives on Employee Performance.
Thomson Business Press.
o A more detailed discussion on the major issues around performance
management is set out in Chapter 3 of Armstrong, M. and Baron, A. (2005)
o Managing Performance. CIPD. A practical guide to carrying out the appraisal
is given in Gillen, T. (1998)
o The Appraisal Discussion. IPD; Moon, P. (1997) Appraising Your Staff. Kogan
Page.
o A variety of approaches to performance management systems is given in
Hartle, F.(1997) Transforming the Performance Management Process. Kogan
Page.
o For a summary and discussion of American PM systems, see Lawler, E. and
McDermott, M. (2003) ‘Current Performance Management Practices’,
WorldatWork Journal, Spring, 49–60.
Websites
http://www.pmn.net/index.html
The website of the Performance Management network.
http://www.pmassoc.com/links.html
A list of performance management links compiled by Performance
Management Associates Inc.
