Performance Appraisal: Functions and Implementation
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This dissertation project has been undertaken for the fulfilment of the business degree MBA, General Management from the University of East London. The findings of this dissertation will contribute to concerned company and the author to complete the MBA degree. At the beginning, a leading mobile tele-communication organisation in Bangladesh named Banglalink was chosen as the research organisation. In the middle of the study, the management refused to cooperate with providing information. As a result the author had to find and choose a suitable company to collect research information and data to finish the study. Secure Facilities Management Company Ltd. (SFM) was the new company chosen to finish the research.
The introduction chapter gives an overall idea about the study. In this part, the background, objectives and research questions and the structure of this dissertation will be discussed.
1.2 Background of the Study
The study discusses about the functions and the implementation of performance appraisal in the new era.
The concept of ‘Welfare Personnel' was developed in the end of the British golden colonial history by the humane concerns of some business families like Cadbury and Rowntree. Then within the next century, the concept had changed and became Personnel Management and later on Human Recourse Management. Now the world has just entered into a new millennium and the concept of human resource management has become a strategic partner for the business organisations. (McKenna & Beech, 2008:2 - 3)
Organisations require many things in order to be effective, a method for producing a product or service, financial resources, a way of marketing and human resources. While all of these are important to organisational effectiveness, the only factor that represents a potential competitive advantage is human resources. This is why the concept of human resource management is s important to every organisation.. The basics of managing people are getting people, preparing them, stimulating them motivate them. To manage human resources in any organisation the following questions are to be considered: (Dessler, 2005:4-5)
- Are the persons hired for the job wrong?
- Is the organisation able to milk out the best from the employees?
- What is the most frustrated area of human resource management?
- Is the rewarding system working properly?
The above refers to how people worked in the past, what changes are required in future to make the production system effective, what are the weaknesses of the system and how to improve. These actually refer to the evaluation of employees of job which is called Performance Appraisal.
Performance appraisal system is an important function of personnel department in any organisation. The system has a close relationship between organisation goals and individual performance. The performance appraisal system represents a year round exercise of managing individual performance in an integrated manner with a view to enabling employees to perform at their performance standards. (Dessler, 2005:310)
With the view of increasing organisational effectiveness through the effective management of human resources, the organisations use different methods of appraising performance of their employees.
For this research a small security service company named ‘Secure Facilities Management Company Ltd. (SFM)' - a private single owner security service company has been chosen. SFM became a successful organisation in the last few years. Their high standard efficient employees are one of the key factors for their success. For that, SFM has been chosen to practice the theoretical knowledge and to get familiar with the existing system of Performance Appraisal of a small private company.
1.2 Research Question
In general, most of the organisations have a kind of formal or informal performance appraisal system. Through the performance appraisal system, the employees get to know their performance standards, which area of their performance needs to be developed etc. The supervisor also provides them with feedback, development and incentives to help them eliminating their performance deficiencies. If performance appraisal system is effectively used, it can improve attraction & motivation of the employees on the job. If inappropriately used the appraisal process can have disastrous effects (Dessler, 2005:310). Hence the discussion leads to the research questions:
- What is the level of understanding and compliance of the employees on performance appraisal?
- What are the reactions of the employees regarding the performance appraisal?
- What are the constraints of the performance appraisal in practical life?
1.3 Aims and Objectives of the Study
The research has been undertaken for the fulfilment of the requirement for completion of MBA, General Management for the year 2008/2009. This is mainly aimed to develop the job expertise in the performance appraisal activities under the guidance of expert faculty member of University of East London.
It is really a difficult task to assess consistency, relevance and reliability of the tools and techniques of the system, however and effort is made to have some ideas about the matter.
- The study mainly aims at knowing about the awareness, the level of understanding and compliance of the employees of SFM regarding performance appraisal system. The study attempts to analyse the present performance appraisal system and the role of both appraisers and appraises in connection with the implantation of the system in real life situation.
- To be acquainted with and acquire practical knowledge regarding performance appraisal system of an organisation.
- To relate the theoretical knowledge of performance appraisal with practical implication.
- To determine the acceptability and reliability of the performance appraisal system in a certain organisation.
- To assess the constraints/factors which influence the performance appraisal system.
1.4 Scope of the Study
- Target group includes officers of all level.
- The working forces those who are working in the head office and also in the other sites.
- Value Perception of both appraisers and appraises of the organisation under study.
1.5 Limitations of the Study
While preparing this report, the following limitations had been faced:
- At the beginning a renowned mobile Tele-communication company in Bangladesh, Banglalink, was chosen for the study but they refused to deliver any information and cooperation just one and half month before the submission date. As a result, the author had to choose a small security company, Secure Facilities Management Company Ltd. (SFM) to carry on and finish the study within such a short time.
- SFM has a master plan on performance appraisal, but at present implementing a part of it.
- As a part of the business strategy, SFM did not provide all information on their performance appraisal procedure.
- The major limitation of the study was the lack of time for such an intensive work which compelled the author to narrow the scope of the study.
- All officials were very busy with their own assignments. As a result, they had a little opportunity for giving much time in this regard.
- Limitation was faced on the volume of the report due to which many relevant and important things will remain unexplored in detail.
1.6 Organisation Profile
Introduction to Secure Facilities Management Company Ltd. (SFM):
Since its formation SFM has built its reputation by providing security personnel of the highest calibre. This has been achieved by combining sound management with sensible terms and conditions for all staff. SFM strives to ensure that their clients and staff benefit from a focused and well-defined professional approach, the ratio of management to client is kept to no more than one manager per 10 clients.
SFM strives to provide the highest standards of efficiency to all its clients, both large and small. SFM understands the importance of first impressions and that their personnel are often the first point of contact for their clients' visitors and residents.
1.7 Structure of the Research
This structure of this study has the following five chapters:
- Chapter 1 is the introduction chapter where the background, research question and rationale, objective, company profile and structure of the research are stated.
- Chapter 2 contains a brief literature review on performance management, history and meaning of the performance appraisal, purposes, functions, types of performance appraisal, MBO, 360 degree appraisal, problems and solutions of performance appraisal and essentials of a good performance appraisal. This chapter will provide a basic understanding about performance appraisal which is related to the research questions.
- Chapter 3 contains Research Methodology which includes research framework, the design of the research, population and sampling, and questionnaire.
- Chapter 4 provides Data analysis, statistical analysis and findings of the research.
- Chapter 5 describes the critical review of the findings.
- Chapter 6 discusses on recommendation and conclusion of the study and reflection summery.
Organisations require consistent levels of high performance from their employees in order to survive in a highly competitive environment. In a view of this, performance appraisal can be a systematic system through which evaluation of an employee is done & analyze effectively to determine required performance. It plays a key role in rewarding systems. It is the process of evaluating the performance of employees, sharing information with them and searching for ways to improve their performance. Appraisal is necessary in order to:
- Allocate resources in a dynamic environment;
- Motivate and reward employees;
- Give employees feedback about their work;
- Maintain fair relationships within groups;
- Coach and develop employees; and
- Comply with regulations.
It is also a formal opportunity to do what should be done much more frequently in organisations to express appreciation for employee contributions.
Companies must administer their employee performance reviews, at all levels, fairly and without discrimination. Since all appraisals can be used against a company in an appraisal employee lawsuit, it is critical that these reviews should be completely accurate.
This practice of performance appraisal has been given a variety of titles. The academicians call it performance appraisal, performance review etc. In Government services in Bangladesh, it is known as ACR (Annual Confidential Report). In private organisations, it is often described as merit rating, personnel rating, progress rating, annual performance, etc.
Performance appraisal plays a major role in Human Resource Management. The subject is a part of Performance Management. It is necessary to discuss the performance management briefly before proceeding to performance appraisal.
The primary concern of performance management is the improvement of individual and collective performance. It is a continuous cycle of self-renewing. The aim of performance management is make direct link together individual goals, departmental purpose and organisational objectives. It integrates the major elements of HRM like appraisal and employee development, performance-related pay and reward management, individualism and employee relations. In other way it can be called as day-to-day management activity as it deals with organising works to get the best result.
“... a strategic integrated approach to delivering sustained success to organisations by improving the performance of the people who work in them and by developing the capabilities of tams and individual contributors”. Armstrong (2001:467)
According to Armstrong (2001:475) the main activities of performance management are Role Definition, The Performance Agreement or Contract, The Performance Development Plan, Managing Performance Throughout the Year and Performance Review. These activities are a continuous cycle.
According to Marchington & Wilkinson (2004:187), the process of performance management system involves Induction and Socialisation, Reviewing and Appraising Performance, Reinforcing Performance Standards and Counselling and Support.
Beardwell and Holden (2001:538) stated “Performance Management is not simply the appraisal of individual performance: it is an integrated and continuous process that develops, communicates and enables the future direction, core competencies and values of organisation, and helps to create an ‘horizon of understanding'”.
Performance Management is an effective tool by which the employees' work behaviours are aligned with the organisation's goals. There is no one way to manage performance. Whatever system is adopted needs to be similar with the culture and the principles of that organisation. However, most system of performance management has several parts:
- Defining Performance: Carefully defines employee performance so that it supports the organisation's strategic goals. Setting of clear goals for the individual employee is a critical component of performance management.
- Measuring Performance: Measuring performance does not need to be narrowly conceived, but can bring together multiple types of performance measured in various ways. The key is to measure often and use the information for mid-course corrections.
- Feedback and Coaching: In order to improve performance, the employee needs information (feedback) about their performance, along with the guidance in reaching the next level of results. Without frequent feedback, employees are unlikely to know that behaviour is out of synchronization with relevant goals, or what to do about it.
The major aim of performance management is to find ways of continual improvement of levels of both organisational and individual performance and performance appraisal is the perfect weapon for that improvement.
The Rise of Performance Appraisal
The performance appraisal has a long history which started China in the third century, the reign of Wei Dynasty. It was mainly used for the civil servants, army officers and managers until recently. Now it is very much wide spread all over the world and has become a popular management tool. In the UK most of the private sector organisations has introduced and are practicing performance appraisal during the last decade or two. Some people suggested that the reason behind for its growth is to use the individualised performance-pay system. Some other factors like market competition, managing change, organisation goal, milk out the best from the employees etc. are also important. Now the terminology ‘performance appraisal' is changing to ‘personal development review' and ‘performance review and development'. (Taylor, 2004:247-248)
Meaning of Performance Appraisal
Performance Appraisal (PA) is a methodical, on the job-review of an employee's abilities and accomplishments. Performance appraisal functions as a valuable management assessment tool and a superior employee motivation weapon. It enables us to strike a workable balance between organisation's need for qualified and trained personnel and employee's need for feedback and motivation. Performance is the contribution and appraisal is the procedure of measuring the contribution. Performance appraisal is an integral part of a system of managing individuals working in an organisation. Performance appraisal is an inevitable inspire of modern technology and all the systems and controls coming into widespread us, people remain the most important factor in all kinds of business, government agencies, charitable organisations and all other organisation.
Performance appraisal is a process of bringing together the approaches of performance management like counselling, training, improving performance etc. that helps the managers to exercise them to achieve the goal of the organisation. It is a procedure of rewarding and disciplining the employees to improve the over performance of the organisation.
It is the process of evaluating performance or contribution of an employee to the organisation during a specific period of time by his or her supervisor with relation to his or her job requirements.
An effective, reliable and valid performance appraisal system recognizes the legitimate desire of employees for progress in their professions. Integration of organisational demands and individual needs through career management is the part of performance appraisal. Therefore, the performance appraisal program is inevitable for measuring the contribution of both “employees and managerial personnel”.
Performance appraisal program is the basis of determining who is profitable to higher position and who is to be rewarded for better contribution to the organisation he or she belongs to. Performance feedback lets employees know how well they have performed in comparison with the standards of the organisation. Performance appraisal program is the administrative and employee development tool, which is the domain of the management not shared by the employees.
Opponents of the performance appraisal attack it on a variety of grounds but without appraising performance of the employee's career development, organisational development, recently a number of organisations have revamped their appraisal system in a bid to reduce possible negative outcomes. Appraisal, no doubt is a complex issue and it is clear that to be effective, a system must be designed and implemented with great care.
“Performance appraisal means evaluating an employee's current and/or past performance relative to his or her performance standards”. (Dessler, 2005:310)
Michael Armstrong (2001:486) says “Performance review discussions enable a perspective to be obtained on past performance as a basis for making plans for the future.” He explains that the five elements of performance management (measurement, feedback, positive reinforcement, exchange of views and agreement on action plans) can be achieved through performance review.
In the conclusion it can be said that, performance appraisal is the process by which an employee's contribution to the organisation during a specific period of time is assessed. Performance Feedback then lets the employee know how well they have performed in comparison with the standards of the organisation.
Who Should Do The Appraisal?
- By traditionally a manager's authority typically has included appraising subordinates performance. The logic behind this tradition seems to be that since managers are held responsible for their employees” performance, it only makes sense that these managers do the evaluating of their performance.
- The employee's immediate boss conducts about 95 percent of all performance appraisals at the lower and middle levels of the organisation.
Purposes of Performance Appraisal: HRD & Employees' View
Performance appraisal or evaluation serves a number of purposes for Human Resources Department and for the development of the employees.
- Management uses performance appraisal for general human resource decisions. Evaluations provide input into such important decisions, transfers, and terminations.
- Performance appraisals identify training and development needs. They pinpoint employee skills and competencies that are currently inadequate but for which programs can be developed to remedy.
- Performance appraisal can be used as a criterion against which selection and development programs are validated. Newly Hired employees who perform poorly can be identified through performance appraisal. Similarly, the effectiveness of training & development programs can be determined by assessing how well those employees who have participated do on their performance appraisal.
- Performance appraisals also fulfil the purpose of providing feedback to employees on how the organisation views their performance.
- Furthermore performance appraisals are used as the basis for reward allocations. Decisions as to who gets merit pay increases and other rewards are frequently determined by performance appraisal.
Purposes of Performance Appraisal: Organisation's View
- Identify the successful & less successful aspects of the employee needs & organisational goals.
- Assist decision makers in allocating resources & in planning for future.
- Assist managers in just frying expenditure & accounting for those expenditures.
- Monitor employee activities & to detect any change in activities or the quality of services.
- Serve as a benchmark, i.e. identifying best practice performance, using that performance as a goal, investigating the factors that led up to that performance, & then trying to replicate that level of performance.
Functions / Uses of Performance Appraisal
Multiple uses of Performance Appraisal are:
- Development uses.
- Administrative uses/decision makings.
- Organizational maintenance/objectives.
Types of Performance Appraisal
There are various types of performance appraisal which includes Alternation Ranking Method, Graphic Rating Scale, Management By Objectives (MBO) etc. (Dessler, 2005:315)
These are explained below.
Alternation Ranking Method
It is the oldest & simplest of formal systematic rating is to compare one person with all others for the purpose of placing them in a simple rank order of worth. In doing this, the appraiser considers person and performance as an entity; no attempt is made to systematically fractionize what being appraised into component elements.
Graphic Rating Scale
This method is widely used in merit rating & is similar to the techniques in point-evaluation plan. This involves the supervisor to rate employee performance in terms of prescribed traits i.e. quality of work, quantity of work, initiative, dependability, knowledge of work etc. Each trait is defined & various degrees of each are prescribed in some way. From traits & degrees over-all rating can be obtained.
Forced Distribution Choice
Another attempt to counteract the tendency of raters to give average ratings or even sometimes to “twist” a report to bring about a desired result is the forced-choice technique. Here the rater is faced with groups of three of four statements, & he must tick the one, which applies most nearly to the employee under assessment. These statements are so devised that it is impossible for the rater to know which will give the most favourable rating.
It is a further development to the guideline approach which attempts to provide a frame work of reference by defining a number of levels at which the characteristics is displayed & asking Managers to select the definition which most closely describes the individual they are assessing. For example, in rating effective output the Manager in a typical grading scheme is asked to choose between:
- Outstanding - Outstanding output of high quality work
- Satisfactory - Satisfactory level of output & effort
- Fair - Completes less than the average amount of effective work
- Poor - Low output & poor worker.
Critical Incident Method
The critical incident method requires every Supervisor to adopt a practice of recording in a note-book of those significant incidents in each employee's behaviour that indicate effective or poor behaviour. These are recorded in a specifically-designed notebook that contains characteristics under which the various behaviours can be recorded.
Management by Objectives (MBO)
Management by Objectives (MBO) is a critical process that often consists of four steps as a way to attain desired performance:
- Objective setting-joint determination by manager & employee of appropriate levels of future performance for the employee, within the context of over-all unit goals & resources. These objectives are often set for the next calendar year.
- Action planning-participative or even independent planning by the employee as to how to reach those objectives. Providing some autonomy to employees is invaluable; they are more likely to use their ingenuity, as well as feel more committed to the plan's success.
- Periodic reviews-joint assessment of progress toward objectives by manager & employee performed informally & sometimes spontaneously.
- Annual evaluation-more formal assessment of success in achieving the employee's annual objectives coupled with a renewal of the planning cycle. Some MBO systems also use performance appraisal to tie rewards for employees to the level of results attained.
MBO had been taken likened to a modem form of scientific management. It is also subject to the same possible criticisms of too great an emphasis on individual job definition together with a management authority structure, & the assumption of no conflict between individual & organisation goals. MBO should not be applied simply as a pressure device by which management apply increasingly demanding targets which Staffs are expected to achieve. MBO draws attention to the objectives for individual members of the organisation as a whole. MBO is a potentially & attractive system. It provides an opportunity for staff of accept greater responsibility & to make a higher level or personal contribution. There is much to recommend it to both the organisation & individual managers.
360 - Degree Appraisal or Evaluation
The latest approach to performance appraisal is the use of 360 - Degree evaluations. It provides for performance feedback from the full circle of daily contacts that an employee might have, ranging from mailroom personnel to customers to bosses to peers. The number of appraisals can be as few as three or four evaluations or as many as 25; with most organisations collecting five to ten per employees.
The appeal of 360-degree appraisals is to fit well into organisations that have introduced teams, employee involvement, and TQM programs. By relaying on feedback from co-workers, customers and subordinates, these organisations are hoping to give every one more accurate reading on employee performance.
Appraising Performance: Problems and Solutions
Few of the things a manager does which are more risky than appraising subordinates' performance. Employees in general tend to be overly optimistic about what their ratings will be, and also know that their raises, career progress, and peace of mind may well hinge of how they are rated. This alone should make it somewhat difficult to rate performance; even more problematic. There are more numerous structural problems that can cause serious doubt on just how fare the whole process is. Some of the main appraisal problems and their solution are explained below.
Dealing with the Five Main Rating Scale Appraisal Problems
Five main problems can undermine appraisal tools such as graphic rating scales: unclear standards, halo effect, central tendency, leniency or strictness, and bias.
- Unclear Standards: The problem of unclear standards is illustrated. Although the graphic rating scale seems objective, it would probably result in unfair appraisals because the traits and degrees of merit are open to interpretation. For example, different supervisors would probably define ‘good' performance, ‘fair' performance, and so on differently. The same is true of traits such as ‘quality of work' or ‘creativity'.
- Halo Effect: The halo effect means that the rating of subordinate on one trait (such as ‘gets along with others') biases the way that person is rated on other traits (such as ‘quality of work'). This problem often occurs with employees who are especially friendly (or unfriendly) towards the supervisor. For example, an unfriendly employee will often be rated unsatisfactory for all traits rather than just for the trait ‘gets along well with others'. Being aware of this problem is a major step toward avoiding it. Supervisory training can also solve the problem.
- Central Tendency: Many supervisors have a central tendency when filling in rating scales. For example, if the rating scale ranges from 1 to 7, they tend to avoid the highs (6 to 7) and lows (1to 2) and rate most of their people between 3 and 5. In a graphic rating scale, this central tendency could mean that all employees are simply rated ‘average'. Such a restriction can distort the evaluations, making them less useful for promotion, salary, or counselling purposes. Ranking the employees instead of using a graphic rating scale can avoid this central tendency problem because all employees must be ranked and thus cannot all be rated average.
- Leniency or Strictness: Some supervisors tend to rate all their subordinates consistently high (or low), just all some instructors are notoriously high graders and others are not. This strictness/leniency problem is especially serious with graphic rating scales since supervisors aren't necessarily required to avoid giving all their employees high (or low) ratings. On the other hand, when the raters rank subordinates, they are forced to distinguish between high and low performances. Thus, strictness/leniency is not a problem with the ranking or forced distribution approach.
In fact, if a graphic rating scale must be used, it may be a good idea to assume a distribution of performances-that, say, only about 10% of the people should be rated ‘excellent', 20% ‘good', and so forth. In other words, try to get a spread (unless, of course, the raters are sure all their people really do fall into just one or two categories).
- Bias: Individual differences among raters in terms of characteristics like age, race, and sex can affect their ratings, often quite apart from each rate's actual performance. In one study, for instance, researchers found a systematic tendency to evaluate older rates (over 60 years of age) lower on ‘performance capacity' and ‘potential for development' then younger employees. The rate's race and sex can also affect the person's rating. However, bias is not necessarily consistently against minorities or women, as it seems to be in the case of older workers. In one study, high performing females were often rated significantly higher than were high performing males.
An interesting picture of how age can distort evaluations emerges from a study of registered nurses. When the nurses were 30-39 years old, they and their supervisors each rated the nurses' performance virtually the same. In the 21-29 category, supervisors actually rated nurses higher than they rated themselves. However, for the 40-61 nurse age categories, the supervisors rated nurses' performance lower than the nurses rated their own performance. The conclusion here may be that supervisors are tougher in appraising older subordinates. Specifically, they don't give them as much credit for their success, while attributing any low performance to their lack of ability. A related problem is described in the Diversity Counts feature.
An employee's previous performance can also affect the evaluation of his or her current performance. The actual error can take several forms. Sometimes the rater may systematically overestimate improvement by a poor worker or decline by good workers. In some situations-especially when the change in Behaviour is more gradual-the rater may simply the insensitive to improvement or decline. In any case, it is important when rating performance to do so objectively.
How to Avoid Appraisal Problems
There are at least three ways to minimize the impact of appraisal problems such as bias and central tendency:
First, be sure to be familiar with the problems as just discussed. Understanding the problem can help the rater avoid it.
Second, choose the right appraisal too. Each tool, such as the graphic rating scale or critical incident method, has its own advantages and disadvantages. For example, the ranking method avoids central tendency but can cause ill feelings when employees' performances are in fact all ‘high'.
Third, training supervisors to eliminate rating errors such as halo, leniency and central tendency can help them avoid these problems. In a topical training program, raters are shown a video tape of jobs being performed and are asked to rate the worker. Ratings made by each participant are then placed on a flip chart and the various errors (such as leniency and halo) are explained. For example, if a trainee rated all criteria (such as quality, quantity, and so on) about the same, the trainer might explain that halo error had occurred. Typically, the trainer gives the correct rating and then illustrates the rating errors the participants made. According to one study, computer-assisted appraisal training improved managers' ability to conduct performance appraisal discussions with their subordinates.
Rater training is no panacea for reducing rating errors or improving appraisal accuracy. In practice, several factors including the extent to which pay is tied to performance ratings, union pressure, employee turnover, time constraints, and the need to justify ratings may be more important than training. This means that improving appraisal accuracy calls for not just training but also reducing outside factors such as union pressure and time constraints. (Dessler, 2005:328-331)
Essentials of a Good Performance Appraisal System (Pas)
An Appraisal system is good if it is acceptable to all and fairly assesses the employee's performance. With this view, some measures have been found out to shape the performance appraisal system.
- It must be job related:
The content of appraisal system should be related and the employee's must be rated on the basis of their jobs.
- Easily understandable and less time consuming:
It the system is too complex or too much time consuming there will be misunderstanding and confusion more over the situation of errors may likely be caused.
- It should fit the organization's structure and operations:
The system should be prepared in the manner that it fit the organizational structure and its operations. Otherwise it will be not acceptable to the organization.
There shall be a direct linkage between appraisal and rewards. The system should be prepared with built-in-incentive that is rewards should follow satisfactory performance.
- Similar criteria for similar job:
Rating procedure and forms should be constructed in a manner that can be applied to all jobs in the organization and similar job should be measured by similar criteria regardless of all individuals' job.
The system should be valid. The validity of rating is the degree to which they are truly indicative or intrinsic merit of the employees. A good measure of performance should measure important job characteristics and be free from extraneous or contaminating influences it should also encompass the whole job.
The system and the content should be reliable. The reliability of ratings is the consistency with which the ratings are made, either by different raters or by one rather at different times. Interrupter reliability is the most relevant type of reliability for performance appraisal. It is high when two or more rather agree on the performance of an employee and low when they do not. Interrupter reliability is usually quite good when performance raters come from the same level of the organization.
- Free from Bias:
The system should be constructed in the manner that it will appraise the employees regardless of their race, sex, nationality, origin and so on. The raters should observe Reito's performance on the job.
- Freedom from rating error:
There are generally four types of rating errors such as (i) leniency error, (ii) severity error, (iii) central tendency errors and (iv) halo error.
- Leniency error:
Leniency is a very common type of rating bias. Sometimes rates give employees more positive performance rating than they deserve. When leniency error occurs most employees receive high performance rating.
- Severity error:
Severity error is the reverse of leniency error. Sometimes raters evaluate employees more unfavourable than their performance warrants. When severity error occurs the distribution of performance ratings goes dramatically towards the left that is negative of the true distribution of performance.
- Central tendency error:
Central tendency error result in a rating distribution is highly compressed around the middle point. In occurs when a supervisor rates all employees near the midpoint of a performance scale.
When a central tendency, leniency and severity error are frequent an appraisal system cannot accomplish its purpose of differentiating among good and poor workers. When one of these errors occurs, nearly each employee receives the same rating.
- Halo effect:
When halo error occurs an employee receives nearly identical performance rating on all performance areas and the correlation among the ratings is very high.
Leniency, severity and central tendency errors occur when several employees are appraised and halo occurs when a single individual is appraised on several aspects of performance.
3.1 Research Methodology:
Methodologies are the heart of any research; they show the image for what research is and how it should be carried out. Methods are tools or techniques of gathering of data, techniques of analysis, and techniques of writing. Since it is a tool, then a scrupulous method can often be used by many different methodologies (both qualitative and quantitative). Therefore, methodologies are at a more abstract (or general) level than are methods.
According to Saunders, Mark; Lewis, Philip & Thornhill, Adrian (2000), all research will possibly involve categorical or numerical data or data that can be use for analysis to help the researcher answer the research questions.They have defined quantitative as a type of empirical knowledge and qualitative is the converse of quantitative, which more precisely describes data in terms of quantity. (P - 326 & 380)
The methodologies have been followed to prepare the study are as given below:
- Studying the theories of performance appraisal from different Human Resources Management books.
- Studying and analysing the previous available data about the performance appraisal procedure.
- Intensive visit to the concerning organisation, in order to observe the routine performance appraisal procedure and to obtain an all round picture of performance appraisal procedure.
3.2 Research Framework and Design:
A general frame work is adopted to provide guidance about all facets of the study, from assessing the general philosophical ideas behind the inquiry to the detailed data collection and analysis procedures. Using an extant framework also allows researcher to lodge the organisation plans and ideas well explained in the literature and recognized by audiences that read and support proposals for research.
Here introducing three basic approaches to research. The proposal developer needs to consider three framework elements; John W. Creswell (2002).
Philosophical assumptions about what constitutes knowledge claims, General procedures of research are called strategies of inquiry, and detailed procedures of data collection, analysis and writing called methods.
Qualitative and quantitative and mixed methods approaches frame of each of these elements are different, and these differences are identified and discussed next.
3.2.1 The Research Design
For understanding the various research approaches and strategies, Saunders et al (2000) had described the research process “onion”. This is because conducting a research is like peeling the back layers of an onion—in order to come to the central issue of how to collect the necessary data needed to answer the research questions and objectives, important layers should be first peeled away. They said that researches are undertaken by considering whether one should, for instance, administer a questionnaire or conduct interviews, thoughts on this question should belong to the centre of the research ‘onion'. That is, in order to come to the central issue of how to collect the data needed to answer one's research questions, there are important layers of the onion that need to be peeled away: the first layer raises the question of the research philosophy to adopt, the second considers the subject of research approach that flows from the research philosophy, the third examines the research strategy most applicable, the fourth layer refers to the time horizon a researcher applies to his research, and the fifth layer is the data collection methods to be used. (P - 84 & 85)
The Different Research Strategies:
According to Saunders et al (2000:92), the different research strategies are:
- Case Study;
- Grounded Theory;
- Action Research;
- Cross-sectional and Longitudinal Studies;
- Exploratory, Descriptive and Explanatory Studies.
3.3 Types of Data
There are two types of data that can be achieved through the research process. These are primary and secondary data. Both primary and secondary data are used to reach a convincing result.
3.3.1 Primary Data Sources:
The primary data are important for both qualitative and quantitative research. The primary data are collected first time by the researcher which are original and used for that research for first time. The primary data sources are:
This study adopted Questionnaire and discussion methods to collect primary data from the employees of the company.
3.3.2 Secondary Data:
The secondary data can be obtained through the published researches and the reports which are already done by previous researchers. The secondary data are found in literature material or documents such as academic research papers, corporate annual reports, transcripts of chief executives speeches, advertisements, and statements and so on. They can be obtained by reading books, journals and surf on the internet.
For this study the author used books, journals available at the University of East London library and also some other relevant books privately owned. The internet is another helpful source of information.
Different periodic HR policies, different reports regarding performance appraisal developed in the company had been studied. Different HRM books, journals, articles etc. had been considered also.
3.3.4 Questionnaire Design:
Questionnaire is the most familiar method used in business surveys or researches. A questionnaire is set of questions used to collect information/data for a particular research. The major advantage of this method is that the respondent answers to the questions directly in the absence of the researcher. According to Harvey Maylor & Kate Blackmon (2005:185), the respondents interact with the researcher only through the structured and standardised list questions and answers in a questionnaire. The main methods of data collection through questionnaire are:
- By Post: the researcher sends the questionnaire by post to the respondent and the respondents complete and send it back to the researcher by same way.
- Deliver and Collect: the researcher hands out physically or leaves the questionnaire in a suitable place from where the respondents collect and complete and returns them to the researcher or to a suitable place.
- Email Surveys: in this way the researcher sends the questionnaire as an email or attachment to an email to the respondents to complete and return them same way.
- Web Surveys: here the researcher directs the respondents to a particular web site where they can fill out the computer assisted questionnaire.
To carry out the research work on Performance Appraisal, a detailed printed questionnaire has been used for each respondent which were delivered to and collected from the respondents. The aim and the objectives were considered prior to the designing of the questionnaire. The questionnaire was designed in intention to discover the results of the research which would assist to verify the validity of the data.
The author had used the close-ended questions for this research which consisted of alternatives for the respondents to choose the quick and the best answer. The questionnaire was written in English so that the multicultural respondents can easily find the right answer.
The questionnaire was designed with 34 questions classified in to two sections (see Appendix - 1). The questionnaire informs the respondent about the purpose of the research, assures their information will be kept confidential, the structure of the questionnaire and the instructions on how to do the questionnaire.
Sampling is the process of gathering data from a subset, or sample, from a population who represent the whole population (Saunders et al, 2000:150-153).
2.6.1 Types of Sampling:
The sampling can be divided into two types:
- Probability Sampling:
The most commonly used sampling technique for statistical test associated with survey based researches is the probability sampling. Probability sampling means to make sure that each of the unit of the entire population has the equal opportunity to be selected as a sample (Harvey Maylor & Kate Blackmon 2005:195). According to Saunders et al, (2000:153) there are four techniques of probability sampling:
- Simple Random Sampling: the researcher selects the samples randomly from the entire population like 1,5, 8, 20, 80, 91 etc.
- Systematic Sampling: here the researcher selects samples at regular intervals like, 2, 12, 22, 32 etc.
- Stratified Random Sampling: where the population is not uniform, the researcher tries to make sure that enough samples are selected of certain subsets of the sample frame.
- Cluster Sampling: here the researcher, prior to sampling, divides the population into discrete groups which are termed as cluster.
Non-probability sampling is not statistically chosen at random. This method gives the researcher alternative techniques on the basis of subjective judgement. Saunders et al, (2000:171) explained that there are five techniques of non-probability sampling:
- Quota Sampling: completely non-random sampling technique which is used usually for the interview surveys. It is one kind of stratified sampling where the cases within the chosen segment are selected non-randomly.
- Purposive: here the researcher can use self judgement to select samples that will best help to get the desired answers.
- Snowball: this technique is used when it is difficult to find the actual cases. Here the researcher finds one or two cases and theses cases lead to other cases, for example the people who are working but also on unemployment benefit.
- Self-selection: here the individual sample comes forward to take part in the research when the researcher publicise the need for the samples through proper media.
- Convenience: it is the method of choosing the samples which are very easy to obtain and easy to continue till the desired number is fulfilled.
The followings are considered during the sampling process of this research.
Defining the study population is the major part in sampling design. Due to time restriction and other limitations, the study will only use the head-office people and officers working in London.
All the Managers and Supervisors of SFM, who are involved in designing and implementing performance appraisal procedure, and Security Officers whose performances are evaluated are considered as sampling units.
It was very hard to allocate number of samples for each sample units for attaining relevant information of performance appraisal of a business organisation like SFM. The sample frame would be random selection in different age, gender etc. Although all of the sample units are equally important for this study, even though, samples had been selected from every sample units; the followings had been selected as sample frame:
- All the Managers and Supervisors.
- Security Officers from different sites.
Throughout the study, each and every sample had been picked by applying simple random sampling process.
The population size for the study was not large and also the study had a very short span of time to be completed. As a result, the sample size had been set to 15.
Having fixed up the sample size and sample units, 05 days had been spent to complete the task of information collection as the security officers were in different places of London. In spite of the time and resource constraints, total 015 personnel were met.
Variables that should be taken to review the appraisal system are as following:
- Clarity in standard.
- Central tendency of the supervisor when filling in rating scales.
- Halo effect of the appraisal system.
- Leniency or strictness of the superiors when rating their staff.
3.3.5 Data Analysis:
After collecting all the data from different sources, statistical tools have been used to find out the satisfaction level of the employees on their performance appraisal.
Data Analysis and Findings
Data Analysis and Findings
To carry out the study on Performance Appraisal the author had used a detailed printed questionnaire for each respondent. Primary data were collected from this questionnaire and the secondary data was collected from the previous records of the organisation.
The questionnaire entitled “Questionnaire for Information” which is enclosed in Appendix - 1 was specially designed to get the required to the point information for the study.
The questionnaire has two sections. The front page was designed for the respondent's professional and demographical identification. Section - 1 was designed for all the respondents as all of them are the employee of the company. It was applicable for both the appraiser and appraisee. Section - 2 was designed only for the appraisers. As such, the persons who evaluate the performance of their subordinates and at the same time evaluated by their superior had to have responded both section 1 & 2.
Fifteen persons were called for interview to fill up the questionnaire. Of them, five persons (supervisors or upper level personnel) were those who evaluated the performance of their subordinates and at the same time evaluated by their superior. Information related to the length of service, promotion, job satisfaction and system of appraisal were included in the questionnaire.
Front Page: Professional and Demographical Identification Analysis
To get the respondents' Professional and Demographical Identification few questions were placed before them from where the following information was got:
- Designation with Grade
- Respondent's Length of Service in This Company:
5.3 Section - 1
To have a realistic and wide range of information, a total of 15 employees (05 supervisors & above officials and 10 security officers from different sites of London) who are evaluated by their superiors shared their opinion through the questionnaire. The data received from SFM during the research on performance appraisal are given below:
- Do you think performance appraisal is an important & essential need for an organisation?
- Is there any performance appraisal system in your organisation?
- If no, how employee performance evaluated?
- Do you have the same performance appraisal system for all the staffs?
- Do you think the present system of performance appraisal in your organisation is appropriate for evaluating performances of all employees?
- Is the objective, importance and policy of performance appraisal system communicates to all?
- How often employees' performance should be evaluated?
- Does your supervisor discuss with you prior to evaluate?
- If no, do you feel that the supervisor should discuss with you before appraisal?
- Does the supervisor often friendly and helpful in performing your job?
- Do you have the freedom to seek help from your team leader when problems arise at your work?
- What purpose of the below serves your performance appraisal?
- Do you think performance appraisal in your organisation truly determines your performance?
- If, no please specify reason(s).
- Does the performance appraisal motivate & influence your performance?
- Are you always careful to improve the rating of your performance appraisal?
- Do you think that the present performance appraisal system also encourage others to put their maximum effort in the wok?
- Do you have a system of pre-evaluation interview in your organisation by which the result of performance appraisal review is explained to the related employee?
- Which appraisal system you prefer?
- Are you satisfied about the present performance appraisal system in your organisation?
- Does the performance appraisal have any impact to improve the productivity? 22. What purpose does serve performance appraisal of subordinates in your organisation?
- How long have you been doing performance appraisal of your subordinates?
- Is performance appraisal done in a regular basis?
- Does the higher authority countersign supervisor's evaluation?
- Have you received any training to evaluate performance?
- If not, do you think training is needed?
- Do you think that performance appraisal format used in your organisation truly determines performance of employees?
- If no, why?
- Do you discuss with your subordinate before evaluating their performance?
- Do you think that the performance appraisal system of your organisation has opportunity for any external influence?
- If yes, how can it be overcome?
- Is appraisal system used in your organisation based on confidential reporting?
- Which appraisal system do you prefer?
Through our study and observation by questionnaire of the followings are overall findings:
- There is a basis and criteria for performance evaluation in SFM.
- Most of the employees of the SFM like the present annual system of performance appraisal.
- Superiors do not discuss with their subordinates before evaluating the performance which most of the employees do not like. Most of them feel that superiors should discuss before appraisal.
- Most of the employees informed that their performance is duly evaluated by their superiors.
- There is a systematic performance appraisal system in SFM which done annually.
- The performance appraisal system in SFM is based on confidential reporting.
- Superiors sometimes discuss with their subordinates before appraisal.
- Most of the employees choose the participatory system of performance appraisal.
- The higher authority countersigns the superiors' evaluation.
- Superiors are trained and quite efficient on performance evaluation.
- Present format of performance appraisal is quite good.
- There is no opportunity for external influence in evaluating employees' performance.
5.4 The employees agree that:
- Employees are influenced by the performance appraisal review.
- Systematic performance appraisal system is essential for an organisation.
- They are careful to improve the rating of performance appraisal.
- Their increment, training, promotion, punishment and incentive depend on performance appraisal.
- Superiors need specialised training to evaluate performance.
- Performance appraisal criteria are related to job.
- When problem arises in job existence of freedom to seek help, the objective, importance and policy of performance appraisal system are communicated to all employees.
- They are happy about the present system of performance appraisal.
- The supervisors offer friendly and helpful criticism.
5.5 Opposition and equal Opinion:
- Communicate to all
- Discussion before appraisal
- Existence of system of a pre-evaluation interview
- Performance truly determines.
The analysis of primary as well as secondary data depicts that there are a number of limitations of the present appraisal system of SFM. Majority of the respondent put their positive recommendations on the subject matter. Recommendations of the respondents as well as of the author presented as follows:
- The system must be transparent and easy to avoid confusion.
- Many of the respondents expressed their viewpoint about the necessity of pre-evaluating interview.
- Employee must be given his annual appraisal copy.
- Format should be clear so that judgment could be made more accurate.
- There must be provision of open discussion between rater and those being rated before finalization of annual performance appraisal.
- Enhance superior's accountability to clarify and implement performance appraisal system.
- Importance, objective and policy of the system should be communicated to all employees to avoid confusion.
- Provision of special training for the rater is very much necessary.
- Performance indicators should be developed, indicators for core values should be clarified.
- There should be provision of reward for the outstanding performance of the employee.
- Standards should be made clear to avoid miss-interpretation.
- The system should be modern.
- Re-define and review performance rating.
Performance appraisal is an important component of management information and control system. Its objectives and uses could be several. A performance appraisal system could tell the employee what the management expects from him, gives him an opportunity to perform, provides feedback, guidance and support and establishes personnel policies concerning rewards, training, career development, etc., which are contingent upon one's performance. It can also be noted that besides these, the clarity of the concept, criteria used, the culture and context of the organisation also influence the appraisal system.
The findings coming out of the questionnaire is expected to focus on the short comings and their remedies so as to meet the demands of a pragmatic and dynamic system of evaluation. Therefore, it can safely be concluded that the system will undoubtedly prove the very fruitful in the context of developing countries like Bangladesh.
In order to achieve the objectives of any organisation, the organisation needs productive human resources. An organisation has to give due importance to undertake measures in order equip staff with sound knowledge and skills so that they can contribute in achieving the organisational, departmental as well as individual objectives. A relentless effort is necessary to help in improving employee's personal and professional development. It is performance appraisal system through which an attempt may be made to link with staff's performance and staff development. Through performance appraisal techniques, the ‘Diamonds' in our organisation can be discovered and polished to the drizzling brilliance.
This is really a difficult task to design and implement a standard performance appraisal system in an organisation. Performance exceptions of line managers and subordinates, the procedural compliance, subjectivity, tools and performance standards are to intricate elements inherent in the system for which the designing and implantation of the system becomes difficult. The inherent inconsistency in the process, unclear performance criteria, unclear role of line managers and personnel, lack of honesty, dialogue between supervisors and supervisee may be some of the significant limitations of the system that every organisation has to carefully handle.
If performance appraisal system is effectively used, it can improve attraction & motivation of the employees on the job. If inappropriately used the appraisal process can have disastrous effects.
1.3 Importance of the Study
Performance appraisal is an important management tool and a superior employee motivation weapon. Through performance appraisal techniques, a company can discover the real diamonds in the organization and polish them to the drizzling brilliance. Performance appraisal also enables an organization to strike a workable balance between the company's need for qualified and trained Human Resources and on the other hand, it also enables employees need for feedback and motivation.
Performance appraisal plays role as one of the important component of information & control system. In order to achieve the objectives of the organisation, the organisation needs productive human resources. An organisation has to give importance undertake measures in order to equip staff with sound knowledge & skills so that they can contribute in achieving the organisational, departmental & also the individual objective. A relevant effort is necessary to help in improving employee's personal & professional development. It is performance appraisal system through which an attempt may be made to link with staffs performance & staff development. Through performance appraisal technique, the efficiency of the employees can be discovered in the organisations. But such development is slowed and less effective if the employees systematically appraised and fed back information concerning his or her quality of performance.
The most basic value of performance appraisal is that it provides information of great assistance in making and enforcing decisions about such subjects as promotion, pay increase, lay-off and transfer. It provides this information in advance of the time when it may be needed, thereby avoiding spot judgement when a decision has to take. It compares one person with all others for the purpose of placing them in a simple rank order of growth.
The importance of performance appraisal could be either for evaluation or development. The
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