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Effective performance appraisal system for employee and employer


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This paper aims to critically assess an effective appraisal system in relation to employee and employer. One of the major key importances of this study is the satisfaction and acceptance of organisational appraisal system by both employee and the employers, while emphasizing the need of an effective performance appraisal system to function well in terms of satisfying all stakeholders' needs including the employees. Some employees and employers view performance appraisal negatively, suggesting that it's only a waste of time, resources and energy. A literature review capturing various understanding of knowledgeable aspects of these study shall be undertaken and various views shall be put into consideration. This study intends to shed light on the performance management and its relation with performance appraisal; guiding us through the reasons for some major rifts in performance appraisal systems continuously affecting employees and employers, while also highlighting some accepted purpose of performance appraisal and its system. This study would give a theoretical background of what organisations should consider in creating an effective performance appraisal system; including understanding the appraisal purpose, description and specification for the appraiser i.e. appropriate and adequate training should disbursed to employee and the employer, and the design and implementation of an effective performance appraisal take employee involvement to consideration. This study draws its conclusion from Hunt N. (2007), who argues that an effective performance appraisal should take the satisfaction of its employees and employers (organization) as a great concern; as a satisfied employee works more efficiently and a profitable company also makes employers or organizational managers happier.

Performance Management

A suitable analysis of performance appraisal without stating its origin in performance management would not give a true and fair view of performance appraisal in theory. Performance management and performance appraisal are two related aspects that should not be seen identically. In simple terms, we can describe performance management to be a strategic part of human resource management; which is an all-inclusive process that aims to bring together various aspects including performance appraisal. Performance management is viewed as a wider strategic aspects that focus on organizational, team or individual focus rather than performance appraisal which operationally focused on individual's performance and development. Noticeably, an important aspect of performance appraisal is enhancing performance, which is a key element of organizational life and performance management (CIPD 2005, a - Performance management and performance appraisal).

Research has identified a gap amongst the managers and employees by research between their perception about performance management theory and its actual practice (Bratton J. and Gold J. 1999). Nevertheless, the general acknowledgment that performance management is a tool used to promote employee understanding of its contribution to organisations strategic goals; while also ensuring that the right talent and skills are centered on the things of importance. Even though in practice, it has been regarded as just a documentation phase that is used to fulfill basic organizational and statutory requirements (CIPD - Performance mgt in action). Performance appraisal is a large and vital process of performance management.

INTRODUCTION/the Concept of Performance Appraisal

For decades, performance appraisal has been a significant issue and topic of importance. It has been given considerable attention in various literatures, from both researchers and practitioner's alike (Roslyn 1996). Past and recent scholars have regarded performance appraisals are often regarded as a strategic and integral part of the organization (Goff 1992 and U.S Dept of Interior 2004). In acceptance of these suggestions, it can be inferred that the management of human capital is an important aspect of organization that has an intense effect in all the activities of the organization.

Pettijohn L. (2001) cites performance appraisal from Longenecker (1997), describing performance appraisal as two simple terms that provoke and propel strong responses, sentiments, opinions and judgment in the organizational context of formal appraisal procedure when mutually used together. He further argue that most organizations of the world according to irrespective of its size, type and product distinction employ the use of performance appraisal; but with different level of accomplishment as an instrument used to drive a mixture of human resource management purpose. However, further literatures' suggests performance appraisal existed based on several rationales such as a basis for making provision for selection decisions, a yardstick for salary increment, a medium for providing feed-back among managers and employees and facilitation of employee development. Recently, research are been focused toward establishing systems for improving the psychometric properties of performance ratings (Mount 1984, Fombrun and Laud 1983). Nevertheless, Tom Redman (2006) attributes development changes in recent performance appraisal to large scale organisations rather than advances in theory.

Numerous definitions as been given to performance appraisal by numerous scholars, researchers and practitioners. According to Flippo (1984), "performance appraisal is the systematic, periodic and an impartial rating of an employee's excellence in the matters pertaining to his present job and his potential for a better job." Flippo described performance appraisal as a systematic way of evaluating and appraising the performance of an employee/subordinate within a specified period of time, while also planning his future career. However, a short and concise definition of performance appraisal by CIPD (2010) was referred as an operational short to medium term tool used to assess individual performance and development. In summary, Performance appraisal is a dominant tool to evaluate, assess and compensate the performance of employee/subordinate. It should help create goal congruence between the organization and it employees.

Past and recent scholars have argued that the lack of a generally acceptable purpose served by performance appraisal system process has raised questions for the degree to which it's various function conflicts with the employee and employer (Beer, 1981). This may suggest that a key generally acceptable purpose of an effective performance appraisal process is still a major rift in research.


Hunt N. (2007) in his book "Conducting Staff Appraisal" cited past scholars in his literature arguing that organization's purpose "they claim" is not appraisal inclined but rather to make money and generate profit or in the case of public corporations, provide social amenities i.e. good service. He argued that the view that appraisal does not have a direct connection with production is a fallacious statement and suggested that the purpose of a well structure appraisal system should be promoting satisfaction for both employee and employers (organization), as employees become satisfied knowing that employers or its organization are after its needs and not just the profit objective.

However, research by some major proponents suggests that performance appraisals in practice surface to be aimed at four purposes, which are: making distinctions among employees, differentiation of a person's strength from its weakness, execute and assess organizations' human resource systems, and the documentation of personnel assessment (Cleveland, Mohammed, Skattebo, & Sin, 2003; Cleveland, Murphy, & Williams, 1989). Nevertheless, further aims and purpose of performance appraisals may in due course arise and enhance performance at the employee and, subsequently, the employer or organizational level (see DeNisi & Gonzalez, 2000; Meyer, Kay, & French, 1965).

Traditional Performance appraisal

Past approach to performance appraisal referred to as traditional, viewed performance appraisal as a method for justification employee salaries, rewarding and punishing employee for organizational performance. Traditional approach seems to be a judgmental process rather than a developmental process that focus only on historical performance of employees as a basis of their appraisal (http://appraisals.naukrihub.com/performance-appraisal-approaches.html). Performance appraisal methods rate employees using the quantitative tools and employ numerical or scalar ratings orientation. The combination of these methods with logical decision will provide sufficient procedure of performance; nevertheless as the complexity of employment increase, the orientation to figures makes it more challenging because the reduction of individual contribution's complexity and competency to a figure results from a mix of inadequate reasons (Murphy T. and Margulies J. 2004).

Modern Performance appraisal

A more collaborative technique approach to an effective performance appraisal is the modern performance appraisal, which has developed the appraisal system of organizations over the years to a more formal and structured system. This appraisal approach is viewed as a tool for identifying performing employee; identifying training needs of employees; developing employee career paths; promoting rewards, bonus and promotion amongst other development aims. (http://appraisals.naukrihub.com/performance-appraisal-approaches.html). Modern appraisal approach includes; management-by-objectives (MBO), work planning and review, 360° appraisals, peer review, etc. (Murphy T. and Margulies J. 2004). Here, the promotion of employee and employer relationship in the organization is strengthened; while communication is also improved through its feedback process. This approach is developmental in nature and future oriented, identifying employees as individuals.

Theoretically, the formal appraisal process merits are numerous and striking to any organization allowing for their use. However in practice, various shortcomings associated with the formal performance appraisal systems design and implementation are well known and continue to raise issues with both practitioners and academics (Goff 1992 and Bernardin & Klatt 1985). According to Nick (1996), the formal role of performance appraisal process has been given common concentration in the recent years and a make believe that an organization's effective design and well structured implementation appraisal system will provide the employee, the supervisor and the employee/organization with multiple of positive benefits.

Objectives of Performance appraisal

Major objectives of an effective performance appraisal can be perceived from two approaches: the traditional and the system approach. The traditional approach was concerned with attributing guiding values to individuals; the primary goal of this approach was aimed at providing control and documenting employee historical performance. The appraisal was performed occasionally and the leadership practices were estimated and directional in nature. This approach emphasized an individual orientation reward practice with high degree of formality process. On the other hand, the system approach is primarily aimed at developing and creating a problem solving environment for employees; and promotes a leadership style that is facilitative and tutoring in nature. The objective of this system has its guiding value attributed to the performance appraisal system, and employs a more frequent (periodic and continuous activity) appraisal system for employees. This system has a low degree of formality and practice a group or team orientation reward practice. The result of this system approach promotes HR decisions such as reward, promotions, training and development, transfers and demotions. However, the system approach might have emerged from the lapse or the gaps posed by the traditional approach. Bratton and Gold (1999) however, concluded that the tension between the judgemental (Traditional) and developmental (Modern system) process of appraisal systems has never been resolved and is likely to continue in its nearest future.

Drawing from a past literature for performance appraisals, it was suggested that an effective appraisal system should enhance employee motivation and efficiency; ensure concrete basis for wage and salary management; help discuss employee concerns for growth and development; provide adequate information for management decisions; and provision of useful communication tool to carry out employee goal setting and performance planning for managers (Morhman, Resnick-west and Lawler 1989).

Appraisal System

Landahl (2010) suggests that an effective performance appraisal is a significant vehicle for improving performance and productivity by organizations to improve the performance of its employees and organizations' well designed and implemented appraisal system, which helps to improve company operations. In support of these, Journal of Applied Psychology argues that a, "poorly designed or implemented performance appraisals may lead to employee frustration, resentment and withdrawal."

Different performance appraisal instrument is been employed by a number organizations with conflicting mixture of goals and objective, and this have frequently resulted in stemming up confusion has to what the accurate meaning of performance appraisal systems. Notwithstanding, Wiese and Buckley (1998) highlighted that the core of performance appraisal process enables an organization to appraise and assess an individual employee's activities and performance over a scheduled point in time. In addition, Coutts and Schneider (2004) described performance appraisal as a fundamental factor of a more refined position of human resource practices; viewing it has machinery for assessing the level of employee's performance on a daily basis in line with the organizational set goals and objectives.

Review of Literature

Hunt N. (2007) argues that most employers or large organisations do have performance appraisal policies in existence but the practical implementation of these policies are inefficient and ineffective in reality and this has lead most employees not to take the performance appraisal as a serious tool but a managerial procedure.

One of the most common fear or worries of performance appraisal by employees is the raters' subjectivity. The human bias nature and favouritism is a loom affecting employee acceptance of performance appraisal system and its outcome.

Many scholars have also ascribed the shortcoming of performance appraisal system to the unwarranted focus on alleviating signs of reduced performance rather than emphasizing the cause of the problem in itself.

A major problem of performance appraisal system is the criteria for its implementation. A bad designed system would not generate a good performance appraisal objective, most recent appraisal focus more on the formal application rather than the substance satisfying objective.


Effective performance appraisal has so far been considered in different perspectives. The exploration of significant areas such as results of effectiveness of performance appraisal and recognition of negative factors that can affect the effectiveness of performance appraisal in both the perspective of employee and employer. The highlighted gap in the perspective of performance appraisal is what this paper is set to discuss.

For one thing, WP&R interviews are strictly man-to-man in character, rather than having a father-and-son flavor, as did so many of the traditional performance appraisals. This seems to be due to the fact that it is much more natural under the WP&R program for the subordinate to take the initiative when his performance on past goals is being reviewed. Thus, in listening to the subordinate's review of performance, problems and failings, the manager is automatically cast in the role of counselor. This role for the manager, in turn, results naturally in a problem-solving discussion.

In the traditional performance appraisal interview, on the other hand, the manager is automatically cast in the role of judge. The subordinate's natural reaction is to assume a defensive posture, and thus all the necessary ingredients for an argument are present.

Performance appraisal effectiveness refers to the accuracy of performance observations and ratings as well as the ability of the performance appraisal process to improve the ratee's future performance (Lee C. 1985).


As highlighted above, that the word performance appraisals evoke immediate and sometimes negative response from the managers and employees in the appraisal process of organizational life (Longenecker 1997). Yet, every manager recognizes that, like it or not, performance appraisals are here to stay.

Longenecker (1989) argues that politics has its stake in an organization's performance appraisal process and that it takes only the deliberate effort of the manager and those partaking in training employees on appraisal techniques to make the performance appraisal process free from what he called "Mired political game". Politics has been indicated as a critical determinant in organizations for reward distribution and this however still remains an untapped research (Sogra et al 2009).

For decades, employee evaluations have been used for a variety of different organizational purposes. Previously, the appraisal process was generally considered to be one of the more difficult and yet routine and narrow management practices. In contrast, it is now widely recognized as a significant vehicle for improving performance and productivity of both employees and organizations. To this end, many organizations and managers are currently reexamining their appraisal procedures and practices. Why performance evaluation currently is viewed in such an expanded light after its rather difficult and humble past?

Discrepancies with performance appraisal in relation to employee and employer

Consequently the review of the literature drawing from Crook and Crossman (2004) and Mount's (1984) research on an effective performance appraisal system, it was discovered that major difference exist in the perception of appraisal system between employees' and managers'. These differences were however attributed to the roles employees' and managers' perform during the appraisal process; Managers' are "givers" of information and feedbacks, whereas employees' are mere "receivers".

Bretz et al. (1992) suggests that major discrepancies arising from performance appraisal system may be traced to the lack of adequate training given to people for their role as an appraisee. The author argues that training to make adequate assessments and oversee an effective performance appraisal system is been given to managers and other principal, while training for analyzing and acting on constructive performance evaluations are not given to the appraisees. He further suggests that those without any appraisal role within the organization do not often receive training in the performance appraisal system, both in efficient utilization of its output and its method of working (Crook and Crossman 2004).

CROOK AND CROSSMAN (2004) based on his findings, asked a fundamental question in solving these discrepancies "is a difference in satisfaction with a PAS linked to a person's role in an organization a desirable outcome?" He argued that it is advantageous for participants of appraisal alone to be more pleased with the performance appraisal system rather than participants who act both as appraisee and appraisers. The authors further argue participants that fill both roles will encounter problems from both perspectives and therefore ensure a fairly and time-framed appraisal considering their experience.

Organizational managers should identify the significance of employee involvement in establishing performance values at the launch of the appraisal phase and provide performance feedback through the appraisal phase (Inderrieden et al. 1988).


In order to build up an effective performance appraisal system, two major criteria and goal need to be accomplished. Firstly, the relevance and its applicability of performance appraisal to everyday work practice in organizations (both large corporation and small business enterprise) and secondly, the satisfaction and acceptability of the performance appraisal system by employees and employers appraisers and workers (Duraisingham V. And Skinner N. 2005).

Past and recent research have argued that a firm's objective should be able to focus on how their employee will improve its knowledge and skills in order to have high increase productivity, sustained competitive improvement. Both employee and employers require adequate training in order to participate fairly in the performance appraisal system in ensuring that realistic expectations and feedbacks are received and acted on. An effective work plan (goal setting) for managers was also considered suitable and the consideration of employees' via discussing their career plans in the appraisal process, which enhance goal congruence between the employee and employer (Crook and Crossman 2004, Mount 1984 and Inderrieden et al. 1988). Bretz et al (1992) also advocated the need for training to be an ongoing process in order to attain utmost efficiency and effectiveness.

Crook and Crossman (2004) states that an effective appraisal system can be achieved by increasing interactional justice by promoting employee involvement in the appraisal system. The joint involvement of both the employee and employer in the performance appraisal system will effectively ensure a more conducive working environment and targeted agreement between both parties; through the use of feedback, training, frequent reviews for development and many more. Systems that focus only on examining performance without any personal benefit would not attract employees (Hunt N. 2007).

An effective performance appraisal system should be as simple as possible without been over-bureaucratic. The operation of the performance appraisal system would however not be effective without the fairness and consistentency in operation by the participants. This will lead to enhanced satisfaction for both employees and employers (Crook and Crossman 2004 and Hunt N. 2007). Hunt N. (2007) suggests that employers and organizations should also eliminate political mentally in order to have a successful and effective performance appraisal as this promotes unfairness and would tamper productivity in the long run

The present paper suggests that utilizing performance appraisal formats and designing training programs without considering the nature of the task may explain unsuccessful attempts in devising more accurate and efficient performance appraisal systems. Appraising performance according to the nature of the task, matching task nature with performance appraisal format, and designing training programs to increase observational accuracy may improve performance appraisal systems as well as contribute to successful organizational placement and promotion decisions. Future research should examine other factors that may contribute to performance appraisal effectiveness (Lee C. 1985).

Whatever system is used, a good measure of success is how those appraised and compensated perceive the accuracy and fairness of the program. A program that is seen as fair and personalized, regardless of sophistication, will likely be motivational. A good first step in deciding whether changes are needed in a performance appraisal system may be a survey of management and employee attitudes about appraisal practices and compensation.

Biased and malicious deliberate appraisers should be eliminated in constructing an effective performance appraisal system. However, it is not feasible for employee - employer relationship to remain good all the time, but the system must be designed in a way that it does not ensure systematic partiality; which might warrant the use of external appraiser (even though this can also lead to rifts).

In establishing an effective and efficient performance appraisal system, it would be imperative put into consideration not only the employee but also the employers, who will act as the appraiser rather than the appraised. Employers and managers would also have anxieties and apprehension about the appraisal system's effectiveness, whether training would be adequate for employees, whether employees are aware of the opportunities for training and development available within the organization.

In order to have an effective performance appraisal, both participants of the process should be sort during the designing process of the system to the implementation stage.


Performance appraisal is a formal exercise carried out for all executives and workers/ staff with respect to their contributions made towards the growth of the organization. The benefits of a successful appraisal system can be summed up as follows.

a. For the Appraisal

1.      Better understanding of this role in the organization. What is expected and what needs to be done in meet those expectations.

2.      Clear understanding of his strengths and weakness so as to develop himself into a better performer in future.

b. For the Management

1.      Identification of performer & non-performers and their development towards better performance.

2.      Identification of training & development needs.

3.      Generation of ideas for improvement.

c. For the Organization

1.      Improved performance throughout the organization.

2.      Creation of culture of continuous improvement and success.


There are many benefits to implementing a regular and systematic performance appraisal system within an AOD organisation. In order to gain the most benefit from performance appraisals it is recommended that a system is developed in consultation with workers and managers, and clear links are established between appraisals and valued rewards and outcomes (Duraisingham V. And Skinner N. 2005).

Read more: http://www.bukisa.com/articles/351690_introduction-to-performance-appraisal#ixzz15gqd81Gd

Hunt N. (2007) Conducting Staff Appraisals; How to Books Ltd, United Kingdom. Chapter 1 - 11.

Redman T. and Wilkinson A. (2006); Contemporary Human Resource Management (Text and Cases): Performance Appraisal: Chapter 6 pg 153 - 187; Pearson Education Limited: England.

Bratton J. and Gold J. (1999): Human Resource Management (Theory and Practice): Performance Appraisal: Chapter 8 pg 214 - 236: Palgrave publishers Ltd: Houndmills

Fletcher, C. (1994). Performance appraisal in context: Organizational changes and their impact on practice. In N. Anderson &P. Herriot (Eds.), Assessment and selection in organizations: Methods and practice for recruitment and appraisal (pp. 41-56). Chichester, England: John Wiley & Sons.

Duraisingham V. And Skinner N. (2005): Workforce development 'TIPS' - Theory in Practices strategies resource kits: performance Appraisal: Chapter 8: www.nceta.flinders.edu.au

(Cleveland, Mohammed, Skattebo, & Sin, 2003; Cleveland, Murphy, & Williams, 1989)

DeNisi & Gonzalez, 2000; Meyer, Kay, & French, 1965).

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