The challenges in managing employee’s performance through effective appraisal system



Developing an appraisal system that accurately reflects employee performance is a difficult task. Performance appraisal systems are not generic or easily passed from one company to another; their design and administration must be tailor-made to match employee and organizational characteristics and qualities.

This assignment highlights the importance of effective performance appraisal system with the rating errors and challenges that the organization faced in a competitive working world. First of all I give a clear understanding of what performance appraisal is and then in discussion part I look forward the problems and challenges that organizations faced while rating their employee performance through rating scale method using company examples. Later on the study discussed detailed on the critical incidents that organizations might faced and the solution. In conclusion part I suggest a modern effective performance appraisal system that can help organizations to overcome the problems and challenges they faced during evaluation of the employees.

Performance Appraisal

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According to Hannah, P., (2009), 'Performance appraisal is a formal management system by which the job performance of an employee is examined and evaluated, with the intent of identifying their strengths and weaknesses for improvement in future. The procedure is conducted by the subsequent supervisor or manager'

Aminuddin. M (2008), States that 'Organizations interested in best practice are constantly and actively looking for ways to improve employee's performance and motivate individual employees to achieve the best they can. In order to be effective, performance appraisal must fulfill certain criteria; performance appraisal system should be formalized so as to ensure fairness to the workers involved, a systematic appraisal of employees makes it possible to achieve various benefits like:

Encouraging quality performance by rewarding those who do well

Improve current performance by giving workers feedback

Identify training needs

Initiate fair disciplinary proceedings

Provide a channel of communication between managers and their subordinates

Challenges with effective performance appraisal

Several problems may arise during performance appraisals. Some problem arises from the manager, some from the employees and some from other factors (Wells, 1994). Most employees dislike performance appraisal interviews for fear of criticism, fear of uncertainty in handling question and fear that their salaries, promotions and their destinies with the organization hinge upon the outcomes of these interviews as justification for decisions that are already made concerning salaries, promotions and job tenures (Nelda, ND).

Sometimes organizations come across various problems and challenges of performance appraisal in order to make a performance appraisal system effective and successful.

Determining the evaluation criteria

Recent research on Compare InfoBase Limited (2007), has shown, the Identification of the evaluation criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in a measurable term.

Create a rating instrument

The purpose of appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees in the organization, Compare InfoBase Limited (2007).

Lack of competence

Top management should choose the raters or evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively, Compare InfoBase Limited (2007),

Errors in rating and evaluation

Many errors based in personnel bias like stereotyping, halo effect may creep in the appraisal process. Therefore the rater should exercise objectively and fairness in evaluating and rating the performance of the employees, Compare InfoBase Limited (2007).


The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal. The slandered should be clearly communicated and every employee should be made aware that what exactly is expected from them, Compare InfoBase Limited (2007).

One study shows that in UK, most of their Universities and colleges faced problems of performance appraisal. Simmons, J., (2001), states that, a closely related issue was the age -old appraisal dilemma of achieving an appropriate balance between the aims of control and commitment. the study shows that the traditional appraisal schemes emphasis on "control" by stipulating and assessing the individual employee contribution to the organization "lives on" within contemporary performance management system by ensuring each employees performance objectives drives from and contribute to those at departmental, divisional, or corporate level.

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Taylor, S., (2002), research shows that the way in which appraisal carried out in the organization and in particular, to unfair bias in managerial assessments of performance. According to him the problems with the rating systems are:

The tendency to give a good overall assessment on the basis that one particular aspects has been accomplished well

A tendency to avoid giving tow ratings, even when deserved, for fear of angering or upsetting a weak performer

The tendency to give a poor overall assessment on the basis of particular poor performance in one area

The tendency to give particular weight to recent occurrences in reaching judgments about individual performance

The tendency to give high rating to people who have performed well historically, whatever their performance over the previous years

A tendency to refrain, on principle from giving particular high ratings

A tendency to rate subordinates at a lower level than the appraiser achieved when in their position

Some of the criticism of performance appraisal are the focus will be too much on the individual and does little to develop employees. Employees and supervisors believe that the appraisal process is seriously flawed and appraisals are inconsistent, short term oriented, subjective and useful only at the extremes of performance.

Problems with the ratings

The drawback of essay evaluation method will be their length and content can vary considerably, depending on rater, the appraisal are difficult to compare and the writing skills of appraiser can also affect appraisal.

Critical incidents drawbacks are like rater is required to jot down incidents regularly, which can be burdensome and time consuming. And this method may lead to friction between manager and employees when employees believe manager is keeping a book on them.

The drawback for checklists would be raters can see positive or negative connotation of each question which introduces bias. It is time consuming to assemble questions for each job category, separate listing of questions must be developed for each job category and checklist question can have different meanings for different raters.

Problems with graphic ratings scale have some weaknesses by evaluating the rates, such as evaluators are unlikely to interpret written descriptions in the same manner due to differences in background, experience and sometimes personality. So it would be better to choose categories that have little relationship to job performance and omit categories that have a significant influence on job performance.

Performance appraisal can also have legal consequences in the field of discrimination on ground of sex, race and disability. This occurs when they are used as the basis of or justifications for promoting employees, increasing or decreasing individual pay levels, or selecting employees for new opportunities in the organization. Similar considerations apply where pay rates are determined as a result of performance ratings.

Sometimes the law will also affect the evaluation of performance of employees and sometimes these subjective judgments can introduce bias into the system. In Brito v. Zia Company, the company's performance evaluation instrument was invalid because it did not relate to important elements in the jobs for which employees were being evaluated. Other performance evaluation lawsuits have dealt with sex, race, and age discrimination in terminations, promotions, and layoffs. Maclean, J., (2001), States that, when Canadian employment conducts an appraisal these laws prohibits discrimination based on race, religion, ethnic or national origin, sex and marital status.

Problems that organization face while using 360-degree feedback would also include rate errors. Each source of feedback suffers from varying sources of potential rater error. (e.g., halo error, leniency or severity, attribution errors). By using all these differing sources of information means dealing with the all different potential avenues for rater error to seep into the evaluation.

The second criticism is cost and confusion. It can often be very costly and tedious to implement a 360-degree program. The multiple sources of feedback are difficult to coordinate, may contradict each other, and are often confusing to sort out and process effectively. This puts the burden on the manager to filter through the material provided and refine in into a coherent evaluation.

Critics also fear a negative attitude in 360-degree appraisal. The added sources of information may be used by a manager to bolster negative appraisals with a "see I told you so" approach. Finally employees alike worry about confidentiality. With so many sources of feedback about single individual floating around, it is feared that both rater and ratee may lose their rights to confidentiality.

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The problem with MBO is that it will be not applicable to all jobs; allocation of merit pay may result in setting short-term goals rather than important and long-term goals.

Psychological appraisal would be slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depends upon the skills of psychologists who perform the evaluation.

Disadvantages for assessment centers will be Costs of employees traveling and lodging, psychologists, ratings strongly influenced by assessee's inter-personal skills. Solid performers may feel suffocated in simulated situations. Those who are not selected for this also may get affected.

Desseler,G., (2011), 'The number of things that can lead to bias during appraisals is limitless. One study focused on the rater's personality. Raters who scored higher on conscientiousness tended to give their peers lower ratings , they were stricter, in other words, those scoring higher on agreeableness gave higher ratings, they were more lenient'. Even the appraisals purpose biases the results. Unfortunately the appraisee's personal characteristics also affect their ratings.

Solutions for rating evaluations

Rater training and orientation in 360-degree appraisal programs is becoming increasingly popular. Research shows that most of the American companies used to train their raters in order to minimize the problem occur during the appraisal. This training introduces employees to the concept of multiple source feedback, and it makes them aware of rater error and methods to diminish it. Rating formats that focus on the frequency of specific behaviors can also help to limit sources of errors. Desseler, G., (2011), Computer appraisal software makes dealing with the glut of incoming information easier to handle. This software can also present the wealth of available data in a simple format to give to or discuss with the employee.

Desseler, G., (2011), Overall 360-degree appraisal systems provide a wealth of information about an employee's behavior that might be unavailable in traditional manager evaluation formats. Customers (both internal and external), peers, subordinates, and others may all have access to unique performance data that can provide a truer picture of the individual's performance. This method of evaluation can also provide information on the state of the company's goals and needs. For example, Digital executives use the feedback from external customers to determine if the strategic plan they laid out is flattering down to employees.

Federal express uses a 360 -degree feedback system as the foundation of objective goal setting. By receiving information from internal and external customers, an individual gains feedback as to what areas are seen as superior and what areas are seen as deficient. Desseler, G., (2011), this feedback is then used in a management by objectives system to define the goals for that individual according to the needs of his or her customers. These new goals help to focus employee on what is required to improve performance and achieve customer satisfaction at the same time.

According to Taylor, S., (2002), we can conclude that the assessment centers will be more flexible. They are not purchased 'off-the-shelf' like psychometric test, and are not time restricted as interviews. There is therefore a plenty of scope to introduce exercises that are of specific relevance to the job and the organization involved. For this reason, each center is likely to differ from others to a considerable degree. That said a number of exercises and types of exercises associated with assessment centers are frequently included.

Desseler, G., (2011), States that well-conducted assessment center can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment centers. The tests also make sure that the wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and promotion. Garry Desseler, (2011), Many of American top companies have set up assessment centers where they can first interview potential employees, then evaluate them in real work situation. It provides an excellent way to evaluate an individual's capabilities so perform and entry level management job.

Donald, (2008), When the organization uses MBO techniques, it will increases the employee's involvement in setting performance objectives and concomitantly increase the motivation required to reach those objectives. On the same time it offers and objective factual basis for measuring accomplishment and also it emphasizes results, not traits or personality characteristics. MBO is entirely job centered; it supports the psychological concept that people will exercise self direction and self control in the accomplishment of organizational objectives that they have participated in settings.

Sommerville (2007), argue that performance appraisal must be free from discrimination. The appraisal criteria, the methods and documentation must be designed to ensure that they are all job related. Otherwise there will be a possibility that an employee may challenge decisions made by management based upon a flawed appraisal system in court because managers and supervisors have said or done something that has adversely affect their e employees.

The Recommendations for a legally defensible appraisal system would include

Procedures must not differ because of race, sex, national origin, religion, or age

Use objective, non-rated, uncontaminated data

A formal system of review or appeal should be available for disagreement over appraisals

Use more than one independent evaluator

Use a formal, standardized system for evaluation

Avoid ratings on traits, such as dependability, drive, aptitude, and attitude

Improvement of performance appraisals

Performance appraisals usually can be improved vastly. The manager should be prepared adequately before conducting a performance appraisal interview. Many managers seem too busy to gather the needed information or to plan for an interview, resulting in frustration and confusion for the employee. The performance appraisal interview is too important and has too great an impact upon the organizational climate to be conducted without necessary information and preparation (Nelda, ND).

Hannah Paul, (2009) it is a usual practice in most places that, managers conduct appraisals just to justify pay increase or decrease, forgetting that the sole purpose of performance appraisal is not salary increase or decrease, but the development of employee skills and the improvement of work in the office. Besides that, it is also important to give employees feedback (whether it is a matter of money or not), on the work that they are doing. This helps build employee morale and motivates them to work even better, whereas it is also important to give critical feedback to employees, so they can get their act together.

The focus of managers on performance appraisals at the end of the year, instead of working towards improving performance during the year is the main problem today. If managers focused their attention to helping employees improve their job performance it would make it easier for them to analyze it at the end of the year, instead of just rating employees based on numbers or personality traits, which is neither accurate nor fair to the employees. If managers and supervisors were to understand how much they themselves would benefit from doing this, it would make their job much easier.


Debora, F.B.,, (1997), one of the first steps in developing an effective performance evaluation system is to determine the organization's objectives. These are then translated into departmental and then individual position objectives - working with employees to agree their personal performance targets. This allows the employee to know "up front" the standards by which his/her performance will be evaluated. This process involves clarifying the job role, job description and responsibilities - explaining how the role and responsibilities contribute to wider goals, why individual and team performance is important and just what is expected within the current planning period. Objectives developed in this way should be reflective of the organizational goals and provide linkages between employee and organizational performance.

After studying the methods that used to evaluate employee performances the best method that I could find was 360-degree feedback method and MBO method. These two methods helps to evaluate employee's performance with all the important factors that an employee needs to improve in order to improve the individual levels as well as organizational level. Managers can use these two methods to evaluate employee's performance and give feedback to employees about their strengths and weaknesses which they need to improve and after analyzing this, employees can work hard to achieve organizational goals to compete with others.


In conclusion it can be said that, performance appraisal is generally a performance measuring tool, It is not only to identify employee's job performance but it also helps managers gain information that help them make their employees work more prolific. Also vital information can be gained so that organizations may recognize the difficulties that workers face in everyday work. However it should not be forgotten that this system has a lot of flaws, and may not always be ideal for companies, but it cannot be ignored. It is an inevitable procedure which no matter how much employees or managers try to ignore it, needs to be carried out, because without it employee evaluation is not possible. One can soften it by calling it "development discussions" or have them on a usual basis to identify areas of improvement, but it cannot be overlooked.

Developing an effective performance appraisal system requires strong commitment, from top management: if the system does not provide the linkage between employee performance and organizational goals, it is bound to be less than completely effective.