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The importance of performance appraisal as an instrument to understand how to make better use of the available technical skills and knowledge, also how to meet future challenges and achieve goals, was explained by Armstrong (2006). He also explained that performance appraisal will help improve the skills and capabilities of an individual and the organization as a whole. According to Szilagyi & Wallace(1990) it is through this process of performance appraisal that the organization gets feedback and review on the performance effectiveness of the employee. (Wiese & Buckley, 1998) employees in an organization can understand and know their level of skills and knowledge and will know how to utilize their capabilities and thus can make proper career decisions.
The method of performance appraisal empowers the employees to achieve their targets individually by improving their performance by understanding their drawbacks. Through this way it is possible that the combined performance targets of individuals will ultimately contribute to the strategic goal of the company. According to a survey by CIPD (Chartered Institute of Personnel and DevelopmentÂ ) in 2005 it was seen that almost 65% organizations did single annual performances appraisal and 27% twice every year.
Human resources is a valuable asset for every organization thus all organizations try to improve upon and maintain the existing skilled employees as it is very difficult to replace skilled labour. Thus performance appraisal in all sense helps an organization keep track of its employee skills and knowledge and take advantage of it in a proper way (Amstrong and Baron, 2004). Performance appraisal aims to improve and upgrade the performance of the employees, it is only with the help of employees who perform well can an organization its achieve strategic objectives (Michlitsch ,2000).
Performance appraisal has various purposes (Edmonstone1996) that include building rapport and proper channel of communication between the superior and subordinate though the feedback process. Understanding the area of improvement of the employee and finding ways to improve the performance along with identifying the area in which the employee needs training. Companies set standards for performance and based on the set standards performance they evaluate the performance of the employees Appraisal helps in finding out exactly based in performance who needs to be given promotion and who has to be demoted.
Characteristics of performance appraisal
According to (Caruth &Humphreys,2006) performance appraisal system is catered to the needs of a company and based on its strategic objectives and is a result of careful thinking. Though performance appraisal method varies among companies in both private and public sector, all successful appraisal methods had mostly similar characteristics (Boice & kleiner ,1997).
The process of appraisal should blend with the organization and its activities. Every organization should have written and well thought out rules, policies and procedures for the implementation of performance appraisal (Allan1994).
In order to measure performance in a meaningful way, there should be a standard measure which would help prevent performance appraisal method being just a discussion between the appraiser and the subordinate. According to Armstrong(2006) there are certain criteria based on which performance appraisal can be measured.
The performance appraisal method should go hand in hand to the various strategic goals of the company.
The individual roles and responsibilities also needs to be addressed in the appraisal method.
The whole process of performance appraisal system should focus on the ultimate outcome or output or result.
The process of performance appraisal should act as a medium for communication and should be able to provide proper feedback in all respects.
In organization where the outcomes can be measured it is easy to implement the performance appraisal process while it is difficult to execute it in companies where the performance and outcome measurement is not easy. Marsdon(1999) " Any performance appraisal system that did not consistently measure work performance accurately cannot be considered an effective one". In certain organizations were the performance standards are not set and there are no clearly defined objectives for the organization to achieve, the implementation performance appraisal would be in vain. For a performance appraisal to be effective there should be an interaction and open communication among the superior and subordinate. According to O'Reilly and Anderson, (2006)communication happens when the manager gives feedback to the subordinate. They interact and discuss the on the performance of the employee and the expected performance. The managers of a company need to ensure that their subordinates know the level of performance they exhibit; this is possible only with the help of an efficient performance appraisal system (Lee 2005). The appraiser also should be efficient and his work also should be effective along with the performance appraisal program in the company." The appraiser should develop an interpersonal relationship link based on trust, openness, shared control and reduced defensiveness in dealing with difficult topics" (Piggott-Irvine,2003). According to Allan (1994), the success of a performance appraisal system lies in the hands of the appraiser, thus the appraiser should be well trained and should know the process well and should be able to give proper feedback to employees. (Fink and Longenecker 1998) to conduct performance appraisal effectively 10 characteristics are required for the managers.
The manager should know what kind of performance appraisal method is being adopted in the company.
The manager should be able to interact with the subordinates and make them aware of the performance expectations.
The managers should be able to make decisions effectively.
They also should possess the ability to coach the subordinate and provide training and help to them.
Communication skill is highly important for the managers as they need to communicate with the employees verbally and in writing.
They should possess the skills to encourage and empower the subordinates and should be able to delegate work to them properly.
Managers should be good observers.
They should take measures to help the employees develop in their area of work and also in an overall way.
They should be in a position to make sure that no conflicts occur in the company and all problems are mitigated and solved properly. Thus problem solving skill is important.
Managers are liable to know the corporate law to certain extend and should comply with the law.
Managers however have taken little steps to ensure that the appraisers or subordinate have enough capability to do the appraising. Every employee in the organization makes valuable contribution to the organization; this is achieved by setting goals for them individually, which would also help in measuring them. While the goals are being set for the individual, they should be consulted so that it will improve upon their commitment towards achieving those goals. If the goals or objective set are not easy to attain and are set without consulting the employee will reduce their commitment (Locke & Lathom 1990). Foster (2000) also has agreed to this point that such practices would help in bringing in a kind of motivation among the employees. Allen (1994) pointed out the importance of proper communication and the capabilities of the appraiser. Employees need to have a trust in the appraisers and their ability to provide proper feedback.
Performance rating errors
Accuracy of recall
In many companies some of the superiors do not keep a written note of their subordinate's performance and in the end they evaluate the performance of the employee based on their memory and what they remember about the employee performance which can turn out to be faulty. Thus in order to bring in a validity and make the performance system effective the managers should try to make proper note of the employee performance.
The halo effect
An employee might possess a characteristic which may be different from others which can be both positive and negative. That might be exceptionally good or harmful to the organization. In such a case the superior would be biased or influenced by that particular character of the employee and they forgo other skill and capabilities of the employee. Thus their perception of the employee performance completely depends on that trait of the employee. This will lead to a performance evaluation that is not effective.
Thus the superiors or managers must try to observe the employee properly and understand the specific characteristics and evaluate them.
Nisbett & Wilson (1997)," halo error is the longest recognized, most pervasive and yet least understood form of rating error". According to them the rating depends on the total judgment of the employee behavior and gives a consistent score without evaluating characters independently. Bretz, Mikovich and Read are of the opinion that halo effects are interrelated collection of appraisals or ratings as the raters do not rate the behavior on the basis of a single character. Nathan & Lord (1983) are of the point of view that employees will be continuously or always rated as good or poor performers. Even if the individuals have changed that would not be reflected in the rating or evaluation.
In this form of rating errors managers perceive the behavior or character of an individual based on the category or group he belongs. That may be based in religion, caste, age etc. the manager might have a good or bad impression about that group and thus the individual. I many cases the perception of the managers about the employee behavior is may not have any relation to reality. This form of stereotyped behavior can lead to poor performance appraisal system. Thus all managers should try to perceive the real characteristics and behavior of the subordinates and make note of their performance.
Differences in Rating Scales
This kind of errors occurs when two raters rate the same behavior differently based on their internal standards and perceptions and judgments. This happens mostly in cases where there are no well defined goals for the employee and there are no standards set for them. Thus the managers will evaluate the performance of the employee based on their internal standards.
Projection is the case where the manager rates the employee performance based on his values and characters and not based on the predefined performance standards.
Such an error occurs when the managers evaluate the performance of employees by comparing it with the other employees and not based on the standards set.
This kind of an error occurs when a manager evaluates the performance of the employee based on events that have occurred recently without taking into account the previous or earlier behaviors.
A manager at times confuses an employee's observed work behavior with its cause. There may be many reasons behind an employee's unfavorable behavior. But the right cause can be understood by the manager only if the manager records the employee behavior properly and regularly. Thus the real cause behind unprecedented behaviors can be easy understood and rectified. Thus if the superior takes measures to document the behavior of the employee time to time then steps can be taken to coach and provide proper training to remove any undesirable work behaviors of the employee.
Different supervisors have varying tendency to rate their employees. They rate their employees based on their strictness or leniency. Some managers may be strict in the way they evaluate the performance and may give lower scores even for people who perform well. Thus the rating is not as expected or correct. Similarly there may be some other managers who may rate their employees based on their leniency. Thus lenient managers give good scores to the employees. This is also not a right kind of performance evaluation process.