Performance appraisal systems play an important role in an organizational setting. Scholars of performance appraisal have regarded it as a fundamental part of any organization (Pettijohn et al 2001).It is defined as a process of identifying and measuring people's performance in an organization (Mejia et al). This definition however, raises the question of how performance can be quantified. This study aims to spot the various types of appraisal systems, their mode of measurements and explore critically their impacts on both the organization and its employees. Error types linked with performance appraisals will also be identified concluding that performance appraisal systems in practice, fails both the employer and the employee. This conclusion is based on the findings of the analysis.
Several researchers have defined performance appraisal systems in different ways. According to Edwards and Pinnington (2000), performance appraisal is the formal means of setting, measuring and meeting performance expectations. Bennington & Baix (2005) also describes performance appraisal as a management concept from the west aimed to improve individual and organizational performance, he further elaborates that the structure put into place for measurement and assessment of employee performance in an organization is known as the Performance Appraisal System. Shahid (2009) on the other hand, regarded it as an essential employee practice of the overall human resources framework of an organization.
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There are various reasons for performance appraisal systems (Mount 1984). Such reasons may be for improvement purposes or in taking decisions about an employee. Mejia et al (2004) classifies appraisal systems into developmental; for training purposes or administrative linked to promotion or termination. It is believed to be for corrective reasons such as, coaching, promotions and pay rewards (Murphy and Murgulies 2004). They are aimed at continuous improvement, annual cull; reward high achievers and enable managers address performance without conflict (Redman and Wilkinson 2009). However, despite the clear aims of performance appraisal systems, there are a number of downsides in its implementation. Brumback (2003) is of the view that performance appraisal is traditionally done via ratings which frequently turn out to be biased. Organizations therefore need to work in hand with performance management to put things in place. Mejia et al (2004) notes that worker's morale may be lowered after appraisals and this can pose problems for peers and management, he advices some measures of performance management be adopted to resolve such issues.
According to the CIPD (2010), there is no right way to carry out an appraisal. It argues that some organizations appraise employees individually, collectively, via customers, managers, and subordinates. Whatever type is used, it is expected that an effect will emerge on both the appraised and his organization as past researches have recognized that there is a gap amongst managers and employees in performance management theory and its practical (Bratton and Gold 1999). An overview of the above analysis leads us to support that Performance appraisal is carried out using various methods with varying effects.
An individual appraisal system measures the individual's contribution to his organization. It is often used when rewards and sanctions are tied to performance. In providing feedback to the individual, he is able to improve and work towards achieving a better performance result (Wilkinson and Redman 2009). However, where the individual perceives to have been appraised incorrectly his attitude to work might change (Mejia et al 2004).He further opines that this, can pose a huge problem for his employer and colleagues. According to Byrne and Hochwarter (2008) where an individual perceives injustice he may adopt a strategy for dealing with derision by becoming self defensive towards the object of contempt, in this case, the employer via the manager or peers. Again, critics 'of the individual method of appraisal have argued that it brings about fierce competition among employees because comparison is usually made among them (Roberts 2003). There is the tendency that every employer will want to come out best and this will lead them to strive at all cost not caring who they step on in the process. Yamaguchi (2003) opines that individual needs and wants takes priority over relationships, group harmony and functionality. This may disrupt the team spirit within the organization and cause unusual rivalry
Recently, there has been huge emphasis on team work. Organizations are subdivided into units and all groups are expected to work together to achieve organizational goals (Washington and Foster 2009). Human relations theory according to Kanaki and Davies (2006) believes that good interpersonal interactions are vital in organizational functions. Differences are expected to be dealt with internally. Performance here is judged by group and every member of the group gets an equal rating (Wilkinson and Redman 2009). How then do you measure an individual's performance to his group? This system does not seem to put into consideration the fact that certain individuals might be rebellious or subdued in their groups. Individuals with urgent training needs might not be easily spotted using this system (Roberts 2003). It also seems rather unfair that those who contribute little or nothing get the same grade with those who work really hard. Afolabi and Ehigie (2005) propose that individuals with high need for achievement would be less effective in teams as they would be on independent tasks so as to be solely linked with success. This might suggest that in getting ranked generally, the organization misses what they can offer as individuals.
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The ranking and yanking system is a common method of performance appraisal. Ranking is connoted with numbers and people who fall at the top of numbers are rated as good while those below get rated as bad and given a chance to improve, their inability to pick up may lead to disengagement which is the yanking system (Wilkinson and Redman 2009). They further state that, the basis for this system is to reward the top and punish the bottom. This system gives a hint of inequality as it does not reveal whether the top rated worker in one team is a better performer than the average rated worker in another team (Mejia et al 2004).It also puts the older workers at a disadvantage because they seem to have reached the point of diminishing returns, they have a greater representation in the bottom ten percent (Wilkinson and Redman 2009). The implication of this is that they go away with their experience leaving the organization vulnerable to "trial and error". Steven et al (2002) in a research on downsizing in universities found that most senior professors were retrenched forcefully at a point in their career. However, they do not leave without putting up a legal fight. Schraeder et al (2006) also highlights this point in quoting Eyres (1989) who notes that using performance appraisal as a basis for termination or layoffs could prompt employee lawsuits. This implies that organizations could be charged with discrimination even if the organization is disengaging them on incompetent grounds.
Pate et al (2003) considers competency difficult to define. He summarizes it into the rationalist approach which is the attributes employed in performing a job and the subjective approach which focuses on the rapport between the individual and the job. The term "attributes" seems subjective as it cannot be quantified. Competency based assessment provides employees with feedbacks and gives them direction on areas to improve on, it also examines the progress an individual is making on the job (Redman and Wilkinson 2009) but the subjective nature of competency makes it difficult to measure. Competence assessment is based on perception (Pate et al 2003). Perceptions are just views or ideas. It is the way one perceives the world. Krueger (2007) quotes Lopes (2007) in defining perception as a representation by sensing. It does not necessarily connote reality. In an organization where a certain skill is valued as part of its culture, the demonstration of such skill may be perceived as competent. This may leave other contributions unaddressed or poorly served (Lindsay and Stuart 1997).
Upward Appraisal system is staff appraisal of managers which involves distribution of questionnaires to employees who are expected to rate their managers anonymously, feedback is then provided to the manager who uses this to get better.(Wilkinson and Redman 2009).This method gives employees a voice (Mathew and Redman 1997).Nevertheless, they pointed out that evidence from early adopters of the exercise reveals that managers on discovering what employees think of them experience great trauma which was expressed via anger, anxiety, acceptance, annoyance and assistance. To them, an employer also has an opportunity to get back at his manager through this appraisal. The fear of being victimized may lead employees into giving responses that they think the manager will appreciate more. When a manger exhibits displeasure at his appraisal subsequent appraisals may not get true ratings. Tzafrir et al (2004) deem that employee's trust or lack of it in managers can influence behaviour.
Perhaps, an attempt to protect appraisers from oppression may have led to the adoption of the mystery shopper appraisal system. It involves customer appraisal of employee (Erstad 1998). Often times, technology surveillance is used to monitor how customers are treated. It is most common in service based companies. This system of appraisal helps employers know why customers stop patronizing them. Erstad (1998) is of the view that mystery shopping monitors services obtainable to customers with information from customer contentment. It also captures the real behaviour of the employer. Calvert (2005) adopts the work of (Guzman 1992) who remarks that the method is a "snapshot" of services unaffected by previous experience. It however raises moral issues; employee's privacy is encroached upon in the adoption of this technique. A notion highlighted by Malcolm & Carrigan (2000) who state that ethical issues are raised as mystery shopping compromises privacy. Redman & Wilkinson (2009) also opine that it makes employees feel they are not being trusted. This can affect their loyalty to the organization.
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The 360 degree appraisal is a multiple source of appraisal. Hurley (1998) refers to it as a "multi-rater". He believes that the information gathered here is more dependable since it involves three or more raters; the chances of prejudice are less. This system provides the individual with feedback. Those involved in giving feedback are supervisors, peers, subordinates and self. This rating system does not include the customer, the very reason for business (Garavan et al 1997). Peer's appraisals seem to draw up a lot of emotions. Mejia et al (2004) carried out a study in an engineering firm where appraisal results were not to be tied to pay. Employees were asked to evaluate their colleagues. He recorded that after the appraisal; a number of employees got upset and went further to file their grievances on how they were rated as they believed they should have gotten more scores. Feedbacks were said not to have been welcome as employees thought their colleagues were not in the best position to offer them. It is also very unlikely that individuals will rate themselves low even if others see them as underperforming.
Some theorists, notably Halachmi (2005) have argued that translating human interactions to measurement is impersonal and difficult. He states that it is often unreliable to quantify phenomena as complex as performance. Possibly, this factor can be associated with inherent errors produced in the cause of performance appraisals. The halo effect for instance, is a belief that if an employee is good at one thing, he will also be good at another. Murphy and Murgulies (2004) describe it as scoring employees excellent in many categories when they stand out only in one. The opposite of the hallo effect is the horn effect. Edwards and Pinnington (2000) opine that the horn effect is a reverse of halo effect; here the appraiser underestimates the performance of an individual. This rating system can be said to have a biased undertone and employees may wish to seek redress in the court when they sense this error. Lindbom (2007) advices that direct observations will reduce halo and horn effects and avoid ethical and legal pitfalls.
Another famous error in appraisal is the Doppelganger (Keizer 2007). It is the tendency that people who share some similarities with the appraiser get higher ratings. Arguably, this error is a hindrance to organizational development as it does not reflect true performance. A study by Bozionelos (2005) on selection process in a university showed that a dominant group who were proponents of a traditional research methodology were able to manipulate questions at an interview and went ahead to select applicants who shared the same ideas with them. He recorded that the school fell in ranking among other schools. This could be because candidates were not appraised and chosen transparently.
Again, employees with emotional and physical challenges may experience setback in their works. The impersonal nature of the appraisal system does not seem to put this factor into thought. Purbey et al (2007) asserts that performance measurement indicates what has happened not its reason for happening or what to do regarding it. So despite what the employee may have offered or what he can offer, he gets appraised only by his performance as at the time the system is being utilised regardless of the fact that certain situations are beyond his control. In times of recession for example, people tend to spend less (Begg and Ward 2009). It will therefore seem imprudent to appraise an employee whose target is sale based low when the market is generally unfavourable. However, because appraisals are target oriented, an issue noted by Professor Andy Neely in (Powell 2004), such factors as recession are of little concern to the appraiser when making his judgment.
In conclusion, performance appraisal system was created to be an effective way of managing employee and employer performance through identification, evaluations and feedbacks to ensure performance development. An effective performance appraisal system helps both parties to identify their weaknesses and directs them on what needs to be done to improve. Yet, it is difficult to relate performance appraisals to output. Woodburn (2004) acknowledges this in his work, "engaging marketing in performance management", noting that performance measurement is not easily associated to productivity. Still, there is a lot of shove on it thereby creating pressure on the workforce with little or no long term gain. It also needs to be constantly modified. Aghazadeh and Mojtaba (2004) propound that high performance work system involve changes in an organizational culture and restructuring, which can be risky and costly. Organizations are bound to keep changing their systems to meet up their present organizational goals as well as changes that may have occurred in the business world (Woodburn 2004). Rees and Porter (2004) opine that appraisal schemes may require substantial commitment in terms of organizational resource. Apart from the fact that Performance appraisal is time consuming and costly, it may also demoralize employees who feel they have not been appraised fairly therefore, leading to fall in performance. A number of errors have also been associated with performance appraisal systems. That is why Soltani et al (2001) in a survey by the Institute of Employment Studies, showed that despite the fact that performance appraisal is everywhere, it often fails both the employees and the organizations.