Effectiveness Of Performance Appraisal System Business Essay

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According to Pulapa Subba Rao (2003), Human Resource Management (HRM) means to employ people, helping them to develop their resources, making effective use of by maintaining and compensating them for their services in relation to their work and the organization's requirements with the aim to achieve proportionately the organizational, individual and social goals. HRM functions can be categorized into managerial and operative functions of which consist of recruitment, development, rewards, training, selection, motivation, strategic planning, resourcing and performance management which include performance appraisal of employees in an organization.

1.2The need for Performance Management System (PMS)

The term performance management was emphasized due to a rise of competitive pressure in the market place. Armstrong and Baron (1998a) define performance management as an achievement agreement to manage and develop people that improve the possibility for better performance in the short and longer term. A performance management system will help an organization to better achieve its goals, mission and visions with the commitment and development of its workforce. Hence, with a comprehensive performance management system that reflects transparency, equity, consistency and regular effective feedbacks an organization will improve its communication, overall productivity, performance effectiveness and loyalty of its employees. For a performance management system to give out its best result it needs to be implemented in its integrality.

1.3Performance Appraisal

Performance appraisal as describes by Fletcher (2001) consists of a numbers activities within an organization which aim at assessing and developing employees' competencies to promote performance and distribute rewards accordingly. Performance appraisal is taking an increasingly important place in human resource practice as described by Boswell and Boudreau (2002). Performance appraisal is defined as a method that evaluates employees' behaviour, their need for training and development in relation to results at the work place. It indicates how well did employees meet their job target but some time when carried out informally tends to take highly biased form in any organization (Fletcher, 1997). It also indicates how recruitments and selections in an organization have been effective. The successful implementation of a performance appraisal system is opened to challenges that can be overcome through proper training and commitment from staff at all level in an organization.

2. Literature Review

2.1 Performance Appraisal System

"(Performance) appraisal systems should be seen as being transparent and equitable, providing report consistency and regular feedback on performance" Armstrong and Baron (2005). Performance appraisal system has a major contribution to the performance management system as it a tool through which the goals and objectives of an organization are explained, employees performance are assessed and developed. Fletcher, (1997) draws the conclusion that since performance management is evolved into a broader outlook with performance appraisal being more indulged into human resources systems for further accomplishment that it could do by its own.

2.2 Transparency in Performance Appraisal System

Transparency is one of the first considerations for effectiveness in performance appraisal systems as stated by Armstong and Baron (2005). Performance Appraisals need to be transparent in order for employees to find it reliable. The evaluation process itself has to be free from any bias, manipulation, discrimination according to age, gender, religion. The appraisee is to be informed well in advance of the appraisal, what is expected from him in doing his job and how his role is contributing to the goals of the organization. Appraisers on the other side need to be clear enough in providing the necessary information during the evaluation sessions, guaranteeing that information given by appraisees will not be altered nor tempered with to their disadvantage. Transparency in the system will reduce the level of conflicts that may exist prior to the appraisal and may contribute to a better relationship between both parties.

However, Fletcher (2004) explains performance appraisal as "High risk activity" on the part of managers, as it involved an issue of pitfalls which was further supported by Newton and Findlay (1996) who refer to appraisals as being open to manipulation from supervisors.

2.3 Equity in Performance Appraisal

Equity of a performance appraisal system is vital for its success. According to research carried out by Cook and Crossman (2004), they find out that perceived fairness of an appraisal system itself contributes to overall perception of equity in an organisation. Furthermore, in individual performance appraisal, Simmons (2002) draws the conclusion that equitable appraisal together with enhancing and resistant performance will gain the commitment of professionals and can be considered as key factor for achieving high return on an organisation "intellectual Capital".

On the other hand, Brumbach (2003) describes performance appraisal system as a dishonest annual ritual. Similarly, DeNisi (1996) with a more in depth research, puts forward that due to the subjective nature of performance appraisal system that it is not surprising to see so much literature on unreliable, inaccuracy and inherent unfairness of most appraisal system.

2.4 Performance Appraisal providing Report Consistency.

As argued by Armstrong and Baron (2005), performance appraisal systems should provide report consistency, employees have to be considered equal to everyone, and there should be a common and proper process of evaluation to all staff. Williams (2002) suggests that training be incorporate into the cycle of performance appraisal so that all employees are provided with the same opportunity to improve their areas of weaknesses and ensure consistency in the application of the report.

However, Hartle (1997) cites that the reports are to be unreliable to the fact that ratings can be inconsistent and unfair with performance appraisal systems too individualistic and remote. Wilson and Western (2001) bring this belief further by suggesting that the procedures in appraisal that gives most staff the excitement comparable to a visit to the dentist.

2.5 The importance of feedback in Performance Appraisal Systems

Most employees like to receive feedbacks to know where they stand with the expectations of the organization. Effective feedback is vital factor in improving performance (Williams 2002). It can be considered as the lifeblood of performance appraisal process as it builds up trust from employees. Unlike performance management which is continuous, feedbacks and appraisals are with more periodic activities (Rao 2004). As reviews in most organization take place annually, Sahl (1990) recommends that reviews are made for frequently to ensure that developmental objectives are achieved within a time frame. It is best to give feedback both before and after the performance appraisal period, this will provide the employee with the opportunity to fulfill the shortcomings found.

However, effectiveness of feedback will depend on the ability of the appraiser to provide appropriate feedback to the appraisee. Very often managers don't have the requisite skills for direct feedback but instead go for superficial feedback sessions that are purposefully rushed, interrupted and end up with a couple of slices of general complements to hide the negative feedback through a sandwich approach. Furthermore, it is recommended by Kline and Sulsky (2009) that feedbacks from more than one source are more reliable in terms of ratings and performance achievement.

2.6 Performance Appraisal and Rewards and Motivation

When an organisation bases its merit pay system on the results from performance appraisal, it requires that appraisal to be linked to financial reward is done and in a very professional way. In case that the reason for merit pay is not related to the results of performance appraisal there is still good ground for appraisal to be carried out as suggested by Edward. E. Lawler (1981). Decisions which are based on employees' performance are most commonly related to rewards, bonus, high salary rates, extra benefits and allowances. Hence, it is argued by Grobler et al (2005), that the terms merit review or merit evaluation are used by organisations to decide about pay increases. The financial rewards whether monetary or non monetary may be used as motivation and retention tools at the same time.

2.7 Performance Appraisal and Training and Development.

Appraisal of employees performance is an important tool to frame appropriate training and development policies and programmes as described by Carell et al (2001). It helps to identify lack of individual knowledge and skills for future career moves for employees. Performance Appraisal is used to identify future training, development programmes and problems resulting from lack of a critical skill or ability caused by low morale or some form of grievances at work.

2.8 Performance Appraisal and recruitment and Selection

Grobler et al (2001) believe that performance appraisal contributes a lot in the procedures of recruitment and selection. Appraisal provides human resource professional the possibility to evaluate the effectiveness of their past recruitments and selections to know about the validity of their strengths and weaknesses in such procedures and to identify potentials of employees. Hence, appropriate changes in recruitment and selection of future staff can be implemented to set future objectives of the organization.

3. Analysis and Discussion

3.1 Organisation profile

The Co-operative division of was formed in 1913 under the ministry of Agriculture as a result of the Co-operative Society Ordinance which became law in 1913 with the aim to solve the financial problems faced by sugarcane planters. Nowadays, it is governed by the Cooperative Act 2005 and it forms part of the ministry of Business, Enterprise and Co-operatives (Co-operative Division) which has the objectives of facilitating the promotion and development of the co-operative movement. The Co-operative movement has a workforce of hundred and forty-three employees. It has the responsibility of eight hundred and fifty co-operative societies from different sectors such as agriculture, manufacturing and service sector all over the islands of the Republic of Mauritius.

3.2 Analysis of Performance Appraisal at the Co-operative Division

The Co-operative Division can be considered to be in a period of transition period in terms of the types of performance appraisal used to appraise its employees. The performance appraisal system which is in use since its formation up to now is the Annual Confidential Report (ACR) which is to be replaced by the Performance Management System (PMS) as from next year. The PMS has already been implemented on a pilot basis since year 2009, and is supposed to be fully operational by year 2013.

3.3 Analysis of the Annual Confidential Report and its purpose

The ARC is a traditional performance appraisal method that is used to assess employees' performance confidentially on an annual basis. The report is based on observations, judgment and intuitions that an appraiser has over his subordinates. It is requested that the appraiser be at a rank at least two grades above that of the appraisee. The appraiser does not have the right to show or to communicate the content of the report to the appraisee but has to pass it on confidentially to his responsible officer for comments. The ARC is in the format of a form which is divided into three sections. The first section is filled up by the appraisee himself concerning his personal data and record of service. The next section consists of the grading for qualities and performance of the employee's works. The last section deals with recommendation from top management on the appraisee's ability to perform a higher grade job. The purpose of the ARC is to provide an assessment on the performance of the employee that is used for confirmation in service, grant of increment on his salary scale, promotion, deputation and scholarships.

3.4 Analysis and uses of the Performance Management system

The PMS is a method in itself designed by the Ministry of Civil Service and Administrative Reforms MCSAR) aiming at redirecting managerial efforts from conformance to performance.This performance appraisal involves two main actors namely the appraisee and the appraiser who should be the immediate supervisor of the appraisee irrespective of his rank or grade. The performance appraisal is carried out through an assessment form in six parts which should be agreed and signed by both the appraiser and the appraisee. The part on personal data, performance Agreement and Identification of competencies and performance standards have to be mutually agreed at the beginning of the year between the appraisee and the appraiser. The performance cycle is for a period of 12 months. The second part will be filled and signed by mid-year by the appraisee himself on a self-assessment and a personal development plan in relation to strengths, area for development and proposed actions, followed by the next part on progress discussed and agreed with the appraiser in the mid-term itself with feedbacks. In the six following months the same exercise as in part three is going to be repeated to see the evolution of the performance as agreed in mid-term for ratings. Here also the appraiser and appraisee are going to have a discussion about the progress discussed and agreed before coming to the assessment of overall performance and the overall score with appropriate feedbacks.

4. Discussion

4.1 The performance appraisal System as being transparent.

The ACR can be considered as a method with no transparency at all due to the restriction of access to the report from the appraisee, this can be associated with what Newton and Findlay (1996) refers to appraisal that it is opened to manipulations.

However, the PMS is one of the system that satisfies the requirements of being transparent in performance appraisal as argued by Armstrong and Baron (2005). It is a method where ratings are agreed mutually upon and where dialogues and communication are vital for its implementation. PMS provides the opportunity of having a face to face interview between the appraisee and the appraiser.

4.2 Equitable performance appraisal;

Under the application of ACR, very often the appraiser does not even know the appraisee or his performance at work, as it is a must for the appraiser to be at least two ranks or grades higher which means that they hardly work together. The appraiser may obtain information from other third party sources which are not reliable and honest. Hence, ACR can be related to how Brumbach (2003) describes appraisal as a dishonest annual ritual

On the other hand, PMS provides fairness where the appraiser is the immediate supervisor and has to look for the agreement of the appraisee for rating his performance which can be related to Simmons (2002) on equitable appraisal. If in case the appraisee does not agree with the assessment, he may appeal to the Moderating Committee.

4.3 Report Consistency in performance appraisal;

ACR does not solve the problem of competency gaps, unfavourable ratings and weaknesses are not followed by training and development as remedial actions. Furthermore, favoritism in terms allocation of scholarships to those who have been dishonestly favourably appraised make the system more inconsistent. This is an example of inconsistent and unfair ratings with performance appraisal systems as cited by Hartle (1997).

Thanks to the implementation of the PMS there is a common process to all who are being appraised as the system is transparent. Dates for interviews are agreed in advance, any appraisee will have the opportunity to meet face to face with his appraiser at least twice and to agree on ratings. If ever there is any weakness or competency gap the possibility for training is incorporated in appraisal for all those concerned as suggested by Williams (2002).

4.4 Performance appraisal with feedback;

One of the main limitations of ACR is that it does not provide feedback to the appraisee, which is a vital factor for improving performance as recommended by Williams (2002). If proper training was provided to appraisers on informal feedbacks that would have helped its effectiveness since formal feedback is restricted.

However, PMS allows reviews to be made more frequently to ensure that developmental objectives are achieved as recommended by Sahl (1990). Communication is at the center of PMS, appraisees will be provided with both formal feedbacks during Mid-year and End of year meetings, in addition with informal feedbacks all during the year. For further effectiveness of the system more sources of regular feedback can be included.

4.5 Rewards with performance appraisal;

Both the ACR and the PMS findings on employee's performance are used for decision related to rewards which satisfied the argument of Grobler et al (2005) about pay increase.

The monetary aspect of rewards is attached to ACR for the payment of annual pay of increment on the salary scale of employee and more in importantly to the eligibility for promotion to a higher grade with higher salary scale and allowances as and when the need for vacancy arises.

However, since the PMS is not fully operational it will be confusing to use both methods for rewards for the same period. As from next year, when fully implemented, PMS will be determinant for any additional type of rewards, motivation and retention such as the payment of end of year bonus to employees and double or triple increments on salary scale.

4.6 Performance Appraisal influence on Recruitment and Selection

Unfortunately, the use of ACR is limited and is not in line with the belief of Grobler et al (2001) on appraisal with regard to recruitment and selection. The ACR only contributes in the selection for promotion purposes which is usually on the basis of seniority in the public service.

Unlike the PMS, though it is not fully implemented, it gives a clear picture of the effectiveness of the recruitment and selection processes made by the public Service Commission (PSC). Hence, the PSC will be better equipped with the competencies and skills required for job analysis, publication of vacancy and during the recruitment and selection process.

5. Human Resource Development with performance appraisal

With the introduction of PMS the Co-operative Division have contributed a lot towards training and development of employees. As describes by Carell et al (2001), performance appraisal helps in designing appropriate training and development programmes to fill in the competency gap that exists.

On the other hand, ACR has not proved to be an effective tool for providing appropriate training and development but only for the allocation of scholarships which is not directly related to the Co-operative sector or to the improvement of employees' performance.

6.Human Resource Management supports in performance appraisal

The HRM has a very important role to play in the proper implementation of the PMS rather than that of the ACR. HRM is more employee-oriented and caters more for the need of the employees rather than having merely administrative role as with the ACR. It is responsible to organizing training, ensuring that assessment dates for interviews are adhered to, resolving conflicts and divergence, dealing with appeals at the Moderating Committee and provides the necessary support in respect of PMS.

7. Conclusions


It is observed that the Co-operative Division has undergone major changes in its Human Resource practice supported by the introduction of a new performance appraisal systems the PMS in 2009. It can be argued that since the formation of the Division up to 2008, the HR practice was based mainly on the traditional personnel Management with rather poor industrial relations as being more administrative and merely exerting control over its personnel. Thanks to the reorganization of the public sector by the MCSAR which has brought several changes in the HRM including the PMS, hence has developed the traditional personal management to respond to ever changing demand of the public, looking for more value for money and meeting the need of employees in the public sector.

The need for performance appraisal system to be transparent as argued by Armstrong and Baron (2005) has been met in the Co-operative Division as with the phasing out of the ACR by the end of this year, the possibility of appraisal being considered as a high risk activity with manipulations from managers is fading out. PMS brings more openness and interactions between the appraiser and appraisee.

Similarly, thanks to PMS, appraisal at the Division will no longer be perceived as being considered as a dishonest annual ritual for many employees with the ACR. The new appraisal system which is perceived with fairness will bring an overall perception of equity in the Co-operative Division, hence improving both commitment and achievement from employees.

Given the arguments that the new appraisal system is transparent and equitable there is no doubt that PMS brings consistency in its reports. A consistency report provide the same opportunity to all staff with particular weaknesses to have recourse to properly tailored training and development programmes to improve their weak areas.

The PMS is a much more effective appraisal system than ACR in terms of feedback. There is no existence of feedback at all in the ACR with everything being confidential to the appraisee. Although PMS is recognized for providing regular formal and informal feedbacks, it was observed that some superiors are not fully equipped with the necessary abilities and competencies for appropriate feedback delivery.


The new PMS in the Co-operative Division have been designed to overcome the weaknesses of the ACR. However, it should be implemented properly in its integrality to yield all the benefits from the system. Though the system seems to satisfy the criteria set by Armstrong and Baron for an effective performance appraisal system, it is only its full integration and more commitment from all the staff of the Division that it can achieve its optimum benefits.

It is recommended that PMS is implemented fully as soon as possible. It was observed that some appraisers and appraisees do have wrong perceptions of the system and are showing resistance to its implementation as they not master its benefits. This can be remedied with properly tailored training, workshops and additional information to boost up commitment, productivity and loyalty. Furthermore, the PMS can be more effective by extending its sources of feedback such as self-Appraisal and 3600 feedback, to have more reliable ratings and better performance.