Firms Usage Of Performance Appraisal Systems Business Essay


Every organisation has some goals and to achieve those goals organisation hire people who can perform as per their standards to enable the organisation achieve its mission and vision. So performance is the key to achieve organisational goals. But to keep records and to analyse the performance, organisation needs to follow a specific processes which is known as "Performance Appraisal". The important aspect for an organisation is not just to recruit good employees but also to retain them. Good working environment, promotions, career growth, rewards and recognition in return of their good performance will automatically retain the employees with the organisation. It is essential for an organisation to undertake different activities so that their employees feel motivated and give their best to the organisation. To increase employees' morale and performance resulting in better productivity, organisations should undertake performance appraisal system.

"Performance appraisal systems are formal methods of planning and evaluating employee's performance which involve employee interviewing."(Strategy and human resource management, Peter Boxall and John Purcell, Palgrave Macmillan)

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Performance management is one, which links organisations, individual and departmental goals together. It perform many functions like deciding upon incentives and rewards to the employees on the basis of their performance and establishing good relations between the employees and the organisation. Performance appraisal is a part of performance management. Another objective of performance appraisal is to encourage the employees for open communication so that they can directly communicate with the each other and the management. It helps in providing feedback and recognition for their performance. The process of Performance appraisal also provides them the understanding of the skills required for the particular job which is assigned to them, i.e. the basic requirements for the job and expectations of the organisation. It also helps in determining the need of training for the employees for developing their skills and working environment. Performance appraisal identifies the problem areas for improvement, providing adequate solutions for the same and also set goals to be achieved in the coming year. (employees manual pdf save)

Performance appraisal can be done with the help of formal meetings between manager and employee. In that meeting manager shares feedback, set their goals for the coming year and decide how to achieve them by meeting deadlines. There are more methods of measuring the performance of the employees which will serves as a basis for the rewards, recognitions, benefits and also the pay hikes. Then there are radical critique and orthodox critique of performance appraisal and we will focus on the implications of these critiques on the design of performance appraisal system.

" The performance appraisal is often the central pillar of performance management and a performance management survey carried out in 2004 found that 65 per cent of organisations used individual annual appraisal, 27 per cent used twice-yearly appraisals and 10 percent used rolling appraisals". (

Reasons to conduct performance appraisal:

According to the work place employee relationship survey(WERS), it was noted that formal performance appraisal were conducted in 79 percent of workplaces, with appraisal being slightly common in public sector (83percent)than the private sector (77 percent). Armstrong and baron (2004) survey showed that 87 percent of the respondents operated a formal performance management process, 65 percent were planning to introduce this system over next two years.

"According to IRS survey, the visible reasons of adopting the performance appraisal vary but ultimate aim being continued organisational growth. As per the study, 87 percent of the organisation has adopted it for identifying the needs of training and development where as 82 percent used to evaluate the performance of an individual employee, 32 percent to ensure that the communication between supervisors and employees is good and 19 percent used that for taking decision regarding the performance rewards. After Studying the survey we can see that performance appraisal serves multiple objectives for the employers. (Stephen Bach managing human resources)

On the basis of the above survey following are the reasons to conduct performance appraisal:

Performance appraisal helps in deciding the percentage of increment in the salaries of the employees. By performance appraisal evaluation of performance is done for the whole year and then on the basis of that evaluation, management decides the percentage of hike provided to the employees.

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Basis of promotions, i.e., by the process of performance appraisal, management do analysis and then decides to whom the promotion should be given .Those employees who have shown the outstanding performance in the whole year may be rewarded with the promotion . It is also used in providing the fair and reliable judgement on the performance of the employees.

Another reason is that it helps an organisation in setting the goals and objectives for the coming year. Performance appraisal helps in assigning the task, roles, authorities and responsibility to the employees for the coming year on the basis of their previous year performance. It also helps the organisation in enhancing the performance of the employees and motivating them to work and achieve new targets and goals.

Another important reason for performance appraisal is to let the employees know that where they are standing on the expectations of the organisations. In other words, employees become aware of the expectation of the organisation and whether they are meeting the expectation of management or not.

Providing feedback to the employees, so that they can improve their performance in future and get to know about their strength and weaknesses, is equally important role of the appraisal process. It also helps in identifying the need of training to the employees for their personal development and for their good performance. (ppt saved)

How firms conduct performance appraisal:

Most of the organisations conduct the performance appraisal by taking into account the key elements like Measurement, Feedback, Positive reinforcement, exchange of views and agreement. 'Measurement' means that the performance of an individual is measured against the specified goals and objectives. 'Feedback' includes positive and negative aspects of the employee's performance. In 'Positive Reinforcement' acknowledgement is given to worker about the work they did well and the areas of improvement. Manager also 'exchanges his views" openly with the employees so that they can feel motivated and can improve their performance. 'Agreement' is also a key element in which all the persons are agreed on the same topic and jointly solve the problems. (

Techniques of performance appraisal:

Following are some of the techniques for performance appraisal : Graphic rating scale, Straight ranking method, management by objective, field review, critical incidents, essay appraisal methods and 360 degree appraisal .(

The first one is Graphic rating scale this methods involves measuring the performance of an employee on the scale of yes, no or outstanding to un-satisfactory level. It measures employee's performance on the basis of the rating scale.

Straight ranking method is used to compare the performance of one employee with the other employees. Ranking is given one by one after making comparison with the other employees, after this the final ranking is given on the basis of overall comparison. (

Management by objective is that method which helps a manager and employees to agree on the same objectives and then employee work towards the same. They need to show regular performance to the manager and on the basis of that performance the manager gives ranking to the employee by comparing the performance with the agreed objectives. (

Field review is a method in which, head of the department asks from their supervisors to give feedback of their subordinates and rate their performance. (naukihub)

Critical incidents methods are those in which the analysis of an employee's performance is done on the basis of their behaviour in a critical situation, and then the negative or positive feedback is given on the basis of their reactions.

The other method of doing the performance appraisal is 360 degree method. This method is widely used by managers and employees in organisations. In this method views of customers, colleagues, and subordinates are taken for the performance appraisal process and then a 360 degree review is prepared. After this a final opinion of manager is taken to complete the employer's feedback. This method is used globally for the performance appraisal. (

the 360 degree feedback is based on important implications this is that with the help of different feedbacks an employee can know that where their performance is lacking it helps in increasing the self awareness of an employee, and with the self awareness an employee can easily increase his/her performance.

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There are so many reasons of doing the 360 degree appraisal. This appraisal is important because it increases the moral of an employee and gives them the courage of continuous improvement in their work. Another is feedback from the different persons helps in easily accepting for the because it is more valid. the information gathered through this appraisal method is used to do further planning in the organisations.

It also helps in giving the efficient framework for assessment and with the help of this framework employees can improve their further performance. It also helps in directly communications between the employee and with colleagues, customers, managers by giving and receiving the feedback. This type of appraisal system is best specially for customer oriented organisations so that the customers feedback is also taken while doing the appraisal of an employee.

Effect of performance appraisal on employees' attitude:

Employees' attitude plays a very important role in every organisation. When it is positive then they will be satisfied with their job and if negative than they may create unhealthy environment in the peer group. Employees attitude depend on various factors like pay, promotion opportunities, aspirations, instrumental benefits, needs, working conditions ,co-workers and supervisors.

Research studies show that employees are likely to feel more satisfied with their appraisal result if they have the chance to talk freely and discuss their performance. It is also more likely that such employees will be better able to meet future performance goals.(Nemoroff, journal of occupational psychology,Vol-52,25-34).

Studies by researchers shows that if freedom is given to an employee to talk and discuss the performance than they will be more satisfied with their appraisals because they don't have any doubt in their minds regarding their appraisal and it also leads to improvement in employees future performance for the organisational goals. (Nemoroff, journal of occupational psychology,Vol-52,25-34)

As per Bannister notes, it is important that the appraiser be well-informed and credible. If it is so, employees are more likely to view the appraisal process as accurate and fair. They also express higher acceptance of the appraiser's feedback and a greater willingness to change.

According to Bannister ,an appraisal should be reliable and open in front of the employee, so that they came to know that the appraisal is correct and reasonable and also they will accept with more belief. it is very important to include an employee in their performance appraisal so that they can gain more trust on the appraisal process conducted by the organisation.

Orthodox and radical critiques of performance appraisal:

Performance appraisal process is increasingly being used by organisations. Every organisation uses the performance appraisal as tool to motivate their employees and to achieve organisational goals. But the said assessment process or Performance Appraisal process faces another question - whether the outcome should be allowed to be driven by the characteristics of the appraiser or quantifiable checks and processes should drive it?.These two diverse approaches are Orthodox critiques and Radical critiques.

The Orthodox Critique

Orthodox critique says that there are imperfections in the design of performance appraisal and the implementation of performance appraisal is also not favourable for employees as well as for organisation. Orthodox framework of management is based on subjectivity, i.e., we can say that this process is more of qualitative thus lacking on the actual quantification through the assessment. When management is evaluating the performance of an employee and judging on his/her own perceptions rather than following a process or a set of rules then it will result in a subjective decision. So, orthodox critique can results in a bias decision. (class notes)

Sometime manager is the only individual who has to perform many tasks such as performance evaluation, providing feedback, trainings, etc. So as he/she is facing administrative difficulties, this may result in skewed outcome of the performance appraisal process.(class notes)

Individual's impression impact on the performance assessment is termed as "halo effect assessment". This means that if a manager has some positive impression about an employee just because of one instance then he will rate that employee high on performance rating scale, whether he deserves it or not. Same can happen if manager has some negative impression for an employee then he will assign a negative score on performance rating scale whether this employee is good on other things.(class notes)

In orthodox critiques we find doppelganger effect, which means that when we go through the whole performance appraisal data, we find similarities in various aspects between the manager who is doing performance appraisal and the employee who's appraisal is done. So, here we find that the manager wants to promote or praise only those employees whose attitude and behaviours matches his own attitude and behaviour. So, we can say that sometimes manager give rewards and recognition only to those employees who are alike him and score them high on performance appraisal scale.(class notes)

Sometime we find that supervisors are showing favouritism to few subordinates just because of their personal relation. This favouritism and personal relation is not related to performance, capability or qualification of the employee and will results in cronyism. Crony effect can affect the performance of the other employees as they know that manager is doing favour to an employee and this will ultimately affect the organisation. If an performance appraisal is done by orthodox critiques then the appraisal will result in de motivation of employees, misuse of data, issues of trust, complexity in working processes, etc. (

The radical critique

Radical critique is totally different from orthodox critiques. In radical critiques there is no place for subjectivity. In radical critiques the manager who is doing performance appraisal always follows rules and regulations of the performance appraisal cycle. In this the performance appraisal is done by management without concerning about that individual employee, what concerns to them is performance, qualification, and capability of the employee.

In radical critiques performance appraisal is more paper based process, in other words we can say that while doing performance appraisal manager scores the employee on the basis of data which he has in records about his performance. (class notes)

As employees know that their management is based on radical approach, they always obey to the rules and regulations of the organisation. Under this type of performance appraisal employees become more disciplined, active, capable, efficient and always try to initiate new approaches in the organisation. (class notes)

Performance appraisal is based upon facts and figures which makes working environment more transparent. Data which is used for performance appraisal is timely updated so that whatever employees are delivering would be recorded without any discrepancy or delay. More reliability is there in radical critiques. Feedbacks which are provided by the manager to the employees are acceptable and reliable thus results in an open discussion between manager and employee. Open discussion after the feedback always motivate employees to improve themselves and work efficiently to achieve his goals as well as organisational goals.(class notes)

Chances of bias decision are less. Manager can not show any favouritism to any employee as he has to support his decision with data. Because performance analysis is totally based on practicality there is a full control of management over employees behaviour and working patterns which will provide employees a standardise working platform and thus reduce employees conflicts , struggle or opposition.(class notes)

Individualism is observed in radical critiques as all the decisions are taken by an individual. All the rules , patterns, working conditions, goals, etc in performance appraisal cycle are framed by individual for group of employees .(ortho & redcl pdf)Mutual benefit also become doubtful sometimes, that is whether the performance appraisal process is beneficial for both manager and employee or not. Because the evaluating pattern and assessment methods are decided by individual.(orthdx & red pdf)

There is a assumption In radical critiques that there should be a consistent reaction of both the manager and employee towards scores of appraisal ratings. It is assumed because the whole performance appraisal process is based on data and facts which are there in records.(class notes)


From the above discussion it is clear that performance appraisal is an integral part for the continued growth strategy of the organisation. Visible reasons for conducting performance appraisal range from employee satisfaction (through increments, promotions, etc.), initiatives required to increase productivity (through trainings and skill enhancement) to better communication (360o feedback). Performance appraisal also affect employees attitude towards the work and organisation.

When performance appraisals are done well, they will result in a motivating the employees thus resulting in improved performance. Conversely, if performance appraisals are done poorly then they may result in negative enviornment. When employees are not satisfied with the performance appraisal and the feedback provided by their supervisors is not satisfactory and reliable then they may react in a provocative way. They may become de-motivated, start thinking negatively and waste their time in correcting the management and policies. It can also results in conflicts as employees may raise questions on management's work, their approach, policies, attitude and working strategies. Importance of both quantitative as well as qualitative approaches (Orthodox & Radical critique) can not be ignored. Proportionate mix for the two may differ based on the field / sector / segment of the organisation. For example, a completely process driven organisation may want to have higher allocation to quantitative approach. Whereas, a sales organisation might want a mix of the two, as personal preferences of the supervisor will have direct impact on the sales productivity.

So it is necessary for an organisation to do performance appraisals in a right manner to achieve organisational goals and employees retention and satisfaction.