Personnel performance assessment or performance appraisal is a systematic and periodic process that assesses an individual employee's job performance and productivity in relation to certain pre-established criteria and organisational objectives (Manasa, K. & Reddy, N. (2009). Efficient performance of an organisation as whole strongly depends amongst other things on the effectiveness and quality of performance of each selected individual in that organisation. In order to attain high levels of personnel efficiency one must amongst other things find and single out what drives each in every person to succeed in their daily work activities. What drives them to learn and improve their performance in other words find what motivates then to perform.
Importance of performance appraisal cannot be underestimated. Performance management systems are employed "to manage and align" all of an organisation's resources in order to achieve highest possible performance. (Muchinsky, P. M. (2012). How performance is managed in an organisation determines to a large extent the success or failure of the organisation. Therefore, improving performance appraisal for everyone should be among the highest priorities of contemporary" organisations (Muczyk, J. P. & Gable, M. (1987, May).
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In this paper I will present the results of research conducted on the subject and attempt to analyze existing personnel performance appraisal and motivation techniques in Gazpromabank. I will then present ways that I think can improve the performance assessment system in Gazpromabank to increase the motivational drive and thus improve the efficiency and competitiveness of the organisation as a whole.
This section reviews literature relevant to performance appraisal. It serves as theoretical foundation upon which this term-paper is based. It starts off with an examination of what is performance, and why it should be measured, how performance appraisal fits into performance management. Follows with a review of literature covering appraisal systems and their application. With some references to existing performance appraisal system in Gazprombank.
Definition of performance
The Oxford English dictionary defines performance as the "accomplishment, execution, carrying out, and working out of anything ordered or undertaken". Armstrong and Baron (2005) argue that performance is a matter not only of what people achieve, but how they achieve it. Bates and Holton (1995) suggest that performance is a multidimensional construct, the measurement of which depends on a variety of factors. Brumbach (1998) offers the most precise definition. "Performance means both behaviours and results. Behaviours are also outcomes in their own right and can be judged apart from results".
From the definition, and interpretations above, it can be argued that performance is not just about outputs, it is also concerned with actions and behaviours demonstrated to achieve given targets.
Most commonly used and rephrased definition is provided by Armstrong (2000) who writes "performance management is a strategic and integrated process that delivers sustained success to organisations by improving the performance of people who work in them, and by developing the capabilities of individuals and teams". Further research by Armstrong (2000) suggests that when performance management is used well, it will contribute to organisation success, and as such, is a vital management function. It is the strong believe of the author that any sustained managerial success or positive performance in the long run can only be achieved through formation of a professional, well orginased team of driven and motivated individuals. Where attention is given not only to individual achievements attained but individual professional growth.
Key performance management aspects:
McMaster (1994) and Williams (2002) amongst others, suggest that the sequence of performance management is as follows:
i. Identification of strategic objectives
ii. Setting of departmental/team goals
iii. Activities identified/performance plan developed
iv. Outputs agreed
v. Monitor/review of performance through appraisal
vi. Determine development needs
vii. Allocate reward
For employees, this entails they should be able to answer the following questions:
What is expected of me?
How am I doing?
What shall I do next?
What help will I need ?
(Source: Macauley and Cook 1994)
Although allot of attention is given to individual performance appraisal very little of the literature reviewed applies the above concepts to team performance. Among the exceptions are Armstrong and Baron (1998) who point out the lack of attention paid to team performance, and Brumbach (2003) who argues strongly for the importance of team performance management, and suggests the above four questions could be adapted to teams or individuals.
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Performance Appraisal is increasingly considered one of the most important human resource practices (Boswell and Boudreau 2002). Commonly found definition of appraisal in most dictionaries revolves around means of estimating the value or quality of something. (The Oxford English Dictionary defines the word appraise as "estimate the value or quality of") Linking this to performance, Bird (2003) suggest performance appraisal is the assessment of what we produce and how. Although most authors are similar in their definitions of performance appraisal one in particular stresses the view that the appraisal system can be seen as a dishonest annual ritual (Brumbach (2003). More in depth research by DeNisi (1996) suggests that due to the subjective nature of appraisals, it is not surprising there has been much written on bias, inaccuracy and inherent unfairness of most systems. St-Onge, Morin, Bellehumeur and Dupuis (2009) draw together a number of surveys showing worldwide dissatisfaction with appraisal, in particular citing research of 50,000 respondents that reveals only 13% of employees and 6% of Executives consider their firm's appraisal process useful.
Brown (2001) cites the following major problems in common appraisal techniques and processes:
Managers do not take the process seriously
Inadequate effort from all involved
Bad communications and training hinder effectiveness
The systems are too individualistic, remote and divisive, and
Ratings can be inconsistent and unfair
Although the overall perception of performance appraisal is something that needs to be done and gotten over with it has been deeply rooted in the corporate culture worldwide. Managers and employees continue to accept performance appraisal systems whilst accepting they are fraught with inaccuracies ( St-Onge, Morin, Bellehumeur & Dupuis 2009).
The aims of performance appraisal
Interpretation and understanding of the benefits associated with appraisal systems has been evolving. Early literature, best demonstrated by Stewart and Stewart (1987), mentions the benefits of appraisal systems, but these were mainly from the organisation perspective. Boice and Kleiner (1997) cite the general purpose of performance appraisal is in letting the employee know how his or her performance compares with the managerial expectations. Again, this is a one sided view. Fletcher (2006) takes a more balanced view, suggesting that in order for performance appraisal to be constructive and useful, it should be beneficial to both for appraiser and appraisee. Youngcourt, Leiva and Jones (2007) suggest that the common purpose of performance appraisal tends to be aimed at the measurement of individuals, and consider that this focus is insufficient.
From the organisation's or corporate perspective, successful performance management is the key to achievement of corporate goals. In order asses the quality of such management a system of performance appraisal is needed. It can be argued that performance appraisal is the central component of performance management, and there for is an essential part of any successful corporate strategy. Caruth and Humphreys (2008) add to this viewpoint by suggesting it is a business imperative that the performance appraisal system includes characteristics to meet the organisational needs and all of its stakeholders (including management and staff).
Most of the literature reviewed concentrates on the purpose of Performance Appraisal from the individual perspective, particularly focusing on measurement of individual performance, identifying training and allocating rewards. Weightman (1996) focuses on the individual when citing the purposes of performance appraisal, suggesting it can be used for many reasons, including; reward, discipline, coaching, counselling, raising morale, measuring achievement of targets and outputs, identifying development opportunities , improving upward and downward communication, reinforcing management control and selecting people for promotion or redundancy.
A slightly broader definition of performance assessment is presented by Harrison & Goulding 1997 that sees the most obvious reason for appraising an individual is to secure its improvement and it follows that securing performance improvement for all individuals, will enhance wider organisation performance. Thus stressing that a successful performance appraisal should not only concentrate on analyzing the performance of the individual but rather should be structured in such way as to give an indication of overall team performance compared with performance of an individual.
Thus from the above a number of most common purposes of personnel appraisal can be identified:
1. Achievement of Organisation Goals
2. Setting of individual objectives
3. Evaluation of individual performance against objectives
4. Improvement of Performance
5. Allocation of Rewards
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Self appraisal and it's benefits are not well covered in literature reviewed however evidence gathered by Williams (2002) suggests that use of it in organisations is increasing slowly. There is little empirical evidence to suggest it is having any impact, and this is an area worthy of further investigation in organisations where it does take place. Atwater ( 1998) identified some of the potential benefits of self appraisal, below, but fell short of evaluating their worth.
Increases employees perception of fairness of the process
ii. Reduces potential for individual bias by providing further rating
iii. Provides a useful tool to increase communication in the process
iv. Helps clarify differences of opinion regarding performance requirements
v. Increases commitment to development plans and new goals.
Rees and Porter (2003) suggest self appraisal can have a part in structured feedback, as people can be their own harshest critic. It is argued however that self appraisal is most beneficial in combination with traditional appraisal done by management, the two can then be compared to show how the view of the employee of himself differs or coincides with the views and findings of management.
Frequency of performance review and feedback
Whilst Performance Management is a continuous process, appraisals are periodic activities (Rao 2004). Most organisations have at least an annual review. Sahl (1990) suggests that frequent reviews are required to ensure progress is being made on developmental objectives. It is the view of the author that allot depends on the size of the organisation in question. Smaller companies and firms can perform quarterly performance appraisals as it will not demand allot of time and resources to perform. However in a large multinational organisation such often appraisals will not only be a very costly endeavor but will also be extremely time consuming for all involved. Although the process can be broken up in larger and smaller scale assessments that concentrate on different aspects of staff activities and will not be so time consuming.
Training and guidelines
An important element of developing an effective performance system is training for those individuals involved as raters (Boice and Kleiner 1997). Evans (1991) suggests that training should incorporate coaching and counselling, conflict resolution, setting performance standards, linking the system to pay (if applicable) and providing employee feedback. Williams (2002) also recommends training being incorporated into any system to ensure it is used consistently and effectively. Brown (2001) cites major problems in Towers Perrin Performance Appraisal practices and suggests lack of training for managers is particularly important. Pigott-Irvine (2003) cites research that suggests training for conducting appraisal should encompass all elements, such as values, purpose, objective setting, observation skills, interviewing and report writing.
Rees and Porter (2003) also cite the need for training of use of the scheme to be included, covering the key skills appraisers need. Training for employees should also be considered (Williams 2002). Farr (1993) notes the need for the requirement of training to be given to employees to receive feedback in a non-defensive manner. Bretz, Milkovich and Read (1992) also suggest that a lack of training of appraisees may cause discrepancies between expected and actual performance of the process, and associated satisfaction. Overall, training should increase the effectiveness of the Performance Appraisal system and lead to greater organisational success (Cook and Crossman 2004).
The Performance Appraisal Interview
The appraisal interview should be conducted in an open and non-threatening manner to help reduce anxiety or doubt appraisees may have (Harrison & Goulding 1997). Trust between appraiser and appraisee is an important factor. Performance appraisal could be seen as another form of management control (Brumbach, G. 1998). This is even more important when there seems a reluctance or inability to collate objective information to inform the appraisal process (Pigott-Irvine 2003).
Where appraisal is working well, it is often because management have accorded it appropriate priority (Pigott-Irvine 2003).
The literature review reveals a whole host of issues that could/should be covered in the interview. Redman and Wilkinson (2001) cited research of the practice of Performance Appraisal at an NHS Trust hospital. The purpose of setting out this table below is to show the range of issues discussed and uncovered in the research.
Range of issues covered in appraisals:
Achievement of work objectives
Future work objectives
Personality or behaviour
Skills and competencies
Training and Development Needs
Pay or benefits
How you might improve your performance
How your supervisor might help you improve your performance
Personal or domestic circumstances
(Source: Redman and Wilkinson 2001)
What is appraised
Definitions of Performance Management earlier state the need to align individual and
organisational goals. It is only when the purposes of the organisation are agreed, and
activities and products are defined and measured, can there be efficient use of resources. A productive performance assessment system has to contain quantifiable and specific measures of performance. These measures also need to be standerdised in order to eliminate bias when a rating of results is carried out. A good example of a balanced performance assessment system would a one that uses SMART criteria (specific, measurable, agreed, realistic and time
related) for performance measurement. However it is not always done well. Setting objectives and targets remain the core activity of performance appraisal, but in practice when poorly conducted, with little regard for ensuring that organisation and individual objectives are aligned can give misleading results. If the goals and objectives are not realistic and achievable
may reduce a staff member's individual commitment and demotivate them.
If people do not know what is expected of them, there is a good chance that
their behaviour will not conform to expectations.
Many organisations are moving towards inclusion of competency measurement.
Competencies are important factors which contribute to high levels of individual
performance and therefore organisational effectiveness (Armstrong 2000) and so there
must be a strong link to the competencies staff have and their ability to achieve their set
goals. Specifications for employee competencies that are required could be usefully
integrated into appraisal schemes. These could help to direct the employees to analyze and balance their competencies and improve on those that are lacking.
Some examples of competencies may include:
Business thinking Business awareness
Working with colleagues
Developing self and others
Persuading and influencing
Communicating and presenting
Achieving Goals Delivering results
Rating systems and fairness
The rating system of staff at Gazprombank is rather simplistic. Staff are deemed to have
either exceeded objectives (rating 1) met objectives (rating 2) or missed objectives
(rating 3). The table below sets out the definitions (Table 1).
ting Description Definition
To score an overall 'Objectives Exceeded' rating means that there is significant evidence of consistently high performance across all the areas of work covered by the objectives. And that the objectives planed were significantly surpassed, for instance when target sales were exceed by 10 or 20 percent.
To score an overall 'Objectives Met' rating is achieved when there is significant evidence of
achievement that covers all the work areas for which objectives were set. This would reflect meeting all objectives. In some situations an objective may have ceased to apply owing to
circumstances beyond the individual's control.
The 'Objectives Missed' rating applies when there is evidence of underperformance across the work areas for which objectives were set, provided the individual can be held personally accountable for the lack of result.
Fairness of the rating system is considered important. Research by Cook and Crossman (2004)
suggested that the perceived fairness of the system itself contributes to overall perception of fairness. The issue of accuracy in performance assessment is a problematic one. It is also curtail that the objectives set before the employees are discussed and agreed upon with the employees beforehand. If the employee is inexperienced or has recently joined the organisation it is the responsibility of the managerial staff to make sure the objectives set are achievable given the expertise level of the employee as unfairly high objectives will demotivate the new employee and put him under additional pressure.
Outcomes of the system
Rogers (1999) suggests that one of the key components of performance appraisal is solving problems - i.e. improving performance. He also suggests that whilst many managers may have the skills to identify the need to improve performance, they may need much more support than is currently made available to sort them. Poor performance can arise from a host of reasons, including inadequate leadership, bad management or defective work systems (Armstrong 2000). It can also be argued that appraisal and disciplinary processes need to be separated. This is also argued by Armstrong (2000) who suggests that capability issues should be taken outside of the appraisal process. This appears sensible, but unrealistic to some extent. A key feature of the appraisal system is achievement of goals, and a lack of achievement must at least give managers an early warning that something is not right.
Appraisal outcome and reward
The current performance appraisal system at Gazprombank is not linked to pay. Manager that performs the assessment may recommend an increase in pay or a promotion, but such recommendations are only considered as comments and a rarely lead to promotions.
Performance Related Pay is best described as the explicit link of financial reward to individual, group or company performance. There is much research on the subject of appraisal leading to pay. Research by Simmons (2002) uncovered strong opposition from respondents in HE and FE sectors against linking appraisal to pay, citing divisive criteria and the impact on teams performance in particular. It is commonly practiced in a large majority of motivational techniques that motivation driven by pay or financial benefits if very limited in its effect. Research and personal exprerience of the author show that only financial motivation is very short term in its effect. It can therefore be argued that only when combined with other non-financial motivation can they truly effective. Such may include:
Formal commendations and awards
Favourable mention in company publications
Freedom concerning job duties and/or hours
More involvement in setting goals
Involvement in educational seminars
Provision of easy-term educational loans
Performance appraisal at Gazprombank
Existing performance appraisal techniques and personnel motivation programs in Gazprombank are fairly underdeveloped and non-systematic. The performance appraisal process is divided in two stages the planning or goal setting stage and assessment of the achieved results. The planning stage consists of setting the goals an employee aims to achieve within the assessment period (12 months) in accordance with the position occupied. Each individual aim or goal contains a numeric value that can be assessed and measured when the rating process is carried out at the end of the assessment period, the objectives are rarely set in accordance with SMART criteria described in section 7. For instance a typical aim description would contain the following "increase sales of personal loans by 10%". Some objectives and aims are purely abstract for instance "efficient performance of work activities in accordance with job distinction". How efficiently or inefficiently an employee carries out these objectives can only be appraised subjectively by management, since the is no measurable criteria. This leads to bias assessment results and questionable outcome decisions.
The assessment stage consists of comparing the results planned in the begging of the assessment period with the achieved results at the end of the assessment period. Conclusions of the assessment are then drawn from whether or not the target results were met and by how much. After that a rating process is carried out according to the rating criteria displayed in table 1.
After that recommendations are given as to what competencies the employee should concentrate on improving or where he is doing better than the average result. If the performance appraisal results are consistent for two or more periods employment decisions are made. If an employee shows consistently positive results, recommendations are made for the employee to receive a salary increase (or a once off bonus). However the results of the performance appraisal are rarely decisive when employment decisions are made.
The performance appraisal system at Gazprombank is rarely taken seriously by the managerial staff. It is seen as a ritual that has to be done and gotten over with. It's considered time consuming and seen as a distraction rather than an opportunity to increase employee performance and level of communication with management outside the day to day job related atmosphere. Thus it is carried out on yearly basis in an automatic manner with little effort. This is mainly due to the fact that the performance appraisal system is too standardized and it's results (outcomes) inspire little confidence that any changes would follow. This underlines the need for making assessment results (outcomes) grounds for making reward or employment decisions. Only when management sees specific results arising from their recommendations will they change their attitude to the assessment process and motivate staff to do the same. At the moment the results of the performance appraisal have little effect on employment, financial or non-financial reward decisions made.
In a large financial organisation there are numerous functions performed by the staff. Each job description is different and each job process has different and sometimes unique aims and goals, however the performance appraisal system is the same for all involved. In order to make the system efficient at the stage of setting objectives each goal and aim has to be tied to employees job description and take into consideration the unique responsibilities required from the individual according to his position. These objectives need to be communicated to the employee in order to ensure concurrence and full understanding of what is expected. Possibly the best way this could be done is through an interview that would require feedback from the employee. During such an interview not only could objectives and aims be clarified but feedback from the employee on how the managerial staff performs their duties could be received. Although the feasibility of this feedback would be questionable (due to the nature of job hierarchy and work relations) never the less it could be used as a source of guidelines for self-assessment purposes of the managerial staff.
To ensure objectivity of rating of the results the importance of each objective (aim) has to identified, as some objectives are more curtail than others. Thus each objective has to have a weight assigned to it in order to identify its importance amongst others. This also helps to differentiate the level of development of core competencies of the employee amongst other competencies.
Little attention is paid to unedifying and developing specific non job related individual skills and abilities. Like social orientation and communication skills, corporate loyalty, level of adherence and association of individual aims with corporate goals and aims, presence and level of one's team spirit and willingness to take responsibility for risky and decisive actions. All these are not taken into account in the performance assessment. Although these can be curtail in developing of future managerial staff.
Existing non-financial reward system is completely separated from the performance appraisal results. Even though a yearly staff training program exists, when employees are given a chance to choose what job related training or education they would like to receive, contents of this training is in no way related to appraisal results of their core competencies or individual skills. It can be argued that if such training was based on assessment of one's professional and personal skills and abilities it could be by far more effective.