The performance appraisal is not a new system to the organisations it can be traced back to thousands of years. All most all organisations use this performance appraisal to evaluate their employees and the organisations use this performance appraisal whether formally or informally to evaluate their employees. In the past most of the people would consider performance appraisal as not so productive and not so comfortable. Then the question raised that why do many organisations use this performance appraisal when they consider this as not so productive or comfortable? The main aim in implementing this performance appraisal by many organisations is that it is linked to many organisational decisions such as pay, promotion, reward, transfer, termination etc.
All most all organisations use this performance appraisal to evaluate their employees and different organisation use different tools to evaluate their employees. These evaluations are done by the organisation to achieve their organisational goals and to implement their strategy effectively. With the help of performance appraisal we can easily come to know whether the individual's performance is met with the employer's expectations and to identify weaknesses and any training if required. "The performance appraisal is defined as the managerial activity: 'the provision of data designed to ensure that resources are used efficiently in accomplishing organisational objectives'" (Armstrong & Baron, 2000).
1.1 Formal and informal performance appraisal:
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For long time organisation survived quite well without formal appraisal system. Then the question arises that why do we need a formal performance appraisal system? As the organisation evolve into a large organisation with professional management system came into practise a more formal performance appraisal system came into existence to meet the needs of administrative decision making. Regardless of the system in place whether it is formal or informal system, decisions should be made about who receives promotion, who is terminated and who is transferred.
Lot of practitioners has expressed their doubt on how the informal appraisal is fair enough to conduct it on a day to day basis as an integral part of the job by the management and supervision. A good manager will regularly monitor the staff and evaluate their performance and points out their mistakes to correct them and encourages and motivates them to perform better in their job. If you continue the formal appraisal on a regular basis like the informal once is time consuming.
These decisions are to be assisted by a process that monitors and evaluates an employee's progress and allows the comparisons of the individual performance of the employees within the organisation. Thus we can say that formal system has simple replaced informal system. Many practitioners say that the formal appraisal systems continue to depend primarily upon human information processing and judgment-imperfect processes, at best (Boice & Kleiner, 1997).
"There are many advantages to using a formal system if performance appraisals are designed used properly" (Murphy and Cleveland, 1995). Many organisational decisions such as reward allocation, promotions or demotions, layoffs or recalls and transfers are facilitated much on performance appraisal. This helps in assisting manager in developing employees and it also assist individual employee's decisions regarding career choices and the subsequent direction of individual time and effort. Additionally by conducting frequent performance appraisal may increase employee commitment and satisfaction, due to improvements in organisational communication.
"A properly administered performance appraisal system may be an asset to an organisation. However, if the tools and goals of the performance appraisal process are incongruent with organisational goals, the resulting performance appraisal system may, in fact, be a detriment to effective organisational functioning" (Barrett, 1967). It is difficult task to develop a perfect appraisal system that accurately reflects employee performance appraisal. "Performance appraisal systems are not generic or easily passed from one company to another; their design and administration must be tailor-made to match employee and organizational characteristics and qualities" (Henderson, 1984, p. 54). According to law employee have the right to know how their performance is measured. If the performance appraisal is not conducted then the employer may not know the mistakes done by the employee and the good working habits are ignored. The employer has the right to evaluate the performance of the employee according to law. The employer may convey to the employee if they feel his performance is not up to their criteria and they may arrange the require training and if the performance of the employee is satisfactory they can promote to the higher post or transfer them to another department. If this is carried out effectively then we can say that the performance appraisal is fair enough.
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Some believe that individual performance appraisals will interfere with the team work by over stressing the individual on the performance appraisal in a team. If the performance appraisal is not carried out effectively there will be a confusion in which aspect of the job is most important and which is least important this is due to the direct linkage between the employee behaviour and the organisational rewards. "Finally due to the differing (and often conflicting) needs of stakeholders (the organisation, appraiser, and employee); the process itself is often a source of unmet expectations for all concerned" (Murphy and Cleveland, 1995).
It is important to distinguish between appraiser/rater goals, appraisee/ratee goals, and the organisational goals and their uses in the performance appraisal system. Four types of performance appraisal are described by Cleveland et al. (1989); they are between person, within person, systems maintenance and documentation. Between persons are referred to as the administrative purposes, it consist of recognition of the performance of the individual and in making administrative decisions regarding the salary, retention, promotion, layoffs, termination etc. Feedback on the performance such as the strengths and weaknesses of the individual and identifying if the individual require any training and determining the assignments to the individual and transfers. Organisational goals are achieved with the help of the performance appraisal. Legal requirements need a valid performance appraisal documentation process which can be obtained from the personnel decisions and through the performance appraisal tools. The organisations are trying to meet all the needs and at the same time developing the new tools for performance appraisal. The organisations are unsatisfied with the results; this dissatisfaction motivated the researchers to develop more sophisticated tools in the performance appraisal and is continuously doing that.
"Performance appraisals were developed when organisations were large and hierarchically organised, when market and organisational environments were relatively stable, when the workforce was homogenous and relatively well qualified, and when long-term employment was the norm" (Murphy and Cleveland, 1995). Internal and external environment are dynamic in today's organisations. Nowadays organisations are becoming highly decentralized and managers to non-managerial employee ration are reducing. The factors like social, political and technical environment in which the organisations exist plays a critical role on the organisation. The work force is heterogeneous and these are not well prepared for complex jobs. The employees who are changing jobs, organisations and even careers are increasing day by day.
Performance appraisal should consider the most important aspects of the work performed in the organisation in each functional area because of the change in job definitions and the job roles in the current market situations. The appraisal should focus mainly on the strengths and the weaknesses of the employee because of the increase in the transfer of the employees. The performance appraisal should be in such a way that it should identify a group of quality workers in the organisation and it should not go for the best person in the organisation. Performance appraisal goals must be more comprehensive that means goals should be beneficial to both the organisation and the individual. For example, instead of helping an organisation make decisions about an employee, performance appraisal should be used to help an employee to make personal decisions about his current performance and provide strategies for future development. Performance evaluation of the employee is done by the managers, supervisors, subordinates, suppliers, self, customers and other relevant sources.
In some organisations the performance appraisal is mainly focused on the individual employees. Nowadays more and more organisations are focusing on both individual as well as group performance of the employees. When the organisations are focusing on the group performance appraisal they should make clarification on how they will be appraised, individually and in group. To avoid unfairly feeling in the employee, individual and the team performance evaluation should be given and these will help in administrative decisions. Performance appraisals are to evaluate the set of performance dimensions which are important to the functional unit and these are based on individual contribution and on the group work. Performance appraisal should also include the behavioural activities of the employee in the team and when he works individually. As the organisational demands changes and when the team works on a project, performance appraisal cycles should be conducted on a regular basis. If an employee works anything outside the observation of the supervisor, the supervisor has the limited opportunity to evaluate the employee and the required suggestions to improve on their work. Nowadays most organisations are employing temporary workers, the duration of the temporary workers is relatively short and there is a very less opportunity to socialise and motivate the employees and develop skills in them. Logically the manager who manages the temporary employees spends less time evaluating their performance.
1.2 History of performance appraisal:
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There are many examples in the bible that related to performance measurement of the individuals although it is not called as the performance appraisal it can be taken as an example. "The Lord has filled him (Bezalel) with the Spirit of God, in wisdom and understanding, in knowledge and all manner of workmanship to design artistic works, to work in gold and silver and bronze, in carving wood, and to work in all manner of artistic workmanship" (Exodus, 35, pp. 31-3). "In this instance, Moses selected the man who was known to be the most skilled craftsman from the tribes of Israel to build and furnish the tabernacle of the Lord in approximately 1350 BC. Merit exams were given for selection and promotion decisions as early as the Han Dynasty, 206 BC-220 AD" (Wren, 1994). It was in 1648, that Dublin (Ireland) Evening Post used a rating scale based on personal qualities to evaluate its legislators (Hackett, 1928). To say most likely the performance appraisal has begun in the 1800s with the use of the "silent monitors" by Robert Owen's in the cotton mills in Scotland (Wren, 1994). Silent monitors were the blocks of wood painted with different colours on each visible side and are placed over the employee's work station. Each colour represents a particular grade to the employee. These observations are based on the behaviour of the employee and the case study analysis show that this showed a significant impact on the employee's behaviour. In the 1970, a new trait-based model was introduced for staff appraisal in the National Health Service in the nursing profession and in that decade it has spread to the other professional group.
1.3 Cultural issues:
The evaluation of one employee by the superior is an important aspect between superior and subordinate relationship in organisations. More and more organisations are introducing the systemic and formal procedures. Performance appraisal has two main purposes. They are administrative and performance improvement. The administrative purpose have seen some changes from entirely being involved with issues such as transfers, promotions, training and increase in the salary and are used for the source of data for personnel planning integration. The managers have got the scope to provide the employees with the necessary training with the help of performance improvement role of appraisal.
In most cases cultural assumptions are imported or exported carelessly into the organisations when performance appraisal is introduced in the developing countries. Many organisational theorists are appreciating the need to question the western managerial practise in introducing culture into the organisation in the developing countries. There is a lot of work to do to introduce a good local practice in the culture. The understanding of the good local practice helps in the development of organisations in developing countries. While some theorists say that need to implement the performance appraisal practice that is culturally acceptable in a particular country by understanding the local practice. While some say that by implementing this practice inhibits these organisations not only the performance appraisal but also the personnel systems which are concerned with assessment and development.
1.4 Objectives of performance appraisal:
The main aim to determine the effective performance appraisal is to meet the organisation's objectives. These objectives are then conveyed into departmental objectives and then to the individual position objectives. Working with employees helps in achieving and also agreeing their personal targets. This helps the employee know how their performance is evaluated by means of certain standard. This process also involves detail explanation of the job role, job description and responsibilities. Explaining the importance of how the role and responsibilities of the employees will contribute to wider goals and also explaining the importance of the individual and the team with in the current planning period. The objectives should be in such a way that it should provide a linkage between the organisational performance and the individual performance and it should also reflect the organisational goals.
The objectives of the performance appraisal are classified into a number of ways. McGregor (1960) had produced one of the best known classifications and he grouped them into three ways. They are
1. Administrative: it helps in providing a systemic way of determining promotions, transfers and increase in salary.
2. Informative: it provides the data to the management on the performance of the subordinate and also gives information about the strengths and weaknesses.
3. Motivational: it creates a learning experience to the employees and motivates employee to develop themselves and improve their performance.
McGregor's groupings are not only useful in drawing attention to different purposes but it is also useful to different organisational philosophies towards performance appraisal.
1.5 Performance related pay:
Almost all the organisation relates their performance to the pay. Employers think that in order to maintain competitiveness among employee this is necessary. It is possible that employee may ignore the performance appraisal process when the pay is not linked to the performance. In order the pay per performance to be more effective, adjustments to the pay should be made in time to the performance appraisal conducted. The performance appraisal review should be done before to the next month pay in order to make it effective. This makes the employee more committed and more dedicated to the work. This distinguishes the employee the difference between successful and unsuccessful objective and how this will affects them directly.
1.6 The advantages and disadvantages of performance appraisal:
First of all we need to know what the performance appraisal means to the each of the main parties involved in appraisal what they are expect to gain. Who are the main parties? The main parties are the appraisee, the appraiser and the organisation. They can be defined as:
The appraisee: he is the person who is being appraised.
The appraiser: he is the one mostly manager or supervisor who is conducting the appraisal.
If the appraisal is carried out properly the appraisee may benefit in the following ways.
We can expect a greater clarity of results.
By giving the accurate and constructive feedback on past the employee may be benefited.
He knows his strengths and weaknesses.
By suggesting him the development plans and helping him to minimise his weaknesses.
He comes to know the wider context of the job by learning about the manager's objectives and priorities for the department.
He comes to know the career prospects by discussion.
It is common to all people to face anxiety when their work is being appraised and their skills are under constant scrutiny. Managers who conduct the performance appraisal should take the responsibilities to convey these benefits to the employees in a possible clear manner. Only if staff comes to know about the benefits outweighing their natural fear about performance appraisal and these people can participate in performance appraisal fully and without feeling of any defensiveness.
The following benefits can be gained by the appraisers if they carry out the performance appraisals carefully manner.
It is an opportunity to the appraiser to measure and identify styles in performance of the staff.
The appraiser comes to know of the staff, their weaknesses, hopes, their desire and their goals.
The appraiser gets the opportunity in clarifying his own objective and priorities and the appraiser can give a clear view to the staff where their contribution fits in with the work of others.
The appraiser gets the chance to focus on individuals and he can increase motivation in them.
The appraiser gets the opportunity in developing the staff performance.
The appraiser has the chance to change the duties of the staff.
The benefits constitute the objectives of good management. The major task is that the appraiser has to encourage seeing performance appraisal as an essential tool of a good management and which when implemented properly increases and helps in achieving the success of the appraiser's own objectives.
By implementing the performance appraisal properly the organisation will get benefited and not the just individual. The benefits that the organisation will get when implemented properly are:
We can see an improved communication between the staff.
We can see an increase in the motivation in the staff.
We can observe an increase in the overall corporate performance.
We can notice a greater achievement of the objectives.
The fundamental step in the performance appraisal is that taking to key parties and clarifying their doubts. This one is the essential thing upon which the performance appraisal is built. If the performance appraisal is carried out effectively we can resolve the possible conflicts among appraisal objectives and helps in gaining commitment in all parties.
There is greater negative impact on the organisation if the performance appraisal is not effectively conducted in the initial phases. They are:
The appraisee may feel uneasy about being appraised and may try to defend himself.
If the appraisal give little time and effort to the performance appraisal it is like reducing it into a meaningless activity.
The top management may not show the enthusiasm and give their whole hearted support to the performance appraisal.
If all these problems achieved we cannot expect that we can achieve the objectives of the performance appraisal.
1.7 Legal issues involved in performance appraisal:
The main aim of developing an effective performance appraisal is that to make the company more productive and more profitable and to make the employees know their performance. They are many legal reasons that associated with the performance appraisal system and in developing them. "Failure to conduct appraisal "properly" (failing to maintain adequate records, for example) may result in employees (or their unions) taking legal action" (Boice & Kleiner, 1997). The employee handbook is a reference to the performance appraisal of the employee and it must be carried out in detail and it should be acceptable. If an employer states that he will conduct an annual performance review and then he fails to do that the employee can take him to the court for breaking the given promise. "Employers must ensure, therefore, that they adhere to their commitments to conduct such reviews" (Nobile, 1991). It is extremely important for the employee that the strengths and weaknesses of the employee should be clearly documented because it acts as a source of reference for the further action such as in case of terminating an employee if their performance is not satisfactory. Performance appraisal ratings are used by many organisations as the basis for the purpose of promotional decisions. If the performance appraisal is not done correctly it may result in negative effect on the employees and it can thus lead to legal action.