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The concept of Performance management is a core concept in organization's human resources management in the sense that it centers every organization goal of performing. In this regard, performance management is defined by Murphy and Margulies (2004) as a systematic process that organization involves its workforce in scope of members of a group or/and as individuals to improve organization's effectiveness in order to accomplish organization's goal and mission. The range of activities that encompasses performance management include developing the capacity to perform, setting expectations and planning work, periodically rating employees performance, monitoring workforce performance, rewarding employees' good performance and performance appraisal (Murphy and Margulies, 2004).
However, this paper shall seek to review literature regarding performance appraisal with an aim of uncovering effectiveness to an organization and how to further improve its efficiency. In this regard, the paper shall examine the overall concept of performance appraisal and thereafter shall the significance it has to the overall organizational progress. Moreover, the paper deem fit to examine and explain the various methods of performance appraisal, and on how they are conducted with aim of enriching organizations human resources capacity to meet its objectives.
LITERATURE REVIEW: PERFORMANCE APPRAISAL
The concept of human resource management is that it touches everybody engaged in any form of employment. This means all employees pass through this process as it is through it that various responsibilities are assigned, and personnel acquired for the right tasks. This paper however looks at the human resource department and actually picks one area, Performance Appraisal, and then proceeds to expounding on the role played by performance appraisal.
The importance of performance appraisal is without doubt enormous - it is an integral part of performance management. Clearly, it is not the only tool to be used to manage performance but, nevertheless, it is one of the ranges of tools of Performance appraisal in the field of human resource management which is used as a tool for evaluating employees. It acts as an effective management and evaluation scheme of staff, aimed at developing, and improving organizational performance. In the corporate world there are the annual, or semi-annual performance appraisals, in which individual staff members are evaluated by their line managers, or Directors being appraised by the Chief Executive Officers, and the CEOs appraised by the company owners or rather the chairman. Therefore performance appraisal touches all the aspects of the organization since all members within a corporation undergo this appraisal at different stages.
Performance appraisal according to Grote and Grote (2001) is "a formal management system that provides for the evaluation of the quality of an individual's performance in an organization". The term performance appraisal is synonymous to employee appraisal, performance review, or career development discussion. A more encompassing definition is actually provided by Grote (2007) whereby performance appraisal is arguably considered to be a means through which the job performance of an individual is gauged both in terms of quality, quantity, cost, and time, and basically by the respective manager or supervisor (Grote D., 2007, April 29). Therefore performance appraisal falls under the process of career development. It involves the obtaining, analyzing, and recording facts about the corresponding value of an employee to the organization. It is as well an inquiry into the successes of an employer as well as his/her failures, his/her strengths and weaknesses, and finally his/her suitability for promotion and recommendation for further training(Grote D., 2007, April 29)
Performance appraisal is therefore a way of assessing the conduct of individual employees at work, quantitative as well as qualitative features of the job. Performance appraisal possesses both systematic as well as objective ways of evaluating employee potential and getting to know how to promote and improve this employee (Grote D., 2007, April 29).
Performance appraisal, according to CIPD research(2010, Feb), should however be distinguished from a 'top down process' or rather a situation whereby one person asks questions while the other one answers. It is an opportunity for the parties concerned to engage themselves in a dialogue regarding individual performance, development, as well as to receive the required support from the manager concerned (CIPD, 2010 Feb).
CIPD research emphasizes the significance of an affirmative relationship between the staff and the line managers as a result of performance appraisal, but goes ahead to distinguish between performance management with performance appraisal. Accordingly, performance management falls under the strategic level management, and is rather broader as it concerns long term goals; it joins various aspects of business, employee management, groups, and individuals. On the contrary, performance appraisal focuses heavily on the operational aspects which are either short term or medium term (CIPD, 2010 Feb).
How to Conduct Performance Appraisal
The CIPD research rightfully indicates that conducting performance appraisal is not a clear cut process and that there exists several ways to conduct this appraisal process. However it has been proven that a certain number of elements are essential as pertains this process of performance appraisal. These include; measurement, feedback, positive reinforcement, exchange views, and agreement (CIPD, 2010 Feb).
Regarding measurement, the manager, assesses employee performance basing on the targets that have been set and agreed upon by both parties, as well as the objectives. For example, in a sales process, a sales executive will be given a target of $1,500,000 on a monthly basis. This implies that the employee attains a 100% mark upon achieving this goal. Failure to achieve it leads to some either further training as per the way forward or termination of the contract.
Feedback on the same note is very essential, for it provides employees with in formation regarding their performance and progress. It is actually through feedback that an employee is able to correct areas that need attention. Positive reinforcement on the other hand, lays more emphasis on the individual achievements of a member of staff within an organization. It involves constructive criticism on the weaker areas of individual performance.
Another key element is that of exchange of views which according to CIPD (2010) involves looking at what has happened, then going a step further to defining on how appraises can lead to improvement of performance on the part of the employees, the kind of boost that should be provided to them, and finally focusing on the aspirations of these employees. In this way the emphasis is shifted from a top down manner of leadership to a more dialogue-oriented style.
The Significance of Performance Appraisal
Researches conducted by various scholars rightfully indicate that performance appraisal is without doubt, of great importance. Performance appraisal analysts Grote and Grote (2002) in a very reasonable way assert that performance appraisal serves the following functions. According to Grote and Grote, (2002) state that performance appraisal is essential provision of feedback to employees about their performance. The provision of feedback is a common explanation for a business to have a performance appraisal system. Through it the employee learns how well he/she has been doing and then uses that information to develop in the future. Hence, performance appraisal helps by ensuring that the manager's prospects are communicated.
Additionally Grote (2007), emphasize that performance appraisal assists in the determination of those who qualify for promotions. Almost everyone in an organization wants to get ahead. How should the company decide who gets the brass rings? Performance appraisal makes it easier for the organization to make good decisions about making sure that the most important positions are filled by the most capable individuals.
Moreover, performance appraisal facilitates the layoff or downsizing decisions within the organization (Murphy and Margulies, 2004). Performance appraisal, promotions are unanimously needed; and people will always avoid dismissals. But forced by economic circumstances an organization has to downsize. Performance appraisal ensures that the most brilliant employees are retained and that only the organization's peripheral performers downsized (Murphy and Margulies, 2004).
Performance appraisal encourages performance improvement and superior performance (Grote and Grote, 2002). Superior performance is another classic aim for having a performance appraisal system. Performance appraisal motivates people to perform superiorly in several ways; to begin with, it helps them learn superior standards of an organization. Then, it provides them with ways to show that they really are. Conclusively, performance appraisal inspires individuals to avoid being branded as poor performers (Grote and Grote, 2002, p.210).
Furthermore, Grote and Grote, (2002) emphasize that performance appraisal facilitates the setting and measuring goals. The process of goal setting has constantly been revealed as a management process that leads to optimal performance. Therefore, performance appraisal in most cases is used to ensure that organizational members set and achieve operational targets (Grote and Grote, 2002, p.209).
Murphy and Margulies (2004) state that performance appraisal help to counsel poor performers. Within an organization setting, some employees do not meet the expected targets. Their standard of performance is questionable and therefore it is the role of managers to use this as an effective tool for counseling these employees.
Performance appraisal is a useful tool for the determination of compensation packages. Performance appraisal acts as an efficient method of determining those employees who deserve what pay. It is actually a way of facilitating improved performance so that as employees are executing their mandates, they ensure that they are as well motivated with better pay. Therefore in the light of Grote, "those who do better work receive more pay" (Grote and Grote, 2002, p.231).
Performance appraisal encourages coaching and mentoring. With regard to coaching and mentoring Grote affirms that managers are expected to play the role of good coaches to members of their team as well as mentors to their responsibilities. Performance appraisal recognizes the areas where coaching is essential and motivates managers to actively embrace the role of coaching (Grote, D. & Grote, R., 2002).
Performance appraisal promotes manpower planning or succession planning. Organizations that are well-managed from time to time assess their basic strength to ensure that they have the aptitude in their positions that they will need thereafter. Organizations should define who and where their most brilliant members are. They should identify the sections that are endowed with talent and those lacking talent. Performance appraisal therefore acts as a tool required to ensure they have the intelligent individuals required in the long run.
Reviews by Murphy and Margulies (2004) Performance appraisal is instrumental in determining individual training and development needs. If the performance appraisal procedure includes a requirement that individual development plans be determined and discussed, individuals can then make good decisions about the skills and competencies they need to acquire to make a greater contribution to the company. As a result, they increase their chances of promotion and lower their odd of layoff. This is another classic reason for having a performance appraisal system. Performance appraisal helps motivate people to deliver superior performance in several ways. First, the appraisal process helps them lean just what it is that the organization considers being 'superior'. Second, since most people want to be seen as superior performers, a performance appraisal process provides them with a means to demonstrate that they actually are. Finally, performance appraisal encourages employees to avoid being stigmatized as inferior performers (p.215).
In summary, performance appraisal serves a very significant role in the process of dealing with employees and assisting them to focus on the organizational main objective. It provides a firm basis for various issues either in terms of compensation, performance evaluation, or in looking for the way forward so that the organization maintains its stability amid the competitive environment. The various methods analyzed indicate that one tool cannot be used to evaluate employees but rather a collaborative method. The traditional method makes evaluations a one-point focus in the long run hence the modern methods.