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Performance appraisal is a distinct and an integral part of human resource management in organizations. Organizations use performance appraisal systems to understand its human capital needs, strengths and weaknesses and evaluate their set skills to specific tasks and job responsibilities. This essay is an attempt to analyze the role performance appraisal systems play in organisations and to assess its effectiveness to employee and organisations in general. This will be achieved by defining performance appraisals and tracing its history, reviewing existing literature on the topic and examining its benefits to all parties concerned. Performance appraisal system is about identifying and harnessing mutual goals for both the employer and the employee. This paper will identify the major points of critical importance to organisations and individuals in developing and implementing performance appraisal systems to suit their operational goals and strategic objectives.
Performance appraisal is a management control tool and a formal management procedure; it is part of the larger process of performance management (Edmonstone, 1996). It should not be perceived as the core of performance management, as it feeds into the larger concept in relation to other activities and should not be addressed as performance management in itself. Performance appraisal goes beyond the formal assessment of how well employees are performing their jobs to the formal communication of the organizations missions and goals, a foundation on which to establish informal channels of communication, a method on which to base organizational rewards and a tool to improve the performance of each and every employee within the organization (Desselle 2009). There are numerous texts as to the definition of performance appraisal. DeVries et al., (1981) defined performance appraisal as the process that allows an organization to measure and evaluate an employee's behaviour and accomplishments over a specific period of time. Performance appraisal in organizations is geared towards the future and it is developmental in nature. Bowles and Coates (1993) defined performance appraisal as performance expectation, identifying training and development needs, career counselling, succession planning improving individual and to determine promotion. Moon (1993, p. 8) went ahead to define performance appraisal as a formal documented system for the periodic review of an individual's performance. Marchington and Wilkinson (1996) describe it as a cyclical process: determining performance expectations; supporting performance; reviewing and appraising performance; and, finally, managing performance standards.
Performance appraisal is often confused as performance management; Performance management is concerned with the general well being of the organization bringing up different elements that will make the learning, development and management of people successful. It is a process which contributes to the effective management of employees as individuals in an organisation and members of a group in order to achieve high level of performance in the organisation and improve organization productivity. Here it gives an understanding of what is to be achieved and an approach to developing people. The purpose of performance management is to encourage employee to raise their performance, develop their abilities, increase job satisfaction and achieve their full potential on desire level skill set of an individual to the benefit of the individual and the organization as a whole (CIPD 2010). Performance appraisal recognizes employees as individuals and focuses on their developments in an organization.
Over the years interest in performance appraisal has increased, the practice of informally evaluating employees has been on for centuries. Grint (1993), Traces it back to Chinese third-century practice of Sun Yu a Chinese philosopher. In United States, formal performance appraisals started in the military when an army general submitted an evaluation of his men ranking them in as "a good-natured man" or "a Knave despised by all" (Bellows and Estep, 1954). The first organizational application of performance appraisal in the United Kingdom according to Randall (1989) was at the Robert Owen's textile mills where a system called the 'Silent Monitor' which is a four sided wooden block with different colours was used to evaluate employees. In the 1950s, performance appraisal was used to evaluate employees past performance in the organization over a period of time. It was a tool for justifying employee salaries, determining rewards, pay rise or pay cut of past performance of employees. It is past orientated, pays no attention to training and development, career development and possibility of an employee.
Performance appraisal has seen an immense growth in organizations over the years much of the changes have been driven by organizational changes rather than theoretical advances (Redman and Wilkinson, 2009).
Redman and Wilkinson (2009) also attributed changes in payment systems over the years as a rationale for the growth and development of performance appraisal systems to achieve an integrated reward system, and the use of merit and performance based pay have been strongly associated with the growth of performance appraisals.
Performance appraisal is a system designed with dual process outcome, one is the evaluation of the employee and the other is the decision making in regards to the employee. The aim of evaluation is to identify and analyze the gap between the employee's actual performance and that which is expected or required in the organization. Performance appraisal system is a way of managing individual performance, particularly in managerial and professional work (Gallie et al., 1998).
Performance appraisal system form the basis for individual work planning, discussion 'critical success factors' and provide the key input to decision on merit-based salary increase, training, promotions and international transfer.
The informal method of performance appraisal system is found to be flawed and the chance of biasness is high, this paved way for the formal performance appraisal system. There are various types of performance appraisal and it varies from organisation to organisation. For the purpose of this essay, only four of these methods would be discussed.
The upward appraisal involves the employee rating their manager's performance via an anonymous questionnaire. Anonymity limits the potential for managerial retribution or what is termed the get even factor of upward appraisal. Upward appraisal improve managerial effectiveness and leadership through make you better feedback and increased employee voice and empowerment (Redman and Wilkinson, 2006). Because of the use of multiple ratters, upward appraisal is seen as been robust to legal challenge of performance judgements and career threatening. Grint (1993) states that honest opinions of subordinates look more like the barbs on a whale harpoon than a gentle and constructive nudges.
Competency-based appraisal is a system of appraisal where the competency of an employee is evaluated. This method is directly targeted at the managers but it is also growing for non managers. It is aim at directing an employee attention at an area that needs improvement. Sparrow (1994), states that competency helps concentrate the appraisal process on the key area of performance and effectiveness and provides a language for feedback on performance. One consequence of the competency based appraisal system is that organisations attempt to use competency approach to develop an integrated human resource strategy.
Team base appraisal the growing interdependence between jobs has brought about team base appraisal. (Johnson et al., 1993). Performance can be accurately assed by measuring the performance of larger units within an organisation than an individual. (Landy and Farr, 1983). The increasingly use of teams in an organisation has highlighted the need to foster cooperative team environment and provide a mechanism to influence the collective motivation of team members. (Shamir, 1990). In some organisations, teams are been responsible for recruitment, setting bonuses and goal settings, in this case, performance appraisal should be base on the teams themselves. According to Lawler (1994), the manager should make no attempt to differentiate one member from another in performance terms. Equal ratings and rewards should be ensured for all team members regardless of performance.
The 360 performance appraisal is used to describe the all-encompassing direction of feedback derived from a composite rating from peers, subordinates, supervisors and occasionally customers. It is also conducted anonymously; some recent innovations allow the use of audio and video to record feedback answers. The 360 appraisal recognizes the complexity of management and the value of input from different sources. Subordinates are well positioned to view and evaluate leadership behaviours- they may have more complete and accurate information about many leadership behaviours than supervisors have.(Garavan et al., 1997). The 360 feedback is time consuming and is subject to conflicting roles in the organisation.
Organisations use performance appraisal for two main reasons according to Tznier, et. al., (2000), first is that performance appraisal is used for administrative purposes such as promotions, salary allocations, and assignments. And second, performance appraisals are used as a tool for employee development processes such as offering feedback, critiquing performance, and setting goals for improvement. With these broad purposes, every organization establishes their own often unique performance appraisal systems to evaluate and develop their employees.
Development and evaluation in an organisation is completely dependent on the intent of the performance appraisal process as established by the individuals who establish and administer the performance appraisal system. In an organisation where performance appraisal is conducted and both employers and employees reported the experience as been successful, the benefits are enormous and the productivity of the organisation increases. Performance appraisal improves motivation in the organisation (Churchill et al., 1985). Performance appraisal gives an individual a better understanding of their roles in the organisation, especially when there are conflicting roles in the organisation, it also gives the individual a sense of belonging because the performance appraisal gives a clear understanding, how and where they fit in within the wider picture. Performance appraisal increase training and development in the organisation, it offers a supervisor and a subordinate the opportunity to recognize and agree upon individual training and development needs. Performance appraisal creates room for the need of training more pressing and relevant linking it clearly to performance outcomes and future career aspirations. Performance appraisal is used to monitor the success of the organisation recruitment and induction practices. It can also be used to monitor the effectiveness of recruitment strategies in the organisation. Performance appraisal provides employees with recognition for their effort; the power of social recognition has been noted
Evaluating employee performance has long been of interest to researchers and practitioners (Avery & Murphy, 1998, Bernardin & Beatty, 1984, and Hyde, 2001). Despite the benefits of performance appraisal, its effectiveness to employers and the organisation in general terms of job productivity and alignment to strategic objectives has its limitations. Performance appraisal accuracy and performance appraisal effectiveness is highly dependent on the performance appraisal system in the organization (Anderson, 2002). Critics of performance appraisal blame the failure on managers tagging them as "not naturally good at conducting performance appraisal" (Redman and Wilkinson, 2009).
According to Lee, (1995) Performance appraisal effectiveness refers to the accuracy of performance observations and ratings as well as the ability of the performance process to improve the ratee's future performance. In order to understand the effectiveness of the performance appraisal system, it is important to look at the performance appraisal interview and those involved.
For those involved with human resource development, the performance appraisal interview is widely regarded as one of the main instruments for identifying, training and developing needs at the individual level. Indeed, Armstrong and Baron (1998, p. 8) in the performance appraisal interview, the supervisor and the employee are the only people involved, supervisor perception and employee perception will influence the effectiveness of the system, if the supervisor places importance or high value on the interview, it is likely the performance appraisal will be accurate, and if the supervisor does not place high importance on the interview, the opposite happens. Here, motivation here plays a vital role because if the supervisor is not motivated then the interview will be ineffective.
There is a widely held view that performance appraisal is politically manipulated. Politics are inherent in the very contextual fabric of organizations (Ferris et al., 1996). Snape et al., (1994) states that managers frequently play games with performance ratings, they sometimes manipulate ratings as a means to satisfy personal goals and to accommodate contextual demands or to suit various ends. Sometimes it is used as a means of punishment for rebellious employees. Redman and Wilkinson, (2009). On the other hand, a poor performer may be given excellent ratings so they will be promoted and posted out of the department, this will reflect favourably on the manager been responsible for such a high performing team. This will be argued that it lacks credibility because the method can be fabricated.
The major problems of objectivity based appraisal system as identified by Kessler and Purcell (1992) is that the failure of achieving a balance between maintenance and innovator objectives; and the inflexibility to redefine objectives as circumstances change during appraisal. Performance appraisals process affords management the opportunity to inform employees of the importance of their roles and responsibilities to the organization and how their performance will be measured, thus mitigating the possibility of roles stress among employees (Eulburg et al 1988).
In conclusion, performance appraisal is an integral part of any organisation human management. Performance appraisal varies from organisation to organisation. Despite its numerous benefits, its effectiveness is limited in implementation. Biasness should be eliminated, politics and as well as the process of the evaluation should be improved. Martin and Bartol, (1998) suggested that performance appraisal should be done more frequently either semi-annually or quarterly accompanied by a substantial feedback process. According to Ilgen et al., (1979), an organization's performance appraisal system can be a practical tool for employee motivation and development when employees perceive their performance appraisals as accurate and fair. The effective use of performance appraisal encourages trust in an organisation, commitment, enhanced output, customer satisfaction, and decline in conflict (Mayers and Hayes, 1999). Because employees perception of fairness are linked to organisational relevant attitudes and behaviours beyond the level of the discrepancy between actual and expected performance in an organisation. (Cropanzano et al., 2007, p. 45).