An Overview Of Performance Appraisal Benefits Commerce Essay

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The underlying objective of performance appraisal is to improve the performance of individuals leading to improvement in the performance of the organisation as a whole. An effective appraisal scheme, therefore, offers a number of potential benefits to both the individual and the organisation.

It can identify an individual's strengths and areas of development and indicate how such strengths may best be utilised and weaknesses overcome.

It can help to reveal problems which may be restricting progress and causing in efficient work practice.

It can develop a greater degree of consistency through regular feedback on performance and discussion about potential. This encourages better performance from staff.

It can provide information for human resource planning, to assist succession planning, to determine suitability for promotion and particular types of employment and training.

It can improve communications by giving staff the opportunity to talk about their ideas and expectations, and how well they are progressing.

The process of appraisal can also improve the quality of working life by increasing mutual understanding between managers and employees. However, it is important 'to have in place a viable performance appraisal scheme, for an ill-conceived scheme will produce exactly the opposite effects to those intended'.

Performance Appraisal Methods

Appraisal system can be used to measure attitude, bahaviour and performance. Measurement may be a combination of:

Quantitive measures using some form of rating scale.

Qualitative measures involving an unstructured, narrative report on specific factors and or overall level of behaviour and work performance.

The use of behaviourally anchored rating scales (BARS) is an attempt to overcome difficulties with conventional rating scales and provide measurement scales that are directly related to the job being appraised. A sample group of managers/supervisors are asked to identify, independently, several key behavioural aspects of the job in question.

In some companies, employees receive assessments from their manager, peers, subordinates, and customers, while also performing a self assessment. This is known as a 360-degree appraisal and forms good communication patterns.

Behavioural Theory


Motivation can be described as the direction and persistence of action. It is concerned with why people choose a particular course of action in preference to others, and why they continue with a chosen action, often over a long period, and in the face of difficulties and problems.

Mitchell defines motivation as the degree to which an individual wants and chooses to engage in certain specified behaviors'.

The various needs and expectations at work can be categorized in a number of ways for example the simple division into physiological and social motives, or into intrinsic and extrinsic motivation.

Extrinsic motivation: is related to 'tangible' rewards such as salary and fringe benefits, security, promotion, contract of service, the work environment and conditions of work. Such tangible rewards are often determined at the organizational level and may be largely outside the control of individual managers.

Intrinsic motivation: is related to 'psychological' rewards such as the opportunity to use one's ability, a sense of challenge and achievement, receiving appreciation, positive recognition, and being treated in a caring and considerate manner. The psychological rewards are those that can usually be determined by the actions and behaviour of individual managers.

Motivation Theories

There are many competing theories which attempt to explain the nature of motivation. The search for a generalized theory of motivation at work appears to be in vain. A major determinate of behaviour is the particular situation in which individual workers find themselves. Motivation varies over time and according to circumstance, it is often most acute for younger people starting on their career for people at mid-career position or for those who find limited opportunities for promotion or further advancement. For employers there may be difficulties in motivation staff both in the longer term as well as in the short run.

Traditional Motivational Theory - Taylor

Taylor developed his theory of "scientific management" as he worked his way up from a labourer to a works manager in a US steelworks.

From his observations, Taylor made three key assumptions about human behaviour at work:

(1) Man is a rational economic animal concerned with maximising his economic gain;

(2) People respond as individuals, not as groups

(3) People can be treated in a standardised fashion, like machines

Taylor had a simple view about what motivated people at work - money. He felt that workers should get a fair day's pay for a fair day's work, and that pay should be linked to the amount produced (e.g. piece-rates). Workers who did not deliver a fair day's work would be paid less (or nothing). Workers who did more than a fair day's work (e.g. exceeded the target) would be paid more.

The implications of Taylor's theory for managing behaviour at work were:

- The main form of motivation is high wages, linked to output

- A manager's job is to tell employees what to do

- A worker's job is to do what they are told and get paid accordingly

Weaknesses in Taylor's Approach

The most obvious weakness in Taylor's approach is that it ignores the many differences between people. There is no guarantee that a "best way" will suit everyone.

Secondly, whilst money is an important motivation at work for many people, it isn't for everyone. Taylor overlooked the fact that people work for reasons other than financial reward.

Content Theories of Motivation

Attempt to explain those specific things which actually motivate the individual at work. These theories are concerned with identifying people's needs and their relative strength, and the goals pursue in order to satisfy these needs, content theories place emphasis on the nature of needs and what motivates.

Major content theories of motivation include:

Maslow's hierarchy model;

Alderfer's modified need hierarchy model;

Herzberg's two-factor theory; and

McClelland's achievement motivation theory.

Maslow's Hierarchy of Needs Theory

Maslow identified eight innate needs, including the needs to know and understand, aesthetic needs, and the need for transcendence. However, the hierarchy is usually shown as ranging through five main levels, from, at the lowest level, physiological needs, through safety needs, love needs, and esteem needs, to the need for self-actualisation at the highest level. The hierarchy of needs may be show as a series of steps, but is usually displayed in the form of a pyramid.

Physiological needs: these include homeostasis (the body's automatic efforts to retain normal functioning) such as satisfaction of hunger and thirst, the need for oxygen and to maintain temperature regulation. Also sleep, sensory pleasures activity, maternal behaviour, and arguably sexual desire.

Safety needs: these include safety and security, freedom from pain or threat of physical attack, protection from danger or deprivation, the need for predictability and orderliness.

Love needs: (often referred to as social needs). These include affection, sense of belonging, social activities, friendships, and both the giving and receiving of love.

Esteem needs :( sometimes referred to as ego needs). These include both self-respect and the esteem of others. Self-respect involves the desire for confidence, strength, independence and freedom, and achievement. Esteem of others involves reputation or prestige, status, recognition, attention and appreciation.

Self-actualisation needs: this is the development and realisation of one's full potential. Maslow sees this as: 'what humans can be, they must be', or 'becoming everything that one is capable of becoming'. Self-actualisation needs are not necessarily a creative urge, and may take many forms which vary widely from one individual to another.

Once a lower need has been satisfied, it no longer acts as a strong motivator. The needs of the next higher level in the hierarchy demand satisfaction and become the motivating influence. Only unsatisfied needs motivate a person. Thus Maslow asserts that 'a satisfied need is no longer a motivator'.

Also Maslow suggests that most people have these basic needs in about the order indicated, he also makes it clear that the hierarchy is not necessarily a fixed order. There will be a number of exceptions to the order indicated.

Alderfer's Modified Need Hierarchy Model

A modified need hierarchy model has been presented by Alderfer this model condenses Maslow's five levels of need into only three levels based on the core needs of existence, relatedness and growth (ERG theory).

Existence needs: are concerned with sustaining human existence and survival, and cover physiological and safety needs of a material nature.

Relatedness needs: are concerned with relationships to the social environment and cover love or belonging, affiliation, and meaningful interpersonal relationships of a safety or esteem nature.

Growth needs: are concerned with the development of optional, and cover self-esteem and self-actualisation.

Like Maslow, Alderfer suggests that individual's progress through the hierarchy from existence needs, to relatedness needs, to growth needs, as the lower-level needs become satisfied. However, Alderfer suggests these needs are more a continuum than hierarchical levels. The lower-level needs become the main focus of the individual's efforts.

The results of Alderfer's work suggest that lower-level needs do not have to be satisfied before a higher-level need emerges as a motivating influence. Therefore if a person's needs at a particular level are blocked then attention should be focused on the satisfaction of needs at the other levels.

Process Theories of Motivation:

Process theory, or extrinsic theories, attempts to identify the relationships among the dynamic variables which make up motivation and the actions required to influence behaviour and actions. They provide a future contribution to our understanding of the complex nature of work motivation.

Equity Theory - Adams

Equity theory focuses on people's feelings of how fairly they have been treated in comparison with treatment received by others. It is based on exchange theory. People expect certain outcomes in exchange for certain contributions, or inputs. Social relationships involve an exchange process. For example, a person may expect promotion as an outcome of a high level of contribution (input) in helping to achieve an important organisational objective. People also compare their own position with that of others. They determine the perceive equity of their own position. Their feelings about the equity of the exchange are affected by the treatment they receive when compared with what happens to other people.

A feeling of inequity causes tension, which is an unpleasant experience. The presence of inequity therefore motivates the person to remove to reduce the level of tension and the perceive inequity. Adams identifies six broad types of possible behaviour as consequences inequity:

Change to inputs: a person may increase or decrease the level of his or her inputs, for example through the amount or quality of work, absenteeism, or working additional hours without pay.

Change to outcomes: a person may attempt to change outcomes such as pay, working conditions, status and recognition, without changes to inputs.

Cognitive distortion of inputs and outcomes: in contrast to actual changes, people may distort, cognitively, their inputs or outcomes to achieve the same results.

Leaving the field: a person may try to find a new situation with amore favourable balance, for example, by absenteeism, request for a transfer, resigning from a job or from the organization altogether.

Acting on others: a person may attempt to bring about changes in others, for example to lower their inputs or accept greater outcomes. Or the person may cognitively distors the inputs and outcomes of others. Alternatively, a person may try to force others to leave the field.

Changing the object of comparison: this involves changing the reference group with whom comparison is made.

Behavioural theory & HRM:

Humans are an organisation's greatest assets; without them, everyday business functions such as managing cash flow, making business transactions, communicating through all forms of media, and dealing with customers could not be completed. Humans and the potential they possess drive an organization. Today's organizations are continuously changing. Organizational change impacts not only the business but also its employees. In order to maximize organizational effectiveness, human potential-individuals' capabilities, time, and talents-must be managed. Human resource management works to ensure that employees are able to meet the organization's goals.

"Human resource management is responsible for how people are treated in organizations. It is responsible for bringing people into the organization, helping them perform their work, compensating them for their labors, and solving problems that arise.

There are seven management functions of a human resources (HR) department that will be specifically addressed: staffing, performance appraisals, compensation and benefits, training and development, employee and labor relations, safety and health, and human resource research.

Generally, in small organizations such as St Vincent De Paul with fewer than a hundred employees they don't have an HR department, and so a line manager will be responsible for the functions of HRM. In large organisations-those with a hundred employees or more-a human resource manager will coordinate the HRM duties and report directly to the chief executive officer.

Prior to the above, it is necessary to understand the job analysis. An essential component of any HR unit, no matter the size, is the job analysis, which is completed to determine activities, skills, and knowledge required of an employee for a specific job. Job analyses are "performed on three occasions:

(1) when the organization is first started,

(2) when a new job is created, and

(3) when a job is changed as a result of new methods, new procedures, or new technology.

In St Vincent De Paul organization Jobs analyzed through the use of questionnaires, observations, interviews, employee recordings, or a combination of any of these methods. Two important tools used in defining the job are

(1) a job description, which identifies the job, provides a listing of responsibilities and duties unique to the job, gives performance standards, and specifies necessary machines and equipment; and

(2) the job specification, which states the minimum amount of education and experience needed for performing the job.

Performance Appraisals:

Once a talented individual is brought into an organization, another function of HRM comes into play-creating an environment that will motivate and reward exemplary performance. One way to assess performance is through a formal review on a periodic basis, generally annually, known as a performance appraisal or performance evaluation.

Just as there can be different performance evaluators, depending on the job, several appraisal systems can be used. Some of the popular appraisal methods include

(1) ranking of all employees in a group;

(2) using rating scales to define above-average, average, and below-average performance; (3) recording favorable and unfavorable performance,

(4) managing by objectives.

illustrates how performance appraisals serve several purposes, including:

(1) guiding human resource actions such as hiring, firing, and promoting;

(2) rewarding employees through bonuses, promotions, and so on;

(3) providing feedback and noting areas of improvement;

(4) identifying training and development needs in order to improve the individual's performance on the job; and

(5) providing job related data useful in human resource planning.

Compensation and Benefits:

Compensation (payment in the form of hourly wages or annual salaries) and benefits (insurance, pensions, vacation, modified workweek, sick days, stock options, etc.) can be a catch-22 because an employee's performance can be influenced by compensation and benefits, and vice versa. In the ideal situation, employees feel they are paid what they are worth, are rewarded with sufficient benefits, and receive some intrinsic satisfaction (good work environment, interesting work, etc.). Compensation should be legal and ethical, adequate, motivating, fair and equitable, cost-effective, and able to provide employment security.


With the number of organizations participating in some form of international business, the need for HRM research will only continue to grow. Therefore, it is important for human resource professionals to be up to date on the latest trends in staffing, performance appraisals, compensation and benefits, training and development, employee and labor relations, and safety and health issues- both in the Ireland and in the global market.


1. Effectively managing and utilizing people.

2. Trying performance appraisal and compensation to competencies.

3. Developing competencies that enhance individual and organizational performance.

4. Increasing the innovation, creativity and flexibility necessary to enhance competitiveness.

5. Applying new approaches to work process design, succession planning, career development and inter-organizational mobility.

6. Managing the implementation and integration of technology through improved staffing, training and communication with employees.


Name of the Book: Management and Organisational Behaviour

Written by: Laurie J. Mullins

Published: year 2005