Critical Evaluation Of The Performance Appraisal System Commerce Essay


Performance Management is the lifeblood of an organisation and the backbone of the Human Resource Management System since it reflects the employees' contribution to the success of the organisation and thus it's potential for sustained competitive advantage. In the increasing competitive environment, organisations have to focus on value of investments in human resources especially performance management as a major source of competitive advantage.

In order for this to be successful, team and individual objectives must be agreed upon jointly by the employee and management and they must be used to measure and access employee performance. Performance Management, therefore, aligns employees' individual performance with the organisation's vision and strategic objectives.

One of the main intrinsic advantages of a well designed performance appraisal is that it provides for the alignment of the employees and organisational objectives. Performance appraisals have the capacity to cause improvement in individual performance that leads to achievement of organisations goals and strategies.

Background of Company

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Eastern Credit Union Co-operative Society Limited (ECU) was founded on April 16, 1973, and emerged following the dissolution of the Bermudez Employees Credit Union. The Credit Union started with twenty-two pioneers from the Biscuit Company with $58.50 and has since then expanded its services by way of 10 branches located throughout Trinidad and Tobago with approximately 312 employees.

With total assets surpassing $1.5 billion, a loan portfolio of over $965 million and a membership base in excess of 165,000, ECU now ranks as one of the leading Credit Unions in Trinidad and Tobago and one of the largest financial co-operatives in the Caribbean. As a leader in the financial services sector, ECU continues to exert its considerable influence in the fashioning of a co-operative culture that is deeply aligned and firmly rooted in the practical philosophy of mutual support and co-operation.

ECU's vision and mission are aligned to its tag line, "Leading the way", and the performance appraisal system should be designed to reflect the philosophy of the organisation.

Aim of Research

At ECU, the performance appraisal is completed twice per year and bias and unfair perspectives are prevalent. The employees have voiced their dissatisfaction of the performance appraisal and what is done with the final result.

The subjective measure in a performance appraisal is the rating which is not provable by others and leads to being bias. Some managers and supervisors allow personal prejudice to be reflected on the appraisal form. Others use the halo effect while others stick to the central tendency adopting the safe policy and rating their direct reports down the middle avoiding the extremes.

As ECU is a unionised organisation increases in salary are based on the outcome of the negotiation between the Company and the Union. There is no compensation or remuneration for excellent performance and when tokens are awarded even the non performers are recipients.

The main aim of this research is to ascertain if the performance appraisal system at Eastern Credit Union Co-operative Society Limited (ECU) is effective in increasing the organisation's productivity. In order to determine the effectiveness of the performance appraisal, this study will take a holistic approach in examining performance, in particular how it is appraised and whether it is aligned with the organisational goals and objective. Firstly, the approach will be to critically scrutinise the present appraisal system to determine its effectiveness in achieving its goals and objectives and secondly, to make suitable recommendation in terms of improvement or changing the system.

Objectives of Research

In order to succeed in this increasingly competitive global market place organisations are eager to manage continual individual and organisational improvement. The essential tool that is used in accomplishing this feat is the employee performance appraisal as it can be served as the foundation for aligning the employee's performance and the organisation's goals and objectives.

Five objectives have been identified. By investigating these interconnected objectives through the linking of previous research, a detailed literature review and empirical research, it will be determined, in fact, if the appraisal system at ECU is effective. The objectives of this research are as follows:-

To critically review and analyse literature on how performance is appraised

To evaluate the performance appraisal system at ECU.

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To determine whether or not the employee performance appraisal is aligned with ECU's goals and objectives.

To compare the findings to theoretical frameworks and best practices and

To make suitable recommendations.

Literature Review

Organisational performance is the achievement of organisational goals in pursuit of business strategies that lead to sustainable competitive advantages (Gephardt & Van Buren 1996) [1] . "Performance Management is the systematic process by which an organisation involves its employees, as individuals and members of a group, in improving organisational effectiveness in the accomplishment of the organisation's mission and goals", (U.S. Office of Personnel Management) [2] .

Armstrong (2001) defined performance management, "As a strategic and integrated approach to delivering sustained success to organisations by improving the performance of the people who work in them and by developing the capabilities of team and individual contributors." [3] 

The main purpose of performance management in an organisation is to measure the effectiveness of the performance of the employees, to identify strength and weaknesses and to recommend training where necessary. The performance appraisal is a formal record of a manager's opinion of the quality of an employee's work. (Grote 2011) [4] . The performance appraisal assists in providing important feedback on how well the employee is getting along in the organisation (Gibson, Ivancevich & Konopaske, 2011). [5] 

In assessing the employee goals, the performance management system is a helpful tool as emphasised by Beardwell, Holden and Claydon, (2004) [6] , "The process, as a management tool, is established on the basis that organisational objectives can be broken down and translated into individual goals, the attainment of which can then be effectively measured".

The performance management system plays an important part in assessing an employee according to Armstrong (2009) [7] "Performance Management involves a continuing dialogue between managers and the people they manage. The dialogue is based on goal achievement, performance analysis and constructive feedback and leads to performance and personal development plans"