Explore The Effectiveness Of Performance Management Commerce Essay

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The purpose of this dissertation is to explore the effectiveness of performance management in a Multinational Company and its effect on the employees and the organizational growth. This paper, explains how performance evaluation helps in assessing, evaluating and appraising employees performance in the organization as well as rewarding employees and providing them with the necessary training and development. It tries to explain, how it motivates employees when goal setting theory is applied in order to perform better in the organization. The study basically highlights the impact of performance appraisal on the employees and on the organization's objective of growth and development.

The business climate has changed during the past few years. It seems that no industry is immune to a shake up as a direct or indirect consequence of deregulation or competition from aboard. For many organizations, one result of this trend is a justifiable obsession with quality and productivity. It's therefore more important than ever to accurately measure job performance so rewards can be distributed fairly and performance problems can be solved quickly. (Swan & Margulies, 1991:3)

A few decades ago the performance appraisal was a procedure of very limited utility, used to pinpoint coarse distinctions between good and bad performers. Today many more job types and levels are subject to PM, and the performance appraisal is used for decisions about salaries, promotions and placements, to pinpoint performance problems improve employee performance for career counselling and to help implement the strategies and install the values of the organization.

The conventional approach, unless handled with consummate skill and delicacy, constitutes something dangerously close to violation of the integrity of the personality.

Managers are uncomfortable when they are put in the position of "playing god" the respect we hold for the inherent value of the individual leaves us distressed when we must take responsibility for judging the personal worth of a fellow man. Yet the conventional approach to performance appraisal forces managers, not to only to make such judgments and to see them acted upon, but also to communicate them to those who had been judged. (McGregor, 1957:37)

The "conventional" approach McGregor worried about is the practice of periodically determined whether and to what extent a given person has lived up to certain predetermined requirements. It is the "playing god" aspect that concerns managers the fear that what gets put on a piece of paper might spell the end of a man's career, or the dashing of his hopes and aspirations (McGregor, 1957:38).

(McGregor, 1957:40) saw what so many managers have reported about performance appraisal: that it is tricky, often subjective, and in many ways dangerous thing to do.

These managers feel that there is something inherently wrong with "judging" a man or woman. There are dreadfully afraid of making a once-and-for-all judgment which turns out to be wrong, and they are as much or more afraid of having to tell someone they are going to give him or her a "low rating" (McGregor, 1957:38).

The key purpose of PM in organizations is that it helps in; measuring the effectiveness of performance in the organization also, it helps in identifying training needs and largely promotes motivation towards work. But, how exactly does performance appraisal help in running the organization? Every organization has a set of objectives and functions and the main task is to accomplish the desired objectives and functions. This can only be achieved, if the employees know their duties well. Employees form an important asset of the company, therefore they should be provided with a proper package, remuneration and good training and development. All these facilities will only help the employee to be, highly motivated towards their work and would help in producing the right output i.e. performance.

Performance appraisal is used all over the world. Many organizations use PM in order to develop a clearer picture of their organization. The performance appraisal process allows an organization to measure and evaluate an individual employee's behaviour and accomplishments over a specific period of time (DeVries et al., 1981).In recent years the attention towards performance appraisal has increased rapidly, due to its important potential implications ,relating to fair employment practices and the because of increasing concerns about employee productivity in the organization.(Pearce and Porter,1996 ) What ultimately lies is the end product which is performance which has to proper, therefore, in order to achieve that, the employees should be utilized to the full extent.

Organizations have to be organized and systematic in their approach, so that they can extract the exact performance from their employees which can help them, to create a balance between performance and organizational objectives.

Performance Appraisal : Overview

The most basic purpose of performance appraisal is to provide information to the employees about their job and the amount of effort and behaviour expected from them.

Performance appraisal (PA) systems aim to help, develop individuals, and improve organizational performance and to develop the basis from which builds a baseline for planning for the future. Generally PA includes the following main purposes:

Creation of a shared vision of the organization's objectives, occasionally through a mission statement communicated to all employees.

Setting of individual performance targets relating to the operating unit's target within the overall organization.

A formal review of progress towards these targets, and/or the identification of training needs.

The PA system assessed regularly to evaluate its effectiveness for overall organizational performance. (Coates,1994)

McEvoy and Cascio (1990) suggested that employees should be told their duties i.e. they should be told what is expected from them plus effective orientation towards effective performance. As a result, the intention is to provide employees with an adequate understanding about their job, and encourage employees to work towards their organizational goals. When objectives are set for the employees it becomes simpler for them to attain the desired task. Performance can be obtained, when a desired goal is given. Locke's (1968) Goal setting theory emphasizes the importance of conscious goal levels as determinants of employee performance. Goal setting theory is summarized as follows-

Hard goals produce a higher level of performance than easy goals,

Some specific hard goals produce higher level of output,

Behavioural intentions regulate choice behaviour.

How widespread is performance appraisal?

Performance appraisal is widely used in many Western countries. In US the percentage of organizations using performance appraisal increased from 89 percent to 94 percent from 1970s to 1980s. (Locher and Teel, 1988) Similarly, in UK the use of formal performance appraisal system has rapidly increased. (Armstrong and Baron, 1998) Appraisal is particularly prominent in some big industrial sectors in the UK, such as financial services. Cully et al (1998) add that performance appraisal has developed from an initial application to the middle managers and professional occupations and is now frequently applied to non-managers and professionals. Performance appraisal is also used in non-western countries like China, India, Hong Kong and Japan.

Objective of the study:

The aim of this study is to explore the operation and effects of performance appraisal in Multinational Company. It will assess whether the appraisal process creates a positive response or negative response from employees and assess the subsequent impact on employee attitudes and behaviours. The appraisal process studied is that of a Multinational company in UK. The appraisal system of this company was designed to improve employee productivity. The findings, suggests that the performance appraisal system is important in the Multinational company among employees and the organization. The study also explains how performance appraisal systems have encouraged employee development in the organization considered. An over view of the existing literature relevant to this topic is considered in the following chapter.

Over view of the chapters:

Chapter 1: Introduction:

A brief introduction about the purpose of the research is given. A brief overview of performance appraisal is presented. Then the research objective is mentioned. Then a brief description about the remaining chapters is given.

Chapter 2: Literature review:

Chapter 2 comprises of Literature review. It starts with the history of performance appraisal system. It explains how performance appraisal system was evolved in the industry and what its current importance in the industry is. The chapter then, explains 10 the various concepts relevant to the subject. The purpose and perception of appraisal system is explained. This is followed by the process of performance appraisal. The literature review was designed to explain the main motive of the research, therefore accordingly the relevant literatures pertaining to the research was only considered.

Chapter 3: Research methods

Chapter 3 comprises of research method adopted in the research. This chapter gives an overview of the research and the research objective. It then explains the purpose of qualitative research adopted in the research. It then highlights the relationship between the study and the research method adopted. The majority of the chapter explains how the data was collected for the research and the process of data analysis.

Chapter 4: Analysis of Data

Chapter 4 comprises of the Analysis section. This section gives a brief introduction to the parameters on which the employees are tested in the organization and the scale on which they are judged are explained. This chapter then explains the findings of the research. This section broadly explains the reaction of the employees, of the appraisal system of their company.

Chapter 5: Conclusion

Chapter 5 concludes the research by stating briefly the findings of the research and sums up the whole research. The conclusion also suggests recommendations for future.

Chapter 2

LITERATURE REVIEW:

PM may be defined as a formal and systematic process, by means of which the job-relevant strengths and weaknesses of employees are identified, observed, measured, recorded and developed. PM provides the opportunity for the organization to evaluate and take stock of its human resources. It also provides information so that important decisions can be taken and gives feedback for further development of staff (Doris, 1994:160).

It gives management the opportunity for communication with staff, to clarify expectations and to take part in the development of each staff member. For the employer, it gives the opportunity to discuss with employees their performance and career goals for the future (Doris, 1994:161). PM is an ongoing communication process, undertaken in partnership, between an employee and his or her immediate supervisor that involves establishing clear expectations and understanding about:

The essential job functions the employee is expected to do.

How the employee's job contributes to the goals of the organization.

What "doing the job well" means in concrete terms.

How employee and supervisor will work together to sustain, improve, or build on existing employee performance.

How job performance will be measured.

Identifying barriers to performance and removing them.(Doris, 1994:163).

Performance appraisal is regarded widely as a necessary attribute of management, part of an over-riding value set of efficiency, of being seen to succeed, to perform and to control. (Barlow, 1989) PM forms a baseline for setting the objectives and helps in giving a clear picture to employees and clearly explains, what is expected from them. Therefore, the question that arises is, whether performance appraisal system is meant only for completing the organizations objectives? Yes, performance appraisal does that, but at the same time it gives training and development to employees, proper pay package and right remuneration packages which help in motivating the employees to produce the right output i.e. performance. Performance appraisal is a unique and significant managerial tool used to motivate and control workforce.

Linkage of Human resource management and Performance appraisal:

Human resource forms an indispensable part of the organization. Hence, it is very important to examine the role of appraisal in the effective and efficient utilization of this resource. (Cummings and Swab, pg 56)

Fig: 1. The process of Human utilization

According to Bratton and Gold (2003:7), "Human resource management (HRM) is a strategic approach to managing employment relations which emphasizes that leveraging people's capabilities is critical to achieving competitive advantage, this being achieved through a distinctive set of integrated employment policies, programs and practices." HRM forms a core in understanding people's behaviour towards their colleagues as well as their companies. The model laid down by Fombrun, Tichy and Devanna (1984) of HRM gives a clear picture of the HRM process.( Bratton and Gold,2003)

Fig 2. HRM Process

In this model, Selection: Selecting the right candidate who would fulfil the organisational goals and objectives. Performance: The output of employee's abilities which add value to the organization. Human resource development: Providing the necessary training session, this would help the employees to possess the relevant knowledge and skill to perform better in the organization. Due to this the employees would improve individual skills as well as advance in the organization. Appraisal: Appraisal which depends largely upon the employee's capability to perform would then show the employee's competencies and talent.

The modern human resource system may be divided into four parts acquisition of human resources (recruitment and selection), training and development, motivation and compensation. Performance appraisal is involved in all four parts and serves to tie them together by providing feedback information for all of the other parts. (Latham and wexley, 1977: griffin: 604)

Performance appraisal therefore is known as the powerful tool for managing human resources. (Forbrum and Laud, 1983) Therefore, an HRM process forms an important element in the organizational structure. HRM department knows the objectives and function well of the organization. Therefore, it knows what kind of people the company needs and recruits in that way. It provides adequate training session to employees so that they know their tasks, well in advance and acts accordingly; it helps in encouraging and motivating employees and sees to it that, the employees do their duties well. When the employees know their task well, they would obviously perform well. But, still HRM has to do another important task is to check whether the performance of the employees is as per the standards or not. This is where a formal appraisal system comes into picture. Therefore, Huber (1980) rightly puts it that in the context of human resource management, formal appraisal serves three purposes: 1. Evaluation, 2. development and 3. Employee protection

Richard & Johnson (2004) suggest that organizations need to match HR framework and practices up to holistically corporate strategy in order to achieve superior performance in the organization.

Traditional Performance Management Systems

PM can be described as absolutely logical. The assumptions underlying it that relate to organization effectiveness, are somewhat flawed and contains many excellent notions. Its approaches are generally described within the context of a managing by objectives framework (MBO). An MBO system includes the following components:

Development of role and mission statement.

Establishing strategic goals.

Defining results.

Establishing indicators or effectiveness, goals, or organizational objectives.

Establishing performance standards for each objective.

Action planning for each employee.

Coaching/training to remediate deficits.

Some form of evaluation or assessment done formally and included in an employees' record.

MBO is a process in which manager and subordinate sit down at the beginning of each performance period and agree upon individual job goals that subsequently serve as a basis for personal performance assessment (Lynch and Cross, 1991:42).

Within an MBO system, the PM process to the management of the individuals begins with the assignment of individuals' objectives, through to the final, formal assessment process.

In addition, the MBO is a system that begins with the hoped for outputs and measures the quality of effort and the effectiveness of resource utilization, against these hoped for outputs (Ordione, 1979:36)

Lynch and Cross (1991: 203) have identified five major problems with MBO:

Fosters internal competition rather than teamwork because it is a mechanism for assessing individual or departmental contributions at review time;

Goals are set by senior management that may or may not be strategy related.

MBO goals often ignore the customer and are based on past performance.

Focuses on the manager, subordinate, or departmental structure within the company's vertical structure, rather than on the horizontal work flow independent of organizational boundaries.

Objectives once set, tend to become fixed throughout the organization adapting to changes in external environment is often difficult.

Measures tend to be one dimensional, often financially oriented.

PERFOMANCE MANAGEMENT OBJECTIVES

The most known purpose of performance appraisal is to improve performance of individuals. Performance appraisal has basically two important purposes, from an organizational point of view: 1.The maintenance of organizational control and 2. The measurement of the efficiency with which the organization's human resources are utilized. (Cummings and Shwab.1973 pg. 55) but ,there are also a variety of other declared purposes and desired benefits for appraisal, including: Improving motivation and morale of the employees, clarifying the expectations and reducing the ambiguity about performance, determining rewards, identifying training and development opportunities, improving communication, selecting people for promotion, managing career growths, counselling, discipline, planning remedial actions and setting goals and targets.(Bratton and Gold,2003:284, Bowles and Coates,1993).

However, according to Armstrong and Baron, there is rise in more harder and judgmental forms of performance appraisal than softer and developmental approaches. Therefore there has been a shift in performance appraisal away from using it for career planning and identifying future potential and increased use of it for improving current performance and allocating rewards.(Redman and Wilkinson,2001: pg.60) Performance appraisal can be used as an effective tool to improve employees' job performance by identifying strengths and weaknesses of the employees and determining how their strengths can be best utilized within the organization and overcome weakness over the period of time. The next question that comes into mind is that who gets more out of the appraisal process the organization or the employees?

Who obtains more gain out of it? Either the organization or the employees or both of them. The following study gives us an explicit understanding of the different purposes of performance appraisal in the organizational context and highlights the different key features of performance appraisal. It also helps us to know who benefits from the appraisal system.

Mcgregor (1972) in his paper, "An uneasy look at performance appraisal" said that formal performance appraisal plans are designed to meet three needs, one of the organizations and one two for the individual: The following are his ideas about PA. Firstly, PA provides systematic verdict to back up salary increases, promotions, transfers, demotions or terminations. Secondly, PA forms a means of telling subordinate how he is doing, how his performance is towards the organization and suggesting the changes in his behaviour, attitudes, skills or job knowledge improvements ,they let him know "where he stands" with the boss. Thirdly, PA is increasingly being used as a basis for coaching and counselling of the individual by the superior.

Similarly, Murphy and Cleveland (1995) studied how performance appraisal is used in organization. They compared 'between individual' and 'within-individual' performances. The 'between individual' performances was able to provide information to make decisions regarding promotion, retention and salary issues. The 'within individual' performances was useful in identifying the training and development needs which includes performance feedback, identifying the strengths and weaknesses of employees as well as determining transfers. Another use of performance appraisal was found out through this study was that of ' system maintenance' which was used to identify the organizational goals and objectives, to analyze the organizational training needs and to improve the personnel planning system of the organization. Finally, documentation purposes are to meet the legal requirements by documenting personnel decisions and conducting validation research on the performance appraisal tools.

Bowles and Coates (1993) conducted a postal survey of 250 West Midland companies in June 1992, where the organizations were asked questions pertaining to the use of PM in the organization. These questions included the perceived function of PA in the management of work, its strengths and weaknesses, the role of commitment in the management of work. Through their survey they found out that PA was beneficial in the following ways:

PA was beneficial in developing the communication between employer and employee,

It was useful in defining performance expectations and

Identification of training needs.

An important study in the field of employee's performance appraisal program was conducted by Redman et al (2000) on National Health Service Trust hospital (UK). In this study, they explained the effectiveness of performance appraisal in public sector. Their research was mainly to check in what context does performance appraisal hold an upper hand in proving its worth in the public sector. The results however were pretty surprising. The results obtained showed that performance appraisal was considered as 'organizational virus'. Nelson (2000) adds that PA largely helps the employee to have a focused and fixed approach towards the target goal. He elaborates that appraisal system acts like a boosting factor for the employee to do his job well. It recognizes the employee's capabilities in order to achieve the given objective and function. It also helps in knowing the shortcomings of the employees and acts like an important element, for career development and planning.

Perception of PA in organization

It revolves if PA gives a positive impact or a negative impact to the employees. It shows whether the employees get motivated to perform better, if they receive a good feedback or do they get de-motivated and loose interest in their job. So far, we have come across the purpose, uses of PA in the organization, but the perception i.e. the understanding of PA is not taken into consideration in most cases which is important for the employee as well as the organization. If the employees don't recognize this, then they would suffer unnecessarily in the organization the reason being that, an employee has a certain level of expectation from his company when he joins it; he expects some kind of growth from it, also the organization expects a lot from him. But, a negative feedback of performance would largely hamper him mentally and make him loose his interest in his job. There would be change in his attitude, which would be problematic for him as well as the organization. He would be de motivated to achieve the organizational objectives.

Many employees have a kind of view that, their promotion or salary increments largely depends on their performance. Employees therefore are in a dilemma and consider this situation as 'survival of the fittest'. They know for a fact that, their performance is only taken into consideration at the end of the day, and in order to grow in the company they need to be pro active towards their work. The feedback the employee receives from his superior, may simply describe the level of performance achieved. (Evans, 1986) Hence, it is important for the managers to conduct the appraisal process properly. Employees can only accept criticism if it is useful and relevant to them. Managers should know how to provide information regarding improvement in performance and how to present criticism as well.

Managers feel that whenever they have to provide a negative feedback, the employee is most likely be dejected and de-motivated. Meyer et.al (1965) carried out a study in General Electric Company where certain points relating to performance feedback was highlighted. In this study, appraises were appraised by their managers on two occasions over two weeks. The study was carried out by questionnaires, interviews and observation. It was observed, that there was a lot criticism pointed out by the managers, which lead to defensive behaviour of the employee. The conclusions from this study were that- Criticism leads to create a negative impact on the motivation and performance of the employees. Interviews designed to improve performance should not at the same time weigh salary and promotion issues.

Participation by the employee in goal setting helps to produce favourable results. After this study, there were many studies which reflect upon employee's performance issues due to negative feedback. Ilgen et. al (1979) add that the appraisal has to be fair. Employees who believe that the appraisal system is under any kind of bias and misunderstanding between them and the managers are, most likely to be dissatisfied by their work and can also leave their jobs. The extent to which employees are able to accept feedback will vary to a considerable degree between employees and managers will need to be able to cope with such variations .That is ,they will need to 'know' their people as individuals, and this itself will be a reflection of the development of managers.( Bratton and Gold,2000,p.286)

One possible reason for the widespread dissatisfaction with performance appraisal in organization is that the systems used by organizations do not help them or their employees meet the desired goals. It has been shown that individuals are motivated to seek feedback (if it is seen as a valuable resource) to reduce uncertainty and to provide information relevant to self evaluations (Ashford, 1986).

How is PA conducted?

Performance appraisal system should not merely be a checklist of 'do's and don'ts ', it should provide a wider perspective to the employees. Performance appraisal has to be designed in such a way that, both, the employee and the organization can obtain fruitful results from it. A performance appraisal system should be made in such a way that the organization can ensure proper accomplishment of goals; at the same time the employee can expect clear and concise work expectations. Knowing what is expected from them is the first step in helping one cope better with the stress usually associated with lack of clear divisions. (Baker, 1984)

To make performance appraisal effective, our criteria need to be present. These are-

Employees should be actively involved in the evaluation and development process

Bosses need to enter PM with the constructive and helpful attitude.

Realistic goals must be mutually set.

Bosses must be aware, and have knowledge of the employee's job and performance. (Baker, 1984)

Cole (1988) presented the following appraisal process framework. This framework explains how the appraisal process is carried out. First, the appraisal form is completed by the manager and the employee then a formal interview is explained where a job improvement plan is established which gives three outcomes action agreed, promotion or transfer or salary review.

FIG. 3 PA PROCESS

APPRAISAL METHODS:

Management by Objective:

Management by objective (MBO) was introduced by Peter Drucker in 1954 which changed a manager's role from being a judge to a helper. Management by objective is an approach where employees are evaluated by how well they accomplish their tasks and objectives which are important to be critical in the successful completion of their job. MBO is a process, which converts organizational objectives into individual objectives. It helps in goal setting, planning, self review and performance review. In goal setting, the organizational objectives are used as guidelines through which the individual objectives are set up. Goals are set up between the managers and the employees, which become the standards against which the employee's results will be evaluated. MBO is used in planning process i.e. making the action plan for carrying out the assigned goals. It includes identifying the proper activities necessary to accomplish the objectives.

Self-control is another important step in MBO, where a systematic monitoring of performance is done by the individuals so that they get a clearer picture of their performance. (Rudman, 2003) says that it is crucial to have very precise and well defined objectives; this will eradicate scenarios whereby the appraisers have to appraise performance based on unclear objectives which will in turn affect motivation. The advantage of MBO lie in its result oriented emphasis. It assists the management for planning and control functions and is considered as a result oriented approach for performance appraisal, because employees would know exactly what is expected of them and how they will be evaluated and how their evaluation will be based on their success in achieving their goal. MBO clearly defines an employee's goals and objectives to be achieved in the organization.

Although management by objectives has many positive features, its limitations need to be understood. The primary issue that needs to be addressed by the organization is the high level of management commitment and time required to reorient the thinking of employees (Patten, 1977, Weise and Buckey, 1998).

Graphic Rating Scale (GRS)

GRS is considered as the most popular and oldest of the appraisal systems. GRS is used mainly in evaluating performance based on quantity and quality of work. In this the rating of an employee is done on some specific areas only. The rater has to mark the employee on the basis of certain scale which best describes the employees performance in the organization. GRS helps in analyzing employees on a quantitative scale and can help to compare and contrast the employee's behaviour on this scale. There is greater standardization of items so comparability with other individuals in diverse job categories is possible. (Henderson, 1984, p.175)

BARS and BOS:

Behaviourally Anchored Rating Scales (BARS) was introduced by Smith and Kendall. BARS development is a long and arduous process, involving many steps and many people. From this process, performance dimensions are more clearly defined and are based on more observable behaviours. (Weise and Buckley, 1998) This system received special attention in the field of performance appraisal. This method was useful in analyzing the performance on the basis of behaviour. BARS, clearly highlights the definite, observable and measurable behaviours done in the job. Behaviourally Anchored Rating Scale was greatly accepted because it made use of specific behaviours which is derived for each job and which would produce relatively reliable and error-free ratings. Behaviour observation scales were then introduced which were intended to improve BARS. (Latham and Wexley, 1977)

Motivation and Goal setting theory

Performance appraisal process and its outcome can affect an employee's motivation.

Employee's performance is seen as most directly as a consequence of the employee's ability and his motivation to perform. (Cummings and Swabs, 1973, pp. 46) In Organisational context, the performance is evaluated by examining the employee's abilities and capabilities to achieve the desired objectives.

Behaviour Maintenance Model

The BMM presented by Cummings and Swabs attempted to show how people become motivated to perform effectively in the organization. This model shows the importance of outcomes in the motivational process.

Fig 4 Behaviour Maintenance Model

In the framework, Goal aspirations lead to goal attainment and motivation. When goal aspirations leads to goal attainment which when achieved by the employee give a sense of job satisfaction him. When an employee is satisfied then he ultimately becomes motivated to work more efficiently in the organization.

Evans (1986) also presented a model of motivation in which a goal i.e. a starting point is set up by the supervisor or the individual and it is then accepted by them. This goal largely influences the employee's persistence, attention effort and the approach or the strategy which he adopts to complete the goal. These factors and the constraints of performance determine the actual performance. When this task has been accomplished then this actual performance is compared with the original.

Fig 5: Evans Model of Motivation

Locke (1968) introduced the Goal setting theory whereby the employee gets motivated to work for his organization when he has a goal to achieve. Locke's Goal setting theory is summarized as follows-

Hard goals produce a higher level of performance than easy goals,

Some specific hard goals produce higher level of output,

Behavioural intentions regulate choice behaviour.

Feedback

Feedback about the effectiveness of an individual's behaviour has long been recognized as essential for learning and for motivation in performance-oriented organizations. (Ilgen et al 1979) Feedback is considered as an important tool in performance appraisal process. Feedback can be a useful tool for development, especially if it is specific and behaviourally oriented, as well as both problem-oriented and solution-oriented (Murphy and Cleveland, 1995)

One of the basic purposes of formal appraisal process is the provision of clear and performance based feedback to employees.( Carroll and Scheiner,1982) Some organizations use feedback as a development tool ,while in some organizations it is used for merit evaluation and compensation adjustment.(McEvoy and Buller,1987; London ,Wohlers and Gallagher,1990) Feedback is very essential for the employees because it forms a baseline for the employees which help them to get a review of their past performance and chance to improve their skills for the future.(Ashford,1986) says that when feedback is considered as a valuable resource, then only the individuals feel motivated to seek it, which helps in reducing uncertainty and provides information relevant to self evaluations. There is also evidence that performance feedback (if given appropriately) can lead to substantial improvements in future performance (Guzzo et al., 1985; Kopelman, 1986; Landy et al., 1982)

360 degree performance appraisal:

360 Degree appraisal is used to describe a comprehensive nature of feedback which is received by an individual through everyone in the job. It is also referred to as 'multisource feedback' or 'multi-rater feedback'(Kettley, 1997) adds that when an individual receives feedback from different sources of the organization, including peers, subordinate staff ,customers and themselves, i.e. When a feedback is received from 'all-round' a job, then the process is known as 360 degree appraisal or feedback.

Nearly all the Fortune 300 companies are adopting 360 degree appraisal process. (London and Smither, 1995) The demand of 360 degree, in UK is increasing rapidly.

(Handy et al, 1996, Geake et. al, 1998) There hasn't been a lot of empirical evidence on the 360 degree appraisal system. (Fletcher and Baldry 1999 : pg63) say that-'The actual amount of empirical evidence on the impact of 360 degree feedback is disappointingly small considering its extent of its use; widespread adoption seems to have reflected faith rather than proven validity'. Even though 360 degree, is not widespread enough it is been used for a lot of purposes. Research has shown that 360 degree is used for the following purposes-

(Fletcher and Bailey 2003) state that 360 degree feedback gives a great scope to commend and criticize on their sub ordinates performance. It also helps in building up the competency of the organizations framework and objective. It aids in increasing self awareness as self-assessment corresponds to subordinates perception.

Management benefits

While PM cannot solve every problem, it has the potential to address many common management concerns. If it is properly used, with invested time on it, and a cooperative relationship, PM can:

Reduce the need to be involved in everything that goes on.

Save time by helping employees make decisions on their own by ensuring they have the necessary knowledge and understanding to make decisions properly.

Reduce time-consuming misunderstanding among staff about who is responsible for what.

Reduce the frequency of situations where you do not have the information you need when you need it.

Reduce mistakes and errors (and their repetition) by helping you and your staff identify the causes of errors or inefficiencies.

Identify individual training and development needs.

Build closer working relationships based on mutual trust and respect.

Provide better feedback to individuals about their performance and progress based on mutual understanding of needs.

(Armstrong, 1994:237)

PM is an investment up front so that managers can just let employees do their jobs. They will know what they are expected to do, what decisions they can make on their own and how well they have to do their jobs.

Employee benefits

It can provide scheduled forums for discussion of work progress, so employees receive the feedback they need to help assess their accomplishments and to know where they stand. That regular communication ensures there are no surprises at the end of the year. Since performance helps employees understand what they should be doing and why, it gives them a degree of empowerment-ability to make day-to-day decisions.

It helps in figuring out how to improve performance, even if there are no current performance problems. This provides an opportunity to help employees develop new skills and is more likely to identify barriers to better performance, such as inadequate resources.

Employees benefit from better understanding their jobs and their job responsibilities. If they know their limits, they can act more freely within those parameters.

Organizational benefits

When people in the organization understand how their work contributes to the success of the company, morale and productivity usually improve. A company can have all of its parts aimed at the same bulls-eye. PM is the key to making these links clear to everyone.

Performance measures

The focus and content of performance plans and measures will of course vary considerably between different occupations and levels of management as shown below on figure 4:

The performance of Senior Managers- The focus for senior managers is likely to be based on definitions of principal accountabilities, which emphasize their personal responsibility for growth, added value and results. The emphasis will largely be on objectives in the form of quantified targets, with less prominence given to competences. Their performance will be measured by what they do to get results.

The performance of managers/Team leaders- Their performance is measured by reference to definitions of their principal accountabilities. The achievement of quantities targets is still important but more emphasis is placed on attribute and competence requirements.

Administrative and support staff- Their performance is measured by defining main tasks or key activities with standards of performance (objectives) as a basis of measure.

Production workers- Their performance is measured by standards of out or time taken. Sales targets and customer service measure sales staff.

Summary of literature review

Performance appraisal was evolved in the third century in China in the Wei dynasty. (Weise and Buckley, 1998) PA was seen in industry in the early 1800.In UK; Randell (1994) observed it in Robert Owens 'silent monitors'. In US, an Army General introduced it in for evaluation of his army men. Earlier, PA was used only for administrative purposes like retention, discharges, promotion and salary administration.

The linkage of human resource management and performance appraisal is shown in the research. Huber (1980) rightly puts it that in the context of human resource management, formal appraisal serves three main purposes: 1. Evaluation, 2. development and 3. Employee protection. Richard & Johnson (2004) also suggest in this context that organizations need to match up with the HR framework, objectives and practices up to holistically corporate strategy in order to achieve superior performance in the organization. The research explained why a formal performance appraisal was necessary in the organization. PA gives an employee a proper understanding of his duties and tasks towards his organization. It helps the organization to evaluate employees on a common ground and gives scope for retention, salary decisions, promotions, training and development programs etc. (Jacobs, Kafry & Zedeck, 1980) Studies by McGregor, Murphy et al, Bowles and Coates etc explained the various purposes of performance appraisal.

About 61% of organization adopted Performance appraisal by 1950. Performance appraisal developed on the basis of objectives and goal function, thus MBO was evolved. MBO was helpful in setting up goals, which became the standard against which the employee's performance was compared. However, MBO was ineffective performance was measured in units. Therefore, behaviourally monitored performance review was introduced. Thus, Behaviourally Anchored Rating System (BARS) was introduced. BARS was designed by Smith and Kendall in 1963. It found to give more accurate rating of performance. Behaviour observation scales were then introduced which were intended to improve BARS. (Latham and Wexley, 1977)

It was seen that performance appraisal can be used as a motivational tool. The Behaviour Maintenance Model presented by Cummings and Swab in 1973, which explained how people become motivated to perform effectively in the organization. Similarly, Evans (1986) also presented a model which explained how individual and manager decide a goal and how this goal largely influences the individual's persistence, attention and the strategy he/she adopts to complete the goal. These factors determine his actual performance. When the individual's tasks are achieved then this actual performance is compared with the original goal. Locke (1968) introduced the Goal setting theory which emphasizes the importance of conscious goal levels as determinants of actual performance. Goal setting theory is summarized as follows- a. hard goals produce a higher level of performance than easy goals, b. some specific hard goals produce higher level of output; c. behavioural intentions regulate choice behaviour.

Feedback is another important element in the field of performance appraisal. the feedback which an individual receives is the report of the performance achieved by him/her. 360 degree feedback was introduced which refers to feedback received by an individual through everyone in the organization.360 degree feedback includes feedback from peers, sub-ordinates and customers. It is also known as 'multi-source feedback'.

Chapter 3

RESEARCH METHODOLOGY

This section would help understand and explain the reasons behind the choice of the methodology I have adapted for this research. The choice of research methodology depends on the nature of study topic (Creswell, 1994).

Research objective

The research objective was to understand the effectiveness of an appraisal process on the employees. The main purpose of this dissertation was, to study the employee's ability to perform well in the industry and to check the impact of performance feedback over their job.

Research methods

Quantitative Vs Qualitative

Denzin and Lincoln (2000) say that, Qualitative research generates the socially constructed nature of reality, the intimate relationship between the researcher and what is studied, and the situational constraints that shape inquiry. They seek answers to questions that stress how social experience is created and given meaning. In constrant, quantitative studies emphasize the measurement and analysis of casual relationships between variables, and not processes. Qualitative research thus has a humanistic element to it, whereas Quantitative research is grounded in mathematical and statistical knowledge. (Gephart, 2004)

Qualitative research is a representation of peoples mind and, it is interpretative and highly inductive. (Van Maanen, 1998) Another interesting difference between the two methods is, that quantitative techniques require the researcher to produce and verify hypothesis and reduce entities into simple variables for the benefit of understanding and generalizing. Also, it assumes that all occurrences are independent events that have no connection to the surrounding environment. On the other hand, qualitative research attempts to prove and understand phenomena rather than explaining the cause and effect relationship. Further, it believes that all occurrences are linked in some way to the surrounding environment. (Easter by smith et al, 2002)

Why qualitative?

The goal of qualitative research is to understand the research topic more explicitly, from the perspective of the interviewee, and to understand how and why they have arrived at this perspective. (Gephart, 2004) adds that, qualitative research methodology largely depends on recounting, understanding and explaining complex or interrelated phenomena, namely, the methodology is to understand multi-dimensional, dynamic picture of a subject of study. Qualitative research method was ideal for this project, because it gave a deeper understanding of the, given theories and helped in obtaining an edge in knowing the concepts well. As the data obtained through qualitative is the interviewees own responses, it helps in gaining a broader perspective about the topic. The exact responses pertaining to the literature review helps in linking the data well.

Research Tactics

The tactics used for data collection for the research are classified as follows:

Primary data:

The research deals with the reaction of the employees after being appraised. Hence, it was necessary to conduct the research through semi structured interviews. Cooper and Schindler (2001) suggest in this context, that if the research is an exploratory study, use of interviews is more appropriated for the researcher to understand and get an in depth view of the topic being explored.

Design of interview question

The interview questions were designed, keeping in mind the research objective. Eight questions were designed in accordance with the literature review. The interview questions were categorized into four parts. The first part reflected the employees' basic experience with performance appraisal. The second part, focused on the training aspect of the organization, which forms an important part of the appraisal process. The third part, focused on the direct implications of the appraisal process on the employee's life. The last part was designed to reflect answers relating to motivation and better performance in the organization. The questions designed were open-ended because, it could give the employee the chance to elaborate his given situation.

Easter by-Smith, et al., (2002) state that, investigators conduct qualitative interview to understand 'how individuals construct the reality of their situation formed from the complex personal framework … in order to help explain and predict events in their world'.

When was the research done?

The research was done in mid July to mid August.

Data analysis:

For the data collected in this research through interviews, a framework given by Bryman and Bell (2003) was used. The framework is known as Theoretical sampling which is explained as follows.

Theoretical Sampling:

It is a process of data collection for generating theory where the researcher collects and analyzes data and decides what data to collect next and where to find it, in order to develop his theory as it emerges (Bryman and Bell, 2003). Thus, data was collected from various sources until there was a theoretical saturation. The same content leads to descriptive content analysis which is discussed in detail in the next section (Bryman and Bell, 2003, p.330).

Figure - Theoretical sampling

Secondary research

This has been provided through the available research and various reports. This was done by accessing the library and books, journals, market reports and internet extensively.

Limitations of qualitative research:

The big problem with qualitative data is how to condense highly complex and context-bound information into a format which tells a story in a way that is fully convinced to the reader." (Cassell and Symon, 2004) Qualitative research methods are descriptive. Also, they are subjective in nature which always leads to a kind of research bias. Sometimes, the interviewees were not willing to open up much, towards some question. This would either lead to incomplete information or incorrect information.

Summary of Research methods:

The research method was done keeping the research objective in mind. The research method adopted for this research was Qualitative research method. Qualitative research method helps to understand multi-dimensional, dynamic picture of a subject of study. The research tactics adopted for the research were done in the form of primary data source and secondary data source. Primary data was obtained in the form of structured interviews. The questions designed for these interviews were open ended. The secondary data was obtained in the form of reports, books, journals etc. A theoretical sampling method of Bryman and Bell (2003) was adopted for data analysis method.

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