An Evaluation of Performance Appraisal

Introduction

The following Literature review focus on an evaluation of existing literature which relates performance appraisal with controlling and developing of an employee in the organisation. This review will start with concepts and definition of performance and performance appraisal within the existing literature, this will also explain the common themes and strategies being considered within the scope of the organisational framework. This review will further examine, observe and narrow down the factors to performance appraisal. Limitations will be discussed thoroughly to see the challenging factors which are further playing a vital role in changing the dynamics of appraisal and in the end, the review will summarise and conclude

Definitions: Performance, Performance Management & Performance Appraisals: Different angles given by various authors

Rothwell (2005) describes the performance as, “outcomes, results or accomplishments.”  This is a simple yet profound concept. Here we ask first, what needs to be accomplished and how we will achieve that, what are the controlling and driving factors – extrinsic or intrinsic and how this helps in developing an employee and ultimately an organisation. This Literature review will focus on these above-said areas. Considering performance as a most critical factor in this literature we found, four separate components of performance, (Morhman et al (1989)) They state that “A performance consists of a performer engaging in behaviour in a situation to achieve results.”  The authors indicate that most types of performance systems focus on the performer, the behaviour or results.

In 2009 Redman and Wilkinson defined that performance management is a comparatively new term for an established managerial activity (i.e. management-by-objectives and performance appraisal. (Gerard McMahon, 2013)

Subsequently, in 2013, Gerard McMahon studied on the existing literature of Performance management and described it as a process by which organisations define and set objectives and goals, determine standards, allocate and assess work, and distribute rewards (Varma et al., 2008). In effect, it is used to improve organisational, team and individual performance and development, including activities designed to ensure that goals are consistently being met in an effective and efficient manner and this is an on-going activity relating to all scenarios where people meet for the purpose of attaining objectives. (Gerard McMahon,2013)

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Authors emphasised on the fact that these terms ‘performance management’ and ‘performance appraisal’ are frequently used interchangeably, and this can be argued that ‘performance management’ is more elaborate, multifaceted and expensive than ‘performance appraisal’. That is, the former progress in areas such as performance pay, 360-degree feedback, competency-based appraisal, coaching and (more recently) employee engagement (Mone and London, 2009). So too Torrington et al. (2008) point out that ‘performance management’ is progressively seen as the way to achieve employee performance, and has combined the appraisal eview process.

On this theme Armstrong (2009:9) suggests that performance management is a ‘systematic process’ for improving organisational performance, via the development of the performance of individuals and teams. That is, within a decided context and framework of defined and planned goals, standards and competency requirements it is a means of getting better results, as one accomplishes performance in a way which emphases on future performance planning and improvement. This process entails the provision of feedback and the assessment of an employee’s progress and achievements, so that action plans can be prepared.

Performance management is that vital link of human resource strategy that aligns and optimises individual performance with the overall performance of the organisation.  It is a continuous process that identifies, measures and develops performances in the organisation.

Significantly these terms are used interchangeably and has transitioned from an appraisal activity to the performance management here Jonathan Roe framed it this way – “Performance appraisals are an important tool in managing employees. They are communication tools that allow managers to set goals and expectations with employees and then evaluate their performance.  Based on how they do, the employee can be rewarded or if need be, a corrective plan of action can be implemented.  Either way, performance appraisals set clear expectations for what is expected from an employee” (Liza Estino Daoanis,).

Appraisals Influence on Employee Outcomes:

Armstrong (2006) describe the role of the performance appraisal as a tool for looking forward to what needs to be done by people in the organization in order to achieve the purpose of the job to meet new challenges. Better use of technology skills and attributes (Szilagy &Wallace 1990) in addition will develop both organizational and individual capabilities and reach agreement on areas where performance needs on the effectiveness of its employee generating information which influences many of the organizations’ decision. 

In Industrial psychology, an extensive literature about performance appraisals exists, Murphy and Cleveland (1995) surveyed that these studies have their own impact on important issues in appraisals such as measurement problems, how to define measuring scales in appraisal forms, how to minimise the biasedness and favouritism, the effect of one’s features on systems, procedures, processes and others and so on. Moving forward this review will emphasise on what are the cause and effect of performance appraisal in employee lifecycle, what are the challenges performance appraisal have faced over a period of time and how they affect employees. (Peter Cappelli and Martin J. Conyon, 2017)

In the encyclopaedic EBSCO database, more than 400 articles were reviewed in 2016 that had the phrase ‘‘performance appraisal’’ in either the heading or title or the abstract. Practitioners and academics have raised similar alarms as to whether the appraisals have much influence on employee outcomes, such as pay increases and promotions. Let us examine this view empirically, here emphasis was on academic view of appraisals, which are completely adapted by the explicit contracts of workplace where performance appraisals are understood as the corresponding of post contract review – discussing and negotiating employee’s compensation based on their performance over the previous period and as a supplement to explicitly contractual arrangements , highlighting the challenges being faced in measuring aspect of performance and using discretionary compensation to reward those aspects. Peter Cappelli and Martin J. Conyon, 2017phrased it this way “An alternate view is that performance appraisals are a central component in a relational contract, in which employment is seen as an open-ended employment relationship moderated by supervisors”.

Theory of attribution deflection:

Lu Huia, *, Gu Qin-xuan (2009) highlighted the different side of performance appraisal – “the reason why appraisals are not welcomed”, this reflected two different views in their study, one was appraiser’s and other was appraisee’s view. In Appraisee’s view when the performance appraisal’s result is announced, there is a feeling of unfairness developed in some of the employees (appraisee’s). They think they performed better than others but not appraised well by their managers and then they think others made their way out in performance appraisal in some informal ways. In this case, we need to consider that others’ organizational political behaviour affects one’s sense of injustice. In addition, we must give attention to personal attribution deflection. In the theory of attribution deflection (by Frietz Heider, 1958), selfish deflection has been described as one person often attributing their success to personal ability and efforts while attributing their failure to the external environment such as bad luck or the impossibility of finishing the task. At the same time, they attribute others’ success to the external environment while attributing their failure to personal factors. This attribution deflection leads to unfairness and injustice so employees think performance appraisals makes no sense and it’s a format where employer’s appraise favouritism.

Robert C Sinclair (2004) in his study “investigated the effects of order of information acquisition and mood state on performance appraisal decisions”. In his theoretical research he gave the importance of mood in appraisal performance and mentioned that subjects in depressed moods display greater accuracy in judgments than subjects in elated moods since subjects in good moods have been shown to be broader categorizers. Mood state have their own importance and significance in appraisal performance.

Performance scales are the instruments to measure performance.  Murphy & Constans (1987) found in one study what scales showed, scales may lead to appraisal errors if measures are not defined properly. Contextual performance plays a major role in the entire process and in addition, with the finding of contextual performance other task is appraise contextual performance. However, contextual performance pays great attention in developing skills and attitude of employees like communication skills and interpersonal behaviours which in further promotes job relations with descriptive index. Here we come to the same point – appraisal indexes have subjectivities to affect equality, whenever goals or task performance is not well defined.

Purpose of appraisal has always been debated from centuries, some authors focused on individual development while others gave pragmatic effects on organisational growth. Falcone, Paul; Sachs, Randi in 2007 said that “common misconception is that the sole purpose of an appraisal is to inform employees how their performance has been rated”.  This is very unfortunate because a productive appraisal can achieve far more than this. A productive appraisal, can evaluate and review the quality of the employee’s work and give an opportunity to supervisor and employee in which they set new goals and objectives for the next financial year. A productive appraisal recognizes that employees are an extremely valuable resource with specific needs, goals and objectives.

Furthermore, they added that people join companies and leave managers. “It’s also said that the difference between an active and a passive job seeker is one bad day in the office”. It is very important to keep your staff occupied in productive work and use their energy and resources in bringing organisation to next level and it is more important to show them the path they want to see in terms of their own growth and development which is further in line with organisation’s growth and development. Failing to provide these key motivational drivers may lead to the high attrition and premature turnover, and that may, in turn, reflect passively on your next performance review.

When we talk about developing an employee, appraisal systems play a vital role in this context which is linked with other domains of performance management system like goal setting, training and development, balance score cards, performance-based rewards etc. Traditional Appraisal and Modern appraisal, authors are defining these two terms to distinguish the complexity of systems. According to Clive Fletcher & Richard Williams (2016) modern appraisals are appraisal in assessing productivity & promotability, but in the traditional kind, its role is a limited one. Many organisations have started using psychometric tests and assessment centres lately. This is in trend, and one of the advantages of this kind of strategy is that it allows performance and potential in line led with the goals of the organisation and gave a wider perspective to potential which cannot be easily provided by line management alone. If handled rationally, assessment centres and tests can give line managers a substantial role in implementing career development plans and decisions for their staff.

Conclusion:

The Literature review gave the academic meaning of “performance appraisal “and highlighted how different authors gave definitions in their own terms. This review distinguished two terms performance management and performance appraisals and how these two terms are linked with each other. Despite the fact these terms are used interchangeably, each have their own significance and importance in organisation. Theoretically performance appraisal is a platform for providing positive feedback and giving promotions, providing corrective feedbacks and unfortunately sometimes giving terminations, determining compensations, market wage analysis, identifying strengths or weakness and identifying development needs that helps in career planning.

This literature review showed in general the behavioural aspect of performance appraisal and effects of the state of mood on appraisals, subjects in good moods make more positive evaluations and retrieve more positive and less negative information than subjects in bad moods (mood congruency). 

This Literature reviewed the challenges in measuring factors, objectivity is important in terms of setting goals and defined measures should be placed in system in order to maintain the authenticity of appraisals systems else it is very challenging to find the fair deal in organisation. The issue of building trust with managers and exchange of feedback is a very sensitive two- way communication and in addition to maintain manager’s performance management skills, the appraisers must continue to receive periodic training. The use of training will help to reduce and possibly eliminate the common rating errors that are experienced even with traditional performance appraisals. (Steven H. Appelbaum, Michel Roy, Terry Gilliland, (2011))

 This Literature review showed that “Appraisals are not one-shot deals”. Forsyth, P. (2011) It’s an ongoing process, year on year there is no sigh of relief and appraisals achieve the most when placed in a long-term context and linked to ongoing operations. Appraisals gave platform for change management and is linked with organisational goals hence it plays a major role in organisational development. They work as catalyst for effective management, and thus effective performance. The benefits are considerable and tangible. Sun Jian defined in his book “360-degree feedback process “that it is hard to evaluate and appraise the value of innovation and personal value in team work.

There is no one hard rule which can be applied to all the industries to get the system right but it is important to have these various factors, mainly like a) clarifying what’s expected, b) appraising and communicating quality of performance, and c) coaching for improved performance. It is important to put these three factors in the proper context and to recognize that other things can also be done to improve performance. (Kirkpatrick, Donald L., 2005). Various techniques such as career planning workshops and workbooks and development centres can help them further in this respect.

Now we can conclude that, no matter appraisers or employees, in the condition of information dissymmetry, resources scarcity, and bounded rationality, some organizational, behavioural or political factors will lead to unfair feeling in different ways and can lead to more organizational political behaviours. This is vicious cycle, we can see that authors made lots of analysis on failures of many systems but we found that it’s not the performance appraisal’s fault only. Performance appraisal have too much benefit-related factors, and non-proper usage of these factors might lead to troubles. So, we can say that creations of one system that can be approved by all employees become a permanent topic.

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