Methods of Employee Performance Appraisals by Outlining their Benefits and Limitations

Introduction

Organisations and managers are now using a number of appraisal methods in order to assess employee performance, and these methods both have benefits and negatives. An employee performance appraisal is a critique and a review of an employee's performance during the year, or another specified time period (Woods, 2003). Performance appraisals are one of the most important processes for successful businesses, and are one of the key metrics a human resource department within an organisation will be judged on (Kressler, 2003). Performance evaluations and appraisals have been conducted since the times of Aristotle, and the measurement of an employee's performance can allow a company to take rational decisions on an individual employee level, when reflecting on their performance (Virginia Tech, 2010). Employee performance appraisals provide a structure for managers and employees to meet and discuss performance with each other (Lotich, 2014). Jafari et al., (2009) assert that performance appraisal is one of the most important processes that the human resource department has to implement.

Indeed, "there is little disagreement that if well done, performance measurements and feedback can play a valuable role in effecting the grand compromise between the needs of the individual and the needs of the organisation" (Virginia tech, 2010). Companies need to understand the purpose of appraising performance. This is to motivate an employee to increase their performance levels by attempting to help the employee understand why they are not performing effectively. It is also to identify how they can perform better (Kokemuller, 2012). This essay will look at a range of different employee performance appraisal methods, ranging from rating scales to team and self-evaluations. Both the benefits and the limitations of these will be looked at, in order to assess how effective they are as performance appraisal methods. Finally, the conclusion will discuss if there is one effective method that organisations should use, or if this is not the case.

Rating Scales

One method of appraisal is rating scales, and this is one of the more common forms of performance appraisal found within organisations (Jafari et al., 2009). Two of these which are commonly used are the graphic rating scale as well as the behavioural rating scale. Using the graphical rating scale, the employees are assigned a score based upon different criteria which are important to job success (Kokemuller, 2012). The behavioural scale focuses on the actual behaviours an employee displays. The benefits of rating scales is the fact that they are easy to use and to understand. Many managers and employees are also familiar with this technique, and they offer a simple way to communicate areas of strengths and weaknesses to the employee (Kokemuller, 2012). The graphical rating scale is not very time consuming at all, and they are easy to develop and administer as well as allowing for a range of quantitative analysis. Negatives of rating scales is the assumption that they are tied to a raise or a bonus for the employee, and this can contribute towards score inflation. Managers can also have a negative bias towards employees when utilising this method too (Kokemuller, 2012).

Narrative Techniques

Another technique is the narrative technique, which is similar to the critical independent method. When compared to the rating scales technique, these offer a more detailed analysis of job performance (Kokemuller, 2012). In these, an essay assessment is written of the performance for the narrative technique, with a log kept for the critical independent method. This log is based on the critical incidents which occur over the year, or the period of time the performance appraisal focuses on, and looks to the actual performance as opposed to behaviours like the essay technique (Jafari et al., 2009). A benefit of these techniques is the amount of detail, and how thorough they can be in analysing the behaviour of employees (Kokemuller, 2012). Maintaining a detailed set of notes throughout the year enables a manager to give a well-rounded and an accurate account of employee performance (Root, 2011). As well as this, there can be a focus on praising positive behaviours, as well as addressing areas where correction is needed. However, this thoroughness and scope for wide ranging discussion does leave the analysis up for open interpretation without a scoring and rating system, and therefore the employee may interpret the evaluation in a too positive or too negative light (Kokemuller, 2012). This method can be used in conjunction with other methods, such as the graphical scale, to enable something more quantitative with a qualitative rating too (Jafari et al., 2009).

Comparison Methods

Comparison methods is a multi-person method, which is a common appraisal technique. This approach, and the forced distribution method, compare the employee's performance to the fellow workers within the organisation (Kokemuller, 2012). This allows the manager to communicate to an employee where they are performing well, and where they are not performing well in comparison to the other employees. The benefits of this are that this can motivate performance in competitive workplaces and among employees who have a competitive nature (Kokemuller, 2012). However this comparative methods could cause infighting, lack of teamwork and a lack of harmony among employees within the business, and this could lead to a deterioration in performance (Kokemuller, 2012). This method could be used in conjunction with the graphical scale, as the graphical scale would allow easy comparison between employees (Root, 2010).

360 Feedback

The development of an employee is dependent on the progress made within the specific department that they work in, as well as how effective they are when working with the rest of the company (Root, 2010). 360 degree feedback is a popular performance appraisal technique in modern organisations. In this method, the employee is evaluated by a wide range of people. This can range from co-workers, to supervisors as well as customers and those working under them (Kokemuller, 2012). One advantage of this is that the employee can see how a wide range of stakeholders view their performance in the key relationships that are critical to the employee's job role. Different perspectives are also a positive in the appraisal process, and this is much more comprehensive than having just one person assessing the employee's performance (Kokemuller, 2012). Hakala (2012) notes that 360 degree feedback is the most comprehensive, but also the most expensive performance appraisal measure and is normally only reserved for key employees within the organisation. Indeed, 360 degree feedback can be seen to be very good for gaining a broader perspective, having multi source feedback and for greater self-development. It is able to measure a range of different objectives effectively that other aspects may not, such as interpersonal skills and customer satisfaction (HRwale, 2015). There is also the 720 degree method, which Shaout and Yousif (2014) cite that it is 360 degree but practiced twice. It includes getting feedback from further external sources such as suppliers, family and communities of which the organisation is intertwined with. 360 degree feedback is expensive and time consuming for organisations to implement, as it is much more comprehensive, and requires much more time invested in it to implement as opposed to the other methods previously discussed.

Self Evaluation and Team Evaluations

Another form of effective performance appraisal has been seen to be self-evaluation and team evaluation. The benefits of these are that they are easy to administer, involving forms that can be filled in and used to rate yourself or those in your team based on a number of different criteria (Root, 2011). These forms can also be used in conjunction with other methods in an attempt to see if their colleagues and self-performance evaluations are of a similar view to the managers. Indeed, Root (2010) mentions that this is particularly useful when teamed with a performance review. Fellow workers may possibly have a better perspective of the jobs that are performed by their peers, and also have a better insight into what working them is liked (Root, 2012). However, there is obviously the possibility that a bias may exist when self-evaluation, or evaluating colleagues who may be friends, or who may be disliked despite having stellar performance in their job roles. This evaluation by peers or by the team can help to open up conversation between the manager, the employee, and the team which can be extremely beneficial to the overall development for the employee (Root, 2010). This is because there can often be discrepancies between what the management, and what the employee consider to be important performance factors (Hakala, 2008).

Management By Objectives

The final technique of performance appraisal is management by objectives. Here, employees are assessed on how they can accomplish a specific set of objectives that the company have asserted are critical for the successful completion of the organisations corporate objectives (Jafari et al., 2009). Their performance can be graded against the objectives which are specified by the management (Shaout and Yousif, M, 2014). This is a process which converts objectives or organisations to objectives for the individual employees. This requires: setting goals, periodic reviews, plans of action as well as self-control (Jafari et al., 2009). So, the process would begin with statements of action such as "reduce defected parts in the manufacturing process to 5%", throughout the process there would be a close monitoring and reviewing of the objectives previously identified to keep the employee focused on their goals (Hakala, 2008). Therefore at the end of year performance appraisal, the progress the employee has made towards their goals is assessed, with new goals set for the next year. This process can be seen to be more useful for managerial positions, as their key goals may be more closely aligned with corporate strategy, and thus easier to identify. Likewise, the negatives may not be applicable to all jobs. Another negative would be the fact that focusing on specific objectives in the performance review may lead the employee to neglect any objectives which are not so heavily scrutinised, or not tied to the allocation of merit pay (HRwale, 2010).

Conclusion - Is there one best method of performance appraisals?

As has been seen in this essay, and as academics assert, there is no one size fits all approach to employee performance appraisal (Scott and Einstein, 2001). It can be seen that a range of different performance appraisal processes are effective when implemented (Root, 2010). As well as this, more and more companies are beginning to recognise that effective performance appraisal is key to successfully achieving corporate objectives (Grote, 2000). Human resource management and performance appraisals are aimed to improve corporate performance, while targeting individuals on the individual level as opposed to the business level. It is important to develop realistic and clear performance standards while reducing communication problems between the managers and their employees. Companies need to select the correct method for them based on a range of different factors, such as the need to compare employees, the cost of the method, the scope for error as well as the training needs evaluation for their specific company (Jafari et al., 2009).

If performance appraisals are not done correctly, a mixed message can be left which leaves employees feeling disappointed and confused, whereas the purpose of performance appraisals are to reinforce the good work the best performers do, and to try and improve what poor performers do (Knight, 2011). In order for the performance appraisal process to be successful, it needs to have the same quality of businesses who thrive. It needs passion, agility, speed and alignment (Bersin, 2013). Organisations need to be flexible in their processes, and arrange them to meet the targets for their specific company. Organisations also need to be aware of overcoming the negatives of performance evaluation such as having a one sided conversation, or an evaluator bias (Johnson, 2011). If these are present, they can have a negative effect upon employees, which is not intended. Therefore it is impossible to recommend one process over all of the others. As has been seen, all the processes have negatives and positives and are more applicable in different situations. 360 degree feedback is the most comprehensive of all the methods, but this is expensive and time consuming and can still fall foul of the negative aspects of performance appraisal. Companies thus need to ensure efficient performance appraisal, and align the process with their corporate objectives.

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