Performance Appraisal Systems in Human Resource Management - Research Paper Example

Performance Appraisal: A Form of Organisational Control? At the centre of the organisation are the people, also known in organisational terms as human capital or labour, and human resources or employees. The people are considered the life of the organisation, as through them the organisation is able to realise its goals. They are also found the most crucial and most complex resources of the organisation – the most crucial, as in them laid the organisation’s success or failure; and most complex, as they are not only unique and unpredictable but are also intricately moulded. Added to this complexity is the inherent complex nature of the organisation. But here lies the beauty and challenge of managing organisations – achieving unity in diversity towards a collective goal. In this context, control becomes inevitable in organisation because without it, the organisation will forfeit itself, as the organisation is a pre-determined social order collectively working towards one goal achieved through controlled performance (Buchanan & Huczynski 1997, quoted ‘What is an organisation?’ n.d: 1). With employees at the centre of the organisation, productivity can only be achieved if and only if employees perform efficiently and effectively. In this context, human resources mean “the traits that people bring to the workplace [organisation] – intelligence, aptitude, commitment, tacit knowledge and skills, and ability to learn” (Javed 2009: 3). And one of the many old ways management achieve this is through performance appraisal. Performance appraisal can be historically traced back to Fredrick Winslow Taylor’s pioneering studies of Time and Motion, but as a systematic management tool for evaluating employees’ performance, it really dates back to World War II (Steel Authority of India Ltd. 2008: 3), yet, it has become an integral part of the life of organisation, that has continually evolved until today trying to respond to the rapidly changing times and needs. Having a strong impact on employees’ working lives, performance appraisal has become not only an issue dividing management and employees into two contending sides but also a favourite topic of debate among theorists and practitioners. In theory, performance appraisal convincingly sounds a useful management tool meant to ultimately improve organisational productivity through bettering employee performance by finding out the best employee practices that have to be rewarded and the worst employee practices that have to be rectified. Yet, many management practices ranging from the very purpose of conducting performance appraisal to the whole process itself put the validity and effectiveness of performance appraisal under question, most debatable of which is the use of performance appraisal to control employee performance, which is viewed more negatively than positively by employees causing tensions in management-employee relationship – a problem being avoided by organisations as it does not only deter productivity but also wastes energy and time and much more, it tarnishes the organisation’s public image and reputation. Almost all organisations programmatically conduct their own performance appraisal whether informally or formally, and with or without the employees’ knowledge. Managers commonly believe that through this, they can appropriately evaluate their employees’ performance whether or not they are efficient and effective. The result of performance appraisal is also usually used as basis for employee’s promotion, remuneration increase, awards and other benefits, commonly perceived as one way of motivating employees to perform much better. However, there are some who question the underlying reason of management in conducting performance appraisal. To them, this is “the most misused and abused and disused management tool in history” (Thaker 2008: 1). In fact, performance appraisal is seen as a form of organisational control. If this is so, is the topic this paper delves on. And to be enlightened on this matter, understanding on both performance appraisal and management control system shall be reached. Thus, the following questions: What is management control system? Is it an organisational need or a simple management whim? What is performance appraisal? What are the underlying reasons of management conducting performance appraisal? To which advantage and disadvantage is performance appraisal? Is performance appraisal a necessity or a mere scapegoat of management to get rid of employees? Does performance appraisal truly measure what it means to measure? And does performance appraisal promote efficiency or further inefficiency? Or does performance appraisal strengthen the organisation or just create disunity among employees? Is performance appraisal a necessary management tool? Organisational Control: The Essence of Management Function Aside from the fact that control is inherent in organisations, as it is one of the basic functions of management, control is pervasive to all the other basic management functions: planning, as it curbs the activities of the organisation; organising, as it limits the positions in and composition of the organisation; staffing, as it defines the boundaries of tasks, roles and authorities of each of the members of the organisation; and directing, as it aligns all members of the organisation towards one goal, one vision, and one direction. All these functions require control. Without control, organisations cannot reach its goal, as management control system is “the process of evaluating, monitoring and controlling the various sub-units of the organisation so that there is effective and efficient allocation and utilisation of resources in achieving the predetermined goals” (Prakash 2009: 2). Concretely, “the ways… tasks are divided, activities coordinated and decisions taken within organizations, together with the monitoring and control of performance, are the basic building blocks for managing employment relations” (Sisson & Storey 2000: 67). Thus, management is essentially the ability to control, which is done utilising different techniques through which the organisation is provided with the “type and amount of information [it] need[s] to measure and monitor performance” (CliffNotes 2009: 4). Basically, control systems go through “four key steps: (1) establish standards [by which] to measure performance; (2) measure actual performance; (3) compare performance with the standards; and (4) take corrective actions” (CliffsNotes 2009: 1). And generally, control in organisation focuses on its four aspects/areas: “physical resources, human resources, information resources and financial resources” (‘Basic Elements of Control’ n.d: 1). Among these areas of control, the most controversial of which is the human resource control, understandably because people are thinking and feeling individuals – the hardest to control yet the most challenging one and the most productive. Controlling human resource “helps managers regulate the quality of newly hired personnel, as well as monitor current employee’s developments and daily performances” (CliffsNotes 2009: 4) and is usually done through selection and placement, disciplinary programs, observations, training and development, performance appraisal, and compensation (Ibid and op cit). As was stated earlier, the quality of employees largely determines the effectiveness and efficiency of the organisation, controlling this area is therefore vital (CliffsNotes 2009: 4). But how could performance appraisal control employees’ performance when it is only a tool supposed to measure the performance of employees? Moreover, how could it control employees when it seemingly sharpens the inherent conflict between management and employees, especially so that it is widely believed that when conflict characterises management-employee relationship, more expectantly than not, employees tend more to disobey, worse retaliate, than follow neither cooperate. So, “what is the point of performance appraisal” (Thaker 2008: 1)? Does it meant to improve employee performance or it is meant to control employee behaviour? Performance Appraisal: Quality Control of the Employee’s Performance Conducting performance appraisal is neither simple nor comfortable, and neither easy nor self-fulfilling. It is in fact “one of the most complex activities in human resource management” (Ilgen & Feldman 1983 cited in Roberts 1998: 301), not only because employees – the target of evaluation – together with their superiors – the evaluators – are themselves both superbly complex, but also because there are many points of potential flaws that may reduce the validity and reliability even of a most well thought of performance appraisal system: among which are “rater bias, unclear performance standards, inadequate documentation, heuristical and attributional errors, and an absence of training” (Daley 1992 cited in Roberts 1998: 301). A confluence of these worsens the problem and increases the questionability of performance appraisal as a human resource management tool. In fact, to some, specifically the proponents of Total Quality Management Theory (TQM), these are defects inherent to performance appraisal, and are irreparable, rendering this management tool ineffective, as this is based on a faulty theory (Deming 1986 and Thayer 1991, cited in Roberts 1998: 301), especially so when it is used as a device to command and control employees, to measure performance inaccurately, to blame employees for performance problems that are in fact systemic – ‘poor management system, work process flaws’ – and to promote unhealthy conflicts and competition among employees (Thayer 1991, cited in Roberts 1998: 301). Performance appraisal is done in varied ways, which could be summed up into three general categories: trait formats – used when the specific aim of appraisal is to evaluate employees based on specific personality traits perceived important to the nature of the organisation, management by objectives (MBO) formats – used when the specific aim of the appraisal focused on evaluating employees as to how well they progress in achieving work-related goals, and behavioural system formats, for example the Behaviour Observation Scales (BOS) – used when the specific aim of the appraisal is to evaluate employees as to how they behave in the conduct of their work, of course zeroing on the behaviours found necessary and desirable to the organisation (Gabris & Ihrke 2001: 157). With these varied techniques, the performance appraisal process summarily serves organisations with at least three purposes important to the organisation’s efficiency and effectiveness: (1) to provide employees with periodic, formal feedback, as this will help employees see their performance in proper perspective whether or not they need to improve, which in turn also provides managers with the necessary information to better human resource management; (2) to control employee behaviour, resultantly their output, as performance appraisals are designed based on the predetermined standards and goals of the organisation – meaning whether or not the employees qualify to remain in the organisation or if the employees desire to stay in the organisation they should work hard to reach the standard; and (3) to determine individual merit, as performance measurement, which is tantamount to productivity measurement, is commonly seen as the most justified basis of merit-pay (Ibid). Understanding the interrelation of these three major purposes of performance appraisal would bring us to realise that its underlying value is, indeed, control. Lets take a closer study on the first stated purpose: that performance appraisal intends to provide formal feedback to employees as to how well they rate vis-à-vis the standards of the organisation. Although this sounds good, this may be perceived in two contrasting ways: for people who would like to improve their performance, knowing how well they rate as employees is helpful, as they would have the tangible basis to which area they should improve, but for those who either suspect the real motive of the appraisal and those who are not confident enough in their ability compared with their co-employees, appraisal is something they dreaded and wouldn’t approve of. But whichever way, this already provides valuable information to the management as to what kind of employees the organisation has. Although it may be true that it provides feedback to employees, the effect of this information to employees is essentially to catch up with the standard of the organisation. Thus, what determines employees’ action is dictated by the organisation. Much more, the areas being evaluated are the areas important not to the employees, as to what the employees see deem fit for their personal growth, but to the organisation. Therefore, in this context, this purpose is ultimately meant to control employees’ performance as seen deem efficient and effective by the organisation. Furthermore, even in view of the management’s reasoning that information from performance appraisal is used as basis in conducting activities best suited to the employees’ improvement and growth needs, the bottom line goes back to control – employees’ improvement and growth are determine by the organisation as to what skills, knowledge and behaviour the organisation needs. Yet, this is but understandable for the organisation, as it is built for a specific purpose. Thus, it should do, within its power anything that could positively contribute for the attainment of its purpose, which essentially is its being. This therefore requires performance appraisal instruments to be consistent with current management philosophies. In the second purpose, control is explicitly stated: to control employee behaviour, resultantly their output. In fact, analysis of personal appraisal instruments show that most, if not all, are structured based not only around managerial objectives – to put human resources to maximum benefit of the organisation – but also on the kind of behaviour and working attitude management would like to customise in employees. For example, instruments merely measuring simple traits evidently demonstrate this line of thinking by commonly encouraging enthusiasm, loyalty, dependability of reliability, and being team-oriented in employees (Latham & Wexley, cited in Gabris & Ihrke 2001: 157). In this context, appraisals dictate on employees the behaviour and output, the organisation expects from them. And since results of appraisals have become an accepted normative basis in the reward system of organisations, appraisals could well be understood as a warning sign whether or not you could be promoted, rewarded, or maintained. In effect, not unless employees do not mind being fired, demoted or reprimanded, employees tend to modify their behaviour and improve their output according to what is being measured for them to be rewarded at most or be retained at the least. In this way, employees are subtly controlled. This, in fact, is how influential and powerful this seemingly harmless device. And lastly, the third purpose is to determine individual merit, which “is primarily done through linking performance appraisal to merit-pay” (Gabris & Ihrke 2001: 157). Control here is in fact two-folds. First what is meritorious is a management sole prerogative; and second, how much merit pays, although determined by law, in the end still depends on the management, whether or not they will abide by the law or they will be more than generous. Again, employee performance is controlled by appraisal, as it determines how much should an employee’s performance be compensated. In the final analysis, performance appraisal is more of a human resource management control device than a simple measurement tool or an information feedback tool, as it acts as an employee’s quality control. With it, employees are sorted out as to the best, the average, and the rejects. And now here comes the real problem: if performance appraisal is practically acting as an employee’s quality control, how sure are we then, that it really measures what it meant to measure? Performance Appraisal: A Problematic Employee Performance Quality Control System How can a device, like performance appraisal system, determine quality, when its own legitimacy is being questioned? It’s just like relying on the testimony of a well-known liar or opportunist to convict an accused, or asking a blind witness on the details of the crime scene. Reliability, validity, accuracy and objectivity of the instruments, those using the instrument and the process itself are the areas of contention that make performance appraisal a questionable device for employee performance quality control. How could a device, which legitimacy is cast with so much doubt, be a basis of crucial human resource management decisions? Imagine, a flawed human resource management tool determining the future of the employees in the organisation; it’s “a deadly sin” (Deming 1986, cited in Roberts 1998: 301)! It is no wonder then, why many employees fear and even abhor undergoing performance appraisal. Does performance appraisal system accurately measure what it’s meant to measure? Of course there are two contending views on this matter. Psychometricians assert that work behaviour and output could be accurately measured, as there are mathematical formulae to reduce rating error (Roberts 1998: 301). But “critics of … psychometric tradition argue… performance appraisal systems promote… false measurement precision based upon … quantitative scales, when, at best, performance appraisal systems promote ordinal … judgments” (Fox 1991, cited in Roberts 1998: 301). One research study on performance appraisal found out that: majority of the supervisor-respondents “agree that performance appraisal systems are rarely accurate as they claim to be” (Ibid), however, majority believes that measurement loopholes in the performance appraisal systems can be remedied (Ibid). As implied, respondents believe measurement problems in performance appraisal systems are not inherent in themselves; that’s why they are repairable, and that once these problems are remedied they can accurately measure employee performance. In relation to this, majority “agreed that solving problems facing performance appraisal entails the application of additional resources, primarily rater training and additional time for raters to complete appraisals” (Ibid). Another big problem that makes the efficacy of performance appraisal system questionable is the ever-present rating errors in it: “halo/horn effect, central tendency, recency, leniency, attribution bias,” (SAIL 2008: 7), as most people can hardly be objective or accurate in rating other’s performance due to varied uncontrolled variables such as personal experiences, emotional state, intellectual preparedness, etc. Sometimes people tend to generalize an employee’s overall performance based on first impression or on one aspect of an employee’s performance. For example, an employee who is very artistic, which happens to help in sanitizing the organisation, is most of the time rated outstanding even if he/she is weak in more areas of work. This is halo/horn effect. Also, by trying to be just in rating people, the usual practice done is to rate employees in the middle scale or get the average, even if their performance should have been rated higher or lower. This is the central tendency. Another common tendency of people is to magnify recent events in rating even if the recent event is very minor compared to past events, which are major ones. For example, yesterday one employee has successfully closed a deal with a not so big company, and the next day a performance appraisal is conducted, this employee will most probably be rated higher than the employee who has closed more and bigger deals in the past. This is recency effect. Lastly, people tend to blame performance failures to employees, but attribute achievements to outside factors. For example, the supervisor usually attributes the successful performance of his/her group to the quality of his/her leadership, but on the other hand blames their failings on his/her subordinates inefficiency, unhealthy work attitude, etc. This is attribution bias (Ibid). “The research literature and practical experience demonstrate that reducing rater error is extremely difficult because of its many causes and manifestations”(Roberts 1998: 301); furthermore, because, the rater him/herself is unpredictable. However, just like any other problems surrounding performance appraisal, rater error, although extremely difficult can be reduced and curbed. Theorists (Bernardin and Beatty 1984, and Greenberg 1987) suggest that in order to correct rating errors a comprehensive set of interventions are needed such as: “rater training (e.g., frame of reference training), observational techniques including diary keeping, and a comprehensive psychometric assessment of ratings to identity problems in performance appraisals” (cited in Roberts 1998: 301). These are only few, yet the most controversial ones, among the many problems confronting performance appraisal systems. Some of the minor problems are: “problems in providing clear and specific performance feedback… absence of organisational commitment manifested in several ways… literacy levels” (Ibid) and others. These explain why performance appraisal system is a problematic human resource management tool. With this, will it be wise to utilise performance appraisal as a human resource management tool? Conclusion Just because performance appraisal systems are found problematic as human resource management device for employees’ performance quality control, would render it useless. On the contrary, these problems should bring theorists and practitioners to better this quality control system, because it cannot also be denied that despite its many flaws, it has been proven useful – in fact, it has stood the test of times. So instead of throwing everything away, it would be much better to look for ways to address the problems that make performance appraisal problematic. One good suggestion to consider is that of the Steel Authority of India Ltd. (2008: 5): Performance appraisal should mutually addressed both the employees and the organisations, as employees’ development should be viewed intertwined with that of the organisation’s because they are the organisation’s main resources, thus, neglecting their interests will also be deterrent to the organisation. Therefore, the bottom line in correcting the problems in performance appraisal system lies in the organisation’s view of itself. If organisational goals were seen distinct from that of the employees’, then performance appraisal would then appear more of a controlling device in the negative sense, but if organisations goals were regarded one with the employees, then performance appraisal could be seen more positively. Reference List Basic elements of control, n.d. [Online]. Available: http://www.scribd.com/doc/14256049/Basic-Elements-of-Control [21 August 2009] CliffNotes, 2009, The organizational control process. [Online]. Available: http://www.cliffsnotes.com/WileyCDA/CliffsReviewTopic/The-Organizational-Control-Process.topicArticleId-8944,articleId-8925.html [22 August 2009] Gabris, G.T. and Ihrke, D.M., 2001, Does performance appraisal contribute to heightened levels of employee burnout? 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Available: http://www.scribd.com/doc/6327877/What-is-the-Point-of-Performance-Appraisal [21 August 2009] What is an organization?, n.d. [Online]. Available: www.nta.nhs.uk/areas/workforce/docs/SM1_Strategy_OHPs.ppt - [23 August 2009] Read More