The Performance Appraisal - Literature review Example

Introduction Human nature is to strive for meritocracy. Performance is important to every individual and everyone wants to emerge a winner. Organizations recognize that each individual is unique and given an opportunity, each individual is capable of improving performance over time. They adopted refined methods of seeking improvement at workplace and the concept of performance appraisal took shape. While some call it performance management others call it performance appraisal (PA). PA has been defined as "formal evaluation of an employees job performance in order to determine the degree to which the employee is performing effectively" (Griffin and Ebert 200, cited by Schraeder, Becton & Portis, 2007). An organization needs to measure performance because it helps to determine if a function is productive and where to focus energies on (Hendry, Woodward, Bradley & Perkins, 2000). It is essential to understand where to use the quantifiable data effectively thereby justifying the need for additional resources. While many believe an annual appraisal or attention is enough, according to Cascio (1995) it demands daily attention (cited by Connell & Nolan, 2004). Once a year has not been considered sufficient to identify and discuss job strategies and weaknesses of individuals or teams. Performance appraisals have come under increased scrutiny in recent years. Ninety percent of the human resources executives are dissatisfied with the current performance appraisal system. Many argue that lack of objectivity in their completion, inappropriate timing of such a review and the lack of appropriate content have lead to their unpopularity among managers and subordinates alike. With diverse opinions available on this issue, this paper will explore the ineffectiveness of performance appraisal. Perceived benefits of the PA system The system of Performance Appraisals was introduced as it was expected to improve organizational efficiency and enhance productivity. Facilitating communication can even help reduce employee uncertainty. Feedback is essential for employees as failure to provide a feedback can have negative implications. Without a system of feedback employees keep guessing whether they are on the right track or whether they should chart another course of path. A properly structured and applied appraisal system can help reduce distractions and promote an increased level of trust within the organization (Schraeder, Becton & Portis, 2007). PA systems provide a forum for collaboration in setting goals for the employees. During the appraisal when individual goals and objectives are aligned with those of the organization, it may reduce uncertainty. Appraisals lead to the right decision regarding the training and development needs of the employees. It can be useful in establishing and monitoring employees’ career goals. The Performance Appraisal (PA) system can provide employees with a feedback about their performance which would reduce errors, increase productivity, improve service quality for customers, motivate the employees and give them a sense of commitment (Nikols, 2007). They also provide an opportunity for discussing work related goals and objectives that relate both to the individual and the organization. It helps to identify training and development needs and engage in career planning. It also affords the organizations legal protection against law suits by employees for discrimination and wrongful termination. The beneficial use of performance appraisal has been associated with rise in pay. Performance appraisal has gained importance in the face of globalization and Performance-related-Pay (PRP) has become an important toolkit for optimizing human resources. The New Economics of Personnel (NEP) theory suggests that PRP will produce better results because this creates an explicit connection between the individual and the organizational interests. In maximizing his own interest, the worker also enhances the firm’s position. Criticisms of performance appraisals PA has been subjected to criticism and not always for the wrong reasons. The most common complaints that PA attracts are that they are all the same, take too much time, are subjective and make distinctions without a real difference. They are also untimely and result in degrading employees. Subjectivity according to Kennedy & Grogan (2001) is not really a negative trait. In order to improve performance, immediate goals are designed which include motivating changes in behavior, developing competencies, promoting success and terminating failure. Most often the PA system has been used as a means to gather information for personal decisions like rewards and promotions, rather than using it as a tool to identify weakness that could determine the training needs of the employees. The PA system is also believed to encourage short-term performance at the expense of long-term planning, discourage risk-taking, build fear by pitting people against each other, and undermine teamwork as people are encouraged to work for themselves instead of the company. In nutshell, it has been considered unreliable and inconsistent as a tool. Appraisals can be meaningful if they are provided immediately after an incident or as soon as the behavior to be appraised has been perceived. If there is a time lapse, then the recollections of the performance results fade. Even if the accuracy may remain intact months later, the opportunity to provide motivation and useful feedback is lost. Rensis Likert had criticized the system of performance appraisal even in 1959 emphasizing that instead of increasing effectiveness, it de-motivates and discourages employees and fails to make any positive contribution. Appraisal continues to be linked to compensation, succession planning and promotion decisions. Both employees and their supervisors find the process painful and demotivating. They find it a stressful process with no perceived connection to their compensation. The decision rests on the managers and the bias control mechanism cannot be eliminated due to the human element involved (Davis & Landa, 1999). In fact, PA system has been considered an impediment to the pursuit of quality. Receiving a performance appraisal can be unnerving and frightening experience for some employees and it also leads to tensions and conflicts between the employees and their supervisors. Performance appraisals have been considered important as employees want encouragement and freedom rather than being subject to control mechanisms (Connell & Nolan, 2004). Nevertheless, the practice of performance appraisal has been exerted by the management as a sophisticated control mechanism. Research suggests that performance data is used by management in a way that encourages defensive behavior. The same information can be used for improvement and identification of the problems and the weaknesses. Performance rating does not take place in a vacuum and no matter how well designed the system is, the human dimension can interfere with the manager’s ability to be completely rational and objective. They can alter information and performance for their own ‘good reasons’. People try to manipulate the target-setting to ensure targets are achievable but this jeopardizes the very purpose of appraisal. Managers lack soft skills that are essential in consultation and participation. Research suggests that PA is merely a game that appraisers and appraisees play to gain the support of the right mentors, sponsors or decision makers which would help them to forge ahead. Performance-related-pay (PRP) too has been subject to criticism. The managers face difficulties when they have to determine an individual worker’s contribution to the overall performance of an organization (Belfield and Marsden, 2003)). Amidst uncertainties, managers risk overpaying the workers for their contribution, in which case the workers are likely to withdraw the effort they put in for the compensation. Under such circumstances, the NEP suggests it is better to pay the workers on the basis of input. The workers are also likely to withdraw their effort if they consider the compensation unfair. Research suggests temporary reduction in productivity following PA which could range from three to six months. Companies like Nokia have also experienced that it actually erodes performance over time as people realize that goals are achievable and hence a positive appraisal assured (Nikols, 2007). PA systems hamper organizational agility. They provide financial leverage to employees and unions as well as to management. Lewis (1998) contends that if the performance management is in place employees are better able to meet the increased market competition and key decisions can be pushed down to the line managers who accept accountability. Studies reveal that it would affect ratings if the opinions of different managers differ. It was also found that most often managers are not aware what rating to give to staff. Sometimes they gave high rating because they did not know what rewards it would translate into. According to Schraeder, Becton & Portis (2007), they give high ratings that exceed true performance to avoid conflicts and unpleasant consequences. Recommendations for improvement PA is an effective management tool and the leaders have to take a proactive approach in planning the appraisal process. The PA process should be ongoing and continuous where feedback is seen as a function of quality improvement. The effectiveness of the appraisal system should also be evaluated periodically. The raters need to be trained on the appraisal process, policies and the forms to evaluate effectively (Schraeder, Becton & Portis, 2007). Ratings should be less subjective in nature and must be directly related to the accomplishment of the job-related tasks. The tools used for appraising performance should include the ‘hard’ HRM approach by employing methods like management by objectives, job competencies and rating scales. A ‘softer’ approach should typically involve employees in the design and integration of the performance appraisal schemes. Attention should also be paid to the social and motivational aspect of the appraisal system which should be in alignment with the organizational culture. The management style and the skills of the appraiser are also important. The right understanding and education regarding the purpose and aim of appraisal system is essential. Nikols suggests that a formal PA system is not necessary as informal counseling sessions are known to improve employee performance. Linking PA to pay also serves no purpose as bonuses and other increases can and should be tied to more specific, visible and highly measurable results. PA should be based on pre-established set of criteria directly related to the job assignments. The ratings should provide an accurate reflection of the employees’ performance (Schraeder, Becton & Portis, 2007). Some organizations use these ratings for promotion decisions and if ratings are not accurate the resulting decisions may have negative effect on employees thus leading to legal action. Kennedy & Grogan (2001) are of the opinion that if the PA system cannot be abolished altogether, a typical approach should be to have six to ten raters per person. This would also require a good management information system to report and administer the multiple ratings but this approach requires that so many people should directly be interacting with the employee concerned. Finding such closely associated people would be the greatest deterrent to such an approach. A more effective approach would be to hold the supervisors accountable for the effectiveness of their performance management efforts and provide them adequate training in effective supervisory communication skills. There should be no preconceived notions at the time of appraisal. Conclusion The PA system has been criticized in the way it is applied. While there are perceived benefits its disadvantages far outweigh the benefits. Changes to the system could enhance its effectiveness. One of the most effective ways to bring about change is to have periodic and timely appraisals rather than making it an annual event. The cost to the organization of a defective PA system is very high which may not be visible to the managers. An informal and ongoing system of appraisal would go a long way in motivating the employees and establishing and maintaining a healthy relation between the employees and the supervisor. The organizational goals would also be in alignment with the goals of an individual. References: Belfield, R., & Marsden, D., (2003), Performance pay, monitoring environments, and establishment performance, International Journal of Manpower Vol. 24 No. 4, 2003 pp. 452-471 Connell, J., & Nolan, J., (2004). Managing performance: Modern day myth or a game people play. International Journal of Employment Studies, Vol 12 Issue 1, pp. 43-63 Davis, T., & Landa, M. (1999). A contrary look at employee performance appraisal. Canadian Manager, Vol. 24 Issue 3 Hendry, C., Woodward, S., Bradley, P., & Perkins, S., (2000), Performance and rewards: cleaning out the stables, HUMAN RESOURCE MANAGEMENT JOURNAL VOL 10 NO 3 PP 46-62 Kennedy, P.W., & Grogan, S., ( 2001). Appraising and paying for performance: Another look at an age-old problem. Employee Benefits Journal, Vol 26 Issue 4, Lewis, P., (1998), Managing performance-related pay based on evidence from the financial services sector, HUMAN RESOURCE MANAGEMENT JOURNAL VOL 8 NO 2 pp 66-77 Nickols, F. (2007). Performance Appraisals. Journal for Quality & Participation, Vol. Issue 1, Schraeder, M, Becton, B.J., & Portis, R A., (2007), Critical examination of performance appraisals. Journal for Quality & Participation, Vol. 30 Issue 1, Read More