Problems with Performance Appraisals - Coursework Example

FRUNNING HEAD: PERFORMANCE APPRAISAL Performance Appraisal [The Writer’s name] [The name of the Institution] Performance Appraisal Introduction In terms of PA practice in organizations, it seems likely that the focus of the content of appraisal will continue in the immediate future to be centered on achievement against goals or objectives and on assessment of competencies. The literature on goal-setting continues to grow for a review of this domain) though perhaps without any notable major theoretical developments, apart from work on the concept of goal orientation described below. Much the same might be said of competencies, though some writers have begun to express doubts about the way in which competencies are being used. However, there is research on other themes, which is of significance for appraisal content (including competencies) and aims. Although it is difficult to recommend one appraisal format over another for multiple purposes, behaviorally-based formats do appear to offer advantages with respect to fostering performance improvement and worker development. Past research has demonstrated that when performance feedback is precise and timely it may result in behavior change, even though job behaviors are generally difficult to modify. (Arthur, 2004. P. 670-88) Why do employers go to considerable effort and expense to undertake this system of performance appraisals? In a nutshell, it is because they believe that it increases productivity and profitability. Companies identify a number of purposes for conducting performance appraisals. Beyond measuring individual performance, other objectives include: providing feedback to employees; improving individual performance; providing motivation and recognition; determining pay raises and promotions; coaching, mentoring and counseling; determining training and development needs; making decisions pertaining to downsizing or layoffs; and finally, to have proper documentation for legal purposes, such as employee litigation. (Arthur, 2004. P. 670-88). Appraisal process Appraiser--appraise interaction. As previously noted, there has been more research on the social and motivational aspects of PA. One consistent theme here has been the influence of liking. The process of goal-setting seems to give the appraisee a broader picture of the work unit and the organisation’s objectives, and how the set goals contribute to that unit and to the organisation’s goals. Consequently, feedback coupled with goal-setting was associated with higher organizational commitment pointed out that although the effects of liking are well documented, the reasons for the influence of liking are not clear. They interpreted the findings from their own study as indicating that rather than affect being a biasing factor, it (i.e. affect) resulted from better performance in the first place. However, Goldin (2006) identified a range of conceptual and methodological problems in studies on liking as an influence on PA, such as the failure to take account of the duration of the relationship, and concluded that it is not justified to assume either that liking reflects bias or that it simply stems from a reaction to good performance. The influence of liking on ratings, for whatever the underlying reasons, is less where clear standards and observable performance information are available (Goldin, 2006, p.127). Another frequent line of enquiry on appraisal process deals with the importance of appraise participation level, both of itself and as a factor in perceptions of procedural justice. The meta-analysis reported by Drago , (2005) makes the useful distinction between instrumental participation--which is participation for the purpose of influencing an end result--and value-expressive participation--participation for the sake of having one's voice heard. They found that the latter had a stronger relationship with appraisal reaction criteria than did the former. Whilst research of this kind highlights some general factors at work in the appraisal interaction, they do not always help in actually handling it better in practice; you cannot manipulate appraisers' levels of liking for their appraises to produce improved appraisal outcomes! Even the conclusions on the value of participation are likely to be tempered by cultural considerations. In fact, research on what contributes to greater success in conducting the appraisal interview itself attracted some attention in the 1960s and 1970s, but has been somewhat neglected in recent years. (Goldin, 2006, p. 1-27) Although there are numerous books giving advice on the handling of the appraisal session, little of the content could claim a strong research base. Goldin (2006) points out that the interview is the point of delivery of PA, and in his view is 'the Achilles' heel of the entire process'. Given that this is the face-to-face interaction element in the PA process, and much is likely to depend on it, the paucity of work done--in marked contrast to the selection interview--is unfortunate. Some more recent research has been reported in this area. For example, Drago, (2005) advocated a contingency approach to handling the appraisal interview and in their research sought to provide some guidelines for this. They studied 55 appraiser-appraise dyads and found, amongst other things, that ( 1) criticism had a positive effect only where the person appraised had a good relationship with their line manager and ( 2) that goal setting had a greater impact on poor performers who reported a poor relationship with their supervisors. They concluded that there is 'no one best way' to conduct an appraisal interview--it depends on the situation, the relationship of the parties involved and their individual make-up. More PA research based on a contingency model is likely to yield results of practical value; for a fuller analysis of the individual psychological factors that influence the appraisal situation, see Fletcher (in press). As was noted above, there is a stark contrast with the vast amount of research on the selection interview. It seems possible that this body of work could act as source of ideas for further research on the appraisal interview. For example, investigation of the impact on interviewers' judgments of the different kinds of attributions for previous poor performance that candidates make in the selection situation (Swabe, 2008, p.17-23) surely has some implications for the appraisal interview also. Multi-source feedback Changes in organizational structures, processes and cultures (see below) and the limitations of traditional top-down appraisal have combined to create the conditions where other sources of performance feedback have become not only more acceptable but more necessary. As noted above, performance feedback combined with goal-setting contributed most strongly to rates’ measures of work satisfaction, possibly since goal-setting fosters feelings of participation in work-related issues and meaningfulness at work, both of which were components of the study’s satisfaction measure. (Swabe, 2008, p.17-23). Multi-source feedback lends itself to research; it has previously been quite unusual to have the opportunity to collect multiple perspectives on performance in a systematic way. Not surprisingly, literature on this topic is developing. This is just as well, because the speed with which 360 degree feedback has been taken up means that unless research on it moves forward rapidly, it will be left trailing in the wake of practice, and condemned to a limited role of producing conclusions on feedback systems that have already been superceded as organizations continue to innovate in this area. One major change that is already evident relates to the purpose of multi-source feedback. Problems with Performance Appraisals A review of the literature on performance appraisals finds it littered with criticisms of the performance appraisal process. Indeed, it may be more accurate to use the word condemnations rather than criticisms. W. Edwards Deming identified performance appraisals as one of the "Seven Deadly Diseases" destructive to organizations and has called them "...the most powerful inhibitor to quality and productivity in the Western world". (Deming, 2005, p. 98), not one to mince his words, Deming wrote: "In practice, annual ratings are a disease, annihilating long term and politics, leaving people bitter, crushed, bruised, battered, desolate, despondent, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in." (Deming, 2005, p. 102). Deming was by no means alone in his condemnation of the practice. Human resource (HR) professionals, who are responsible for the design and implementation of their companies' performance appraisal systems, are not much more enamored of these systems than the managers who carry out the appraisals or the employees being appraised: The researchers noted that the latter finding was compatible with Cardy (2007) observation that employee appraisal satisfaction is related to a general satisfaction factor, which includes affect toward the appraisal system, the quality of performance feedback, and the extent to which the appraisal form aids discussion of the formulation, performance, and facilitation of personal development plans. If firms and organizations establish and undertake regular performance appraisals for seemingly worthy purposes, why are they almost universally despised by both the employee and the manager doing the appraising?. Many of these assumptions relate to the process of the evaluations themselves. For instance, the following are taken as given: inter-evaluator consistency; intra-evaluator consistency; reasonable and achievable work standards; work standards directly relevant to the business and its clients; identical work processes; stable work systems capable of delivering the expected results; evaluations lead to improvements in individual performance; individual performance can be identified separate from system factors; and the employee has control over the results. (Cardy, 2007). Relationships between incentive compensation systems and firm performance suggest that incentive compensation contributes to increased product quality, greater acceptance of changes and improved firm performance (Drago, 2005, p. 507-32). One issue relating to performance management in particular raised the ire of W. Edwards Deming. As the early proponent of Total Quality Management, Deming advocated for the application of statistical control methods in industry, and an awareness of the interrelated systems involved in any medium or large scale organization. According to Deming, as much as 94% of the variance in performance in organizations is due to the systems in place rather than the individual employees. Statistically, half of the remaining percentage over performed, and half underperformed. Deming felt that it was unfair and unproductive to assign credit or blame to individual employees, unless management could determine whether an employee's variances were due to personal or systemic reasons: "...apparent differences between people arise almost entirely from action of the system that they work in, not from the people themselves" (Deming, 2005, p.110). A similar problem is that performance appraisals do not account for teamwork. In fact, in trying to apportion credit or blame to individual members of a team, the appraisal process undermines teamwork substantially. Individuals are torn between actions that would benefit the team and its goals, and actions which might place the employee in good light for the appraiser. Taylor (2007) indicates that cultural influences on management procedures are more important in the areas of motivation, leadership, decision-making and organizational design and less important in the more measurable areas such as planning, staffing, and training. The problem at the heart of performance evaluations is that they represent a form of external control. Indeed, it has been suggested that the world of work represents our predominant external control environment, based on the theory of rewards and punishment (Taylor, 2007). As employees, we dislike performance evaluations because, as human beings, we are hard-wired to resist external control. For the most part, managers dislike doing appraisals because they damage their relationships with the employees. Ironically, there is considerable evidence that even a positive evaluation can be de-motivating (Wood, 2005), because it is still perceived by the employee as controlling. Additionally, positive feedback in a performance evaluation can end up being demoralizing if it is less flattering than either a previous appraisal or the appraisal of a co-worker (Wood, 2005). Studies indicating a positive impact for training on firm performance show training to be important in enhancing competitive advantage (Frey, 2004, p. 589-511), improving quality of output, facilitating firm growth, and improving profitability (Frey, 2004, p. 589-511). Waldron (2008) concluded that training appeared to enhance all dimensions of firm performance, i.e., quality of product, development of products, employee relations, growth in sales, profitability and market share. In addition, training is seen as a useful means of coping with changes fostered by technological innovation, market competition, organizational structuring, and demographic shifts (Waldron, 2008, p.8-17). The stress-inducing nature of external control management can therefore negatively affect both psychological and physiological health. Wright, (2004), for example, found that employees of supportive, less-controlling bosses reported fewer illnesses and generally superior overall health than those employees who worked for a manager with a more controlling orientation. One writer used Eric Berne's concept of ego-states to illustrate the degree to which external control management limits the development of the employee. In the role of parent, the manager becomes judging and controlling, while the "child" becomes rebellious and spiteful. Otherwise, managers run the risk of creating a self-fulfilling prophecy: if management views workers as untrustworthy, then they will create external control systems, policies and procedures, which eventually lead to an alienated, untrustworthy workforce. The external control elements of performance evaluations are myriad. Typically, performance evaluations are mandatory procedures, scheduled by the manager rather than the employee. While the meetings may vary from system to system and evaluator to evaluator, they typically follow a format pre-established by management. The evaluations deal with issues (problems) identified by the manager, and relate to goals or standards largely set by the manager. The manager, or evaluation team, in essence sits in judgment of the employee, who usually is alone. Typically, the/ocM5' is on the employees' past efforts, actions and decisions. Finally, appraisals are very often tied to decisions by management about salary, bonuses, advancement, and layoffs. The discrepancy in power in these situations is palpable. Many performance evaluations are tied directly orindirectly to financial rewards, in the form of merit pay, bonuses, or career advancement. This represents the "carrot “in carrot-and-the-stick external control boss management. The "stick" in such an approach includes reductions in salary, withholding of pay raises, or even termination of employment. Critics of performance evaluations suggest that this can lead to inter-employee jealousy, hostility and competition. It also reduces the likelihood of employees developing professional creativity, as employees get locked-in to focusing on meeting specified goals in the conventional manner. Appraisals linked to reward systems can lead some employees to intentionally create "solvable problems" so that senior staff can take note of the effective manner in which the employees deal with these situations. They have recognized the irony that effective management work habits which eliminate problems before they occur often goes unnoticed by senior management. Additionally, some employees or their managers will intentionally establish achievable performance goals in order to ensure a positive appraisal. Thus the existence of appraisal systems might lead to systemic erosions in performance over time. Importantly, PA consisting of performance feedback followed by goal-setting produced even more positive ratee outcomes than PA comprising only feedback. Unlike work satisfaction, organisational commitment was only slightly affected by performance feedback alone. Organisational commitment has been defined as the extent to which an employee identifies with, and is involved in; his/her work unit and the organisation as a whole. In view of the broader scope of organizational commitment in comparison to work satisfaction, it is not surprising that performance feedback had less effect. (Australian Bureau of Statistics, 2003). Alternatives to Performance Appraisals W. Edwards Deming is considered to have been one of the most influential thinkers in the management field, and is revered in Japan as the person most responsible for the phenomenal development of industry in that country following World War II. Deming is also perhaps the most famous critic of performance appraisals, and advocated abolishing appraisals as a key step in moving an organization towards quality. When asked what an organization should do in place of performance appraisals, Deming is reported to have replied: "If your performance evaluation system does more harm than good, just quit doing it. You don’t have to have an alternative to make an improvement."(Deming, 2008). Deming's answer reflects a starting point for a discussion on alternatives to the current human resources practice of carrying out performance appraisals. One of the difficulties managers and bureaucrats have in following Deming's advice is that performance evaluations are so entrenched in the administrative mindset that it is inconceivable to eliminate them. It appears that managers, like nature itself, abhor a vacuum. They want to replace the current system with a new system, because they have trouble conceiving in the way Deming did, of there simply being no system at all. Instead, many management professionals suggest that the solution is to create better appraisal programs, or alternatively to consider the information from appraisals within a wider context, along with other sources of information (Wooden, 875-83). As a result, companies frequently revamp their performance appraisal systems. One study revealed that over seventy percent of companies surveyed had either changed their system in the last two years, or intended to-do so in the future, and reported that companies often restructure the performance appraisal systems two or three times a decade. Some companies have recognized the destructive and non-productive nature of their performance appraisal systems and have stopped the practice. Unfortunately, most of those companies that have decided to give up individual performance appraisals have replaced them with alternatives that still reflect external-control psychology. For example, evaluating the performance of work groups or teams rather than individual employees (Wright, 2004) still represents a top down, judgmental management style. Negative group ratings not only might de-motivate individual employees in the group, but there is also the possibility that such ratings might initiate a pattern of blaming or competition within the group, thus breaking down the sense of teamwork managers hoped to encourage. Similarly, some have reverted to the old practice of gift-giving in place of their evaluation-based merit systems. Reward systems are still a form of external control, and fail to motivate individuals, as research has amply demonstrated (Wood, 2005). PERFORMANCE APPRAISAL GUIDELINES 1. Involve managers and employees in developing the appraisal form and policies. 2. Make clear the objectives of performance appraisal and place the proper emphasis on each. 3. Focus feedback on observable, job-related results and performance. 4. Avoid giving personal feedback. 5. Listen first and talk later. 6. Be positive first and negative later. 7. Probe first and prescribe later. Conclusion The nature of management and employer-employee relationship has changed in recent decades, and now more closely reflects the principles of internal control psychology. Vestiges of external control boss-management are still in evidence, however. Chief among those is the continued reliance in many organizations of performance appraisal systems, as well as their affiliated reward systems. Appraisal systems are both ineffective and inefficient. These performance appraisals are ineffective in that they do not measure performance, primarily because they fail to take into account the system factors which account foremost of variation within an organization. They are inefficient in that they erode interpersonal relationships, teamwork, creativity and motivation. Organizations which undertake performance appraisals fail to recognize that motivation comes from within the individual - it is not externally implanted. Organizations can create an atmosphere conducive to internal motivation, however. Such a workplace is characterized by ongoing, open two-way communication between management and employees which focuses on future achievement rather than past failures. Workers need to know that they are trusted, that their work is meaningful, and that their input is valued. With this in mind, it becomes clear that there is no room for performance appraisals in today's modern, internal control oriented organization. References Arthur, J. B. (2004). ‘Effects of human resource systems on manufacturing performance and turnover’. Academy of Management Journal, 37: 670–88. Australian Bureau of Statistics (2003). Career Experience. November 2002, No. Cardy, R. L. and Dobbins, G. H. (2007). Performance Appraisal: Alternative Perspectives. Cincinnati, OH: South Western Publishing Company. Deming, W.E. (2005). Out of the Crisis. Cambridge, MA: M.I.T. Center for Advanced Educational Services. Drago, R. and Heywood, J. S. (2005). ‘The choice of payment schemes: Australian establishment data’. Industrial Relations, 34: 507–32. Frey, B. S. and Jegen, R. (2004). ‘Motivational crowding theory’. Journal of Economic Surveys, 15: 589–611. Goldin, G. (2006). ‘Monitoring costs and occupational segregation by sex: a historical analysis’. Journal of Labor Economics, 4: 1–27. Swabe, A (2008). 'Performance-Related Pay: A Case Study', Employee Relations 11 (2): 17-23. Taylor, M (2007). 'DFAT Deal Sets New Benchmark', The Canberra Times, 20 December. Waldron, L (2008). 'The Dilemma of Merit Pay in the Public Sector', Human Resource Management Australia August: 8-17. Wood, R (2005). 'Performance-based Pay as a Coordinating Mechanism in the Australian Public Service', AJPA 54(1): 81-96. Wooden, M. (2004). ‘How temporary are Australia’s casual workers?’ Work, Employment and Society, 15: 875–83. Wright, C & Australian Centre for Industrial Relations Research and Teaching (2004). Incentive Payment Systems in Australia, Department of Industrial Relations. Industrial Relations Research Series, 9, April. 6254.0. Canberra Australia. Read More