The Importance of Performance Appraisal in Determining the Employees Compensation - Essay Example

Performance appraisal is an aspect of employee compensations which is looked into by every employee and organization to ensure maximum employee motivation. This makes it important that organization based upon their requirements develop a performance appraisal system which will suit their business need and provide maximum opportunity to satisfy the employee. This paper examines the manner in which performance appraisal system needs to be developed in an organization so that employees’ compensation is properly framed. In addition to it the performance appraisal should match the requirements of the organization and the overall opportunity for the business can be maximized in such a manner that employee are further motivated to work towards the well being of the organization. This makes it important that before moving on further with the topic it is important to understand what performance appraisal means? Performance appraisal deals not only with what the employee or a person achieved but also deals with the manner in which a person achieves it (Bach, 2000). This has further being built and developed which states that performance appraisal forms a vital part of the employee compensation and comprises of different factors which has a relevance in understanding the employee contribution (Bates & Holton, 2005). The most appropriate definition which fits performance appraisal is that it is both behavior and result (Brumbach, 1998). This helps to bring forward an important finding that performance appraisal doesn’t only deal with the final results but also looks at the actions and behavior that has helped them to achieve the desired outcome. The different values and advantage that the management is able to witness due to the use of performance appraisal has become a part of management (Rose & Lawton, 2009). This has thereby increased the use of different performance appraisal tools to find out the performance of the employees in the public sector (Wisniewski and Olafson, 2004). The importance of performance appraisal in determining the employees’ compensation has led towards identification of the following steps that the management has to follow (Brumbach 2003) The first most step is identifying the objectives which the employees have to achieve so that a direction can be given towards which the employees have to work This has to be followed by setting the goals of the team members so that the individual efforts of all the employees can be directed This has to be followed by developing the performance plan which the employees and others will work on so that the stated goals can be achieved in the most efficient manner The next stem is determining the output and measuring the performance against the standards that have been set so that the performance of the employees can be identified. The next step leads towards determining the needs and developments that have to be made and finally the employees are rewarded based on their performance and contribution made towards the goal of the organization. The performance appraisal methodology thus looks towards following some basic steps which will help to measure the performance of the employees and determine the amount of compensation that will be made to them. To ensure better performance appraisal method for individual a performance focus management cycle is developed which focuses on individual member instead of the entire team. This will thereby help to build a performance appraisal system which fits an individual employee and involves the following (Armstrong & Baron, 1998) The first most step is identifying the objectives which the employees have to achieve so that a direction can be given towards which the employees have to work This has to be followed by developing the performance plan which the employees and others will work on so that the stated goals can be achieved in the most efficient manner Then individual plan for the employee or the person has to be designed which will help to measure the performance of the person and will help to provide the direction through which the performance of the individual performance will be evaluated The next step is determining the output and measuring the performance against the standards that have been set so that the performance of the employees can be identified. The next step leads towards determining the needs and developments that have to be made and finally the employees are rewarded based on their performance and contribution made towards the goal of the organization This model varies from one organization to another and no formal training is required to ensure that the implementation of the performance appraisal provides conclusive evidence. All that is required is that a note has to be provided to the manager to ensure that there is consistency in the manner the performance is evaluated and the manner in which it will contribute towards dealing with identifying the different fundamentals having an effect on performance appraisal. Performance appraisal thereby looks towards measuring the performance of the employee in comparison to other employee so that their position or stand can be identified (Boice & Kleiner, 1997). This looks towards one dimensional view but new developments in this direction has evolved the manner in which and the development of new performance appraisal tools has provided an impetus to both the appraiser and appraisee which can be used in a constructive way for future developments (Fletcher, 2006). The different performance appraisal tools which have been developed is used by different organization but the Passenger Focus method of performance appraisal is the most simplest. Also the fact the developing a performance appraisal system which clearly highlights the different aspect of performance is difficult but using the Passenger Focus method which is developed based on the requirements of the individual organization will ensure better use of the appraisal system (Caruth & Humphreys, 2006) Organization using Passenger Focus method of performance appraisal doesn’t have to use the appraisal method continuously but is used at periodic intervals. Organizations look towards using period review of the performance appraisal system so that the progress can be reviewed and the objectives of the business can be determined and achieved by looking at it on a continuous basis (Sahl, 1990). This system of performance appraisal requires that the formal appraisal is done in once six months and also requires informal appraisal every month which is done between the manager and the employee. This will help to identify the areas that employees need to work on for better appraisal and will provide an opportunity to correct one and get a proper performance appraisal when it occurs. The performance appraisal requires that the person appraising the performance has the relevant skills so that the employees can be properly appraised. This will require that the person going to appraise the employee is provided the required training which should look towards coaching and counseling, conflict resolution, setting performance standards, and linking the system to pay (Williams, 2002). It has been seen that employees face a major hurdle due to the fact that the person appraising the employees don’t have the required skills and knowledge to be able to ensure development of proper appraisal system within the organization. This will also require that the employees are also provided the required training so that they receive the feedback from the person in a non-defensive manner (Pigott-Irvene, 2003). This will require working on the different areas and will help to improve the overall performance of the employees. Using the Passenger Focus appraisers’ method doesn’t require any training which limits this method as it makes it difficult for the organization to be able to ensure proper strategy for evaluating the credentials of the employees. This requires that the appraisal interview is conducted in a non threatening environment so that both the appraiser and the appraise have belief on each other (Harrison & Goulding, 1997). The Passenger Focus appraisal system looks towards ensuring that belief and trust between the appraiser and the appraise is developed. This helps to ensure that the appraisal system is dealt in the most effective manner and the final result that the business gets due to it gets reflected in the final outcome of the employees. The Passenger Focus appraisal system also ensures that the appraisal system takes time and evaluates the different parameters which help to reflect the actual stand and position of the employee (Pigott-Irvine, 2003). This will help organization using Passenger Focus appraisal system to be able to work on the different areas of appraisal system through which the overall appraisal system is improved and both the employee and the management benefits The question which arises now is what needs to be appraised? A study in the same direction highlights that 84% of the employees are evaluated on the basis of quantifiable measures (CIPD, 2005). Organization with the development of different marketing tools have moved a step further and have started to use different tools and measure the performance of the employee by using the SMART criteria (specific, measurable, agreed, realistic and time related) appraisal system (Armstrong & Baron, 1999). This will require that the objective of the individual employee and the organization is aligned so that the employees are able to associate themselves with the organization and get a direction through which the business and the individual will be able to achieve the objectives. This is relevant in case of Passenger Focus appraisal system which helps to ensure alignment between the individual and group goals which ensures better method to appraise the performance of the employee. This also requires that competancy based assessment is conducted to evaluate the performance of the employees which is lacking in case of Passenger Focus appraisal system. This has made many organizations look towards integrating competency based assessment in the Passenger Focus appraisal system so that it is able to work on the different aspect of performance of an employee so that the appraisal system is better (Rees & Porter, 2003). The different benefit that competencies provide has been one of the major reasons which have made business look towards using it. This has been highlighted in the competency areas that will be evaluated for an employee in the following table Area of Competency Competency Business thinking Awareness about business and solving the problem of business Working with colleagues Working in team, building relationship & development of self Inspiring People Building Confidence, Persuading & Communicating Achieving Goals Delivering results and improving performance The competency system assessment which is used in Passenger Focus appraisal system requires fairness while evaluating the employees. Ensuring accuracy in evaluating the performance of the employee is difficult and requires a development of a rating system which should be part of the employee appraisal system so the effectiveness is gained (Atwater and Yammarino, 1997). This is an area of subjectivity and organizations that are able to ensure and develop a framework through which the performance of an employee is evaluated in a correct and fair manner are able to gain. This ensures consistency and being able to develop a rating scale in Passenger Focus appraisal system will help the employees and the organization to judge the actual capability of the employee and will be able to deliver the required performance on different parameters. The Passenger Focus appraisal system is not linked to pay directly which ensures that the different areas which contribute towards the appraisal of an employee can be identified. This ensures that the pay and bonus both for the employees are separated (Langridge, 2004). This will ensure that the parameters used in this method of appraisal looks towards finding out the contribution of the employee towards the organization which will ensure that the goals are better aligned. This will help to develop the appraisal system which looks towards working on different areas of the employee compensation and will help in the development of a appraisal system which provides the employees the manner in which their performance will be measured. The appraisal system requires that the appraisal system should be such that it doesn’t have an effect on the morale of the employees. The most important aspect here is the employee rating being given to another employee which has relevance on their motivation level and affects the degree of involvement (Poon, 2004). This affects the manner in which employees work and have an effect on the future appraisal system and management development that the organization has to use in the future. This will determine the manner in which the future appraisal system is developed within the organization and will have an impact on the final decision making of the employees with regard to employee compensation. This has been also shown in the chart below The above factor is one of the most relevant information while developing the performance appraisal system as it has a direct impact on the employee morale and thereby affects the working of the organization in the future. This thereby requires that the appraisal system is fair and works on the different factors and parameters which will help to ensure that the final outcome from this provides the business an opportunity to grow which will thereby ensure better achievement of the individual and group goals This requires that the Passenger Focus appraisal system looks towards using Boston Consulting Group Strategic Mix (Stern & Stalk, 1998). This method uses two axes which helps to measure the performance of the employees based on different parameters and looks towards using both the human and system factor so that better appraisal system can be developed. This method when integrate with the Passenger Focus appraisal system will look towards ensuring that both the system and human factors are considered while evaluating the performance of the employee. This will thereby help to build a framework through which the organization is able to ensure better appraisal system which will ensure better achievement of the goals The table will help to ensure better relations with the employee as the different variables will be identified and based on it a better appraisal system can be developed. This will help to ensure that the employees are evaluated on the correct variables and will help to understand the different parameters based on which the performance of the employee is evaluated. Organization using Passenger Focus appraisal system are thereby able to focus on the individual behavior and are able to use different tools which helps to evaluate the behavior and result of an employee on different parameters. Performance appraisal thereby looks towards measuring the performance of the employee in comparison to other employee so that their position or stand can be identified (Boice & Kleiner, 1997). This strategy will ensure that the business is able to work on the different fundamentals through which the business is able to develop a framework through which the business is able to yield effectiveness while working towards identifying the employees’ compensation and bonus. Organizations look towards performance appraisal system so that the progress can be reviewed and the objectives of the business can be determined and achieved by looking at it on a continuous basis. The performance appraisal requires that the person appraising the performance has the relevant skills so that the employees can be properly appraised. This will require that the person going to appraise the employee is provided the required training which should look towards coaching and counseling, conflict resolution, setting performance standards, and linking the system to pay. This will thereby help to evaluate the performance of the employee based on different parameter which will help to understand the manner in which the employees’ confidence increases and the business is able to grow and conduct its business in the most effective manner. The appraisal system requires fairness while evaluating the employees. Ensuring accuracy in evaluating the performance of the employee is difficult and requires a development of a rating system which should be part of the employee appraisal system so the effectiveness is gained. This will require that a fundamental which helps to evaluate the performance of the employee is developed so that the organization is able to clearly identify the manner in which the compensation will be determined and ensure complete transparency and fairness while looking towards evaluating the performance of the employee. Thus, performance appraisal system forms an important part of the business as being able to develop a system which ensures proper compensation towards the employee will ensure that the organization is able to take better decision and grow. This makes it important that organization based upon their requirements develop a performance appraisal system which will suit their business need and provide maximum opportunity to satisfy the employee. This helps to bring forward an important finding that performance appraisal doesn’t only deal with the final results but also looks at the actions and behavior that has helped them to achieve the desired outcome. This will require that organization develop a performance appraisal system and developing a Passenger Focus method of performance appraisal will ensure that the focus is on individuals which will help to develop a linkage between the group and individual goals which will thereby ensure that the business is able to ensure better use of the resources. This will ensure that a performance appraisal system which looks at the different elements of developing the performance appriasal method and ensuring better use of training and skills both for the appraisee and the appraisal will help to provide the basic framework which will ensure better appraisal system and help in determining the correct compensation for the employee. References Armstrong, M. & Baron, A. 1998. Performance Management; the new realities. Wiltshire, Cromwell Press Atwater, L.E. & Yammarino, E.J. 1997. Self-other rating agreement: A review and model. 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International Journal of Productivity and Performance Management. 53 (7), 602-610 Williams, R.S 2002. Managing Employee Performance. London, Thomson Learning Read More