PERFORMANCE APPRAISAL
Performance appraisals take place in every organization whether there is a formal program or not. Managers are constantly observing the way their employees carry out their assignments and thereby forming impressions about the relative worth of these employees to the organization. Most organizations, however, do seem to use a formal program.
The success or failure of a performance appraisal program depends on the philosophy underlying it and the attitudes and skills of those responsible for its administration. Many different methods can be used to gather information about employee performance. However, gathering information is only the first step in the appraisal process. The information must then be evaluated in the context of organizational needs and communicated to employees so that it will result in high levels of performance.
Performance Appraisal Programs
Formal programs for performance appraisal and merit ratings are by no means new to organizations. The federal government began evaluating employees in 1842, when Congress passed a law mandating yearly performance reviews for department clerks. From this early beginning, performance appraisal programs have spread to large and small organizations in both the public and private sectors. Advocates see these HR programs as among the most logical means to appraise, develop, and thus effectively utilize the knowledge and abilities of employees. However, a growing number of observers point out that performance appraisals frequently fall short of their potential.
Recent interest in total-quality management (TQM), for example, has caused numerous organizations to rethink their approach to performance appraisal. The late W. Edward Deming, a pioneer in TQM, identified performance appraisal as one of seven deadly diseases of U.S. management. While most managers still recognize the benefits of performance appraisal, TQM challenges some long-standing assumptions about how it should be conducted. Motorola, General Motors, and Digital, for example, have modified their appraisal systems to better acknowledge quality of performance (in addition to quantity), teamwork (in addition to individual accomplishments), and process improvements (in addition to performance outcomes).
Purposes of Performance Appraisal
A performance appraisal program can serve many purposes that benefit both the organization and the employee. The Travelers Insurance Company has the following objectives for its performance appraisal program. They are similar to the objectives of other organizations.
1. To give employees the opportunity to discuss performance and performance standards regularly with their supervisor
2. To provide the supervisor with a means of identifying the strengths and weaknesses of an employee's performance
3. To provide a format enabling the supervisor to recommend a specific program designed to help an employee improve performance
4. To provide a basis for salary recommendations
The list below shows the most common uses of performance appraisals. In general, these can be classified as either administrative or developmental.
USES OF PERFORMANCE APPRAISALRANKING
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20. / Salary administration
Performance feedback
Identification of individual strengths and weaknesses
Documentation of personnel decisions
Recognition of individual performance
Determination of promotion
Identification of poor performance
Assistance in goal identification
Decision in retention or termination
Evaluation of goal achievement
Meeting legal requirements
Determination of transfers and assignments
Decision on layoffs
Identification of individual training needs
Determination of organizational training needs
Personnel planning
Reinforcement of authority structure
Identification of organizational development needs
Establishment of criteria for validation research
Evaluation of personnel systems
Administrative Purposes
From the standpoint of administration, appraisal programs provide input that can be used for the entire range of HRM activities. For example, research has shown that performance appraisals are used most widely as a basis for compensation decisions. The practice of “pay-for-performance” is found in all types of organizations.
Performance appraisal is also directly related to a number of other major HR functions, such as promotion, transfer, and layoff decisions. Performance appraisal data may also be used in HR planning, in determining the relative worth of jobs under a job evaluation program, and as criteria for validating selection tests.
Performance appraisals also provide a “paper trail” for documenting HRM actions that may result in legal action. Because of government EEO/AA directives, employers must maintain accurate, objective records of employee performance in order to defend themselves against possible charges of discrimination in connection with such HRM actions as promotion, salary determination, and termination.
Finally, it is important to recognize that the success of the entire HR program depends on knowing how the performance of employees compares with the goals established for them. This knowledge is best derived from a carefully planned and administered HR appraisal program. Appraisal systems have the capability to influence employee behavior, thereby leading directly to improved organizational performance.
Developmental Purposes
From the standpoint of individual development, appraisal provides the feedback essential for discussing strengths and weaknesses as well as improving performance. Regardless of the employee’s level of performance, the appraisal process provides an opportunity to identify issues for discussion, eliminate any potential problems, and set new goals for achieving high performance.
Newer approaches to performance appraisal emphasize training as well as development and growth plans for employees. A developmental approach to appraisal recognizes that the purpose of a manager is to improve job behavior, not simply to evaluate past performance. Having a sound basis for improving performance is one of the major benefits of an appraisal program.
Reasons Appraisal Programs Sometimes Fail
In actual practice, and for a number of reasons, formal performance appraisal programs sometimes yield disappointing results. The primary culprits include lack of top-management information and support, unclear performance standards, rater bias, too many forms to complete, and use of the program for conflicting purposes.
For example, if an appraisal program is used to provide a written appraisal for salary action and at the same time to motivate employees to improve their work, the administrative and developmental purposes may be in conflict. As a result, the appraisal interview may become a discussion about salary in which the manager seeks to justify the action taken. In such cases, the discussion might have little influence on the employee's future job performance.
TOP 10 REASONS PERFORMANCE APPRAISALS CAN FAIL1.
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10. / Manager lacks information concerning an employee’s actual performance.
Standards by which to evaluate an employee’s performance are unclear.
Manager does not take the appraisal seriously.
Manager is not prepared for the appraisal review with the employee.
Manager is not honest/sincere during the evaluation.
Manager lacks appraisal skills.
Employee does not receive ongoing performance feedback.
Insufficient resources are provided to reward performance.
There is ineffective discussion of employee development.
Manager uses unclear/ambiguous language in the evaluation process.
Other reasons why performance appraisal programs can fail to yield the desired results include the following:
- Managers feel that little or no benefit will be derived from the time and energy spent in the process.
- Managers dislike the face-to-face confrontation of appraisal interviews.
- Managers are not sufficiently adept in providing appraisal feedback.
- The judgmental role of appraisal conflicts with the helping role of developing employees.
Performance appraisal at many organizations is a once-a-year activity in which the appraisal interview becomes a source of friction for both managers and employees. An important principle of performance appraisal is that continual feedback and employee coaching must be a positive “daily” activity. The annual or semiannual performance review should simply be a logical extension of the day-to-day supervision process.
One of the main concerns of employees is the fairness of the performance appraisal system, since the process is central to so many HRM decisions. Employees who believe the system is unfair may consider the appraisal interview a waste of time and leave the interview with feelings of anxiety or frustration. Also, they may view compliance with the appraisal system as perfunctory and thus play only a passive role during the interview process. By addressing these employee concerns during the planning stage of the appraisal process, the organization will help the appraisal program to succeed in reaching its goals.
Developing an Effective Appraisal Program
The HR department ordinarily has the primary responsibility for overseeing and coordinating the appraisal program. Managers from the operating departments must also be actively involved, particularly in helping to establish the objectives for the program. Furthermore, employees are more likely to accept and be satisfied with the performance appraisal program when they have the chance to participate in its development. Their concerns about fairness and accuracy in determining raises, promotions, and the like tend to be alleviated somewhat when they have been involved at the planning stage and have helped develop the performance standards themselves.
Establishing Performance Standards
Before any appraisal is conducted, the standards by which performance is to be evaluated should be clearly defined and communicated to the employee. These standards should be based on job-related requirements derived from job analysis and reflected in the job descriptions and job specifications. When performance standards are properly established, they help translate organizational goals and objectives into job requirements that convey acceptable and unacceptable levels of performance to employees.
In establishing performance standards, there are four basic considerations: strategic relevance, criterion deficiency, criterion contamination, and reliability.
Strategic Relevance
This refers to the extent to which standards relate to the strategic objectives of the organization. For example, if a TQM program has established a standard that “95 percent of all customer complaints are to be resolved in one day,” then it is relevant for the customer service representatives to use such a standard for their evaluations. Companies such as 3M and Rubbermaid have strategic objectives that 25 to 30 percent of their sales are to be generated from products developed within the past five years. These objectives are translated into performance standards for their employees.
Criterion Deficiency
A second consideration in establishing performance standards is the extent to which the standards capture the entire range of an employee’s responsibilities. When performance standards focus on a single criterion (e.g., sales revenues) to the exclusion of other important but less quantifiable performance dimensions (e.g., customer service), then the appraisal system is said to suffer from criterion deficiency.
Criterion Contamination
Just as performance criteria can be deficient, they can also be contaminated. There are factors outside an employee's control that can influence his or her performance. A comparison of performance of production workers, for example, should not be contaminated by the fact that some have newer machines than others. A comparison of the performance of traveling salespersons should not be contaminated by the fact that territories differ in sales potential.
Reliability
Reliability refers to the stability or consistency of a standard, or the extent to which individuals tend to maintain a certain level of performance over time. In ratings, reliability may be measured by correlating two sets of ratings made by a single rater or by two different raters. For example, two managers may rate the same individual and estimate his or her suitability for a promotion. Their ratings could be compared to determine interrater reliability.
Performance standards will permit managers to specify and communicate precise information to employees regarding quality and quantity of output. Therefore, when performance standards are written, they should be defined in quantifiable and measurable terms.
For example, “ability and willingness to handle customer orders” is not as good a performance standard as “all customer orders will be filled in 4 hours with a 98 percent accuracy rate.” When standards are expressed in specific, measurable terms, comparing the employee's performance against the standard results in a more justifiable appraisal.
Complying with the Law
Since performance appraisals are used as one basis for HRM actions, they must meet certain legal requirements. Performance appraisals are subject to the same validity criteria as selection procedures. As the courts have made clear, a central issue is to have carefully defined and measurable performance standards.
In light of recent court rulings, performance appraisals should meet the following legal guidelines:
· Performance ratings must be job-related, with performance standards developed through job analysis.
· Employees must be given a written copy of their job standards in advance of appraisals.
· Managers who conduct the appraisal must be able to observe the behavior they are rating. This implies having a measurable standard with which to compare employee behavior.
· Supervisors should be trained to use the appraisal form correctly. They should be instructed in how to apply appraisal standards when making judgments.
· Appraisals should be discussed openly with employees and counseling or corrective guidance offered to help poor performers improve their performance.
· An appeals procedure should be established to enable employees to express disagreement with the appraisal.
To comply with the legal requirements of performance appraisals, employers must ensure that managers and supervisors document appraisals and reasons for subsequent HRM actions. This information may prove decisive should an employee take legal action. An employer’s credibility is strengthened when it can support performance appraisal ratings by documenting instances of poor performance.
Deciding Who Should Appraise Performance
Just as there are multiple standards by which to evaluate performance, there are also multiple candidates for appraising performance. Given the complexity of today’s jobs, it is often unrealistic to presume that one person can fully observe and evaluate an employee’s performance. Companies such as US West, Westinghouse, and The Walt Disney Company have begun to use multiple-rater approaches to performance evaluation. These raters may include supervisors, peers, team members, self, subordinates, and customers.
Manager/Supervisor Appraisal
Manager and/or supervisor appraisal has traditionally been the method of evaluating a subordinate’s performance. In most instances they are in the best position to perform this function, although it may not always be possible for them to do so. Managers often complain that they do not have the time to fully observe the performance of employees. The result is a less-than-objective appraisal. These managers must then rely on performance records or on the observations of others to complete the appraisal.