1 Gardakazahn

Evaluating Performance Appraisal Systems Essay

Table of contents

Acknowledgements

Executive summary

List of tables

List of figures

List of abbreviations

Chapter 1 – Introduction
1.1 Study background
1.2 Defining Performance Appraisal effectiveness within manufacturing firms...
1.3 Performance Appraisal with manufacturing firms operating in Malta.
1.4 Research objectives
1.5 Dissertation scope
1.6 Dissertation Structure

Chapter 2 – Literature Review
2.1 Chapter Introduction
2.2 Studies on Performance Appraisals
2.3 Defining Performance Appraisals
2.4 The purpose to undertake Performance Appraisals
2.5 The extent of Performance Appraisals’ effectiveness
2.5.1 Conflicting perspectives
2.5.2 A holistic definition of ‘effectiveness’
2.5.3 The implications of organisational culture on the effectiveness of Performance Appraisals
2.5.4 Performance Appraisal’s effectiveness in assessing employees’ performance.
2.5.5 Appraiser and appraiseer’s perception on Performance Appraisals’ effectiveness
2.5.6 Fairness of Performance Appraisals
2.6 Claimed flaws within Performance Appraisal systems
2.7 Claimed benefits when conducting Performance Appraisals
2.8 Improvements in Performance Appraisals’ effectiveness
2.8.1 The importance of improving Performance Appraisals
2.8.2 The significance of effective communication between the appraiser and the appraisee
2.8.3 The relevance of competent raters in a Performance Appraisal system
2.8.4 Segmenting the function of Performance Appraisals – An Innovative approach
2.9 Chapter summary

Chapter 3 – Methodology
3.1 Chapter introduction
3.2 Research development
3.3 The contribution of primary and secondary research
3.4 Distinguishing between qualitative and quantitative data
3.5 Selecting the sampling technique
3.6 Self- selection sampling – data gathering method
3.6.1 Identifying participating firms for the field research
3.6.2 Option 1: Self-completion questionnaire
3.6.3 Option 2: Participant observation
3.6.4 Option 3: Internet and intranet-mediated questionnaires
3.6.5 Option 4: Telephone questionnaires
3.6.6 Option 5: Interviews
3.7 Interview methods
3.7.1 Non-standard interviews
3.7.2 Semi-structured interviews
3.7.3 One-to-one interviews
3.7.4 Face-to-face interviews
3.8 Designing the interview questionnaire
3.9 Logistical preparation for the interview
3.10 Interview pilot test
3.11 The interviews outcome reliability
3.12 Ethical considerations when conducting interviews
3.13 Evaluation of the field research findings
3.14 Chapter summary

Chapter 4 – Research Findings and Analysis
4.1 Chapter introduction
4.1.1 Chapter overview
4.1.2 The respondents’ role and their participation in the field research study
4.2 Overview of the interviews approach
4.3 Research findings
4.3.1 The composition of manufacturing firms in Malta and their HR set-up.
4.3.2 Reasons for undertaking Performance Appraisals
4.3.2.1 Performance Appraisals as a control mechanism
4.3.2.2 The link of Performance Appraisals to a reward system
4.3.2.3 Performance Appraisals as a training needs identification tool
4.3.2.4 The link of Performance Appraisals to develop and build working relationships
4.3.2.5 The link of Performance Appraisals to increase productivity levels.
4.3.3 Claimed benefits and flaws within Performance Appraisals
4.3.3.1 Unfairness of Performance Appraisal due to subjectivity and biased opinions of managers
4.3.3.2 Do Performance Appraisals serve as a control mechanism and limit creativity?
4.3.3.3 Are Performance Appraisal’s flawed by the managers’ negative feedback?
4.3.3.4 Reluctance by managers to undertake Performance Appraisals
4.3.3.5 Political motivation
4.3.3.6 The claimed benefits of Performance Appraisals
4.3.3.7 Productivity improvements as a direct result of Performance Appraisals’ interview outcome
4.3.3.8 Increase in production output
4.3.3.9 Quality and accuracy levels
4.3.3.10 Statistical data
4.3.3.11 Cost savings
4.3.4 The extent of intended purpose of Performance Appraisals...
4.3.4.1 Are Performance Appraisals being applied as intended?..
4.3.4.2 Perceived fairness of Performance Appraisals..
4.3.4.3 Communication process and time allocation for Performance Appraisals..
4.3.4.4 The fairness of Performance Appraisals when appraisers rating are compared...
4.3.5. Performance Appraisals’ effectiveness – distinct perspectives by HR Practitioners..
4.3.5.1 Definition of effectiveness
4.3.5.2 Recommendations for enhancing effectiveness of Performance Appraisals
4.3.5.3 Recommendation for Performance Appraisal improvements specifically in terms of productivity
4.4 Chapter Summary

Chapter 5 – Conclusion
5.1 Chapter introduction
5.2 Conclusions from research analysis and discussion
5.2.1 The influence of HR Practitioners on Performance Appraisals effectiveness in manufacturing firms
5.2.2 The objectives of Performance Appraisals
5.2.3 Benefits and flaws of Performance Appraisals
5.2.4 Defining ‘Effectiveness’
5.2.5 The extent of Performance Appraisals fairness
5.2.6 Improvements in productivity.
5.3 Conclusive statements on the dissertation objectives
5.4 Recommendations
5.4.1 Initiatives that can be practically applied
5.4.2 The opportunities and challenges posed by these recommendations in their practical application
5.5 Reflections
5.5.1 Research strengths
5.5.2 Research limitations
5.5.3 Final comments

References

Appendices
Appendix 1 – List of manufacturing companies in Malta
Appendix 2 – Consent Form
Appendix 3 – Interview covering letter
Appendix 4 – Interview questions
Appendix 5 – Overview of manufacturing firms who took part in the study
Appendix 6 – Proposal and ethics approval

List of tables

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List of figures

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List of abbreviations

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Chapter 1 Introduction

1. Introduction

1.1 Study background

Business organisations set realistic goals to ensure their competitiveness and profitability on a long-term basis. Herman (2005) sustains that PAs are a process that managers use to assess employees’ performance in order to attain company’s goals. PAs represent a strategic tool for evaluating performances defined as “the formal assessment and rating of individuals by their managers at or after a review meeting” (Armstrong 2009:618). Sheal (1992) stresses that the main objective of an appraisal system is to upgrade performances within individual and organisational structures. The potential benefits of appraisal systems have been expounded in detail by various researchers including Cascio (1986). Conversely, Taylor et al. (1995) sustains that appraisals tend to be perceived and even over rated as the cure to all challenges directly linked with employee performance.

Managers need to manage their manpower resource efficiently and effectively and therefore it is imperative that periodic upgrading of employees performance is undertaken (Bowman 1994). Although there is a pressing need so as to step up productivity, businesses are more than ever constantly questioning the reliability and validity of the design of PAs systems (ibid). Lawler III et al. (1984) highlight, that an insightful assessment of PAs should focus on the notion of effectiveness underpinning the whole system, in terms of the perspectives of both the appraiser and appraisee. This is sustained by Campbell and Barron (cited in Nathan et al. 1991:365) advocating that “Organisations are often dissatisfied with the efficacy of performance Appraisals”. Finally, the degree how far PAs impact employee performance and work attitude, is still to be determined in substantial depth (Nathan et al. 1991). Since empirical evidence is highly restricted, a high degree of research is essential in assessing PAs efficiency.

Lawler III (2003) advocates that the criteria established to ensure an effective PAs system are still highly disputed among researchers. There is definitely lack of agreement among researchers concerning the effective steps which need

to be undertaken in the design of PAs, so that employee performance particularly in terms of productivity, can be upgraded. Longenecker and Gioia (1988) indicate that PAs are considered by most researchers and likewise HR Practitioners as ineffective. This belief is strongly testified by Bratton and Gold (2007:285) who claim that “appraisal is arguably the most contentious and least popular among those who are involved”. Deming (1986) and Joiner (1994) sustain that appraisal targeted to individual employees are in an essence dysfunctional.

1.2 Defining Performance Appraisal effectiveness within manufacturing firms

Within the context of PA, Reddin (1970) views effectiveness as the degree to which a manager attains the targeted outputs within pre-determined time schedules. Furthermore Longenecker and Fink (1999) indicate three strategic criteria underpinning the effectiveness of PA systems. These include:

- Effective appraisal program
- Effective appraisal planning and practices
- Ongoing review and support

Jacobs et al. (1980) specify three criteria which are deemed as indispensable in ensuring the holistic effectiveness of appraisal systems. These embrace both the quantitative and qualitative criteria together with evaluation of performance practices (ibid).

It needs to be admitted that the importance of PAs are meaningful to both managers and subordinates. The latter are ranked in terms of their performance, and their overall contribution towards the fulfilment of pre-determined business goals. From a practical dimension managers are confronting challenges to benchmark the effectiveness of PA systems. This is because manufacturing firms across the wide spectrum of the economy are distinct in terms of size, industry sector, market related features, business cultures adopted and management design systems. Managers are persistently facing aggressive competitive pressure to hold the advancing impact of low-cost based firms.

1.3 Performance Appraisal within manufacturing firms operating in Malta

The year 1964 was of pivotal importance for Malta, not only as regards the attainment of its political independence, but also in setting a secure platform for manufacturing firms. So far, manufacturing firms were geared to meet the needs of the local market. Companies faced multiple problems foremost lack of capital, diseconomies of scale due to the limitations of the local market, lack of expertise in technical skills, and lack of government support. One cannot exclude the high degree of competition which the local product faced from their overseas counterparts. However, after 1964, consecutive Maltese administrators sought to invest in upgrading the necessary employment, technology, capital and general infrastructure, so as to attract and entice both local as well as foreign manufacturing firms (Gonzi 2005).

Malta’s competitive advantage within the sub-period 1964 - 1980 was the provision of cheap labour. However throughout the past two decades, manufacturing businesses based in Malta, in line with the Western counterparts, have been finding it extremely challenging to compete with low labour cost economies located within the Far-East region. Moreover East European countries are still providing low-cost labour. Apart from the challenge to compete with these countries, firms based in Malta are facing high employee turnover. This is because new career opportunities are emerging for the Maltese workforce within the financial services, ICT, I-gaming and construction.

HR Practitioners are highly interested in assessing employee performances to ensure the long-term sustainability of their manufacturing firms. The effectiveness of PA systems plays a pivotal role within these circumstances. The strategic role of HR Practitioners as the primary intermediaries between the appraisee and appraiser in PAs is both vital and beneficial. Failure to evaluate employee performance and continuously improving productivity is not an option for manufacturing firms operating in Malta but a strategic imperative.

1.4 Research objectives

Although there are substantial insightful research and empirical findings on PAs, the researcher identified a gap in the available literature, as regards to the effectiveness of PAs particularly on productivity improvements within manufacturing organisations. Thus, this dissertation aims to answer the following research questions:

- Are PAs effective in improving productivity levels of subordinates?
- What are the key elements that make PAs effective?
- What could be the criteria to test the effectiveness of such systems?
- Does company size matter when evaluating the effectiveness of PAs in manufacturing firms?
- Does productivity increase, decrease or remain unaffected after undertaking PAs?

As Murray (2006) argues, having clear objectives is fundamentally important in a dissertation and therefore the study objectives are defined hereunder:

(i) Identify the current research on PAs and critically describe their relevance in terms of their effectiveness within firms. Moreover, the researcher aims to assess the ‘gap’ within the literature findings in terms of productivity improvements.
(ii) Undertake a field research so as to evaluate the extent of PA systems as an effective tool to improve appraisees’ productivity performance in manufacturing firms operating in Malta.
(iii) Evaluate the effectiveness of PAs on criteria sourced from the literature review and compare it to what is actually being applied in manufacturing firms in Malta.
(iv) Identify factors that can improve appraisees’ productivity as a direct result of an effective PA system.

1.5 Dissertation scope

It is deemed imperative from the onset, that the dissertation scope is defined within the ambit of manufacturing firms in Malta. The term ‘manufacturing’ is specifically defined within the context of this study, as being the integration of a wide range of activities, facilitating the transformation of raw materials into finished tangible products. Beamon (1998) perceives ‘manufacturing’ as a set of inter-related yet distinct processes and systems, that once integrated translate into the output of another product. The manufacturing firms that participated in this study are listed in table 1.1.

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Table 1.1: Manufacturing firms in Malta selected for the field research

The study will investigate the ‘effectiveness’ of PAs as viewed by HR Practitioners engaged in these firms. HR Practitioners perform the role of a mediator linking the Functional Manager and the appraisee in the PA process. A justification and explanation of this approach is provided in section 4.1.2.

For the purpose of this dissertation, the term ‘appraisee’ employed by manufacturing firms in Malta, refers specifically to non-managerial employees working directly in production areas. Therefore it excludes support services employees (e.g. maintenance, logistics and security people) together with clerical or administrative staff. The terms appraiser, rater, respondent and interviewee are used interchangeable for the person undertaking the appraisal.

Finally, it is worth stating that the definition of PA is limited to interviews conducted on a periodic basis as indicated by Erdogan (2002) which can also be referred to in the framework suggested by Armstrong (2009) illustrated in Figure 1.1.

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Figure 1.1

The dissertation scope within the performance management cycle: performance review and assessment

Adapted from Armstrong (2009:621)

1.6 Dissertation structure

The structure of the dissertation is provided with a brief overview of the four chapters that follow after Chapter 1.

Chapter 2

This chapter includes the academic review findings undertaken in past studies. PA’s definitions, various applications and methods, claimed benefits and flaws, and the effectiveness of such systems are critically examined, contrasted and compared.

Chapter 3

The study then proceeds with a detailed account of the methods employed in undertaking this study, starting from the selection of the dissertation topic, moving towards the selection of primary and secondary research. The justification of each method employed is provided.

Chapter 4

The dissertation progresses with a description of the findings derived from the field research undertaken in conjunction with HR Practitioners in a selected sample of manufacturing firms operating in Malta. The findings are categorised in specific themes guided by the literature review outcomes. These findings are then evaluated on a set of criteria derived from the literature. A commentary follows on whether the interview outcomes support, conflict or have a neutral outcome when compared with the theoretical findings.

Chapter 5

This conclusive chapter includes the final dissertation conclusions derived from the findings in the previous chapter. Their relevance towards the achievement of the study’s objectives is discussed. A list of recommendations on how PAs can be more effective in manufacturing firms follows. Moreover, the study’s reflections including limitations and areas for further research are provided.

Chapter 2 Literature Review

2. Literature Review

2.1 Chapter introduction

Literature review findings on the subject matter are presented in this chapter. Every effort was undertaken by the researcher to critically evaluate, contrast, and compare the distinct views presented by various researchers. An overview of past studies on PAs commences this chapter, followed by theoretical definitions. After evaluating the objective for undertaking PAs the term ‘effectiveness’ is defined within the context of PAs outcome. The respective flaws and benefits of PAs are likewise indicated, backed by a theoretical perspective on how these can be improved.

2.2 Studies on Performance Appraisals

There is a general consensus linking business professionals and academics, that the importance of intellectual capabilities within business organisations is crucial for corporate survival. Companies strive to ensure that their human asset is maximised, since this determines the successful organisational outcomes (Falcone 2007). It is therefore no surprise that employees’ performances have been under critical scrutiny by practitioners adopting HRM orientation. PAs have been investigated throughout the past eight decades by various academics (Landy and Farr 1980; Fletcher 2002).

Stroul (1987), claims that this practice has been an on-going process since 1957. However, Brutus (2010) argues that research on PAs has primarily focused on performance ratings. Tziner and Murphy (1999) sustain that only minor attention was granted to political factors regarding PAs within the context of academic research. Others, including McGregor (1972) argue that PAs have become a benchmark in HRM. However, there are conflicting views whether PAs are effective or otherwise within organisations. There is quite a considerable volume of research suggesting that PAs are effective since they tend to augment worker performance and productivity (Rodgers and Hunter 1991). Conversely, Kuvaas (2007) suggests that since no conclusive evidence can be provided as to whether PAs affects employee work performance or not, future research on this topic is recommended. Martin and Bartol (1998) argue that although the arena of PAs has been extensively researched, very limited attention has been directed on how PAs are effectively maintained.

2.3 Defining Performance Appraisals

“Performance Appraisal is defined as the formal process of evaluating organisational members ...including establishment of performance standards, appraisal related behaviours of raters, ...determination of performance rating, and communication of the rating to the ratee” (Erdogan 2002:556). Falcone (2007) incorporates a step wise approach in the holistic cycle of PA. These include goal setting, the constant provision of feedback and training, backed by a fully fledged appraisal and reward mechanism (ibid). PA takes place when there is a long-term relationship between the appraisee and the appraiser (ibid). Lee (1985:323) sustains that PA refers “to the accuracy of performance observations and ratings as well as the ability of the performance appraisal process to improve the ratee’s future performance”. It is also relatively important that the maintenance of the system is explained by HR Practitioners to appraisees (Martin and Bartol 1998).

2.4 The purpose to undertake Performance Appraisals

Some scholars maintain that one of the main purposes of endorsing PAs is to provide feedback to employees on how they can upgrade organisational performance within the holistic dimension of the organisation ( Asmuß 2008; Peretz and Fried 2008). Fletcher and Williams (1996) remark that this exercise is intended to encourage commitment by the employee, as well as to upgrade the organisation’s effectiveness. Patz (1975) advocates that the most common reason to undertake PA is salary justification. Chu and Chen (2007) argue that PA refers to a method that enables the management to keep full control within the organisation and provides information so that reasonable decisions can be effectively taken as regards promotions, transfers, incentives and training.

Chu and Chen (2007) advocate that within manufacturing companies, PAs are mostly employed to sustain a competitive advantage. This is attained by providing the necessary training and by sustainably developing employees’ skills and abilities (ibid). A more distinct approach adopted towards the planning and implementation of the appraisal system is derived by Ritchie and O’Malley (2009:2) who claim that this is essentially an “emotional transaction”.

McGregor (1972) and Beer (1981) sustain that PAs provide judgments to established salaries, promotions and demotions. Moreover McGregor (1972) and Beer (1981) ventured a step further by stating that PAs serve as a unique opportunity for managers to inform subordinates regarding their respective performance. From a critical perspective, PAs also provides the exclusive opportunity to deliver periodic coaching and counselling by the superior (ibid). It is appropriate to state, that after collating all these distinct theoretical approaches, the researcher identified that the primary objective in undertaking PAs is to have “...formal evaluation of an employee’s job performance in order to determine the degree to which the employee is performing effectively” (Griffin and Ebert cited in Schraeder et al. 2007:20).

2.5 The extent of Performance Appraisals’ effectiveness

2.5.1 Conflicting perspectives

The output of PAs is one of the major debates which motivated researchers to disseminate the final result of this measuring method. In fact, Schraeder et al. (2007), claim that many researchers and HR Practitioners questioned the efficiency of PAs in terms of their own respective organisation. Kuvaas (2006) argues that the effectiveness of PAs tends to be assumed and thus lacks empirical evidence. Conversely, Stroul (1987) emphasises that after capitalising on PAs for a period beyond 35 years, manufacturing organisations studied within his research managed to produce highly effective and successful business outcomes. Although there are still questions whether PAs are effective, it has been admitted by many researchers that inbuilt issues will jeopardise the effectiveness of PAs (Schraeder et al. 2007).

2.5.2 A holistic definition of ‘effectiveness’

Drucker (2002:1) defines ‘effective’ as “getting the right things done” and ‘effectiveness’ is about getting the right things done right. McCrimmon (2007) classifies ‘effectiveness’ within a management context as doing the right things at the least cost. On the same lines of thinking, Hackett (2003) labels the same term as the degree to which organisational goals are met. Wojtczak (2002) defines ‘effectiveness’ as the activity that attains the intended purpose of use. When analysing the various definitions of ‘effectiveness’, the researcher qualifies this term as the degree to which a task is achieving its pre-set objectives undertaken in the right time, place and manner. From a subjective perspective, the definition of ‘effectiveness’ entails a determining factor in the actual results of this study, since PAs will be evaluated on the merit of their effectiveness within manufacturing firms.

2.5.3 The implications of organisational culture on the effectiveness of Performance Appraisals

A study undertaken by CRANET [1] in 21 countries around the globe identified that the effectiveness of PAs is directly embedded within the social values and norms (Peretz and Fried 2008). Apart from establishing cross-cultural connections, the distinct organisational conditions have directly impacted their employees (ibid). Moreover, studies revealed that PAs effectiveness can be effected by various factors such as “social ...nature of the task, the ...work group, ...rater and ratee’s attitude [and] ...judgemental error” (Lee 1985:330). In a study undertaken by Kuvaas (2006:514), PAs were found to be “...more effective in influencing attitudes and behavioural intentions than in increasing work performance’’. This notion can be further illustrated in figure 2.1 where employees’ motivation, skills and knowledge will influence their behaviour in their work performance.

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Figure 2.1

Factors influencing employees’ behaviour

Source: Haringey Council (2007:11)

Bretz Jr et al. (1992) and Schraeder et al. (2007) remark that in order to be effective, PAs must be implemented as an on-going process. Stonich (1984) and Nathan et al. (1991) claim that PAs must be linked to the firm’s organisational culture and in essence serve as quality improvement on-going programmes. These theories strongly suggest that PAs are directly influenced and furthermore shaped by both organisational behaviour and culture.

2.5.4 Performance Appraisal’s effectiveness in assessing employees’ performance

Past research on PAs effectiveness is related to the applicability and practicality of using this tool to assess appraisees’ performances at the workplace. In fact, Orpen (1997) argues that PAs are mostly effective in assessing performance of employees whenever there are applicable, reliable and quantifiable measures. This could be more appropriate in manufacturing companies especially where production quotas are in place. Similarly, appraisees can be tested on their ability to produce to specific quality product standards. In line with this thinking, Roberts and Reeds (1996) advocate that whenever there is a common standard of performance, PAs can prove to be highly effective in improving productivity. Once PAs are applied on a common standard of performance, appraisees may be motivated to produce more. Pettijohn et al. (2001) sustain that PAs are expected to influence employee work performance in a healthy manner. Furthermore, Boswell and Boudreau (2002) suggest that the ultimate objective of PAs is to improve employee performance, and thus help in sustaining a competitive advantage to the respective organisation.

It may also be the case the PAs can be used as a way to have a formal method of recording employees’ performance and use these records to monitor improvements throughout the year. This idea is shared by Lawler III et al. (1984) revealing that PAs are mostly effective when they manage to document performance for further detailed analysis. Practical examples of this approach are found in a study undertaken by Sanwong (2008) in Thailand, were it was revealed that PAs serve as a tool to upgrade employees’ performances. Through PA outcomes, HR Practitioners can assess appraisees’ needs and improvement areas for further career advancement and progress. Supporting this premise, Wanguri (1995) maintains that PAs can be effective when these are specifically linked to training and development needs.

2.5.5 Appraiser and appraisee’s perception on Performance Appraisals’ effectiveness

In order to assess whether PAs are effective, one has to take into account a set of inter-related factors. Firstly, one has to assess the manner PAs are being perceived by the manager and at a later stage the manner by which PAs are critically judged by the appraisee (Lawler III et al. 1984). Ideally it should fulfil both perceptions (ibid). This approach is also agreed upon by Longenecker and Goff (1992) when they seek to critically assert whether the two criteria embedded within a PA is effective or not. Both the appraisee and the appraiser must agree on defining the set of functions for which the PA is being employed within a particular situational context. At a later stage, both the appraiser and the appraisee have to seek agreement whether PA is rightfully serving its intended purpose. PAs must not be enacted in a vacuum, but must occur within an interpersonal relationship linking both managers and employees (Nathan et al. 1991).

2.5.6 Fairness of Performance Appraisals

One of the most important criteria mentioned by researchers on how to assess whether PAs are effective or not, concerns the degree of fairness by which it has been undertaken (Jacobs et al. 1980). Zhang and Lovegrove (2009) suggest that the employees’ perception about justice being generated by a PA is crucial in ensuring fairness. The perception of justice in the eyes of the appraisee and the appraiser is specifically linked to this aspect (Konovsky and Cropanzano 1991).

There are various opinions on how a procedure to undertake a PA interview is perceived to be fair. Erdogan (2002) claims that the procedure employed in PA systems can be considered as being unfair. The appraisee must be given a fair hearing, meaning that the participant must be granted adequate time to present his/her case and explain the input before a decision is taken (ibid). Erdogan (2002) proclaims that the communication process must also be perceived to be fair throughout implementation. This includes the provision of a two-way communication process, with respect and consideration for opinions from both sides.

Researchers argue that in order for PAs to present a true and fair view, it must be in line with the organisational culture (Maroney and Buckely 1992). Appraisers must enact every possible effort to ensure that full scale justice is tactfully applied (Erdogan 2002). Organisations disallow employees undertaking comparison exercises of their respective ratings with their colleagues since this generate unnecessary competition (ibid). Whenever, PAs are perceived as being fair, transparent and unbiased by the subordinates, then they are deemed effective (Murphy and Cleveland 1995).

2.6 Claimed flaws within Performance Appraisal systems

Before attempting to investigate the extent of PA’s effectiveness, one must critically evaluate the claimed flaws within this system. This topic is a source of dispute between both practitioners and researchers. Only a few researchers sustain the effectiveness of PAs (Longenecker and Goff 1992; Fletcher 2001). Way back in the 1960s when General Electric undertook a study on its PA systems, it was found that through extensive effort and design together with commitment from the management the best is attainable through PAs (Lawler III et al. 1984). Furthermore, a study in China revealed “...the lack of openness, transparency, mutual influence and objective standards” in PAs (Benson et al. cited in Zhang and Lovegrove 2009:191). Tagliaferri (1978) maintains that although PAs are still in use, they are mostly subjective. Kuvaas (2007:388) further sustains that “...the present study suggests that perceptions of developmental PA do not increase work performance’’.

Problems generated from PAs are in most cases attributed to conflicting objectives, inadequate time to carry out the appraisals and failure to reward managers in systematically developing particular skills on the part of their subordinates (Stroul 1987). Fletcher (2004:21) argues that PAs has been perceived by employees “as biased, subjective and unfair” . Stroul (1987:72) advocates that PAs are mostly associated with “control mechanisms rather than as a tool for development’’. Lawler III et al. (1984) argue that whenever the PA system is inadequately designed, it is doomed to be ineffective.

Many researchers claim that leaders and managers are reluctant to undertake PAs (Bernardin and Villanova 2005; Brown et al. 2010). Further research sustains that having an optimal appraisal system does not necessarily imply that the procedure is effective (Longenecker and Goff 1992). Henderson (1984); Zhang and Lovegrove (2009) further claim that whenever a PA system is ineffective, the outcomes are destructive and inspire abhorrence and lack of trust between employees.

Patz (1975) argues that there are major obstacles dampening the holistic effectiveness of PAs as an effective management tool. Additionally, Heathfield (2007) sustains that PAs are biased in favour of the appraiser and they are imperfect in their very nature. In a study undertaken in a Fortune 500 service organisation, the main bottlenecks which were highlighted to be associated with PAs were: the “multiple use of the ...[appraisal document], subjectivity and inflated ratings, problems in defining objectives and dissemination of the evaluation results to employees” (Laird and Clampitt 1985:50).

Heathfield (2007) argues that although there are a number of criteria to determine the manner an employee is performing, employees are still judged by the manager’s subjective opinion. Moreover, Patz (1975) maintains that in most instances, PAs are directly associated with political motives. Nickols (2007) tends to adopt a harsher approach in his criticism, remarking that PAs lead to a reduction in productivity and erodes performance whilst hindering organisational agility.

Heathfield (2007) claims that PAs lead to a de-motivated workforce because the appraisee thinks that the manager does not sufficiently care for his/her pay rise. As to the relationship between managers and subordinates, it is argued that managers lack the vital package of skills to undertake PAs and thus they do not provide an honest opinion and feedback to the appraisee (ibid). Opponents argue that PAs “...never worked to begin with and now it’s no longer relevant” (Hyde cited in Bowman 1994:133) and such systems “...discourage innovation and reinforce the status quo” (Bowman 1994:134). Beer (1981) mentions the flaws within PAs when undertaking interviews, may conduce to lack of trust and build an adversary relationship.

The employees tend to internalise negative feedback on the part of their managers as very difficult to accept. Whenever employees face negative outcomes from their appraisals, the net effect is that they are going to end up de-motivated (ibid). Additionally, managers feel embarrassed to criticize in some situations (McGregor 1972). Thus whenever this is the case, PAs are counter-productive (ibid).

2.7 Claimed benefits when conducting Performance Appraisals

There is no doubt that various empirical studies claim that PAs promise major benefits. Organisations today are investing in PAs to assess their employee’s performance and moreover to provide meaningful opportunities for employee development ( Asmuß 2008). Kuvaas (2007) claims that when PAs are linked to a BSC System, they tend to improve employees’ commitment to the company’s goals. For instance it transpired in a study undertaken in the US, that several companies use PAs to improve employee performance (Murphy and Cleveland 1995). Moreover, there is a general consensus that PAs have positive impacts on organisations (Keeping and Levy 2000).

Fletcher (2001) and Poon (2004) argue that PAs are critical for HR practice. Fletcher and Williams (1996) claim that empirical studies have found that high quality PAs augment job satisfaction. Roberts and Reed (1996) sustain that when a PA is well administered, designed and implemented, it provides multiple benefits including increased motivation and productivity. Moreover, Longenecker and Goff (1992) emphasize that PAs ensure high standards for wage determination, upgrade employees’ development, provide information to take effective decisions and present managers with the necessary planning structures and clear goal setting approaches. A number of studies have also determined that PAs are positively linked to marked improvement in employees’ performance (Broady-Preston and Steel 2002).

One can observe that whenever PAs are effective, they help directly to improve the overall quality of job performance, enhance motivation, ensure commitment, and minimise labour turnover rates (Ahmed et al. 2010). This is also supported by other researchers who sustain that when linked to objectives, PAs can have effective influence on organisational performance (Kreitner 2008). Jenks (1991) further maintains that PAs can increase employee productivity and can also improve effective vertical communication systems between the superior and the subordinate.

Whatever the criticism inflicted on PAs, managers are not willing to discard them (Patz 1975). This is because as Stroul (1987) maintains that employees tend to perceive PA as both effective and positive when their managers assume the role of a counsellor. Managers and subordinates believe that PAs are effective since they enhance motivation, change behaviour and improve understanding among all stakeholders concerned (Lawler III et al. 1984). This is further supported by Boswell and Boudreau (2002) who emphasize that PAs improve the effectiveness of employees at the workplace.

2.8 Improvements in Performance Appraisals’ effectiveness

2.8.1 The importance of improving Performance Appraisals

The application of PAs evolved throughout consecutive years, motivated HR Practitioners so as to constantly test and upgrade the effectiveness of this instrument. It is a common belief that PAs promise major benefits for the respective organisation whenever applied appropriately. Throughout the past decades, research undertaken has identified various factors that can upgrade PAs effectiveness in a sustainable manner. For instance Patton (1973) and Lawler III (2003) argue that the underlying objectives of PAs serve to reward individual performance. Stroul (1987) sustain that PAs can only be upgraded by altering employee’s approach, rather than revising evaluation forms. Brown et al. (2010) maintain that the quality of PAs impact organisational efficiency and thus their systematic improvement is of pivotal importance.

2.8.2 The significance of effective communication between the appraiser and the appraisee

The importance of effectively communicating the outcome of PAs is highly expounded within the arena of management literature. From the managers’ perspective, it is pertinent that the outcome is clearly understood by the subordinate. The manager must know where he/she stands with the subordinate. Sincerity when providing feedback to the subordinate is crucial in designing an effective PA system. Managers should provide “...true pleasure when giving positive feedback and true concern when giving negative feedback” (Ritchie and O’Malley 2009:6). As Lee (1985) comments, the effectiveness of PAs can therefore improve whenever regular feedback is given to the employee’s performance.

Furthermore, Beer (1981) proclaims that PAs can be structured in a systematic manner so that negative feelings particularly on the part of the employee are minimized, together with systematic improvements in the communication process. The interview undertaken in the PA process is crucial in providing information regarding the employees’ opinions (Roberts 2002). Longenecker and Goff (1992) argue that both the appraisee and the appraiser must perceive and believe that the PA is indispensable to their respective interests to ensure a high degree of effectiveness.

Thompson (cited in Youndt et al. 1996:845) went even further to state that “continuous employee feedback and developmental performance appraisal would likely be of great value to manufacturers pursuing flexibility strategies”. Ritchie and O’Malley (2009) maintain that the way how feedback is granted from the superior to the employees, generates a specific impact on the effectiveness of PAs.

2.8.3 The relevance of competent raters in a Performance Appraisal system

Researchers recommend that raters are trained to ensure that PAs outcome are more fair and effective, thus increasing acceptance by subordinates (Farh et al. 1988; Nathan et al. 1991). Schraeder et al. (2007) argue that organisations must train the raters, use behaviour-based methods, provide feedback, and use multiple rates. Inderrieden et al. (2004) suggest that managers must understand how the work of their subordinates is being performed to have an effective PA.

Managers must be educated and trained to manage a PA system effectively (Patz 1975). Longenecker and Goff (1992) sustain that managers must have the competence and are willing to implement PAs. The superior undertaking the PA must be trained in collecting the relevant information, processing and observing the subordinates behaviour (Lee 1985).

2.8.4 Segmenting the function of Performance Appraisals – An innovative approach

Researchers such as Beer (1981) sustain that the PA systems need to be strategically segmented. In this respect, two appraisals need to be designed - one which is directed towards the assessment of performance and the other representing an insightful assessment on training and development (ibid). Vasset et al. (2010) recommend that the managerial power must be restrained so as to ensure successful outcomes regarding PA exercises. This idea is supported by Patz (1975) who recommend HR Practitioners to keep PAs easy and straightforward and separate from the promotion system.

PAs effectiveness can be systematically improved whenever these are linked to constructive outcomes. Within this context, Youndt et al. (1996:860) sustain that “...results-based performance appraisal...may still be very appropriate for manufacturers pursuing cost containment”. Gabris and Giles (1983) advocate that the productivity and effectiveness of PAs can be periodically upgraded via non-financial rewards. These incorporate job rotation, group building, training and counselling management. Moreover, Orpen (1997) remarks that PAs can be more effective whenever the methods and systems engaged are corresponding with the type of assignment being performed.

2.9 Chapter summary

The literature reviews findings on PAs have demonstrated that this subject area raises controversial and conflicting opinions on the part of both HR Practitioners and researchers. The secondary research has established that employees’ performances are measured, monitored and controlled through PAs. Some academics even state that through this exercise, the interaction process linking the appraisee and appraiser, contributes a significant element to the success or failure. The literature findings have identified diverse reasons justifying the application of PAs. Foremost, they are utilised as a reward system to improve employee performance. This includes behavioural changes, directing employees towards achieving organisational goals, determining and evaluating training needs of appraisees and establishing a long-term sustainable relationship between the appraisee and the appraiser.

The literature review findings established that the term ‘effectiveness’ can be holistically evaluated on various criteria. However, such views centred primarily on the objectives that PAs should attain. They must be shared and agreed jointly by the appraiser and the appraisee, backed by a reliable and agreed rating system. Researchers agree that PAs should be perceived to be fair by both sides. Moreover, the literature review established that in order to be effective, PAs should spearhead organisations towards overall improvement in productivity levels. Conversely, researchers claim that PAs are flawed, since they are prone to subjectivity by the appraiser. Moreover, they are politically motivated and mostly employed as a control mechanism with unclear objectives. Subsequently, the literature suggests constructive tactics in improving the overall effectiveness of PAs.

[...]



[1] Cranet stands for:The Cranfield Networkon International Human Resource Management

Learning Objective

  1. Be able to describe the various appraisal methods.

It probably goes without saying that different industries and jobs need different kinds of appraisal methods. For our purposes, we will discuss some of the main ways to assess performance in a performance evaluation form. Of course, these will change based upon the job specifications for each position within the company. In addition to industry-specific and job-specific methods, many organizations will use these methods in combination, as opposed to just one method. There are three main methods of determining performance. The first is the trait method, in which managers look at an employee’s specific traits in relation to the job, such as friendliness to the customer. The behavioral method looks at individual actions within a specific job. Comparative methods compare one employee with other employees. Results methods are focused on employee accomplishments, such as whether or not employees met a quota.

Within the categories of performance appraisals, there are two main aspects to appraisal methods. First, the criteria are the aspects the employee is actually being evaluated on, which should be tied directly to the employee᾿s job description. Second, the rating is the type of scale that will be used to rate each criterion in a performance evaluation: for example, scales of 1–5, essay ratings, or yes/no ratings. Tied to the rating and criteria is the weighting each item will be given. For example, if “communication” and “interaction with client” are two criteria, the interaction with the client may be weighted more than communication, depending on the job type. We will discuss the types of criteria and rating methods next.

Graphic Rating Scale

The graphic rating scale, a behavioral method, is perhaps the most popular choice for performance evaluations. This type of evaluation lists traits required for the job and asks the source to rate the individual on each attribute. A discrete scale is one that shows a number of different points. The ratings can include a scale of 1–10; excellent, average, or poor; or meets, exceeds, or doesn’t meet expectations, for example. A continuous scale shows a scale and the manager puts a mark on the continuum scale that best represents the employee’s performance. For example:

PoorExcellent

The disadvantage of this type of scale is the subjectivity that can occur. This type of scale focuses on behavioral traits and is not specific enough to some jobs. Development of specific criteria can save an organization in legal costs. For example, in Thomas v. IBM, IBM was able to successfully defend accusations of age discrimination because of the objective criteria the employee (Thomas) had been rated on.

Many organizations use a graphic rating scale in conjunction with other appraisal methods to further solidify the tool’s validity. For example, some organizations use a mixed standard scale, which is similar to a graphic rating scale. This scale includes a series of mixed statements representing excellent, average, and poor performance, and the manager is asked to rate a “+” (performance is better than stated), “0” (performance is at stated level), or “−” (performance is below stated level). Mixed standard statements might include the following:

  • The employee gets along with most coworkers and has had only a few interpersonal issues.
  • This employee takes initiative.
  • The employee consistently turns in below-average work.
  • The employee always meets established deadlines.

An example of a graphic rating scale is shown in Figure 11.1 “Example of Graphic Rating Scale”.

Essay Appraisal

In an essay appraisal, the source answers a series of questions about the employee’s performance in essay form. This can be a trait method and/or a behavioral method, depending on how the manager writes the essay. These statements may include strengths and weaknesses about the employee or statements about past performance. They can also include specific examples of past performance. The disadvantage of this type of method (when not combined with other rating systems) is that the manager’s writing ability can contribute to the effectiveness of the evaluation. Also, managers may write less or more, which means less consistency between performance appraisals by various managers.

Checklist Scale

A checklist method for performance evaluations lessens the subjectivity, although subjectivity will still be present in this type of rating system. With a checklist scale, a series of questions is asked and the manager simply responds yes or no to the questions, which can fall into either the behavioral or the trait method, or both. Another variation to this scale is a check mark in the criteria the employee meets, and a blank in the areas the employee does not meet. The challenge with this format is that it doesn’t allow more detailed answers and analysis of the performance criteria, unless combined with another method, such as essay ratings. A sample of a checklist scale is provided in Figure 11.3 “Example of Checklist Scale”.

Figure 11.1 Example of Graphic Rating Scale

Figure 11.2 Example of Essay Rating

Figure 11.3 Example of Checklist Scale

Critical Incident Appraisals

This method of appraisal, while more time-consuming for the manager, can be effective at providing specific examples of behavior. With a critical incident appraisal, the manager records examples of the employee’s effective and ineffective behavior during the time period between evaluations, which is in the behavioral category. When it is time for the employee to be reviewed, the manager will pull out this file and formally record the incidents that occurred over the time period. The disadvantage of this method is the tendency to record only negative incidents instead of postive ones. However, this method can work well if the manager has the proper training to record incidents (perhaps by keeping a weekly diary) in a fair manner. This approach can also work well when specific jobs vary greatly from week to week, unlike, for example, a factory worker who routinely performs the same weekly tasks.

Work Standards Approach

For certain jobs in which productivity is most important, a work standards approach could be the more effective way of evaluating employees. With this results-focused approach, a minimum level is set and the employee’s performance evaluation is based on this level. For example, if a sales person does not meet a quota of $1 million, this would be recorded as nonperforming. The downside is that this method does not allow for reasonable deviations. For example, if the quota isn’t made, perhaps the employee just had a bad month but normally performs well. This approach works best in long-term situations, in which a reasonable measure of performance can be over a certain period of time. This method is also used in manufacuring situations where production is extremely important. For example, in an automotive assembly line, the focus is on how many cars are built in a specified period, and therefore, employee performance is measured this way, too. Since this approach is centered on production, it doesn’t allow for rating of other factors, such as ability to work on a team or communication skills, which can be an important part of the job, too.

Ranking Methods

In a ranking method system (also called stack ranking), employees in a particular department are ranked based on their value to the manager or supervisor. This system is a comparative method for performance evaluations.The manager will have a list of all employees and will first choose the most valuable employee and put that name at the top. Then he or she will choose the least valuable employee and put that name at the bottom of the list. With the remaining employees, this process would be repeated. Obviously, there is room for bias with this method, and it may not work well in a larger organization, where managers may not interact with each employee on a day-to-day basis.

To make this type of evaluation most valuable (and legal), each supervisor should use the same criteria to rank each individual. Otherwise, if criteria are not clearly developed, validity and halo effects could be present. The Roper v. Exxon Corp case illustrates the need for clear guidelines when using a ranking system. At Exxon, the legal department attorneys were annually evaluated and then ranked based on input from attorneys, supervisors, and clients. Based on the feedback, each attorney for Exxon was ranked based on their relative contribution and performance. Each attorney was given a group percentile rank (i.e., 99 percent was the best-performing attorney). When Roper was in the bottom 10 percent for three years and was informed of his separation with the company, he filed an age discrimination lawsuit. The courts found no correlation between age and the lowest-ranking individuals, and because Exxon had a set of established ranking criteria, they won the case (Grote, 2005).

Another consideration is the effect on employee morale should the rankings be made public. If they are not made public, morale issues may still exist, as the perception might be that management has “secret” documents.

Fortune 500 Focus

Critics have long said that a forced ranking system can be detrimental to morale; it focuses too much on individual performance as opposed to team performance. Some say a forced ranking system promotes too much competition in the workplace. However, many Fortune 500 companies use this system and have found it works for their culture. General Electric (GE) used perhaps one of the most well-known forced ranking systems. In this system, every year managers placed their employees into one of three categories: “A” employees are the top 20 percent, “B” employees are the middle 70 percent, and “C” performers are the bottom 10 percent. In GE’s system, the bottom 10 percent are usually either let go or put on a performance plan. The top 20 percent are given more responsibility and perhaps even promoted. However, even GE has reinvented this stringent forced ranking system. In 2006, it changed the system to remove references to the 20/70/10 split, and GE now presents the curve as a guideline. This gives more freedom for managers to distribute employees in a less stringent manner1.

The advantages of a forced ranking system include that it creates a high-performance work culture and establishes well-defined consequences for not meeting performance standards. In recent research, a forced ranking system seems to correlate well with return on investment to shareholders. For example, the study (Sprenkel, 2011) shows that companies who use individual criteria (as opposed to overall performance) to measure performance outperform those who measure performance based on overall company success. To make a ranking system work, it is key to ensure managers have a firm grasp on the criteria on which employees will be ranked. Companies using forced rankings without set criteria open themselves to lawsuits, because it would appear the rankings happen based on favoritism rather than quantifiable performance data. For example, Ford in the past used forced ranking systems but eliminated the system after settling class action lawsuits that claimed discrimination (Lowery, 2011). Conoco also has settled lawsuits over its forced ranking systems, as domestic employees claimed the system favored foreign workers (Lowery, 2011). To avoid these issues, the best way to develop and maintain a forced ranking system is to provide each employee with specific and measurable objectives, and also provide management training so the system is executed in a fair, quantifiable manner.

In a forced distribution system, like the one used by GE, employees are ranked in groups based on high performers, average performers, and nonperformers. The trouble with this system is that it does not consider that all employees could be in the top two categories, high or average performers, and requires that some employees be put in the nonperforming category.

In a paired comparison system, the manager must compare every employee with every other employee within the department or work group. Each employee is compared with another, and out of the two, the higher performer is given a score of 1. Once all the pairs are compared, the scores are added. This method takes a lot of time and, again, must have specific criteria attached to it when comparing employees.

Human Resource Recall

How can you make sure the performance appraisal ties into a specific job description?

Management by Objectives (MBO)

Management by objectives (MBOs) is a concept developed by Peter Drucker in his 1954 book The Practice of Management (Drucker, 2006). This method is results oriented and similar to the work standards approach, with a few differences. First, the manager and employee sit down together and develop objectives for the time period. Then when it is time for the performance evaluation, the manager and employee sit down to review the goals that were set and determine whether they were met. The advantage of this is the open communication between the manager and the employee. The employee also has “buy-in” since he or she helped set the goals, and the evaluation can be used as a method for further skill development. This method is best applied for positions that are not routine and require a higher level of thinking to perform the job. To be efficient at MBOs, the managers and employee should be able to write strong objectives. To write objectives, they should be SMART (Doran, 1981):

  1. Specific. There should be one key result for each MBO. What is the result that should be achieved?
  2. Measurable. At the end of the time period, it should be clear if the goal was met or not. Usually a number can be attached to an objective to make it measurable, for example “sell $1,000,000 of new business in the third quarter.”
  3. Attainable. The objective should not be impossible to attain. It should be challenging, but not impossible.
  4. Result oriented. The objective should be tied to the company’s mission and values. Once the objective is made, it should make a difference in the organization as a whole.
  5. Time limited. The objective should have a reasonable time to be accomplished, but not too much time.

Setting MBOs with Employees

(click to see video)

An example of how to work with an employee to set MBOs.

To make MBOs an effective performance evaluation tool, it is a good idea to train managers and determine which job positions could benefit most from this type of method. You may find that for some more routine positions, such as administrative assistants, another method could work better.

Behaviorally Anchored Rating Scale (BARS)

A BARS method first determines the main performance dimensions of the job, for example, interpersonal relationships. Then the tool utilizes narrative information, such as from a critical incidents file, and assigns quantified ranks to each expected behavior. In this system, there is a specific narrative outlining what exemplifies a “good” and “poor” behavior for each category. The advantage of this type of system is that it focuses on the desired behaviors that are important to complete a task or perform a specific job. This method combines a graphic rating scale with a critical incidents system. The US Army Research Institute (Phillips, et. al., 2006) developed a BARS scale to measure the abilities of tactical thinking skills for combat leaders. Figure 11.4 “Example of BARS” provides an example of how the Army measures these skills.

Figure 11.4 Example of BARS

Figure 11.5 More Examples of Performance Appraisal Types

How Would You Handle This?

Playing Favorites

You were just promoted to manager of a high-end retail store. As you are sorting through your responsibilities, you receive an e-mail from HR outlining the process for performance evaluations. You are also notified that you must give two performance evaluations within the next two weeks. This concerns you, because you don’t know any of the employees and their abilities yet. You aren’t sure if you should base their performance on what you see in a short time period or if you should ask other employees for their thoughts on their peers’ performance. As you go through the files on the computer, you find a critical incident file left from the previous manager, and you think this might help. As you look through it, it is obvious the past manager had “favorite” employees and you aren’t sure if you should base the evaluations on this information. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1360849/embed

The author discusses the How Would You Handle This situation in this chapter at: https://api.wistia.com/v1/medias/1360849/embed.

Table 11.3 Advantages and Disadvantages of Each Performance Appraisal Method

Type of Performance Appraisal MethodAdvantagesDisadvantages
Graphic Rating ScaleInexpensive to developSubjectivity
Easily understood by employees and managersCan be difficult to use in making compensation and promotion decisions
EssayCan easily provide feedback on the positive abilities of the employeeSubjectivity
Writing ability of reviewer impacts validity
Time consuming (if not combined with other methods)
Checklist scaleMeasurable traits can point out specific behavioral expectationsDoes not allow for detailed answers or explanations (unless combined with another method)
Critical IncidentsProvides specific examplesTendency to report negative incidents
Time consuming for manager
Work Standards ApproachAbility to measure specific components of the jobDoes not allow for deviations
RankingCan create a high-performance work culturePossible bias
Validity depends on the amount of interaction between employees and manager
Can negatively affect teamwork
MBOsOpen communicationMany only work for some types of job titles
Employee may have more “buy-in”
BARSFocus is on desired behaviorsTime consuming to set up
Scale is for each specific job
Desired behaviors are clearly outlined

Key Takeaways

  • When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.
  • The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.
  • The rating is the scale that will be used to evaluate each criteria item. There are a number of different rating methods, including scales of 1–5, yes or no questions, and essay.
  • In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.
  • An essay performance evaluation will ask the manager to provide commentary on specific aspects of the employee’s job performance.
  • A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the employee’s job.
  • Some managers keep a critical incidents file. These incidents serve as specific examples to be written about in a performance appraisal. The downside is the tendency to record only negative incidents and the time it can take to record this.
  • The work standards performance appraisal approach looks at minimum standards of productivity and rates the employee performance based on minimum expectations. This method is often used for sales forces or manufacturing settings where productivity is an important aspect.
  • In a ranking performance evaluation system, the manager ranks each employee from most valuable to least valuable. This can create morale issues within the workplace.
  • An MBO or management by objectives system is where the manager and employee sit down together, determine objectives, then after a period of time, the manager assesses whether those objectives have been met. This can create great development opportunities for the employee and a good working relationship between the employee and manager.
  • An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and time limited.
  • A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor performance.

Exercise

  1. Review each of the appraisal methods and discuss which one you might use for the following types of jobs, and discuss your choices.

    1. Administrative Assistant
    2. Chief Executive Officer
    3. Human Resource Manager
    4. Retail Store Assistant Manager

1“The Struggle to Measure Performance,” BusinessWeek, January 9, 2006, accessed August 15, 2011, http://www.businessweek.com/magazine/content/06_02/b3966060.htm.

References

Doran, G. T., “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives,” Management Review 70, no. 11 (1981): 35.

Drucker, P., The Practice of Management (New York: Harper, 2006).

Grote, R., Forced Ranking: Making Performance Management Work (Boston: Harvard Business School Press, 2005).

Lowery, M., “Forcing the Issue,” Human Resource Executive Online, n.d., accessed August 15, 2011, http://www.hrexecutive.com/HRE/story.jsp?storyId=4222111&query=ranks.

Phillips, J., Jennifer Shafter, Karol Ross, Donald Cox, and Scott Shadrick, Behaviorally Anchored Rating Scales for the Assessment of Tactical Thinking Mental Models (Research Report 1854), June 2006, US Army Research Institute for the Behavioral and Social Sciences, accessed August 15, 2011, http://www.hqda.army.mil/ari/pdf/RR1854.pdf.

Sprenkel, L., “Forced Ranking: A Good Thing for Business?” Workforce Management, n.d., accessed August 15, 2011, http://homepages.uwp.edu/crooker/790-iep-pm/Articles/meth-fd-workforce.pdf.

This is a derivative of Human Resource Management by a publisher who has requested that they and the original author not receive attribution, which was originally released and is used under CC BY-NC-SA. This work, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

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