Performance Appraisal: a Critical Review

PERFORMANCE APPRAISAL: A CRITICAL REVIEW Abstract: Performance appraisal is used in many organizations in order to assess the performance of their employees. But there are some issues and problems that are associated with performance appraisal can have negative impacts on the performance of employees and can make it useless. These issues and problems are: absence of objective criteria, gender issues, rater’s bias, social and ethnic issues. And there are empirical research evidences that are very much consistent with the problems and issues I identified before. But performance appraisal should not be abandoned due to the problems mentioned above. Its can prove very effective if used by trained appraisers in a constructive manner using objective criteria against which the performance of the appraisee to be checked. It not only reviews the performance of an employee but also helps to identify training and development needs of the appraise. Introduction: In organizations, there are some formal and informal methods of performance assessment, and performance appraisal is one of the most widely used formal methods of the assessment of performance. Performance appraisal is also a valuable tool of performance management in organizations as CIPD describes that:†Performance appraisal is an important part of performance management. In itself it is not performance management, but it is one of the range of tools that can be used to manage performance† (CIPD, 2008). CIPD (2008) describes that performance appraisal essentially provides an opportunity to the appraisees and appraiser to review and discuss, in a constructive manner, the performance of the appraisee and possible reasons and determinants of his or her bad performance in a one on one meeting. It also provides an opportunity to them to identify and set objectives regarding training and development for the future and to reach an agreement about the possible actions required getting those objectives and the support the individual or appraisee expects from the manager. If performance appraisal is conducted in a sensitive and constructive manner, then it can establish a positive relationship between the individuals and the line managers. Aims and objectives of performance appraisal: There are some clear aims and objectives for conducting performance appraisal in organizations, and these objectives are listed and described below: 1. One purpose of conducting a performance appraisal is to exercise organizational control 2. The main purpose of a performance appraisal system is to review the performance of individuals over a period of time 3. Performance appraisal is also aimed at finding out that the appraisee is productive or not. 4. One purpose of performance appraisal is to review the actual performance of an employee against the set objectives or desired standards. 5. Another important objective of conducting a performance appraisal is to find training and development needs of the appraisee. 6. One purpose is to identify the type of support the appraisee expects from the management in order to meet those training and development needs. Key elements of performance appraisal: CIPD (2008) has described following five key elements of performance appraisal: 1. Measurement – individual’s performance is assessed against agreed standards and objectives. 2. Feedback – the individual or appraisee is provided information on his performance and progress after the performance has been assessed. . Positive reinforcement – the appraiser recognises the good performance and make constructive criticism about the aspects of performance where there is a need of improvement. 4. Exchange of views – there is a dialogue between the appraiser and the appraisee about the outcomes of the assessment, and how appraisees can improve their per formance, the support they need from their managers to achieve this and their aspirations for their future career. 5. Agreement – an agreement is reached by all parties about what needs to be done to improve performance and issues are overcome. Problems with performance appraisal: Having described the definition, objectives, and the key elements of performance appraisal, we move on to problems or dilemmas with performance appraisal. Performance appraisal is considered a way or tool of motivation and enhancing morale and it is also assumed that appraisal will lead to an improvement in performance or performance will decrease without appraisal. (Grint, 1995). But it can also lead to negative effects on performance and motivation and leaves the apprsisee with negative feelings such as inferiority, bitterness, depression and some other negative feelings (Ridly, 1995). On the part of the appraiser, there are some dilemmas and difficulties that the appraiser faces in the course of performance appraisal process. One of these is the subjectivity of the appraiser that cannot be completely avoided in spite of efforts. Another important dilemma faced by the appraiser is to play both the roles of a judge and a facilitator at the same time as Fiona Wilson (2002) and many other including McGregor (1957), and Fletcher and Williams (1985) have described this problem. One of the aims of performance appraisal is to identify training and development needs of the employees. In order to do so, the appraiser is assumed to judge the gaps between the desired performance and the actual performance by assessing the performance of the employee against a set of objective standards, this not always possible to have objective criteria available, as Fiona Wilson (2002) describes that: â€Å"If staff development is the aim then the temptation is to search for inadequacies in the appraisee’s performance. In order to act as judge the appraiser needs criteria with which to judge, yet the subjective evaluation and trait oriented criteria for evaluating performance have been recognised as a central problem. Objective criteria against which to assess staff are difficult to achieve and are going to be judgmental to some degree. Counseling does not usually involve making any judgments but allows the person to reflect on performance and make their own judgments†. There is an increase in the use of 360-degree feedback in organizations as Bruce and Ira Kay have noted that:† The use of 360-degree feedback has grown dramatically in recent years. According to HR consulting firm William M. Mercer, 40 percent of companies used 360-degree feedback in 1995; b 2000, this figure jumped to 65 percent† (Bruce & Ira, 2002). But there are also some serious issues associated with 360 degree feedback and it is assumed that it can have some negative effects on performance and can hurt the appraise as Bruce and Ira Kay (2002) have quoted Watson Wyatt’s human capital index study which found that the use of 360-degree feedback is associated with a decrease in shareholder value. Bruce and Ira also quoted the other findings of Watson Wyatt’s HCI study and described that:†Watson Wyatt's 2001 HCI report revealed that companies using 360-degree feedback have lower market value. According to the study, companies that use peer review have a market value that is 4. 9 percent lower than similarly situated companies that don't use peer review. Likewise, companies that allow employees to evaluate their managers are valued 5. 7 percent lower than similar firms that don't† (Bruce & Ira, 2002). Ghorpade (Ghorpade quoted in Bruce & Ira, 2002), a professor of management at San Diego State University, reported that only one-third studies out of 600 feedback studies found improvement in performance and one-third found a decrease in performance and rest of them found no effects. Bruce and Ira (2002) have also identified some other issues and problems with 360-feedback such as: lack of training, and the costs of 360-degree feedback. Arvey and Murphy(1998) have described the issues around the costs of measures of performance as well: â€Å"A discussion of the relative costs of alternative performance measures was provided by Stone et al (1996). As an alternative to a more expensive â€Å"hands-on† performance measure, a low-cost, readily available measure of performance was developed for Air Force specialty jobs using an existing data base that rank-ordered individuals. More research is needed to explore the relative advantages of low-fidelity and low-cost performance measures. Conceivably the relative value of such instruments might be better than more highly specific, high-fidelity instruments if relatively molar decisions are being made about individuals (e. g. promote versus not-promote, high versus low performance)† Subjective and objective Evaluation: The main problem and issue associated with performance appraisal may be the subjective evaluation and absence of objective criteria against which the performance of the individual is to be assessed. Subjective evaluation may result in devastating effects on the performance of the individual or the appraisee. As Longenecker et al. (1987) have noted that the appraisers sometimes intentionally distort and manipulate appraisal for political purposes. Subjective measures of performance sometime lead to biasness on the part of the rater and result in negative effects on performance. But Arvey and Murphy (1998) have reviewed a research conducted by Bommer et al in 1995, and described that Bommer et al assessed the relationships between relatively objective and subjective measures of employee performance. He used meta-analytic techniques to summarize the relationships for over 50 independent samples, and found that the two measures were significantly related. Bias on the part of line manager or the appraiser or rater can result in negative effects on performance. Arvey & Murphy (1998) write that many studies have focused on the potential biases of supervisors that occour as a result of their likings and disliking about their subordinates. But recent studies show that affective influences on ratings may not represent rating biases. Vera et al (quoted in Arvey & Murphy, 1998) presented evidence that supports this argument. Arvey and Murphy (1998) quoted a study in their paper conducted by Schrader and Steiner in 1996, and described that: â€Å"They hypothesized that ratings in which employees are evaluated against clear and specific objective standards will differ from those in which such objective criteria are not specified and the standards are ambiguous. Results supported this proposition. However, ratings made when using internal, relative, or multiple standards of comparison were not terribly different from those made under the more objective conditions both in terms of mean differences and supervisor-self agreement. Thus, a conclusion that employee standards that involve objective and specific standards against which to evaluate individuals are the one â€Å"best† method seems premature given the results of this study† Ethnic, Social and Gender Issues: There are some gender, and social issues in terms of bias and subjectivity related to performance appraisals. Societal stereotypes may cause the appraisers to be biased against women and minorities. In 1996, Woehr & Roch (quoted in Arvey & Murphy, 1998) studied the effects of prior evaluations that were different in terms of performance and ratee gender on subsequent evaluations and on recall of a male or female of average performance. Results suggested that both the performance level and the gender of the target ratee's prior evaluation affected the subsequent rating. Relatively low performance for the prior target influenced subsequent evaluations differentially for male and female target ratees and males were given higher evaluations than females. Another study conducted by Ford et al (quoted in Arvey and Murphy, 1998) conducted a meta-analysis across 53 studies, and found that that blacks receive slightly lower performance scores than whites on both subjective and objective measures of performance. Arvey and Murphy reviewed a study conducted by Kraiger and Ford in 1985, and wrote that: â€Å"Kraiger & Ford (1985) conducted a meta-analysis of 74 studies across field and laboratory settings and concluded that an interaction effect existed: White raters rate white ratees higher than black ratees, whereas black raters evaluated black ratees higher than white ratees. Moderator effects were found also for group composition and research setting: Effect sizes increased as the proportion of blacks in the group decreased, and field studies generated larger effect sizes than laboratory studies. †(1998). These are the problems and issues that make a person think if the performance appraisal should be abandoned or not. In my opinion, performance appraisal should not be abandoned because of the problems and issues associated with it, if it is used carefully in an objective and constructive manner, it can prove a useful tool in motivating, developing and enhancing the performance of an employee. Bruce and Ira have also tried to answer this question: â€Å"Despite these drawbacks, there are good reasons not to give up on 360-degree feedback. The process still holds the potential to deepen employees' understanding of their own performance. And, it may be able to help companies create value by better aligning job performance with business strategy. The question is this: Can 360-degree feedback be implemented in such a way that it achieves these benefits without negatively affecting the bottom line? Based on our analysis–and conversations with clients– we believe the following steps may help companies transform 360-degree feedback into a value creator, not destroyer. Implement 360-degree feedback for the right reasons. â€Å"The first thing you need to ask is why you're doing it,† says Paul Rumely, a New York-based executive coach, If you can't articulate a strong business case for a 360-degree feedback program, it should not be introduced† (Bruce & Ira, 2002). Training can be very useful in enhancing the effectiveness of performance appraisal systems and can equip the raters with essential knowledge and skills to cope with the problems and issues associated with performance appraisals in work settings. Bruce and Ira suggest that: â€Å"Train people in giving and receiving feedback. Companies that implement 360-degree feedback without first checking and developing managers' feedback skills risk serious damage to teamwork and morale. Providing constructive feedback takes instruction, training and practice. †(Bruce & Ira, 2002). They also write that: â€Å"While training individuals to give and receive feedback may temporarily increase the expense associated with 360-degree feedback programs, the gains will outweigh the higher costs as the feedback delivered to participants becomes more focused, targeting the behaviors most closely associated with value creation and destruction. Ultimately, the goal should be to create a culture in which individuals feel comfortable giving and receiving feedback–both positive and negative–on a real–time basis, rather than waiting for an annual review† (Bruce & Ira, 2002). Assessment of performance of employees is essential to the process of performance management in organizations, and a performance appraisal not only assess or review the performance of an employee but also identify training and development needs of the employee, and is an important need of organizations. As Fiona Wilson has also stressed: â€Å"Given these difficulties identified in the literature, it may be tempting to abandon any hope of finding fair assessment of performance. Yet, there is still a need for control, accountability, assessment and staff development in organizations. Bias is difficult to overcome but can an individual give feedback on performance without that feedback being construed as negative and can staff be developed? One way to achieve this is to design an appraisal scheme where the emphasis is on development, to use a ‘safe’ approach, which recognises achievements and supports professional development and avoids the issue of accuracy and rating of performance† (Fiona Wilson, 2002).