The Performance Of Performance Appraisal Sanjeev Kumar Saxena - Jodhpur Today, most of organisations attempt to develop the outlook and performance of its employees by using multiple and complex training and educational programmes. In comparison to this, several academician's, researches and professionals hold that the personality of employees is generally developed when they learn several dimensions of job while working. Similarly, it is also believed that proper development of the personality of an employee by exercising 'on the job' will be more useful when the organisation simultaneously gets related feed back through a systematic method of performance appraisal. Performance appraisal is a process of obtaining, analyzing and recording information about the relative worth of an employee. It is a systematic periodic and an impartial rating of an employee's excellence in matters pertaining to his present job and his potential for a better job. A good appraisal system provides right feedback about the quality of performance of an employee.
In spite of dislike by several employees, performance appraisal has become an inescapable feature. It imparts benefits not only to the employees but also on supervisors and management. By viewing the benefits of performance appraisal, an attempt was made to find out from personnel managers, general manager and owners of 37 hotels of Rajasthan, the performance appraisal scenario in hospitality industry. There are certain identified criteria for which performance appraisal is carried out in the hospitality industry that includes: To check current performance Know future potential Maintain work force Improve performance Determining training needs Personal development opportunity Basis of promotion Transfer and discharge Basis of pay revision Feedback and communication mechanism. Appraiser well-designed performance appraisal system might fail to bring about the desired results, if an appropriate appraiser is not selected.
In most of situations, it is been seen that the appraiser is an immediate supervisor of the people to be appraised. Therefore, an attempt was made to find out the people, who conduct the performance appraisal interview in selected hotel's units. The above analysis (Table I) indicates that in more than 50 per cent of the five, four, three-star and heritage hotels, the performance appraisal is done by the immediate supervisor as he is most familiar with subordinates and their work, and he is considered to be the most able man to appraise them. Whereas in two hotels performance appraisal was mostly conducted by the personnel manager. In one and unapproved hotels, the concept of written performance appraisal system was not found, though they conduct performance appraisal but in an informal way. Duration The Indian corporate world undertakes various pattern of duration for conducting performance appraisal.
An attempt was made to project the duration in which performance of employee is evaluated by selected hotels units. It is noticed that some hotels exclusively prefer to have a formal system of performance appraisal and the duration is either annually, half yearly, quarterly and some prefer to have an informal system of performance appraisal and the duration is either weekly, daily or continuously. It was also noticed that some hotels prefer to have the appraisal in both combinations. Methodology The corporate world had broadly classified the method of performance appraisal into two categories: (a) Traditional Methods (b) Modern Methods Traditional methods include a confidential report, ranking method, essay or free form, paired comparison, forced distribution, checklist method, critical incident, group appraisal and field review method. While the modern performance appraisal methods includes an appraisal by result or MBO, behaviour ally anchored rating scale method. An attempt was therefore made to highlight the preference of performance appraisal methods in selected hotels: The above analysis (Table II) significantly explains that the most common method of performance appraisal being used in selected hotels units is confidential report, as more than 50 per cent of all categories of hotels are using this method.
Today, the traditional confidential report method is widely used by immediate supervisors as a major determinant of subordinate's promotion and transfer. This report deals with the year work and general opinion of the later toward the employee. It has also been observed that 33 per cent and 14 per cent of five star and heritage hotel respectively also used appraisal by result modern method of performance appraisal because frequently feedback and supervisor subordinate interaction are the key factors of this method. The superiors play supportive counselling and coaching roles. The employee is judged on the basis of the achievement of targets and not in term of operational methodology. Whereas 100 per cent of the one and unapproved hotels do not use any of the method of performance appraisal as they have informal system of performance appraisal.
Performance appraisal though very widely used an probably sound in theory but it presents a numbers of problems in actual practice. The obstacles which are noted quite common and more frequent during the research are: Unskilled supervision An ineffective form of performance appraisal, inadequate procedures, infrequent evaluation, fear of offending employees and unfairness, failure to follow up. Therefore, an ideal approach to performance appraisal is that, in which the evaluator is free from personal biases, prejudices and idiosyncrasies. During the research following suggestion were also noted to make performance Appraisal system more effective.
(a) The employee should be aware of the performance in term of goals, targets, behaviour etc expected of them. (b) It should be ensured that the appraisal system itself is job-related, performance-based, uniform and non-variable, fair, just and equitable, and that the appraiser are honest, rational, and objective in their approach, judgment and behaviour al orientations. (c) Performance appraisal reports should be examined meticulously before taking any positive or negative action. (d) To promote intra and inter-departmental consistency and uniformity, line and staff coordination should be ensured. (e) Supervisors responsible for performance appraisal should be well trained in the art and science of performance appraisal to ensure uniformity consistency and reliability.
(f) There should be provision of appeals against appraisal to ensure confidence of the employees. The employees should be given an opportunity to express their feeling on the performance reports. (g) The appraisal should be less time consuming and less costly. At the same time, it should bring the maximum benefits. Above all the improvement depends on the mutual respect, cooperation, cohesiveness, and empathic attitude covering all aspects of organisational activities. (The author is a faculty at the Institute of Hotel Management, Jodhpur) Introduction Performance Appraisal The history of performance appraisal is quite brief.
Its roots in the early 20 th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management. As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War - not more than 60 years ago. Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession! There is, says Dulewicz (1989), '... a basic human tendency to make judgement's about those one is working with, as well as about oneself.' Appraisal, it seems, is both inevitable and universal.
In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily. The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgement's made will be lawful, fair, defensible and accurate. Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes.
If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well.
Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance. These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence. As a result, the traditional emphasis on reward outcomes was progressively rejected.
In the 1950 s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time. Modern Appraisal Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development. In many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions. By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay.
(Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay. ) Whether this is an appropriate use of performance appraisal - the assignment and justification of rewards and penalties - is a very uncertain and contentious matter. Controversy, Controversy Few issues in management stir up more controversy than performance appraisal. There are many reputable sources - researchers, management commentators, psychometrician's - who have expressed doubts about the validity and reliability of the performance appraisal process. Some have even suggested that the process is so inherently flawed that it may be impossible to perfect it (see Derv en, 1990, for example). At the other extreme, there are many strong advocates of performance appraisal.
Some view it as potentially '... the most crucial aspect of organizational life' (Lawrie, 1990). Between these two extremes lie various schools of belief. While all endorse the use of performance appraisal, there are many different opinions on how and when to apply it. There are those, for instance, who believe that performance appraisal has many important employee development uses, but scorn any attempt to link the process to reward outcomes - such as pay rises and promotions. This group believes that the linkage to reward outcomes reduces or eliminates the developmental value of appraisals.
Rather than an opportunity for constructive review and encouragement, the reward-linked process is perceived as judgmental, punitive and harrowing. For example, how many people would gladly admit their work problems if, at the same time, they knew that their next pay rise or a much-wanted promotion was riding on an appraisal result? Very likely, in that situation, many people would deny or downplay their weaknesses. Nor is the desire to distort or deny the truth confined to the person being appraised. Many appraisers feel uncomfortable with the combined role of judge and executioner. Such reluctance is not difficult to understand. Appraisers often know their appraisees well, and are typically in a direct subordinate-supervisor relationship.
They work together on a daily basis and may, at times, mix socially. Suggesting that a subordinate needs to brush up on certain work skills is one thing; giving an appraisal result that has the direct effect of negating a promotion is another. The result can be resentment and serious morale damage, leading to workplace disruption, soured relationships and productivity declines. On the other hand, there is a strong rival argument which claims that performance appraisal must unequivocally be linked to reward outcomes.
The advocates of this approach say that organizations must have a process by which rewards - which are not an unlimited resource - may be openly and fairly distributed to those most deserving on the basis of merit, effort and results. There is a critical need for remunerative justice in organizations. Performance appraisal - whatever its practical flaws - is the only process available to help achieve fair, decent and consistent reward outcomes. It has also been claimed that appraisees themselves are inclined to believe that appraisal results should be linked directly to reward outcomes - and are suspicious and disappointed when told this is not the case.
Rather than feeling relieved, appraisees may suspect that they are not being told the whole truth, or that the appraisal process is a sham and waste of time. The Link to Rewards Recent research (Bannister & Balk in, 1990) has reported that appraisees seem to have greater acceptance of the appraisal process, and feel more satisfied with it, when the process is directly linked to rewards. Such findings are a serious challenge to those who feel that appraisal results and reward outcomes must be strictly isolated from each other. There is also a group who argues that the evaluation of employees for reward purposes, and frank communication with them about their performance, are part of the basic responsibilities of management. The practice of not discussing reward issues while appraising performance is, say critics, based on inconsistent and muddled ideas of motivation.
In many organizations, this inconsistency is aggravated by the practice of having separate wage and salary reviews, in which merit rises and bonuses are decided arbitrarily, and often secretly, by supervisors and managers. Don't Redesign Your Company's Performance Appraisal System, Scrap It! A Look at Costs and Benefits (c) Fred Nickols 2000 This article appeared in the May-June 1997 issue of Corporate University Review. Abstract At a time when many corporations are engaged in unrelenting searches for ways to improve operations and reduce costs, there is one aspect of organizational life that has largely escaped scrutiny: Performance Appraisal. Perhaps this is because performance appraisals have become an unquestioned fact of life in most large organizations. As with most unquestioned facts, a critical examination can prove beneficial. In this article, the author points out that the hard costs of operating formal performance appraisal systems are measured in billions of dollars annually and that the soft costs might be even higher.
The primary offsets to these costs are the purported benefits of performance appraisal systems. Upon inspection, these appear to range from non-existent to minimal. Here, then, is a situation rife with opportunity for organizations willing to challenge the status quo. Introduction If you " re a change-minded senior executive looking for ways to improve performance, cut costs, or free up resources that can be redirected against important issues waiting in the wings, you might give serious thought to scrapping your company's performance appraisal system. It devours staggering amounts of time and energy, it depresses and demotivates people, it destroys trust and teamwork and, adding insult to injury, it delivers little demonstrable value at great cost. Here's a quick and easy performance appraisal cost-estimating exercise you can apply to your own company: double the number of employees who receive appraisals, add three zeroes, and place a dollar sign in front of the resultant number.
That's the cost of the performance appraisal system at your company. If you think $2, 000 per employee is too high, don't double the number of employees, just add three zeroes. [ Lest you think this estimating methodology too cavalier, please know that two very thorough cost estimates were submitted by respondents to the e-mail survey that gave rise to this paper. One came in at $1, 945 per employee and the other at $2, 200. The latter included the costs of union participation so it was rounded down to $2, 000. ] But you probably won't like that result either.
If you do scrap your company's performance appraisal system you will accomplish more than realize a sizable cost savings; you will also, in one bold move, unfreeze your organization's culture and eliminate one of the chief structural obstacles to any changes you and your management team might be contemplating. The one thing you should not do is listen to those who will implore you to let them redesign the performance appraisal system to make it more supportive of the changes you have in mind. Some reading these words will consider the previous comments outrageous and unfounded. But, as Craig Brooks, the director of a Winona, Minnesota human services organization and a 26-year veteran of performance appraisal sessions claims, 'I could retire on the salary I earned during those meetings.' An exaggeration? Perhaps, but the point is clear enough: performance appraisals chew up a lot of time and money. On the other hand, they supposedly provide benefits that offset these costs. But do they? The Internet offered an unprecedented means of finding out and so, during the last two months of 1995, three e-mail messages were posted in quick succession to several discussion lists on the Internet (see the list at the end of this paper).
The first message dealt with the form and function of the 'classic' performance appraisal system - one where a manager appraises the performance of a subordinate or 'direct report.' The second proposed an informal cost-benefit analysis of such appraisal systems. It included a starter list of costs and benefits as well as a call for additional costs and benefits from anyone interested in participating. The third presented a summary and synthesis of all responses and some rather obvious conclusions. The bottom line? Performance appraisal systems provide questionable benefits at amazingly high costs. In one company alone, the costs were conservatively estimated at almost $100 million. The Benefits The Accepted Mythology of Performance Appraisal Systems From the viewpoint of senior executives, performance appraisal systems are generally regarded as a necessary part of the organization's management system.
This condition seems to exist because of the widely accepted, generally unquestioned benefits of performance appraisal systems. If asked, a typical executive might indicate the following benefits: 1. The system provides employees with an opportunity to receive feedback regarding their performance, usually at least once a year and often on an interim basis during the year. This leads to reduced error and waste, increased productivity, improved quality and service for customers, as well as enhanced employee motivation, commitment, and a sense of ownership.
2. The system provides an opportunity for performance related discussions that include the following aims: setting work objectives for the employee, aligning individual and organizational goals, identifying training and development needs, and discussing career progression opportunities. 3. The system standardizes performance appraisals and makes them objective by providing uniform processes and criteria. This further results in a fair, valid, and legally defensible basis for rewarding and recognizing individual performance. 4.
The system affords the corporation legal protection against employee lawsuits for discrimination and wrongful termination. A perhaps less typical but more candid executive might add a final benefit: the formal performance appraisal system shores up an organization's hierarchical authority system. It gives the supervising manager control over the carrots and sticks in what is essentially a carrot-and-stick management system. The list of benefits above, with the exception of the last one, represents an idealized view of performance appraisal systems, a view that is espoused by many but achieved by few, if any.
Why? What is it about organizations that causes performance appraisal systems to fall short of this ideal? Can we or should we try to change things so that performance appraisal systems work the way we want? Or is there a better course of action? Answering these questions requires taking a rational look at the form and function of performance appraisal systems, and the effects such systems have on the very people they are intended to help. The Reality Figure 1 - A Basic Performance Appraisal System The general form of a basic performance appraisal system is depicted in Figure 1. A discussion follows. Based on his or her perceptions, a manager prepares an appraisal of another employee. Appraisals typically have two components: text, and a number. The number is usually the basis for determining the employee's merit increase (i.
e. , the size of the pay raise for the subsequent year). This is often quite modest and amounts to little more than a cost-of-living increase, an offset against inflation. Moreover, differences between the maximum and minimum increases are also quite modest. The merit carrot is not a very big one. Perhaps the most significant aspect of the structure depicted in Figure 1 is that the appraisal has as its primary input the perceptions of the manager.
Technically speaking, they are the only input. Given this model, it is obvious that if the system is to work effectively the manager's perceptions must be objective, accurate, comprehensive, and free from any significant bias, distortion or undue influence; otherwise, the system is patently flawed. This leads to the following assertion: The structure of the typical performance appraisal system makes managers who prepare appraisals the targets of efforts aimed at influencing, shaping, and just plain manipulating their perceptions and the appraisals based on these perceptions. Several people have an interest in influencing a manager's appraisal of a given employee's performance. The most obvious is the employee. But there are others.
These include other employees who are being appraised by the same manager, and anyone with a vested interest in having a given employee receive a good or a bad appraisal; for example, clients, customers, mentors, co-workers, and other managers whose own subordinates must compete for a finite pool of merit increase monies, plum assignments, and increasingly limited promotion opportunities. In a word, the politics of performance appraisal can be fierce. The preceding assertion may be elaborated upon as follows: Many efforts to influence the perceptions of the managers who prepare appraisals, and the appraisals they prepare, are independent of and often have no relation to the performance of the person being appraised. People and politics are not the only forces tending to negate the positive potential of performance appraisal systems. There are also important systemic or structural factors at work. An appraisal leads to a merit increase.
The size of the merit pool is limited and the distribution of these monies is typically according to some formula. Thus, in a performance appraisal system that allocates merit increase percentage on a five-point scale, not everyone can receive a five because there isn't enough money available to support such an outcome. This is a restraint, a 'can't do.' By the same token, the numbers assigned must fit within the limits of the available pool of merit monies. This is a constraint, a 'must do.' Restraints and constraints can also include EEO and affirmative action considerations.
Because merit rating numbers must be adjusted to meet various restraints and constraints, the language and tone of the appraisals must in turn be adjusted so as to be consistent with the numbers. From this follows an inescapable conclusion: the honest, fair, valid, and objective assessment of all employees is literally impossible. The structure, restraints, and constraints of the system do not permit it. The preceding discussion looks at performance appraisal systems mainly from a managerial perspective. But how does it look to employees, and what are its effects on them? People responding to the Internet queries provided the following answers to these questions.
Reductions in Productivity Several people cited temporary reductions in productivity in the aftermath of the appraisal review sessions. One person estimated this period of reduced contribution lasts for about three months. An employee of the federal government said this period lasts at least six months. Even if it is assumed that such periods last no more than a few days or weeks, and that they represent a decrease in productivity of no more than 10 percent, the costs are still astronomical. Erosion of PerformanceTauo Jokinen, a product development manager with Nokia, conjectured that performance appraisal systems actually erode performance over time as a result of people endeavoring to set goals that are achievable, thus ensuring themselves a decent appraisal. This might be viewed as a form of structural deflation regarding performance, and it is quite reminiscent of the late Kenneth Berrien's view that management might control the lower limits of productivity but employees are clearly in control of the upper limits.
[ Berrien's comments were made in the context of a discussion about the balance of control between a supra system and its subsystems, and can be found in Chapter VII of General and Social Systems (Rutgers University Press: 1968). ] Creation of Emotional Anguish Also cited were negative emotional states: worrying, depression, stress, and anguish (on the part of those giving as well as those receiving appraisals). After first acknowledging the 'hard' costs of performance appraisals, Harry Heflin, an engineer with Inter sys who is also chairman of the IEEE Engineering Management Society in Boston, wrote, 'But I think the real cost is the emotional anguish as everyone anticipates, prepares for, and works the process.' Damaging to Morale & Motivation Closely related to the emotional factors cited above are the penalties paid in the form of decreased morale and motivation. These are deemed especially severe when the performance appraisal system is seen as 'bad' or unfair.
An element of unfairness cited by Charles Ladd, a TQM consultant, is the use of performance appraisal systems to reward or punish people for what are really natural variations in system or process performance. This means that people are praised and rewarded or cursed and punished for factors beyond their power to influence let alone control. Emphasizing Individual vs. Team and Task vs. Process One factor the author was sure would be cited, but wasn't, is that the classic performance appraisal system emphasizes individual or task-level performance instead of team or process performance. Appraising individual performance can be a divisive factor in an environment where genuine teamwork is required.
Consequently, in times of change, retaining an appraisal system that focuses on individual task performance sends at best a mixed message when management calls for teams or wants to focus on business process performance instead of individual task performance. Fostering A Short-term View Another factor the author thought would be cited and wasn't is the short-term view that is inherent in annual performance appraisal systems. Essentially, annual performance appraisal systems ask of employees, 'What have you done for us this year?' Employee contributions over time - past or future - do not enter into the equation. Little wonder, then, that Mike Hammer, the famed re engineering guru, could be heard lamenting the lack of a long-term view in one of his recent seminars.
[ Mike could be heard uttering this lament in Boston, on December 4, 1995, during the first offering of his new seminar, 'The Process-Centered Organization.' Mike was lambasting the media and the educational establishment for churning out young people with a short-term, self-interested view. ] Institutionalizing Existing Values & Biases military officer with a Ph. D. , who is stationed at the Pentagon and who wishes to remain anonymous, observed that performance appraisal systems serve to institutionalize the values and prejudices of those in power - and to protect these values and prejudices from challenge. Consultant Charles Ladd made this same observation independently of the officer. Both argued that this aspect of performance appraisal systems forms a structural impediment to cultural change, that it acts to maintain the status quo.
Fostering Fear and Lack of Trust Directly related to the factors cited above is the degree of fear associated with the appraisal system. This ties to a lack of trust in one's boss, and management in general, and leads to a phenomenon known as 'malicious compliance,' that is, a passive-aggressive stance of 'tell me what you want me to do and I'll do it' on the part of an employee. As one might expect, Deming's dictum to drive fear out of the workplace was frequently cited in this context. A Carrot-and-Stick Management System The source of the fear cited above owes to the fact that the carrot-and-stick nature of appraisal systems is mostly stick. Performance appraisals become a permanent part of the employees' personnel folders. There, many people have access to them including prospective employers elsewhere within the company, the human resources department (HR), and other executives and senior managers.
Past appraisals exert a significant influence over status and standing, future assignments, and promotions. Thus, although performance appraisal systems do not distribute much in the way of rewards, they can inflict great damage. Control of appraisals is largely in the hands of the employee's supervisor. Savvy employees know that success hinges in large part on 'psyching out the boss.' They also know that when senior executives call for change, the marching orders, if any, will come from their supervisors. Redesigning Performance Appraisal Systems Is A Sisyphean Task In short, for political, structural, and systemic reasons, performance appraisal systems cannot function as intended.
Worse, they seem to have an almost exclusively negative impact on the very employees they are meant to help. This view of performance appraisals squarely contradicts the mythology of performance appraisal systems. Further, the reasons performance appraisal systems fail to provide the benefits claimed for them seem firmly rooted in the nature of organizations and the behavior of people. Trying to change these factors so that performance appraisal systems will work the way they are intended is truly a modern-day version of Sisyphus's legendary task. All things considered, one would hope that performance appraisal systems are relatively inexpensive.
This is not the case. The Costs The costs cited by the Internet respondents run the gamut from obviously quantifiable or hard costs to soft costs or costs that are much more difficult to quantify. The preceding discussion can be viewed in large measure as a discussion of the soft costs. The following discussion focuses on the hard costs.
These consist chiefly of the direct and indirect expenses associated with the following activities: o preparing appraisals o setting goals and objectives o conducting interim and annual performance reviews o reviewing at higher levels appraisals written at lower levels o designing, printing, copying, filing, and distributing appraisal forms o designing and communicating the appraisal process o training supervisors, managers, and executives in the appraisal process o handling post-appraisal appeals, grievances, and lawsuits A manager who works as a re engineering specialist for a large overseas retailing operation used only the first three cost categories above to derive an annual per-employee cost of $1, 945. He then reduced his company's 130, 000 employee count to 85, 000 full-time equivalents (FTEs). He further assumed that only 60 percent of those FTEs actually receive a performance appraisal. Even so, his calculations place the cost of his company's performance appraisals at a staggering $100 million. As he pointed out, these are not out-of-pocket costs, but they do represent the cost of the time used.
Johann Hanekom, CEO of a 500-person subsidiary of a South African telecommunications company, indicated that the labor costs required to recover all operating expenses and burden at his company are pegged at $85 per hour. Using his estimate of hours, the annual per-person cost of performance appraisals at his company comes to $2, 200. This amounts to a company-wide cost of $1. 1 million per year. (Hanekom's estimate includes the cost of union participation. ) Hanekom also suggested that the linkage between merit increases and the performance appraisal system contributes to a form of structural inflation.
Whether through union bargaining or the uncoordinated demands of people for decent ratings, wages and salaries increase more than would be the case if there were no performance appraisal system or if it were not linked to the annual pay increase. In short, performance appraisal systems provide financial leverage to employees and unions as well as to management. Conclusions A reasonable person would be hard pressed to argue that the benefits of performance appraisal systems outweigh their costs. The costs are extraordinary and many of the supposed benefits cited do not withstand serious scrutiny.
Of what benefit or credibility, for instance, are career discussions in organizations where downsizing and layoffs are the order of the day? Performance-related discussions between bosses and subordinates do not require a formal, full-blown performance appraisal system. Indeed, it can be argued that the real coaching and counseling sessions that shape and improve employee performance occur informally, outside such systems. The same can be said of goal setting and feedback. It is also questionable if much of what passes for feedback in formal performance appraisal sessions is deserving of the term. [ For a quick look at how the concept of feedback in the social sciences differs markedly from its technical origins, see my article, 'Feedback About Feedback,' in the Human Resources Development Quarterly (Jossey-Bass: Fall 1995). For a scholarly and well-researched examination of the evolution of feedback thought, see George P.
Richardson's marvelous book, Feedback Thought in Social Science and Systems Theory (University of Pennsylvania Press: 1991). ] If feedback is viewed as information about actual conditions compared against a set of reference conditions, and if the results are measurable and measured, what role does the manager really play? If they are neither measurable nor measured, what role can the manager play? The need for a basis on which to allocate the annual merit increase presupposes the need for an annual merit increase. If this is indeed the case, the reasons for it need to be examined. If it serves as a cost-of-living increase, a hedge against inflation, this can be done on a flat-rate basis without the need for a performance appraisal system.
If pay increases are warranted for other reasons, it is unlikely that they require a performance appraisal system to administer. Bonuses or other special increases can and should be tied to very specific, very visible, very measurable results, and this doesn't require a performance appraisal system. Profit sharing is another case in point. Poor performers probably constitute less than 10 percent of the work force, so why incur the expense of keeping book on the entire work force? Moreover, keeping book on poor performers does not require an elaborate, formal performance appraisal system. Worse, the books kept on those who are not poor performers can backfire in court.
As Craig Brooks wrote, 'The typical, traditional performance appraisal is worthless and, in fact, lawyers have told me the appraisal itself quite often is management's worst enemy in disciplinary grievances and court challenges.' Brooks is not alone. Several people pointed out that performance appraisal systems might increase, not decrease the costs of appeals, grievances, and lawsuits. The legal protection provided by performance appraisal systems seems questionable. Perhaps the greatest cost of all is that performance appraisal systems silently mock senior executives who call for change.
This is embarrassingly apparent when initiative after initiative pleads to have the performance appraisal system changed to support its aims. Such pleas offer compelling testimony that performance appraisal systems are seen as a basic device for getting individuals to comply with the aims of management. This emphasis on compliance is the status quo that such systems maintain, no matter how much they are redesigned. This emphasis is out of place in a world where the ability to elicit contributions from employees matters more than the ability to ensure compliance.
As a purely practical matter, given the time lag between changes in the aims of management and changes to performance appraisal systems to support those new aims, it seems unlikely that changes to performance appraisal systems can keep pace. In conclusion, performance appraisal systems could be eliminated with no harm done and with great economic and emotional benefit. Consequently, change-minded executives should not listen to pleas to redesign their company's performance appraisal system but should instead give serious thought to scrapping it. The Internet discussion lists are named below: 1. (business process re engineering) 2. (change management) 3.
(consulting) 4. (human resources) 5. (learning organizations) 6. (TQM in manufacturing and service companies) 7. (training and development) Contact the Author Fred Nickols may be reached by phone at (740) 397-2363 and by e-mail at. Links to Other Areas of This Web Site o Articles by Fred Nickols o Distance Consulting Company Home Page o Personal o Project History o Resume This page last updated on February 14, 2002 Make performance appraisal relevant Winston Oberg FOREWORD The author's position is that performance appraisal programs can be made considerably more effective if management will fit practice to purpose when setting goals and selecting appraisal techniques to achieve them.
He presents a catalog of the strengths and weaknesses of nine of these techniques; then he shows how they can be used singly and in combination with different performance appraisal objectives. He maintains that if management will undertake this matching effort, many familiar pitfalls of appraisal programs can be avoided. Mr. Oberg is Professor of Management at the Graduate School of Business Administration, Michigan State University. These frequently voiced goals of performance appraisal programs underscore the importance of such programs to any ongoing business organization: o Help or prod supervisors to observe their subordinates more closely and to do a better coaching job.
o Motivate employees by providing feedback on how they are doing. o Provide back-up data for management decisions concerning merit increases, transfers, dismissals, and so on. o Improve organization development by identifying people with promotion potential and pin-pointing development needs. o Establish a research and reference base for personnel decisions. It has been estimated that over three fourths of U. S.
companies now have performance appraisal programs. (1) In actual practice, however, formal performance appraisal programs have often yielded unsatisfactory and disappointing results, as the growing body of critical literature attests. (2) Some critics even suggest that we abandon performance appraisal as a lost hope, and they point to scores of problems and pitfalls as evidence. But considering the potential of appraisal programs, the issue should not be whether to scrap them; rather, it should be how to make them better. I have found that one reason for failures is that companies often select indiscriminately from the wide battery of available performance appraisal techniques without really thinking about which particular technique is best suited to a particular appraisal objective.
For example, the most commonly used appraisal techniques include: 5. Essay appraisal. 6. Graphic rating scale. 7.
Field review. 8. Forced-choice rating. 9. Critical incident appraisal.
10. Management-by-objectives approach. 11. Work-standards approach.
12. Ranking methods. 13. Assessment centers.
Each of these has its own combination of strengths and weaknesses, and none is able to achieve all the purposes for which management institutes performance appraisal systems. Nor is any one technique able to evade all of the pitfalls. The best anyone can hope to do is to match an appropriate appraisal method to a particular performance appraisal goal. In this article, I shall attempt to lay the groundwork for such a matching effort. First, I shall review some familiar pitfalls in appraisal programs; then, agonist this background, I shall assess the strengths and weaknesses of the nine commonly used appraisal techniques. In the last section, I shall match the organizational objectives listed at the outset of this article with the techniques best suited to achieving them.
(1) See W. R. Spiegel and Edwin W. Mumm a, Merit of Supervisors and Executives (Austin, Bureau of Business Research, University of Texas, 1961); and Richard V. Miller, 'Merit in Industry: A Survey of Current Practices and Problems,' ILR Research, Fall 1959.
(2) See, for example, Douglas McGregor, 'An Uneasy Look at Performance Appraisal,' HBR May-June 1957, p. 89; Paul H. Thompson and Gene W. Dalton, 'Performance Appraisals Managers Beware,' HBR January-February 1970, p. 149; and Albert W. Schrader, 'Let's Abolish the Annual Performance Review,' Management of Personnel Quarterly, Fall 1969, p.
293. Some common pitfalls Obstacles to the success of formal performance appraisal programs should be familiar to most managers, either from painful personal experience or from the growing body of critical literature. Here are the most troublesome and frequently cited drawbacks: o Performance appraisal programs demand too much from supervisors. Formal performance appraisals obviously require at least periodic supervisor observation of subordinates' performance. However, the typical first-line supervisor can hardly know, in a very adequate way, just what each of 20, 30, or more subordinates is doing. o Standards and ratings tend to vary widely and, often, unfairly.
Some raters are tough, others are lenient. Some departments have highly competent people; others have less competent people. Consequently, employees subject to less competition or lenient ratings can receive higher appraisals than equally competent or superior associates. o Personal values and bias can replace organizational standards. An appraiser may not lack standards, but the standards he uses are sometimes the wrong ones. For example, unfairly low ratings may be given to valued subordinates so they will not be promoted out of the rater's department.
More often, however, outright bias dictates favored treatment for some employees. o Because of lack of communication, employees may not know how they are rated. The standards by which employees think they are being judged are sometimes different from those their superiors actually use. No performance appraisal system can be very effective for management decisions, organization development, or any other purpose until the people being appraised know what is expected of them and by what criteria they are being judged.
o Appraisal techniques tend to be used as performance panaceas. If a worker lacks the basic ability or has not been given the necessary training for his job, it is neither reasonable to try to stimulate adequate performance through performance appraisals, nor fair to base salary, dismissal, or other negative decisions on such an appraisal. No appraisal program can substitute for sound selection, placement, and training programs. Poor performance represents someone else's failure.
o In many cases, the validity of ratings is reduced by supervisory resistance to making the ratings. Rather than confront their less effective subordinates with negative ratings, negative feedback in appraisal interviews, and below-average salary increases, supervisors often take the more comfortable way out and give average or above-average ratings to inferior performers. o Performance appraisal ratings can boomerang when communicated to employees. Negative feedback (i.
e. , criticism) not only fails to motivate the typical employee, but also can cause him to perform worse. (3) Only those employees who have a high degree of self-esteem appear to be stimulated by criticism to improve their performance. o Performance appraisals interfere with the more constructive coaching relationship that should exist between a superior and his subordinates. Performance appraisal interviews tend to emphasize the superior position of the supervisor by placing him in the role of judge, thus countering his equally important role of teacher and coach.
This is particularly damaging in organizations that are attempting to maintain a more participative organizational climate. (3) See Herbert H. Meyer, Emanuel Kay, and John R. P.
French, Jr. , 'Split Roles in Performance Appraisal,' HBR January-February 1965, p. 123. A look at methods The foregoing list of major program pitfalls represents a formidable challenge, even considering the available battery of appraisal techniques.
But attempting to avoid these pitfalls by doing away with appraisals themselves is like trying to solve the problems of life by committing suicide. The more logical task is to identify those appraisal practices that are (a) most likely to achieve a particular objective and (b) least vulnerable to the obstacles already discussed. Before relating the specific techniques to the goals of performance appraisal stated at the outset of the article, I shall briefly review each, taking them more or less in an order of increasing complexity. The best-known techniques will be treated most briefly. 1.
Essay appraisal In its simplest form, this technique asks the rater to write a paragraph or more covering an individual's strengths, weaknesses, potential, and so on. In most selection situations, particularly those involving professional, sales, or managerial positions, essay appraisals from former employers, teachers, or associates carry significant weight. The assumption seems to be that an honest and informed statement -either by word of mouth or in writing- from someone who knows a man well, is fully as valid as more formal and more complicated methods. The biggest drawback to essay appraisals is their variability in length and content. Moreover, since different essays touch on different aspects of a man's performance or personal qualifications, essay ratings are difficult to combine or compare. For comparability, some type of more formal method, like the graphic rating scale, is desirable.
2. Graphic rating scale This technique may not yield the depth of an essay appraisal, but it is more consistent and reliable. Typically, a graphic scale assesses a person on the quality and quantity of his work (is he outstanding, above average, average, or unsatisfactory? ) and on a variety of other factors that vary with the job but usually include personal traits like reliability and cooperation. It may also include specific performance items like oral and written communication. The graphic scale has come under frequent attack, but remains the most widely used rating method.
In a classic comparison between the 'old-fashioned' graphic scale and the much more sophisticated forced-choice technique, the former proved to be fully as valid as the best of the forced-choice forms, and better than most of them. (4) It is also cheaper to develop and more acceptable to raters than the forced-choice form. For many purposes there is no need to use anything more complicated than a graphic scale supplemented by a few essay questions. (4) Barnes Berkshire and Richard Highland, 'Forced-Choice Performance on a Methodological Study,' Personnel Psychology, Autumn 1953, p. 355. 3.
Field review When there is reason to suspect rater bias, when some raters appear to be using higher standards than others, or when comparability of ratings is essential, essay or graphic ratings are often combined with a systematic review process. The field review is one of several techniques for doing this. A member of the personnel or central administrative staff meets with small groups of raters from each supervisory unit and goes over each employee's rating with them to (a) identify areas of inter-rater disagreement, (b) help the group arrive at a consensus, and (c) determine that each rater conceives the standards similarly. This group-judgment technique tends to be more fair and more valid than individual ratings and permits the central staff to develop an awareness of the varying degrees of leniency or severity -as well as bias- exhibited by raters in different departments.
On the negative side, the process is very time consuming. 4. Forced-choice rating Like the field review, this technique was developed to reduce bias and establish objective standards of comparison between individuals, but it does not involve the intervention of a third party. Although there are many variations of this method, the most common one asks raters to choose from among groups of statements those which best fit the individual being rated and those which least fit him. The statements are then weighted or scored, very much the way a psychological test is scored. People with high scores are, by definition, the better employees; those with low scores are the poorer ones.
Since the rater does not know what the scoring weights for each statement are, in theory at least, he cannot play favorites. He simply describes his people, and someone in the personnel department applies the scoring weights to determine who gets the best rating. The rationale behind this technique is difficult to fault. It is the same rationale used in developing selection test batteries. In practice, however, the forced-choice method tends to irritate raters, who feel they are not being trusted. They want to say openly how they rate someone and not be second-guessed or tricked into making 'honest' appraisals.
A few clever raters have even found ways to beat the system. When they want to give average employee Harry Smith a high rating, they simply describe the best employee they know. If the best employee is Elliott Jones, they describe Jones on Smith's forced-choice form. Thus, Smith gets a good rating and hopefully a raise. An additional drawback is the difficulty and cost of developing forms.
Consequently, the technique is usually limited to middle- and lower-management levels where the jobs are sufficiently similar to make standard or common forms feasible. Finally, forced-choice forms tend to be of little value- and probably have a negative effect- when used in performance appraisal interviews. 5. Critical incident appraisal The discussion of ratings with employees has, in many companies, proved to be a traumatic experience for supervisors.
Some have learned from bitter experience what General Electric later documented; people who receive honest but negative feedback are typically not motivated to do better - and often do worse - after the appraisal interview. (5) Consequently, supervisors tend to avoid such interviews, or if forced to hold them, avoid giving negative ratings when the ratings have to be shown to the employee. One stumbling block has no doubt been the unsatisfactory rating form used. Typically, these are graphic scales that often include rather vague traits like initiative, cooperativeness, reliability, and even personality. Discussing these with an employee can be difficult. The critical incident technique looks like a natural to some people for performance review interviews, because it gives a supervisor actual, factual incidents to discuss with an employee.
Supervisors are asked to keep a record, a 'little black book,' on each employee and to record actual incidents of positive or negative behavior. For example: Bob Mitchell, who has been rated as somewhat unreliable, fails to meet several deadlines during the appraisal period. His supervisor makes a note of these incidents and is now prepared with hard, factual data: 'Bob, I rated you down on reliability because, on three different occasions over the last two months, you told me you would do something and you didn't do it. You remember six weeks ago when I... .' Instead of arguing over traits, the discussion now deals with actual behavior. Possibly, Bob has misunderstood the supervisor or has good reasons for his apparent 'unreliability.' If so, he now has an opportunity to respond.
His performance, not his personality, is being criticized. He knows specifically how to perform differently if he wants to be rated higher the next time. Of course, Bob might feel the supervisor was using unfairly high standards in evaluating his performance. But at least he would know just what those standards are. There are, however, several drawbacks to this approach. It requires that supervisors jot down incidents on a daily or, at the very least, a weekly basis.
This can become a chore. Furthermore, the critical incident rating technique need not, but may, cause a supervisor to delay feedback to employees. And it is hardly desirable to wait six months or a year to confront an employee with a misdeed or mistake. Finally, the supervisor sets the standards. If they seem unfair to a subordinate, might he not be more motivated if he at least has some say in setting, or at least agreeing to, the standards against which he is judged? (5) Meyer, Kay, and French, op. cit.
6. Management by objectives To avoid, or to deal with, the feeling that they are being judged by unfairly high standards, employees in some organizations are being asked to set - or help set - their own performance goals. Within the past five or six years, MBO has become something of a fad and is so familiar to most managers that I will not dwell on it here. It should be noted, however, that when MBO is applied at lower organizational levels, employees do not always want to be involved in their own goal setting. As Arthur N. Turner and Paul R.
Lawrence discovered, many do not want self-direction or autonomy. (6) As a result, more coercive variations of MBO are becoming increasingly common, and some critics see MBO drifting into a kind of manipulative form of management in which pseudo-participation substitutes for the real thing. Employees are consulted, but management ends up imposing its standards and its objectives. (7) Some organizations, therefore, are introducing a work-standards approach to goal setting in which the goals are openly set by management. In fact, there appears to be something of a vogue in the setting of such work standards in white-collar and service areas.
(6) Industrial Jobs and the Worker (Boston, Division of Research, Harvard Business School, 1965). (7) See, for example, Harry Levinson, 'Management by Whose Objectives?' HBR July-August 1970, p. 125. 7. Work-standards approach Instead of asking employees to set their own performance goals, many organizations set measured daily work standards.
In short, the work standards technique establishes work and staffing targets aimed at improving productivity. When realistically used, it can make possible an objective and accurate appraisal of the work of employees and supervisors. To be effective, the standards must be visible and fair. Hence a good deal of time is spent observing employees on the job, simplifying and improving the job where possible, and attempting to arrive at realistic output standards. It is not clear, in every case, that work standards have been integrated with an organization's performance appraisal program. However, since the work-standards program provides each employee with a more or less complete set of his job duties, it would seem only natural that supervisors will eventually relate performance appraisal and interview comments to these duties.
I would expect this to happen increasingly where work standards exist. The use of work standards should make performance interviews less threatening than the use of personal, more subjective standards alone. The most serious drawback appears to be the problem of comparability. If people are evaluated on different standards, how can the ratings be brought together for comparison purposes when decisions have to be made on promotions or on salary increases? For these purposes some form of ranking is necessary. 8. Ranking methods For comparative purposes, particularly when it is necessary to compare people who work for different supervisors, individual statements, ratings, or appraisal forms are not particularly useful.
Instead, it is necessary to recognize that comparisons involve an overall subjective judgment to which a host of additional facts and impressions must somehow be added. There is no single form or way to do this. Comparing people in different units for the purpose of, say, choosing a service supervisor or determining the relative size of salary increases for different supervisors, requires subjective judgment, not statistics. The best approach appears to be a ranking technique involving pooled judgment. The two most effective methods are alternation ranking and paired comparison ranking.
Alternation ranking: In this method, the names of employees are listed on the left-hand side of a sheet of paper - preferably in random order. If the rankings are for salary purposes, a supervisor is asked to choose the 'most valuable' employee on the list, cross his name off, and put it at the top of the column on the right-hand side of the sheet. Next, he selects the 'least valuable' employee on the list, crosses his name off, and puts it at the bottom of the right-hand column. The ranker then selects the 'most valuable' person from the remaining list, crosses his name off and enters it below the top name on the right-hand list, and so on.
Paired-comparison ranking: This technique is probably just as accurate as alternation ranking and might be more so. But with large numbers of employees it becomes extremely time consuming and cumbersome. To illustrate the method, let us say we have five employees: Mr. Abbott, Mr.
Barnes, Mr. Cox, Mr. Drew, and Mr. Eliot.
We list their names on the left-hand side of the sheet. We compare Abbott with Barnes on whatever criterion we have chosen, say, present value to the organization. If we feel Abbott is more valuable than Barnes, we put a tally beside Abbott's name. We then compare Abbott with Cox, with Drew, and with Eliot. The process is repeated for each individual. The man with the most tallies is the most valuable person, at least in the eyes of the rater; the man with no tallies at all is regarded as the least valuable person.
Both ranking techniques, particularly when combined with multiple rankings (i. e. , when two or more people are asked to make independent rankings of the same work group and their lists are averaged), are among the best available for generating valid order-of-merit rankings for salary administration purposes. 9.
Assessment centers So far, we have been talking about assessing past performance. What about the assessment of future performance or potential? In any placement decision and even more so in promotion decisions, some prediction of future performance is necessary. How can this kind of prediction be made most validly and most fairly? One widely used rule of thumb is that 'what a man has done is the best predictor of what he will do in the future.' But suppose you are picking a man to be a supervisor and this person has never held supervisory responsibility? Or suppose you are selecting a man for a job from among a group of candidates, none of whom has done the job or one like it? In these situations, many organizations use assessment centers to predict future performance more accurately. Typically, individuals from different departments are brought together to spend two or three days working on individual and group assignments similar to the ones they will be handling if they are promoted.
The pooled judgment of observers - sometimes derived by paired comparison or alternation ranking - leads to an order-of-merit ranking for each participant. Less structured, subjective judgments are also made. There is a good deal of evidence that people chosen by assessment center methods work out better than those not chosen by these methods. (8) The center also makes it possible for people who are working for departments of low status or low visibility in an organization to become visible and, in the competitive situation of an assessment center, show how they stack up against people from more well-known departments.
This has the effect of equalizing opportunity, improving morale, and enlarging the pool of possible promotion candidates. (8) See, for example, Robert C. Al brook, 'Spot Executives Early,' Fortune, July 1968, p. 106; and William C. By ham, 'Assessment Centers for Spotting Future Managers,' HBR July-August 1970, p. 150.
Fitting practice to purpose In the foregoing analysis, I have tried to show that each performance appraisal technique has its own combination of strengths and weaknesses. The success of any program that makes use of these techniques will largely depend on how they are used relative to the goals of that program. For example, goal-setting and work-standards methods will be most effective for objective coaching, counseling, and motivational purposes, but some form of critical incident appraisal is better when a supervisor's personal judgment and criticism are necessary. Comparisons of individuals, especially in win-lose situations when only one person can be promoted or only a limited number can be given large salary increases, necessitate a still different approach. Each person should be rated on the same form, which must be as simple as possible, probably involving essay and graphic responses. Then order-of-merit rankings and final averaging should follow.
To be more explicit, here are the appraisal goals listed at the outset of this article and the techniques best suited to them. Help or prod supervisors to observe their subordinates more closely and to do a better coaching job. The critical incident appraisal appears to be ideal for this purpose, if supervisors can be convinced they should take the time to look for, and record, significant events. Time delays, however, are a major drawback to this technique and should be kept as short as possible. Still, over the longer term, a supervisor will gain a better knowledge of his own performance standards, including his possible biases, as he reviews the incidents he has recorded. He may even decide to change or reweigh t his own cr.