In today’s business environment of leaner organizations, reengineering, and continuous improvement efforts, it has become extremely important to evaluate employee work behavior and performance. Performance appraisal is the process by which organizations evaluate individual job performance. It is a periodic, formal evaluation of employee performance. The human resource department uses the information gathered through this process to evaluate the success of recruitment, selection, orientation, placement, training, and other activities. This paper tries to study all the methods of appraisal in different organizational frameworks and then judge their practicality.We will write a custom Managing People. Performance Appraisal Methods specifically for you
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It is important to study the different organizational concepts before studying performance appraisal as the organizational theories will give us a fair idea as to what is the current environment in which the appraisal system needs to be implemented.
Ouchi’s Model: The success of large Japanese corporations in export markets for traditional western products such as cars and electronic goods in the 1970s and 80s took many western organizations by surprise. Studies of Japanese corporations emphasized the importance of effective people management in the competitive strategies of these organizations (Ouchi, 1982). Research showed that Japanese employers performed far better than their western competitors in terms of labor productivity and in process innovation. The key to this success lay in the human resource management practices adopted by Japanese corporations such as Toyota and Matsushita.
Organizational or corporate culture became an important element in understanding the competitive success of firms and was a major theme of management thinking in the early 1980s (Peters and Waterman, 1982). This new genre of western organizations following the Japanese organization model was termed as Theory Z organization (Ouchi 1982). Research shows that firms like IBM, Procter & Gamble, Hewlett-Packard et al. are organizations of the Z type.
Models of Strategic HRM
One of the early models is the one by Fombrun, Tichy and Devanna (Fombrun et. al, 1984). It is a fairly simple model that uses five categories of variables: selection, performance, appraisal, rewards, and human resource development. It is a static model without a social environment or a business strategy, nor is any attention paid to the characteristics of tasks and functions.
A second well-known model is the ‘Harvard model of HRM’ by Beer et al. (1984). In this model, situational factors (among which strategy, laws and societal values, labor market) together with stakeholders’ interests influence HR policies and HR outcomes such as high commitment and high individual performance leading to a cost-effective performance of the organization as a whole.
The third model of HRM by Guest (Guest, 1987, 1997) also takes the perspective that HRM can help to achieve better performance. Guest stresses the integration of HR practices such as selection, training, appraisal, rewards, job design, involvement, status, and security. Guest states that his model performs better in ‘organic’ organizations. This is quite understandable as the model defines performance outcomes in terms of productivity, quality, and innovation that are produced by motivation, cooperation, involvement, and organizational citizenship.Get your
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A fourth model by Hendry and Pettigrew (1990) called the Warwick model is the one most oriented to processes of change. The authors take the position that socio-economic, technical, political, legal, and competitive influences affect culture, structure, politics and leadership, task technology, and business outputs. In the Warwick model, the ‘business strategy content’ directly influences the HR content of HR-flows, work systems, reward systems, and employee relations. However, the model fails to make clear how and in what ways HR instruments like recruitment, selection, appraisal, and rewarding as part of the HR content contribute to strategy formulation and performance.
Performance appraisal systems developed are of two types:
- Past-Oriented Appraisal Methods
- Future-Oriented Appraisal Methods.
Past-Oriented Appraisal Methods
Rating scales: a performance appraisal technique in which supervisors indicate how or to what degree each relevant job characteristic is possessed by a worker. Some companies rate employees on specific job duties and on broader factors. The latter include cooperation, supervisory skills, time management, communication skills, judgment and initiative, and attendance. Ratings are a popular way of evaluating performance for two reasons: they are relatively easy to construct, and they attempt to reduce personal bias.
Critical Incidence Method: this requires the rater to record statements that describe extremely good or bad behavior related to job performance. It is useful for giving employees job-related feedback. Its main drawback is a predominance of rater recency bias.
Behaviorally Anchored Rating Scales (BARS): a performance appraisal technique in which appraisers rate critical employee behaviors. The BARS items can be scored objectively by indicating whether the employee displays that behavior or by selecting on a scale the degree to which the employee displays that behavior. This method has two approaches:
- Behavioral Expectation Scales (BES): use specific named behaviors as benchmarks to help the rater. This method reduces objectivity and some of the biases of other performance appraisal methods.
- Behavioral Observation Scales (BOS): use specific named behaviors as benchmarks and require the rater to report the frequency of these behaviors.
Their advantage in comparison to the other past-oriented approaches is that their development considers specific job-related behaviors, which makes their validity more defensible.
- Results are sufficiently accurate since it is done by a person expert in the particular field.
- It sets clear standards. The critical incidents along the scale help to clarify what is meant by “extremely good performance, average performance, and so forth.
- The use of this method may be useful in giving feedback to the persons being appraised.
- The technique is not biased by the evaluation of the rater.
But their job-specific feature makes them costly and time-consuming, thus making them complex to develop and administer.We will write a custom
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Future-Oriented Appraisal Methods
Self-Appraisal: a performance appraisal technique in which managers assess their own abilities and job performance. This reduces resistance from the employees towards the appraisal process but has several disadvantages. First, they tend to be higher than evaluations by superiors and to show greater leniency. Second, they focus more on interpersonal skills and less on specific job skills. Third, cultural differences in the leniency of self-evaluations have been noted. E.g., in Taiwan, employees were found to rate their own performance less favorably than did their supervisors: “modesty bias.”
Management By Objectives (MBO): Evolved by Peter Drucker (The Practice of Management, 1954), MBO consists of goals that are objectively measurable and mutually agreed on by the employee and the manager.
MBO consists of 2 phases: goal setting and performance review.
- Goal setting: employees meet individually with supervisors to determine the goals for which they will strive in the time before the next appraisal, usually a year, and to discuss ways of reaching those goals. The goals must be realistic, specific, and as objective as possible.
- Performance review: employees and supervisors discuss the extent to which the goals were met. Again, this is a mutual process involving both parties. The performance appraisal is based on job results, not on characteristics such as initiative or general skills.
Advantages: MBO helps and increases employee motivation because it helps to relate an individual’s goals with the organizational goals. Managers are more likely to compete with themselves than with others. Since MBO focuses on providing clear targets to be achieved and the order of priority, it helps to reduce role conflict and ambiguity. MBO forces mangers to plan. Since target setting itself requires planning hence this process aids in planning MBO identifies problems better and early since it helps to identify performance deficiencies and enables the management and the employees to understand the training needs.
Disadvantages: MBO program takes a great deal of time, energy, and form completion on the part of managers. It is very often difficult to apply MBO concepts to work habits. It is hard to think about the results of work rather than the work itself. Subordinates may try to set the lowest possible targets to avoid not meeting them. It lacks support from top management. MBO systems also tend to emphasize the quantifiable aspects of performance while ignoring the more qualitative aspects.
The Assessment Center Method: it was initially applied to military situations by the German Army in the 1930s. The most important feature of this method is job-related simulations or mock situations. These simulations involve characteristics that managers feel are important for job success. The evaluators observe and evaluate participants as they perform activities commonly found in these higher-level jobs. The major limitations are of this system are:
- It is a time-consuming process.
- A relatively expensive process.
- Assessment center ratings are said to be strongly influenced by participant’s interpersonal skills.
MSFS (popularly known as 360-degree feedback): it is best defined as a process comprised of many elements; the most salient of these being the use of multiple evaluation sources, varying along with hierarchical levels (e.g., peers and subordinates) and organizational positions (e.g., customers) (London & Smither, 1995; Dunnette, 1993; Tornow, 1993). MSFS holds a dynamic and multidimensional view of individual performance, one that is presumably best captured by these multiple perspectives (London & Smither, 1995).Not sure if you can write
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Some of the advantages of this process are it may reduce many forms of bias. If all parties are told that their ratings will be compared with those assigned by others, they are likely to be more objective in their assessments.
However, research on MSFS has demonstrated that many challenges are inherent to this process. First, employee acceptance, integration with other processes, and instrument design can be difficult (Brutus & Derayeh, 2002). Second, individual performance yielded relatively weak results (Seifert et al., 2003; Smither et al., 2005). Moreover, it is a costly process.
Practical Applicability of Performance Appraisal Methods
Many of the methods mentioned above are not widely used. This part of the discussion will focus on the methods which are widely being used by corporate. The first is MSFS, which in the United States is estimated that over one-third of organizations are using some form of MSFS (Atwater, Ostroff, Waldman, Robie, & Johnson, 2002), and recent surveys show that this practice is still gaining popularity (Rose & Walsh, 2004, Brutus & Derayeh, 2003)
The second is the MBO method. Research at such organizations as Black and Decker, Wells Fargo, and General Electric has shown that, on the whole, MBO programs can succeed. At Xerox Reprographic business group, objectives are set between the manager and the employee annually. A second-level manager reviews and approves those objectives. They are then subjected to an interim review after six months by the manager and the employee. Adjustments, if any, are made. At the end of the year, a written appraisal evaluates performance against the objectives. The appraisal then serves as a basis for setting the next year’s performance and development activities. This briefcase shows the practicality of the method.
The third is BARS. This process is most popular in the academic field. Campbell and Cairns (1994) argue that BARS is a valuable measurement technique for a learning organization. McIntyre and Gilbert (1994) established that BARS could be successfully used to evaluate student behavior in the case of academic courses. Finally, Rarick and Baxter (1986: 39) conclude that BARS “have the potential to increase both the accuracy of employee appraisal and ultimately the effectiveness of the organization.”
Performance appraisal is a critical activity in HR management. As for the frameworks of strategic HRM, there lies congruency in one theme, i.e., there exists to link and correlations in all the HRM functions. Performance appraisal forms a link with all these functions. For instance, a good performance appraisal will not only evaluate the employee but also identify her training needs, the procedure for selection, employee relations, et al. So, choosing the right appraisal method that suits the culture of the organization is of utmost importance.
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