Chapter 2(1)

LITERATURE REVIEW

2.1 LITERATURE REVIEW

The amount of research regarding the topic “Performance Appraisal” is so vast. The topic is

literally not new; it is as old as the formation of the organizations. Before the early 1980’s,

majority of theoretical studies emphasized on revamping the rating system within the

organization. The actions were a great thing to reduce the chaotic of employee’s performance

appraisal (Feldman, 1981). With the passage of the time the methods and rating system

among the employees got enhanced and received an immense appreciation and attentions of

the managers.

Behavioral Observation Scale (BOS) is one of the best techniques utilized by the managers to

arte the employees. The dilemma was on the peak in the 1960s and 1970s. In the same period

couple of new innovated rating scales were introduced, which was Behaviorally Anchored

Rating Scale (BARS) and the Mixed Standard Scale (MSS). The innovations were dominant

one which condensed the errors and improved the observation skills from the performance

appraisal practice. According to the research of Arvey and Murphy (1998), there were

hundreds of thousands of researches had been taken place between the periods of 1950 to

1980, which merely focused on the different types of rating scales.Landy and Farr (1980)

reviewed and researched the methods of performance appraisal in totally a different manner,

in which they understand the rater and process in an organizational context. Other

Performance appraisal reports include the rater characteristics in their report like race, gender

and likeability.

After the year 1980 the biasness among the performance appraisal system occurred

outrageously and appraisal had been granted on the favoritism or race and gender basis rather

examined the knowledge, skills and style of the work of the employee. The accuracy criteria

among the performance appraisal system clutched its grip in the start of the 1980s, where the

researches were emphasized on common psychometric biases which include the diversified

rating errors like leniency, central tendency and halo, which were termed as rating errors in

the appraisal method. It has been observed that the bias free appraisals were inevitably true or

more precisely we can say more accurate, but the concept was totally refused by the research

of Hulin in 1982. According to them the biasfree appraisals were not necessarily accurate

(Murphy &Balzer, 1989).

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Researches which had been done in the year 1980 were found the most dominating one which

contributed the appraisal system in a great deal. The researches of the1980 also helped out to

clarify some presumed assumptions regarding the performance appraisal, just like the work of

Murphy (1982). Research has included the measure of employee attitudes towards the system

of performance appraisal and its acceptance (Roberts, 1990). Bernardian and Beatty (1984),

suggested in their research that behavioral and attitudinal kinds of measure ultimately prove

to be better anticipator as compared with the traditional psychometric variables, which we

have declared earlier as well, like leniency, halo and discriminability. A Performance

Appraisal system is totally ineffective in practice due to the dearth of approval from the end

users (Roberts, 1990).

According to a number of researchers, the enhanced and upgraded performance appraisal

procedure and method will enhance the satisfaction level of the employees and definitely will

improve the process of goal setting within the organization.

OVERVIEW VIEW OF HUMAN RESOURCE MANAGEMENT

Introduction

Human resource management (HRM) is the strategic and coherent approach to the

management of an organization's most valued assets - the people working there who

individually and collectively contribute to the achievement of the objectives of the business.

The terms "human resource management" and "human resources" (HR) have largely replaced

the term "personnel management" as a description of the processes involved in managing

people in organizations. In simple words, HRM means employing people, developing their

capacities, utilizing, maintaining and compensating their services in tune with the job and

organizational requirement.

Features

Its features include:

Organizational management

Personnel administration

Manpower management

Industrial management

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But these traditional expressions are becoming less common for the theoretical discipline.

Sometimes even employee and industrial relations are confusingly listed as synonyms

although these normally refer to the relationship between management and workers and the

behavior of workers in companies.

The theoretical discipline is based primarily on the assumption that employees are individuals

with varying goals and needs, and as such should not be thought of as basic business

resources, such as trucks and filing cabinets. The field takes a positive view of workers,

assuming that virtually all wish to contribute to the enterprise productively, and that the main

obstacles to their endeavors are lack of knowledge, insufficient training, and failures of

process.

Human Resource Management(HRM) is seen by practitioners in the field as a more

innovative view of workplace management than the traditional approach. Its techniques force

the managers of an enterprise to express their goals with specificity so that they can be

understood and undertaken by the workforce, and to provide the resources needed for them to

successfully accomplish their assignments. As such, HRM techniques, when properly

practiced, are expressive of the goals and operating practices of the enterprise overall. HRM

is also seen by many to have a key role in risk reduction within organisations.[5]

Synonyms such as personnel management are often used in a more restricted sense to

describe activities that are necessary in the recruiting of a workforce, providing its members

with payroll and benefits, and administrating their work-life needs. So if we move to actual

definitions, Torrington and Hall (1987) define personnel management as being:

“a series of activities which: first enable working people and their employing organisations to

agree about the objectives and nature of their working relationship and, secondly, ensures that

the agreement is fulfilled" (p. 49).

While Miller (1987) suggests that HRM relates to:

".......those decisions and actions which concern the management of employees at all levels in

the business and which are related to the implementation of strategies directed towards

creating and sustaining competitive advantage" (p. 352).

Academic theory

The goal of human resource management is to help an organization to meet strategic goals by

attracting, and maintaining employees and also to manage them effectively. The key word

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here perhaps is "fit", i.e. a HRM approach seeks to ensure a fit between the management of

an organisation's employees, and the overall strategic direction of the company (Miller,

1989).

The basic premise of the academic theory of HRM is that humans are not machines, therefore

we need to have an interdisciplinary examination of people in the workplace. Fields such as

psychology, industrial relations, industrial engineering, sociology, economics, and critical

theories: postmodernism, post-structuralism play a major role. Many colleges and universities

offer bachelor and master degrees in Human Resources Management or in Human Resources

and Industrial Relations.

One widely used scheme to describe the role of HRM, developed by Dave Ulrich, defines 4

fields for the HRM function:

Strategic business partner

Change management

Employee champion

Administration

However, many HR functions these days struggle to get beyond the roles of administration

and employee champion, and are seen as reactive rather than strategically proactive partners

for the top management. In addition, HR organisations also have difficulty in proving how

their activities and processes add value to the company. Only in recent years have HR

scholars and professionals focused on developing models that can measure the value added

by HR.

Business practice

Human resources management involves several processes. Together they are supposed to

achieve the above mentioned goal. These processes can be performed in an HR department,

but some tasks can also be outsourced or performed by line-managers or other departments.

When effectively integrated they provide significant economic benefit to the company.

Workforce planning

Recruitment (sometimes separated into attraction and selection)

Induction, Orientation and Onboarding

Skills management

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Training and development

Personnel administration

Compensation in wage or salary

Time management

Travel management (sometimes assigned to accounting rather than HRM)

Payroll (sometimes assigned to accounting rather than HRM)

Employee benefits administration

Personnel cost planning

Performance appraisal

Labor relations

HRM Strategy

An HRM strategy pertains to the means as to how to implement the specific functions of

HRM. An organisation’s HR function may possess recruitment and selection policies,

disciplinary procedures, reward/recognition policies, an HR plan, or learning and

development policies; however all of these functional areas of HRM need to be aligned and

correlated, in order to correspond with the overall business strategy. An HRM strategy thus is

an overall plan, concerning the implementation of specific HRM functional areas.

An HRM strategy typically consists of the following factors:

"Best fit" and "best practice" - meaning that there is correlation between the HRM

strategy and the overall corporate strategy. As HRM as a field seeks to manage human

resources in order to achieve properly organisational goals, an organisation's HRM

strategy seeks to accomplish such management by applying a firm's personnel needs

with the goals/objectives of the organisation. As an example, a firm selling cars could

have a corporate strategy of increasing car sales by 10% over a five year period.

Accordingly, the HRM strategy would seek to facilitate how exactly to manage

personnel in order to achieve the 10% figure. Specific HRM functions, such as

recruitment and selection, reward/recognition, an HR plan, or learning and

development policies, would be tailored to achieve the corporate objectives.

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Close co-operation (at least in theory) between HR and the top/senior management, in

the development of the corporate strategy. Theoretically, a senior HR representative

should be present when an organisation's corporate objectives are devised. This is so,

since it is a firm's personnel who actually construct a good, or provide a service. The

personnel's proper management is vital in the firm being successful, or even existing

as a going concern. Thus, HR can be seen as one of the critical departments within the

functional area of an organization.

Continual monitoring of the strategy, via employee feedback, surveys, etc.

The implementation of an HR strategy is not always required, and may depend on a number

of factors, namely the size of the firm, the organisational culture within the firm or the

industry that the firm operates in and also the people in the firm.

An HRM strategy can be divided, in general, into two facets - the people strategy and the HR

functional strategy. The people strategy pertains to the point listed in the first paragraph,

namely the careful correlation of HRM policies/actions to attain the goals laid down in the

corporate strategy. The HR functional strategy relates to the policies employed within the HR

functional area itself, regarding the management of persons internal to it, to ensure its own

departmental goals are met.

Ethical Issues in Human Resource Management

            A large area of human relations management is concerned with various ethical issues,

both on the part of upper–level management in its business decisions and lower–level

management in the treatment of individual employees. Philosophic decisions on the

relocation of areas of production or entire plants can have a major impact on the company but

also can be devastating to individual employees and the communities in which they live.

Management decisions must be made honestly taking all factors into consideration, including

social responsibility as well as stockholder concerns. On a lower level, supervisors must, if

they are to retain any sprit de corps within their unit of the organization, treat those they

supervise fairly in matters of promotion and compensation.

                     Initially it is appropriate to define the term “ethics” as used in this paper. The

American Heritage Dictionary defines “ethics” as: (1) A set of principles of right conduct. A

theory or a system of moral values. (2) The study of the general nature of morals and of the

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specific moral choices to be made by a person; moral philosophy. (3)The rules or standards

governing the conduct of a person or the members of a profession.

In secular human resource management, generally ethics is treated as being relative, i.e.

whether an action is moral or immoral, or right or wrong depends on the prevailing view of

the particular individual human resource manager. Such view is certainly molded by the

culture. A human resource manager may well consider decisions to be ethical if all

consequences are considered in the light of business needs balanced with consequences to all

concerned, including the employees.

            In making decisions the human resource manager should consider alternative

solutions to the needs of the business as well as the effects the decisions will have on the lives

of the employees. Frequently a human resource manager will be given instructions from

higher level management to take action which will be oppressive to the employees and the

manager must either present argument to higher management for alternate solutions which

will have less impact on the employee morale or determine the best method for implementing

the instructions which have been given.

            Business ought to conform to the best ethical practices, not just for a religious reason

or for principles of human dignity, but also to keep from violating federal laws. Though the

laws may not be known, they would not be violated if the business were operated by ethical

principles. Experience has shown that in the long term business profits will be greater for

businesses that practice good ethical behavior than those which do not.

One of the most challenging aspects of human relations management is to maintain

objectivity in hiring, promotion, and compensation. For example, a male supervisor must

refrain from promoting or increasing the compensation of an attractive woman who pays

undue attention to him, but who consistently is late in arriving for her job and whose work is

second rate.

            It is both reasonable and logical to assume that compensation should track

performance and that ethical considerations would not be a factor in performance analysis.

Sometimes it is difficult for a supervisor, who rationally accepts this premise, to follow it,

and sometimes it is difficult to persuade an employee of its rationality. The supervisor who

either recommends or has the authority to adjust compensation may be persuaded by other

factors to downplay the performance of an employee’s production. Likewise, an employee

who will be negatively impacted by measuring employee output may have a hard time

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understanding why lower production should produce lower income when the hours spent on

the job are the same as others with higher production and higher income.

            Employee evaluation generally will consist of multiple factors including such items as

punctuality, attitude, appropriate apparel, personal grooming (particularly in a position where

clients are involved), language, neatness, congeniality, and performance output, among other

things. The evaluation process will be considerably different between service and production

personnel and between general employees and professional employees. The ethical challenge

arises when, after all the factors have been considered, the decision is made on a factor or

factors other than those by which all the employees have been evaluated.

The attitude of a business towards its employee's acts is a litmus test for its ethical character.

The relationship between the business and its employees is based on the employment

contract. In this chapter we discussed various ethical issues in personnel management

activities like: hiring, remuneration and retrenchment.

An ethical organization follows the principle of ethical selection for hiring prospective

employees.

According to this principle an organization should hire a person who is expected to contribute

the maximum towards enhancing long-term owner value. According to the principle of

ethical selection factors like age, gender, religion and nationality are irrelevant for hiring a

person

An engaged workforce can lead to increased production, innovation and good word f mouth

advertising for the company as an employer.

Creating a Safe and Healthy Workplace

In most jurisdictions there are minimum standards which must be met in relation to employee

health and safety. It is also possible to go further than the bare minimum and create a

workplace health promotion program. Implementing a workplace health promotion program

is also an opportunity to improve employee engagement and value human capital. Employees

can nominate or be selected to participate in the design and implementation of the project and

be the project’s champion in the workplace.

From a corporate social responsibility perspective, the implementation of a workplace health

promotion program can be seen as the company playing its part in addressing important

societal problems such as obesity and environmental pollution.

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Skills Development

Another method of employee engagement is to implement a skills development program for

all employees. Skills development programs can include both internal and external training

opportunities, mentoring programs and corporate volunteering programs.

Ethical Human Resource Management - The Corporate Social Responsiblity Benefits

The benefits for business of adopting ethical human resource management practices and

viewing employees as human capital to be developed and to provide a unique advantage in

the marketplace can be utilised as part of a corporate social responsibility strategy. Effective

corporate social responsibility requires that along with minimising harm to the environment,

a company needs to be aware of the social impacts of its operations and ensure that they are

not harming human stakeholders.

Engaged employees are motivated employees who may provide an opportunity for increased

production output or innovative production methods, are less likely to leave the company

voluntarily and may spread word of mouth advertising about how good the company is to

work for. Employee engagement surveys provide an opportunity to discover employee

thoughts about the company, which if positive, can be expressed to external stakeholders

through a corporate social responsibility report.

The history of performance appraisal is quite brief.

Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion

studies. 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 judgments 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 judgments made will be lawful, fair, defensible and accurate.

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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.

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

1950s 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.

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2.2 ABOUT THE TOPIC

PERFORMANCE APPRAISAL

DIFFERENT SCHOOLS OF THOUGHT

There are many respected sources - researchers, management commentators,

psychometricians - who have expressed doubts about the validity and reliability of the

performance appraisal. Some have even suggested that the process is so inherently flawed

that it may be impossible to perfect it (Derven, 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 use the use of

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.

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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.

OBJECTIVES OF THE PERFORMANCE APPRAISAL PROCESS

Clearly define job expectations

Improve communication between employee and supervisor

Align employee goals with the overall goals of the organization ,division and

department

Link performance with rewards such as compensation increases, promotions,

recognition, assignments, professional development opportunities, and career

advances

Identify employee training and professional development needs

Establish clear-cut intervention strategies when performance does not meet identified

job requirements

Process is aligned with the organization’s Core Values:

Respect for one another

Cooperation

Intellectual and spiritual growth

Creative imaginings

Pride in a job well done

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PERFORMANCEAPPRAISAL BASIC PURPOSES

Performance appraisal systems may assume many different styles and types. Effective

appraisal systems contain two basic systems operating in conjunction: an evaluation system

and a feedback system.

The main aim of the evaluation system is to identify the performance gap (if any). This

gap is the shortfall that occurs when performance does not meet the standard set by the

organization as acceptable.

The main aim of the feedback system is to inform the employee about the quality of his or

her performance. (However, the information flow is not exclusively one way. The

appraisers also receive feedback from the employee about job problems, etc.)

One of the best ways to look at the purposes of performance appraisal is to look at it from

the different viewpoints of the main stakeholders: the employee and the organization.

EMPLOYEE VIEWPOINT

From the employee viewpoint, the purpose of performance appraisal is four-fold:

(1) Tell me what you want me to do

(2) Tell me how well I have done it

(3) Help me improve my performance

(4) Reward me for doing well.

ORGANIZATIONAL VIEWPOINT

From the organization's viewpoint, one of the most important reasons for having a system of

performance appraisal is to establish and uphold the principle of accountability.

For decades it has been known to researchers that one the leading causes of organizational

failure is "non-alignment of responsibility and accountability."

Responsibilities and duties are performed. What typically happens is that several

individuals or work units appear to have overlapping roles.

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The overlap allows - indeed actively encourages - each individual or business unit to

"pass the buck" to the others. Ultimately, in the severely non-aligned system, no one is

accountable for anything. In this event, the principle of accountability breaks down

completely. Organizational failure is the only possible outcome.

In cases where the non-alignment is not so severe, the organization may continue to

function, albeit inefficiently. Like an engine that is poorly made or badly tuned, the non-

aligned organization may run but it will be sluggish, costly and unreliable.

BENEFITS OF APPRAISAL

Perhaps the most significant benefit of appraisal is that, in the rush and bustle of daily

working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a

one-on-one discussion of important work issues that might not otherwise be addressed.

Almost universally, where performance appraisal is conducted properly, both supervisors and

subordinates have reported the experience as beneficial and positive.

Appraisal offers a valuable opportunity to focus on work activities and goals, to identify

and correct existing problems, and to encourage better future performance. Thus the

performance of the whole organization is enhanced.

For many employees, an "official" appraisal interview may be the only time they get to

have exclusive, uninterrupted access to their supervisor. Said one employee of a large

organization after his first formal performance appraisal, "In twenty years of work, that's

the first time anyone has ever bothered to sit down and tell me how I'm doing."

The value of this intense and purposeful interaction between a supervisors and

subordinate should not be underestimated.

MOTIVATION AND SATISFACTION

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Performance appraisal provides employees with recognition for their work efforts. The power

of social recognition as an incentive has been long noted. In fact, there is evidence that

human beings will even prefer negative recognition in preference to no recognition at all.

If nothing else, the existence of an appraisal program indicates to an employee that the

organization is genuinely interested in their individual performance and development. This

alone can have a positive influence on the individual's sense of worth, commitment and

belonging.

The strength and prevalence of this natural human desire for individual recognition

should not be overlooked. Absenteeism and turnover rates in some organizations might be

greatly reduced if more attention were paid to it. Regular performance appraisal, at least,

is a good start.

TRAINING AND DEVELOPMENT

Performance appraisal offers an excellent opportunity - perhaps the best that will ever

occur - for a supervisor and subordinate to recognize and agree upon individual training

and development needs.

During the discussion of an employee's work performance, the presence or absence of

work skills can become very obvious - even to those who habitually reject the idea of

training for them!

Performance appraisal can make the need for training more pressing and relevant by

linking it clearly to performance outcomes and future career aspirations.

RECRUITMENT AND INDUCTION

Appraisal data can be used to monitor the success of the organization's recruitment and

induction practices. For example, how well are the employees performing who were hired

in the past two years?

Appraisal data can also be used to monitor the effectiveness of changes in recruitment

strategies. By following the yearly data related to new hires (and given sufficient numbers

on which to base the analysis) it is possible to assess whether the general quality of the

workforce is improving, staying steady, or declining.

EMPLOYEE EVALUATION

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Though often understated or even denied, evaluation is a legitimate and major objective

of performance appraisal.

But the need to evaluate (i.e., to judge) is also an ongoing source of tension, since

evaluative and developmental priorities appear to frequently clash. Yet at its most basic

level, performance appraisal is the process of examining and evaluating the performance

of an individual.

Though organizations have a clear right - some would say a duty - to conduct such

evaluations of performance, many still recoil from the idea. To them, the explicit process

of judgment can be dehumanizing and demoralizing and a source of anxiety and distress

to employees.

It is been said by some that appraisal cannot serve the needs of evaluation and

development at the same time; it must be one or the other.

But there may be an acceptable middle ground, where the need to evaluate employees

objectively, and the need to encourage and develop them, can be balanced.

CONFLICT AND CONFRONTATION

Invariably the needs arise during a performance appraisal to provide an employee with

less than flattering feedback.

The skill and sensitivity used to handle these often difficult sessions is critical. If the

appraise accepts the negative feedback and resolves to improve, all is well. But if the

result is an angry or hurt employee, then the process of correction has failed. The

performance of an employee in such cases is unlikely to improve and may deteriorate

even further.

SELF-AUDITING

According to Krein (1990), appraisers should not confront employees directly with

criticism. Rather, they should aim to let the evidence of poor performance emerge

"naturally" during the course of the appraisal interview.

This is done by way of open-ended questioning techniques that encourage the employee

to identify their own performance problems.

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Instead of blunt statements or accusations, the appraisers should encourage an employee

to talk freely about their own impressions of their performance. For example, consider the

case of employee who has had too many absent days. The appraiser, in accusatory mode,

might say:

Your attendance record is unacceptable. You'll have to improve it.

A better way to handle this might be to say:

Your attendance record shows that you had 7 days off work in 6 months. What can you

tell me about this?

The technique is to calmly present the evidence (resisting the temptation to label it as

good or bad) and then invite the employee to comment. In many cases, with just a gentle

nudge from the appraiser here and there, an employee with problems will admit that

weaknesses do exist.

This is much more likely when an employee does not feel accused of anything, nor forced

to make admissions that they do not wish to make.

If an appraiser can get an employee to the stage of voluntary admission, half the battle is

won. The technique described by Krein is a type of self-auditing,

since it encourages the employee to confront themselves with their own work and

performance issues.

The technique is useful because it is more likely to promote discussion and agreement on

the need for change. Confrontation techniques that rely on "charge and counter-charge"

tend to promote adversarialism - and that leads to denial and resentment.

OWNERSHIP OF PROBLEMS

Perhaps the most powerful aspect of the self- auditing process is that employees are more

willing generally to accept personal "ownership" of problems that have been self-

identified. This sense of ownership provides an effective basis for stimulating change and

development. (Some would argue that it provides the only basis.)

Nevertheless there are individuals who will not admit to anything that appears to reflect

poorly on them. With ego defenses on full-alert, they will resist the process of self-

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auditing very strongly. In such cases, appraisers may have no choice but to confront the

poor performer directly and firmly with the evidence they have.

Sometimes the shock of direct confrontation will result in the employee admitting that

they do need to make improvements. But sometimes it will just make their denial of the

problem worse.

In providing any feedback - especially negative feedback - appraisers should be willing

and able to support their opinions with specific and clear examples. Vague

generalizations should be avoided.

The focus should be on job-related behaviors and attitudes. If a specific observation

cannot be supported by clear evidence, or touches on issues that are not job-related, it

may be best to exclude all mention of it.

Appraisers must carefully scrutinize their own perceptions, motives and prejudices.

TIPS FOR EFFECTIVE APPRAISAL SYSTEM

ENCOURAGE DISCUSSION

Research studies show that employees are likely to feel more satisfied with their appraisal

result if they have the chance to talk freely and discuss their performance. It is also more

likely that such employees will be better able to meet future performance goals. (e.g.,

Nemeroff&Wexley, 1979).

Employees are also more likely to feel that the appraisal process is fair if they are given a

chance to talk about their performance. This especially so when they are permitted to

challenge and appeal against their evaluation. (Greenberg, 1986).

CONSTRUCTIVE INTENTION

It is very important that employees recognize that negative appraisal feedback is provided

with a constructive intention, i.e., to help them overcome present difficulties and to

improve their future performance. Employees will be less anxious about criticism, and

more likely to find it useful, when the believe that the appraiser's intentions are helpful

and constructive

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In contrast, other studies have reported that "destructive criticism" - which is vague, ill-

informed, unfair or harshly presented - will lead to problems such as anger, resentment,

tension and workplace conflict, as well as increased resistance to improvement, denial of

problems, and poorer performance.

SET PERFORMANCE GOALS

It has been shown in numerous studies that goal-setting is an important element in

employee motivation. Goals can stimulate employee effort, focus attention, increase

persistence, and encourage employees to find new and better ways to work.

The useful of goals as a stimulus to human motivation is one of the best supported

theories in management. It is also quite clear that goals which are "...specific, difficult and

accepted by employees will lead to higher levels of performance than easy, vague goals

(such as do your best) or no goals at all."

APPRAISER CREDIBILITY

It is important that the appraiser (usually the employee's supervisor) be well-informed and

credible. Appraisers should feel comfortable with the techniques of appraisal, and should be

knowledgeable about the employee's job and performance.

When these conditions exist, employees are more likely to view the appraisal process as

accurate and fair. They also express more acceptance of the appraiser's feedback and a greater

willingness to change.

APPRAISAL METHODS

In a landmark study, Locher& Teel (1977) found that the three most common appraisal

methods in general use are rating scales (56%), essay methods (25%) and results- oriented or

MBO methods (13%).

Certain techniques in performance appraisal have been thoroughly investigated, and some

have been found to yield better results than others.

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RATING SCALES

The rating scale method offers a high degree of structure for appraisals. Each employee trait

or characteristic is rated on a bipolar scale that usually has several points ranging from "poor"

to "excellent" (or some similar arrangement).

The traits assessed on these scales include employee attributes such as cooperation,

communications ability, initiative, punctuality and technical (work skills) competence.

The nature and scope of the traits selected for inclusion is limited only by the imagination

of the scale's designer, or by the organization's need to know.

The one major provision in selecting traits is that they should be in some way relevant to

the appraisee's job. The traits selected by some organizations have been unwise and have

resulted in legal action on the grounds of discrimination.

The effects of rating scale formats on several indices of the usefulness of performance

appraisal for employee development were examined. The job performance of 96 police

officers was rated using simple graphic scales or one of two behaviorally oriented rating

formats: behaviorally anchored rating scales (BARS) and behavior observation scales

(BOS). As predicted, ratees' satisfaction with performance appraisal was highest and their

perceptions of performance goals most favorable when using BOS. In addition,

performance improvement goals for officers rated using BOS were judged by experts to

be most observable and specific. Contrary to the authors' predictions, graphic rating

scales were generally as good as BOS and as good as or better than BARS when

evaluated in terms of ratee attitudes and goal characteristics. The results suggest that

different behaviorally-oriented rating formats can enhance or inhibit the developmental

applications of performance appraisal.

Researchers and experts in performance appraisal have suggested two broad uses of

appraisal in organizations First, it serves administrative purposes in areas such as reward

allocation (salary increases, bonuses) and assignment decisions (promotions; transfers,

demotions). Second, it contributes to employee development in that it makes possible the

identification of their strengths and weaknesses, provides performance feedback, and

facilitates exchanges with supervisors.

A wide range of rating scale formats have been used in performance appraisal , and there

is substantial literature dealing with the psychometric characteristics of rating scales On

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the whole, differences in rating scale formats seem to have little impact on the reliability

or validity of performance ratings.

However, it is possible that differences in rating scale formats could influence other

important dependent variables. In particular, different methods of obtaining and recording

information about job performance may be more or less conducive to the developmental

uses of performance appraisal. The purpose of this article is to examine the effects of

rating scale formats on several variables that are important when using performance

appraisal as a developmental tool, in particular ratee satisfaction with appraisal and the

characteristics of goals that are developed in response to performance appraisal and

feedback. Ratee satisfaction can be assessed with performance appraisal and the

characteristics of goals developed following performance appraisals using one of three

rating scale formats:

(a) behavioral observation scales (BOS), which ask raters to report the frequency of

specific job-related behaviors;

(b) behavioral anchored rating scales (BARS), which use behavioral statements to

illustrate rating levels; and

(c) Graphic rating scales (GRS)> which ask raters to provide general evaluations of

ratees' performance in specific areas.

These formats differ in terms of the extent to which they use specific behavioral

information in evaluating performance (BOS and BARS contain more behavioral

information than GRS) and in the way behavioral information is used (BOS ask raters to

describe specific behaviors that have occurred, whereas BARS use behaviors as examples

to illustrate rating dimensions and scales).

It is possible that these differences will affect ratee reactions to appraisal as well as

affecting the characteristics of goals and plans that are formed in response to performance

appraisal and feedback. In particular, formats that maximize their reliance on specific

behavioral examples of the ratee's performance (i.e., BOS) may be more acceptable to

ratees and more conducive to developing specific and clear plans for improving

performance than rating scale formats that minimize the use of behavioral information

(GRS) or that use behaviors solely as illustrations for rating scale anchors (BARS).

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Satisfaction with appraisal. Ratee satisfaction of an appraisal method is a crucial element

in performance appraisal ; the effectiveness of appraisal and feedback depends

substantially on the extent to which ratees accept the appraisal system

There is evidence that the use of scale formats that focus on specific behaviors (e.g.,

BOS) can increase both raters' and ratees' comfort with and acceptance of performance

appraisal and feedback

Rating scale formats that are strongly behavior-based appear less subjective and allow

raters and ratees to focus on specific behaviors rather than on the rater's subjective

evaluation of those behaviors

The research cited above suggests that performance appraisal and feedback is most likely

to be accepted by ratees when it is phrased in terms of specific behaviors carried out by

the ratee rather than in terms of the supervisor's evaluation of behavior. This suggests that

ratees will be more likely to accept appraisal systems based on BOS than those based on

GRS; appraisal systems based on BARS may be seen as less subjective than those that

employ GRS (because they include behavioral exemplars), but more subjective than those

that employ BOS (because the behaviors in BARS are for illustrative purposes only).

A distinction is often made between satisfaction with processes and satisfaction with the

outcomes of those processes Applying this distinction here, there is some utility in

distinguishing between ratees' satisfaction with how performance appraisal is done versus

their satisfaction with the actual ratings they receive. This process-outcome distinction is

not always observed in the literature on reactions to different scale formats, but it is

consistent with theories of justice in organizations to argue that ratees' perceptions of the

acceptability of the process involved in evaluating their performance will be an important

determinant of the effectiveness of feedback and development exercises based on

performance appraisal .

Goal characteristics. In this study, performance appraisals were used by raters and ratees

to help set goals for improving future performance. Because they differ in both the extent

to which they focus on specific behaviors and the amount of information they potentially

provide about actual behaviors, it seems likely that the use of different rating scale

formats will affect the performance goals set by raters and ratees.

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ADVANTAGES

The greatest advantage of rating scales is that they are structured and standardized. This

allows ratings to be easily compared and contrasted - even for entire workforces. Each

employee is subjected to the same basic appraisal process and rating criteria, with the

same range of responses. This encourages equality in treatment for all appraises and

imposes standard measures of performance across all parts of the organization.

Rating scale methods are easy to use and understand. The concept of the rating scale

makes obvious sense; both appraisers and appraises have an intuitive appreciation for the

simple and efficient logic of the bipolar scale. The result is widespread acceptance and

popularity for this approach.

DISADVANTAGES

Trait Relevance:

Are the selected rating-scale traits clearly relevant to the jobs of all the appraises? It is

inevitable that with a standardized and fixed system of appraisal that certain traits will

have a greater relevance in some jobs than in others.

For example, the trait "initiative" might not be very important in a job that is tightly

defined and rigidly structured. In such cases, a low appraisal rating for initiative may not

mean that an employee lacks initiative. Rather, it may reflect that fact that an employee

has few opportunities to use and display that particular trait. The relevance of rating

scales is therefore said to be context-sensitive. Job and workplace circumstances must be

taken into account.

SYSTEMIC DISADVANTAGE

Rating scales, and the traits they purport to measure, generally attempt to encapsulate all

the relevant indicators of employee performance. There is an assumption that all the true

and best indicators of performance are included, and all false and irrelevant indicators are

excluded.

This is an assumption very difficult to prove in practice. It is possible that an employee's

performance may depend on factors that have not been included in the selected traits.

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Such employees may end up with ratings that do not truly or fairly reflect their effort or

value to the organization. Employees in this class are systemically disadvantaged by the

rating scale method.

ESSAY METHOD

In the essay method approach, the appraiser prepares a written statement about the employee

being appraised.

The statement usually concentrates on describing specific strengths and weaknesses in job

performance. It also suggests courses of action to remedy the identified problem areas.

The statement may be written and edited by the appraiser alone, or it be composed in

collaboration with the appraisee.

ADVANTAGES

The essay method is far less structured and confining than the rating scale method. It permits

the appraiser to examine almost any relevant issue or attribute of performance. This contrasts

sharply with methods where the appraisal criteria are rigidly defined.

Appraisers may place whatever degree of emphasis on issues or attributes that they feel

appropriate. Thus the process is open-ended and very flexible. The appraiser is not locked

into an appraisal system the limits expression or assumes that employee traits can be

neatly dissected and scaled.

DISADVANTAGES

Essay methods are time-consuming and difficult to administer. Appraisers often find the

essay technique more demanding than methods such as rating scales.

The techniques greatest advantage - freedom of expression - is also its greatest handicap.

The varying writing skills of appraisers can upset and distort the whole process. The

process is subjective and, in consequence, it is difficult to compare and contrast the

results of individuals or to draw any broad conclusions about organizational needs.

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RESULTS METHOD

(MBO METHOD)

The use of management objectives was first widely advocated in the 1950s by the noted

management theorist Peter Drucker.

MBO (management by objectives) methods of performance appraisal are results-oriented.

That is, they seek to measure employee performance by examining the extent to which

predetermined work objectives have been met.

Usually the objectives are established jointly by the supervisor and subordinate. An

example of an objective for a sales manager might be: Increase the gross monthly sales

volume to $250,000 by 30 June.

Once an objective is agreed, the employee is usually expected to self-audit; that is, to

identify the skills needed to achieve the objective. Typically they do not rely on others to

locate and specify their strengths and weaknesses. They are expected to monitor their own

development and progress.

GOAL SETTING PROCESS

CHARACTERISTICS OF GOOD GOALS:

S = Specific

M = Measurable

A = Attainable

R = Relevant

T = Timely

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PROCESS FOR SETTING GOALS:

1. Identify areas for goal setting. These might include:

Personal development

Process improvements

Teambuilding

Activities/projects to help department/university achieve its goals

Activities/projects that focus on providing better service

2. Write a goal statement, focusing on observable, measurable performance (e.g. "deliver,

develop, produce, increase, or improve"). Include a time frame for completion.

3. Determine measures of success. Determine how you will know if the goal has been

achieved.

4. Develop a specific action plan to include what needs to be done, who is responsible, and

when each step will be completed.

5. Identify resources needed to accomplish the goal and how they will be obtained.

GUIDELINES:

1. Identify 3-5 major goals for each employee.

2. Goals may apply to more than one performance area on the form.

3. Some performance areas may not have a specific goal identified.

ADVANTAGES

The MBO approach overcomes some of the problems that arise as a result of assuming that

the employee traits needed for job success can be reliably identified and measured. Instead of

assuming traits, the MBO method concentrates on actual outcomes. If the employee meets or

exceeds the set objectives, then he or she has demonstrated an acceptable level of job

performance. Employees are judged according to real outcomes, and not on their potential for

success, or on someone's subjective opinion of their abilities.

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The guiding principle of the MBO approach is that direct results can be observed,

whereas the traits and attributes of employees (which may or may not contribute to

performance) must be guessed at or inferred.

The MBO method recognizes the fact that it is difficult to neatly dissect all the complex

and varied elements that go to make up employee performance.

MBO advocates claim that the performance of employees cannot be broken up into so

many constituent parts - as one might take apart an engine to study it. But put all the parts

together and the performance may be directly observed and measured.

DISADVANTAGES

MBO methods of performance appraisal can give employees a satisfying sense of

autonomy and achievement. But on the downside, they can lead to unrealistic

expectations about what can and cannot be reasonably accomplished.

Supervisors and subordinates must have very good "reality checking" skills to use MBO

appraisal methods. They will need these skills during the initial stage of objective setting,

and for the purposes of self-auditing and self-monitoring.

Unfortunately, research studies have shown repeatedly that human beings tend to lack the

skills needed to do their own "reality checking". Nor are these skills easily conveyed by

training. Reality itself is an intensely personal experience, prone to all forms of perceptual

bias.

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COMMON MISTAKES

Where performance appraisal fails to work as well as it should, lack of support from the top

levels of management is often cited as a major contributing reason.

Opposition may be based on political motives, or more simply, on ignorance or disbelief

in the effectiveness of the appraisal process.

It is crucial that top management believe in the value of appraisal and express their visible

commitment to it. Top managers are powerful role models for other managers and

employees.

Those attempting to introduce performance appraisal, or even to reform an existing

system, must be acutely aware of the importance of political issues and symbolism in the

success of such projects.

FEAR OF FAILURE

There is a stubborn suspicion among many appraisers that a poor appraisal result tends to

reflect badly upon them also, since they are usually the employee's supervisor. Many

appraisers have a vested interest in making their subordinates "look good" on paper.

When this problem exists (and it can be found in many organizations), it may point to a

problem in the organization culture. The cause may be a culture that is intolerant of

failure. In other words, appraisers may fear the possibility of repercussions - both for

themselves and the appraisee. Longenecker (1989) argues that accuracy in performance

appraisal is impossible to achieve, since people play social and political games, and they

protect their own interests. "No savvy manager...", says Longenecker, "... is going to use

the appraisal process to shoot himself or herself in the foot."

No matter what safeguards are in place, "... when you turn managers loose in the real

world, they consciously fudge the numbers." What Longenecker is saying is that

appraisers will, for all sorts of reasons, deliberately distort the evaluations that they give

to employees.

Indeed, surveys have shown that not only do many managers admit to a little fudging,

they actually defend it as a tactic necessary for effective management.

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The fudging motives of appraisers have, at times, a certain plausibility. For instance, a

supervisor who has given an overly generous appraisal to a marginal performer might

claim that their 'legitimate' motive was the hope of encouraging a better performance.

On the other hand, fudging motives can be a lot less admirable and sometimes devious:

the appraiser who fudges to avoid the possibility of an unpleasant confrontation, the

appraiser who fudges to hide employee difficulties from senior managers, the appraiser

who fudges in order to punish or reward employees.

JUDGMENT AVERSION

Many people have a natural reluctance to "play judge" and create a permanent record which

may affect an employee's future career. This is the case especially where there may be a need

to make negative appraisal remarks.

Training in the techniques of constructive evaluation (such as self-auditing) may help.

Appraisers need to recognize that problems left unchecked could ultimately cause more

harm to an employee's career than early detection and correction.

Organizations might consider the confidential archiving of appraisal records more than,

say, three years old.

PERIOD:

A fundamental component of successful evaluation is regular communication between the

supervisor and the employee. Building work relationships is essential to achieving desired

results. Regular two-way communication between the employee and supervisor helps build

this relationship.

Brief discussions should take place whenever appropriate. Formal sessions should be

scheduled at least once during the evaluation period, and preferably quarterly, to discuss

what is going well and what can be improved. Use these sessions to describe rather than

evaluate performance. Inquire about any changes in the work situation since the previous

discussion. Determine if there are any obstacles blocking success. Acknowledge

accomplishments during this period. Discuss new priorities in the department so the

employee can re-focus efforts, if appropriate. Modify plans in response to changes.

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It is important for both parties (supervisor and employee) to maintain open

communication in order to keep each other informed of work progress and work together

to resolve problems when they occur. It is far better to resolve problems when they are

small, before they become "disasters."

A key principle that encourages employees to accept constructive criticism is to be "hard

on the problem, and soft on the person." The focus should be on correcting the problem or

behavior, not on punishing the employee. The performance evaluation is an assessment of

performance and should not be punitive. The performance evaluation should not be the

place where the employee first hears about disciplinary action.

A useful motto for the performance appraisal should be "no surprises." Through this

approach, you can reduce the likelihood of the employee becoming emotional during the

review.

Strive to provide continual feedback concerning expectations and performance. When

things are going well discuss how and why this is so. When things are not going well

discuss what needs to be done to make them right. When an employee is not doing things

properly, get together and plan what needs to be done to correct the matter. If there is a

performance gap, help the employee understand the cause and the action necessary for

correction. Support plans for professional development.

By providing feedback on a continual and timely basis throughout the evaluation period,

the supervisor establishes the groundwork for indicating that there is a performance

problem.

APPRAISER PREPARATION

The bane of any performance appraisal system is the appraiser who wants to "play it by

ear". Such attitudes should be actively discouraged by stressing the importance and

technical challenge of good performance appraisal. Perhaps drawing their attention to the

contents of this web site, for example, may help them to see the critical issues that must

be considered.

EMPLOYEE PARTICIPATION

Employees should participate with their supervisors in the creation of their own performance

goals and development plans. Mutual agreement is a key to success. A plan wherein the

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employee feels some degree of ownership is more likely to be accepted than one that is

imposed. This does not mean that employees do not desire guidance from their supervisor;

indeed they very much do.

PERFORMANCE MANAGEMENT

One of the most common mistakes in the practice of performance appraisal is to perceive

appraisal as an isolated event rather than an ongoing process. Employees generally

require more feedback, and more frequently, than can be provided in an annual appraisal.

While it may not be necessary to conduct full appraisal sessions more than once or twice

a year, performance management should be viewed as an ongoing process. Frequent mini-

appraisals and feedback sessions will help ensure that employees receive the ongoing

guidance, support and encouragement they need. Of course many supervisors complain

they don't have the time to provide this sort of ongoing feedback. This is hardly likely.

What supervisors really mean when they say this is that the supervision and development

of subordinates is not as high a priority as certain other tasks.

In this case, the organization may need to review the priorities and values that it has

instilled in its supervisory ranks. After all, supervisors who haven't got time to monitor

and facilitate the performance of their subordinates are like chefs who haven't got time to

cook, or dentists who are too busy to look at teeth. It just doesn't make sense. If appraisal

is viewed as an isolated event, it is only natural that supervisors will come to view their

responsibilities in the same way. Just as worrying, employees may come to see their own

effort and commitment levels as something that needs a bit of a polish up in the month or

two preceding appraisals.

BIAS EFFECTS

Gabris& Mitchell have reported a disruptive bias in performance appraisal known as the

Matthew Effect.

It is named after the Matthew of biblical fame who wrote, "To him who has shall be

given, and he shall have abundance: but from him who does not have, even that which he

has shall be taken away."

In performance appraisal the Matthew Effect is said to occur where employees tend to

keep receiving the same appraisal results, year in and year out. That is, their appraisal

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results tend to become self-fulfilling: if they have done well, they will continue to do

well; if they have done poorly, they will continue to do poorly.

The Matthew Effect suggests that no matter how hard an employee strives, their past

appraisal records will prejudice their future attempts to improve.

There is other research to support the theory that poor performers might not be given a

fair chance to improve. A study of supervisors in nearly 40 different organizations found

that subordinates tend to be divided into two groups: in-groupers and out-groupers.

This study, by Heneman, Greenberger &Anonyou (1989) reported that ingroupers are

subordinates who seem to be favored by their supervisors. In their relationship with the

boss, they enjoy "a high degree of trust, interaction, support and rewards."

ERRORS IN A PERFORMANCE APPRAISAL SYSTEM

This type of error occurs when the rater allows one aspect of a man’s character or

performance to influence his entire evaluation. It is the tendency of many raters to let the

rating they assign to one characteristic excessively influence their ratings on all

subsequent characteristics. Many supervisors tend to give an employee approximately the

same rating on all factors.

CENTRAL TENDENCY

This error occurs when the rater is in doubt about the subordinates or has inadequate

information about them or is giving less attention and effort to the rating process.

LENIENCY OR STRICTNESS

Some supervisor has a tendency to be easy raters and others have a tendency to be harsh

in their ratings. Lenient or easy raters assign consistency high values or scores to their

subordinates and strict or harsh raters give consistently low ratings

STEREOTYPING

It is a mental picture that an individual holds about a person because of that person’s sex

age, religion caste etc. by generalizing behavior on the basis of such blurred images, the

rater grossly

RECENCY EFFECT

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In this case the rater gives greater weight age to recent occurrence than earlier

performance. For example, an excellent performance that may be six or seven months old

is conveniently forgotten while giving a poor rating to an employee’s performance which

is not so good in recent weeks.

HORN EFFECT

The rater’s bias is in the other direction, where one negative quality of the employee is

being rated harshly. For example, the ratee does not smile normally, so he cannot get along

with people.

FIRST IMPRESSIONS (PRIMACY EFFECT)

The appraiser’s first impressions of a candidate may color his evaluation of all

subsequent behaviors. In the case of negative primacy effect, the employee may seem to

do nothing right; in the case of a positive primacy effect, the employee can do no wrong.

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