Employee Performance Appraisal Best Practices Management Essay

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Introduction

The Software development industry is a vital part of the economy

worldwide even during economic insecurities. As a result of the ever

increasing globalization of markets and the need for improved efficiency,

organizations are investing on software that allows them to do business

in competitive markets. This has lead to the growth in the software

development industry.

The growth in this industry has lead many companies to shift to countries

with a low cost of development. Today the development of new software

is outsourced while the management is situated in western countries.

This has lead to more efficient cost-control over the process.

hSenid Business Solutions is a software development company

specializing in Total Human Resource & Payroll Management Solutions,

Time & Attendance Solutions, Outsourcing, Gold Trading Solutions,

Community Development Management Solutions, Customized Software

Developments and ASP Solutions.

The Company was established in 1997 by Mr. Dinesh Saparamadu with

few engineers. Today hSenid is a software development company with

offices in United States, Singapore, India and R&D centers in Sri Lanka

& Malaysia. The Company has made a significant impact on the IT

industry both, locally and globally with its unique and innovative range of

products.

As mentioned above the Business Solutions division of hSenid is

specialized and globally recognized in building comprehensive HR

applications that assist HR professionals to effectively manage their

human resource and implement HR best practices. These solutions have

been specially designed to meet employee needs swiftly and consistently,

aligning manpower and skills with organizational goals and mission.

The capturing, maintaining and updating of employee related information

stands at the very core of any HR or personnel management work. It is

an elementary stepping stone to all other tasks. Hence a core HR module

is required to build and maintain a database which would serve as a

centralized location for other modules to access information.

The Employee Master Information module has been designed for this

purpose. It includes a comprehensive set of tools, capable of capturing a

wide variety of relevant employee data, maintaining them with a high

level of security, displaying the details in a very logical manner and

providing the necessary information to all other parts of the HRM

solution. In addition modules such as Time and Attendance, Leave

Management, Payroll, Benefits Administration have been designed to

manage various HR functions.

The success of hSenid however lies in their creativity and innovation.

Abiding by their mission to innovate hSenid has introduced the Software

As A service (SaaS) delivery model. As the world is gradually moving

towards the concept of cloud computing, SaaS has offered a platform

upon which Small and Medium Sized Businesses could reap the benefits

of low-cost software solutions. The new model bears minimum

investment unlike the alternative option of purchasing the software

upfront. Hence businesses adapting to the new model would benefit from

the cost savings in administration costs, standardization, increased speed

and quality of work.

hSenid aims to grab the attention of businesses towards the modern

trend of the industry by providing their software solutions across a

common platform. The SaaS model has paved the way in this regard.

However the Human Resource functions of each organization is not

standardized. One such HR function which varies based on the industry

is Performance Evaluation of Employees. Organizations adopt various

methodologies to measure the performance of its employees. Thus if the

HRM solution is to be deployed as a Service, Standardization is of

significant importance since it is intended to cater the requirements of all

potential clients.

It is evident that all organizations are on the look out to retain motivated

and skilled employees. Employee retention is considered as an integral

aspect of HRM. As mentioned above due to the diversity of requirements

among most organizations developing a Performance Appraisals module

is considered as a challenging task. Hence the development of an

appraisal model that could be implemented across a common platform

laid the foundation for the research.

The research was focused on proposing an evaluation model which could

be deployed across a common platform. It was understood that the

standard model should satisfy the requirements of most organizations

and possibly exceed majority of the requirements. Various employee

performance evaluation methodologies were evaluated to gather

information on the best possible solution. The drawbacks and the

advantages of each of these models were considered in developing the

suggested approach. Furthermore it was imperative that the proposed

approach could be implemented as a software solution. The research also

involved a thorough study on aspects which have an impact on

performance appraisals. A study was carried out to identify best

practices that should be followed in order to execute a sound appraisal.

The report highlights the approach and the methodology used to develop

a Standard Framework, which would address the above mentioned issue.

A survey was conducted to gather information on various Performance

Evaluation practices. Banking and Telecommunication industries were

considered for research purposes. It is recommended that hSenid

develops an Employee Compliance tracking module to further enhance

the process of performance evaluation. Furthermore the research team

recommends a list of best practices that could be adopted in the

appraisal process.

2. Review of Related Literature

From an organizational perspective performance is usually defined as the

extent to which an employee contributes to achieving the goals of the

organization. Performance appraisal is broadly defined as the process of

identifying, evaluating, and developing the work performance of the

employee in the organization. Appraisals are aligned with organizational

goals and objectives whilst benefiting employees in terms of recognition,

receiving feedback, and offering career guidance. (Lansburry, 1988).

Employee performance appraisal is an essential aspect in any

organization and is practiced since centuries. Longenker and Fink (1999)

cited several reasons that formal performance appraisals should be

practiced in organizations. According to them, formal appraisals are

required to justify HR decisions such as promotions, demotions, pay rises

etc. Appraisals are also required to determine employee training needs.

The authors have cited that a recent study on high performance

organizations indicate that performance appraisal is one of the top 10

vehicles for creating competitive advantage. On the other hand

ineffective appraisal systems could give rise to many problems including

low morale, decreased productivity and a lessening of the employee's

enthusiasm, support for the organization. (Somerick, 1993).

It is mainly the advocates of TQM (Total Quality Management) who

oppose the implementation of performance appraisal in organizations

(Deming, 1986; Glaser, 1993; Kane and Kane, 1992). Deming is of the

view that 85% of the factors that affect the employee's performance flow

from the system which are beyond the control of the employee, and only

15% of the factors are attributable to the employee. On the other hand,

human resource (HR) practitioners do not subscribe the view of TQM

proponents. HR practitioners often claim that performance appraisal is

an essential part of an organizational culture and it is required to assess

organizational progress towards goals (Daley, 1993; Landy and Farr,

1983). Aldakhilallah and Parente (2002) have developed a performance

appraisal process, known as TQMPE (Total Quality Management

Performance Evaluation) and is said to be a revised version of the

conventional methods of performance appraisal.

The following factors are considered as the benefits of an appraisal

system,

Enables employees to identify their strengths and weaknesses

Provides an opportunity to motivate employees and encourage for better

performance.

Lets determine the need for further training.

Helps to set goals for future superior performance.

Organizations at all levels are trying to ensure that their departments

and units are doing more with less. In this context employee performance

appraisal system can be considered as a tool that can measure and

suggest how to improve productivity (Vallance, 1999).

In the modern context the common approach used in employee

performance appraisal is the use of a numerical or scalar rating system

whereby managers are required to score an individual against a number

of objectives/attributes. In some companies, employees receive

assessments from their manager, peers, subordinates, and customers,

while also performing a self assessment.

The popular methods used for performance appraisal are,

Management by Objectives

360 degree appraisal

Behavioural Observation Scale

Behaviourally Anchored Scale

Trait based systems are also used in some organizations which rely on

factors such as integrity and conscientiousness. However since Trait

based systems are based on the personality traits, they make it difficult

for a manager to provide feedback that can initiate positive change in

employee performance. This is due to the fact that even though an

employee can change a specific behaviour they cannot change their

personality.

Further Trait-based systems, because they are vague, are more easily

influenced by office politics, causing them to be less reliable as a source

of information on an employee's true performance. The vagueness of

these instruments allows managers to fill them out based on who they

want to/feel should get a raise, rather than basing scores on specific

behaviors employees should/should not be engaging in. (Wikipepedia,

2009)

Management by Objectives (MBO) is a process where the management

sets the objectives and the employees agree on the objectives and

understand their role within the organization.

An Important aspect of MBO is the measurement of the employee's

actual performance against the standards that is set. Since employees

themselves have been involved with goal setting and choosing the course

of actions to be followed by them, they are more likely to accomplish

their responsibility. The advantage of the MBO model is that employees

gain a clear understanding of what is expected of them. i.e their roles

and responsibilities. Furthermore employees are motivated as they are

actively involved in the goal setting process. The MBO model also

facilitates better communication and coordination among superiors and

subordinates. This in turn helps employees to maintain good

relationships within the enterprise.

However the MBO model does not take into account the context in which

the goals are set. Furthermore it does not address the issue of

responding to obstacles and constraints that the employee may come

across when reaching the goal. Companies also tend to evaluate their

employee against the "Ideal" employee. In other words MBO focuses on

what employees should be not what they should do.

The 360 Degree Feedback performance appraisal model refers to

feedback that comes from all around an employee. In other words

feedback on individual performance is provided by subordinates, peers,

and supervisors. It also includes a self assessment and sometimes

feedback from clients and other sources such as the stakeholders.

The results from the 360-degree feedback are generally used by the

person receiving the feedback to plan personal development. Results may

also be used by organizations in making administrative decisions such as

promotions.

However there is significant controversy as to whether the 360 feedback

model improves employee performance or whether it decreases employee

performance. Most organizations opt for an anonymously filled up 360

degree feedback document. The gathered data is then tabulated in a

confidential manner. The results are shared with the person whose skills

and performance were evaluated. This approach relies heavily on the

relationship, trust and satisfaction that the employees exhibit with their

supervisors and therefore is highly subjective.

The lack of accountability has been an issue with the 360 degree

evaluation model. Since the feedbacks are coming from anonymous

sources there is a significant question mark as to whether the feedback

could be used for something other than development purposes. "When

anonymous feedback from peers is improperly used, a department stand

to destroy whatever trust and credibility existed between manager and

employees." (Carey,1995, p.56)

Finally the information alone will not be useful in changing the behaviour

of the employees. It takes a considerable amount of time to digest and

form realistic action plans. If the feedback obtained from the 360 degree

feedback is not converted to a realistic plan it is bound to lose the value

of the entire evaluation process. (Waldman & Atwater, 1998, p.17)

Furthermore techniques such as essay appraisal, graphic rating scale,

forced choice rating scale, field review, work standards approach,

ranking methods, assessment centres are also used in the appraisal

process.

In Essay Appraisals the appraiser is required to write an essay on the

employee's strengths, weaknesses and the potential skills. This technique

is less complex and is more valid as compared to other appraisal

methods. The drawback however is the difficulty involved in combining

and comparing essays as it might include various aspects on an

employee's performance and qualifications. In other words the essays

might not follow a standard format; hence essays written to evaluate

employees might differ in terms of the aspects covered in the essay.

Graphic Rating Scale is a consistent and reliable method. A person's

quality and quantity of work is assessed in a graphical scale. Several

personality traits such as the employees' cooperation and reliability are

taken into consideration in this method. The advantage of this method is

that it is more economical to develop and is less complicated. Although

the Graphic Rating Scale method is widely used it is under frequent

debate among HR professionals.

Forced Choice Rating technique is unbiased compared to other rating

methods. This method does not involve a third party in the appraisal. The

raters are required are required to choose among groups statements

those that best fit the individual employee and those that least fit

him/her. The statements are then weighed and scored the same way

psychological tests are scored. This technique however is limited to lower

and middle management levels in organizations as the levels of jobs are

similar to make standard common appraisal forms for the group.

Field Review is a group judgement technique, which tends to be more

fairer and valid than individual ratings. In this method a member of the

personnel department meets with a small groups of raters from each

supervisory unit and goes over each employee's ratings with them. The

advantage of this method is that, each rater conceives uniform standards,

arrives at group consensus whilst identifying areas of disagreement. The

biggest drawback of this method is that it consumes a considerable

amount of time.

In Assessment Centers, the assessment for future performance or

potential of the employee is assessed in contrast to the past performance.

In this method individuals from various departments are brought

together and they spend two or three working days on group

assignments similar to ones they would be handling if they were

promoted. The pooled judgement of the observers leads to order of merit

ranking on the participants.

Ranking Methods are useful when two employees who work for different

supervisors need to be compared. In this method appraisal forms are not

particularly useful. This method is also used to compare people in

separate units of an organization.

Work Standards Approach is a technique where daily performance

standards are set for each employee. It is focused on improving

productivity and could be used to provide an accurate and objective

appraisal of work for each employee. This method revolves around

spending a considerable amount of time on observing the employees on

the job, simplifying and improving the job where possible and arriving at

realistic output standards. However the drawback is that employees are

rated differently and hence makes it difficult to draw comparisons among

employees especially in situations such as salary increase and

promotions.

In most performance appraisal programs/systems the superiority of the

supervisor is over-emphasized which might be damaging especially in an

organizational culture which is focused on employee participation. On the

other hand when negative feedback is communicated to employees, it

might fail to motivate employees and often result in worse performance.

In some organizations employees are unaware as to whether an appraisal

system exists. An appraisal system would not be successful if the

appraised does not know the criteria under which he/she is evaluated.

Hence the communication of evaluation criteria is of utmost importance.

The issue of tough and lenient raters/evaluators is also of concern. Some

departments might have highly competent employees as compared to

other departments. In such situations appraisals can be highly intensive.

Biasness in organizations is often the biggest drawback of appraisal

systems, which may result in non competent employees being rewarded.

This would demotivate highly competent employees, thus resulting in an

organizational culture which is less active and dynamic.

3. Research Approach

3.1. Methods

This research was primarily conducted based on the information

gathered through the World Wide Web. In addition an interview session

was held with Mr. Sampath Jayasundara to obtain an insight into various

performance evaluation methodologies. Questionnaires were also used to

gather information on employee opinions. The questionnaires were

designed to investigate the various approaches used by organizations to

measure the performance of its employees. A total of 200 questionnaires

were distributed amongst employees from the Banking and

Telecommunication sectors. The questionnaire used a combination of

both open ended and close ended questions with the intention of

obtaining additional information from the recipients. Each team member

focused on collecting information from 40 employees, which required

personal visits to selected organizations.

3.2. Results

Majority of the employees are of the view that the appraisal system

prevalent in their organizations does not take into account the external

aspects relevant to their occupation. Most employees complain that even

though they perform a dual role, the evaluation considers only the

activities related to their respective designations. Employees state that

the evaluation systems are obsolete and have not been reviewed

frequently. The lack of employee involvement in the goal setting process

has also been raised as a concern. Furthermore in most organizations

annual appraisals are conducted in a very short time period. Hence

certain aspects are often ignored.

Results indicate that approximately 67% of the employees suggest that

the existing appraisal system is not satisfactory. They are of the view that

supervisors and managers tend to forget the achievements made by an

employee as time passes by. Elaborating further some employees went

on to say that all the hard work done at the beginning of the year is often

forgotten at the time of appraisal. This in turn results in employees being

evaluated on their current performance as opposed the overall

performance within the year. Around 9% of employees shared an

interesting opinion. These employees were of the view that existing

appraisal system was satisfactory and that it required minor alterations.

They were also of the view that the employees tend to complain about

appraisal systems when they do not receive the expected benefits.

Around 60% of the employees believe that the appraisal process should

be conducted in a methodical manner and that supervisors should

maintain clearly documented achievements and failures of each

employee. This will in turn serve as a guideline in the appraisal process

and will obviate the need for an informal assessment. This will also

eliminate the focus on relationships in a corporate environment.

Employees suggest that they should have the opportunity to view their

achievements and failures (areas of improvements) over a time period.

The following section provides a detailed analysis on the data gathered

through questionnaires.

The following section provides a detailed analysis on the data gathered.

It was interesting to note that the opinions of employees in both sectors

followed a similar pattern. Questionnaires were formulated to gain a

precise understanding of individual perspectives. The use of both open

and close ended questions enabled the research team to gather a vast

amount of information relevant to the research.

Do you believe that the existing Appraisal System is satisfactory?

Answers

Industry

Strongly Agree

Agree

Disagree

Strongly Disagree

Neutral

Banking

7

15

33

39

6

Telecommunications

11

19

24

38

8

18

34

57

77

14

Table 3.1. Employee opinions on existing appraisal systems

As mentioned above a large percentage of employees are not satisfied

with the prevalent appraisal system. As Table 3.1. indicates 26% of

employees agree that the existing system is satisfactory. These

employees argue that "employees who perform well are always

recognized". Furthermore the use of diverse assessment criteria was also

highlighted as a justification to the successfulness of existing appraisal

systems.

What measure would you think is most suitable to solve issues in existing

appraisal systems?

Answers

Industry

Change Existing System

Alter the existing system and continue

Introduce a novel concept

Merge Existing Appraisal Models

Shouldn't be changed

Banking

25

16

19

24

16

Telecommunications

28

14

23

22

13

53

30

32

46

29

Table 3.2. Employee opinions on measures to solve the issue

As Table 3.2. indicates when questioned as to what measures could be

taken to solve the issues, a considerable amount of employees stated that

either the existing system should change or an alteration should be done

to the existing system. However it was important to note that 41% of

employees from both sectors believed that the existing system should

either be altered or organization should adopt a combination of appraisal

models.

If the existing appraisal system is to be improved what

additions/alterations do you think are required?

Answers

Industry

Involve employees in the goal setting process

Eliminate the relationship based culture

Track employee actions throughout the year

Train the evaluators

No Improvements are needed

Banking

27

19

22

18

11

Telecommunications

23

20

16

26

14

50

39

38

44

25

Table 3.3. Employee opinions on improvement factors

The involvement of employees in the goal setting process was highlighted

as one of the key aspects that should be incorporated to the appraisal

system. The results in Table 3.3. provides evidence that elimination of

the relationship based culture and the involvement of employees in the

goal setting process could improve the appraisal systems.

Furthermore 22% of employees from both sectors suggest that the

evaluators should be trained before they perform appraisal. A small

percentage of employees (12.5%) believe that the existing appraisal

systems do not require changes. These employees questioned the

sustainability of a new or a modified appraisal system and suggested that

if a new appraisal system is to be introduced it should satisfy the

requirements of all employees, which is not practically possible.

Do you think employees should retain a copy of their assessment?

Answers

Industry

Strongly Agree

Agree

Disagree

Strongly Disagree

Neutral

Banking

46

21

13

16

4

Telecommunications

37

25

17

14

7

83

46

30

30

11

Employees of both sectors displayed a common attitude towards the

retention of personal assessment copies. A significant 64.5% of

employees shared critical views on retaining a copy of personal

assessments. Most of these employees argued that copies of assessments

could be used to correct their mistakes and further enhance their skills.

This would in turn be beneficial to employees in terms of personal and

professional growth. However the assessment should provide acceptable

justifications for each comment/remark.

On the other hand some employees believe that copies of assessments

shouldn't be handed over to employees. These employees stated that

certain comments made by supervisors cannot be directly justified and

could only be associated with the behaviour of each employee. Hence

making a comment/remark on the behaviour of an employee might create

a environment of doubt which is not healthy in a corporate environment.

Do you think that the time period for appraisals is too lengthy?

Answers

Industry

Strongly Agree

Agree

Disagree

Strongly Disagree

Neutral

Banking

31

19

26

18

8

Telecommunications

27

13

30

24

4

58

32

56

42

12

Table 3.4. Employee opinions on the length of appraisals

It was noted that 45% of the employees believe that the prevalent

appraisal systems are time consuming and effects the productivity of the

organization. However these employees agreed that an appraisal system

is critical for any organization and that it should be conducted in a

methodical manner which consumes less time.

A Further 73% of employees are of the view that the time frame in which

the performance evaluation is conducted is insufficient. They argue that

this has in turn lead to incomplete appraisals which might not take into

account the essential aspects of the evaluation process. Organizations

that conduct appraisals bi-annually tend to limit the time consumed for

the evaluation process. Furthermore since the appraisal process does not

have a direct impact on the revenue, most managers consider the

appraisals as wastage of human hours. Some employees stated that "It is

the employees that drive a business and if proper recognition is not given

to the work they do employee retention will turn out to be an issue."

Almost all the employees suggested that the appraisals should be aligned

with the designation/role of each employee. For an example the

evaluation criteria used to evaluate the performance of a receptionist

should be different from the criteria used to evaluate an engineer. The

performance criteria should ideally take into consideration the various

aspects related to each designation/role. In most organizations there is a

lack of distinction between performance evaluation criteria used for

various designations/roles.

A negative attitude was visible among most employees when asked as to

whether they were satisfied with the existing process. Some employees

state that if the appraisal is to be successful all employees should actively

participate in the process. However most employees are reluctant to

adhere to processes as they believe that processes consume a

considerable amount of time and results in decreased productivity.

Hence an overall change in the employee attitude towards appraisals was

considered as an important resolution.

4. Employee Performance Appraisal Best Practices

A list of best practices was derived by the research team following the

analysis of the gathered data. It was identified that the following aspects

play a vital role in improving the effectiveness of appraisal systems.

Employee participation: based on the research outcome it was evident

that most employees believe that the appraisal systems are biased. In

such a situation it is highly unlikely that they would accept the outcome

of a performance evaluation. Participation gives an opportunity for the

employees to discuss their concerns. Performance methodology, criteria

for evaluation and the evaluation form itself could be developed with the

involvement of employees. Higher employee participation is bound to

generate an atmosphere of cooperation and support. This in turn would

facilitate in the development of a healthy coaching or counseling

relationship. Appraisal related tension and rater-ratee conflicts could also

be reduced by initiating a relationship based culture. Somerick (1993)

suggested that having a dialogue session between the manager and the

employees would initiate problems to be solved immediately.

Goal setting: Goal setting consists of performance goals that are specific,

challenging and accepted. Goal setting within performance appraisal has

resulted in greater appraisal satisfaction and increased performance

(Dobbins et al., 1990). Stevens (1990) states that: "…assign employees a

series of goals to be accomplished in the course of a year. When annual

reviews are held, rate the employees' progress in achieving these goals."

Furthermore goal setting should take into consideration the context in

which the goals are set. It should also take into consideration the

obstacles that the employees may face during the course of the time

period concerned.

Developing performance standards: Standards should be developed in

order to measure the essential job duties and responsibilities.

Performance appraisal interview: In a performance evaluation interview,

the interviewer must be aware of the employee needs to protect

confidentiality and privacy. Roberts (1994) is of the view that it is of

utmost importance to provide undivided attention during the interview

and reserve sufficient time for a full discussion of the issues.

Krug (1998) suggested asking open-ended questions would encourage

employee participation in the appraisal interview. He suggests that

question such as "Do you enjoy your job?" should be avoided and

replaced by questions which would bring about answers which are more

thoughtful and informative. As an example the question "How do you feel

about working in this company?" requires a certain degree of thought.

Self evaluation: Self evaluation is also of significant importance as it

enables employees to systematically assess their performance. Studies

provide evidence that self evaluation increases employees' perceived

fairness on the appraisal process. Employees can perform a self

evaluation by completing their own appraisal form and presenting the

draft for discussion with the evaluator. McCarthy (2000) comments that

employees who have an opportunity to asses their own performance often

come up with creative solutions that would not have been considered in

the one-sided managerial evaluation. Pam Perry, vice president of human

resources for CB Richard Ellis says (cited in McCarthy, 2000, p. 25)

I have my staff write their own reviews; they do the rating and include

their comments, then we sit down together and go over them. It

eliminates the debate over who is right and who is wrong and allows us

to focus on what's important. It's valuable for employees to express their

thoughts about their performance in writing.

Management feedback: Management feedback is of essential importance

for two reasons. Firstly employees' work should be appreciated when

they exceed expectations or when they perform the assigned task in an

acceptable manner. Secondly employees should also be given

constructive feedback on aspects that he/she would require

improvements. If constructive feedback is not given on areas which

employees need improvement, there is a possibility that employees may

believe that their current level of performance is satisfactory. Camardella

(2003, p. 105) states: Evaluating each employee as average, without

specifically mentioning strengths and weaknesses, diminishes the value

of the appraisal process. When an employee's strengths and weaknesses

are explained, the employee can build on his or her strengths and correct

his or her weaknesses. Employees cannot improve their job performance

unless they are told where their performance is inadequate. To have an

effective performance appraisal system, there must be formal and

informal performance feedback.

Roberts (2003, p. 93) states that: Feedback is essential in gaining the

maximum benefits from goal setting. Without feedback, employees are

unable to make adjustments in job performance or receive positive

reinforcement for effective job behavior. Effective performance feedback

is timely, specific, behavioral in nature, and presented by a credible

source. Performance feedback is effective in changing employee work

behavior and enhances employee job satisfaction and performance.

Furthermore Feedback should provide a short list of areas where the

employee needs improvement, highlight the most important ones to be

improved first.

Need of a user-friendly procedure: The Performance evaluation criteria

and rating procedure should be simple enough so that they could be

understood by the raters and ratees. Essentially the performance criteria

should focus on the employee's job. It should also take into account other

intangible aspects such as attitude, personality traits, etc.

Design of specific and relevant appraisals: Employees often complain that

"Our company uses the same appraisal for all positions. Appraisal

systems should be reviewed and updated periodically to address the

present situation. Some employees state that the organizations do not

change the appraisal system sufficiently, and therefore the appraisals are

not relevant at times.

Evaluator training: The results of the research suggests that most

employees are of the view that the person responsible for assessing the

performance is not properly trained and therefore is incapable of

providing feedback on employees' performance. The research conducted

by the American Management Association provides evidence that the

main reason for employee and supervisor's dissatisfaction with the

performance appraisal process is that a large number of managers are

poorly trained on providing feedback to employees (cited in Krug, 1998).

Mot employees are of the view that the person who conducts the

appraisal exercise should receive extensive training in goal setting,

setting performance standards, conducting interviews, providing

feedback, avoiding rating biases, etc.

In particular, top management must be aware about the competency

level of the raters as mentioned by Martin and Bartol(1998, p. 226):…a

review may suggest that a rater who consistently gives all high ratings

would be committing a leniency error. On the other hand, a rater who

rated most employees low may have fallen prey to the stringency error,

and one who entered most employees in the middle of the scale may be

demonstrating the error of central tendency.

Revision of the performance appraisal process: Appraisal system should

be revised periodically so that it reflects the present situation of the

organization. Longenecken and Fink (1999, p. 22) state: It is important to

systematically and regularly review system operations to make sure that

process and practices are being followed and effective. Examples of

measures that can be used to assess the health of your appraisal system

include employee acceptance and trust of the appraisal systems.

Employees are subject to both conscious and unwitting assessment by

their supervisors on a daily basis. Much of this assessment is subjective

and may be affected by factors such as the ability of the employee to get

on with his or her supervisor, his or her reactions under pressure, his or

her appearance, degree of organization, levels of attentiveness and

interest. While these sort of assessments are difficult to avoid, a standard

appraisal model that would take into account the above mentioned

factors would to a certain extent reduce the reliance on such informal

assessment. The following section describes the proposed appraisal

model.

5. The Solution

Firstly the performance evaluation criteria should be properly structured.

Each criteria should have a clearly defined meaning along with a set of

subcriteria. The subcriteria should have their respective weights and

priorities. The criteria used to evaluate the performance of a particular

employee should be specific to the designation/role concerned. It should

essentially entail the job responsibilities as well as the expected

improvements. Improvements have to be set based on a study of each

employee.

Initially the supervisor sets goals and objectives for a particular

employee with his/her participation in the goal setting process. This will

ensure that the employees have a proper understanding of what is

expected of them. The supervisor then has the responsibility of tracking

'incidents' related to the employee. In other words the supervisor should

document the activites of the employees. For an example if the employee

delights the client that can be considered as achievement. On the other

hand if the employee misses a deadline due unacceptable reasons that

can be considered as a fallout. However this process of recording actions

of an employee over a time period ensure that there is clear evidence of

the actions performed by each individual. This in turn would facilitate in

an effective appraisal process and would prevent the possibility of

employees being evaluated on based on the relationship that he/she has

with the managers/supervisor. In annual appraisals the supervisor and

the employee would meet up after the specified time period. The

supervisor would then complete the appraisal based on the recorded

objectives and goals that were set initially. The recorded 'incidents' could

be used to justify each evaluation. If the employee agrees with the

appraisal he/she could comment and sign the appraisal. The process

would be completed once the reviewing manager signs and retains a

copy. The supervisor and employee would receive a copy of the appraisal.

This would enable the employee to have a focus on the aspects that

he/she needs to improve and thereby will form a strong base for

'Personal Development'.

However if the employee disagrees with the appraisal he/she would be a

given a time frame to prepare the comments. The supervisors would then

forward both the appraisal and the comments from the employee to the

reviewing manager. Reviewing manager could then uphold/recommend

changes to the appraisal within a specified time period. The appraisal is

sent back to the supervisor and results in a meeting with the employee

concerned.

Figure 5.1. The Proposed Appraisal Process (Main Flow)

Figure 5.2. The Proposed Approach (Sub Flow)

6. Recommendations

As described above factors such as employee participation in the goal

setting process, self evaluation, evaluator training, design of specific and

relevant appraisals, management feedback etc should be taken into

consideration in developing a 'Performance Appraisal' module. Managers

should be able to carry out the appraisal processes tailored to their needs

and access information in a variety of different forms and reports.

Employees on the other hand should be able to benchmark themselves

with other employees, divisions etc. The ability to define own appraisal

forms, adjust grading criteria, set goals and targets, track entire

sections/divisions, generate inputs for training are some of the essential

aspects that should be considered in developing the appraisal module.

In the knowledge based economy, it is of critical importance to deliver

the right knowledge and skills to the right people at the right time within

the given financial resources. Hence the research team recommends that

a comprehensive training and development module should be

incorporated to the existing HRM solution. The training module should

provide functionalities to record training needs, track attendance,

evaluation programs, etc. The training module should be interlinked with

other HRD modules (Performance Appraisal/Management) to provide a

platform for human capital management. This in turn would enable the

organizations using the HRM product to gain a competitive advantage

based on the workforce.

Furthermore existing modules such as Competence Management &

Employee Self Service should be further enhanced to optimize the

process of human capital management. As an example defining the

competency levels required for specific job roles is an integral aspect

which has to be given due consideration. Methods to assess monitor and

manage competencies of each employee should be clearly structured.

These modules should have strong relationships with modules such as

Training & Development, Performance Appraisal/Management, etc.

Personal benchmarking and the tracking of employees with highest

potential are essential aspects which need to be incorporated to the

Competence Management module. Employee Self service on the other

hand should enable employees to view their personal files, update

information and perform HR functions relevant to them.

This would give employees more confidence and a better overview, which

in turn would be beneficial to the organization in retaining employees.

It is also recommended that hSenid develops an Employee Compliance

tracking module to further enhance the process of performance

evaluation. Employee Compliance should initiate an employees'

commitment towards the organization's defined rules, regulations,

policies, processes and, procedures. The initiation of aspects such as

daily task updates, team meetings, action items, etc would enable the

organization to obtain feedback on each employees' actions. The

feedback could then be used in the performance appraisal process. The

implementation of this module could be elaborated as follows. Employees

are assigned tasks by their respective Managers, Supervisors etc. These

tasks would be entered into a system which is accessible by all

employees. Each employee would then be able to view the assigned

tasks. Each task would have an estimated time duration and an

associated effort. On a daily basis the employee is required to lodge time

for the tasks performed. However if the employee fails to do so it can be

considered as non-compliance. The feedback obtained over a period of

time would serve as a source of evaluation for each employee. Constant

maintenance of team meetings, action items, action plans to resolve

issues etc. can also be considered as a form compliance. These factors

could be used to track the progress of each employee. Employee

performance in challenging circumstances could be observed by

maintaining team meetings and action plans.

The development of an incident capturing module is also recommended

as it would serve as a form of justification in the appraisal process. In this

method the supervisor would identify and prepare a list of critical

incidents, giving details of very effective and ineffective, also positive and

negative behaviour of an employee. The negative or ineffective critical

incidents represent the poor behaviour of employees on the job. There is

a separate log for each employee in the organization, which is

maintained by their supervisor or manager. These critical incidents of

worker behavior is recorded periodically by supervisors and is used to

evaluate the employees' performance at the end of a period. For this

purpose there should be a methodology to note down the critical

incidents.

7. Conclusion

It is a known fact that employee appraisal systems play a vital role in

retaining valuable employees. Such appraisal systems enable employees

to understand their job responsibilities. Furthermore properly structured

appraisal systems help employees achieve personal growth. On the other

hand unfair appraisal systems can result in employee dissatisfaction

which in turn would have a negative impact on the employees'

productivity. Hence it is of utmost importance to identify the various

factors that are needed to develop an effective appraisal system. The

research was carried out with the intention of developing an acceptable

performance appraisal approach that could be deployed as a software

solution. hSenid Business Solutions, the market leader in HRM products

provided the platform to conduct the research.

The software-as-a-service (SaaS) delivery model is extensively used to

cater small and medium scaled enterprises (SMEs). hSenid with its vision

to innovate has initiated the deployment of HRM products as a web

service. However certain HR functionalities such as employee

performance appraisals are not conducted in a standardized manner

across organizations. Hence it's imperative to construct a standard

approach/model that most organizations could utilize. In evaluating

existing methodologies it was evident that companies are concerned

about problems of equality in evaluation and effectiveness, they are also

concerned about other issues such as evaluation accuracy, mistakes in

ratings, or a consideration of the cognitive processes applied in the

evaluation process.

The research focuses on the drawbacks of various appraisal approaches

and aims to provide a sustainable solution. Employee opinions and

feedback from various managers were taken into consideration in

deriving a best possible approach that could be utilized by majority of the

organizations. It was concluded that effective employee evaluation

results could be achieved by considering aspects such as informing the

employees of the objectives that they need to achieve, employee

involvement in the designing of the appraisal process etc. The proposed

model/approach could be utilized by most organizations as it includes the

key aspects that any organization would be looking for. As mentioned

above it includes aspects such as the constant maintenance of an

'incident journal' which would eliminate the drawbacks associated with

the traditional relationship based approach. Major issues such as

relevance of objectives, experience gained and significance of objectives

were given due consideration in developing the proposed approach.

Proper research techniques were selected to test the effects of various

appraisal models used in the Sri Lankan banking and telecommunication

industry. Feedback of employees from these sectors was used to derive

the proposed approach. From the team's perspective the experience

gained by all team members was invaluable as it helped the team to

understand, analyse and thereby provide a feasible solution for the

problem concerned. The exposure gained by interacting with industry

experts, employees of different organizations was invaluable as it

provided an insight into how the corporate world handles an important

aspect as employee performance evaluation.