Tuesday, October 9, 2018

Importance of Effective Performance Appraisal



Introduction


Performance appraisal is the systematic evaluation of employees with respect to their performance on their job and their potential for development. In other words, it is the process of measuring productivity in terms of efficiency and effectiveness (Brumbatch 1988).

The performance appraisal may be one of the few times during the year where an employee and the reviewer, typically the employee's supervisor, can sit down and have a lengthy face-to-face discussion about all aspects of the job (Asmu , 2008). Thus, the appraisal can serve a number of important functions. If done effectively, the appraisal can offer a large degree of satisfaction for both the employee and the reviewer. (Benadin et al 1995).

Most employees are interested in knowing how well employees are doing at present and how employees can do better in a future. Employee want this information to improve their performance in order to get promotions and merit pay. Proper performance feedback can improve the employee’s future performance. It also gives employee satisfaction and motivation (Bates and Holton,1995).

Video Clip 01 - Performance Appraisal

                                                                 (Source : Gregg , 2018)

Employee Performance Appraisal Process

If handled correctly, the performance appraisal process is a mutual exchange between an employee and manager (Toppo & Prusty,2012). The process allow the employee to get direct feedback about what employee is doing well and a clearer understanding of what employee needs to improve upon. It provides the manager a chance to share manager’s expectations and give the employee valuable feedback. Nothing should be a surprise in a performance appraisal, as all issues are best handled when they occur (Walsh and Fisher, 2005).

Company Process

Many companies, especially larger corporations, as the organization I work for, which is engaged in Equipment finance have a process in place for conducting performance appraisals. Work with Human Resources department to ensure employees are following the company sanctioned process. Base feedback only on aspects of the employee’s job, which can include soft skills that include communication and teamwork. Apply the process consistently across all employees and ensure the employee understands her role in the process.

Timing And Forms

After an employee has been on the job for a minimum of 90 days or a maximum of six months, deliver employee’s first round of feedback. After the first evaluation, most companies complete a mid-year and year-end appraisal. Adjust this as needed to accommodate individual learning curves and challenging employees. Most companies provide a standardized form for managers to use. If not, then create one using an easily updated word processing document.

Manager Input

Document each area or task the employee is responsible for and indicate how the employee is doing in respect to each. A numbered rating scale and a section for comments is sufficient. Include both areas for improvement as well as those items the employee is doing well. Showing the direct link between the employee’s tasks and company goals or missions reinforces how employees’ actions affect the company as a whole.

Employee Input

After the manager documents feedback, the employee will review and respond to the rating and comments. Employees will get more out of their appraisal by not being defensive. Certainly factual errors should be corrected, but placing emphasis on future changes is the way to approach an appraisal. The employee should also document accomplishments who wants to emphasis and any training or resources employee needs to more effectively complete employee’s job.

Six Steps of the Performance Appraisal Process

Business owners must be able to gauge whether or not an employee is meeting performance standards. Developing a process that enables managers to appraise performance through objective metrics is imperative, so that a manager can define any underlying human resource issues versus operational issues. It is possible to customize the process, although there are six primary steps in the performance appraisal process, (Torrington, Hall and Taylor, 2002).

1. Establish Performance Standards

Performance standards are not arbitrary. These standards are necessary with each job position, because the performance standards are used to fulfill the mission and vision of the company. Performance standards are established through job descriptions, employee handbooks and operational manuals. Standards are subject to adjustment, based on changes in business needs.
Performance standards include everything from attendance to sale goals. Businesses must set a company culture of expectation fulfillment that is consistent for everyone. Giving some people a pass on meeting standards creates problems with team morale and potential legal issues when firing employees.

2. Employee Communication

Establishing performance standards isn't enough. Business leadership must clearly communicate these standards to employees. Even though standards are written and distributed in company manuals, there also should be a specific on boarding process that summarizes the company's expectations. Regular meetings reviewing the standards and expectations reiterates to employees that everybody must meet certain minimum requirements to retain employment or to be eligible for raises or promotions.

3. Measure Employee Performance

Clearly defined standards are easy to measure. Leaders track and regularly review how employees are performing. Attendance might be reviewed weekly when the schedules are made, whereas sales goals might get reviewed monthly. Business leaders need to determine how often different performance standards are reviewed, based on how it affects business achievement. For example, if a florist has a production line and one person does not keep up with the daily flower arrangement quotas, a manager needs to review that employee's performance sooner rather than later, before it negatively affects sales or morale among the others on the team, who must absorb the negligent employee's workload.

4. Compare to all Employee Metrics

Employers usually set performance standards, based on experience and industry data. Every business and its employees are unique. However, comparing one employee against all others who perform the same tasks gives an employer an idea about whether or not the underlying issue is the employee or if it's a bigger issue of training or operations obstacles. As with the example of the floral production line, one employee who is not keeping up differs considerably from the entire team not performing. In the latter situation, a manager must look at improved training or must hire more people to keep up with demand.

5. Employee Feedback

Performance appraisals must be reviewed with employees to be effective. Sit down with each employee to review the standard expectations and provide feedback about what has been done well and what areas need improvement. Make sure all feedback is written in objective terms and speak to employees in a professional, positive manner. Use performance review meetings to not only give employees feedback but also to gather feedback from employees about personal performance, sales goals, professional goals and feedback on company protocol.

6. Action Plan Development

Set an action plan for future performance appraisals. Build bigger goals around areas of employee success and provide specific plans of action where improvement is needed. Get employees invested in growth by asking them to include personal expectations and goals as part of the development plan. Have employees sign the plan, and to accept its contents, including agreeing to the action plans. Once signed, make a copy for the employee and make another for the human resources file.

Characteristics of an Effective Performance Appraisal

The annual performance appraisal is something employees and managers alike often dread. Yet, the meeting can be a source of motivation and reward if both parties are knowledgeable about how a performance appraisal works (Bard Kuvaas, 2006). The performance appraisal is an opportunity for the manager to convey to an employee specific expectations and suggestions for future performance. The meeting is also an opportunity for an employee to share with her manager her professional goals and career aspirations (Boswell, & Boudreau , 2000). 

  • Explain The Appraisal Process 
  • Clarify Job Expectations

  • Review and Update Job Skills

  • Review Accomplishments and Goals

  •  Final Steps and Rewards

Importance of effective performance appraisal
It is clearly that the HRM makes a great contribution for either private or public sector organizations to achieve organization goals, therefore, as an important function of HRM, the performance appraisal has significant importance in organizations (Crawford, 2003). If there is no performance appraisal system, an organization can hardly have a clear understanding of its current situation, therefore it cannot get the direction and goals for improvement for future, the situation of the organization will be dangerous. If the performance appraisal system is full of deviation or even error, it can possibly lead the organization into a wrong direction of resource inputting, thus the organization will lose its long-term competitiveness  (Bladen, 2001). On the contrary, an effective performance appraisal system can ensure resources of the organization invested into the most critical processes, which can improve competitive advantage of organization (Michlitsch, 2000). 
Generally speaking, the importance of performance appraisal to organization is mainly reflected in three aspects:
 
1. Affecting the productivity and competitiveness of organization. Performance of employees has a huge effect on productivity and competitiveness of the organization. Performance can be measured from work results, work action and work attitude of employees (Armstrong , 2010);
2. Performance appraisal result is an important indicator of personnel decisions. Performance evaluation offers important reference when organization making personnel decisions, such as promotion or demotion, secondment, salary adjustment and so on (Fletcher C , 2001).;
3. Effectively performance appraisal leads to better staff management. It means that an organization can make better evaluation of staff performance, which results in more reasonable remuneration and incentive. It also means that an organization will be able to offer more help to employees’ self-development since performance evaluation can explore the potential of employees and help them know clearly about what they should do to meet expectations better. Besides, it will help to achieve better communication between superiors and staffs, which promote greater unity of purpose (Samuel, 2013).
The performance appraisal may be one of the few times during the year where an employee and the reviewer, typically the employee's supervisor, can sit down and have a lengthy face-to-face discussion about all aspects of the job (Venclova , 2013). Thus, the appraisal can serve a number of important functions. If done effectively, the appraisal can offer a large degree of satisfaction for both the employee and the reviewer (Greller, and Martin ,1998).

Benefits of Performance Appraisals to the Organization

The performance appraisal is an essential part of the human resources department's contribution to an organization (Javotz, 2006). An effective appraisal may not only eliminate behavior and work-quality problems, it can motivate an employee to contribute more. Often, a company will ask its employees to perform "360-degree feedback” that assesses peers and subordinates as well as supervisors and management. Regardless, the opportunity to give and receive constructive criticism shouldn't be ignored (Mamatglu, 2008).

1. Improving Communication

2. Providing a Career Path

3. Encouraging Good Work and Improvement

4. Improving Decision-Making Ability

When a company has detailed information on employee performance, business decisions become easier. Filling open positions with existing staff strengthens the organization and promotes loyalty. Knowing which employees display what strengths improves the speed with which projects can be assigned (Roberts ,1992). Appraisals also provide a framework when making decisions about compensation – and layoffs. If the organization becomes the unfortunate party to a lawsuit, the performance appraisal can refute or support claims (Smith and Dick, 1998). As a result, the effective use of performance appraisals helps an organization operate efficiently and with focus (Som, 2008).

The Effects of Performance Appraisal on Organizational & Employee Performance

Performance appraisal doesn't benefit only employees (Strauss, & Shore, 2008). Organizations that use the results of performance appraisal to identify areas of strength and opportunity can benefit as well. Performance appraisal can provide an indication of areas of training need as well as direction for leadership development, performance improvement and succession planning ( Kuvaas, 2006).
The employee performance appraisal is an important career development tool for the manager and employee (Fletcher,  2001). The manager can help guide the employee on the path to corporate advancement, and the employee gets a clearer understanding of what is expected from her in her daily job duties. Performance appraisals have a wide variety of effects on employees that managers must identify and understand ( Javotz, 2006).

Table 01 : The Effects of Performance Appraisal on Organizational & Employee Performance 
Effects on Organizational Performance
Effects on Employee Performance
Identifying Areas of Strength
Motivation
Identifying Training Needs
Clarity
Leadership Development and Succession Planning
Take Responsibility

Teamwork

(Source : Mamatoglu , 2008)

Methods of Performance Evaluation

A comprehensive employee appraisal is often made up of several different methods of performance evaluation (Armstrong, 2010). Employer can choose to use just one evaluation process when judging an employee's performance, but when you use multiple evaluation methods employer is able to get a broader picture of the areas where the employee needs improvement and what recommendations manager should make to support employee development (Armstrong, 2010).

Self-Evaluations and Reviews
The self-evaluation is often effective when teamed up with a performance review. The employee is asked to judge his own performance by using a form that requires multiple choice answers, essay-type answers or a combination of the two. One of the benefits of a self-evaluation is that employer can compare the self-evaluation to your own appraisal and see the areas where there is a discrepancy in an understanding of employee performance. This opens up conversations that can be beneficial to employee development.

360 Evaluation

An employee's development consists of progress made within employee’s own department, and the effectiveness of employee’s interactions with the rest of the company (Mamatoglu, 2008). A 360 degree performance evaluation is one that involves input from managers in other departments that the employee works with on a regular basis. Employees are evaluated on their effectiveness within their own department based on their job descriptions, and employees are also evaluated based on how effectively employee work with the rest of the company (Mamatoglu, 2008).

Graphic Scale

The graphic scale of performance evaluation is commonly used by managers (Fox, 1991). The employee's performance in various areas of his job duties is graded on a scale. The value in a graphic evaluation system is that it allows manager to compare the performance of several employees simultaneously (Fox, 1991). The system can be done with numbers or letters, and it usually consists of a range, running from poor to excellent.

Checklist Evaluation Method

A checklist evaluation method is simplistic but effective (Mamatglu, 2008). Checklist evaluation method consists of a series of performance questions that are traditionally given the option of yes or no. An excessive number of negative responses indicates developmental training is needed for that employee. The checklist can be used as a quick way to identify employees that have deficiencies in too many performance areas (Mamatglu, 2008).

Critical Incident

Keep an ongoing log throughout the year of an employee's performance, and then use that information to fuel discussion during the employee performance review (Fox, 1991). This method of keeping a list of good and bad incidents of employee performance is known as critical incident evaluation (Fox, 1991).
Advantages and Disadvantages of performance appraisals
Table 2.0: Advantages and Disadvantages of Performance Appraisals
Advantages
Disadvantages
Documentation
Create Negative Experience
Structure
Time Consuming
Feedback
Natural Biases
Clarify expectation
Waste of Time
Annual Planning
Stressful work place
Motivation

(Source: Crawford, 2003)

Conclusion

The performance appraisal is a central part of performance management in organizations. It is only one component and   links to the entire performance management cycle. Supervisors who carry out the assessment of employees performance must have a clear understanding of the process and need to be motivated to do a good job. Staff play a role too in making the process  effective. HR  managers,  carry the bulk of the responsibility for implementing a performance appraisal process that adds value to their organization. They must constantly monitor to  ensure the system is moving well. Designing a clear process  and monitoring how it is working and making adjustments as needed, are smart steps to ensure the performance appraisal adds value.

This is the time for the employee to make the manager aware of his career aspirations and skills he would like to learn. The manager and employee will sign the appraisal document and receive copies. An official copy will also go into the employee’s personnel file. Remember to keep an electronic copy; this will make the next appraisal easier.

As one of the most important functions of the HRM, performance appraisal plays a large role in the success of the organizations’ HRM. Performance appraisal affects the productivity and competitiveness of organization, the results of performance appraisal is an important indicator of personnel decisions and effectively performance appraisal leads to better staff management. Performance appraisal has a big importance to either private or public sector organizations and an effectively performance appraisal system does offers great help for either private or public sector organizations to achieve strategic goals. However, since the complicated relationship within the organizations and the complications in establishing well-designed appraisal system, performance appraisal cannot always be effective and useful as we expected it. Hence much planning and proper implementation is necessary for a successful performance appraisal, which benefits both the employer and employee.


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